Chicago, Milwaukee, St. Paul & Pacific Railroad Company v. Illinois

PETITIONER:Chicago, Milwaukee, St. Paul & Pacific Railroad Company
RESPONDENT:State of Illinois, Illinois Commerce Commission, and Milwaukee Road Commuters’ Association
LOCATION:United States District Court for the Northern District of Illinois, Eastern Division

DOCKET NO.: 12
DECIDED BY: Warren Court (1957-1958)
LOWER COURT:

CITATION: 355 US 300 (1958)
ARGUED: Nov 12, 1957
DECIDED: Jan 13, 1958
GRANTED: Dec 10, 1956

ADVOCATES:
Charlie H. Johns, Jr. – for the appellees
Harry R. Begley – for the appellees
R. K. Merrill – for the appellant
S. Ashley Guthrie – for the appellees

Facts of the case

The Interstate Commerce Commission (ICC) passed an order making intrastate passenger fares for the Milwaukee Road’s Chicago suburban commuter line higher than the fares the state commission had authorized. The state of Illinois, the Illinois Commerce Commission, and the Milwaukee Road Commuters’ Association sued the ICC in district court and sought to enjoin the enforcement of the order. The district court held that the ICC had failed to show that the fares authorized by the state commission caused undue, unreasonable, or unjust discrimination against interstate commerce, and therefore the order was not justified. The ICC appealed the case directly to the Supreme Court.

Question

Did the district court correctly find that the ICC lacked the necessary evidence to support the imposition of the order raising intrastate commerce fares?

S. Ashley Guthrie:

If the Court please.

Before passing on to what I think, possibly, more important part of the case, I might — I might say something as to what was said about the interstate rate.

The only interstate rate involved in this case were rates to Walworth and Zenda, Wisconsin which were the tail end of the west suburban — of the north suburban line of the Milwaukee road out of Chicago.

The — there was no independent evidence of any kind as to the interstate rate to Zenda and Walworth.

The rates were fixed on that line to correspond with the intervening intrastate rates as fixed.

There was no special attention directed to it.

As a matter of fact, there’s one train, it goes out through them.

One suburban train needs to — goes out, one comes in.

That’s all the service they have each day.

The complaint interstate — the Illinois Commerce Commission which joined in the complaint and of course is interested primarily in interstate rates and the petition was based on Section 13 (4) directed intrastate rates.

They prepared the complaint for the rate, the entire order will be set aside.

Obviously, if the intrastate rates — the order as to intrastate rate is set aside, there’s nothing for the order to the two little Wisconsin villages to stand on.

There — there’s a — if — if the Court, the District Court couldn’t set aside, the order is to — as to intrastate rates, they say the order shall remain in effect as standard state rates.

Compared that to the interstate rate, the interstate rates necessarily fall and follows at a District Court an enjoining enforcement of the Interstate Commerce Commission’s order into the whole order.

Any other decree wouldn’t have any consistency or any common sense in it.

The — that’s their — a very minor part of this case that I thought I would say that at the start of my argument.

Felix Frankfurter:

Well, suppose the other way around is true to, isn’t it?

S. Ashley Guthrie:

What’s that?

Excuse me, Justice.

Felix Frankfurter:

(Voice Overlap) —

S. Ashley Guthrie:

I didn’t understand you.

Felix Frankfurter:

I mean, if the intrastate order stand, I suppose, or am I wrong about that.

S. Ashley Guthrie:

The intrastate order stands and the interstate order rather stand.

Felix Frankfurter:

Pardon me?

S. Ashley Guthrie:

If the intrastate order stand and —

Felix Frankfurter:

As to interstate, that’s all I —

S. Ashley Guthrie:

Yes, certainly.

The —

Hugo L. Black:

What state would (Inaudible)

S. Ashley Guthrie:

The — the case involves a 13 (4) case and they just — they’re just the tail end and it deserve no separate consideration and the District Court would have been — well, they would have been idiotic for the District Court to give them any separate consideration on the record before it.

S. Ashley Guthrie:

There was nothing — nothing we had read about them.

Hugo L. Black:

I don’t quite understand what you said there, you talk a little fast.

S. Ashley Guthrie:

Excuse me.

Hugo L. Black:

You — are you saying that if the intrastate wage, if the court below should sustain on the section on the intrastate rates, it would be compelled to sustain it on what it did to the interstate rate?

S. Ashley Guthrie:

I could say that consistency and common sense would require it, yes.

There was no separate evidence.

The intra — there was nothing — no, no separate consideration to the interstate rates.

They were fixed.

Hugo L. Black:

Suppose they were not.

S. Ashley Guthrie:

They were fixed to — to conform —

Hugo L. Black:

(Voice Overlap) — why — why couldn’t we consider the power of difference in reference to the two?

S. Ashley Guthrie:

The power is different.

Hugo L. Black:

Yes.

S. Ashley Guthrie:

The power is different but the District Court reviewed the entire order of the Interstate Commerce Commission and if the — the District Court held that there was no — that the intrastate rate shouldn’t be fixed in the — necessarily, the interstate rates, Mr. Justice Black, that depend on it have nothing to stand on.

Hugo L. Black:

Well, are the find — do you consider the findings required are the same for setting aside an order relating to interstate rates and for setting aside an order relating to intrastate rates?

S. Ashley Guthrie:

Not necessarily but in this particular case, all the findings have to do with the intrastate rates and the interstate rates are fixed to correspond and said so.

Hugo L. Black:

But if you could put that in the brief so that I could even then derive an act of (Voice Overlap) —

S. Ashley Guthrie:

Well, it is in our brief.

Hugo L. Black:

— on that.

I think you are wrong.

S. Ashley Guthrie:

Well, it is in our brief, Your Honor.

The — the only ground upon which the interstate rates were fixed at all was to be — to correspond with the intrastate rates.

And they said the intrastate — it says in the — the interstate rate should be raised accordingly.

Now, if you take off the intrastate rates, what is left for the interstate rates to depend upon, are you going to have a different rate of fare to Zenda than you are to the — to the next station inside which is in Illinois.

I would think that would follow and I — I would respectfully suggest that — that’s what I think here.

Now, I believe that I will say a little more on the question of the jurisdiction — conflicting jurisdictions if you please, or coordinate jurisdictions of the State and the Federal Commission over intrastate rates.

The — there’s no question — it has never been questioned by the courts and I might refer to the North Carolina case, stating it very well, as to the paramount authority of the interstate — of the State Commission — state authorities, let me put it that way.

I don’t care to get the commission in yet, the state authority over intrastate rates.

The statute where the State Commission gets its authority is the state statute and of course it’s different in the federal statute.

But when it comes to fixing rates, when you’ll — adequate revenue, intrastate rates, the paramount authority is in the State Commission.

S. Ashley Guthrie:

And Sections 13 (4) — 13 (3) and 13 (4) — 13 (3), refers to — whenever at any investigation under the provisions of this part and so forth, there — shall brought an issue, any rate, fare, charge, classification, regulation or practice, made or imposed by authority of any state — in the next — made or imposed by authority of any state.

And then in the next Section, 13 (4) it says, whenever in any such investigation, the Commission after a full hearing finds that such rate, fare, charge, classification or regulation, using the same words, passing down a little, results in any undue, unreasonable or unjust discrimination against interstate or foreign commerce then the Interstate Commission can remedy the — the discrimination.

But it does have to be a rate fixed by the State which causes undue, unjust, and unreasonable discrimination against interstate commerce.

Now, that doesn’t mean always that it has to be fixed by a State Commission.

For example, in my own state in Illinois, the carrier post a rate and if the commission — neither the Commission nor anyone interested objects to that rate, goes into effect.

And that’s a rate by — fixed by state authority under the state law.And there is no question in my mind that you could file a petition in the — under Section 13 (4) in the — before the Interstate Commerce Commission to remove a discrimination if there was a discrimination caused by such rate.

There was the case in the Florida state — in the Florida case.

That was a court — was careful to find that the rate there had been fixed by state authority although there has been no hearing before the Commission.

It was a case where the — under the state law, the rates became effective without a hearing as it does in most states where no hearing is demanded.

But that isn’t the case we have in front of us.

In the case here, there was a hearing before the interstate — the Illinois Commerce Commission.

And where a hearing is demanded under the Illinois law, there can be no rate fixed by state authority under Section 13 (3) until that hearing has had.

We don’t have to take a hypothetical case where a rate is fixed by state authority without a hearing before the Commission.

In this particular case, there was a hearing before the Commission.

Furthermore, the action before the Interstate Commerce Commission was brought by the Milwaukee Road.

It wasn’t an independent investigation.

It wasn’t brought on behalf of the public or some suffering shipper, it was filed by the Milwaukee Road for — for increased rates and the basis of the — the — the cause of action, if you want to call it that, as stated in the petition before the Interstate Commerce Commission was that the Illinois Commission had acted unfairly.

The Milwaukee Road sets up and it filed a petition in 1952 and that after extensive hearings, for — extending for a year or more, the Illinois Commission after holding it under advisement for a considerable period, denied it.

They denied the increase.

Now, the case is this — expressly based on a contention that the Illinois Commission, which admittedly has primary jurisdiction over interstate rate had acted unfairly in fixing those rates.

Now —

Felix Frankfurter:

By unfairly, in any more meant then that the disallowance of a rate, resulting in the maintenance of an existing rate, operated and it is claimed in violation of 13 (3) — a violation of 13 (4), does mean any more than that?

S. Ashley Guthrie:

I want to make — give you a fair answer and I’ll try.

If there has been a real fixing of the rate by state authority, fairly fixed and that causes — fairly presented, I’m — I mean, net causes, undue, unjust or unreasonable discrimination against interstate commerce, I think the Interstate Commission can act under Section 13 (4).

But it must be a rate fixed by state authority and I believe, Your Honor, that when you say a rate fixed by state authority, you must mean a rate fixed by state authority on the basis — on the same accounting theory upon which they asked the Interstate Commerce Commission to fix the rate.

Otherwise, the proceeding before the — before the state becomes a farce.

Felix Frankfurter:

Will it — whether it becomes a farce or not, the fact is, I quite agree with your starting point that the fixing of intrastate rates as such is for the State, the Interstate Commerce Commission has no power to fix an intrastate rate as such.

It merely as the power to deal with the relationship, the bearing of an intrastate rate either specific or what we call discrimination against commerce.

What I want to know is what difference does it make?

What the proceeding is?

Felix Frankfurter:

What your local law is?

What steps are taken or not taken?

There is a rate which as a matter of Illinois law is the lawful rate within Illinois.

And that’s the result of the proceeding in 1952 before your Commission, isn’t that true?

S. Ashley Guthrie:

Yes.

Felix Frankfurter:

So all you have is a rate, there it is, by law.

Whether that is — whether as you indicate.

It goes into effect if nobody objects automatically or whether it goes into effect at a certain period or it is contested and then it is — it is the legal rate.

There is a state rate which the Interstate Commerce Commission has no power to touch as such —

S. Ashley Guthrie:

That’s — that’s right, Your Honor.

Felix Frankfurter:

(Voice Overlap)

S. Ashley Guthrie:

We are — I’m with — with certainty, yes, sir.

Felix Frankfurter:

All right.

Now what — what difference does it make how the law of the state expresses itself in saying, this is the state, this is the rate within Illinois which Illinois and Illinois alone has the power to fix.

S. Ashley Guthrie:

Well, I would like — well, I’ll answer first and then I’ll — I’ll put — read — put in further what I was going to refer to.

I believe that when you say that a rate is fixed by state authority, and in this case, it must be admitted that the state authority was the Commission.

So we don’t have to say what it has to be nor what it was.

In this case the only (Voice Overlap) —

Felix Frankfurter:

I suppose — I don’t know your law but I suppose it’s illegal to carry freight or passengers in Illinois without a rate being on file or being authenticated —

S. Ashley Guthrie:

Oh, yes.

Felix Frankfurter:

— by law.

S. Ashley Guthrie:

Yes.

And — and if the — the Commission or anybody else questions it then there’s a hearing and there were extensive hearings here.

And by the way, just exactly as a result of those hearings the Milwaukee Road dieselized its suburban service as a saving.

Well, we quarrel as to what it was.

They — they say it was 800 and something and we say it was in approximate — under — (Inaudible) it was a million.

Anyway, it is a very large saving to a great advantage of the railroad and the traveling public.

And as they know very well that the interim, before the decision was while they were putting in effect that dieselization, the president of the road in his testimony — at the opening of the case said they had — had no diesels in their suburban service nor did they intend to put any on.

So that they — and that was a testimony on July 24 — no, that was the testimony in the 1950 — the first hearing in 1952.

I think its October.

S. Ashley Guthrie:

The — so the — the State — the supervision of these things by the State is very, very useful.

They’re very close to it.

And it’s — it’s a jurisdiction that should be jealously protected.

I don’t mean that — that if they put a rate in and it’s manifestly unfair that it should stand.

But I say that they must be allowed to proceed — they must have a fair chance to fix their rate on — on the theory of accounting that is presented to the — to the Commission.

I’m going to read a little from the District Court’s opinion because I think it’s pretty good.

First, I’m going to call your attention to the fact and I think it’s already been called attention to that in the report of the Interstate Commerce Commission, the — as Your Honors said, at least it gave a slap on the wrist to the railroad for not having it — presented it, of the $306,000 deficit out-of-pocket, I should say, deficit, that the Interstate Commerce Commission found, $260,000 is in the items that were not presented to the Illinois Commission.

And to make certain other adjustments which I shan’t go into because I haven’t time, they’re in the brief.

I don’t believe there is any deficit but that’s a — that’s a question of — some question of — of a quarrel about accounting theories.

But the District Court said, after quoting from the North Carolina case, showing that the State has paramount authority over intrastate rates and that authority must be jealously guarded, I’m paraphrasing which words to that effect, the District Court said, “Where a railroad seeks the fixing of higher intrastate rates by the Interstate Commission after failing in such endeavor before a State Commission, Section 13 (4) does not contemplate that the State Commission is to be considered only as a way station in a journey to the Interstate Commission.”

In the instant case, justification of the exercise of the federal power to nullify state rates does not purely appear from the record before us.And as you will remember in the North Carolina case, it said it had to — it — that it had to appear clearly and — and with a cert — with certainty and clarity before the Interstate Commerce Commission should intervene.

And I’m going to put —

Felix Frankfurter:

Mr. Guthrie, can I ask you without implying that it is the same but may I ask you whether the railroad could in the first instance without going before your Commerce Commission at all have gone under 13 (3) and (4) to the Interstate Commerce Commission.

S. Ashley Guthrie:

Not unless it had some rate that was approved by state authority to which it —

Felix Frankfurter:

But you had a rate.

There must be (Voice Overlap) —

S. Ashley Guthrie:

But there was a — there was a prior — there was a prior rate.

It’s possible if they could.

I would — I’m — I have to answer your question this way.

There was an unreasonable interval between the posting of their other rate in the present day — I think they will have to go to the State Commission first.

Felix Frankfurter:

You, yourself suggested as I understood you that you don’t need affirmative approval by the State Commission for a rate under certain circumstances, is that right in Illinois?

S. Ashley Guthrie:

Well, silence isn’t — is — is —

Felix Frankfurter:

Well —

S. Ashley Guthrie:

— is an approval.

Felix Frankfurter:

Anyhow, but there —

S. Ashley Guthrie:

Yes.

Felix Frankfurter:

There must be a rate.

S. Ashley Guthrie:

Yes.

Felix Frankfurter:

And what I’m asking is —

S. Ashley Guthrie:

There must be a rate prescribed by state authority.

Felix Frankfurter:

Yes.What I’m asking is whether — no matter how the rate came into being under your local procedure, whether — without going to the Commerce Commission of Illinois at all, the railroad could have gone to the — via the Washington Interstate Commerce Commission.

S. Ashley Guthrie:

If the rate had been fixed within a reasonable time, prior time they went, I don’t think they could get a rate that’s 15 years old and go to the Commerce Commission without first forcing them (Voice Overlap) —

Felix Frankfurter:

There must be some legal rate enforced in Illinois whether — whenever it could fix.

S. Ashley Guthrie:

Well, I believe that the law is a science, I have — as I have been told, science of reason as well as logic.

And that if an unreasonable time has elapsed since the State posted a rate that they’d have to post a new one.

But then again I say, Your Honors, the question is really not involved because they did go to the Congress.

Felix Frankfurter:

Yes.

I understand that.

I — that’s why I said it, I don’t mean to be —

S. Ashley Guthrie:

Yes.

Felix Frankfurter:

— to say it did.

S. Ashley Guthrie:

Now, the — actually, they did get a raise in 1951 to — just before they filed this 1952 petition.

They got a raise, substantially what they asked.

So it isn’t — so that I don’t want the Court to think that they have been entirely mistreated.

The — now, if the Court please, just a word on the question of the evidence of discrimination, this — the Interstate Commission does not have authority to fix an intrastate rate merely on the fact that it is not compensatory or does not yield sufficient revenue.

That’s what the State Commission does.

I don’t mean to say that the — they can’t be fixed on that way but the State — the State Commission is the — is the place to fix that kind of a rate in the absence of discrimination.

Congress has elected to say there has to be discrimination.

That’s what it says in the statute.

And I suppose discrimination must be taken in its ordinary English sense and I think I’ll risk referring to the definition in Webster’s Dictionary was used in this sense, discrimination, “A distinction, as in treatment, especially an unfair or injurious distinction specifically arbitrary imposition of unequal tariffs for substantially the same service.

A difference in treatment made between persons, localities or classes of traffic in respect to substantially the same service”.

There has to be some evidence of — of discrimination of a different treatment of the interstate traffic and service from what — on what is given to interstate traffic and service.

The — in the Burlington case, C, B & Q case, Wisconsin against C, B & Q has been referred to which — as Mr. Justice Frankfurter said is the initial case under Section 13 (4).

In that case, the Court held that Section 15 (a) which had been enacted also in 1920 but somewhat amended since, which ensures to railroads an adequate return does not apply to intrastate traffic.

It does say there’s a dovetail relationship.

And this is what the dovetail relationship was.

There — as I said, if — if there is inequality between disparity, is the word they used, disparity between the interstate and in — and intrastate rates that — that the Interstate Commission can make up that disparity.

And in that particular case, there has been a raise in interstate rates and the decision was that the in — intrastate rates could be raised accordingly.

The — there is — there’s no — no authority for the proposition that the mere insufficiency of revenue to meet expense gives the Interstate Commerce Commission jurisdiction.

That’s just the jurisdiction of the inter — of the — that the Illinois Commission has — that the State Commission has.

S. Ashley Guthrie:

That’s why they — when you say they have paramount authority, that’s what you mean.

If they have authority to consider whether the rate is sufficiently compensatory to the railroad and — and the — I was anxious and under our law, they’re required to fix so there should be a fair return.

The — if Congress thinks that there — there should be more supervision and if they can do it within the Constitution, they could pass another Act.

But I was talking about the Act we have.

There’s no evidence in this case, and no finding as — as to what would be a fair proportionate revenue contribution.

And the Illinois Central case has been referred to.

Well, in that case, they found the value of the property in — in the suburb — in the suburban service, the value of the property in the other service, the ratio of the return from one and the ratio of the return to other in order to — to determine whether the rates they fixed for suburban service were sufficient.

And by the way, in the — in the first Illinois Central case, in 101 F. 2d., the — they didn’t raise the round trip or single fare — fares because they were already up to the interstate rates.

In the later proceeding, we just decided last March, they did raise them but in that — it was joined that — they said they should be raised but they entered no order because that was the proceeding which the Illinois Commerce Commission took part and entered the order.

The — now, the case is not decided wholly on the — on the question that I raised.

They’re very important, very interesting and I think that the decision of the District Court if — if the — as I say, if the — if the states are really — if it mean anything when they say the state court — the commission has jurisdiction, the decision of the District Court is 100% right on that point and should not be overturned.

And I’m — I base that on — as I say, on the facts not on a theory as to whether they could have gone without — without going to the Commission but they went to them.

Now, that — I mean, it’s five minutes, I guess.

The —

Earl Warren:

You have five minutes left in your time.

S. Ashley Guthrie:

The Court — the District Court found that the rates it has fixed, I don’t mean the District Court, excuse me.

The Commerce Commission found that the rates it has fixed were just and reasonable.

That — just and reasonable for the future.

That finding, the District Court held, had no support in the evidence.

The only support for it as appears from the report of the Interstate Commerce Commission was that the rates it has fixed for the same as those of the North Western Railway.

We have in our brief, set forth the colloquy where the witness — between the examiner and the witness about the North Western and the net result of it is that he said — have too much pressure that there was a similarity in the — in the suburban areas served.

Actually, the North Western rates were fixed on a — an operation of 72 steam locomotives and only 3 diesel locomotives.

Whereas the — Milwaukee has — was entirely — is entirely dieselized.

The — there’s no similarity in operation.

There’s never — no foundation for the findings they’re just and reasonable.

Thus, the Interstate Commerce Commission when it fixed the North Western rates, 288 ICC 115 said, the above analysis, that is the analysis on which the Commission’s order was based, relates to an existing suburban operation for the year 1951.

It obviously doesn’t know how to contemplate the cost of some other suburban operation that it might be encountered with diesel engines, gallery type cars and bud cars.

I respectfully submit that the — the decision of the District Court was correct and should be affirmed.

Thank you.