Secretary of Agriculture v. United States – Oral Argument – October 12, 1955 (Part 2)

Media for Secretary of Agriculture v. United States

Audio Transcription for Oral Argument – October 12, 1955 (Part 1) in Secretary of Agriculture v. United States

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Earl Warren:

You may proceed Mr. Frankel

Marvin E. Frankel:

If the Court please, before lunch, I was reviewing these studies that played an important part in the Commission’s decision, studies showing undetected imperfections in eggs given to the carrier for shipment.

I pointed out that in one study there was 3.4% of such imperfection made up of check, stains and only one tenth of one percent eggs was designated as loss.

I also pointed out that more than half of this 1.9% was a kind of imperfection that could not be discovered by the kind of inspection made at destination.

And I said that other study showed varying percentages of this kind of imperfection.

Please review it at pages 31 and 32 of the record in the Commission’s finding.

Now, the inspection at destination does not include candling and clicking.

It’s a joint inspection by the carrier and the consignee which is purely visual and the Commission’s findings also show that at least equal or greater amounts of imperfections of the same kind as those shown in the other tests are undetected at the destination.

That is to say, after eggs are accepted as being in good order by the consignee with the bad eggs put aside, studies by the Department of Agriculture showed imperfections of the same kind check, stains, dirty, and lost eggs totaling from 3.9% to 7%.

But more the materials before it, the Commission concluded that for eggs packed at points other than the rail point of origin, the 5% tolerance would be reasonable because the damage for which the carrier is not responsible averages that amount.

Now, I emphasize the word averages because it plays a critical part in our argument.

Similarly, the Commission held that the 3% tolerance for eggs packed at the rail point of origin would also be reasonable because of the same theory of averages.

The District Court majority found that this problem of damage and the tolerance regulations issued because of this was a part of the whole problem of rate regulations, and the kind of problem confided to the expertise and judgment of the Commission.

It found that the Commission findings were supported by substantial evidence and that the decision and the carriers regulations it approved must therefore be sustained.

Judge (Inaudible) dissenting, concluded that these regulations were limitations of liability and were therefore prohibited by section 20 (11) of the Act.

Now, as I’ve said, we agree with Judge (Inaudible)

20 (11) is set out at pages 20 and 21 of the Government’s brief.

And since we think that the statute almost by its terms, decides this case in now favor, if the Court will be indulge me I’d like to read it.

It says that any carrier subject to the Act receiving property for interstate transportation shall issue a receipt or Bill of Lading therefore, and shall be liable to the lawful holder thereof for any loss, damage, or injury to such property caused by it.

A no contract receipt rule regulation or other limitation of any character whatsoever, shall exempt such common carrier from the liability hereby imposed.

And then, in language which may almost be somewhat repetitious for our purposes, this point about limitations of liability is reemphasized.

The statute says that the carrier shall be liable to the lawful holder.

It said receipt or Bill of Lading of any party entitled to recover thereon for the full actual loss, damage, or injury to such property caused by it, again, not withstanding any limitations of liability in any form and then it goes on to say that any limitations of liability in any form in regulation or another form is unlawful and void.

Tom C. Clark:

Doesn’t the statute mean when it said rule, or regulation or provision or contract or so forth, relieving itself from liability, doesn’t that mean something promulgated by the company and not by Government agencies?

Marvin E. Frankel:

Well, of course Your Honor, these regulations in this case are promulgated by the railroads.

These are to tell —

Tom C. Clark:

They’re no good at — with the — do not receive through the approval of the Interstate Commerce Commission implicitly or impliedly.

Marvin E. Frankel:

Until set aside as unreasonable or unlawful —

Tom C. Clark:

Yes.

Marvin E. Frankel:

— by the Commission, —

Tom C. Clark:

Well —

Marvin E. Frankel:

— they presumably offer —

Tom C. Clark:

They certainly would carry some sanction of the Government.

Marvin E. Frankel:

They now, have the sanction of the Interstate Commerce Commission in that the Commission has held them to be valid.

Tom C. Clark:

But the rule — this wouldn’t be a rule of regulation, would it within the meaning of the statute good for the filing of the carrier.

Marvin E. Frankel:

I think it would, Your Honor.

And Interstate Commerce Commission has so treated it.

The Commission has taken as we presented it, the problem whether these regulations issued by the railroad are lawful under section 20 (11).

It held that they were.

And it recognized that the question is, are they?

And the statute as it’s just been pointed to me refers expressly to any rule or regulation or any tariff filed with the Interstate Commerce Commission as not being permitted to contain any limitation of liability.

And that’s exactly what we have here.

They’ve been variously referred to.

These are regulations, a pair of regulations.

They’re part of the consolidated freight transportation and nobody has doubted and anytime in this litigation that it if these regulations can’t be squared with 20 (11), they are void.

The whole issue has been, can they be held valid against this sweeping language of 20 (11) outlawing any limitation of liability in any form.

As a matter fact, two effects of section 20 (11) are undisputed.

First, it codifies the common law rule that carry a liability.

I think our friends on the other side have some ambiguities in there briefs with their emphasis on the words in 20 (11) “caused by it”.

But there’s no dispute really about what “caused by it” means.

The Commission itself sets it out in its report at page 40 of the record.

That “caused by you”, refers to the familiar standard of the liability form carrier.

That is, the carrier’s liable — I’m reading the Commission’s word at page 40 at the record — for failure to transport safely goods entrusted to its care, unless the loss or damage was due to one of certain causes such as acts of God, the public enemy, the act of the shipper or the nature of the goods.

It is undisputed that when the carrier, when the shipper in a suit for damage to its goods proves that the goods were given to the carrier in good order, that they would deliver in that order and proves the amount of his damage, then the burden is upon the carrier to bring himself within one of these exceptions, acts of God, et cetera.

Now, the second point which has been undisputed of which I should emphasize is that section 20 (11) outlaws any limitation of liability in any form whatsoever.

And it’s been undisputed that if regulations of this kind contain limitations of liability, they are void.

(Inaudible)

Marvin E. Frankel:

Well, I — the — the answer to that question Your Honor is the answer to the Commission’s decision as we see it.

(Inaudible)

Marvin E. Frankel:

That’s right.

Marvin E. Frankel:

And there are causes of damage in the transportation of goods for which a carrier is not liable.

One of those is the inherent nature of the goods.

If the carrier can show in the particular case against a particular holder of the Bill of Lading that in that case, the damage of that holder of Bill of Lading is claiming compensation for was caused by the inherent nature of the goods, then of course we can see that the carrier is not liable.

Felix Frankfurter:

Are you implying that the — that the regulations of section 20 (11) (Inaudible)

Marvin E. Frankel:

If the commodity is say grain, and if the facts show that grain frequently shrinks but sometimes expands when its shipped then our argument would be to that conclusion, although in the one-grain case that Your Honor maybe referring to, that our opponents rely on the physical facts are different.

I think that there — that unrevealed decision is probably wrong but I think we have a much easier situation here.

Felix Frankfurter:

Yes, that one’s here (Inaudible) comes in the conclusion of the said grain (Inaudible) that in every shipment, every usable shipment, which I am saying if they couldn’t —

Marvin E. Frankel:

It could.

It could find for example and this is purely a hypothetical case because there’s no case in history where it has found it.

It could find a grain always in every case (Inaudible)

And then nobody would be worried about economy, but supposed it found that any shipper coming into it could to claim that the carrier loss 2% of its grain is absolutely for close in every case from showing that this grain didn’t shrink, it expanded.

It — it accumulated moisture and gained in weight and that what happened is that the carrier’s employees took off with 100 pounds of grain.

Now, if the Commission on physical facts like that and knows of a physical fact in the real world that grain sometimes shrinks and sometimes expands.

If on facts like that it approved tolerance regulations of uniform application, we think that they would be invalid.

Now, of course —

Felix Frankfurter:

Let’s pretend — let’s pretend that the regulation that it wouldn’t (Inaudible) relatively small, it’s normal and delicate, couldn’t they been (Inaudible) new rule about defined proof and (Inaudible)

Marvin E. Frankel:

Well —

Felix Frankfurter:

And now the egg is wrecked?

Marvin E. Frankel:

That’s right and — I keep trying to lift over grained eggs because I recognize fully that on the physical fact, Your Honor puts.

We have a harder case.

I would like to be able to say simply that we don’t have to worry about which I suppose strictly is true.

But I think in fairness I have to say, that as we read the statute, and if we read the (Inaudible) opinion of Justice Holmes.

Felix Frankfurter:

(Inaudible)

Marvin E. Frankel:

Well, he was dealing with a specific case with a specific shipment and as it applied to that shipment, he held that a regulation of approved by the Interstate Commerce Commission was invalid because it denied to that shipper in that case recovery for his full actual loss on the facts of that case.

Now —

Felix Frankfurter:

Then I would like to just compromise it.

Marvin E. Frankel:

Not in relation to a problem of natural shrinkage and here we have a problem of unnatural breakage if you plea.

So, I think it’s — it’s — I think we have an easy case here.

I think the grain case is a relatively difficult one.

I’ve tried I’ve to say in full honesty to the Court that the rule we contend for in our judgment extends to that grain situation.

Marvin E. Frankel:

But then I emphasize to win this case first that you don’t have a problem of any such difficulty here.

Felix Frankfurter:

(Inaudible)

Marvin E. Frankel:

Well, I — I don’t know of any case, Mr. Justice, in which you have a — a physical law of the undeviating kind that would lead me to agree with the suggestion that following these regulations are valid.

Now, here we have a case where it demonstrates that thousands of carloads of eggs are shipped all over the country without damage, without any damage at least that is reflected in damage claimed.

And the Commission found that the differences in claim, claims asserted and paid by the railroad where they liability.

But the difference cannot be attributed to differences in the particularness or fastidiousness of the consignees or the claim of consciousness of the consignee.

Now, —

(Inaudible)

Marvin E. Frankel:

He may, Your Honor.

And 10% of the shippers of a due have even inspections that are referred to in the record and in the Commission’s finding part, primarily as they are entitled, grading inspections.

They are to determine the grade of the egg.

They do, in determining grade ascertain the amount of imperfections in the egg.

Now, I’ll — I’ll lift the head of my argument to say this.

That if the affirmative part of this regulations, the 3.5% tolerances, if those are invalid as applied to eggs, the exception we think is equally invalid.

And that’s true for several reasons.

First, the exception itself incorporates 1% tolerance in addition to the amount of imperfections found in the eggs at the origin.

Second, I might say that this inspection which causes the shipper if he wants it, from $11 to $15 of carload is not one that the average shipper voluntarily undertakes and pays for it and is not one that the Commission undertook here to compel any shipper he make.

In our judgment, it is — it would be at most, although we claim the exception is unlawful too.

It would be at most and of lawful voluntary alternative to an unlawful affirmative tolerance regulation which in fact I will apply to the great majority of shipment.

That would be the one percent?

Marvin E. Frankel:

We think the one percent is unlawful, but I was saying something additional.

I was saying if the Court agrees with us that you have to strike down the affirmative part of this regulation, the three and five percent tolerances which in fact are of the greatest concerns, and if you agree, too, that the 1% is subject to the same infirmity, then all you’d have left is a kind of shred of an exception.

Without anything, that it would be an exception too.

And you would be faced, if you wanted to save anything, with the problem of writing new regulation for the carrier which is a function, we assume the Court would be unwilling to undertake.

Now, I want to make one other point with respect to this grading certificate inspection.

In my statement, I pointed out that no inspection comparable to this Government inspection is made at destination.

That’s a quick, visual, joint carrier-consignee inspection which the findings of the Commission show leave undetected the same amount of the same kind of imperfections that this origin inspection show.

There’s no candling or clicking as this Government inspections include.

Therefore, if you left this exception to stand, and if it had any function at all, it would place on the shipper’s shoulders, not only the ordinarily undetected origin damage, but also the same kind of damage which is undetected by consignees at destination.

Now, the shippers in this case, and their testimony pointed out that it would be agreeable to them, if you could have a system of comparable, fair inspection at both ends of the trip.

Marvin E. Frankel:

But you don’t get that in this certificate exception which even apart from this 1% tolerance which — to which our argument go directly even apart from that, is an unfair and unreasonable imposition on the shipper.

And as I say, the Commission did not present it as an imposition but merely as a voluntary device, now you used by 10% of shippers by which they could, in the Commission’s view, escape what we think is the clearly unlawful impact of these 3% and 5% tolerances.

Now —

Stanley Reed:

As a matter of fact (Inaudible)

Marvin E. Frankel:

Well, I don’t think we — that it’s possible to reach that problem on these findings.

Stanley Reed:

(Inaudible)

Marvin E. Frankel:

If it wasn’t that view and we say that view is incorrect first, because the Commission —

Stanley Reed:

(Inaudible)

Marvin E. Frankel:

Well, it depends on what one means by true, Mr. Justice Reed.

If it’s true as an average —

Stanley Reed:

(Inaudible)

Marvin E. Frankel:

I would to meet it on that ground because that’s the Commission’s ground, an average loss of 1%, thousands of carloads, and almost all of those that go to the west and the pacific coast shippers are screaming about these regulations, arrive with no damage.

Which is an average loss of (Inaudible)

Marvin E. Frankel:

The Commission says so.

We think not.

But assume it is.

Assume that it is an average loss of 1%.

That means by definition and by the Commission’s findings in this case that there were there losses above 1% and below 1%.

Now, what about the shipper who has no imperfections in his egg, is a holder of the Bill of Lading under Section 20 (11).

He is entitled to recover his full actual loss under section 20(11).

Now, of course, this was the burden on carriers.

This Court’s decision at the common law as well under section 20 (11), recognized that this is a high standard of care.

And in the real facts of the real world, I have no doubt that carriers sometimes pay for losses which an omniscient mind would know they were not responsible for this.

But under their high burden of proof, resulting from a familiar rule of public policy, that’s part of the risk of doing business that they’d bear that cannot be solved.

The Commission at pages 63 and 64 of its brief tells us that it’s a (Inaudible) tells us that there’s nothing wrong with averages because averages have been used from time immemorial in making rates.

An average risk of loss and risk of damage claim is a familiar component of the rates the Commission will authorize.

We agree with that.

We agree that in a rate proceeding, the Commission might well take into account the amount of damage claim the carriers have being paying on it.

Well, I might mention in that connection that if final means clear, that the carriers are losing money on carrying eggs, even with this high damage claims in New York.

I refer only to the record for those situations, I mean including those situations.

Marvin E. Frankel:

If you look at page 1016 of the record in the second volume, you’ll discover that while this investigation was in progress, there was a change in rates that’s very pertinent here.

Stanley Reed:

Well —

Marvin E. Frankel:

1016.

Prior to September 1950, the carload rates on poultry, butter, cheese and eggs had all been the same.

In September 1950, while this investigation was underway, the railroads reduced their rates on poultry, butter, and cheese by what it said here to be about $150.

They left the rates on eggs the same.

Now, it’s entirely reasonable, although this is not a rate case and there’s no evidence on it.

It’s entirely reasonable to suppose that the reason the carriers left their egg rates high, and reduced the others, is that it cost them more to carry eggs.

Now, in publishing rate and in the Commission’s approval or disapproval of rates, this is a valid consideration.

It’s not valid because section 20 (11) forbids its validity in dealing with this problem of claims by holders of Bills of Lading to recover in each case the full actual loss they are able to prove.

Let me refer to one other page of the record that’s interesting on this rate question.

At page 1165 — 1165, there is a table showing over the years involved in this case, the net income of railroads from carrying eggs.

And very interestingly, it shows with index figures that between 1939 and 1948, when this eastern seaboard problem was drawing and egg damage claims on the eastern seaboard were rising, the net income of the railroad from the carriage of eggs after payment of the claim was 60% higher in 1948 than it had been in 1939.

Now, I don’t feel that we have to argue, that we’re really equipped to argue in this case that the railroads are getting rich, or going broke on the carriage of eggs.

The important thing is that this is not a rate proceeding.

You can’t answer those questions on this record.

And if as the Commission says, these averages are valid in rate proceedings, and we agree, then they ought to be presented in rate proceedings, and if the carriers as we think the record makes doubtful.

But if the carriers are losing money on the carriers of eggs, their remedy is through that familiar device of a rating fee and fragility which is after all what we’re concerned with here.

Eggs don’t break themselves.

They’re fragile.

Fragility and risk of damage claims generally is one of the most familiar and elementary considerations in a rate proceeding.

This Court had mentioned it.

The Commission mentioned it in its brief and countless decisions of the Commission testify to that.

Now, with the rate rise, if there is a problem, it can be solved.

It cannot be solved, we say, by this use of averages to control every single case, no matter what any shipper can show and preclude every shipper from collecting 3% or 5% of the damage even when he shows in a particular case that his eggs were smashed up by the utter carelessness and negligence of the railroad.

Now, this is not a problem for abstract study.

The fact is that the railroads who’ve been paying these claims before this regulation, that is, recognizing their liability on it, are well able to distinguish between the various causes of damage to particular shipment.

Now, we — there is in the record an Exhibit 35 which shows the study by the freight claim division of the Association of American Railroads, breaking down the causes of damage in various kinds of shipments and specifically in egg shipments.

And their investigation showed that in such and such a percentage of cases, the damage was due to bad equipment.

In such and such a percentage, the damage was due to negligence of employee and so on and so forth.

Marvin E. Frankel:

And then after they investigate, in one case where they find they were negligent, they may well pay the claim.

In another case, where they find that they were not at fault, that they believe they were not, they don’t pay the claim.

And everybody knows particularly since it’s unlawful to pay for a claim that the railroads don’t pay them unless they think they’re liable.

But the Commission says here, “The railroads were paying large claims, paying them because they were liable.”

So, they instituted these regulations to improve that situation.

That is, to reduce the amount of claims.

Now, that it seems to us is in its barest and most obvious point a reduction of, a limitation of liabilities.

And in fact, the evidence shows that these tolerances cut the claim by 35% to 40% because the tolerances applied which you see, not as a percentage of the whole shipment but as a percentage of the eggs in the damaged cases.

So that if a shipper’s claim let’s say for 10% of the eggs in the damaged cases, a 5% tolerance doesn’t cut the claim 5%.

It cuts it in half.

And experience working under this kind of tolerance had shown, according to the railroads on their testimony, that the face amount of claim is to cut about 35% or 40% by the application of — of these tolerances.

What difference does it really make to the railroads which way this thing goes?

Because if they have to pay to the full extent without tolerances, if they are without any tolerances, it surely reflected those lost payments were reflected in the increase of rates.

What difference does it make to them?

Marvin E. Frankel:

Well, I can’t tell, Your Honor, because this is an odd sort of record which we think is a rather deficient finding.

Here’s that situation to see in New York.

The Commission’s report gives no suggestion of an answer to that (Inaudible) situation.

In the rest of the country, the railroads are having no problem.

Now, if you authorize a tolerance of this kind, it seems to us that you encourage the railroads all over the country and the truckers because they will be included next.

Some of them are in this consolidated freight transportation, now.

You encourage them to light up a bit on how careful they are with eggs because now they can break 5% of them.

Whereas in the south, the west and the southwest they haven’t been breaking any.

That makes no difference.

They can eat them.

And it makes no difference.

If you do it by means of grades and continue the stringent policy of the common law as codified in 20 (11), the railroads retain their incentive to find out why they’re breaking so many eggs.

Now, Commissioner Mitchell who wrote the commissions of food, at the hearing where the Court presented and covering a period of over a year, at page 877 of the record reflected some exasperation that perhaps this record justifies.

He said at record 877, “I think the railroads ought to be discovering what is going on in New York.

God knows we’ve been trying to get them to do it.”

Then a few pages later at 884, he said, “So we get down, don’t we, to a question of what shall we do as to New York rather than shall we penalize the whole nation.”

Marvin E. Frankel:

Well, Commissioner Mitchell never got any answers to his question before this report showed.

And for reasons that we can’t explain, the report he wrote to the Commission does penalize the whole nation for a situation concentrated in New York.

Now, that seems to us to be an unreasonable solution of the problem.

It’s not the kind of solution the Commission is set up to reach.

It doesn’t promote a wise transportation policy.

It doesn’t get at the important problem that shippers and carriers alike are concerned with, why are all these eggs breaking?

Everybody knows apart from this record that eggs can be carried without being broken.

They have bounced along in trucks without being broken.

They were carried in trucks and trains before 1941 without being broken.

These inevitabilities and inherent damages and averages were no problem before 194.

And they are no problem now,.except in New York.

Now, we think that apart from 20 (11), and this is our second claim, the Commission’s order would have to be upset because the findings don’t support it — don’t support this kind of nationwide relaxation of carrier liability.

And —

(Inaudible)

Marvin E. Frankel:

Oh.

Well, the — the regulation provides — let’s take the 3% tolerance.

There’s a 3% to 5%.

The regulation provides that the carrier shall not be liable except for the excess over 3% of the amount of eggs in the cases containing damage.

You can take the total number of eggs in the cases showing damage and 3% percent of that is cut off.

Carrier is in no case liable for that.

Now, usually shipments are not (Inaudible) The shipper consignee will be claiming 5%, 6%, 7%, 10% of the damage, of the contents to the damaged eggs as his loss which is entitled to recovering.

Now, let’s suppose he claimed 6% and that he claims for 6% on $200.

Now the tolerance is 3%.

So, you cut it in half and you cut off $50 of it.

And the railroads experience has shown that the effects of the 5% tolerance is to cut without consideration of liability, the base amount of claims some 35% to 40%.

And in some studies more than that.

So, what we say is that the findings doesn’t support the order in anyway.

And that this use of the averages to cover every case regardless of what the shipper can show is unlawful.

It stamps the rule of section 20 (11) and the common law rule that’s codified on its head instead of leaving the burden upon the carrier to show an accepted cause for which he is not responsible.

It says the shipper, not only will we presume that that cause has been shown conclusively, but no matter what you show, you can’t recover above any — for anything below 3% or 5%.

Marvin E. Frankel:

And of that we say may rightly reflect the problem that can — can be solved by rate.

It can’t be solved by this kind of tolerance because this, we submit, is an unlawful limitation of liability.

Felix Frankfurter:

(Inaudible)

Marvin E. Frankel:

That’s right.

It doesn’t bring the burden on the shipper.

Except that you describe as a burden and insurmountable one.

The shipper, no matter what he shows can never recover for 3% or 5% percent.

Felix Frankfurter:

(Inaudible)

Marvin E. Frankel:

I don’t think so, Your Honor.

I don’t think —

Felix Frankfurter:

(Inaudible)

Marvin E. Frankel:

Well, it’s — it’s very difficult for me — for me to read these regulations as providing that.

It says, “No claim shall be allowed, no claim.”

Felix Frankfurter:

Allow me to read this (Inaudible)

Marvin E. Frankel:

Well, I think there may be ambiguity for this before its construction.

Felix Frankfurter:

(Inaudible)

Marvin E. Frankel:

Assuming I agreed, I would still argue that the regulations are invalid.

But I think in fairness to our understanding that it says I also have to emphasize that I do not agree that under these regulations, if they were risked, a shipper can even recover if he shows negligence.

At least, you’d have to revise them and — and make sure they said that before — before we’d agree what they do.

But even if they did, we say that since the carrier’s liability going way back and certainly under section 20 (11) is much broader than a liability from mere negligence.

Tolerance regulations that chop that liability down are forbidden by 20 (11).

Felix Frankfurter:

(Inaudible)

Marvin E. Frankel:

Can I ask where are you, sir?

Felix Frankfurter:

That’s on page (Inaudible)

Marvin E. Frankel:

I — I think that you said —

Felix Frankfurter:

It doesn’t’ mean — it doesn’t mean that.

Marvin E. Frankel:

— that’s correct.

But I don’t think the regulation say that.

I don’t think the regulation say that.

They say, “No claim shall be allowed, period.”

Marvin E. Frankel:

But let me accept that as a gloss on the regulations an odd way to get a gloss for carrier regulations.

Felix Frankfurter:

But as to the Court —

Marvin E. Frankel:

Accepting it —

Felix Frankfurter:

— that’s the — that’s the regulation given to the carriers liability and gives liability without a clause referenced and they’re not bringing to court in an equity.

Marvin E. Frankel:

Egg shippers don’t always have a lawyer at hand when they’ve lost $25 on a shipment a day.

The record showed that in considering claims for egg damage, the railroads operating under these tolerances have been chopping off the tolerance percentages all over time without considering it.

Now, it maybe that if the egg shippers can periodically get the course they can have this clause enforced.

It has not been enforced.

And then I would add that even if it is rated to the regulations, we insist on the dominion and long standing standard of carrier liability which — of which the wisdom is demonstrated by this Court’s repeated decision.

And we argue the fact standard is violated by these regulations.

Earl Warren:

Mr. Frankel, although your time is just (Inaudible)

Marvin E. Frankel:

Thank you, Mr. Chief Justice.

Earl Warren:

(Inaudible)

Samuel R. Howell:

May it please the Court.

Counsel for appellee railroad and I have agreed upon a division of the argument.

I shall argue the issue of the Commission’s jurisdiction to approve the tolerance rules that are here on appeal.

Now, the — the damage claim problem to egg is not a new problem.

It didn’t just arrive during World War II, when this counsel says that there was a source of equipment and they were overcrowding the cars, but this is a problem that has confronted the Commission for over 40 years.

As a matter of fact, back, in 1911, the Commission conducted an investigation involving the same questions that’s raised here.

How to reduce the damage claims or to make it possible for the railroad to — to avoid having to pay claims on property that it didn’t damage.

And that was the New York Mercantile Exchange Company versus the B&O Railway decided in 1911.

And then in 1919, the Commission again considered the question of claims on damages to shelled eggs.

And that was the case of the National Poultry, Butter and Egg Association versus the B&O Railroad.

And that’s reported in 36 I.C.C.

And there it prescribed a 5% tolerance rule which is — is — which is very similar to the rule that’s involved in this case.

And that stood the test of time until 1948 when the railroads filed another (Inaudible) with the Commission and — and proposed to change that rule and so as to include a — a rule that would cover the damage that occurred during transit due to the inherent nature of these, of the eggs and also to cover the pre-existing damage to eggs before the railroads ever receive them.

Now, that is the history of this thing.

It isn’t something new.

The carriers that applied their best to solve this problem as is shown in the Commission’s decision.

And the Commission’s found that despite all of the efforts of the railroad has made where the — wherein it had used, made test — tests in — in connection with the unloading of the eggs in the cars, putting the eggs, placed them crosswise and lengthwise and there were other sets of — of combination.

Samuel R. Howell:

And but using rubber pads for bunkers and taping the eggs together with — with adhesive so as to make them a compact unit so as to prevent any vibration or shaking or jolting that would cause them to break.

So, the — the Commission found that the — although that the railroads have — have done their utmost to eliminate damage to eggs at destination, little improvement could be expected.

Felix Frankfurter:

Mr. Howell, how would you account do you see (Inaudible)

Samuel R. Howell:

But Your Honor I can answer that.

There — there is an answer to it and the Commission considered that problem.

No matter where the destination of the egg is, there is always the same amount of — or of — and have this average amount of 5% damage existing in the egg crates at the point of origin where those eggs have been packed away from the — the real point of origin.

There is that much damage pre-existing in those eggs before the carrier ever laid his hands on them —

Felix Frankfurter:

At the west or north?

Samuel R. Howell:

— regardless of whether they went east or west or north or south, those eight days damages in those eggs, crates before the carrier puts his hands on them.

And therefore, it would not be fair and just for the carriers to continue to have to pay damages that they didn’t cause.

And that’s exactly what these rules are directed against.

Now, as to the truck situation, of course, we dare the — I — I don’t know whether it’s in the record or not but the — the trucks, the truck — truck — truck transporters I believe do not have, they call as rule.

They — they’d operate without any rules.

And of course, it’s not known whether the — that the companies are as –as fastidious when they’re shipping eggs by truck as they are by rail.

I — I don’t know that.

It’s not in the — in the record.

But it’s — of course we have —

Felix Frankfurter:

(Inaudible)

Samuel R. Howell:

Well if the —

Felix Frankfurter:

(Inaudible)

Samuel R. Howell:

Well the — I — I don’t know that — that there’s anything in the record on that, Your Honor.

But I was trying to answer the questions enough.

The —

Felix Frankfurter:

And also the shipping (Inaudible)

Samuel R. Howell:

Yes, Your Honor.

That it’s (Inaudible)

And if the prices were raised on the cost of shipping eggs by rail any more than they are now, there would not be an egg moved by then.

And that then, so the raising of the price of their transportation according to — in view of this situation here, it is not the answer to the problem.

Felix Frankfurter:

That’s not the problem (Inaudible)

Samuel R. Howell:

That’s not relative to our purpose anyway, Your Honor.

Earl Warren:

But would you say, though, that the moment the shippers change or shift from rail to trucks that they become less fastidious about the kind of eggs they eat?

Samuel R. Howell:

Well, Your Honor, you know, I wouldn’t think so.

Earl Warren:

Well — well how do you account then for the difference?

Samuel R. Howell:

The difference in the damage?

Earl Warren:

Well, no but there’s a great shift, is there not —

Samuel R. Howell:

Oh.

Earl Warren:

— between from railroad — from railroad to trucks.

Samuel R. Howell:

I can answer that question, I — I didn’t know —

Earl Warren:

And also there’s a great — a great void between the — the damage done by railroads and those done by trucks.

Now, how do you account for the fact that these same shippers will not be as critical about the eggs they — they receive by truck as they were by the — of those that they receive by rail?

Samuel R. Howell:

Well, Your Honor, I couldn’t have account that.

Except that I do know that the shippers have gone to the trucks for two or three reasons.

One is that the truck can come to the shipper’s warehouse and pick the eggs up and make delivery at the destination.

And it’s more convenient to the shipper to use the trucks.

And then again, the – the freight rates fix those prices involved.

There the trucks handle a property cheap on a cheaper rate basis than do the railroads.

And so, the — that’s the reason why that the traffic has gone away from the railroads to the truck line.

Felix Frankfurter:

May I ask you this?

I must see now, whether it will establish whether the record shows that is left (Inaudible) in fact holding or whether there are alleged lawsuits to bring.

According to the latter, that might be absorbed but it might be absorbed from the lower rates.

Samuel R. Howell:

But if Your Honor please.

The answer, I think, is that the record shows that there are less damage claims filed on truck shipments.

Felix Frankfurter:

Filed?

Samuel R. Howell:

Filed.

Yes, Your Honor or —

Felix Frankfurter:

Or you do not know the answer is physical.

Samuel R. Howell:

I do not know the actual physical fact of that.

And I — I don’t know that it’s in the record, the counsel for (Inaudible) should be able to answer that then he’s — he’s specified.

Now the — the real question, I think presented here is when there is pre-existing damage to goods delivered to our railroad and when kinds of damage occurs due to the inherent nature to goods of which the railroad is not responsible, does the Commission have the power to approve a regulation designed to relieve the railroads from such damage?

Now, of course, the Commission does have that power and it is to be found in Section 1 (6) of the Interstate Commerce Act which requires the railroads in the first instance to publish reasonable rules, regulations and practices designed to cover the — the delivery, receipt, the transportation and the — the handling of — of freights — of freight.

Samuel R. Howell:

And Section 15 (1) empowers the Commission to investigate any such rule, regulation or practice as is filed by the — by the railroads to determine whether or not they are reasonable and just.

And whether or not they are unlawful.

And if the Commission should find after hearing that there — these rules and regulations are unjust and unreasonable, then the Commission is — is enjoined by Congress to establish what will be the just, reasonable, rule and practice to be followed.

Now, with the — with this in mind, these provisions in mind, the question is presented whether they are affected by the provisions of Section 20 (11), particularly the clause which prohibit the carrier from limiting his liability in the connection with the safe handling of freight.

Now, there was no rule at common law in the first place, that made the carrier liable for damages to goods which the carrier didn’t cause.

And in order for that damage which occurred during the course of transportation due to the inherent of the goods.

There was no rule like that.

And under the common law a carrier will — a carrier, of course, was liable as counsel has said as an insurer for the safety of the handling of the property except for the — an act of God and the public enemy and — and the acts of the shipper and the inherent nature of the goods.

William J. Brennan, Jr.:

Has the common law exception —

Samuel R. Howell:

I beg your pardon?

William J. Brennan, Jr.:

Has the common law exception for the inherent nature of the goods been carried forth in the statute?

Samuel R. Howell:

I — who attends to — well, we — we think that it has.

I — still — doesn’t expressly in — in words.

Well in — not in — in words (Inaudible) but — and, of course, have interpreted the end — the end to the statute.

Now Section 20 (11) and merely we state —

William J. Brennan, Jr.:

In your — in your statute —

Samuel R. Howell:

I beg your pardon?

William J. Brennan, Jr.:

In your statute or into the general statutes?

Samuel R. Howell:

Into the general statutes, sir.

Or maybe there’s — maybe this statute.

In a — in a — I — I’m not sure whether it would be in the general statutes but I am sure that courts have interpreted the —

Felix Frankfurter:

The old common law, that’s the basis of liability.

And under the Commerce Act, amendment became a law, it was lifted.

It was an opinion (Inaudible)

Samuel R. Howell:

That’s right.

Felix Frankfurter:

(Inaudible)

Samuel R. Howell:

That’s right.

And that — that’s the — to answer the question of Justice Reed and able to have given Justice Reed.

Now, the Section 20 (11) I’ve just about to say, nearly reached this — the common law rule of liability.

But it doesn’t add anything, any greater liability to the rule.

Samuel R. Howell:

Now, the tolerance rules approved by the Commission are not predicated upon any sort of carrier liability.

I’d like to emphasize that fact to the Court.

The Commission found that in its report.

And —

Hugo L. Black:

How can you find that?

Samuel R. Howell:

Well, under the — it stated — I missed maybe that was an unfortunate word.

The Commission stated that the — in its — in its decision that the liability imposed here is not predicted upon or rather that the — that the rules are not predicted upon in a sort of common carrier liability but rather upon the inherent nature of the goods that the common carriers hold.

In this case, eggs which are — agree — as agreed in the record are very fragile, very easily to break and that the — even they — in the packing and the breaking operations as described in the Department of Justice is impossible to even carry those on without causing some of — some damage to the egg, even in just the packing.

Hugo L. Black:

All of it?

Samuel R. Howell:

Yes, Your Honor.

Hugo L. Black:

That’s here.

Samuel R. Howell:

That’s in the record.

The — the evidence is in the record.

Hugo L. Black:

That they’re finding.

It would emphasized for me.

Samuel R. Howell:

There — there is a finding —

Hugo L. Black:

There’s a findings with evident distortion from the Commission from full investigation of the fact.

They have found that every shipper — shipment of eggs throughout the country separately and distinctly losses 3% from inherent weaknesses of the egg.

Samuel R. Howell:

There’s a finding to that effect, if the Court please.

Hugo L. Black:

Where?

Samuel R. Howell:

They’re based on averages —

Hugo L. Black:

Well, that — that too?

Samuel R. Howell:

Well, I think that’s what the — the record shows.

As I say the counsel for the railroads that fall to that question will fall in here, still of the argument but it is my understanding that there is a — I’m sure, there’s a finding to that effect.

It’s based on evidences they (Voice Overlap) —

Hugo L. Black:

I understood there was a finding of it.

Samuel R. Howell:

I beg your pardon?

Hugo L. Black:

I understood there was a finding already made from the evidence.

Samuel R. Howell:

Yes, sir.

Felix Frankfurter:

Does the Commission — does the Commissioner agree one of the position that’s made from this question.

Felix Frankfurter:

But when did the letter find any regulation that the Commission as well as carrier had the independent view of the 5%.

In other words, may the Commission upon the problems of carrier is going to be (Inaudible) a certain way through testing, may the Commission (Inaudible)

Samuel R. Howell:

I believe you have, Your Honor.

I — I think that if the carrier filed a tariff under 20 (11) and the Commission —

Felix Frankfurter:

You can’t find the test and no more has.

And that’s — that is as I understand it is informed when they’re talking of generalities.

Samuel R. Howell:

That’s right.

Felix Frankfurter:

Now, suppose nothing is done about it.

Would Commission with the finding that it has no legal implication with that?Or —

Samuel R. Howell:

Will be binding —

Felix Frankfurter:

— finding —

Samuel R. Howell:

I think it would, Your Honor.

Felix Frankfurter:

What?

Samuel R. Howell:

I think it would.

Felix Frankfurter:

Yes.

But would it be binding for us to preclude the requiring of a 20 (11) from that?

Samuel R. Howell:

No, Your Honor it would.

Nothing binding to that.

Felix Frankfurter:

It would not.

Now, suppose you said as the carrier — carrier is operating because nobody objects or suspicious of him.

Suppose you’ve got a situation like this.

There is a contention.

And there is inquiry within all of the Commission is the fact that the Commission make affirmatively an order.

Thanks to the certain limitation on liability, certain basis of recovery for loss.

Does that make a difference before the Commission?

Is it an order that I can see of the record on the part of (Inaudible)

Samuel R. Howell:

I don’t believe there could be any difference in the (Inaudible)

Felix Frankfurter:

(Inaudible)

Samuel R. Howell:

Well I (Voice Overlap) —

Felix Frankfurter:

Ideal numbers are lowered by the Commission it represents.

Samuel R. Howell:

That’s right.

It’s my understanding of the — of the law.

Now, the — suppose rules approved by the Commission as I’ve been saying a moment ago when diverted here.

The — that these rules are not predicated upon carrier liability.

But they are rather predicated upon the damage that exist this — that — that exist in carload shipments (Inaudible) at the time they’re offered to the carrier for transportation.

And whether they have the — the right to protect themselves against claims for such laws where they are not responsible.

I use the Commissioner’s contention that the 1% tolerance were approved covering the transit damages come within the common law exceptions of inherent rights.

Because of the — the evidence shows that the — there’s the approximate amount of 1% or more damage found in the cases at — the egg case at destination than there was at origin.

And that this was due to the inherent nature of the egg.

Now, this finding was based upon evidence that was presented by the Department of Agriculture who — which made studies to determine the amount of breakage in the eggs and damage to eggs before the eggs were delivered to the carrier.

And that percentage was — was recorded.

The same inspector using the candling process that destination as they used at the — at origin.

And — and re-inspecting those same cases that were marked at destination discovered that there was additional amount of damage in them for about — to be settled about one and seven-tenths percent.

Now, that was the testimony that was furnished by the Department of Agriculture who furnished these studies, made the studies and furnished the evidence at the request of the Commission for the purpose of solving the very problem that is here before us today.

Now —

May I ask you a question about, inherent price.

I suppose it’s theoretically possible to transfer — to transport eggs without breaking.

The Commission —

Samuel R. Howell:

(Inaudible)

— found it was done in trucks for example?

Samuel R. Howell:

Well, it — it would not be, Your Honor, because even in trucks — which was the evidence shows there that the amount of damage which the Commission says was negligible.

That’s predicated on the claims that were filed.

We don’t know how much breakage there was to go with the eggs there.

Let me ask you theoretically —

Samuel R. Howell:

Oh, yes.

— that the conductors on the railroad cars to be given eggs and I suppose that could take them down without any trouble on breakage.

And doesn’t the application of the inherent price moves of eggs pre-suppose unlike gasoline there’s average of operating for example.

Doesn’t it pre-suppose some standard which the railroad having followed is relieved of liability for as it measures up to a minimum standard.

And doesn’t that vary from the — doesn’t that impose a different standard in the common law rule of absolute liability subject to this exceptions on which is in inherent advice.

Samuel R. Howell:

Well, that might be different but yet it involves the same inferences and well I don’t know that there’s a — the —

Felix Frankfurter:

The difference is that you lumped them altogether in the common law you actually it individually.

Is that right?

Samuel R. Howell:

Through them all.

Well, the reason why these rules, if the Court please, are –are reasonable and why they should be approved because they — they devise a uniform method of eliminating from — from shipments of eggs, the amount that were in damaged condition before the carrier ever received them.

And in that way it would avoid at what amounts foremost to involuntary, if not it does involve in the amount to involuntary rebates for the carrier to have pay shipper for damages in the — to the property that was in a damaged condition before the shipper ever delivered it to the carrier is exactly what, what is involved here.

Hugo L. Black:

What does it amount to as to the shipper?

Samuel R. Howell:

I beg your pardon.

Hugo L. Black:

What does it amount to as to the shipper?

It can tell to accept less than the value of the common law?

Samuel R. Howell:

Well, he does —

Hugo L. Black:

In order that there may be a uniform rule to the advantage of somebody else.

Samuel R. Howell:

Well the shipper —

Tom C. Clark:

— I’m not saying what’s right in your — whether you have the right to do this.

Samuel R. Howell:

You tell me.

Hugo L. Black:

But that’s the issue here.

Samuel R. Howell:

Well, all as I think in some — in the — many of these regulations they may fall somewhat unevenly.

I don’t know what to do here particularly because of the carrier — if a shipper — that these — doesn’t have to pay any damages, if the shipment he gets contains few or no damages.

The rules do not bother him at all.

He’s not affected by it.

Hugo L. Black:

Of the person — I don’t believe you’re quite meeting the issues as I’d see it.

Maybe I don’t see it correctly.

Samuel R. Howell:

(Inaudible)

Hugo L. Black:

There’s no — there’s no question in here that the affect of the rule that some people would have eggs destroyed who cannot get the full value of the egg that were destroyed.

Samuel R. Howell:

But it’s conceivable that they might —

Tom C. Clark:

Isn’t it — isn’t it a act, but isn’t that the basis of your finding an average law.

That some, in every shipment, — but we’ll not lose that much really.

Samuel R. Howell:

That’s right.

Hugo L. Black:

These eggs will not be destroyed to that extent.

So he losses then.

Samuel R. Howell:

To correct that.

Hugo L. Black:

And some other men who may have — they have just the opposite effect.

But what you are claiming here is the I.C.C. to make it have, has the power to do what it’s done, now which is to lump it altogether to say that we can put — make every — every person who would ship the eggs to have some law whether he had a law to none.

Samuel R. Howell:

Well, I don’t believe the Commission intended to — to side somebody based —

Tom C. Clark:

If it doesn’t do that, what does it do?

Samuel R. Howell:

Well, it does in — in effect — it does as far as I said a moment ago, for some people to maybe pay some damages.

I mean pay something that’s probably was for eggs that were in their shipment it was not damaged.

But I — I don’t know if that is true but that could — could happen.

Hugo L. Black:

How could it keep from being true?

Samuel R. Howell:

Well let’s say —

Hugo L. Black:

Do you — do you claim that that there is a universal rule that every shipper, throughout the country who ships eggs is bound to have 3% of his eggs (Voice Overlap) —

Samuel R. Howell:

Oh, hold on.

I don’t intend — I don’t —

Hugo L. Black:

But some of it would have 1%, we’ll say and some of them 5%.

And you have one who can say 3%.

Samuel R. Howell:

Well that —

Hugo L. Black:

Now, what about the man who’s only had 1% loss, who has to recover for eggs to the extent — the same as though he’d lost 5%.

Samuel R. Howell:

Well, if the Court please.

We don’t know that he — that what he had that many eggs and they placed — were placed when they were — when they were packed because the evidence shows that there is damage in there in every crate and of course —

Hugo L. Black:

The 3% damage in every crate that showed up–

Samuel R. Howell:

No, not — it’s not — it’s not that yet matter.

On the average he would have.

Hugo L. Black:

Yes.

Samuel R. Howell:

And it may be possible that some shipper would have less damage than others.

Felix Frankfurter:

So, what do you really, what does it need to ensure he’s making a (Inaudible) —

Samuel R. Howell:

That’s — that’s right.

Felix Frankfurter:

Isn’t that correct?

Samuel R. Howell:

That’s right and I — I believe that the — this Court held that the Commission could do that in the assigned party.

Felix Frankfurter:

That’s the real purpose.

Samuel R. Howell:

Yes, I — I think it is, Your Honor.

Hugo L. Black:

I gather from what you said at the beginning, Commission reads the conclusion that the trial by lawsuit method on proof of individual loss of damage was resulting in bad injury to the railroad.

Hugo L. Black:

That they were having to pay some time when they shouldn’t pay.

Samuel R. Howell:

Unless —

Hugo L. Black:

And they’ve tried to work it out by putting a — relieving them from the damages of loss, injury that might — that in view of the lawsuit, to that individual lawsuit by applying a general rule.

Samuel R. Howell:

Well, that — that is correct, only if this —

Hugo L. Black:

And they didn’t have the right to do it.

But that (Voice Overlap) —

Samuel R. Howell:

Well, we think the — they do not — we think they do have the right to do it under the theory of the assigned car cases and here’s another — another case I’d like to — but on that — that this Court held in — I can’t find that the — it’s not here right now but it’s the — the case in which you’ve held mentioned the — and so the assigned car cases and also in the New England’s division cases.

The Court held there, this Court held that the Commission may approve rules and the regulations are enter orders that would have general application although they wouldn’t affect every railroad or every rate.

But yes they may file such a — may approve about the rule.

Earl Warren:

Mr. Howell, I — I would like to ask you what reason you can assign for shippers being less diligent in collecting the damages for breakage when they ship by truck than when they ship by train?

Samuel R. Howell:

There is nothing in the record, Your Honor.

Earl Warren:

Is there any reasonable answer to that as far as you know?

Samuel R. Howell:

On the basis of the record, I could not answer that question.

But I have my own ideas about it.

Earl Warren:

What are they?

Samuel R. Howell:

Well, that the —

Earl Warren:

That’s what I want to know.

Samuel R. Howell:

That the truckers, of course, will — they — they move fast.

They’d come up and they’ll back up against the — the loading, unloading dock or the car.

They’ll have a load of eggs and these consignee is anxious to get them.

And they get them to start as soon as possible.

And he brings the man, the trucker does, and say “here they are.”

And — and of course if the consignee begins to complain about it, the truckers as well you could take them or leave them.

I — I — don’t know (Inaudible)

There are some — something to that is the effect — an attitude to that effect on the part that truckers I think that maybe the consignees will — will take the — now, that’s the — my own right there.

Earl Warren:

When they — when they have a right of action against him?

Samuel R. Howell:

Well, not if they have damage of course in the — if the eggs are leaky they wouldn’t to that.

But I’m talking about a — a new inspection like it’s conducted by the consignees at places like New York.

And New York is not the only place in the country where there’s lots of damage found in eggs.

I’m not talking of damaged economy but where the claims are private also in Philadelphia and in Boston and — and Baltimore and Pittsburgh and New Jersey on — at the other point.

Earl Warren:

Why should there be — why should there be so much — more breakage there than in — say in the western part of the country?

Samuel R. Howell:

Well, if the Court please.

I — I don’t know the answer to that question, but I think it’s immaterial anyway because if the — if the ship doesn’t have any — and at this proportion he was not affected unless he had damaged the eggs and the crate by this — by this rule.

And the carriers I’d like to plead that sought with the Court that the carriers are not exempt from any liability which they caused themselves.

And the — and the Commission report and its order intended only to relieve the carriers from paying for damages that were preexisting in the shipments before the carrier ever received them and then when such damage has occurred during transit that was due to the inherent nature of the eggs.

And that was all that the Commission intended to be suited liable and intend to be a suit on the party’s hearing.

In fact Your Honors might (Voice Overlap) —

Could I ask you one question before you sit down?

Your tolerance on, on rail shipment so-called, is 3% and on all pre-shipment is shipment is 5%.

Samuel R. Howell:

That’s right.

What’s the evidence in the — what evidence is there in the record to justify that difference of 2%?

Samuel R. Howell:

The — the testimony shows with respect — adduced of the hearing and agree much on them is punished by the Department of Agriculture when the appellant in this case which showed that there was — and of course other — and railroad testimony would show that there was more damage existing in the egg crates as I understood, Remember the record.

They’re existing with respect to the eggs that were packed, transported in the country, delivered to the packing class in the country and they have swapped into the — at the railway.

Then there was to those eggs that were packed at the rail point of origin, if there’s a difference and that justifies the Commission’s findings in that.

If I’m not mistaken — if I’m mistaken about that Mr. Zearfaus in apology will correct.

I couldn’t find it.

Samuel R. Howell:

Of course I have not planned to discuss the evidence on — on this, but then got into it.

Thank you, Your Honor.

Earl Warren:

Mr. Howell.

Mr. Zearfaus.

William F. Zearfaus:

May it please the Court.

I wonder if that the exemption of my argument would be good enough referred to my brief.

I’s one of the white briefs.

And particularly to the regulations which —

Earl Warren:

Which one Mr. Zearfaus?

William F. Zearfaus:

It’s the one of the white ones.

I’m sorry I asked printer to give a different color but he didn’t.

Earl Warren:

Brief for Intervening Railroads?

William F. Zearfaus:

Yes sir.

(Inaudible)

William F. Zearfaus:

And would you be good enough to refer to page 61 down at the bottom, particularly referring to Section 6.

And these are the regulations which the Commission approved and which now formed the subject of a tariff which is on file with the Commission and which is in effect today.

And they already attack the regulation.Section 6 on eggs placed in packages at rail point of origin of the shipment, no claim shall be allowed with the physical damage to the egg at destination does not exceed 3% of the contents of the package pertaining damaged eggs.

Where damage exceed 3%, claims shall be allowed for all damages in excess of 3% percent if investigation develops carrier liability.

Now, we proceed to exception where bona fide certificates of federal or state egg inspection agencies showing extent of physical damage to eggs determined at rail point of origin of the shipment immediately prior to tender for rail transportation indicate the actual shell damage to be other than 2%, the percentage of actual damage as shown on such certificates, plus 1% shall be used in lieu of 3% specified in this Section.”

Now, the point I want to make in connection with that is that no shipment has to accept the 2% origin damage.

If he wants to, he may give to the railroad a federal or state egg inspection certificate and we will take that percentage as shown in that certificate and add 1% for the transit damage about which I shall speak later and that will be the amount which he’s claimed will be reduced.

Felix Frankfurter:

What cost is involved in getting certificate —

William F. Zearfaus:

$11 for cases in that — of 301 for $400 up to 400, $15 for 401 to 600 cases.

I would say approximately $15 per car, because I imagine they load around $400, I mean 400 cases per car.

Felix Frankfurter:

$15 per car?

William F. Zearfaus:

Yes.

I imagine that would be about a fair statement.

And in addition to that, I might state this point that the testimony from the witness, one of the witnesses from the Department of Agriculture was to the effect that if the shippers wanted this service throughout the nation, that the department could furnish them.

They’re about to employ a number of inspectors but they — there is a self-sustaining service and they could furnish it, so it has no question about that.

Now, the point I want to make particularly is this that this damage, this origin’s damage take this in the the place of eggs before the railroads ever get them.

Now, that’s the first point.

And the second point is that in connection with the transit damage, it is our contention on the Commission so found that there is always a certain amount of transit damage due to the inherent nature of the case, the fragility of the shell egg and the fact that some of the eggs which have been damaged may leak and therefore wet the fillers and cracks and that will cause additional damage during transportation.

That is the damage that we want to get out of a damage claim.

Its damage for which the railroads are not responsible under any circumstances at common law or any law.

No one would be responsible for damage which was in a consignment or a package before they ever received them.

And insofar as the inherent nature is concerned, the inherent nature is one of the four common law exceptions to a common carriers’ liability.

And that’s what we want to get out of these egg claims.

(Inaudible)

William F. Zearfaus:

Yes, sir.

(Inaudible)

William F. Zearfaus:

Yes.

And, I want first to point out to you, Mr. Justice Harlan, that the testimony for the most part came from witnesses for the Department of Agriculture.

We made studies of our own and that the two dovetail.

They both fit.

William F. Zearfaus:

The testimony that I have mentioned here in my brief is from a Mr. Hyman, chief of the dairy and poultry inspection in grading division of the — of the United States Department of Agriculture.

Now, I’m wrong about Hyman.

It’s Mr. Miller, he is — he’s the chief of the Research Department.

If you will refer to pages 23 and 24 of my brief, you will find the — that if a particularly at 23 and down going through the testimony as to these that upon which the Commission based its findings.

The Department took 150 — 150 carloads of eggs.

They had them inspected at point of origin.

And they followed them through to destination.

And that in connection with those, you will find the study of the — of the 115 cases at the top of page 24 of my brief.

It refers to Exhibit Number 22 in the record and is at page 1130 of the record.

The stained and dirties were one decimal four, the checks for one decimal nine and the loss that is the leakers and cracked and so forth was one-tenth of 1% making a total of three decimal 4%.

Now, this same witness conducted another investigation with respect to 737 other cars.

And he found that practically substantiated what he had learned from the first.

Now, in addition to that, the — the witness ascertain — that is, made a comparison of what the damage was, that there were 115 cars at destination as contrasted with what they were at point of origin.

And he came up with the difference of additional damage of one decimal 7%.

And I might state that those eggs were all examined in the same way at both ends of the movement.

They were both — there were candled at origin, they were candled at destination.

Now, there was something said.

Please refer to advice of our opponents here.

That the inspection at destination is not a casual inspection.

We’re not, as matter of fact, the witness from the department that refuse to say that it wasn’t — that it was an — an inspection that was just sort of a casual thing.

I’d like read to yous from page 338 of the record.

Question – In other words, the inspection for damage is not as rigid as an inspection — as the creating inspection?

Answer – I wouldn’t say it wasn’t his region, that bridge of Mr. Madison, I would say it does not go into as much detail from the standpoint of the determinations made.

Now, the Commission also mentioned that with respect to the inspection at New York.

It said that certainly the inspection at New York is being performed with the view of affecting all damaged eggs.

And the result certainly showed that.

As the matter of fact —

Tom C. Clark:

Why do we have to — why do we have to go into all these facts and the evidence in this case when they’re accepted by the Government and then he admits this is a reasonable rule, if the rule doesn’t violate Section 20 (Voice Overlap)

William F. Zearfaus:

You’re probably right sir.

But I — I was interrogated from the bench and I thought maybe I had to go through with it.

William F. Zearfaus:

That is, it is a fact but I want to point out to you that this — that there is substantial justification for the figures.

But then that other thing, I’d like to direct your attention to is this particular point which justifies our contention and supports the Commission and its statement that this 1% damage is a damage which you may expect.

Mr. Hyman about whom I referred before and who testified for the Department of Agriculture stated that it was humanly impossible to handle eggs without some damage.

Now, here is a colloquy appearing at page 343 of the record between Mr. Hyman’s counsel.

This question that said, asked, you say that it is impossible to eliminate every check in cracked eggs from the case of eggs in the process of creating eggs?

And then later, Question – You pointed out it was humanly impossible or at least impractical to pack a perfect car — you have never seen a perfect car have you?

No, I haven’t.

Question – Then there was a normal expectancy of shell damage in every car that is loaded.

Is there not?

Yes, sir.

Now, the point before to add about this is that the impression seems to be that — that there are some perfect shipments of eggs.

As a matter of fact, the Department of Agriculture itself allows a certain amount of tolerance in connection with the various grades of eggs.

For the double A grade, I believe they allow about 11% and for the so-called A grade about 7.5%.

Now, that takes in for all types of damages and so forth.

It takes in — in connection with the double A as I understand it about 5% checks that is, the shell is broken, but the membrane is still intact.

So, you see that what we have done and what the Commission has approved is nothing more than what the trade itself does and what the United States Department of Agriculture does.

We try to make something which is in conformity with the trade practices and with what the government itself designed.

Hugo L. Black:

May I ask you this?

William F. Zearfaus:

Yes.

Hugo L. Black:

It seems to me like in rate cases that I think we have some of them that ordinarily, this grade agent — the grading agent is still taken into account the lawsuits on the account of injuries to persons or injuries to (Inaudible)

William F. Zearfaus:

I don’t think — that’s true.

But I don’t think that the increase in rate takes into account damage where which the railroad is not responsible.

Hugo L. Black:

But it takes (Voice Overlap) —

William F. Zearfaus:

It takes into account the hazard that the railroad has because it’s got something which through its negligence, it might break.

But I think there is a distinction sir, between what the insurance is in the rate on one hand as for the railroad’s negligent handling or the railroad’s liability even under its common law liability on the one hand as contrasted with railroads being held liable for something that you did before.

Hugo L. Black:

Well, but that is individual.

Here as I understand it, the argument is in the right.

That you’re entitled to get your damage — damage suit for use on the average of what the actual law did.

Now, are you not allowed then in your rate cases and do you not take into account when you fix the rates?

William F. Zearfaus:

That hazard of transportation is a factor in making a rate, yes.

William F. Zearfaus:

But I don’t — I think there is a distinction between damage raising the rate for damage for which you cannot be held responsible either at common law or something for which you wouldn’t be liable as in the case like this where the damage exists before you get it.

Hugo L. Black:

But of course you can’t meet this with the common law and no other law insofar as I know has ever held that any company, railroad or otherwise is liable to damages which doesn’t exist.

William F. Zearfaus:

That’s right.

Hugo L. Black:

But —

William F. Zearfaus:

We try to get that up to this.

Hugo L. Black:

Yes, I — I have no doubt about that.

But if you were fix rates now and had a rate and want to fix one time, would you not take into account how much it’s been costing you to individually.

William F. Zearfaus:

We probably could.

Hugo L. Black:

Now, whether you — whether you actually injured them or not.

Whether some shippers had got more than they could, others have gone (Inaudible)

Wouldn’t you put in the big and show how much you’ve been losing year by year?

William F. Zearfaus:

We could probably would but the fact to the matter is this, sir.

Hugo L. Black:

I thought that was always the part of the rebate?

William F. Zearfaus:

But the fact of the matter is this.

That we have lost practically all of the egg business.

And the reasons which the shippers give us on this record are these.

First, that the rates are lower and they give refrigeration service for which we make an extra charge.

And then secondly, they say they have less trouble with the — their claims on one hand but — well, as a matter of fact, they — people on the west coast indicated that it was sort of a give and take proposition.

They helped us and we helped them.

That’s — that’s one of the explanations as to why we don’t have these claims in connection with the trucks.

Earl Warren:

What do you mean by, we help you and you help us?

William F. Zearfaus:

Well, some of these carriers are exempt carriers, some are contract carriers and they’ll do a little favor for a fellow that might work late, a little late some nights and make a delivery.

And therefore, if this driver when unloading the crates happens to drop one of the “forget it John” you helped us.

And they’re not going to bother with it.

That was one of the explanations that we received in connection with the — the hearing out of Los Angeles.

Now, I’m — I’m sorry to say that I can’t tell you why the claims in connection with the truck business are negligible.

In fact, there are claims.

The record shows there are claims, but they also — a shipper, the shippers also contend that they are negligible in contrast with ours.

Now, one of the reasons that one fellow gave was that he had trouble getting paid.

I mean, why bother with it, apparently.

William F. Zearfaus:

I don’t know.

But then I say it is all pretty much a matter of conjecture and the — and the record is that they’re helpful in connection with that face of the matter.

And I don’t think, I don’t want to enter — beg your pardon?

Hugo L. Black:

I see the question I gave because (Inaudible)

It’s pretty well understood by people who ship things that they pay the rate.

It’s fixed.

It’s fixed now and (Inaudible) and so forth.

But it’s also been pretty generally understood in accepting there’ a rule throughout the country that a man who files a lawsuit can recover his full damage.

And the other fellow who has more damages can recover more.

Somebody else who had less can recover less.

Buying is more intriguing with pattern of what I’ve seen either.

For this to handled as a rate model instead of this guy is need of — as whatever that is.

William F. Zearfaus:

Let me give you this further point which I promise you to give you in the first instance.

The fact of the matter is that I suppose there are hundreds and literally thousands of shippers who don’t file claims for damage in connection with eggs which existed at the time that eggs were tended for rail transportation.

Now, if we raised the rates on the shipments of those fellows who look at it let us say from a fair standpoint and don’t do like some of this consignees do at New York city and take (Inaudible) smashed or cracked egg that they can find.

It isn’t fair to the fellow who wants treat us fair to raise his rate because somebody else does something else.

And I think that is a conclusive and good explanation of why would we shouldn’t increase the rates even if we could.

Earl Warren:

How about the– how about the fellow who’s careful about his eggs and — and sends them in the first class shape and he has paid his tolerance.

William F. Zearfaus:

I think as to him, he’s — he is in the position that insofar as he is concerned, the public good as to the — he has to deploy to the public term.

Now, let me discuss that phase of it a little bit.

First of all, Judge Powell said to you, “The railroads are permitted to, even at common law, to make the reasonable rules and regulations with respect to receipt of freight.

So that fraud and imposition won’t be imposed upon him.

At Section 1, paragraph 6, of the Interstate Commerce Act admonished the railroads to do that very thing.

Section 15, paragraph 1, of the Interstate Commerce Act gave the Interstate Commerce Commission authority to determine whether or not those rules, regulations and practices were just and reasonable.

And then you go to the Section 2 of the Act and you’ll find that (Inaudible) shall not be guilty of unjust discrimination.

Section 3 say, you shall not be guilty of undue prejudice or preference.

Now, all of those things to my mind must be read in conjunction with the provisions of Section 20 (11) of the Act.

Because the interpretation which we ask you to place upon Section 20 paragraph 11 of the Act will do away with discrimination.

It will do away with prejudice.

It will assist us, the railroads, in getting away from making involuntary rebates and it will result in uniformity.

William F. Zearfaus:

And as a consequence, something which has been justified by a record such as this one here of thousands of pages in applied hearings hours of hours both Interstate Commerce Commission and this board of experts certainly ought to be given credence and certainly you want to have the benefit of what was done there.

So that every time some shipper of eggs has lawsuit against this, we may not be compelled to go into court, and endeavor to prove the same type of thing that we too, we hope once for all before the Interstate Commerce Commission.

Felix Frankfurter:

You are — you are giving me — you spoke that the policy (Inaudible)

William F. Zearfaus:

Yes, that is true.

Felix Frankfurter:

— that’s in the decision —

William F. Zearfaus:

That’s right.

Now —

Earl Warren:

Well, will it — will it be a simple as you say if this goes through because I understand you from the briefs that you have to — have to pay damages in most of your shippers anyway, in New York because you’re that high in your breakage.

William F. Zearfaus:

No, it is but —

Earl Warren:

I beg your pardon.

William F. Zearfaus:

I say we did but and probably not so many now since we don’t get too much of the business.

Earl Warren:

Well no —

William F. Zearfaus:

But the fact that is in your question.

Earl Warren:

In — in most and practically all your shipments into New York that we’re — that we’re talking about here, your rate of breakage is more than the 3%.

William F. Zearfaus:

Yes, that’s right.

Earl Warren:

So you’re going to have to pay — you’re going to have to pay claims anyway —

William F. Zearfaus:

So, we’re not going to —

Earl Warren:

— so why would it bring about uniformity just to — just to give a tolerance that that everybody’s got to pay.

William F. Zearfaus:

Well, this way.

Now, let me refer you to the so-called watermelon cases which were tried in Philadelphia some years ago.

Their suits were dropped for damage to shipments of watermelon.

And the railroads introduced testimony to experts that there is always a certain number of watermelons that are broken during the course of transportation.

And the question was then less — left before the Court whoever was tried without a jury went to court with the jury while it was described without a jury, as to what — what the normal expectancy of breakage of watermelons moving in such distances.

One judge will say one thing.

Another judge will say another.

And now the jury will say another.

It’s just like the question of rates.

When that of course made the administrative tribunal, established the rates and passed upon their determination.

One jury could say one thing at being a jury the question of common law, what was to unreasonable and what was the reasonable rate.

One jury would say one thing.

William F. Zearfaus:

Another would say another.

The administrative body like the Interstate Commerce Commission gives the uniformity.

It gives the uniformity with respect to the problem itself.

Earl Warren:

Charges everybody the same, regardless of the distance or –or any of the other factors that are involved.

William F. Zearfaus:

That’s right.

That’s true.

Now, the very point (Voice Overlap) —

Earl Warren:

Is that fair to the — is that fair to the policy we don’t have that much breakage?

William F. Zearfaus:

The question — the question is who’s going to know what the breakage is unless they give us the state or federal inspection certificate.

At the point of origin is the time that we should be told what is the condition of the consignment.

We accept the consignment in appearance with order of the condition, contents in tradition if contents are unknown.

But they don’t have too hard at job to — to establish before a jury that the condition was excellent and there was nothing with that thing.

But what we hope to do here is to establish what we know to be the fact that there is some damages here.

And to avoid necessity in every lawsuit of attempting to establish what is the normal expectancy of breakage of eggs.

Felix Frankfurter:

May I ask whether the record show — the statute which there is the actual litigation over these principles and to which comes (Inaudible)

William F. Zearfaus:

No, it does not.

Felix Frankfurter:

That he doesn’t rely on that.

William F. Zearfaus:

My impression is the claim to pay.

Hugo L. Black:

(Inaudible)

William F. Zearfaus:

Yes.

As to its relation.

Felix Frankfurter:

Suppose your argument is let me go to the litigation.

It’s part of the difficulty of moving your position (Inaudible)

William F. Zearfaus:

No, they wouldn’t, sir.

You’d probably participate in order for him to establish the ordinary claim of the amount of damage then —

Felix Frankfurter:

Well, these claims are numbered —

William F. Zearfaus:

They’re numbered.

Felix Frankfurter:

— as I have it.

It’s constantly is a larger number.

There are two big ones in there.

William F. Zearfaus:

Oh, I think that’s pretty well — or pretty well scattered in New York City area.

I think so.

I — I don’t —

Felix Frankfurter:

But what are you going to tell me?

Is this running into the hundreds or tens or what?

William F. Zearfaus:

I don’t know.

I can’t say as a matter of fact.

So, I don’t think the record shows it.

(Inaudible)

William F. Zearfaus:

What I understand it’s charged in New York City as contrast to charge.

Do you remember?

It’s the same as usual.

William F. Zearfaus:

Have seen in it in the record?

Mr. Frankel was concerned enough to direct my attention to page 27 of the record.

You will find that on page 27 (Inaudible)

Marvin E. Frankel:

87%.

William F. Zearfaus:

(Inaudible)

Stanley Reed:

87% of per truck, in 1950.

William F. Zearfaus:

That’s right.

Stanley Reed:

Do you suppose the — the nearness of such areas at Delaware, New Jersey there’s a great, particular inventories.

William F. Zearfaus:

No I don’t think so.

Stanley Reed:

And I think —

William F. Zearfaus:

I think it comes mostly from Indiana, Wisconsin, out in the mid-west section.

Stanley Reed:

I mean the truck.

William F. Zearfaus:

I don’t think that’s the reason why they came by truck.

I think they come from the mid-west section.

Mostly, the traffic comes from there.

In connection with this interpretation which we placed upon Section 20, paragraph 11 of the Act, I’d like to direct your attention to certain things which we feel justifies the — the interpretation which we do place upon.

The submission as far back as 1916, I believe, and probably before that passed upon how it answers in connection with shipments of grain.

And it had practically before the same type of questions which are raised here today, limitations and liability, depriving a man of jury trial and all that sort of thing, passed them by and describe certain limitations in connection with shipments of grain.

William F. Zearfaus:

And then in 1919, in connection with this (Inaudible) situation they prescribed a tolerance of 5% in connection with eggs which were known as currently (Inaudible) are the eggs that come directly from the nest to the market.

Now, we think that the settled administrative construction over such a long period of time well over 14 years is entitled to wait.

And we also think this that Section 20, paragraph 11 Act was amended seven times since those cases were cited.

And while it was amended, those seven times Congress even though these cases were reported to it by the Commission in its annual report to Congress, Congress did not see fit to make any changes in connection with this phase of Section 20 paragraph 11 which is under consideration here today.

And we think that that is entitled to wait in considering the interpretation of that section of the Interstate Commerce Act.

Earl Warren:

May I ask you if there are any other commodities where the Commission has set a tolerance comparable to this?

William F. Zearfaus:

Range — the range?

Earl Warren:

How much?

William F. Zearfaus:

Weighing tolerances in connection with the shipments called where they have a water content and the water sips through during the course of transportation.

I can’t recall any other.

I don’t know if there’s gasoline, but I can’t recall it.

The gasoline would break any (Inaudible)

Earl Warren:

Thank you.

Felix Frankfurter:

Oh, yes.

But that’s different here we have to redo, work your argument in the general direction to move in the decision.

That it’s not within your (Inaudible)

William F. Zearfaus:

I think it is.

I think that there is.

Felix Frankfurter:

There is a difference (Inaudible) to legislation the Court held that in determining decision is to take averages we’re supposed to accomplish this is on the shell eggs in the proper decision in one wherein if too much was done it would tolerate it.

But for this (Inaudible) but it was allowed.

The Court said that that should be completely read (Inaudible) it is unfairly dealt with, then from anytime a –a federal judgment.

William F. Zearfaus:

Of what —

Felix Frankfurter:

There is no (Inaudible)

William F. Zearfaus:

But don’t we do that here?

We do that here.

Felix Frankfurter:

Pardon me?

William F. Zearfaus:

We do that here, except that’s to transfer them.

Felix Frankfurter:

You mean it’s only certain things?

William F. Zearfaus:

Yes, any shipper that comes to us with a certificate and shows that he’s got 1% or one half of 1% damage as to point of origin, that will be taken in consideration.

And that total will be deducted from his rate —

Felix Frankfurter:

It only covered a percent.

William F. Zearfaus:

— except for the transportation that the (Inaudible) does, regardless of what it is.

Felix Frankfurter:

Pardon me?

William F. Zearfaus:

Regardless to what it might be.

Felix Frankfurter:

Put in what percent?

William F. Zearfaus:

Then we’ll add 1%.

Everybody had to take at 1%.

Yes, sir.

Felix Frankfurter:

And what is — what is the foundation of that?

Is that what’s coming?

William F. Zearfaus:

The foundation for that is based upon the studies made by the Department of Agriculture and by the railroads that when the eggs reached destination there is that much more damage and that if they do — due to unreasonable thing.

Now, I might mention in connection with the army, the army which is one of the litigants here proposing this sort of thing.

They have a protection with their eggs for export.

They allow 3% tolerance at the point of origin and 4.5% tolerance with destination when they purchase them from their vendees– the vendors.

Felix Frankfurter:

Do you mean every one of their vendors have shipped off these (Inaudible)

William F. Zearfaus:

No, they’re not correct.

That’s the point.

They — they won’t — they — they will take as good order shipments of eggs.

Felix Frankfurter:

Even though it’s 3 or 4.5%?

William F. Zearfaus:

Yes, that’s 3% of origin, 4.5% destination.

Now, there’s something else I do want to mention before I conclude my argument.

And that is in connection with off rail certificate.

Now, the fact of the matter is that our testimony there is not as complete as the other.

I think we’ve got enough to substantiate what the Commission has found.

The fact is that according to the record, witness Miller and this was the man from the Department of Agriculture said this at page 365 of the record.

“These two studies, I think, will show rather clearly at approximately 4% of the eggs as delivered by producers and sold to the first buyers are in a check condition.

And that an additional 1% was worth of check while traveling from the first buyer to the second buyer.”

This would mean that when mid-western eggs arrived with the carload assemblers of the plant in mid west area states, or reached wholesale as in the northeast, approximately 5% of them would be checked.

Then there are — there are also further place in his testimony where he said they would also be in those eggs about 12% of stains and dirties.

Now, in addition to that, there is this statement by the witness from the New York Mercantile Exchange.

William F. Zearfaus:

He doesn’t just say how many members were — were confirmed as a member for that exchange but they are the dealers in dairy products.

And in the old case which Judge Powell referred to many years ago where he said they represented 500 dairy sellers in the State — in the City of New York.

But this gentleman, Mr. Winters, testified at page 634 of the record this way.

Please let me — if you please, let’s read this colloquy between Commissioner Mitchell and the witness.

Mr. Mitchell, “You say today you would rather have your eggs shipped to you that are rehandled and repacked at the railway because they come in a better condition.

Is that the reason?”

The witness, “We feel so, yes.

We don’t want any factors to enter into the field that might damage the eggs, any extra handling.”

In other words, I suppose you mean that somebody packed these packs of the eggs, puts them on a truck and transfers them 20 miles of the railway.”

Mr. Mitchell, “I mean eggs that are not repacked or rehandled at the railway.

The witness, “We try not to handle those kind of eggs.”

Mr. Mitchell, “Do you believe that trucking of eggs 150 to 200 miles damage the eggs any extent?”

The witness, “There is always hazard that an extra handling will damage eggs.”

Harold Burton:

Will you please —

William F. Zearfaus:

Yes, Your Honor?

Harold Burton:

— will you please relate what you’re saying to the question of liability under Section 20 (11)?

Section 20 (11), I understand as it is a question is the problem.

And it seems to me that with all due deference of what you are discussing as to be reasonable as to the rule what you admitted.

William F. Zearfaus:

Well I —

Harold Burton:

Now, does the rule violate — does the rule violate the limitations against liability fixed in 20 (11).

Isn’t that his question?

William F. Zearfaus:

No, we do not think it does.

Harold Burton:

Well, then somebody ought to talk on that question sometimes for the (Inaudible)

William F. Zearfaus:

Oh, I — I thought I did.

As a matter of fact, the — the provisions of Section 20, paragraph 11 as I should have read in injunction with the other provisions of the Act and the interpretation that we placed upon it, we think, that put the — the — that provision in a — in a situation where all provisions of the Act may be given the full benefit of what Congress intended they should give to us.

Harold Burton:

Is — is it your position then that no matter what the exact words are upon 11, is necessary and proper to have an average rule.

William F. Zearfaus:

That is true.

Yes we did.

That’s my point.

William J. Brennan, Jr.:

And your point is that under 6 (1), you — you have the right to make regulation.

William F. Zearfaus:

Under — under 1 paragraph 6, we got the right that — we’re asked — we’re opposed to it.

Under 6 (1), we’re told to make regulations which are necessary for them to see which way.

That’s the Act reads.

And also our tariff under Section 6 of the tariff, under there Section 6 of the Act.

Well, I thank you very much.

Earl Warren:

Thank you.

Mr. Frankel.

Marvin E. Frankel:

If the Court please.

It’s in our situation, are friends pending the Commission seem less happy with its findings than we are.

On this question of truck damage, is this — are we talking about damage as reflected in claims or damage as reflected in damage?

Now, the Commission found, I read from the record of 39.

The record indicates that in the transportation of eggs by motor truck, the amount of shell damage is negligible.

And that’s based on eight shippers who said they — the eggs came in on trucks and there was no damage.

Now, we accessed that finding.

And we think that they must.

There are similar findings in the record about plain damage.

The shell damage is negligible.

And that simply that some people make claims and other people are generous to the truckers or what not and don’t make claims.

The Commission expressly rejected that suggestion which — which is revived here.

What we’re talking about is shell damage as reflected in broken eggs and claims.

They’re not simply as an inference from who files claims and who’s generous and who doesn’t.

Now, our friends have argued that this tolerance regulation ought to be upheld because all it does is relieve them from paying the damage for which they’re not liable.

Now, they don’t need a regulation, I believe, in — from paying for damage for which they’re not liable.

Although it does that for them.

Now, they say this does it in a uniform way.

Well, this as I think, the Chief Justice suggested is an arbitrary and procrustean kind of uniformity, achieved by treating things that are in fact various as though they were all the same.

Now we are — yes, sir?

Felix Frankfurter:

I hope (Inaudible) to the fact the inherent — the inherent difficulty to prove (Inaudible)

Marvin E. Frankel:

I think —

Felix Frankfurter:

The object of the question is to establish in here (Inaudible)

Marvin E. Frankel:

I think that’s the difficulty that all lawyers face and some are thankful for because it makes them busy men.

But the fact is the railroads say it’s hard for us to prove in any case that we’re not liable.

So, here, we announce the regulation that proves in every case that we’re not liable.

Felix Frankfurter:

(Inaudible)

Marvin E. Frankel:

I think — I think this is of no help to them, Your Honor, because this is a forbidden solution.

Now, we’re not talking —

Felix Frankfurter:

(Inaudible) that’s the question.

Marvin E. Frankel:

That’s the question, Your Honor.

And I, of course, spend my time here —

Felix Frankfurter:

Very well.

Marvin E. Frankel:

— asserting our answer.

Felix Frankfurter:

(Inaudible)

Marvin E. Frankel:

Now, all of these is based on, Your Honor, is not a law of Chemistry or Physics.

As the Commission says exclusively in this report, this is a rule based on averages.

Now, you could strike an average with respect to almost any kind of commodity.

If you look at page 25 of the record, you’ll find that the railroads break a lot of (Inaudible) with for some reason a great deal of sewer pipe tool.

Now, you could get experts to come in and tell about the average amount of sewer pipe or (Inaudible) or automobiles or what not that gets broken for which the railroads are not responsible.

And I take it there is such an average somewhere in the world.

And then on that basis, in terms of the arguments our friends made, you would have an average.

And then you would have the basis for a rule and for uniformity.

Now, we say that that is not permissible under Section 20 (11).

Now, if — I — I should add this.

That what you’re dealing with here, after all, is a problem simply of fragility.

Eggs are fragile.

Tea cups are fragile.

For some reason, sewer pipe seems to be fragile.

And it’s clear as I’ve emphasized with both the trucks and the railroads, that fragile eggs fragile tea cups get broken to some extent but also don’t get broken to a large extent.

If you sanction this unprecedented effort, then I can see no reason why would sewer pipes, tea cups and everything in the world, there should not be similar tolerance regulations based upon averages.

Now, that’s never been done.

As to the suggestion of a settled administrative practice it will of become the, as a government lawyer to doubt the propriety of giving weight to the administrative practice if there is one.

Marvin E. Frankel:

There isn’t any here.

The egg case in 1919, was a case where the railroads proposed general tolerance regulations for egg.

The Commission was asked by the shippers to strike them down as unreasonable with no mention of Section 20 (11).

On that ground alone, unreasonable then, the Commission struck down those regulations with one narrow and totally unimportant exception.

That exception was the so-called current receipts which are run to the next case as they come from the farmer without sorting, there’s a certain number of broken, cracked and otherwise damaged eggs.

As to this, you will see in the Commissions’ report the shippers “practically conceded” that the 5% tolerance rule would be reasonable.

And reasonableness was only issue they had raised.

In other words, they in effect, stipulated for a 5% tolerance as the current decision.

This record show to us current receipts aren’t shipped commercially.

They are wholly on import.

The shippers didn’t care about it.

They won the case.

Because as all other eggs which are shipped commercially, the Commission then found that such a tolerance rule would be unreasonable.

Now, there’s only one case in the Commission, only one.

And that is the case involving grain tolerance ruling in 41 I.C.C.where Section 20 (11) is even mentioned.

Mr. Justice Frankfurter and I discussed the possible bearing of our argument in that rule and I won’t repeat it, except to say that that is the single instance in which the Commission has approved a tolerance rule over the contention that it was forbidden by Section 20 (11).

Now, that decision seems to have caused nobody any trouble.

It’s never been reviewed and appears to be unimportant.But that’s the only case that counsel on either side has found, that discusses 20 (11) with all the way to where it narrowly accorded to settle the administrative practice.

We think that this isolated and unrevealed, apparently unimportant decision, doesn’t come up to the standard that should be impressive to this Court.

I want to ask you to answer the question of Mr. Justice Harlan.

What justifies the 2% difference between eggs shipped from railpoint of origin and egg shipped from elsewhere, all right?

We read the findings, nothing does.

The Commission found that the practices of shippers are uniform.

That in truck transportation, damage is negligible.

That the egg packed away from the railpoint of origin are truck to the railpoint of origin.

In this, we can find no basis with the 2% tolerance.

We think the Commission’s only findings require that it be rejected.

Finally, in answer to the point discussed with Mr. Justice Frankfurter by Mr. Zearfaus, my information although I don’t think it’s in the record today, is the serious little litigation over these claims.

And before they introduced these regulations to, as we see it, limit their liability, the carriers were in many cases paying them.

And Exhibit 35 shows that they don’t regard this as being a problem with uniformity.

Marvin E. Frankel:

Instead, they find themselves perfectly able to determine in many cases that one thing or another, one thing different from another, caused the damage in any particular shipment.

They thought their own report at page 1167 of the records shows that between 1939 and 1948, when these damage claims were rising, the damage caused the eggs from improper handling in trains’ yards or stations, increased 15 times.

This is their own statistics that damage caused by defective (Inaudible) equipment increased eight times.

That damage cause by improper refrigeration or ventilation increased 34 times.

Now, they have apparently, in paying these claims on the basis that they are able to make the particular individual determinations in particular cases.

The rule now, that regardless of what they determine and regardless what the shipper shows, they are absolutely not liable for 3% or 5% of the damage or 1% plus this very questionable certificate showing.

That rule, we think, is — is just inconsistent with Section 20(11).

Thank you.

Felix Frankfurter:

(Inaudible)