LOCATION:Fleetwood Paving Co.
DOCKET NO.: 12
DECIDED BY: Warren Court (1958-1962)
CITATION: 361 US 173 (1959)
ARGUED: Nov 16, 1959 / Nov 17, 1959
DECIDED: Dec 14, 1959
Audio Transcription for Oral Argument – November 16, 1959 in Minneapolis & St. Louis Railway Company v. United States
Number 12, Minneapolis & the St. Louis Railway Co., Appellant versus United States of America.
Number 27 South Dakota et al versus United States et al and Number 28, Minnesota et al versus United States.
Mr. Swiren you may proceed.
Mr. Chief Justice and Your Honors.
This proceeding concerns two competing applications for authority from the Interstate Commerce Commission to acquire the capital stock of a small bridge carrier known as the Toledo, Peoria & Western Railroad.
I brought this large reproduction of one of the two maps appended to our brief in order that we might proceed more expeditiously in painting the picture of the relationships and the basic problem here involved.
The carrier that is the subject matter of the concern crosses the (Inaudible) of the State of Illinois and it is here in green beginning at the Indiana state line passing through Peoria and then on to Lomax and Keokuk on the Iowa side.
It is 240 miles long —
Charles E. Whittaker:
On Iowa side.
On the Iowa side, yes sir.
It’s 240 miles long and draws its strategy from the fact that it bridges the transcontinental carriers of the east and the transcontinental carriers of the west through the Peoria gateway, and that brings us to the problem of what we mean by a gateway.
The largest terminal for railroad interchange is in Chicago with 31 road haul carriers and a large number of switching lines serving this tremendous industrial complex.
The next largest east-west gateway is at St. Louis.
At both points there is a break in the divisions of rates between carriers.
May I ask you a question?
Certainly Mr. Justice Harlan.
I wanted to ask you (Inaudible)
That’s terminal line in — in the Peoria District in the switching district.
Is that (Inaudible)
No sir it is not.
No, there are two switching lines in Peoria.
One is the P&PU and the other is the Peoria Eastern.
The — the advantage of course of Peoria is that it by-passes the congestion and delay of the very busy terminals in Chicago and St. Louis, but it also has the disadvantage to many carriers of shortening their haul and therefore their divisions.
There is a fourth gateway that needs to be considered here, which is the Decatur in combination with the Hannibal Bridge over the Mississippi.
That combination is used exclusively as shown by this dotted line by the Wabash, a wholly-owned subsidiary 99%-owned subsidiary of the Pennsylvania Railway.
Of the two applications of — were pending before the Commission are one by the small carrier that I represent, the Minneapolis and St. Louis Railway —
William J. Brennan, Jr.:
That never has been an issue, has it?
No sir it is not.
It is an independent railway.
It has a $20 million dollar capital and revenues at $20,500,000, a plant with the book value of about $72 million and just to get the orientation it compares with the two competing lines in this fashion.
It has 1400 miles of rail, but lacks density.
For example its density is one million revenue ton miles per mile of rail compared to the national average of almost two and a half million —
William J. Brennan, Jr.:
Is it larger than Agrarian Road?
It’s larger in Agrarian Road, yes sir and the third of it is bridge traffic which does not originate or terminate on its line.
It’s dependent upon connections with other lines and dependent exclusively if I may say upon the Peoria gateway.
It’s the only carrier concerned in this proceeding outside of Western, the subject matter of the controversy, which is confined exclusively to the Peoria gateway and that is one of the key aspects of this matter that unfortunately the Commission did not take into account.
The — the two applications made by the Minneapolis and St. Louis Railway which operates its mainline from Minneapolis while it moves of course down to Peoria.
It has branch lines as the Court will see to a person, your various agriculture areas of Minnesota and Iowa and then extends further out not shown on this map into North — South Dakota.
It’s the only (Inaudible)
I beg your pardon?
As the north (Inaudible) I’ll call this north where I’m going.
Our — our lines goes all the way to Peoria.
And stops there?
It stops there, yes sir.
There’s some more green I see up there.
That’s part of the — of the Western.
The Western starts at Effner, and the Indiana-Illinois state line runs across the State —
Into our —
— to Lomax which is just short of the Mississippi and then down into Keokuk across the Mississippi and Iowa.
As I say there are two applicants.
One is the Minneapolis and St. Louis and I may say that in order to get a proper view of the scope of the other two applicants a reference ought to be had to the first map attached to our brief.
It shows the broad expanse of the two giant carriers whom we oppose in this proceeding.
On the one hand, there is the Pennsylvania Railroad which is far and away the most powerful and largest carrier in the United States in all terms except number of miles of track.
It has 10,000 miles of track.
It has a billion dollars a year in freight revenues.
It has the most concentrated industrial origination territory that the country has.
It has the plant facility that totals a $1,800,000,000.
It has density a 175% of the average I think it runs 4,240,000 revenue ton miles per a mile of track.
In addition to that it has a great many subsidiaries, the most important of which for this purpose is the Wabash which is itself is five times the size of Minneapolis and the Wabash is a very important, a very potent, a very effective competitor of the Western as the Court will see.
It serves the same purpose of joining the east and the west.
The Pennsylvania competes with the Western by concentrating on two gateways.
Its first solicitation is for the St. Louis gateway.
The second solicitation and next longest call is for Chicago.
It has never solicited for the Peoria gateway.
Let me say that again because I want to make this perfectly clear.
Neither the Pennsylvania nor the Santa Fe which now seek to acquire this Western property has ever solicited traffic for this gateway.
They not only prefer but they concentrate on their own longer haul gateways which are St. Louis and Chicago in the case of Pennsylvania and Chicago and the late case of Santa Fe.
Now this map does not show of course the full scope of the Santa Fe which appears on this small map.
It covers 12 States.
It’s the third largest railroad in — in volume in the United States.
It’s — it’s got a plant of $1,600,000,000, $600,000,000 of revenues a year.
It taps the two fastest flowing areas of the United States, the southwest and the California area and it too has tremendous manufacturing originations.
64% of its volume comes from manufacturers originating on its own line and that’s — that’s the profitable and the — the very strong potent weapon for dealing with other railroads because the originating carrier has a great deal of influence on the routing of traffic.
He is the originating carrier deals with the customer, provides the service, provides the cars, provides the wealth of information, in — in short does the day-to-day servicing and is so — and as a result its very close to the originating shipper.
Did you file a question to Senate to the traffic in Western to the eastern district by Pennsylvania’s and the Santa Fe item?
Without — without meaning to avoid the question let me say that I think the word contributed is unfortunate —
– because that’s what —
Use that work you wish.
— but — but the connection — the connection supplies the about 64 % of the traffic that Western gets.
That is the connection over here in the east with Pennsylvania and on the west with Santa Fe.
And those connections I should say came about — and that traffic came about through the genius of a man now dead, George McNear and perhaps this would be a good spot Mr. Chief Justice to indicate how all these came about.
For 33 years, the Pennsylvania Railroad and the Burlington which is another huge western carrier, owned the western property jointly, each owned 50%.
And the interest of those two carriers in the longer haul competing gateways was such that this gateway dried up and Western went into receivership where it languished for 10 years.
And then it was bought as two strips of west if you please by this man McNear who advised the Commission of the time he made the application to acquire the property that this railroad could never prosper as long as it was — was in the control of the carriers with whom it had to compete and that was the situation with the Pennsylvania and the Burlington and he demonstrated that very graphically.
He bought the property in 1927.
In less than two years, the car loadings went from 38,000 to 68,000 and I might say while the Commission says that there is time at least a time relation between the connection at Lomax with the Santa Fe, and the successive Western, it does not appear in the figures or in the facts, there may be a time connection but no factual connection.
Of that 68,000 cars, less than 6000 cars came at that connection and at the same time some Burlington traffic was lost because when that connection was made, the Burlington connection at this point was broken leaving only two other connections with Burlington.
So the 6000 figure is not a net figure and even that is very small in relation to the total picture.
The undisputed fact is and the Commission found that the Pennsylvania and the Santa Fe have offered passive resistance and that’s an interesting term because we — we’ve come to the language problem in that connection presently.
I was interested in hearing the opinions of the Court this morning with respect to differences in the use of language that we — we find that at least two of the railroads in this case had special language of their own and one of the aspects of that special language is this passive resistance.
It didn’t counter-solicit as they said but they tried to get the business themselves through the St. Louis gateway first for Pennsylvania, Chicago gateway second and through the Chicago gateway for the Santa Fe.
Do I understand to say to see if I apprehend what you’ve said that while this road was in the ownership of the Pennsylvania and Burlington, for practical purpose is that the business on the road was dried up until your Mr. McNear acquired it.
It went into bankruptcy and it was sold to him or — or the reorganization turned to him with the permission of the ICC and thereafter began to build up businesses.
That is correct sir.
And since his death, in 1948 the present president, Mr. Cozard has continued the policy of independent solicitation and the property has continued to grow.
Charles E. Whittaker:
Is that what you listed here?
I beg your pardon sir?
Charles E. Whittaker:
Is that what you’ve listed including the two plans?
Under the approved plan, the — the Santa Fe and the — the Pennsylvania had promised to continue the present management and have promised and the Commission took them at their promise, that they would place the connections of Western on parity with Chicago.
And as we demonstrate in our brief, and we shall show presently, with the Court’s permission those promises are contradicted by the president of the Pennsylvania and by the president of Western who was called as the last rebuttal witness for our side that they were Pennsylvania.
You’ll fill the gap a little later by telling us how the present situation arose, namely, how the present plan of re-acquisition certainly by the Pennsylvania and the new center that they came about.
That’s exactly what I’d like to do now Mr. Justice Frankfurter.
In for about eight or ten years there had been a great deal of talk about combining the Minneapolis with Western as a natural merger that the president of the — of the — of this — of the Pennsylvania had been urging it for years.
He said, “This is a natural.”
That is the light word he used.
The president of Western had been endorsing it for years and I might say that those endorsements continued up until the moment of this litigation where they became partisans, they changed their views understandably.
It had always been regarded as desirable to combine these two small carriers each of whom was interested solely in the promotion of the Peoria gateway and had no competing interest.
Charles E. Whittaker:
Always desirable, desirable by whom?
It was thought desirable by men such as the president of the Pennsylvania who was well informed and the largest – represented the largest connection, the president of the Western.
But Mr. McNear, was he concerned with — did he have the desire to merge with somebody else?
That’s a difficult thing to join.
There were two strong personalities, Mr. McNear and Mr. Sprague, who was then the president of Minneapolis and the record shows that Mr. Symes, the president of the Santa Fe had great difficulty getting them even to speak to each other.
And this — that it was the clash of each personality that apparently had made impossible to effect the merger at that time.
And in 1954, new management came into — to the Minneapolis and that was the beginning of a present chapter.
The new management immediately began seeking to acquire the Western.
I may say that my brother on the Government side didn’t read the record very carefully when he said that the trustees of this — of the McNear estate wanted to sell the property, Pennsylvania and Santa Fe came in to buy it and so did Minneapolis.
The — the picture was this.
Minneapolis went to the trustees month after month after month all through the Spring and Summer and Fall to try to persuade the trustees of the McNear estate who controlled 72% of the Western stock to sell and made offers.
And they got no place, until finally, in March, the trustee said, “We’ll now consider this matter and we will come back to you in 40 days.”
In the meantime, other events had occurred.
In the first place it became known that the — that interest (Inaudible) to Minneapolis, had acquired a large position in voting trust certificates of Monon Railroad.
The Monon Railroad is this brown line property that — that runs down from Louisville to Chicago and that it also has a line that goes through to Michigan City.
There has for years been talk of a possibility of joining the three properties, the Minneapolis and St. Louis, the Western and the Monon which with a bridging of a gap of 27 miles would form an outer — outer belt line by-pass at Chicago.
Could you trace that outer, outer belt line?
It — it comes from the Minneapolis to Peoria to Western and then there’s this gap that would have to be bridged with 27 miles and then the Monon that comes up here and connects with all of the eastern carriers and also carriers that come down from Michigan.
And that would make it possible then to move a train on an affiliated line, went around Chicago without any switching or any delays or any duplication of service.
And when Mr. Symes, the president of the Pennsylvania heard that he said, “When I heard this grandiose plans, I decided to put an end to this nonsense” and those are his words, “and I’m going to get permanent protection for the Pennsylvania Railroad.”
And with that sense of public interest, Your Honors, he proceeded to — to buy the property and the way it was bought was this.
Had the Western been making money?
Western has been making money Your Honor, making money now as making money then.
At the time — at the time that which you speak.
At the time at which we speak the Western was making varying amounts running from $650,000 to $850,000 a year net.
It’s a fine property today, in excellent financial condition, operated well and functioning well.
The purchase arrangements that came about were these – Wilmington Trust Company was the corporate trustee and there was an individual trustee for the McNear estate.
The corporate trustee shared in common with — Pennsylvania and one of its subsidiaries, one director and shared in common with three other subsidiaries, other subsidiaries of Pennsylvania, three directors.
At that interlocking directory served Pennsylvania well because it yielded preference in the negotiations.
I should like to make it clear Your Honors that I’m not complaining about a failure to live up to the highest ethical standards required of fiduciary.
It’s interlocking had — they have the approval of the ICC, does it not?
Sir, it’s — it’s even more than that under the — under Section 10 of the Clayton act, no carrier may have any dealings in securities with another corporation with which it shares a director, if the amount is more than $50,000 in any year except by competitive bidding under rules prescribed by the ICC.
That was not done in this case and as we shall see presently the Commission simply found that the Act did not apply because not the first contract but the second purchase contract was nominally in the name of Santa Fe alone and that brings to the negotiations at their next step.
Just about the time of the 30-day period for the trustees to come back and — and tell the Minneapolis whether they would deal or not, and at what level, without words to the Minneapolis the trustees entered into a commitment by two letter agreements to sell 26% of Western to Pennsylvania and 26% of Western to Santa Fe at a $100 a share.
Immediately Minneapolis heard about it, its chairman communicated with corporate trustee and said, “We told you that we’d pay a fine price for this property.
We’re prepared to pay more than what you sold it for.
We’ll pay 5% more.
We don’t know what the price is but we know it’s worth more to us than it is to Pennsylvania and Santa Fe and the trustee said, “We’re sorry it isn’t even worth your corporate to come down and to talk us about it.
The individual trustee then intervened and said he hadn’t been consulted whereupon the Minneapolis sent an offer to pay a $133 a share as against the $100 that’s been paid and kept that offer open for a week and at the request of the individual trustee who said, “You need not worry, we’ll not let you down.
You’ve made the market for us.
They extended it for two weeks more and on the very last day, while counsel for the individual trustee was drafting an acceptance, they called Pennsylvania and Santa Fe.
Pennsylvania said, “We have a contract.”
Alright the 15th contract is good, we don’t care anything about that repudiation we’re going to stand on it.
Santa Fe then signed up to buy a 100% of the stock owned by the estate and expressed its willingness to buy the stock owned by minority shareholders, something Minneapolis had always been prepared to do and had announced to the individual holders.
I’ve lost you Mr. Swiren.
The Santa Fe was prepared that – they would buy buy it 100%?
But having — having the Pennsylvania you’ve just told us that we — we’ve got a prior commitment of the —
That’s right sir.
So that so far as the —
— those two got in this problem, didn’t.
Well, that squabble was soon settled.
The — they were all partners and they remained partners and they still are partners.
And a month after that transaction, Santa Fe entered into a contract to sell Pennsylvania half of the stock reserving to Pennsylvania the rights under its contract which it is now seeking to enforce in — in the court of equity in Delaware against the Wilmington Trust Company.
That litigation is going on, so that that has then brought to the Commission a joint application by Pennsylvania and Santa Fe to acquire the stock of Western.
At the same — and that price was just slightly more than the offer that had been made by Minneapolis and the individual trustee’s assurance that he’d come back to us —
I thought that it was $100?
It was originally a $100 —
And they raised it up.
They raised it to a $135 when ours was a $133 some odd cents and they — they ignored the suggestion of — of Minneapolis that we would be prepared to enter into competitive bidding either privately or publicly for the property because we were certain that under our program which involved economies and efficiency of operation, the earnings would be considerably higher about twice as high and therefore we could afford to pay a higher price.
The surer way to take up situation permit it as to make that proposal and everybody knew what that situation was.
But the Wilmington Trust Company, they put the sale and the application then came before the Commission and so we have two applications before the Commission if I may outline them briefly and what they contemplate, and then I’d like to state if I may even issues of law that seem to me present in this case.
The two applications are these.
Minneapolis proposed first of all that it would integrate its operations with Western being concerned only with the Peoria gateway having no competing or conflicting interest, the integration is possible so that instead of switching cars here at Peoria, that needed to go to Effner or anywhere along this line that same train would come right along instead of yarding it in two different yards and switching it four times (Inaudible) would go right through.
There would be integrated service, duplicate yard facilities, shop facilities, traffic facilities of counting would all be eliminated.
Tell me, wasn’t the Western know that connection for the Eastern traffic?
Western is one of our connections although we also have connections at Peoria that are just as large with the Nickel Plate and with other roads and those connections would continue.
And as a matter of fact the same — this another aspect of the integration would be that with respect to eight different railroads we would be enable to have direct connections instead of switching through another carrier that involved (Voice Overlap) —
Hugo L. Black:
Tariffs and all that.
I beg your pardon.
Hugo L. Black:
Joint tariffs and all that.
Oh yes and what that means is a saving of time and of — and of money and we also proposed new service rights which Western with its relatively small traffic could not justify but which we felt we could justify with the addition of our traffic.
For example, we proposed a connection here at Watsinka with Chicago and Eastern Illinois which would open the way to the south and the southeast.
We proposed is of connections with the Illinois Central and the Gulf of Mobile on their branch lines to open up connections on their main lines so we could stay from 24 to 48 hours on a shipment and that would make us competitive we thought with the traffic moving to the south and southeast and in some respects to southwest.
So our program contemplated first of all new economies and efficiencies and we estimated by a detailed program submitted to the Commission that a $1,770,000 would be saved by eliminating the duplicate facilities and just to give the Court some idea the magnitude of that in relation to properties as a whole the total expense on the Western is about four million six or seven.
Secondly we proposed the accelerated and the added service and the new service routes.
Third we proposed to unify our solicitation.
Western has offices in 19 cities off the line.
We have offices in enough more to make it 35 as a total.
So that instead of soliciting in 19 cities for the — for the Western property we would be soliciting for both properties in 35 cities and we expected to intensify the promotion that way particularly since there was no conflict in this promotion.
There had been some talk I might say the possibility that if Minneapolis ever acquired Western, it would abandon this west end.
That goes to us in our briefly clearly and specifically before the Commission and the Commission found that there is no intention to abandon that property the fact of the matter is that it’s density is much, much greater than many branches of the Minneapolis and it’s much more profitable than many branches, there’d be no purpose to that kind of abandonment.
Charles E. Whittaker:
So that is not in the case.
The Commission found and the whole of the testimony shows that our studies demonstrated the value of that line and that we have every desire and purpose to keep it and promote it.
On the — on the other hand the Minneapolis – Pennsylvania-Santa Fe proposed no change in operation.
They promised that they’d keep the same local management that it would continue to operate and that posed a very serious series of problems to the Commission.
No — no improvement for service, no economies, no change, but here was my acquisition that was being proposed by the two most powerful competitors that Western had.
Here was an acquisition proposed by the Pennsylvania which had undertaken to acquire this property for the deliberate purpose of stifling competition with Western and Minneapolis.
And here was a history of Pennsylvania and another western carrier having only Western and driven it into the ground.
It’s been a disaster.
Well Your Honors the Commission handled that situation in this fashion as to both the motive of Pennsylvania to stifle competition it disposed it but by going —
Hugo L. Black:
Before you — before you tell us what the Commission did, would you be good enough to tell us the proceedings before the Commission?
Both of applicants filed applications to obtain authority to apply for the property.
In keeping with the rule that the Commission had established in a number of cases it considered the many Minneapolis’ application notwithstanding that no contract had been signed because the circumstances were such that there was a reasonable possibility that if the acquisition could be made, they were — the trustees were in the list of accepting.
Hugo L. Black:
Couldn’t they come in as opponents of the —
No sir they did not.
Hugo L. Black:
I said could they — they not have?
They did not though.
Hugo L. Black:
They did not.
They came as applicants.
They came as applicants for the —
No, they didn’t appear at all.
Hugo L. Black:
The Western there —
Western didn’t appear at all.
I don’t understand.
Was this case before the Commission?
The case was before the Commission on two applications.
A joint application by Pennsylvania-Santa Fe and an application by Minneapolis and St. Louis alone and those were consolidated for hearing.
And in the consolidated hearing, the trial examiner decided that the application of Pennsylvania and Santa Fe should be allowed and the application of Minneapolis and St. Louis should be disallowed.
That was affirmed by the fourth division of —
I don’t know what kind of hearing was that before the examiner, extended hearings?
It was — it was a full hearing of five or six days.
I — I gather from the record I wasn’t present.
And then it went to —
And then it went to the division of the — the Interstate Commerce Commission which affirmed which changed the —
Was the hearing before it or did they —
There was a hearing before it.
Human test — human testimony, human testimony?
No sir, just oral argument and briefs.
It then went to the Commission on Exceptions to the report of the Fourth Division with the request for oral argument which the Commission denied.
So that the Commission as a whole never heard even the arguments in the case it had the record and I take it was raised before the Fourth Division.
And it was in that posture that the suit was brought by Minneapolis before the District Court in Minneapolis.
What did the — commission– was the Commission unanimous?
The Commission was unanimous.
Was the Fourth Division unanimous?
Then the examiner, the Fourth Division and the Full Commission all decided against it?
And so did the three judges of the — of the statutory courts in Minneapolis.
Now somewhere along the line certain conditions were imposed.
Were that — is that done by the —
That was done by the — that was done by the Commission.
Those conditions were proposed originally by the Burlington and were accepted by all of the parties.
So that the conditions which were but the existing facilities and routes for service connections should be preserved in all respects.
Those conditions were proposed by the Burlington on the first day of the hearing and all the parties agreed to them.
I might say that my friends in the Government talk about our rigid acceptance of the — the conditions.
We accepted them as soon as they were tendered and then the Commission adopted them as they had been submitted.
And as you accepted them, if — if you were to be successful, you — you agree to these conditions.
We announced that we were prepared to accept those conditions and to abide by them, if our application was granted.
And these —
And the conditions were recommended by the hearing examiner and —
Oh yes and they were adopted by the —
They were adopted by that way.
They are not uncommon.
They are — conditions of rather general use and purpose and they’re designed to keep available the existing routes and facilities and connections.
Was there any labor problem in connection with —
Yes sir there — there was and if Your Honor wants to hear about it now, there’s no reason why we shouldn’t talk about it now.
At least you — you do very well as I may say in your own way.
I prefer to — to talk about it in the — in the setting in which the Commission dealt with the subject.
Would the laws be contradictory?
There always are labor problem when you’re trying to save a $1,770,000 a year.
The — the Commission as I am saying had these three problems with the application of the Pennsylvania-Santa Fe before it got before it got to the question of a comparative hearing.
The first was the problem of its purpose in acquiring Western for the sole reason of stifling competition that it dealt with by ignoring it And so did the Government in its brief and so did the Pennsylvania-Santa Fe.
Everybody, the persons let to the subject with silence.
I say the subject that has been brushed with silence is the admitted purpose of the Santa Fe — of the — the Pennsylvania to acquire Western for the stifling of competition before closing the competition by Western —
That’s on the outer, outer belt.
On the outer, outer belt.
Now there’s no dispute about it.
It was admitted by the President of Santa Fe so that the evidence is here but the Commission simply ignored it.
Let me ask you while we’re on this — this factual situation?
Are the — are the gateways of Danville, Decatur Springfield along the Wabash which is a wholly owned subsidiary of the Pennsylvania, are they of any consequence?
The — the Decatur gateway is because as Your Honor would see that leads through the Wabash to the Hannibal bridge crossing the Mississippi and then on to Kansas City.
The other two are lesser in importance.
The Springfield gateway is — is an important gateway but of lesser importance so far as the Wabash is concerned because it’s opened to other routes.
For example we can reach the Springfield gateway through the Chicago and Illinois Midland and do have a service route which practically rules in the St. Louis from Minneapolis to Peoria and down to Springfield and then across on the (Inaudible) so that the Springfield service route is open pretty generally to most people in the Wabash position is no different from that of any other individual carrier, but in Decatur it has the dominant position because of the Hannibal Bridge controls.
Does it avail transcontinental traffic across from the Wabash?
The testimony showed — the testimony showed that the route of the Wabash to Kansas City had been improved and its time accelerated to a point where it drew traffic away from a combination of Western and Santa Fe.
So that they’re active in competition and successfully in competition I may say.
And the Wabash is wholly owned.
They’re virtually wholly owned by Pennsylvania.
And I should also say that the Santa Fe shortly after the hearing opened up a new facility in Chicago which doubled its capacity and doubled the speed for handling cars and that has tremendous importance because in addition to getting the higher divisions for the longer haul, they now had the opportunity of moving a large volume of cars through on an incremental cost basis.
The cost of facilities there, the fixed charges are already there and the only cost is the service charge of moving the cars through this very efficient expedited automatic yard.
The — I up in negotiations — the — the hearing stage.
The Commission then — then had the second problem that it virtually ignored and that’s the history.
At no time did the Commission say that the incentives which the Pennsylvania and Burlington had no longer obtained because there was some change in circumstance.
Of course there were great many years that have passed but that doesn’t mean that the economic self-interest of people changes.
Human nature hasn’t changed in the last 40 years so that railroads are not interested in their long hauls.
They’ve always been interested in their long hauls and higher divisions.
It’s perfectly natural, perfectly human and universal in its — in its application.
So the Commission ignored the fact that under this — the ownership of Pennsylvania and a Western partner, this very property dried up.
And the incentive, which the investment in this property provided was not sufficient to overcome the advantages of the long haul and the greater divisions.
The third problem —
Now at that time, there was no connection for that (Inaudible)
That — that is true.
That there was a connection and the connection went further which was discontinued at this point at the same time that the Lomax connection was made.
It was a Texas or Burlington.
It — it was a connection that came up here to Burlington.
And with the — the Western.
Yes, the — the Western connected with the CB&Q here at Burlington and Iowa and that connection was broken according to the testimony of Mr. Gurley the President of Santa Fe at the time the Santa Fe connection was made.
Now the Burlington’s gateway at Chicago was the major gateway.
Burlington and Chicago and also had them both, but its major gateway, I think, is Chicago just as the Santa Fe gateway of Chicago.
Now the third question that the Commission had in connection with this application apart from the comparative problem was the fact that these two lines were named the most powerful competitors of Western.
And they got around that by building structure on two pillars.
The first was that this was going to be an independent separate organization running Western.
It was not going to be responsive to the rule or self-interest or the economic well-being of the — the masters.
That’s a very slim reed on which to build any kind of structure let alone an important facility in transportation.
There’s no showing at all of any case in which the Commission has found that this type of operation could function successfully in defiance of the self-interest of the owners.
Secondly and most important of all, the Pennsylvania-Santa Fe told the Commission, “We’re going to put Lomax on a parity with Chicago and Effner on a parity with Chicago for solicitation purposes” and the Commission bought that.
What does that mean, just trying to refer into concreteness?
I — I shall do that sir.
Mr. Gurley was asked what that meant he is the president of Santa Fe and his language was very explicit.
He said, “We’ll tell the shipper that we would take the traffic either at Lomax or Chicago, without preference.”
William J. Brennan, Jr.:
Mr. Daffey the –
William J. Brennan, Jr.:
Without preference, they had no preferences as to whether they got it at Chicago or Lomax.
What significance (Inaudible)
Well that they were willing — that they — they were in their solicitation.
They were going to tell the shippers and I think the best thing I can do is to — to read you what Mr. Daffey said and this appears at 483 of the record.
It is the purpose of Santa Fe to advise all of its solicitation forces that they will place Lomax on parity with Chicago in their solicitation efforts.
He then said, “We would not solicit Chicago preferentially over Lomax.
We won’t solicit Lomax preferentially over Chicago.
Well the shipper could make that choice.
Yes the shipper could make it, of course.
But the —
I mean the shipper could have made it before this —
— promise was made.
But — but the fact remains that the originating carrier has a powerful influence with the shipper and his advice and guidance carry straight weight, but the promise was made to the Commission that they would put these two points on a parity and Pennsylvania said the same thing.
They said, “We’ll continue to seek our long haul to St. Louis but after when Chicago will be on parity.”
Two witnesses gave the light of that.
How can you give a lie to other men something that could in the future?
Well Mr. — perhaps I can demonstrate it by what he said.
You can say it with slim promise but —
No, I think — I think the evidence is it was never meant in the sense in which it appeared and in the sense in which it was bought by the Commission.
William J. Brennan, Jr.:
Well I had assumed that parity means equality.
That soliciting —
William J. Brennan, Jr.:
How do you (Inaudible)
No, in the effort — in the effort to get the traffic.
They then said in solicitation.
Solicitation is the effort to get the —
William J. Brennan, Jr.:
More than they have as many solicitors in Lomax as there has been?
No, that the solicitors would — would ask for the traffic either through Chicago or Lomax heretofore they’d always ask for only through Chicago that the Pennsylvania solicitors —
Should we contend possession with here have to go to Lomax rather than —
It would go equally —
Equally well under the solicitation.
And you would let Chicago be desirable most extensively.
They would not urge Chicago over Lomax and wouldn’t urge Lomax over Chicago.
At — at least that’s what I would understand parity or solicitation to mean.
Now when we went through the record we found this situation.
Mr. Symes, the President of Pennsylvania said, “Well I don’t think there’s going to be the real change after this over.
If anybody asked me where to send the car, I’d say send it through St. Louis.
If I couldn’t it to send it through St. Louis I’ll tell them send it through Chicago.
And then if I couldn’t get them to go through Chicago then I would let it go through Effner.”
So that the parity —
Hugo L. Black:
When did he say that?
He said first St. Louis, second —
Hugo L. Black:
I mean I understand that but when did he say that?
He said that on the witness stand.
Hugo L. Black:
Is that in the record?
Hugo L. Black:
Did he admit that?
Yes sir, this — well that’s what he testified to.
It’s cited in our brief.
When did the first commitment made if they would be with them on a parity, who made that and when?
Three men made that on the witness stand.
And who were they?
Mr. Gurley, the President of Santa Fe, Mr. Daffey the traffic vice president of Santa Fe, Mr. Coffey, the traffic vice president of Pennsylvania.
Now Mr. —
I’m sure you can’t charge officially against Mr. Symes, can you?
Well, Mr. Symes first said what I quoted him in saying and later on he said, “Well they are all three about the same as far as I’m concerned.
I don’t think they make much difference.”
Then the final witness really explained it because is turned out that we were talking that we were involved in a special problem of semantics because Mr. Coulter the president of Western was called as the final rebuttal witness for the successful applicants and he said, “Parity doesn’t mean that they’ll solicit at all.
They are never going to solicit upon the freight for Western.
Nobody that works for Pennsylvania or Santa Fe is going to try to get freight to go through the Peoria gateway.
What parity means is benevolence.”
Now we asked him what has been the attitude up to now that was — that ultimately was described by the Commission as passive resistance.
He says benevolence and he said benevolence and parity are synonymous.
The Commission didn’t pay any attention to that.
It made the finding which it took verbatim out of the briefs of Santa Fe, Pennsylvania and I’d like to read that finding on page 34 of the record.
They said if Santa Fe obtains a half interest in Western, it intends to place Lomax on parity which Chicago from a solicitation standpoint and as the other half-owner the Pennsylvania will recognize Effner as one of its principal interchanges along with Chicago and St. Louis.
After they took it from the yard.
While Pennsylvania will continue to solicit its long haul to St. Louis, Effner and Chicago will be on parity.
Well the truth is that there isn’t going to be any parity here at all.
I could have change a thing upon keep on building the same strong competitors they always were and it isn’t going to change their method of solicitation.
In my understanding on the (Inaudible)
I — I can well understand that sir.
The — the condition that has been obtaining up to now as the Commission found has been described as passive resistance.
Mr. Daffey of the Santa Fe said, “That’s a sort of friendly neutrality.
It’s a benevolence.”
Then when Mr. Coulter got on the stand, he is the President of Western, he said, “Parity doesn’t — parity and solicitation doesn’t mean solicitation at all.
They’re not going to solicit for this gateway at all.
They’re not going to object if a shipper wants to send it through the gateway,” of course they can’t object.
They can’t stop the shipper from naming any point he wants.
“It’s a kind of benevolence”, he says and he was asked then, “Do you mean that parity and benevolence are synonymous” and he said, “Yes.”
Now that’s the state of the semantic.
Meaning without the (Inaudible)
I may say — I may say that they’re — they’re referred to very fully in our brief at — What page is that?
Well I know that.
We’re on our brief.
Mr. Coulter’s testimony appears at 1600 and 1609 in the fourth volume and it might be worthwhile since it’s very short for me just to read that testimony.
William J. Brennan, Jr.:
He favored the acquisition by Minneapolis and St. Louis until May 26, 1955, the date when the second contract was made to sell the property to Santa Fe and then Santa Fe to Pennsylvania.
Up until that point, he favored that Minneapolis acquisition.
After that he said, he favored the acquisition by the new proposed owners.
At 1600, he was asked whether under these conditions with the influence of the Pennsylvania add anything to the influence now being exerted by the PP&W in Santa Fe on a movement across the Peoria gateway.
He said, no.
Question – why not?
Because as I said before, this benevolent influence of the Pennsylvania was truly after a gateway which is present policy but they want their haul to Chicago or St. Louis which includes.
And then on 1609, he was asked, “In what way do you distinguish between parity and having the benevolent attitude toward the gateway?”
Answer – “In this way the railroad that has two gateways such as Effner and Chicago are not provoked if we get the haul through Effner.”
“That is benevolent attitude?”
Answer – “Benevolent.”
What is the difference if they are on a parity?
Answer – “That’s it.”
Question – You think they are synonymous then?
Answer – “I think they are synonymous.”
And so if this testimony given by the witness for the successful applicant has any meaning at all, they simply perpetuated the hopes on the Commission.
There isn’t any parity, there isn’t any solicitation, we’re going to have exactly the same thing that we had before active competition by Santa Fe, the Pennsylvania and the Wabash.
I — I think in a great deal of time on the individual — I may say that the subject is discussed in our principal brief on pages 40 to 42 in our reply brief pages 20 to 23 with the citations to the record on each of the witnesses.
There — there are other aspects of the — the comparative hearing that are significant unless the failure genuinely to make a comparison of the advantages and disadvantages of the two applications.
There was no effort to make a systematic evaluation weighing and balancing of the advantages.
Let me illustrate it.
In 13 different instances, the Commission found — made no findings but said — recited the position of Minneapolis.
Minneapolis insists, Minneapolis contends, Minneapolis states.
On economies they said Minneapolis claims economies of $1,770,000 and those were specified I may say job for job, facility for facility, yard for yard, office for office.
And it made no evaluation to that, but when it came to the Pennsylvania-Santa Fe application it said with representatives of Pennsylvania and Santa Fe on the Board, there ought to be able to find more economical ways of operating Western.
This indefinite they hoped was worthy of a finding but the $1,770,000 in savings each year was not dignified by any evaluation.
Nor did they make any evaluation as to the public service aspects of the improved service proposed.
The Commission found only one thing about that.
It said, “This new service would be extremely harmful to other carriers.”
And that’s substantially a quote.
The only citation for that is the testimony of the president of the Wabash, a subsidiary of Pennsylvania, that a “large part” of 6500 cars a year could possibly be influenced away by Minneapolis if the connections at Forest are improved.
Now the connections that Western has — has at Forest and they were talking about traffic that would move — that now moves as he put it, along Wabash up to Albia and Des Moines.
The amount is — is a pitifully small amount as you can see from the fact that the Wabash moves in at 20,000 cars a year.
And even then, the Wabash was not able to say how much of that large part would originate east of the point of cutoff at Des Moines here and how much west because the Western originations and destinations could not possibly be diverted.
So with that very vague and definite generality about a very tiny movement the Commission said the (Inaudible) program for improved service is extremely harmful.
When it turned to the other side of the coin, it knew how to — to use a real yardstick.
It said that if the Pennsylvania-Santa Fe improved service, and as a result divert traffic, it will not jeopardize the ability of any other carrier to provide adequate transportation service.
That of course has some real relationship to the transportation — national transportation policy.
I want to hurry along because my time is running out and talk about the labor situation that Mr. Justice Frankfurter referred to.
In an industry in which 50 cents out of every dollar goes to wages you can’t have economies, you can’t have elimination of duplication without affecting wages.
It’s utterly impossible.
The Commission said the 256 positions would be eliminated.
That’s quite true, but it didn’t say was the stability of employment was derived not from the number of positions you have but from the efficiency and economy of the service.
That if a gateway dried up there wouldn’t be jobs for the people that were there anyhow.
It didn’t say that the — Minneapolis showed that on the basis of its own experience with the average age of its executives below the officer level at 64, the natural attrition, would provide vacancies in the time necessary because the integration couldn’t be carried out overnight to move these people into other positions and as a further precaution Minneapolis and St. Louis offered its application to adopt the Washington Job Agreement which provides security for employees for a five-year period and in fact permits employees with five years in service to get a year’s pay — a severance pay if they want to move another job.
That was not evaluated.
There was no determination whether there’d be 10 people or six people affected.
They talked only of the 256 positions which, of course, is an unrealistic appraisal of the problem of employment in and of itself.
I want to move on to point two if I may.
There’s much more to be said about the lack of the findings, the absence of findings that we deal with in our brief, the failure to meet the obligation for a comparative hearing in the true sense because what they did was to say the ideal thing is to keep this property as it is.
Obviously that can’t be done if you have integration.
Hence the Pennsylvania-Santa Fe plan was the only one to be taken.
There was no effort to add up the advantages, the disadvantages, the risks, the jeopardies and the public interest.
The second point we make is that the entire transaction of Pennsylvania-Santa Fe is rooted in illegality because the purchase, the dealings in securities between Pennsylvania and Santa Fe are illegal under Section 10 of the Clayton Act.
Now the Commission disposed off that in one way that District Court suggested some others.
And I think all of them were interesting but none of them very helpful.
The Commission thought that because the second contract was signed by the Santa Fe, it was not a transaction between Pennsylvania and Wilmington Trust.
I would think that having the partner sign does not immunize the transaction but more than that, the dealings had already taken place.
One contract had already been signed.
Those were the foundations for this transaction so that the dealings and contract in violation of the statute had already occurred.
The Court thought that possibly the fact that Pennsylvania Company put up the money and bought the 50% interest and was not itself a carrier although wholly owned subsidiary of Pennsylvania might immunize the transaction, but to answer that we need only look at the application.
It’s an application by Santa Fe and Pennsylvania Railroad to acquire control of Western through the purchase of 50% by Santa Fe and 50% by the Pennsylvania Company.
So they met the reality of the situation which the Court was unwilling to do.
And because the Commission didn’t see this as a Section 10 problem, they had no desire or need to inquire as to whether immunizing the transaction was in the public interest.
Now it’s true that under 5 (11) transactions or acts necessary to carry out a Commission order are relieved from the restraints of antitrust laws.
That presents two problems here.
One is can they give condemnation under that statute to an act that is already illegal, not something done to carry out the Commission’s order which is what the statute contemplates, nothing — not something in future, something that has already occurred.
And secondly if it is within the scope of the Commission’s power is it not incumbent upon the Commission to set out precisely the reason, the public interest consideration that warrants overriding the policy of Section 10 of the Clayton Act.
We come finally to the question which is of general and far reaching importance and that is the extent to which the Commission is called upon in administering the Interstate Commerce Act to accommodate the objectives of that Act with the objectives of the national antitrust policies.
Let me say that that was clarified.
The issue was clarified for us by the Government’s brief.
For the first time, the Commission now explains what is added to this.
The Government’s brief says that the national transportation laws were adopted in replacement or to use their language in lieu of the antitrust laws.
We do not read the McLean case either in its prevailing opinion or in its minority opinion to say any such thing.
We assume that the Court said what it meant when it said that the two policies should be accommodated to the extent that they can be.
And of course in accommodating the statutes the economic motivations, the purposes, the alternative possibilities that the second application presents must be taken into account.
Secondly the McLean case says as we see it that the transportation goals maybe permitted to override antitrust violations if positive gains are — are achieved in transportation and if competition remains sufficient.
And that’s the standard I may say that the Commission itself adopted just last year in the (Inaudible) case where they said that they have the right to overrule the antitrust limitations if affirmative transportation gains are affected and if it’s necessary to achieve those gains and they take such form as economies, improvement in service and new efficiency and provided further that adequate competition remains.
If that standard will apply here, this order could not stand.
And I may say that basic to the Commission’s error in this respect is the fact that it — it played around with diversions of traffic.
It was concerned about whether one carrier or another would lose a few hundred or few thousand cars of traffic.
If never faced up to the full sweep of the antitrust problem, to the mechanism that was being set up here that would, if Sante Fe and Pennsylvania already pre-eminent in the Chicago and the St. Louis and the Decatur gateways, virtual domination of the Peoria gateway.
It never faced up to the fact that we were dealing with gateway competition on a large national transcontinental scale.
And in that respect it failed to meet its obligations in determining public interest.
The public interest could not possibly be assessed without taking into account that major problem of gateway competition, the major power, the concentration that was being afforded to the two giants who had undertaken this venture for the deliberate purposes of — of stifling competition.
I may say that while this was directly shown out of the minds of the people of Pennsylvania, the Santa Fe morality is not any better.
The president of Santa Fe testified that he preferred to control the Western, rather than have everyone saying they’ll purchase and that’s it.
This argument of yours rests, does it not, Mr. Swiren on your rejection of the Commission’s finding to the contrary and your rejection of the Commission’s finding to the contrary that if there is no — no basis, no allowable basis and evidence for their finding, isn’t that right?
In part that’s correct.
We’re saying, sir, that the Commission actually did not explore the — the gateway competition and it was charged with the responsibility of doing it.
And of their opinion but they don’t refer to the problem?
They — they do not, they do have —
How many terms —
They — they —
How could that (Inaudible)
Well sir I — I would ask that question too about the whole comparative hearing.
How could they reject our application without making a finding as to our service, as to our economies, as to the strengthening of two small carriers, objectives that are spelled out in the national transportation policy.
But they did.
They had as it were your customers before them didn’t they?
And — and they have the testimony of customers who are feeding railroads and make claims and express preferences.
Now is that relevant to the problem?
As to the customers, there was a campaign under which Santa Fe and Pennsylvania assembled shippers and invariably they testified that they came at the — that has to the Santa Fe or Pennsylvania and supported them.
In practically no instance had they examined our application.
Those who had been familiar with the Minneapolis and St. Louis service said it was fine.
For instance one of the mine owners who appeared said he’d be delighted if he could get a car supply that his competitors got from the Minneapolis and St. Louis just short distance away.
This was by no means an informed opinion of people competent to appraise the situation and the Commission itself has said on a number of occasions that the appearance of shippers or the absence of them does not minimize the responsibility of the Commission itself to form an expertise judgment and that’s something it did not do in this case.
Were there any offers of testimonies on your behalf that the Commission refused to hear?
There were not.
I think the — the facts are not really in controversy.
There are no basic factual problems with evidence on one side or evidence on the other.
We have situations in which the Commission has simply accepted promises in derogation of the economic self-interest, in derogation of the reality of the situation of a history of previous conduct and that kind of —
As to which there was testimony?
There was a testimony and — and the Commission Examiner and the Commission directed itself to those problems and they found against you using improperly against you, is that right?
They found against us in some things and didn’t make findings in others.
Well, that’s a different point that they actually failed to —
They actually failed to comply with the Administrative Procedure Act.
They’re trying to find these.
That’s right sir.
They did not make findings as for example the economies a $1,700,000 of economies.
They didn’t make findings as to the public interest and the improvements in transportation that we offered.
They’ve no — no finding of any kind.
The closest thing it came to making a finding was the one I mentioned the — that some carriers might be hurt.
And that of course is not the statutory test nor is it the test that they themselves applied.
They — they used three different criteria I may say for diversions of traffic as we spell out in our brief, but they say just one word.
It seems to me that what happened here is that the Commission decided in advance that it was going to entrust the Western to its two largest competitors and it was going to ignore the purpose of those competitors in seeking to crush the natural expansion of a small carrier.
And it did it by failing to have comparative hearings, by ignoring the policy of Section 10 of the Clayton Act, by failing to accommodate the antitrust laws to the transportation policies or attempting in any way to give credence to the natural and — and statutory sweep of antitrust prohibitions.
Charles E. Whittaker:
Mr. Swiren, I’ll finally ask you on this.
Charles E. Whittaker:
No, I didn’t say that.
I said that they — their connections, they are the largest connections but the solicitation for that business is by Western.
What Western does is it solicits business from the east that would move in over the Pennsylvania, over the New York Central, over to the Nickle Plate.
It solicits from the west business that will move in over to Santa Fe, the (Inaudible), the Burlington, the Rock Islands half a dozen other carriers.
Now it so happens that the largest volume of business that it gets from the east that gets through Pennsylvania at the Effner gateway.
That’s a perfectly understandable circumstance because of the fact that Pennsylvania dominates the large industrial segment of the east.
Pennsylvania, however, solicits actively for first for St. Louis and then Chicago and its volume through Chicago is ten times its volume through Effner.
It’s five times this volume through — I should say — its volume in St. Louis is five times its volume in Effner.
Similarly, Santa Fe solicits only for Chicago.
It does not solicit for Lomax and its volume through Chicago is 10 times its volume through the Peoria gateway.
The traffic that it gets through the Peoria gateway is solicited by Western or by Minneapolis, which alone depends on that gateway and which concentrates on its solicitation.
Tom C. Clark:
Your position is that there are lines now that cross and that you’re objecting to the fact that they created third line on grounds that they will not protect the interest of the third line.
We think that they will not protect it and we — we think that our self interest is in promoting it and building that gateway and it’s for that reason I may say that the States of Minnesota and South Dakota had joined in supporting our application because of the importance of that gateway to them and their knowledge that our self-interest is in promoting Western, in building it up.
We have no other interest than to maximize its use whereas the Pennsylvania-Santa Fe are interested in promoting the use of St. Louis and Chicago which yield more dollars.
Your — your position is more con — a little more concrete than that.
You say that by virtue of the overriding interest that the Santa Fe and the Pennsylvania have outside of this new acquisition is necessarily will have to supporting them the interest of the new acquisition to their major interest outside of them.
That’s couched as — as if they did came out of our brief only in better in language.
I had the benefit of not reading your brief then.
Thank you sir.
Harold J. Soderberg:
Mr. Chief Justice and Honorable Members of this Court.
The State of Minnesota took a separate appeal as did the State of South Dakota.
I will attempt to cover in whatever time I have left.
The position of those two States, the Attorney General of South Dakota, Mr. Parnell Donohue is here today and he joins with me in the presentation that I have so far as the State of South Dakota is concerned.
There is, of course, a dual system of regulation Federal and State, both of which have certain areas of responsibility and certain areas of authority.
Generally speaking, they’re both to promote the public interest and as I understand the public interest in the matter of railroads, it is to — there to provide an adequate system of transportation.
Now, South Dakota and Minnesota in the discharge of their duties to represent this particular public interest wish to emphasize two basic concerns to the Court, namely, the preservation and development of the M&STL and the preservation and development of the Peoria gateway.
Now as to the M&STL in our Exhibit H77 we have shown general information about the economic contributions of the M&STL to the State of Minnesota.
We’re not so much concerned about those as its contributions to our transportation system.
Now of the total of 1397 miles of the M&STL system, 399 are in Minnesota and 154 in South Dakota.
It serves 57 Minnesota towns, and 17 South Dakota towns.
It provides the only rail service to 42 Minnesota towns and 13 South Dakota towns.
It also provides the only mainline service to the Peoria gateway.
Now what are the consequences of this case upon the M&STL?
First of all, approval of the M&STL application in our judgment would promote both the federal and the state transportation policy.
The M&STL has a shaky economic history.
It had a 20-year receivership and was nearly dismembered in proceedings before the ICC.
Presently, it is financially sound and we believe it’s fully capable of handling this T&W undertaking, yet it needs the TP&W to remove their basic weakness which it has which is its need for diversification.
It’s primarily reliant on agricultural traffic.
M&STL unification with the Toledo, Peoria and Western would give both roads an increased efficiency and improved solicitation and would give both of them a chance to compete better with larger railroads and also with other forms of transportation.
In addition TP&W traffic would broaden the base of heavy density traffic to offset the large areas of low density traffic particularly in South Dakota and Minnesota which we’re concerned about.
On the other hand the approval of Pennsylvania-Santa Fe application, we think would be undermining both the federal and State interest.
Harold J. Soderberg:
It would eliminate all of the positive advantages of the M&STL which I’ve just covered not only now but possibly forever in the sense that this is its logical opportunity for expansion and always was considered to be such and we don’t see any other immediate possibility to diversify and so on.
Further it would divert at one point about $1,100,000 of revenue along the NEMO-Peoria segment.
Now the effect of that could be possible abandonment as was justified to by our witness, Dr. Nightingale, a — a PhD in the field of transportation, a man of many years experience and Mr. Carr from South Dakota their witness, that is South Dakota’s witness and also Mr. Swanson of the M&STL suggested the possibility of abandonments if they lose this revenue.
Even if there weren’t abandonments there’s the possibility of retrenchment in other — and other areas which we feel would not be to the public interest.
Now the Commission’s statement with respect to abandonment from Minnesota we feel gives no real protection to Minnesota and South Dakota.
It simply says that there were no abandonments presently contemplated and that in any event there would have to be an application to ICC.
So what are these possible abandonments be?
Can you show us some of that part —
Harold J. Soderberg:
Actually Minnesota Your Honor this map doesn’t extend up, far enough to cover it, but — and I certainly don’t care to in sense stipulate to any possibility of — of abandonments in Minnesota.
Well being possible.
Harold J. Soderberg:
Well you were talking about what would be their — so-called low density branch lines in Minnesota and South Dakota?
I think that the lowest densities are possibly in South Dakota but I — I’m not sure just exactly which lines or which communities I would say were the most particularly concerned about these towns that I’ve mentioned that — that have no other rail service.
In fact you would have to get permission of your Commission too wouldn’t they for the –(Voice overlap)
Harold J. Soderberg:
Well, as I understand that for station closings and — and for non-service tracks, the — the public utilities of South Dakota or Minnesota could handle it otherwise it would be ICC and of course we’re concerned about that situation too.
Now, we think that the real answer lies to the promotion of the economic strength of the M&STL and not to some kind of an answer that you’ll have to first get authority before you get benefit.
In this attitude of the Commission we feel it’s particularly distressing in — in view of its contrasting solicitude for possible abandonments along the Wabash where there was no — no testimony that there would have to be any abandonment, but only that there might be some diversion of traffic.
We don’t think that was a fair treatment of our interest where we had three witnesses that specifically recognized the possibility of abandonments.
You spoke in the outset of your argument that there are two matters concerned to you, one, was its effect upon the Peoria gateway, wasn’t that one of your —
Harold J. Soderberg:
That’s the point I’m at right now Your Honor.
We’ll be —
— will you deal with that — I’m curios to know why the State of Illinois isn’t concerned about that?
Harold J. Soderberg:
Well the importance to Minnesota and South Dakota is — is the fact that neither Minnesota nor South Dakota is ideally situated geographically in terms of railroad movements to the east because of the presence of the Great Lakes we have to rely on either Chicago or Peoria to get to the east.
Now it’s obviously more desirable to have two gateways that are active than to team up with one and as a consequence if anything should happen to the Peoria gateway in terms — not of its total disappearance but let’s say its decreased effectiveness or ability to handle traffic through it while that would be prejudicial to the interest of Minnesota in terms of — of either peace time or national emergency.
Now the effects of — the effects of this proceeding on the Peoria gateway as we consider them we haven’t seen no application would result in vitalization of the Peoria gateway.
First of all the outer belt concept of the operation of the Peoria gateway to avoid the congestion of Chicago has been in — in large measure the — the cause for success of both the M&STL and the Toledo, Peoria and Western.
The M&STL has no other gateway connection.
Its economic incentive would be to maximize movements through the Peoria gateway in competition with other gateways such as St. Louis and Chicago.
The success of the M&STL and TP&W unified operation would depend 100% on a promotion of the Peoria gateway.
Harold J. Soderberg:
On the other hand we consider the — Pennsylvania-Santa Fe combination’s proposal as resulting in stagnation of the Peoria gateway.
The main interest of Pennsylvania and Santa Fe lie in competing gateways which is to say Chicago and St. Louis.
Their divided ownership in the Toledo, Peoria, and Western would add to their lack of economic incentive to fully exploit the gateway.
Also they would have the lack of — of the intense purpose that the M&STL and — and the Western operation would have because of the comparative unimportance of the operation when considered along with the size of the rest of their systems.
We will recess now Mr. —