Baltimore & Ohio Railroad Company v. Aberdeen & Rockfish Railroad Company

PETITIONER: Baltimore & Ohio Railroad Co., Interstate Commerce Commission, et al.
RESPONDENT: Aberdeen & Rockfish Railroad Company, et al.
LOCATION: Surface Transportation Board at the United States Department of Transportation

DECIDED BY: Warren Court (1967-1969)

CITATION: 393 US 87 (1968)
ARGUED: Oct 17, 1968
DECIDED: Nov 12, 1968
GRANTED: Mar 04, 1968

Arthur J. Cerra - for the petitioners
Carl E. Sanders - for the respondents
Edward A. Kaier - for the petitioners
Howard J. Trienens - for the respondents

Facts of the case

The Baltimore & Ohio Railroad Company operated in the “Official territory,” along with several other railroad companies (Northern lines). Aberdeen & Rockfish Railroad Company and several other railroad companies (Southern lines) operated within the “Southern territory." Beginning on July 17, 1947, the Northern lines tried to obtain new divisions of the freight rates that applied between the Official territory and Southern territory from the Interstate Commerce Commission. These proposed divisions would be based on actual, relative costs of service.

The Commission determined that the existing divisions violated the Interstate Commerce Act (ICA), which directed the Commission to set aside inequitable divisions of joint rates and to prescribe equitable divisions. In determining the relative costs that controlled the divisional formula, the Commission frequently relied on unadjusted average costs incurred by the railroads on the average of all traffic in their territories, and not on actual costs incurred by the Northern and Southern lines. The Commission found that the existing divisions violated the ICA because they allocated a lesser share of revenues to the Northern lines based on relative costs.

The Administrative Procedure Act required that courts set aside agency findings that are unsupported by substantial evidence. On appeal from the Commission’s decision, the district court set aside the Commission’s decision. It held that the Northern lines failed to prove that the Commission relied on substantial evidence about the relative costs of handling north-south freight traffic, noting that the burden of proof lay with the Northern lines. It also rejected the Commission’s finding that the divisions required adjustment due to the greater revenue needs of the Northern lines.


Did the district court properly set aside the Commission’s order because it was not based on substantial evidence or reasoned findings related to the allegedly higher average costs of handling freight traffic for the Northern lines?

Media for Baltimore & Ohio Railroad Company v. Aberdeen & Rockfish Railroad Company

Audio Transcription for Oral Argument - October 17, 1968 in Baltimore & Ohio Railroad Company v. Aberdeen & Rockfish Railroad Company

Earl Warren:

Number 13 and Number 15, the Baltimore and Ohio Railroad Company et al., appellants, versus Aberdeen and Rockfish Railroad Company et al., and Interstate Commerce Commission, appellant versus Aberdeen and Rockfish Railroad Company et al.

Mr. Kaier, you may proceed with your argument.

Edward A. Kaier:

Mr. Chief Justice and may it please the Court.

This is an appeal from a decree of a three-judge court for the Eastern District of Louisiana setting aside an order of the Interstate Commerce Commission which prescribe the joint -- the divisions of joint rates to be received by Northern and Southern Railroads respectively from freight traffic moving between official territory and southern territory in both directions.

Official territory may generally be described as that part as the northeastern part of the United States and the southern territory the southeastern part.

More particularly, official territory would be the territory east to the Mississippi river north of the Ohio and certain cities in Virginia such as Richmond.

Southern territory is east of the Mississippi and south of official territory.

The appellants are the Interstate Commerce Commission and the Northern Railroads and the appellees are the Southern Railroads and two associations, one the southern governor's conference and the other Southeastern Association of Railroad and Utility Commissioners.

Your Honors will recall I believe that a joint rate is one which applies over two or more railroads but is stated in a single sum.

The divisions in issue in this case were primary divisions.

That is to say divisions which applied to and from the certain gateways between Northern and Southern railroads and if there was more than railroad north to the gateway those two railroads over three railroads would get their share of the revenue from subdivisions of the primary division and likewise south of the gateways.

Those subdivisions were not in issue in this case only the primary divisions.

The railroad's evidence both that submitted by the Southern lines and that's submitted by the Northern lines was on a group basis in which all the Northern lines were grouped together and there figures submitted by on the group basis and likewise for the Southern lines.

And it was decided by the Commission on a group basis except that the Norfolk Southern Railroad one of the Southern group, was awarded division higher than that granted to the Southern lines generally.

This was in recognition of its greater revenue needs and there is no issue about that before the Court.

The Commission is empowered by paragraph 6 of Section 15 of the Interstate Commerce Act to prescribe just and reasonable divisions whenever after hearing in its opinion it finds that the existing divisions are unjust unreasonable or inequitable.

The case before the Commission was one that was originally decided in 1953.

Before that decision, the divisional factors prescribed for Southern lines were generally 25% higher mile per mile than those prescribed for Northern lines.

And on the very important item of citrus fruit which moves in great larger in South to the North, the -- an earlier case had fixed the divisions as high as 85% higher than the Northern lines factors.

Now, I should correct that.

The Northern lines -- the Southern lines didn't get divisions 85% higher but the factors which go into make that were 85% higher so that the Southern line got something a lesser percentage than the 85% but very substantially more than the Northern lines.

In the 1953 decision, which is in a decision in the same docket of the Commission as the order here under review -- in the 1953 decision, the Commission concluded that if it were to give controlling weight to the Northern lines cost studies, it would have to give them higher divisions than the Southern lines.

But it regarded the sum elements of the cost as being transient in nature and it's found that it would be the safest assumption for the future that neither group of railroads would have a substantially lower basis of operating expenses than the other.

So, it prescribed equal fact to divisions for both groups of lines.

In 1959, that same proceeding was reopened upon petition of the Northern Railroads.

They alleged in the petition that the experience of the intervening years had confirmed their contention that their cost were higher than those of the Southern lines.

The Commission reopened the case; evidence was taken between 1959 and 1961 resulting in what the lower court called a massive record.

There were extensive briefs proposed report by two examiners recommending increase divisions for the Northern lines, exceptions, replies and oral argument.

The Southern lines contended before the Commission that the relative costs of performing the service involved constitute the decisive measure in determining just and reasonable divisions.

They urged the Commission to find such cost on the basis of the average territorial costs as shown by the Commission's Rail Form A formula for official territorial lines and for Southern territorial lines respectively but subject to 12 adjustments in those territorial average cost which Southern lines proposed.