B. & O. R. CO. v. BOSTON & M. R. CO.
Argument of Robert W. Ginnane
Chief Justice Earl Warren: No. 97 Baltimore & Ohio Railroad Company et al. Appellants versus Boston & Maine Railroad Company et al. No. 98 Maryland Port Authority et al. Appellants versus Boston & Maine Railroad.
No. 99 Interstate Commerce Commission Appellant versus Boston & Maine Railroad.
Mr. Robert W. Ginnane: May it please the Court.
I'm sharing the argument for the appellants in these cases with Mr. Langdon, counsel for the appellant, railroads and Mr. Marbury, counsel for the appellant ports served by the appellant railroads.
The consolidated appeals and from the decision of a three judge court in the District of Massachusetts, which set aside an order of the Interstate Commerce Commission.
The Commission's order issued after suspension of tariffs an extensive administrative proceedings required the cancellation of two sets of proposed railroad rates on export and import traffic excluding iron ore, coal, and coke moving between the North Atlantic ports, which are the ports of Norfolk North, Norfolk, Baltimore, Philadelphia, New York, Albany, Boston, Portland Maine on the one hand and an interior area known as differential territory.
Differential territory consists of the States, points in the States of Illinois, Indiana, Ohio, Michigan except the Northern Peninsula and strips of Wisconsin and Pennsylvania.
I might identify export import rates.
Export import rates in much of the United States are at a lower level than the domestic rates to and from the same port.
For example, through the North Atlantic ports, the average export rate is $0.25 and the average import rate is $0.115 per 100 pounds, below the corresponding domestic rates.
Specifically, the commission ordered the cancellation of reduced rates proposed by the railroads serving Albany, Boston, Portland, and New York, which we all refer to as the Northern Tier ports.
The purpose of their proposal was to equalize at the level of the rates applicable to and from Baltimore.
The export import rates to and from these Northern Tier ports with the export import rates to and from the Southern Tier ports of Baltimore, Philadelphia, and Hampton roads.
Secondly, the commission ordered the cancellation of conditional and retaliatory rate reductions filed by the railroads serving the Southern Tier ports.
Now the export import rates on most traffic on differential territory to and from Philadelphia are $0.02 per 100 pounds below the rates applicable to and from New York.
Baltimore has rates $0.03 per 100 pounds below New York.
Hampton Roads has rates $0.03 below New York for the Western Port points in the Western portion of differential territory.
Boston has the same level of rates as New York.
Portland has rates at the New York level except it has import rates on the Baltimore level on import traffic which moves through Portland and via Canadian lines into differential territory.
These rate differences on export import traffic have been known for many years as the North Atlantic port differentials and their basic structure has been in existence with brief intervals since 1877.
So the basic geography of this 90-year-old transportation dispute is this, the average distance from points in differential territory is 698 miles to Baltimore, 750 miles to Philadelphia, 804 miles to New York and 921 miles to Boston.
The purpose of the rate reductions proposed by the railroads serving the Northern Tier ports was to eliminate these differentials and the purpose of the conditional and retaliatory rate proposals of the line serving the southern tier ports was to preserve the existing differentials at a lower rate level if, but only if the reduced rates proposed by the northern alliance were approved.
The commission found that the proposed reduced rates to Albany, New York, Portland, and Boston separately and collectively are not shown to be reasonably related to the present rates in light traffic between the same interior points and the southern tier points.
And that they would result in undue preference of and advantage to the named ports and undue prejudice and disadvantage to the southern tier ports.
Section 31 of the interstate commerce act, the great anti-discrimination section provides that it should be unlawful for any railroad to give any undue or unreasonable preference or advantage to any particular person, locality, port and conversely to subject any person, locality or port to undue or unreasonable prejudice or disadvantage.
Now summarizing the issues before the commission, because of dispute between the parties as to what the precise issues were then and are now.
The commission had before the proposal of a northern alliance to eliminate the differential.
Their basic justification was that the existing differentials resulted in an undue diversion of traffic to the southern alliance and to the southern ports.
They contemned that the sole purpose of the differentials was to offset lower steamship rates at New York and Boston than existed at the southern tier ports.
So offset in the sense of creating a uniform through rate from the internal point to European destination no matter what port the movement went through.
And they contemned that with the equalization of the steamship rates by 1935.
There was no further justification for differentials and that they were entitled to rate parity with the southern tier ports regardless of the distance and cost advantages of the railroads serving the southern tier ports, they say cost distance had nothing to with it.
Now, the line serving the southern tier port justified, sought to justify their retaliatory rate reduction to maintain the differentials on the ground that if they were eliminated there would be an undue diversion of export import traffic to the northern tier ports, particularly to New York.
It is fundamental in this case that none of the railroads northern or southern decided merely to move the structure of differentials rates down to a lower rate level, thereby dissipating their revenues in a rate war.
The real issue was whether the commission was to impose rate parity on the railroads handling export import traffic to the north Atlantic ports from Portland to Northern that is to enforce the elimination of the port differentials.
This issue was made very clear in the motion to affirm filed in this court by all of the railroad appellees.
They said it is fundamental that if the appellee railroads lawfully reduced their rates to basis of equality with the rates of the opponent railroads as a matter of necessity in order to meet competition.
Then a retaliatory reduction by appellants must be condemned as unnecessary to meet competition.
The Boston appellees stick to that position in their main brief here, the New York appellees are ambiguous.
The commission considered an unusual detail, these conflicting claims adds to the diversion resulting from equalization or from the differentials.
Some of its largely unchallenged findings maybe summarized in part here.
I say in part because the commission reports are likely and in great detail on this very complicated matter.
Commission pointed out that the present differentials measured in cents per hundred pounds have lost much of their relative importance by reason of the great increase in freight rates and in the value of commodities since 1877.
The differentials have stayed at $0.02 and $0.03, if they had increased proportionally with the rate level they'd be $0.10 or $0.12 or $0.15.
Justice Byron R. White: 1877.
Mr. Robert W. Ginnane: 1877.
And they are less than the differences in domestic rates between the same points, because the domestic rates generally reflect differences in distance and services.
Now, this export/import traffic here involved is of two types; bulk cargo and general cargo.
The largest in volume is the bulk cargo, consisting largely of low value commodities, which are loaded and unloaded by mechanical facilities.
General cargo includes manufactured and semi-manufactured goods of relatively high value and usually packaged in some form.
The general cargo requires far more supplemental service and handling in a port than does bulk cargo.
So, it's the general cargo, which provides a much greater employment and revenue per ton to a port than does bulk cargo.
Now, there is a great deal on the record in the commissions findings as to the general dominance of the port of New York and the Atlantic export and foreign trade, it's so well known, I won't bother to go into it.
Moreover, we're concerned here only with the effect of the differentials upon that portion of the North Atlantic foreign trade, which moves to and from differential territory.
The commission found the evidence inadequate to show the comparative trends in the movement of differential territory traffic between the northern tier ports versus the southern tier ports.And because it couldn't determine -- what the trend had been, it was unable to make a finding that with the elimination of the steamship differentials by 1935, there had followed a diversion of traffic, an undue diversion of traffic to the southern lines and southern ports
Unknown Speaker: [Inaudible]
Mr. Robert W. Ginnane: One of the factors, that's right.
Unknown Speaker: What did you say about the fact that in effect, it is agreed that [Inaudible]
Mr. Robert W. Ginnane: No sir, I would not.
Unknown Speaker: What would you say about [Inaudible] Philadelphia for much greater differentials than what has been finally fixed in the 1877 agreement, and much smaller differentials then they've had before 1877, the other factor --
Unknown Speaker: [Inaudible]
Mr. Robert W. Ginnane: But I will point out later, the commission found in 1905 that the differentials at all times exceeded the differences in steamship rates, they were not tailored together.
Unknown Speaker: [Inaudible]
Mr. Robert W. Ginnane: Just those two.
Unknown Speaker: Compromising with the geographical location, the geographical advantages of Baltimore and Philadelphia and equalizing with the ocean rates.
Unknown Speaker: [Inaudible]
Mr. Robert W. Ginnane: I can answer it very briefly sir right now.
The commission has gone to great lengths and equalizing rates on different coasts.
Moreover, to enable a small dominated port to compete at least some of the traffic.
The commission has never enforced parity, where it would result in a diversion of traffic, an undue diversion of traffic to an already dominant port such as New York.
Unknown Speaker: [Inaudible]
Mr. Robert W. Ginnane: The commission --in a case which I will discuss later and which came before this Court in the Texas and Pacific case, the commission intervened in the Galveston, Houston situation to require the differentials we established in favor of Galveston recognizing its distance advantages so that it could compete in terms of its geographical location with the port of New Orleans.
And that by the way was a case in which the steamship rates to the two ports were the same, it's very similar to the present case.
Unknown Speaker: [Inaudible]
Mr. Robert W. Ginnane: I'm sure it's lost the deal to Houston.
Unknown Speaker: I remember when I was there [Inaudible]
Mr. Robert W. Ginnane: But it was the Galveston, New Orleans situation which led to this Court's decision in Texas and Pacific case, which in turn led to what we think was for the purposes of this case the decisive 1935 Amendment of Section 3(1).
Now there was on the record before the commission a detailed study for a test year ending July 1956 and the movement of traffic export/import traffic to and from differential territory.
The commission summarized that and I would like the quote it, because I know it's very important “Of a total of about 11 million tons of exports and imports, exclusive of import petroleum, iron ore and export coal handled between the North Atlantic ports that's all of those ports and the effective territory about one-third moved through the Northern Tier ports.
The preponderance of the tonnage passed through the Southern Tier ports, but as the imports, the excess consisted almost wholly of ores other than iron ore and as for exports, it was represented wholly grain and grain products.”
The commission went on, the complete dominance by New York of the North Atlantic general cargo traffic to and from the differential territory is clear.
Of imports, its volume exceed of that of all the other ports combined was more than double out of Baltimore and almost four times that of Hampton Roads.
As to general cargo exports New York's volume was 62.7% of the total volume for all of the North Atlantic ports and over 50% greater than the Southern Tier ports combined.
Now the Commission didn't have any trouble finding out how New York was able to attract this traffic not withstanding the differentials.
New York has a preponderance of excellent steamship services far surpassing that available to Southern Tier ports.
The General Cargo Services have much more frequent sailings to a wide variety of trading areas around the world and its supplemental port services ranging from international banking to Stevedoring, freight forwarding, marine insurance are unique among the North Atlantic ports.
So, the Commission concluded that New York with its superior port services was able to attract most of the General Cargo traffic not withstanding the lower rates, the differentially lower rates to Philadelphia and Baltimore.
And indeed attracted export traffic from shippers in the backyard, a few miles from Baltimore and Philadelphia ports.
The Commission concluded from such circumstances that the proposed rate equalization would result in an undue diversion of traffic from the Southern Tier ports to the Northern Tier ports and particularly New York.
The Commission found that the proposed rate equalization would not materially affect the flow of traffic through Boston, Portland and Albany and has based that conclusion on the fact that Boston, which has long had the same rates as New York and Albany, which as for years had lower rates than New York on the Philadelphia level simply haven't been able to compete significantly against New York.
Finally, the Commission found the greater distance of the Northern Tier ports from the affected territory and the higher cost of service to and from those ports is firmly established.
The cost evidence in support of that finding will be summarized for the Court by Mr. Langdon.
Thus the problem before the commission boiled onto this.
Nobody wanted to see both sets of rate reductions going to effect, thereby merely putting the differentials down to a lower level, the dissipation of carrier revenues in a rate war just the kind of rate war, which gave rise to these differentials.
So the real issue before the commission was whether to enforce rate parity upon all the railroads servicing the North Atlantic ports or to maintain the differentials at the present level.
The commission concluded that it would not enforce a rate parity, which would ignore the distance and cost advantages of the railroad serving the southern tier ports, and at the same time result in an undue diversion of traffic from the southern tier ports to New York.
In so doing, it was applied the accepted principle that a discrimination which is produced by charging equal rates for unequal service is prohibited by the statute just as much as one resulting from unequal rates for equal service.
Now the Lower Court set aside the Commission's decision and I quote “In so far as it prevents differential eliminating rates from becoming effective.”
We think the Court erred in several major respects.
We contend that it erred in making its own independent finding, that on this evidence the Northern lines certainly have established prima facie the reasonableness of their rates.
We think it further erred in concluding that the commission had based its decision of a finding of a violation of Section 3(1) solely on the distance advantages of the Northern Tier Ports.
The Court stating that while differences in cost might be relevant, there were neither findings nor evidence as to cost.
In fact, the Court overlooked both the Commission's finding as to relative cost and the evidence in support of it which Mr. Langdon will be summarizing.
And finally we submit that the Court erred in holding that distance was irrelevant to the port differentials.
Which it said, were established solely to equalize the aggregate of rail ocean charges.
Now we think it erred in holding that the purpose of the 1935 amendment to Section 3(1) was to permit all ports in the carrier serving them to compete for all import traffic thereby maximizing the number of ports available.
Turning to the history of the differentials, and the role which distance has played in it.
Even prior to 1887, 1877 Baltimore and Philadelphia by agreement between the Northern Lines and the Southern Lines enjoyed differentially lower rates, sometimes there were arbitrary differentials and sometimes they were measured by distance.
But they were substantially greater than the differentials fixed in the 1877 agreement.
They were so much greater in fact that they became intolerable to the New York Central and Erie.
And after a final major rate war Central, Erie, Pennsylvania and Baltimore and Ohio entered into the famous 1877 agreement.
That agreement is in volume four of the record at page 1903.
It recites that it was made to avoid all future misunderstandings in respect of the geographical advantages or disadvantages of the cities of Baltimore, Philadelphia and New York as effected by rail and ocean transportation.
And with a view of effecting an equalization of the aggregate cost of rail and ocean transportation between all competitive points in the west and all domestic and foreign ports reached through above cities.
The agreement further provided that the rates to and from Boston should not be less than the rates to and from New York.
Now it's the language of this 1877 agreement that's the foundation of the argument of the appellees and the position of the Lower Court, that relative distances and cost had no part in the establishment of the differentials.
And that they were established solely to equalize the total rail, ocean charges, and that when the steam ship rates were equalized by 1935 then there was no further justification for the differential rates.
A careful study of the historical materials, which are set forth in the various appellants briefs will show to the contrary.
I can give just two or three brief examples.
For example, in 1905, the Commission examined the differential rate structure as an arbiter at the request of the commercial interest of the Atlantic ports.
It found that if the equalization of the combined rail, ocean rate, and I quote, “Where the proper basis of making the differential, the present differentials are too high, for they undoubtedly exceed the difference in ocean rates.”
In our opinion they always have from the very first.
So we think it's clear that the 1877 agreement included a compromise of claim of a claim of the Southern Tier Ports, particularly Baltimore and Philadelphia for larger differentials, indeed they had up till then enjoyed larger differentials.
Again in 1898 the Commission rejected the complaint of New York commercial interest that the lower rates to Baltimore and Philadelphia were prejudicial to New York in violation of Section 3(1) and on rejecting that complaint the Commission said “We do think that in determining whether is an undue preference, the advantage which Philadelphia and Baltimore possess by way of distance should be considered.”
In 1925 the Commission rejected a similar complaint from the commercial interest of the port of Boston and again it said “In passing upon whether or not undue preference and prejudice exist, it is well settled that cost of service is a factor which must be taken into account.”
And turning to this particular set of facts they said “In view of the very substantial advantages in distance from differential territory, which Philadelphia and Baltimore enjoy, as compared with New York and Boston, we are unable to find that there is anything unlawful about the port differentials in favor of Philadelphia and Baltimore.”
So again and again and again the relative distances and costs have been taken into account, both in the establishment of the differentials and in their maintenance from 1877 down to date.
Unknown Speaker: [Inaudible]
Mr. Robert W. Ginnane: No indeed, and in a real sense it happened.
As I pointed out before with the general increase in the level of rates and in the value of goods, these differentials which have been at $0.02 and $0.03 cents per 100 Pounds since 1877 are much less against it than they were in 1877.
Unknown Speaker: [Inaudible]
Mr. Robert W. Ginnane: That problem has -- that's not a new problem, the Commissioner has considered in one context or another again and again, years ago that Commission pointed out in response to some sort of complaint from the port of New York that much of it's problems were the development of the South Atlantic, the Gulf and the West Coast ports.
New Orleans alone, they say nothing of the seaway, accounts for a great deal of the grain export traffic which formally would go largely to the North Atlantic ports.
Unknown Speaker: [Inaudible]
Mr. Robert W. Ginnane: All the time, and major economic change is going on.
Unknown Speaker: [Inaudible]
Mr. Robert W. Ginnane: The Commission held that competition was not the sole factor to be determined in fixing these rate relationships.
It should take into account and make some allowance for the geographical advantages, the cost advantages of the carriers serving the Southern Tier Ports, cost advantages which as I read the appellee's briefs are not challenged in this Court.
Finally I shall like to discuss the proper construction of Section 3(1) as applied to the facts of this case.
We believe that the legal key to this issue lies in the purpose and history of a 1935 amendment to Section 3(1).
The 1935 Amendment added the words, port and port districts to the --
Justice Hugo L. Black: Port and port what?
Mr. Robert W. Ginnane: Port and port districts.
To the entities which were to be protected from undue preference and prejudice.
That 1935 amendment was the aftermath to this Court's decision in Texas and Pacific Railroad Company, the United States in 289 US decided 1933.
Now that case arose out of Commission Orders issued in 1925 and 1927 in which the Commission found that the maintenance of equalized export and import rates to and from the ports of Galveston and New Orleans and defined inland territory on the other hand, not withstanding the distance advantages of Galveston was unduly prejudicial to Galveston and unduly preferential to New Orleans.
And the commission prescribed fixed differentials in favor of Galveston in those situations where the distances from the inland territory to New Orleans exceeded the distances to Galveston by 25%.
And I think a significant in that case that the Commission also found that the ocean rates were the same to those two ports.
In Texas and Pacific, this Court set aside the Commission's order.
Specifically it held that ports were not included within the word -- meaning of the word locality as used in Section 3(1).
And the Chief Justice Hughes and justices Stone, Cardozo and Brandeis decided.
But there was more in the decision of the majority of this Court from a technical interpretation of the word locality, whether or not locality included port.
Rather that interpretation flowed from the Court's view of basic legislative purposes, but the court said and may I quote briefly, the legislative history of act, now that we are talking about the legislative history of the Hepburn Act as well as the original Interstate Commerce Act.
The legislative history of the act demonstrates that Congress did not intend to forbid the equalization of export or import rates by lines serving the several ports.
These rates it was said were not to be proportioned to the respective distances between inland origins or destinations and the ports.
Now, if the decision and rational of the majority of this Court in Texas and Pacific is the law of the land today.
Then the applees have got a very good case against the application of Section 3(1) to these facts, that we submit that it hasn't been the law since the 1935 Amendment.
We submit that the mere insertion of the word port in 1935 in Section 3(1) indicates that ports like shippers, localities, regions ought to be protected from undue preference and prejudice, even though this means inevitably some restriction on the competitive freedom of carriers.
It also means that in determining preference and prejudice as between competing ports just as between competing regions or shippers or cities, the Commission is to apply transportation standards, standard which admittedly include the factors of relative distance and cost.
But there is more to what had been just -- just the amendment.
There is some legislative history in the Senate where essentially this case was argued.
Well, when the bill is reported in the Senate, Senator Huey Long of Louisiana tried to retain, tried to keep the victory which New Orleans had won in this Court in the Texas and Pacific case, and he tried to do it by offering an amendment and the amendment would have read, where rates and charges of common carries to ports are made as reductions to equalize rates to ports served by competing carriers.
It shall not be termed undue preferences or prejudice.
Well, if the Long amendment had been a passed, sort of a proviso to Section 3(1), the appellees again would be in very good shape here.
But the Long Amendment was rejected after an extensive debate.
Now the appellees would dismiss this in a footnote.
They said the Long amendment said nothing about distance, true, in haec verba, it didn't, but the entire Senate debate was replete with discussion as to whether the Commission should take into account relative distance and cost in dealing with this competitive export-import rate matters.
For example, referring to the bill and to Senator Long's Amendment, Senator Smith pointed out --
Justice Hugo L. Black: From where?
Mr. Robert W. Ginnane: New Jersey.
The object of the bill is to prevent further discrimination against ports where they are more advantageously situated by a virtue of their nearness to the source of supply.
If this amendment, Senator Long's Amendment should be agreed to, we might just as well tear up the reminder of the bill.
So we say that the debate in the Senate and the Long Amendment amounts to a specific rejection of the appellee's basic argument that relative distances and cost are irrelevant and that enforced parity of rates is the only answer.
Briefly, we think the appellee's case was argued and lost in the Senate in 1935.
Justice Hugo L. Black: I noticed that some of its [Inaudible] He was from Maryland.
Mr. Robert W. Ginnane: He was from Maryland –
Justice Hugo L. Black: And so, the controversy in Baltimore court, Maryland court, New Jersey court, New Orleans.
Mr. Robert W. Ginnane: Well, Senator Tydings spoke immediately following this passage for --
Justice Hugo L. Black: What were the particular inputs in this Amendment?
Mr. Robert W. Ginnane: He agreed with Senator Smith's analysis and he agreed with senators and that if the Long Amendment was adopted, they might just as well got fiddled.
Justice Hugo L. Black: Might what?
Mr. Robert W. Ginnane: Might just as well got fiddled.
Senator Tydings agreed whole heartedly with Senator Smith.
Justice Hugo L. Black: Yeah, it entered it in the Baltimore court, particularly wasn't it, or was it.
Mr. Robert W. Ginnane: Well, I am sure he had Baltimore's interest very much in mind.
Justice Hugo L. Black: Is Baltimore involved in this time, one way or the other.
Mr. Robert W. Ginnane: Here today?
Justice Hugo L. Black: Yeah.
Mr. Robert W. Ginnane: Very much.
Justice Hugo L. Black: How?
Mr. Robert W. Ginnane: Baltimore contends that under enforced rate equalization there would be an undue diversion of traffic on Baltimore as from the other southern tier ports to the northern tier ports, particularly New York.
The Port of Baltimore is an active party to this case and I can assure Your Honor.
Chief Justice Earl Warren: Mr. Langdon?
Argument of Jervis Langdon
Mr. Jervis Langdon: Mr. Chief Justice, may it please the court.
Mr. Ginnane has talked and discussed the relationship issue in this case.
There is another very important issue in this case and that has to deal with the reasonableness of the rates, because when as in this case, reduced rates are proposed by railroads, they have the burden of proving them lawful, specifically proving them first to be reasonable and then to be properly related.
Actually the issue of reasonableness is a threshold issue.
You don't really reach the relationship question until you have first shown your rates to be reasonable.
In this case, the commission found on the reasonableness, issue of reasonableness that the New York Railroads had not shown their rates to be compensatory, refused to find that the rates were compensatory.
And this of course, meant that the rates could not be reasonable if not shown to be compensatory.
The Lower Court in Boston made its own evaluation of the evidence and reached a conclusion that a Prima Facie case the reasonableness had been made.
Obviously, the court had to do this because reversing the commissions on the issue of relationship, it had to make a finding of reasonableness.
I want to give you a little of the background, because my argument goes to the point that the New York Railroads did not sustain the burden of proving their rates to be compensatory.
Justice Hugo L. Black: [Inaudible]
Mr. Jervis Langdon: They refused to find them compensatory sir, they did not include in their ultimate finding any mention on reasonableness, but in the body of the report they refused to find after considering the subject that the rates were compensatory and in the dissenting opinion, the majority opinion is construed as being that the New York Railroads failed to sustain the burden of proving their rates to be compensatory.
Justice Hugo L. Black: [Inaudible]
Mr. Jervis Langdon: There is a finding, but it does not amount to a finding that the rates are compensatory.
There is a finding that the out-of-pocket cost would just match the revenue level or the revenue level would exceed the cost by a very small margin.
But then, the commission went on to point out that this cost study applied to only part of the traffic and to determine whether the rates would be compensatory, they had to know the cost which were not supplied as to all of the traffic that the rates would attract and also the Commission said that, we have got to determine too what the contribution should be.
They very clearly came to the conclusion that there had not been a showing that the rates had been -- not been assuring that the rates were compensatory, refused to find them compensatory.
Justice Hugo L. Black: [Inaudible]
Mr. Jervis Langdon: No, very definitely not sir.
We think that the lower Court finding that a prima facie case of reasonable, has been made should be reversed and reveal that not having proven their case, because of the refusal to supply cost data that these New York Railroads indulged in that they should -- having made their bid should line it and that the case should be dismissed, because they did not sustain their burden to prove the rates to be compensatory.
Justice Hugo L. Black: [Inaudible]
Mr. Jervis Langdon: They made no ultimate finding sir, but as I said in the body of the report there is the very definite conclusion that these rates had not been shown to be compensatory.
Now, I might --
Justice Hugo L. Black: [Inaudible]
Mr. Jervis Langdon: Yes, but in addition to that sir, you've got to determine -- someone has to determine the extent to which the cost must be covered.
There has to be a contribution.
The mere fact that rates are on the same level as the cost without any contribution it doesn't necessarily make them compensatory.
Justice Potter Stewart: What do you mean by contribution?
Mr. Jervis Langdon: Contribution to net earning, I mean after the cost of moving the traffic is taken into account a contribution to the constant expenses those expenses don't vary with the traffic and net earnings.
Justice Hugo L. Black: [Inaudible]
Mr. Jervis Langdon: Well, any minimum rate any -- to qualify as a minimum rates sir, a reasonable minimum rate it certainly has to be shown to be compensatory to cover cost.
This is a first step in the showing of the competitive rate to be reasonable as to show that's its compensatory under the law that is now, it's basic, basic principle.
Now in this case of course we have the very unusual situation in that from the very beginning of the case, the Pennsylvania Railroads and the B&O, which serve New York along with these other railroads undertook cost studies, not only at New York, but at Philadelphia, Baltimore and the Hampton Roads lines showed their cost, computed their cost at Hampton Roads and those costs first were computed on a full cost basis and indicated that at New York the ratio of cost to revenue was in an area of a 120 to 100.
At Baltimore, the revenue, the costs were only 75% of revenue, Philadelphia slightly higher, Hampton Roads, the cost were 50% of the revenue.
I would like to mention Hampton Road, because this is an example of the type of discrimination against which these equalizing rates, which these equalizing rates are designed here according the New York interest.
The area of Hampton Roads with the 30 miles more of service than New York from differential territory and a $0.03 advantage in rate.
They have a $0.40 per 100 pound advantage in cost.
In other words, on export traffic moving from differential territory to Hampton Road, the cost of movement is $0.40 per 100 pound or $8.00 a ton less than moving it to New York.
Moreover, the $0.03 differential isn't adequate even on traffic that originates on the Chesapeake in Ohio and Norfolk in Western which are local to Hampton Road to keep that traffic to the local port that the Chesapeake in Ohio and then Norfolk in Western server.
80% of the originated traffic on the CNO, and NNW from differential territory moves to New York despite the fact that Hampton Roads has a $0.03 advantage in rate.
In other words in this instance the differential reflecting a $0.40 advantage in cost, isn't nearly large enough to get Hampton Roads a fair share of the traffic.
The same relative situation obtains at Baltimore where we have a decided cost advantage over New York.
Philadelphia has a decided advantage over New York.
I want to emphasize the situation at New York, because at New York export import traffic is handled in a way that is different than of the other ports.
Freight arrives at the Jersey Railhead in New York and is unloaded and reloaded in the lighters.
And lighters are then towed around the harbor by tugs and the freight given delivery to individual steamships at the peers designated and at the time they designate.
Freight is really expensive service.
All of the traffic between differential territory and New York, practically all of the traffic including grain, between differential territory in New York is handled this way.
This means that New York costs are bound to be high, in the area of $6 to $7 a ton higher than at the other ports.
Now its said that this bulk traffic which New York hopes to get will not be costly, it will be handled, they say on the Jersey shore and the lightering service will be avoided.
The New York Railroad were encouraged to bring in their cost of handling this traffic that would be attracted by these equalized rates, they refused.
We filed a petition with the commission and we asked the commission to investigate the cost of handling traffic at New York to determine whether or not the cost that the BNO and the Pennsylvania Railroad had computed were in fact representative and could be relied on. The New York Railroads resisted this petition.
They said that, this is a relationship case, the level of the rates is immaterial.
They said further there is delay involved in this and they said finally that of course your costs due from the southern ports are lower.
You have the volume; if we had volume we too could have lower costs, but they refused point blank to bring in their cost.
The commission denied the petition for an investigation of the cost of New York.
They said that it will be delaying and they said further the New York Railroads have their burden of proof, let them come forward.
And the New York Railroads --
Justice Potter Stewart: Is there any dispute as to who has the burden of proof?
Mr. Jervis Langdon: No sir, there can be no dispute on that point.
Under the statute the New York and Boston railroads have the burden of proving their lower rates to be reasonable just as we have the burden of proving our matching reductions to be reasonable and related.
But the New York railroads as I say, refused to come forward and they spent their entire time at the hearings insofar as this particular subject was concerned, trying to tear down and break down our Pennsylvania B&O cost at New York, saying they were unrepresentative, but refusing to come forward with their own cost.
In anyway, they produced not one single figure dealing with New York Central costs, all they did was try to restate our figures on the B&O and Pennsylvania to show how much money we were making.
And then, there came at this point in the trial the sort of a break that comes once in a while, the President of the New York Central Railroad publicly admitted, and this is all in the record, that their freight service to and from New York was conducted at a staggering annual loss.
In the case of 1957, it was $10,350,000, and it enhances the, he said this loss was attributable to deliveries to Manhattan and the lighterage service which enhances the New York cargo services.
Justice Hugo L. Black: Is that quoted in your brief?
Mr. Jervis Langdon: Yes sir.
It's in the reply brief and in the main brief sir.
I'll find it and point it out on rebuttal.
I don't come to it right at the moment, but it was a clear statement made at that time in connection with some controversy there in New York City and it's in this record, of course, it's introduction in the record here, it was resisted very strongly by the New York Railroads, but it was admitted in the relevant portion of it.
It was admitted in this record and at that point, there was no further explanation, no offer of cost figures on the part of the New York Central, Erie, any of them.
And the result is that when the commission had this issue before it, we had during the course of the hearings tried to develop and accept as much criticism of our B&O Pennsylvania Railroad figures as the New York Central and other railroads had offered.
We tried to develop as accurate cost figures for our own traffic as possible and we did get down to the point where there was a large agreement among the railroads as to B&O Pennsylvania Railroad costs.
And there was an exception on only their controversy, remaining controversy on only one essential point, and that was this; we took the position, that at New York Harbor with this lighterage service, that this traffic was chargeable with 100% of the cost of that service, that is full cost should be used rather than as insisted by the New York Central, partial cost should be used.
In the example of their approach, the cost of maintaining the floating equipment in New York, the New York Central would charge our export/import traffic with only 10% of the cost of maintaining the floating equipment.
In other words, the implications are that if traffic doubled in New York, the cost of maintaining the floating equipment would increase only 10%, and why?
They said, with an increase in traffic, the average loading of these lighters will increase, and you won't run with a doubling in traffic, you won't run nearly as -- you won't double your lighter miles, you'll only increase them 10% because of this increase in average loading.
The difficulty with that basic position is that our studies, which were un-refuted of the actual performance of the lighterage service in New York Harbor over a long period of time with ups and downs in traffic indicated that as the traffic went up, so did the lighterage miles.
As the traffic went down, so did the lighterage miles and in direct proportion.
Moreover, the lighters per tug, know of the lighters, the tug comes in the middle and he gets as many lighters as he can going in up to four or five sometimes going in the same direction.
Our studies indicated that over a period of time despite the ups and downs in the lighterage miles, there was a constant relationship one-and-a-half lighters per tug.
This didn't change with the ups and downs in traffic.
So consequently, without demonstrated 100% variability of cost with the ups and down in traffic, we thought and still think that this traffic should be charged with the full cost.
This is the basic difference in the cost figures.
Under our cost figure, which the commission did not accept, 110%, the ratio is cost to revenue 110%.
The commission split the difference between the parties and came out with an answer that the revenues were just about equal to the expenses or made a vary -- or exceeded them a very small margin, but again, refused to find that the rates has been shown to be compensatory.
Now the Lower Court reversed because they said these rates are prima facie reasonable, because there is only a small reduction, as if that had anything to do with it.
They said, these rates are compensatory, because the average revenue are twice the average revenues on average traffic as a whole, under this specific traffic.
They also take into account that maybe the expenses are four times the average expenses.
And then, they reached the conclusion that the commission had in fact found these rates compensatory by finding that the revenues equaled the cost, when the commission very clearly reserved the right in order to determine whether these rates were compensatory to have the cost supplied to the traffic that these Northern Railroads hope to get and attract as a result of the rates.
Now, the question as to a remand, we think that is taken included Your Honors by a decision in the Boston Court some four or five years ago.
When the Boston Court was asked to review an order of the commission, wherein certain rates on import iron ore were found to be non-compensatory.
And the Court was asked to consider another different approach to the cost questioned.
And the parties indicated that in any event there ought to be a remand to the commission in order to consider this further cost approach.
And this is what the court said and I think it's altogether appropriate here.
We feel that the Boston Railroads must be prepared to sink or swim with the cost study they submitted to the commission as properly modified, which we have no affirmative reason to believe did not reflect the lowest possible cost estimate.
To decide otherwise, would open the door to a potentially endless series of hearings and appeals.
On the present record, the Boston Railroads have failed to satisfy the burden of proof imposed on them by Congress and the commission's determination that the proposed rates from Boston to differential territory would be non-compensatory was entirely profitable.
In that case, a remand was requested and denied here, no one expect the United States which was not a party to the case is asking for a remand.
Thank you sir.
Unknown Speaker: [Inaudible]
Rebuttal of Robert W. Ginnane
Mr. Robert W. Ginnane: Yes sir, they did.
Unknown Speaker: [Inaudible]
Mr. Robert W. Ginnane: The ultimate finding sir is to reason one is --
Unknown Speaker: [Inaudible]
Mr. Robert W. Ginnane: They went on -- that's sir, they went on the prejudice point and the ultimate finding.
Unknown Speaker: [Inaudible]
Mr. Robert W. Ginnane: With this exception sir that in the body of the report where the cost -- subject is discussed at length, they came to the conclusion or they rather refused to find the rates compensatory, this was the holding of the Boston Court, the Lower Court in the case acknowledged that the Commission had refused to find the rates compensatory.
Unknown Speaker: [Inaudible]
Mr. Robert W. Ginnane: No sir, I would say that the burden of proving the rates to be compensatory was on the New York railroads.
Unknown Speaker: [Inaudible]
Mr. Robert W. Ginnane: No sir I'm asking this Court only to reverse the Lower Court and I think that in those circumstances the Commission having refused to find the rates compensatory, that burden approved not having been sustained the case is over.
Chief Justice Earl Warren: Mr. Marbury.
Argument of William L. Marbury
Mr. William L. Marbury: Mr. Chief Justice, may it please the Court.
Your Honors may remember from school days the old saying of Andrew Fletcher of Saltoun, that if he could write his country's ballads, he cared who wrote our laws.
Lawyers have a variation on that, they say that if they can state the issue they cannot write the opinion.
If your Honors have read the briefs or when you have read them or when you come to read the briefs in this case you'll find it difficult to recognize that the parties are talking about the same case.
You'll find it difficult to recognize that the issues dealt within one brief are the issues discussed in another.
And it seems to me that therefore that it maybe worthwhile for me to go back right to the beginning and see what the issue was before the Commission and then what it was in the District Court.
Now what was before the Commission?
Here was a controversy going back into 1877 and before, between the North Atlantic Ports as to what the fair rate relationship was.
Before 1877, there was no regulation, the carriers would come to an agreement usually by the way at a much higher differential than this one.
And then they get tired of it and they start a rate war and they'd fight it out.
And finally they decided that they'd like to have done with that and they adopted an agreement, the major carriers, fixing what is essentially the present rate relationship, there have been modifications, but this is what essentially it was.
Now they said and I can only say to Your Honors that in appendix A to the brief of the Maryland Port Authority, you will find a very careful historical study of this matter.
I made it myself, so I am bound to say that I think it's fair and accurate.
But at any rate there it is and it goes back into this subject and I think it is perfectly clear that this was a compromise, that it was not intended -- was not based on any fixed principle that it was not intended merely to equalize ocean rates, that it was not intended to merely to recognize distance differences, that it was an essentially a comprise to stop a rate war.
It has been so recognized over the years by the Commission.
They have repeatedly in sustaining it against the fact, said that it was not to be tested by any single criteria.
It was not to be tested by the ocean rates.
Incidentally, some of them were equalized before 1908.
And yet the Commission maintained the rate relationship against attack -- under attack.
A great many of them had been equalized by the time the Boston case came before the Commission in 95 ICC.
In fact, the commission then said they couldn't see that that there was any advantage to the Northern tier ports and yet they sustained it.
So I can't take the time here to go in detail in to the history.
I simply ask Your Honors to read the Appendix A to the Maryland Port Authority's brief, I think it's an adequate answer to an argument which is plausible, but on top.
Now what then was the issue?
Here you have the Northern tier ports Boston, Albany and New York and a very reluctant Portland.
Actually Portland is very unhappy about this thing, it comes in and says that they're against it, but -- a very unhappy Portland tagging along because they have to, saying we want to abolish this differential that's been enforced now for 90 years or more than 85 years.
But on the other hand, you have the carriers that serve Baltimore and Philadelphia and Hampton Roads, saying we'll fight this to the limit, no sir.
You can't do it to us and they are backed up by their port interests.
Now that's what the commission had before it, it had rate reductions intended to equalize no other purpose, they didn't want them unless they were going to achieve parity.
And they had on the other hand matching reductions intended to prevent equalization and protect the differential.
So they were faced with a rate war, there wasn't any question about it.
The rate war had begun at the early stages, but there it was your attack on some tier had been met by the call for volunteers and they were off to the races.
Now what was the commission going to do under those circumstances, what should they do?
Well, there were certain interesting features about this situation.
One was that the distance in the case of Baltimore and Philadelphia, the distance advantage you'll have to look at a map, it's very substantial, as to New York and of course much more so as to Boston and Portland and Albany.
Justice Potter Stewart: Between those ports and the differential territory you mean?
Mr. William L. Marbury: Yes sir, well that's all I'm talking about.
Justice Potter Stewart: That's all is it?
Mr. William L. Marbury: Now not as to Hampton Roads, there was – there they had as to New York, actually New York is 30 miles nearer on the average than Hampton Roads, but there was a cost difference.
It was a cost difference which was never denied.
As a matter of fact Your Honor, I think it's important enough to justify my -- I wanted to read my Section 1, here it is, here it is.
Actually the cost difference is admitted in an answer to the petition which Mr. Langdon has told you about, where they were trying to get the New York people to disclose their costs and have an investigation made to the terminal costs of New York.
The New York appellee railroads came in and said, we admit we have higher costs in the Southern tier ports, that has nothing to do with this case.
And they never have denied it, they didn't deny it in the District Court, they don't deny it here.
There isn't any question about it, that the carriers that served Hampton Roads and Baltimore and Philadelphia have lower costs and much lower cost, than the carriers that served Boston and New York.
Not only is it admitted, the only testimony in the record, the witness Hay, the witness of Paterson, the witness of Warren, all these things are referred to in the briefs and reply briefs of my brother Langdon and he has got it all out there, there isn't any question about it.
There is established, firmly established, as those are the words the commission used, the lower cost.
Now, so we have a rate war and we have the fellows who are trying to defend the deferential with a lower cost.
And what's going to happen if that rate war goes on? You are going to have the deferential reestablished to a lower level and you've got a bunch of carriers who were broke or about to go broke or in a bad situation.
There is no question about it that everybody agrees to that.
My brothers on the other side wail about their financial condition just as loudly as Baltimore to Ohio and the Pennsylvania wail about theirs and with justice.
Now, so what's the Commission to do, is it to sit back and say well “Let the devil take the hindmost and let them fight it out.”
Or are they to take a look at this situation and exercise their powers under the act to prevent this senseless waste of carrier revenue and to determine what the proper relationship is in prescribing.
Now they can do that in either one or two ways.
They could let these rates go into effect that the northern carriers have proposed and say to the southern carriers you can't file yours.
And that's imposing an enforced parity on the southern carrier and that's what they were asked to do by these appellees here before the Commission, that's what they asked them to do.
Or they can do what they did do, and that is to say, “No sir, we are going to cancel all these rates and that in effect means that you have got to maintain the existing differential.”
That's what they did do.
Now why did they do it?
Why did they do it?
Well, in the first place, they had a look at these differentials to see how they operated, the contention was made not only that this was an obsolescent historical survival from the 19th century for which there was no longer any justification, but the contention was made that they were operating in such a way as to penalize the northern carriers in the ports that they served.
And so, the Commission took a very careful look at that as page after page with careful, scrupulous analysis of the evidence.
And they came to the conclusion that, that was not true, that New York had not made out its -- or let me put it this way, that New York had not made out its case nor had any of the northern carriers in that respect.
Now it is true that there are some -- if you take mere tonnages that because the lower carriers have specialized in bulk facilities and Your Honor please what else were they to do?
New York has an overwhelming advantage when it comes to the vast mass of general cargo, which is the high rated, high value cargo.
If you want to know what general cargo is; have a look at the exhibit attached to Mr. Langdon's original brief, and you will see there lists of hundreds of items, which move 100% through New York or 98% through New York at the general cargo.
And it's everything from steel presses that would fill half of this Court room down to cigarettes.
I mean, you have New York today with an overwhelming dominance in the field of the high rated, high value cargo.
You have these out ports clinging on and they have been clinging on and this has been going on from the beginning by specializing in facilities and in the handling of bulk cargoes.
Now what happened was that a lot of ore began to be imported after World War II, some of it before that, but a great deal of it after World War II and it has changed the tonnage figures and there got to be a good deal of grain going to Europe right after the war and that changed tonnage figures.
These tonnage figures are subject to a rapid fluctuation Your Honors.
And as everybody knows, seaway is a tremendous competitor when it comes to this bulk business and primarily competes with the ports that live on the bulk business.
This is what the Commission found when they looked at it.
Now, I haven't got the time here to go into an analysis of the Commission's opinions.
I have tried to make it in the brief, which I prepared here on behalf of the Maryland Port Authority.
I think you will find that, that the Commission met head-on the arguments that were made as to unfairness that this thing was operating in such a way as to give an unreasonable advantage to the Southern Tier ports, to Baltimore and Philadelphia and New York.
I think they meant that argument and I think that at any rate they meant it in such a way that I'm sure that Your Honors will not want to go in to it and try to say that they were wrong, it's supported by all sort of subsidiary findings and everything of that sort.
All right, so then and incidentally they, so they found that the thing in practice was operating in a way that was not unfair, they found that the Southern Ports had developed their economies largely on the basis of this differential, they found that without the differential, New York would have a monopoly of the general cargo business and would divert a great deal of the bulk business as well.
They found that there would be undue diversion, that's what they called undue diversion to New York and they came to the concussion that under those circumstances there was nothing wrong with letting the differential stand if it was, now, all right.
But the question is, what are you going to base, how you are going to proceed, how you are going to act?
Well, obviously they couldn't say that the existing differential was unlawful.
There is no basis for that, as a matter of fact my brother argued that.
They go right up to it and a great deal of everything saying about how awful this is, but then they say if, if there is any prejudice, it was against the Northern Ports.
And they said these case differs from the cases which the commission has decided over the years where they held there was no prejudice in the existing differential, it differs, but they say, this is all immaterial, it doesn't matter whether this – they say it doesn't matter whether they, Southern Ports have a geographical advantage, it doesn't matter whether they have a cost advantage, it doesn't matter whether their traffic is going to be diverted to New York, it doesn't matter that the existing rate is not unlawful, none of those things matter, according to their theory of the case.
The only thing that matters is, that the Northern railroads would like to carry more bulk business and they think that in order to do that they should be allowed to lower their rates.
Now that is in essence what they argued. Now the commission first place had to look at this question of what the Northern, at these rates to see whether or not actually this undue diversion which they had found and on found on -- certainly on a reasonable basis, does it matter, does it matter that the effect of these rates, if they are permitted to go into effect and the Southern carriers are not allowed to do it.
In other words, an enforced parity, does it matter then that would be disregarding a geographical advantage, that it would be disregarding a cost advantage, that it would be disregarding the fact that under parity, the Southern court would lose the traffic, the general traffic that they now have and allow their bulk traffic and would simply be in no position to compete it all, do those things matter?
Well the commission thought they didn't matter, the commission thought they are matter to the extent of justifying or finding under section 3, that there would be undo prejudice.
Now Mr. Ginnane in his brief and in his argument has pointed out to you that when the statute was amended in 1935, the commission was given the power to do exactly that, to waive these factors and to come to that conclusion.
And I think he has shown this conclusively and this argument, these things don't matter that the railroads can compete and are free to compete regardless.
I think it's fully answered in his brief, but I would like to call your attention to another aspect of the matter anyhow.
Suppose that you don't go so far and defined prejudice, was it necessary for the commission to find that these rates are prejudicial, was it necessary?
Well actually the Solicitor General, if I understand his brief, it says, admits that it wasn't, that even though there was no finding under section 3(I) that the commission would have had the power in order to prevent sensed dissipation of carrier revenue by a rate war that could have only resulted in restoring the differential at the same level that they would have had the power to prevent that, exercise their powers under section 15 to prescribe the maintenance of the existing differentials, that's the way what I understand he says.
My brother is representing the railroads dispute there, they say no, no, if you can not make a section 3(I) finding you can't do anything.
Well, I say that the law is against them on that.
Your Honors decision in the Milwaukee case, the opinion of Mr. Justice Cardozo in that case echoed by Judge Henry Friendly in the New York Central Iron Ore case down in -- which is cited on our briefs show perfectly clearly, that there is no question abut the power of the commission when they're faced with a rate war to prescribe a reasonable relationship and to do so without making any independent finding of prejudice under Section 3(1) as such, they have the power to do that.
Now, the Solicitor General says, in effect, well, I don't dispute that they have the power, but I suggest that this case would be referred back to them, so they can make more findings, they should make a fully distributed cost study, a fully distributed cost study.
Well, now I submit if Your Honor please, so they haven't made a Court finding.
Now, I submit that here is the case in which the appellee have chosen their ground, they say it doesn't make any cost, make no difference, we're not going to give you any cost evidence, we're not going to respond to any efforts, although they are reminded that the burden of proof is on them.
You'll find in here when the commission declined to force them to submit cost studies, they reminded them that the burden of proof is on them.
Now, although reminded of their burden they said, “No sir, we choose to take the position that costs are immaterial.
They admit the lower cost.
What is there to remand the case to the commission for?
Nobody argues against -- can argue against the lower cost, they're conceded.
Nobody can argue against the fact that the careers are badly over, that's conceded.
Nobody can argue against the fact that you have a rate war.
Now, one last thing, they say, what this all -- issue all disappeared from the case when it got before the commission.
I mean, before the District Court, how did that happen?
They said there was no cross appeal.
Your Honors, what was there to appeal from?
The southern carriers had found conditional matching rates to take effect only in the event that the rates of the northern carriers became effective.
Since the rates of the northern carriers were ordered canceled, theirs automatically fell with them, what was there to appeal from?
How could they appeal from -- there was nothing to appeal from.
The argument here is that while the issue before the commission was one thing, it suddenly disappeared when it came before the District Court.
I submit if Your Honor please, that if that is the best, that counsel of the evidence, that the counsel in this case can figure out a reply to this argument.
Then all I can say about that is that it indicates, I think, that the argument must be a pretty strong one.
Now it seems to me that there can be no reasonable ground for doubt that faced with the situation which the commission found itself here, once they had answered the arguments which Justice Goldberg had indicated that they were to be answered in this case, once they had examined into those question and satisfied themselves.
I see, I have one more minute, I'd like to say one more word about this business of -- well, if they are equalized everywhere else why not here?
Your Honor, the answer is, New York.
You don't have a New York anywhere else overshadowing these other ports.
New Orleans did, overshadowed Galveston and the commission did there insist on a differential.
Your Honors reversed them, but then the Congress, I think reversed you, and incidentally there were a four man minority there that reached by Chief Justice Hughes, Mr. Justice Stone, Mr. Justice Brandeis, Mr. Justice Cardoza, and I think that the fact that Congress established their minority opinion as the law of the land, is not one which we would cavil today.
Now, that's the real answer, you've got New York completely overshadow, now what about Boston, what about these other ports?
Unless you are going to say, that because a port is handicapped as Boston is or Portland or Albany, that you are going to give them a differential under the port that has the advantage of distance which the commission has never done, never in it's history, that would be bare faced allocation, that would be bare faced allocation nothing else, it would be simply sitting up here and saying Boston hadn't got enough, so we'll give it a rate below New York even though the cost of service is great.
Argument of J. William Doolittle
Chief Justice Earl Warren: Mr. Doolittle.
Mr. J. William Doolittle: Mr. Chief Justice, may it please the Court.
The appellees' time is being shared among the government, the New York interests and the Boston interests.
I shall state the government's position relatively briefly and then the burden of the appellees' argument will be handled by Governor Dewey and Mr. Bleakney.
The United States finds itself in essentially intermediate position in this case.
We agree with the other appellees that the Commission failed to spell out a rational legal basis for its decision and therefore we agree that the Three Judge District Court properly set the Commission's order aside.
However, we cannot agree that the District Court was there upon warranted in substituting its own judgment for that of the Commission on the important question of transportation policy presented by this case.
We believe that the proceeding should have been and should now be remanded to the Commission in order to give it an opportunity to determine whether in the light of the Court's opinion the evidence warrants a different result and in any event to make adequate findings in support of its conclusions.
And we feel that the necessity of such a remand is particularly clear on the question of the justness and reasonableness of the rates in question.
Justice William J. Brennan: Mr. Doolittle is this a body of new evidence or just new findings on the record already made?
Mr. J. William Doolittle: Well I'm going to cover that point in a little more detail Mr. Justice Brennan.
We are not contending that the Commission must reopen the record or anything of that sort, but I'll touch upon that again.
Justice William J. Brennan: Because I think we've many times expressed some dissatisfaction with the legislation that handles the matter of findings, that's why [Inaudible]
Mr. J. William Doolittle: Well our -- the essence of our attack on the Commission's order is on findings and the relationship between findings and conclusion, there is a lack of a rational connection and that's the basis on which we would ask the Court primarily to decide the case.
Because of the extremely limited time available to the Government, I shall have to leave it to counsel for the New York and Boston interests to demonstrate in detail the reasons why the District Court was correct in setting aside the Commission's order.
In the few minutes available to me, I shall focus only on one of the deficiencies in the report in order to illustrate why we think that a remand is called for in this case, then I shall also touch upon the justness and reasonableness point and finally I do hope to spend some time on the nature of the remand that we have in mind.
The defect in the Commission's case on which I should like to focus and it is the defect on which the District Court primarily focused is the Commission's attaching decisive weight to considerations that it had largely ignored in the past, and indeed that it indicated were irrelevant to its conclusions, and that is the question of distance and also to some extent costs.
Now the appellants in their briefs and in their argument here have argued very strongly that in fact in port differential cases in the past the Commission has given distance weight whether they contend the Commission has given conclusive weight or not as they practically did here.
I don't know, but they do argue that the Commission has given it weight in the past.
I'm afraid that I don't have the time to debate that issue in detail, but we do think that the short answer to that question is provided by the Commission's reports in this very case.
At page 3772 and 3773 of the record in the Commission's initial report in this case, the Commission discussed the weight to be accorded the distance element, and I don't see how the Court can read those two pages without coming to conclusion that the Commission is saying in our decisions in the past we have accorded very little weight to the issue -- to the question of distances, and one very important sentence in the Commission's discussion of this particular point is this one at the bottom of page 3772, talking about distance -- disadvantages of the Northern Tier Ports.
Such distance disadvantages as they have are much less than the substantial differences in distance to and from some other ports which have a parity or near parity of rates including the Canadian ports and the Y difference which obtain where the several South Atlantic and Gulf Ports are equalized.
Now, after the Commission rendered this decision, it was sent to the District -- it went to the District Court at the instance primarily of the Boston Carriers.
And then the Commission voluntarily reopened it when it was contended that the Commission had not sufficiently distinguished among the several northern tier ports in making its findings.
And in its opinion on reconsideration, it is there they gave conclusive weight at least as to Boston to the question of its distance disadvantages.
And it said, after discussing the various relative distances and this is on page 3854 of the record.
Such great differences in distance under the circumstances here revealed may not be ignored without running counter to the provisions of Section 3(1) of the Act.
Well we submit that those two statements simply cannot stand in the same case.
Now, the Commission indicated that the -- in its original order that these distances were minor compared to the ones that it allowed elsewhere and then suddenly they become so great that it could not ignore them without running counter to Section 3(1) of the Act.
No explanation as to why such distances elsewhere could not run counter to 3(1) of the Act.
Now, the same general problem exists --
Chief Justice Earl Warren: Do you believe they can or cannot take into consideration the distance?
Mr. J. William Doolittle: We do believe they can Your Honor.
Chief Justice Earl Warren: To what extent?
Mr. J. William Doolittle: Well, we think that the Commission should decide for itself to what extent it should take distances into account.
We think that, that is a proper thing for the Commission to decide.
Our difficulty here is that the Commission has departed from its prior norms of decision.
Up to now it has at least led all of the parties to believe that it wasn't going to report any significant weight to distance and costs in these port differential cases.
The theory being that the distances they were really concerned with are the distances between differential territory in Europe and that it's a question of having different ports available.
And thus that we're not going to worry about the distances on the landward part of that, just as the distances on the seaward part of it, don't make a great deal of difference.
This is the basic reason that the Commission explains in its initial report as to why distances don't make any great difference.
Now the real problem here is having laid that foundation in the past, we believe that the Commission cannot now change the ground rules without an explanation.
All we ask is an explanation.
We believe that the Commission may alter its approach, if changing conditions warrant it, if it now becomes necessary because of the condition of the railroads in the country to give greater weight, the costs and distances, we believe the Commission is entitled to consider that and we further believe that matters of cost and distance are relevant to this sort of question.
We simply believe that the Commission if it's going to change its approach, must explain that it is doing so and must explain why it is now appropriate for it to do so.
And so along with the other appellees, we think the Commission's determination is to the relative weight to be accorded the issues of distance and cost cannot stand.
But the question is what then?
Does that mean that the District Court was warranted in determining what weight those factors should be accorded?
And of course the District Court in effect decided that those factors should be accorded no weight at all, for the reason of course that the Commission had in the past not accorded them anyway.
We think that is not the way that this case should be decided.
Such a determination as this one, the weight to be accorded these important factors calls for an informed and sensitive consideration of a wide range of economic and transportation facts and policies.
For the very essence we -- I'm sorry sir.
Justice Hugo L. Black: I don't quite understand your argument, because what the Commission said was it could not ignore that with other circumstances but are you saying it can ignore it?
Mr. J. William Doolittle: No Your Honor.
My point is that in saying that, in saying that, in the context of the Commission's report, it was according that factor very considerable way.
If you read the report --
Justice Hugo L. Black: You say it can't do that?
Mr. J. William Doolittle: We say it can't do that without explaining why it should do that when it hasn't done so in the past.
When its consistent policy in the past as described in its initial report in this case was to ignore the relative distances particularly when they were as small as they are in this case.
Justice Hugo L. Black: You mean that the Commission has been ignoring distances in passing on whether or not the rate is right?
Mr. J. William Doolittle: They have in the port differential area Your Honor.
Justice Hugo L. Black: Did they ignore it?
Mr. J. William Doolittle: Not completely ignoring it, they --
Justice Hugo L. Black: I'm asking you, because I don't see how they could.
I don't see why their statement is not 100% right.
Mr. J. William Doolittle: Well, what you got to appreciate Mr. Justice Black is that what we're talking about is distant -- relatively long distances, we're taking about distances from the Middle West say to the North Atlantic ports, other cases of course involve the South Atlantic ports, the Gulf ports.
In situations where the percentage difference between the various ports is not terribly great and the Commission's explanation has been as to why distance is not critical is as I mentioned to the Chief Justice, in order to keep the various ports competitive and this is the part really of the development of the national economy, of a development of the national defense structure, in order to keep a number of strong ports on the coast, the Commission will allow the rates on the landward portion of these import export journeys to be the same, because the seaward rates are roughly the same in order that traffic will flow through a variety of ports to the destination and if distance became relevant, why would of course all of the traffic would flow to just one port, and they would be able to accomplish this policy of theirs.
Justice Hugo L. Black: There is still again in that each senate who speaks seems to state, if distance becomes relevant then why isn't distance always relevant?
Mr. J. William Doolittle: Well we don't think the Commission has to take distance into account, we don't think it has to.
And the question here is, when the Commission has not given it decisive weight in the past, when it is decidedly subordinated it to other questions, more particularly the competitive relationships between the ports, we say that the Commission cannot give it decisively weight as it did here without explaining why a change is called for.
Why the Commission has now decided that costs and distances, which are by and large of the same problem, why they have now become important, because we think it's perfectly clear from the Commission's initial report in this case that in the past the Commission has not given a great deal of weight to the question of distances; import differential case.
I'm not talking of course about the domestic rate case.
I'm talking about the special category of cases the port differential cases.
Chief Justice Earl Warren: In any of these cases, has it said that it will not give any attention to the distances?
Mr. J. William Doolittle: It's is consistently said that distances are not very important and in its initial report in this case, here is its language on analysis of its cases.
“It is apparent that considerable disregard of rail distances is characteristic of all port adjustments as it was in the establishment of the rates here it dealt with.”
And as I say the whole tenure, I can only ask the Court to read the pages I have cited, the whole tenure of its discussion in the initial reports was that it was not going pay a great deal of attention to distances and the only time that it did, the only time that it did was when – see it decided the case on the initial report on the basis of the competitive advantages largely of New York, but then when it was required on reconsideration to separate out New York and the other Northern ports from all that appears from the opinion it concluded that it couldn't separate Boston out on its competitive advantages, because it has none and therefore, it fell back on the distance principle that it had never used before, but now felt called upon to use.
And as we say, we sincerely believe that if the Commission feels that it must now place greater weight on distance in these port differentials, it's entitled to do so.
We simply think that the parties are entitled to an explanation as to why it has now become relevant, because as this Court has had occasion to recognize in the past that when an agency completely changes the norms of its decision without any explanation that really amounts to a little more than arbitrariness.
We think, as I say that an explanation is called for and that's why we asked for a remand.
Unknown Speaker: [Inaudible]
Mr. J. William Doolittle: That is right.
Unknown Speaker: [Inaudible]
Mr. J. William Doolittle: That's exactly right Your Honor the --
Unknown Speaker: [Inaudible]
Mr. J. William Doolittle: That's right Your Honor.
One would read the two opinions at least on this point in this same case and it's hard to believe that they were rendered in the same case, because they just -- they face in opposite directions on this issue.
But we don't feel as I say, we don't feel that the District Court should have made the decision as to what weight should these factors be accorded.
We believe that the fact that the Commission has thus far failed to perform the function of passing on these rates does not mean that the question should go by default, an issue as decisive as this one in a case as important as this one should surly be resolved by the one agency qualified to resolve it.
For that reason, we think that the agency shouldn't take the case back to resolve this question, to articulate a judgment as to whether to what extent and why its traditional approach to distances and costs should be changed.
Justice Hugo L. Black: Is that your sole reason for wanting it remanded?
Mr. J. William Doolittle: Well, as I said Your Honor, I've selected this one error.
We think it's probably the most obvious error in the Commission's opinion.
Counsels for the other appellees are going to discuss the other errors.
My time doesn't permit me to go into them.
We feel that what I've said equally applies to the other deficiencies in the report.
Chief Justice Earl Warren: Well, can you state briefly to us whether what the position of the government is in regard to the cost?
Mr. J. William Doolittle: Well, we believe similarly that the Commission attached a great deal more weight to the issue of cost than it has in the past and we believe that there too an explanation is called for.
We would not presume to say of what the Commission ought -- what standard of the sufficiency or the quality of evidence as to costs the Commission ought to have.
We think that's for the Commission to decide.
We don't think that the Commission has finally resolved, certainly its report does not reflect a final resolution on the question of costs and we think that it should spell out its findings in more detail.
We don't as I say, presume as I mentioned to Mr. Justice Brennan, we don't presume to say that they must reopen the record to take more evidence on costs.
Justice Tom C. Clark: I wondered if you just [Inaudible] that the Commission's decision was decisively based upon distance.
Mr. J. William Doolittle: Well, the same would be true with Portland and Albany, that is to say the point that was made with respect to New York namely that they have a competitive advantage doesn't apply to Albany or Portland either.
Justice Tom C. Clark: It wouldn't apply to Philadelphia or Baltimore?
Mr. J. William Doolittle: Well, of course as to Philadelphia -- there are different differences among the Southern Tier ports of course.
And has been pointed out already, the Newport news -- the Norfolk Newport news ports are further away to New York.
The Commission never explained why that difference distance could be ignored, but basically as to the other Northern Tier ports would be Albany important.
Chief Justice Earl Warren: I understood the counsel to say that the reason that Commission was no more or didn't particularize on cost was because the appellees refused to offer any evidence on cost, their cost.
What is your position on that?
Mr. J. William Doolittle: Well, Your Honor, our position is that and this goes to a point that was taken up to some extent in the Interstate Commerce Commission's argument on the relationship between costs and whether or not the rates were just and reasonable, which was the point that was discussed.
We don't believe the Commission has passed on the question.
Chief Justice Earl Warren: I beg your pardon.
Mr. J. William Doolittle: We don't believe that the Commission has passed on the question of whether or not the rates are just and reasonable and whether or not the cost evidence is sufficient.
It maybe as has been suggested that the Commission did not affirmatively sustain the compensatory character of the rates, but it's equally true that the Commission did not reject that the rates as not compensatory.
We think that it is perfectly clear from the face of the opinion that it didn't reach the question of the justness and reasonableness of the rates because it decided the case on the undue preference and prejudice point.
We think therefore it's perfectly clear that on that issue at least there must be a remand for there to be an initial agency determination as to the justness and reasonableness of these rates.
Justice Tom C. Clark: [Inaudible]
Mr. J. William Doolittle: What was admitted?
Justice Tom C. Clark: The rates [Inaudible]
No, the Commission just has not decided.
It hasn't decided as to New York.
It indicated that the rates would equal or barley cover, that the revenues would equal -- equal are barely covered out of pocket costs.
Justice Tom C. Clark: What I meant was that I understood you say that, the carrier [Inaudible] not the Commission, but the carriers [Inaudible]
Mr. J. William Doolittle: No, I don't believe that's been argued and I don't believe it's true.
Justice Arthur J. Goldberg: [Inaudible] doesn't that dispose the case without going into anything else [Inaudible] and the burden is on the carrier of just and reasonable.
Doesn't that mean that the case is over?
Mr. J. William Doolittle: That would be if the case is over Your Honor, but the finding of the Commission on 3807 refers only to the southern tier carrier's rate, that is the rates that were filed as a response to the northern tier rates.
Justice Arthur J. Goldberg: Not to the northern?
Mr. J. William Doolittle: Not to the northern tier rates, there has been no finding on --
Justice Arthur J. Goldberg: [Inaudible]
Mr. J. William Doolittle: Well, there are cost evidences as to both, but it focuses on the northern, actually it focuses more particularly on New York.
Justice Arthur J. Goldberg: [Inaudible]
Mr. J. William Doolittle: The concurring opinion is rather hard to explain.
We don't know the answer frankly.
The concurring opinion indicates that it thinks that the majority opinion is passing on the justness and reasonableness of the rates.
Now, we think there is no ground for that.
There is nothing discernable in the majority opinion to that affect.
We frankly have no explanation as to why the concurring opinion, but say, we agree with something that you said in the majority opinion when they haven't said a majority opinion.
I see --
Justice Hugo L. Black: It is true that the railroads refused to give evidence to the cost on the grounds of due diligence.
Mr. J. William Doolittle: Well, the northern tier carriers did not put in certain kinds of evidence that the southern tier carriers contended was required for the reason --
Justice Hugo L. Black: Is that about cost?
Mr. J. William Doolittle: Yes, it related to their costs; for the reason that they said that the minimal reduction that they were proposing, it was just too small to justify the extensive search that would be necessary to develop this data, and --
Justice Hugo L. Black: So that, if the burden was on them to prove that fact about the being compensatory, I assume you would have to say that they had themselves settled that by saying, we're going -- not going to give any evidence, wouldn't it?
Mr. J. William Doolittle: The only problem Your Honor is the Commission did not so hold.
The Commission did not rule that, that constituted a fatal deficiency in the Northern Carriers case.
Justice Hugo L. Black: [Inaudible] agree in the trial of lawsuit said they should not [Inaudible], not even relevant and they go back on it later on.
Mr. J. William Doolittle: Well, it's not, it's certainly not to be said that the Northern Carriers ever suggested that the question of costs was irrelevant.
They merely declined to put in a certain kind of evidence on the ground that it would be unduly burdensome for them to produce it.
Justice Hugo L. Black: Do you agree with that the burden was on them did --
Mr. J. William Doolittle: No question about it, and they -- no question that the burden is on the Northern Carriers.
Justice Hugo L. Black: [Inaudible] it was compensatory.
Mr. J. William Doolittle: That it was just and reasonable, it was compensatory and that it was not unduly preferential and prejudicial, but the fact is that the Commission did not reject it on that ground.
It did not say that they had failed to meet their burden of proof.
Chief Justice Earl Warren: Were they justified in refusing to offer that kind of testimony when the Commission advised them that they should?
Mr. J. William Doolittle: Again on that question Your Honor, we would not presume to second guess the Commission.
The Commission did not say that they were not justified in doing so and we feel that it must be left to the Commission to determine what amount and what character of evidence will satisfy it on these points.
And we are just not in the position to pass judgment on the Northern Carriers' decision in that regard.
Chief Justice Earl Warren: I - -excuse me?
Justice Hugo L. Black: No I just, I don't quite undisputed it, I thought that the statement was made that the Commissions gave them an opportunity to offer, and they said they wouldn't offer it, didn't -- may not have used the word relevant unimportant to the issue and then the Commission said they didn't have to --
Mr. J. William Doolittle: Well, as I understand the way it came up is that the Southern Carriers asked that they be required, Northern Carriers be required to furnish comprehensive cost evidence.
They asked that the Commission required them and the Commission decline to require them --
Justice Hugo L. Black: What ground?
Mr. J. William Doolittle: Largely that it would be under that -- it largely sustained their contention that it would be unduly burdensome to develop such a vast volume of evidence in relation to a cost differential that was so small, to a rate differential that was so small.
Chief Justice Earl Warren: Well, if it goes back on remand, should they now -- should it be open to that kind of testimony or should it be decided on the testimony that's in.
Mr. J. William Doolittle: Well our -- because of the great amount of time that is already passed in this case, we certainly feel that the Northern Carriers are justified in their feeling that the case should be brought to conclusion as quickly as possible.
We urge that any remand be accomplished as expeditiously as possible and we urge just --
Justice William J. Brennan: I'd like to [Inaudible] to keep the case on the docket, well if question does [Inaudible]
Mr. J. William Doolittle: No, I'm not Your Honor.
I think --
Justice William J. Brennan: Well is this going to be a time it would be a time consuming business if we revert the District Court, the whole procedure starts all over again?
Mr. J. William Doolittle: Well, I don't believe the whole procedure needs to start over again.
I was about to say that we do not believe, we in fact, we think the Commission should be encouraged if possible to remedy the deficient things in its report on the basis of the present record.
Justice William J. Brennan: And then the case has to go again to a Three Judge Court?
Mr. J. William Doolittle: If the parties choose to take it, yes sir.
Justice William J. Brennan: Well, I'm rather sure that one of them will choose to take it.
Mr. J. William Doolittle: And if that's true --
Justice William J. Brennan: You are not suggesting we keep it here?
Mr. J. William Doolittle: No and not all Your Honor.
Justice William J. Brennan: Well, thanks.[Laughter]
Mr. J. William Doolittle: Thank you.
Chief Justice Earl Warren: Governor Dewey.
Argument of Thomas E. Dewey
Mr. Thomas E. Dewey: Mr. Chief Justice, may it please the Court.
I could address myself to the questions which the Court has been asking, but if I may I would like to first cover a couple of things.
I represent the appellee railroads.
I'm happy at last to have an opportunity to speak for ourselves since the Solicitor General is here against us out of our time.
The City of New York, the State of New York and the Port of New York Authority in 18, I believe it is, the interveners have been kind enough to waive their time so that I may have it.
And Mr. Bleakney will speak on behalf of the Boston and the Portland Carriers.
At this stage, the case seems to me to have become incredibly complex and utterly unlike the case as one of my learned brethren said a while back, utterly unlike the cases I came here to argue.
I should like if I may to make four propositions at which point I will then go through an orderly argument.
First as that to the nature of the differential; 85 years ago, there were only four ports involved in the transatlantic trade in the Northern half of the Atlantic Coast.
Baltimore, Philadelphia, New York, and Boston and as I look at the map will demonstrate that Boston and New York are very much closer to Liverpool and Lowe then Philadelphia and Baltimore.
And in those days the ocean rates were higher to the southern port because the ships traveled further and that the very substantial difference.
And the contest for the trade as the railroads were building up and opening up to the West, developed over who was going to get the business from the Midwest, not the peripheral, not the hinterland as it's called in the cases.
Baltimore would have the Maryland traffic and Virginia naturally and Philadelphia hits New York zone and Boston hits New England.
The contest was therefore over the Midwest business, to and from the Midwest to a port on the Northeast on the way through or on the way from London, Liverpool, Lowe, Italy, and the parts of the world.
There were various rate wars which were settled by an agreement between the Presidents of the railroads which served Boston, New York, Philadelphia, and Baltimore and I should like to get this settled once in and for all in this case.
They made the agreement which appears in the record.
The appellants here adopt the curious position that they would like to support the Commission's decision, but it isn't right.
The fact is that these rates were fixed with a differential, Philadelphia $0.2 less per 100 pounds for goods transported from the effected territory in the Midwest, then New York and Boston.
Baltimore $0.03 less per 100 pounds because Baltimore was still closer to the effected territory is what they say.
We say it's because the ocean rates were higher, because it was further.
Now I should like to get this one settled now.
The Interstate Commerce Commission found in this case the -- at record 3745 that the differentials were designed and their effect was to compensate for the differences in these ocean rates in favor of the Northern Tier Ports.
We got better rates than the Northern, on the ocean, so the Southern Tier Ports got better rates on the rail.
Thus, the Commission continues, they tended to produce an equal total transportation charge between an interior point and the foreign origin or destination over all routes through the several ports affording the different railroads and port's competitive rates.
Then I believe that is clear and indisputable.
This differential was not created in a vacuum.
It was created to meet a specific condition of higher ocean rates.
Now in -- by the way as to the origin and since this deals with distance and it's been discussed, I will divert to do that too, the reason.
In this case the Commission quotes what is known as the Cooley Report.
After the rail road presidents agreed on a $0.03 and $0.02 differential back in 1877, it got unstuck to use the vernacular.
Somebody started cutting rates again, so then they agreed upon a distinguished Commission made up of men who had been or were United State Senators, members of the highest courts of various states and one Mr. Cooley who later became the first President of the Interstate Commerce Commission which was created thereafter and in the year 1882 after these rates had been in effect for five years, the Cooley Commission came down with a comprehensive report, one of the most elegantly written documents that I have come across, and it's in the record and they dealt right up with the questions Mr. Justice Black was pressing, as to whether their distance was controlling factor or cost or competition.
And they said and I quote the language not only of the Cooley Report, but of the Commission in this case in its 103 page opinion, “Of the three principles referred to in that report, mentioned variously by the parties as controlling these port relationships, that is, the distance principle should that control, the cost principle should that control and the competitive principle.
The last name was found to be the true one, competitive, not only from the standpoint of their local interest but in the interest and welfare of the people of the nation as a whole.”
This principle of competitive opportunity appears to have been the norm used in testing the soundness of the differentials from their inception, not cost, not distance, but only competitive opportunity for this peculiar kind of a rate.
And then they go on to say when so treated the Atlantic City become merely so many points on so many through routes from the interior of the country to the European ports, and this is not as unreasonable as it sounds.
It had of course the rational as they pointed out in the Cooley Commission, that if one port had the best ocean rates, and all the ports had the same rail road rates, all the business from the entire country would funnel through one port and the others would fall into disuse and this Court would become a monopoly.
So the reason was good and sound.
And I'd like to point out too that the reason is still prevalent today on domestic rates between domestic points.
For instance, there is a case not too long ago, I think it was from Chicago to Peoria, one railroad had a certain line haul between Chicago and Peoria, another railroad was a circuitous route and had a much longer haul, but the Commission said your rates must be equalized because otherwise the one with the lower rates will get all the business and that abolishes competition and without competition the people don't get decent service.
So the theory is practice in domestic rates, here, just as it was in the differentials.
Now the ocean rate difference being the cause of the differentials, how long did it last?
Well on this subject I agree with my learned friends, the Commission has said everything.
Beginning in 1898 they had a long argument on a -- not on a compulsory matter, but on an arbitration sort of thing.
And the Commission said we think the ocean rates are just about equalized.
In 1899, the following year they had an equally long opinion, the ocean rates are still widely different and the differential is designed to equalize the difference in the ocean rates.
In 1905, they had another long one.
In 1912 and 1922 the Boston case in 1928, in everyone of those cases they have hinted that equalization was just around the corner, but it never happened until finally, between 1920 and 1935 the various classes of ocean traffic finally got together, there is the conference, will there the high class transportation on the oceans and there is the trap streamers and there the bulk cargo, sometimes owned by the captain, sometimes owned by companies they go where the business is without schedule.
They finally got together to equalize their rates from the North Atlantic ports and then also the problems of parts of cargoes were also finally equalized.
So in this case this Commission found and I may say the appellants who tried to argue it isn't so, would like to sustain the opinion and of course in this respect as in so many the Commission did a good job and they are right, and they say, beginning in the early 1920s and extending to about 1935 the ocean rates to and from the different ports were equalized.
Consequently the sum of the rail and ocean transportation charges through the Northern Ports became higher than the sum of these charges through the Southern Ports.
In other words it cost $0.03 more to send a 100 pounds of anything from Chicago to New York or Boston than it did to Philadelphia or Hampton Road and at that moment we stared going downhill and that I will demonstrate I believe conclusively in due course.
Now you might legitimately ask me why didn't the railroads come around in 1935 and say, all right, give us equalized rates now, we were at the bottom of the depression.
Nobody was sure about whether the ocean equalization would stick because they had equalized for brief periods, so many times over 60 years that nobody was sure.
So the Northern Tier Ports carried this load of an extra $0.03 bottom of the depression nobody then sure, then came World War II during which the Port of New York handled in convoys and shipping one half of all the men who went overseas in World War II and one-third of all the supply ships of all the ports in the United States.
It is the greatest port in the world as they hurl at us, but it is rapidly going downhill commercially because we have a unique form of torture called discriminatory rates which is keeping us out to the business, and I will demonstrate that in due course.
Then after World War II there was an effort to equalize and it was successful as to one item, and then came the Korean War.
Finally in 1955 they gathered their statistics and filed.
Just equal; the appellee railroads don't ask any favors.
They don't ask somebody to build a barrier against these other ports.
They just ask that they get fair and equal treatment and the Commission found that the equalizing rates proposed by the Northern Tier carriers were to reestablish the equality of through ocean rail charges which existed prior to ocean rate equalization in 1935.
We just wanted to get back even and that's all we are here for, because the Commission apparently will never give it except on orders of this Court.
They had to come here to get it on [Inaudible] grain and we are here to get it on this.
Now, if I might, I would like to invite the Court to pickup our blue brief and look at Exhibit B.
It's the map of the United States.
In the center of this map, the Court will see the pink territory which is sometimes called the affected territory and sometimes called the differential territory.
That is the territory involved in this case.
Only goods flowing from and to the effected territory through the ports of the northeast is penalized by $0.03 per hundred to the northern tier ports.
Now, I direct the Court's attention to the west coast and you'll see between the west coast and the Middle West, a line which looks like the worst gerrymander in history, I cannot explain it.
I've asked a number of people, but it runs in a slightly jagged way, shall we say through the middle of the United States from the border between Montana and North Dakota and El Paso.
Every shipment of goods for rail ocean traffic to go abroad between the eastern part of the United States, east of that line can go for the same identical rate to any one of the ports from San Diego to Vancouver, a spread of 1400 miles.
We really have equalization in the rest of the United States.
You may ship goods from Boston or Florida or Chicago or from El Paso and if you want to go from El Paso, you can ship them to Vancouver for export for the same price as you can ship them to San Diego for export.
If you'll direct your attention to the Gulf ports, you will find that again there is equalization.
To the South Atlantic, again there is equalization.
To the North Atlantic, there is equalization with everybody else up to and including Philadelphia, but this little bit of the corner of the United States is left out and we came here to ask you to let us back into the union.
Now if we look at Exhibit A, the preceding page, I should like to direct the Court's attention on the question of distance.
We picked Chicago because more goods are shipped from Chicago than any other port in the mid west in the effective territory and as you'll observe, Chicago is, for example, 837 miles from Mobile.
It is 1,257 miles from Corpus Christi, 50% further away and the rates are the same.
From Chicago to Mobile or shall we say to New Orleans this time, it's 890 miles.
To Tampa, it's 1199; 309 miles further, but you ship for the exact same pennies for 100 pounds, why?
Because the basic principles of law applicable to this field are that through rates must be equalized or all the business goes through the most favorite port.
Now, look at the South Atlantic, from Chicago to Morehead City, Charleston to Savannah, way down to Jacksonville, the rates are equalized.
And I may say as to all of the Gulf and all of the South Atlantic they are $0:03 under New York, Boston, Albany, and Portland, for no descendible reason, because as you will see most of those ports are further from Chicago than New York, Boston, Albany, or Portland.
Now we look at what this case is about.
Hampton Roads; Hampton Roads in Norfolk are substantially synonymous.
From Chicago to Hampton roads it's 914 miles to New York it's 890.
It's 24 miles further to Hampton Roads, but it's $0:03 less per hundred pounds and if that makes any sense nobody has yet been able to articulate the sense that it makes.
Baltimore is 767 miles, New York is 890.
New York on this map is 16% further away and yet we have throughout the rest of the United States not only permitted, but compelled by this Commission since the decision in this case, equalization where the distances exceed by 30% to 40% and 50% and while I'm on it, if I might direct the Court's attention to a schedule on page 28 of our brief, if you will examine what happens in the west.
From, Tyler, Texas to Seattle is 2351 mile, to Los Angeles it's 1565 mile.
It's 50% further to Seattle then to Los Angeles, a 50% distance excess, but the rates are the same and you go all along the way up, you come to Fort Beaufort, North Dakota 56% further on up through this long column up to [Inaudible] New Mexico where you get to the climax.
[Inaudible] is 1193 miles further to Seattle then to Los Angeles and the distance disregarded is a 153% and the Commission held in this case that 15% of the City of New York was too much distance and we couldn't have equal rates.
I submit the District Court was right that it lacked rational basis and it didn't need any remand to find out, they reversed.
I said 15 this time having said 16% before, because the distances to Chicago are slightly different than those to the effective territory, which is the real issue and the effected territory New York is 15% further than is Baltimore, 30 miles closer than is Norfolk.
Boston, as you will note Boston is 27 miles further and they refuse to give Boston equal rates though they have compelled equalization of rates for Tampa since this case was decided where they were 42% further away.
Now passing from the national pattern and the national policy then each of these rates has existed for many years since at least ocean rates were made the same.
If the ocean rates absorb the distance on the ocean then logically the railroads absorb the distance differences at home and that's the way it works throughout the entire United States.
The reason it does is, so as to distribute the opportunity to compete not to compel where goods show [Inaudible].
Nevertheless, Commission canceled our rates.
They did it on the holding that such great differences in distance make it unlawful under Section 3(1).
This is strictly I submit a question of law, which was decided correctly by the District Court and we should be deciding the same by this Court.
47 pages out of 150 pages of argument of the appellants' briefs are devoted to the vast 15% distance difference of New York and the 27 of Boston as the reason for denying us a chance to be treated like all the other ports in America on all the other Courts.
It's simply a question of law.
If there had been at least 30 decisions on this subject, there is a large body of law built up not only in the Commission and District Courts, but in this Court and I say to you that from the Cooley Report, which held that distance and costs were not controlling or even significant factors in rail ocean rates, but only equality of opportunity.
Every decision ever made says that equality of ocean -- of rail rates is the rule, that equality of through rates between the foreign port and the inland point.
No case, no final decision has ever been entered in 85 years by the Commission or by any Court holding the contrary.
Every final decision has held that it is based -- these are rates are based upon through equality and on competition.
There -- in the New York-Boston area for some 30 or 40 years everybody was trying to change them, and of course they tried on every ground.
But they never succeeded until after the ocean rates became equalized and then there came a decision called Ex-Lake Grain.
Interestingly enough no one of the learned gentlemen who have preceded me have honored that case by mentioning its name.
The reason is that it is on all force with the case at bar was a reversal by the District Court on both Section 3(1) and 1(5) of the Court of the Commission and was affirmed per curiam by this Court in 1951.
Justice John M. Harlan: What's the name of that case Governor?
Mr. Thomas E. Dewey: Well it got three names Your Honor.
It deals with the grain that flows from both Canada and the Far West or the Middle West through the Great Lakes to Buffalo and Oswego, but Oswego is a minor port.
It was called export grain from Buffalo to New York in the Commission.
In the District Court it was called New York Central Railroad against the United States and it was affirmed by this Court under the same name in 342 U.S 890.
The only difference of any importance between that case and the case at bar is that Buffalo is not in the affected territory.
It's closer than the affected territory and therefore the case is a fortiori because the disregard of distance is basically because the affected territory is so far away from the coast, the distance differences don't mean a thing nor do costs, nor do terminal costs, about which we've heard a lot.
Judge McGruder in this very case affirmed by this Court speaking for a three-judge constitutional court, unanimous court, said terminal costs are of no significance in this area.
I think perhaps since I've started on it, perhaps I'd better go ahead and finish it on that, on Ex-Lake.
I indicated that the subject matter was the effort by New York and Boston to get equalized rates with Philadelphia and Baltimore.
It was New York, Albany, Boston and Portland, the four northern ports and there the penalty was only $0.50 from Buffalo to the coast, but it cost $0.50 per 100 pounds more to transport Ex-Lake grain from Buffalo to the four northern ports than to Philadelphia and Baltimore.
And of course the Commission denied equalization.
The District Court reversed and it came to this Court, which affirmed.
The District Court enjoined the proposed rates on the ground that they were not just and reasonable under Section 1(5), but here the holding was clear, precise.
The District Court said it preformed its function, that's what it was created for as I understand the law of correcting the errors of the Commission.
The District Court held that on the evidence before the Commission the rates were just and reasonable, and they enjoined it.
And they said as to the point under 3(1) whether equal rates would prejudice Baltimore or Philadelphia, which is the very issue here.
They weren't very clear as to what the Commission had held, but whatever they held, here are the facts.
It did not violate Section 3(1).
They reversed on both grounds and joined and it was sustained in this Court, I would like to say other courts.
The similarities I should like to enumerate if I may.
First, the argument there just as the same as here over why the differentials?
Why -- how did this thing originate, this $0.50 more per 100 pounds to ship grain from buffalo to the New York and Albany and Portland and Boston.
Same argument, same decision that the Commission made in this case, it was the difference in ocean rates which caused it, and they held of course the same as the Commission did here.
Secondly, they had the same old claims of preference and prejudice.
We can't bail out equal rates, because the great Port of New York will gobble up the business, and that there would be a great diversion.
The Commission held that there would be a diversion.
That it would, New York and Boston would gobble up too much business and therefore equal rates would somehow create a prejudice and I might as well deal with that parenthetically right now.
After the rates went into effect, we had a chance to find out how good the Commission was at fortune telling.
And that the southern railroads filed reduced rates, they wanted to restore their $0.50 differential.
Commission examined the record.
All the so called calamities that had been forecast just as they are in this case, not one of them happened, and the Commissions spent about I think about 40 pages explaining how wrong it had been and how nothing had happened to cause any diversion of traffic and denied the proposed retaliatory rates of the southern tier railroads, just as I am confident they would have to do after and if this Court affirms this decision and these rates go into affect, there will be no substantial diversion anymore than there was then, I would like some diversion, we came into this to get some traffic.
Justice Arthur J. Goldberg: That's what I don't understand, if there is not going to be a diversion, why are you here?
Mr. Thomas E. Dewey: I thought I so agreed Your Honors, that's why I said it just before you did.
Of course we came here to get some business, we're nearly busted, and we got to have some business, otherwise there aren't going to be any railroads left.
Finishing this case --
Justice Arthur J. Goldberg: [Inaudible]
Mr. Thomas E. Dewey: In any business Your Honor, the fellow who gets the business, get the business somebody else couldn't, but I might point out that we're not just discriminated against in the case of Baltimore or Hampton Roads and Philadelphia.
The whole southern -- South Atlantic and the whole Gulf has a $0.03 differential too.
We're just left way out in the cold wilderness for no discernible reason.
Justice William J. Brennan: [Inaudible]
Mr. Thomas E. Dewey: No sir.
It was decided originally, that the way to do this was rate -- it was item by item.
So in 1949, the northern tier railroads filed rates equalizing with the southern tier rates, that $0.50, and that took a long time but they won and then they went into iron ore.
That case has now been -- well been in five courts, it's been in the courts, it celebrated its tenth anniversary.
It's in its second decade, and the railroads decided that if that was the problem, they'd better treat them all at once and get rid of it because if you treat them one by one, it'll last forever.
So we're dealing here sir with all of the rates other than iron ore, coal and Ex-Lake grain which is not really affected territory, Buffalo is a stone's throw from affected territory, literally it's right on the edge, so therefore a stronger point.
In the Ex-Lake Grain case, they made the same claim as to the southern tier -- as to the northern tier rights to equalize with the southern.
It's what my learned friend Mr. Ginnane calls the enforced equalization.
We just said the Northern railroad just said, we're entitled to have same rates as the other fellows and the Court said yes and this Court said yes.
As to the fourth item, they made a big fuss about terminal cost, New York terminal costs were so high, much of my time that I used.
Big fuss about terminal costs ours were so high, of course our terminal costs are high.
We handle general cargo, which pays more and costs more and to make any point to that is beyond me and the Commission talks about it at length and Counsel talked about it at length, it isn't relevant either to 3(1) or 1(5), it's a question of what your revenues are.
Our terminal costs are so high, because we have lots of general cargo, not nearly enough, but that's what our principal business is.
So, in particularly with reference to that in the opinion of Judge Magruder speaking for the unanimous court, it said that the -- it was no significance to the shippers of what your terminal costs were and it's the shipper's that accounted too, that a holding of undue prejudice on the basis of terminal cost was unwarranted and also that neither comparative distances nor terminal operations or of controlling importance.
Fifth, they made this same argument, but this differential is long standing, it has a long white beard, it must be perfect, it must be sacrosanct and of course this Court had held to contrary several times and Judge Magruder's opinion said, age alone seems an insufficient reason for denying a carrier the right to change a differential and of course they were right.
They got the same threats of a rate war.
They had it all over -- they have them on every case, I'm almost embarrassed to hear people argue about how our rates, our proposed rates are illegal, they violate something, because the other side are going to post still lower rates.
Well the legality of our rates is not to be determined by what counterattacks they may make on the structure.
Commission is fully equipped to handle any rates at anytime and the very idea that they would stand up in court and say, our rates are illegal because they have proposed counterattacks preserving a differential, is sheer nonsense as this Court has held repeatedly many times and I think twice within last five years.
Same old argument as to rate war, same old argument as to distance, and here the Commission, I'm sorry to say fell in the grave error.
Commission is the only one that I remember, the only party to this litigation that was brave enough even to mention Ex-Lake Grain in its briefs and not of course in his argument, maybe the others did but I don't remember it.
But anyway the Commission says solemnly on the 64 of it's brief in this Court that Ex-Lake Grain isn't relevant here because when the distances involved were substantially the same and the Northern ports have been getting little of the export grain the distances involved substantially the same.
Your Honors, the differences in the Ex-Lake Grain which were disregarded both by the district Court and in this Court and should have been where as follows.
It was 297 miles to Boston and all this is on the face of the opinion.
To Baltimore it was 452 miles, that's a 105 miles further, that's a 35% excess of distance disregarded of course.
Philadelphia 420 miles, that's a 124 miles further, 41.8% distance excess disregarded of course, it being an export rate.
Boston 475 mile, a 178 mile further than Boston -- than Albany, 59.9 mile 60% disregarded the distance of course, because they are ocean rates.
Portland 547 miles, 248 miles further than Albany a distance disregarded 83.5% of course because they are ocean rates.
No wonder they don't want to talk about Ex-Lake Grain.
Under the authority of Ex-Lake Grain every issue in this case has been decided on almost identical facts.
Justice Arthur J. Goldberg: What about the reasonable rates?
Mr. Thomas E. Dewey: That was up too sir.
Justice Arthur J. Goldberg: The record doesn't [Inaudible] a finding by the Commission?
Mr. Thomas E. Dewey: There was a -- the Commission canceled the rates proposed by the Northern Tier Carriers because they were not just unreasonable under Section 1(5).
The District Court reviewed the testimony and the evidence before the Commission and said it lacked a rational basis that the rates were prima facie shown to be just and reasonable and they reversed on that ground.
That was the ground of the decision sir.
Justice Arthur J. Goldberg: What do you say about this language in petition to the Court [Inaudible]
Mr. Thomas E. Dewey: He didn't know what he was talking about sir.
I will cover that whole subject if I might in a minute.
I've only got one more point on Ex-Lake Grain.
I've indicated before that they examined the testimony, found the rates prima facie just and reasonable and they said we can't tell whether they held these rates were in violation of 3(1), whether they would create prejudice or preference, we can't tell from that decision.
So we'll [Inaudible] 1(2) which was their duty that's what they created for not to keep things kicking back and forth like a tennis ball in a match.
The issues are too great and too important.
So in this Court, we have the request for remand and they also had it in that one and there the appellants were saying, oh, the District Court took over the functions of the Commission and that's forbidden, primary jurisdiction, expertise.
Point was made by the Interstate Commerce Commission exactly as they had made it in one final sentence of their brief here, so they don't argue for it.
But the United States asks a remand here exactly as they did there and as the Chamber of Commerce of Philadelphia, the Baltimore Chamber of Commerce, the City of Baltimore, and all the Southern Tier Railroads, they ask a remand in this Court upfront, of course it was done, seven years it's too long.
If I may come to 1(5), how much time I got left?
Well, I'll finish this very quickly and then come to 1(5) if I may.
The reason for this inconsistency in the Commission's decisions is they couldn't find a reason to hang this on.
And the very idea of sending it back to them to look for one is really a fanciful exercise in intellectual curiosity and would accomplish absolutely nothing after seven long years.
So the Commission relied, it had added a whole mass of irrelevant evidence.
They come up here in fact [Inaudible] they'd say, look, how poor we are -- we Southern ports, we're in bad shape and look at the great big glittering rich fat port of New York, they are not entitled to justice and when Mr. Justice Goldberg said why are the rates -- why shouldn't they be equalized one of the counsels said, New York.
I thought New York was in the union.
I didn't believe that it was basis for discrimination.
So they call it's the greatest port in the world.
It's a sort of the sinister theme running the through the briefs.
It is the greatest port in the world, but is that a reason for destroying it?
430,000 men work, make a living, working on those docks.
And I think their jobs are just as important as anybody else's jobs wherever he lives.
13 million people depend in part on this thing.
This isn't one port.
Everybody talks about like the Port of New York, this is a whole conjures of ports like the President of the New York Central Railroad if I may divert.
They produced this earthshaking statement that we lost $10 million on the New York Central transporting goods to New York their brief says, that isn't what he said.
He said transporting freight to Manhattan which is an island.
It was -- I'm sure it was an inadvertent error.
In the reply brief at page 6, Mr. Langdon, says that Mr. Perelman said because they lost $10 million carrying freight to New York, not so, Manhattan is the port from his original brief.
Of course they lose on the short haul stuff.
Of course they lose on the domestic stuff that's just still going to this island which is difficult to get at, but the mass of it flows down the other side of the Hudson River and not just to New York, which as I said is not just a single port.
The port of New York is a giant port, just as important in some ways as Baltimore and Philadelphia, but they want to forget about all of these other ports that are part of this one.
Jersey City-Hoboken, Elizabeth, Weehawken, they are New Jersey's one of the famous ports of the world.
They all go into Yonkers.
They all go into the name of New York.
Short answer is, we have 24% of the traffic involved in this lawsuit.
In one of the replied briefs they had explained unhappily about the [Inaudible] I should like to direct the Court's attention to the separate appendix and solely because it's easier, easier to handle than the record.
Chief Justice Earl Warren: Which is at the –-
Mr. Thomas E. Dewey: This is a little separate appendix on the jurisdictional appeal Your Honor.
Chief Justice Earl Warren: Oh, yes, yes.
Mr. Thomas E. Dewey: It's so much easier to handle than the big record.
Chief Justice Earl Warren: Yes.
Mr. Thomas E. Dewey: And we're grateful to our neighbors for having printed it.
If you examine Appendix F, you will see the document which the Commission has said is the best evidence in this case.
Appendix F is at page 83; that's an appendix to the first brief and you will see on the rail transportation of exports from affected territory the respondents, that's us, carried a 1,642,000 tons and then in the one below the respondents, that's us, carried 391,000.
You add them up and then you add the total, then you find that the appellee railroads in this case, the Great New York Central, Boston and Maine, the Delaware and Hudson, the area [Inaudible] one of the Grand Trunk New York [Inaudible] -- of the seven Northern Tier ports, Portland, Boston, New York, Albany, Philadelphia, Baltimore and Hampton Roads, all railroads have 24% of the business.
That's the issue here.
The barriers have been built and maintained so high we cannot transport goods.
A half of cent was enough to cause a vast lawsuit in grain and $0.03 means that this Commission has erected in front of the ports which we severe an insuperable barrier.
I also call the attention to the port.
They talked about our general cargo.
If you look on appendix F, you see the grain.
The southern Tier has 83.5% of it.
You see the bulk ore, they have 98.1.
They say we're so rich and fat and all they do is print schedules of selected statistics throughout their brief.
I can prove anything by handing you a schedule of how many dried apples and bailing wire we exported through this port of New York, but you got to take the whole picture.
What's the whole picture?
Here it is on Appendix F, we have 24% of the business and the Southern Tier ports have 83.5% of the grain and 98.1% of the bulk ores.
And if there is any doubt about the whole thing, they talk about total.
They like to talk about totals.
They change the subject when we say we only 24% because of this discriminatory rate.
So if you will Your Honor, two pages earlier on page 79, look; in 1935, 1946 and 1955, the figures were taken off of these seven ports, New York had 50% 49.7.
In 1946, it had 32.
In 1955, it had 24; 24% of the business.
Railroads can't survive with that smaller portion of the relevant traffic.
And New York, they talk about our bulk cargo, I shan't take the time now, because my time is running out, but Appendix D demonstrates dramatically that this high class, high cost expensive to handle high revenue bulk cargo of which we have 60% is a disappearing market.
It shows that in 1923 we had 36% of the U.S. exports and now we have 23%; imports 45% in those days, 28% now.
It's what one of the Commissioners called a shrinking market.
If we must be condemned to that, we will be in bad shape and they say we're so big, we're about the same as Philadelphia in total trade.
The army engineers' figures at 1703 and 5, they didn't put it in the brief, I think we found it till after the brief was printed.
It will show the Philadelphia and New York and Baltimore all about the same.
We handle about 38 million tons in the test year; they handle 37 in Philadelphia, 35 in Hampton Roads and 25 in Baltimore, that isn't the issue.
The Northern Tier ports had 56.5 million tons of business, all four of us, they had 98.7.
The great, dangerous tiger which is going to gobble up all the business, I sorrowfully say the paper tiger and we're -- our ports are falling into disuse and docks are rotting.
Now if I may, I shall address myself Section 1(5).
Of course the point is for remand on 1(5) is not timely.
No appeal was taken from the District Court; no point was made in the District Court of it.
Commission didn't argue with the District Court.
And when they made a motion for a stay in the District Court, they didn't even mention it.
It's inappropriate to ask this Court to review a 4000 page record to find out whether these rates are just unreasonable.
That's the District Court's job as I read the statute and they did it, and what did they do it on.
This has never yet been mentioned in this case, but this is the case.
The appellee railroads in order to meet their obligation under Section 1(5) to prove that these rates were just unreasonable offered standard proof accepted by this Court for three quarters of the century, by the Commission since it was founded.
The standard proof was as follows.
One, it was minimal in nature.
These reductions were so slight that as was said by the District Court they were trivial.
Secondly, they offered proof as to the revenue which would be produced by these proposed rates on imports, our rates would give us $19.5 a ton compared with $8.5 for Baltimore and they say they're not compensatory, and the same as to export.
Our rates will produce twice as high revenues.
Of course we have a more expensive cargo.
We have the general cargo.
It costs more to handle it in the port, costs more to handle it on the railroad, but not that much.
And they're going to get up and say in reply, “Look, we make so much money, you shouldn't be allowed to get any of the traffic.”
That is the gist of their reply briefs.
They are fat and rich, and we shouldn't be allowed to cut our rate to get some of the business, which I think it's a little preposterous.
Now as to the other form, we showed as I said what our ton mile revenues would be.
Those ton mile revenues, Your Honors, would be $2.47 for import, $2.32 for export.
The average of all classes one railroads in the United States, have revenue of a $1.38.
Our proposed rates are not only just unreasonable, they're just fine.
They're twice as much as the whole United States.
They are twice as much as our rates.
This is standard proof and the Commission has approved it just most recently in flaked milk, tea from Chicago, soda ash, all cited in the brief, all recent decisions.
This is the standard method of producing proof and we never refused to produce costs as you hear so many times.
We refused to produce something we haven't got.
We have costs for hinterland which is irrelevant to this case as was pointed out in the record and so, the New York Central refused to produce them.
They made motion to make a cost study.
They knew it was preposterous.
To make a cost study on this, take years and costs millions and when they try to make us produce the costs study, the Commission ruled, it would be costly, time consuming and not warranted or if were found by the Commission I should say, and I'm sorry I didn't have the time left they were found by the Commission to be just -- to be compensatory including 4% on investment which nobody has mentioned either.
The specific language was that on our efforts and after looking at all theirs, the rates would produce the out of pocket costs, including 4% on investment which Your Honors would be a bonanza to railroads that are making 0.61 and hanging on the head of -- by the way that 4% is after taxes, and they rejected the examiner's finding that our rates were not just and reasonable, specifically and they said so in the District Court, we have the transcript.
I'm sorry I hope I haven't transgressed by getting beyond my time.
Chief Justice Earl Warren: Mr. Bleakney.
Argument of Robert G. Bleakney, Jr.
Mr. Robert G. Bleakney, Jr.: Mr. Chief Justice may it please the Honorable Court.
I speak on behalf of the Boston & Maine Railroad, the New Haven Railroad, and the Massachusetts Port Authority which administers the Port of Boston, and I will direct myself principally to the issues in this case as they relate to the proposed equalized rates from and to the Port of Boston.
The three-judge District Court had set aside an order of the Commission which has denied the Boston Railroads the right place into effect equalized rates on a Baltimore basis, rates which would have equalized, those rates not only with the railroads serving Baltimore, but the railroad serving Hampton Roads and with the import Canadian route rate through the Port of Portland, Maine.
The District Court found that the Commission's decision was lacking a rational basis and it set it aside.
We submit Your Honors, and I will attempt to demonstrate further in my argument that the District Court was right both in its conclusion as to the legal errors of the Commission and in the type of remedy that the District Court chose to issue in its judgment.
Before the District Court Your Honors there were two reports of the Commission in this case and an order, the order to which I've referred directing us to cancel our rates.
In its report the Commission said as to the Boston Railroads, that we just aren't participating in this traffic presently and no one here as even suggested the contrary to be true.
And excerpts to the Commission's report which Governor Dewey called to your attention and which all recognizes as the evidence in this case to the relative participation of the carriers, shows that of export traffic through the North Atlantic ports from effected territory, Boston Railroads are only handling 4.4%, 4.4% out of all the exports from effected territory through the North Atlantic ports and even of that amount almost all is but one commodity, export grain.
Other than export grain, we share in one one-tenth of 1% on import to effected territory, import traffic to effected territory.
Our participation is equally negligible.
All commodities moving through the North Atlantic ports to effected territory move through Boston and over its railroads only to the extend of six-tenths of 1%.
Your Honors the effect of this decision of the Commission is to forever bar the Boston Railroads from participating or from seeking to complete in this traffic.
The effect of this decision of the Commission is that so far as the Port of Boston is concerned, and so far as effected territory is concerned, this port shall no longer be considered one of the North Atlantic ports.
In view of these findings that I have just mentioned in the Commission's report and which are unchallenged, one might well wonder how the Commission could possibly find that our rates would be unduly prejudicial to the Port of Boston.
Your Honors, an examination of their two reports and they had two chances to justify their conclusion, shows but one basis.
That basis which Governor Dewey has already mentioned was that because of the fact that our mileage to effected territory is greater generally than that to Baltimore, and to a much lesser extent greater than that to Hampton Roads.
The Commission concluded it may not, may not ignore that mileage difference without running counter to the provisions of Section 3.
I submit there is no other finding in the Commission's report on rehearing or reconsideration or in its original report that offers any basis for its Section 3(1) conclusion on the Boston rates.
Governor Dewey has already talked as has Mr. Doolittle, about the completely arbitrary nature of this complete reliance on distance.
This was a complete reversal of all prior expressions of the Commission in this regard on export/import rates.
And more striking I think is the fact that it was a complete reversal of its own discussion of distance in this very case, the discussion which Mr. Doolittle read to the Court.
For earlier in its original report the Commission had found that considerable disregard is characteristic of all port rate adjustments and it further said that this disregard existed in the establishment of this, present adjustment and moreover it found that the distance differences here involved are far less than those regularly ignored elsewhere.
It would appear from the Commission's brief that it recognizes the absurdity and almost recognizes the arbitrariness of this sole reliance on distance and this one distance finding particularly as our rates.
At page 44 of the Commission's brief, it now says that Section 3(1) conclusion wasn't based only on distance, but it was based on its distance finding plus, plus its finding that there would be undue diversion if the equalized rates at New York became effective.
Your Honors, by no stretch of logic could this finding with which we don't agree, and I think Governor Dewey is perfectly correct on this, but whether it's correct or not as to undue diversion to New York, it certainly can't support a conclusion of undue prejudice with regard to the Boston rates.
It's also interesting to note that in the Commission's brief and in their argument this morning, the Commission states that it has permitted or required the disregard of distance so as to enable disadvantaged ports and the railroads serving them some opportunity to compete for export/import traffic.
I just ask the Court to compare that statement with what the Commission has done here with our -- regard to our rates at Boston, when Appendix F is considered.
I suggest to the Court that it's completely impossible to reconcile the two.
Actually and additionally the Commission did make a finding as to whether there would be undue diversion to Boston.
It said equalization at Boston would not materially affect the flow of traffic through that port and included in this finding were the other smaller ports of Portland and Albany.
Your Honors, here the Commission is finding that equalization will do us no good yet finding that equalization if permitted to us would unduly prejudice the Southern tier ports.
This is a such clear inconsistency.
I say that it vitiates their whole Section 3(1) conclusion.
There must be harm for there to be undue prejudice that the statute proscribes.
Governor Dewey referred to the grain case and in that case, in his decision Judge McGruder 99 Federal Supplement talked of the sort of harm that is involved in undue prejudice and characterized it as drastic diversion.
We have nothing even approaching that sort of a finding here as to our rates.
We have a finding of no material effect on the flow of traffic, if our rates become effective.
No one here has dared to argue that we'll get anywhere as near as drastic amount of traffic from the Southern Tier ports if our rates are allowed and there is nothing in the Commission's decision to suggest and as I point out actually the Commission's opinion and its findings are directly to the contrary.
The United States has agreed, it seems to me, in the briefs and in its argument that the District Court was right in finding that the Commission's decision was without a rational basis.
It merely disagrees on the remedy.
It says that the District Court really should have sent this back to the Commission so that if they could have a third chance to try to find out some rational basis for this decision of theirs ordering the cancellation of our rates.
Your Honors, we submit that such a remand, such a third go around before the Commission would be both inequitable and unwarranted.
Remand is not an executable command when an agency -- agencies ever has been laid there and I don't understand that the United States makes that position at all.
Thus it seems to us that the remand would be meaningless if only one result would come about.
I think the United States would agree that remand should not occur.
Our difference as I see it is merely a narrow one.
It's as to whether there could be any other result and now I'm talking particularly about the Boston rates which directly concern me.
Under Section 3, Your Honors, the error is clearly a legal one.
The Commission has said it may not ignore our distance differences without violating Section 3 and as we point out in brief in some line, this is a complete departure from everything past, and present, and from its own original report, and it affirmed its findings in its original report when it wrote a second one.
Moreover, and a fortiori if I may resort to that phrase, the Commission said, if we get priority, we want to try sending traffic or any material amount of traffic.
I think it's clear as a matter of law that there should be no remand under Section 3 as to our rates.
Governor Dewey has talked about Section 1 and I concur in his expressions on what the Commission has done and as to why there should be no remand.
I'd like to point out some additional factors as to Boston.
Before doing so, I would like to point out something that he was mentioning as he closed his argument.
That the Commission's hearing examiner who heard the evidence, heard the evidence, the prima facie evidence that we and other Northern Tier lines put in and are in support of our rates to show they are just and reasonable.
He heard this attempt at rebuttal that the Southern Tier lines put in which was directed as the Commission found principally to New York port cost not to Boston's port cost.
He heard all of these things and he recommended that the Northern Tier rates as a group be found not showing to be just and reasonable.
The examiner was treating this thing as a group as did the Commission in its first report.
The Commission considered all of the evidence they had before their examiners proposed reports they had exceptions and other things and oral argument of counsel.
And the Commission did not follow the examiner's recommendations and in the words of their counsel below, they eliminated that recommended finding.
And I say the Commission was quite correct in doing so particularly as to our rates.
The Commission found that even on the Southern Tier cost evidence with all the defects they saw in it because it was tied to the higher cost traffic, it didn't cover the lower cost volume bulk traffic, even so the New York rates would equal or exceed out-of-pocket costs.
Commission made additional cost findings.
They pointed out that because of our greater mileage than the New York lines, it cost a little more in transporting this traffic to Boston and to New York and this amounted to somewhere in the neighborhood of $65 or $70 in cost.
And it made findings on the other elements of cost involved in this case, port terminal costs and my brother Langdon in his reply brief has been kind enough to do the mathematics for me.
And there he shows and this is all based on the Commission's own finding that the Boston carriers have a cost -- port terminal cost advantage over the New York carriers far exceeding their line haul disadvantage, because their port terminal advantage is about $175 a car or a net of over a $100 car.
There is absolutely no basis on this record for an adverse Section 1 finding against the Boston railroad.
And remand would be completely unwarranted to give the Commission another chance to try to come up with something, which I say the United States really is only speculating on.
There is just nothing in the record to indicate that there could be any other result, the District Court convinced must have had this in mind when it decided to set aside rather than to remand, and Governor Dewey's reference to the grain cases is quite appropriate.
Because there Judge McGruder recognized a similar situation as to Section 3(1) which the Commission had not affirmatively found one way or another on, but Judge McGruder said they couldn't have formed against our rates under Section 3(1).
Justice John M. Harlan: Did the District Court specifically address itself to the question of remand?
Mr. Robert G. Bleakney, Jr.: They did not in their decision Your Honor, that is correct.
They acquired a counsel -- excuse me.
Justice John M. Harlan: Was the question raised at hearings [Inaudible]
Mr. Robert G. Bleakney, Jr.: My recollection and I've read the transcript fairly recently was they addressed questions to some of the counsel and argument as to whether the Section 1(5) issue had been considered by the Commission and apparently was satisfied by the answers to the question.
And I think it's significant, Your Honor, that none of those who participated in this case, the Southern Tier Railroads and port interests suggest remand, it's the United States who wasn't in this case below --
Justice John M. Harlan: When I refer to remand, I'm referring to remand on the narrow basis suggests reasonable rates.
Mr. Robert G. Bleakney, Jr.: That's right; that was the question.
That was the nature of the question the District Court addressed to counsel in colloquial.
So I think it's clear from that.
It seems to me that the District Court had this in mind as the possibility and recognized.
The Commission has dealt with this, that the Commission made these findings and they could not properly come to any other conclusion and was also impressed by the fact that the Commission had before it an adverse examiner's recommendations and which they used to follow, but did not follow it, it's hard for me to say they refused I suppose, but they certainly did not follow it and the counsel said they eliminated.
I think the District Court put all these things together.
Justice Arthur J. Goldberg: [Inaudible]
Mr. Robert G. Bleakney, Jr.: I don't believe it's in the printed record before this Court, Your Honor.
Governor Dewey has it in this brief.
It's out of the transcript of argument before the District Court.
I don't believe it's in this Court records.
Justice Arthur J. Goldberg: [Inaudible]
Mr. Robert G. Bleakney, Jr.: Certainly it's by me Your Honor, I have never heard a question.
Justice Arthur J. Goldberg: [Inaudible]
Mr. Robert G. Bleakney, Jr.: And I understand it's in the record, I wish, yeah.
Justice Arthur J. Goldberg: I didn't find any majority.
I don't find any [Inaudible]
Mr. Robert G. Bleakney, Jr.: I am quite certain this is basic.
Certainly it is my understanding, I'm referred to Page 57 of the appendix, and it is there in the majority opinion Mr. Justice Goldberg.
Justice Arthur J. Goldberg: Where exactly?
Mr. Robert G. Bleakney, Jr.: This is the separate appending on Page 57.
Justice Arthur J. Goldberg: [Inaudible]
Mr. Robert G. Bleakney, Jr.: I haven't recalled it myself.
Justice Arthur J. Goldberg: Thank you.
Mr. Robert G. Bleakney, Jr.: Your Honors, there are two issues which I frankly consider properly called Red Herrings have been thrown at the Boston rates from time to time in this case and they appear again.
One has to do with Section 4 of the act.
We've dealt with the question of whether there should be a remand under Section 4 in our brief and I just don't feel that I should take the Court's time to go over that again except to point out that the Fourth Section and need for Fourth Section relief would apply to only a few of the rates involved here.
There are many that could go into effect without violation of the Long and Short Haul Clause.
But there's an additional Fourth Section question raised my brother Langdon, who says that if parity is granted to Boston alone and to no one else, why there'd be Fourth Section violations through Albany, through New York and points to a comment to that effect by the Commission in the second report.
The Commission said merely that this would be true if it didn't permit parity at Albany, didn't permit parity at New York and even then would only be true over some routes which is quite correct.
And I think that the reading of that second report affords no support for a conclusion that this comment by the Commission was the reason for their denying us parity rates at Boston because that assumes that Fourth Section violations through Albany, New York or even Philadelphia supports a finding or prejudice against Baltimore and Hampton Roads; this can't follow, but even further, the Commission set over some routes.
We have major routes that don't pass through any of these other ports, the main line of the Boston, the main railroad to the west, the main line of the New Haven to the west, would not even under those circumstances involve Fourth Section violations.
It's also been suggested Your Honors that principally by the United States that perhaps we might interpret the District Court's judgment as permitting us to place into effect equalized rates, without seeking Fourth Section relief in those places where it would otherwise be necessary.
It isn't our position that the setting aside by the District Court of the adverse Fourth Section order is tantamount to directing an affirmative Fourth Section order.
We know that in those places where we need affirmative relief under that statue, from the Commission, from the Long and Short Haul Clause of Section 4, we will have to get it.
But this doesn't apply to all of our rates or all of our routes and certainly, we suggest does not warrant remand of this whole case because of that.
We know we've got to go the Commission on Fourth Section in some instances and in fact, that was an initial Fourth Section application filed of course.
There is just one final comment I'd like to make and that is to point out that this Court of course is vested in broad -- with broad equity powers and I think in considering whether the District Court was right or regardless of that what this Court feels should be done with this case, the equity should be considered.
This case has gone on now as others have pointed out for seven years.
For seven years we've been denied the right to place into effect our rates at the same level of the rates of railroads serving the ports of Baltimore and Hampton Roads.
I think this should be kept in mind by the court in determining the relief that it wishes to give.
I believe my time is up Your honor.
Chief Justice Earl Warren: Mr. Langdon.
Mr. Langdon, before you get to your argument, would you mind commenting on the statement of the counsel to the effect that there is an unbroken line of opinions and decisions of the Interstate Commerce Commission to the effect that both distance and costs are inconsequential in proceedings of this kind?
Argument of Jervis Langdon, Jr.
Mr. Jervis Langdon, Jr.: Your Honor, that in our judgment is not true.
The question of distance is a question that has been debated in these various export/import cases over the years.
In certain instances distance has been regarded, in other instances it has been disregarded.
If there were any question on this point, it seems to me it was settled at the time the Congress in 1935 gave the right to the ports to complain of discrimination under Section 3.
Once they did that they then automatically incorporated the transportation standard as a measure for judging discrimination.
When you have a relationship case, the unbroken authority is, and this applies whether export/import rates are involved or no, that the standard of measurement is the transportation standard, distance, costs.
It said, and in certain cases it's true, that this standard is set aside in the interest of competition and that basically is the case that the New York interests are making here.
They apparently recognize that under the transportation standard lower rates to the southern ports are justified, but they contend that this transportation standard from the point of view of distances and costs would be set aside in the interest of competition.
Our answer to that is, that if the transportation standard is set aside in the interest of competition, this in time will make New York a complete monopoly.
I want to call your -- invite Your Honor's attention to the appendix in the back of our brief, Appendix B, it's the railroad's brief of January 28 and I'd like to call your attention to Appendix B.
I beg your pardon sir.
Justice Hugo L. Black: What's B to the appendix?
Mr. Jervis Langdon, Jr.: If you start with page one of Appendix B.
Chief Justice Earl Warren: Of your brief?
Mr. Jervis Langdon, Jr.: Yes sir.
Justice Hugo L. Black: It's the white one.
Mr. Jervis Langdon, Jr.: It is the white, the white one sir, dated January 28.
Justice Hugo L. Black: Go ahead.
Mr. Jervis Langdon, Jr.: Now this is a full picture of the traffic as it moved during the test year among the ports of New York, Philadelphia, Baltimore and Hampton Roads and differential territory.
Appendix B is the export tonnage and consists of six pages.
It is followed by Appendix -- seven pages, I beg you pardon, it is followed -- sorry there are nine pages to that and it is followed by similar appendix on the import traffic.
Now, I'd like to, and this is the complete overall picture of how this traffic divides under the rates as they exist today.
Now you will notice on page one, there is a whole page of commodities, New York gets 100% of it.
You turn over to the page two and half way down the page New York is still getting 100% of the traffic.
We move on down on page two and you see automobile and auto parts, New York 94% an important traffic, turn over the next page on forwarder traffic, New York 90%, refrigerators 89%, vehicles 60 – 86%.
Right on down to, on the bottom of page four for instance, the manufactured iron and steel, which is a very important export commodity, 61.1% of the traffic through New York, 61.1 is compared with these three other ports.
And you get over to the last page in this appendix, which is page -- a little hard to handle here, page 13 and you will see that on all of the traffic, except agricultural process, New York gets 61% of the whole.
It is only on the agricultural products, the grain, the oats and the corn that Baltimore and the differential ports share and they do dominate, and this record of course was closed before the seaway, they do dominate in relation to those particular commodities, and of course it's the tonnage in relation to grain that runs up our total.
But even including the grain, Mr. Dewey's figure of 24% of the tonnage in the Northern Ports is wrong, because he is assigning to the Southern Ports 1 million tons of traffic that the B&O and Pennsylvania Railroad handle at New York, and when adjustment is made for this, the share of the northern lines is improved very drastically.
Our position is that under this differential, the northern lines have got the bulk of the general cargo, there is no question about it.
On the bulk traffic, yes, it is attracted to the southern ports and why, because of the differential.
And if the differential is eliminated this is all we have to attract any tonnage, we don't have the facilities at New York.
We don't have the attractiveness of their special services.
If the differential disappears, the out ports which live on this bulk traffic, which is responsive to the differentials will be no reason to stay at the out ports.
The New York interest produced a line of shippers including a lot of grain people and they said that the reason they were using the out ports was unaccounted differential.
Chief Justice Earl Warren: What you do with these exhibits of the appellee's brief, the one that Governor Dewey cited us to the one showing that he – then equalization accomplished practically all over the country except in this area, would you mind commenting on that just a minute?
Mr. Jervis Langdon, Jr.: Yes sir the equalization of course has been accomplished around the country and part at least is the result of agreement.
There have been certain contests, but in important part there has been agreement on the part of the railroads, and in the maintenance of equal rates.
But this particular instance here, among the North Atlantic ports there is absolutely no question and the Commission actually found that equalization would produce undue diversion, an undue diversion to a port that already in relation to general cargo completely dominates.
The only thing it doesn't have is this boat traffic, and I remind you that this record was closed before the seaway.
Justice Arthur J. Goldberg: [Inaudible]
Mr. Jervis Langdon, Jr.: Yes Sir.
Justice Arthur J. Goldberg: Please explain why [Inaudible] what's the total tonnage of Philadelphia --
Mr. Jervis Langdon, Jr.: Governor Dewey tells 38 million tons.
Of course are these in your figures that you are reporting to me no.
We have the overall port figures which would include the tonnage through the port whether it might be the export traffic originate right in Philadelphia and moved to the docks by truck.
Of course on the imports at Philadelphia it's importantly influenced by petroleum products which are consumed locally and there is very little having tried to get some of it for our railroad, very little tonnage moving by rail.
Now, the same is true with at Boston.
Boston doesn't get much differential territory traffic, it's true, but they do have a very substantial tonnage consumed and originating locally.
Justice William J. Brennan: [Inaudible]
Mr. Jervis Langdon, Jr.: Well, it might -- no sir.
I answered to Mr. Bleakney, is that if Boston has equal rates with New York, the record shows that New York will get the business.
New York drains all of New England.
Even against higher rates to New York than to Boston, new York still takes practically everything from New England.
They are a real thrust in this case.
They came apparent after the examiner's report and it was not apparent as this case was a tried, is for a lower rate adjustment than New York.
Now, in order to do this, in order to have a lower rate adjustment than New York and presumably since Albany is satisfied with the present Commission decision and isn't appealing and no problem of changing Albany's rates, the rates to Boston would be lower than to New York and lower than to Albany.
Now, this puts Boston under obligation to justify a special case of discrimination, discrimination against higher rated intermediate ports.
Now, it's true that you can go to Boston and not go through New York and it's true that you can go to Boston and not go through Albany.
But the main routes certainly from our territory go through New York [Inaudible] services, across New York harbor is the main route to Boston, one of them.
And from the west to -- many important routes work through Albany, which would remain under Boston's real point here higher rated than Boston itself.
There is a second difficulty with Boston's case.
They realize that it was a parity of rates and probably they can compete with New York for general cargo.
They're after the bulk traffic.
Now, the important bulk traffic that they are after is grain.
They themselves in their own exhibit showed that grain was carried to Boston at less than cost.
In fact the ratio of cost to revenue on grain by their own exhibit was in the neighborhood of 150%.
Justice Arthur J. Goldberg: [Inaudible]
Mr. Jervis Langdon, Jr.: Well, the record isn't awfully clear on that.
There are some generalizations sir that at New York some 50% of the traffic arrives that appears by truck.
Of course we have a lot of traffic, rail traffic from Baltimore and nearby points that go to New York and we can't even attract it to Baltimore, even though it's right in the hinterland, they're right in the area, switching district and it still goes up to New York.
The record is full of cases of this kind and the rivers we get in ports from New York by rail.
The record shows a number of cars on that.
New York is so dominant, so attractive that the three-cent differential is just completely inadequate.