ATLANTIC CITY ELECTRIC CO. v. UNITED STATES
Argument of Charles J. Mccarthy
Chief Justice Warren E. Burger: We'll hear arguments in number 78, Atlantic City Electric Co against the United States and others and Alabama Power Company and others against the United States number 106.
We'll wait just a moment or two Mr. McCarthy.
Mr. Charles J. Mccarthy: Mr. Chief Justice, may it please the Court.
The issue in this case is the reviewability of an order of the Interstate Commerce Commission which authorizes the nation's railroads to raise their freight rates an average of 5% or nearly a half billion dollars a year.
I think it's important to have in mind just how this case arose.
The usual procedure followed by a railroad when it wishes to change a rate is to file the new rate with the commission, 30 days before its effective date.
During that 30 day period, the rate is subject to protest and to suspension and investigation.
If the commission determines not to suspend or investigate, the rate goes into effect, the commission's action is discretionary, not reviewable and one who wishes to complain of the rate must file a formal complaint.
On the other hand, if the commission decides to investigate the final order in the investigation proceeding is subject to judicial review.
In a general increase case, the procedures that must be followed are a little different.
There are three reasons for this.
There are outstanding orders of the Interstate Commerce Commission which prescribe rates.
Those rates can't be changed without commission authorization.
Then in every general increase, situations arise in which there is a lesser rate for a longer distance that applies for a shorter distance included within the longer, and that of course is a violation of Section 4 of the Act, unless the commission authorizes.
Finally there's the mechanical problem.
It's just not feasible to file increases in all the myriad railroad rates.
In a preferred procedure is to file a master tariff which includes all the increases and what are known as connecting link supplements.
These are supplements in each individual tariff which simply say that all of the rates in this tariff are subject to the increases in master tariff.
The commission's tariff filing rules don't permit that so in order to follow that procedure, it's necessary to get authority to depart from those rules.
The proceeding of which we seek review was initiated by the railroads by filing a petition asking for all three of these forms of relief.
The commission immediately granted the tariff filing authority requested and it modified outstanding orders and granted fourth section relief, only to the extent necessary to permit the tariffs to be filed.
At this point, the situation is similar to what it would have been had no such authority been required.
The rates are filed, they're subject to protest; they're subject to investigation and suspension.
There is one major difference though.
That is that the railroad -- that the commission could not at this point, simply say we won't investigate and that the rates going to affect because the commission has -- or the railroads have an obligation to get a modification of outstanding orders and fourth section relief before they can legally put these rates into effect.
And that's recognized by the railroads in their petition.
They ask that the rates be authorized only after hearing and after a finding at the general level will not be more and is just unreasonable.
The rates were protested.
The commission did suspend and the commission did initiate an investigation.
At the same time, it authorized the railroads to put into effect a 3% increase subject to investigation.
That 3% increase isn't involved here.
I mentioned that just in the interest of completeness.
The subsequent investigation was extensive.
The commission divided the case into 10 sub proceedings to one, it assigned the question of revenue needs to the other 9, it assigned various commodities and services.
At the end of the revenue -- end of the hearing in the revenue sub proceeding, the commission ended its order of November 25th in which it authorized the railroads to put in all of the increases they had proposed with some minor exceptions subject to possible change as a result of the final outcome of the other 9 sub proceedings.
At the conclusion of all the hearings, the commission ended its order of January 9.
That order authorizes the railroads to put the increases in effect.
It orders them to cease and desist from charging any higher increases.
It finds that the rates will not exceed a just and reasonable maximum on a general basis.
It modifies all outstanding orders of the commission and grants fourth section relief to the extent necessary to make these increases lawful.
And finally the order says the proceeding is discontinued.
In other words, this is the last step in this general increase case.
The plaintiffs in number 106 are shippers or associations of shippers who pay more than 20% of the nation's freight bill.
And the action was filed as a class action in behalf of all shippers.
In every general increase case, I don't care whether it's a railroad or what kind of utility it is.
There are two basic questions.
One, what increase if any should be authorized?
How much more money should be provided by an increase in rates?
And the second question is, how are we going to spread that increase out over the various services that this utility performs.
Our complaint goes to the first issue.
We say that the commission did not apply the rate making standards in the Interstate Commerce Act and that if it had applied them, it could not have authorized this increase on the present record.
We also say that the commission should have looked at the needs of the railroads in each of the main regions of the country, rather than just a general overall increase, and we say that the commission should have looked at types of traffic by broad categories.
We do not say that the increase makes any specific rate unreasonable.
The controlling principle as we see it, is that there is a presumption in favor of the reviewability of an agency order.
This Court has repeatedly said that an order will not be held to be non-reviewable, unless there is persuasive reason to believe that Congress so intended.
The railroads point to nothing even remotely suggesting that Congress intended to accept general increase orders from the broad statutory authorization that it has given the review orders of Interstate Commerce Commission and to review rate orders generally in the Administrative Procedure Act.
The railroads basically make two arguments.
They say we haven't exhausted our administrative remedy.
Justice William O. Douglas: Could I ask you a question?
Mr. Charles J. Mccarthy: Surely Your Honor.
Justice William O. Douglas: Is this revenue proceeding, this general revenue proceeding creature of the statute or the creature of commission?
Mr. Charles J. Mccarthy: It is a creature of the commission.
The Act provides two sections under which proceedings can be instituted.
If a raid has not gone into effect, the investigation is under 157, if it has, then the shipper has to file a complaint under Section 13.
This is just a section 157 proceeding but it is necessary for the commission to grant the specific authorization because of its outstanding orders relief from tariff filing in the fourth section relief.
Justice William O. Douglas: Why is it that is being administrative creature, it's not very significant as to whether or not the statute has a review per se.
Mr. Charles J. Mccarthy: Well Your Honor, this is a proceeding which follows the Interstate Commerce Act.
The commission is proceeding under the authority granted by Section 157 of the Act.
So the particular way that the commission proceeds in this case is a matter of administrative decision perhaps.
But the authority to proceed and the basic procedure is all pursuant to Section 157 of the Interstate Commerce Act.
Justice William O. Douglas: Do you have specific review provisions in those sections?
Mr. Charles J. Mccarthy: There is a specific review provision Section 1336 of Title 28 which says that all others in the Interstate Commerce Commission are subject to review in the Courts.
Court please, I think of the general level of freight rates as being a horizontal line and the individual rates are dots.
Some of them are above that line and some of them are below.
And the average height of all those dots is the same height as that horizontal line.
Now suppose, we raise that line 5%, if all of the rates are raised proportionately, the relationship of each rate to that new line is the same as its relationship to the old line was.
The railroads say we need to go back to the commission before we can have review of the order raising that horizontal line and file complaints on the million or so rates in which we are interested.
What would the issue be in such a proceeding, when the lawfulness of an individual rate is challenged, the question is, how it is related to the general level of reasonableness.
It doesn't involve the question of where the general level of reasonableness is.
Now we are not challenging the relationship of individual rates to that general level.
So if we followed the railroad suggestion and went back to the commission where these thousands or millions of cases, we would have to say to the commission, we do not challenge the relationship of any of these rates to the new level that you have set, all we want to challenge is what is that level which you have just set in a proceeding that has just been terminated.
Now, that is the administrative procedure that the railroads say “we haven't exhausted it.”
What the railroads are really saying is that shippers have no interest in the general level of freight rates, no legal interest.
They certainly have a tremendous practical interest.
It's more important to a shipper to have his rates raised 5% across the board than it is to have one individual rate raised or to have one individual rate that he thinks is a little bit too high and wouldn't it be a little anomalous to say that he can have Court review where his interests are affected to a minor degree and can't have Court review, if his interests are affected to a major degree.
Now that brings me to the policy question, the railroads argue that this Court should deny relief because some District Court might improvidently grant interlocutory relief to a shipper, to the railroads detriment.
From my experience, I think that danger is greatly exaggerated but I suppose it is possible that the District Court might act improvidently.
But there are two answers to that.
In the first place, if the safeguards that attach to interlocutory relief are not sufficient in a general increase case, then the thing to do is to shore up those safeguards.
It's not to deny judicial review.
You don't throw out the baby with the bath water.
In a second place when Congress authorized review of the Interstate Commerce Commission orders, it knew then interlocutory relief would be granted in cases which the Courts think are appropriate.
If the safeguards and interlocutory relief are not sufficient, the railroads ought to be talking to the Congress and not to this Court.
And while we‘re on the field of public policy, I would just like to remind the Court that there are two sides to every coin.
And we think that the policy reasons for judicial review vastly out weigh any on the other side.
If an agency is insulated from judicial review, there is always the risk that there are handling of cases of this kind may become perfunctory.
Chief Justice Warren E. Burger: Well, are you suggesting Mr. McCarthy that you don't prevail here, you have no evidence of review?
Mr. Charles J. Mccarthy: I am stating exactly that Your Honor.
There is no revenue of review.
This is where the review stops, there is no way that we can get review of what the commission did in this general increased proceeding unless we get it by a direct review.
If we go back to the commission challenging -- we would have to challenge every rate across the board because we're interested in every rate and we say to the commission, we are raising no question about where this particular rate stands in relation to this new level of rates.
In this new level of reasonableness that you've established and we want to re-litigate everything that you did in 259.
The commission very properly is going to say “This isn't the forum to do it and that is you would settle it” and wouldn't it be a monstrous administrative procedure to say that you retail this old ground in all of these individual cases after the commission has spent months and thousands of pages of testimony and arguments and briefs resolving this specific question.
Chief Justice Warren E. Burger: Mr. O'Malley.
Argument of James O’malley
Mr. James O’malley: Mr. Chief Justice, may it please the Court.
The Atlantic City Electric Utility and state appellants appeal here from the order of a three-judge statutory court in the Southern District of New York which dismissed appellant's complaints seeking permanent injunctive relief from the same general revenue order of the Interstate Commerce Commission which has been so clearly described to Your Honors by Mr. McCarthy.
Justice Potter Stewart: I apologize for interrupting you right at the threshold of your argument.
But you come from a different Court.
It's dismissed all of your petition.
Mr. James O’malley: Yes Your Honor.
Justice Potter Stewart: And this suggests that if your view is correct, then every single District Court in the nation could be asked by a shipper to review this commission determination.
Is that correct?
Mr. James O’malley: I would say that every District Court of the nation could do.
Justice Potter Stewart: In every Federal District in the country.
Mr. James O’malley: However, as I believe we suggested in our briefs, reply briefs and the Government has in it, there are various judicial remedies needless to mention to this Court of transfer of venue and stays to decide no other cases and there's always the possibility conceivably of a special master being appointed collectively it seems to us by a group of District Courts, if there are a multiplicity of this type of suit.
In this particular case Your Honor, we had a somewhat different approach to the order from that of Mr. McCarthy and it would have been somewhat difficult perhaps to combine the suits.
Justice Potter Stewart: Well, I didn't -- I say apologize again for interrupting you right at the beginning but that is one of the matters frankly that I had questions about, that is this about how many District Courts there are, 86, a 100 and whatever it is and also as I understand it, there's no statute of limitations.
Mr. James O’malley: This is true.
Justice Potter Stewart: I would hope that in due course in your arguments you would.
Mr. James O’malley: We do believe, however since this is – as you say it that the threshold, it's a terribly important point.
We do note that there is a doctrine of latches, we believe it would be applicable in this area although there isn't a statute of limitations.
But the finality and judicial reviewability of the commission order if I may resume argument sir, are also at issue since in both cases, since both Courts below held that the general revenue proceeding of the commission and the order was not final and not reviewable.
We agree with Mr. McCarthy, these Atlantic City appellants which are-- Footnote four, electric utilities and 10 state departments of agriculture including Attorney General of New York representing the state of New York Department of Agriculture.
We agree with the United States and the Commission and the Alabama appellants that the lower courts were wrong in dismissing the complaints.
We all agree that those parts of the commission order that dealt with findings of general revenue needs to the railroads, nationwide cost to the railroads that the railroads required additional revenues were final determinations and the right for judicial review.
The position of these appellants, I represent differs on the reviewability point from that of the Alabama appellants somewhat but not very much.
The United States Commission take the position that the order appealed from was final only in the aspect of revenues and findings of cause.
It is our position that the order should be reviewable in its entirety and that it is totally right for judicial review under the principles of the City of Chicago, data processing in Barlow v. Collins cases, recently familiar to this Court -- decisions of this Court and under the the general provisions of the Administrative Procedure Act.
The railroads differ from all other parties by seeking affirmance of the orders herein on the grounds that no part of the commission order can be reviewed and it's not final and not right for review but that is not reviewable as well.
Turning now to our argument that the scope of the judicial review should encompass the entire order Your honors.
I believe it might be helpful although it may sound as though I am repeating some of the things that Mr. McCarthy said to touch briefly on the general revenue proceeding itself as an illustration -- and foundation for our contention that the other parts of the order were as final as the parts of the order which were alluded to Mr. McCarthy and are accepted by the Government as reviewable.
After the railroads filed the master tariff which increased the rates on firstly all commodities in the country by varying percentages from 3% to 10%.
The commission after suspending the tariff as Mr. McCarthy has said entered upon an investigation and of the proposed increases commodity by commodity.
The railroads consistently refused to produce any evidence related to the costs of transporting bituminous steam coal or grain, for example in the commodity hearings related to those commodities, the sub hearings.
Those refusals were upheld on appeal to the commission within the framework of the hearing.
The railroads also failed to introduce any evidence that the proposed increases would not drive coal, grain the other commodities from the railroad.
It was on this kind of sparse and deficient record that the commission concluded first that the percentage increases on coal and grain and on all other commodities that they finally found would not “exceed maximum reasonable levels,” and second that those increases would not have a diversionary effect and to move them to traffic by rail and to the spectral latter finding, the commission said in its final order and then that this is in the Appendix of page 393 (a) “The increased freight rates and charges authorized herein will have no on due adverse effect on the movement of traffic by railway” to be precise.
It is the position of these appellants that such findings which constitute a statutory refinement for the Commission permitting the increased rates to become effective, have just as much finality and require judicial review fully as much as to its findings on the railroad costs and revenue needs.
If Your Honors please, there's another aspect of this chase of this revenue proceeding that it seems to us should be equally reviewable and it relates to the commission to purchase from what we regard as proper procedures in conducting the general revenue proceedings resulting in these final determinations at the termination of the proceeding.
We regard them as essential to its findings on cost revenues and across the board commodity percentage increases.
For example, or as admittedly no participation in the hearings by the commission personnel in the face of the kind of record that had to be presented in a general revenue proceeding fragmented evidence by many diverse shippers and the railroad's failure to present anything but the most general statistical evidence on overall cost and revenue needs on a country wide basis with no cost evidence on a commodity by commodity basis and no substantial evidence we submit on the possible effects of diversion.
It appears to us that there was deficient record requiring the commission by counsel and its staff under the Scenic Hudson doctrine decided as you will recall in the Second Circuit 354 F. 2d as to which this Court denied certiorari at 384 U.S. under the Scenic Hudson doctrine.
We submit that the commission had a duty as an agency, an obligation to develop and produce a complete record in all these aspects in which the record was deficient and we believe that the order of the commission should also be reviewable in that light.
Now the railroads require shippers in order to obtain reviewability of this order of the commission to re-litigate before the commission and proceedings under Sections 13 and 15 of the Interstate Commerce Act.
All these issues that in our view and we submit, it seems apparent from the record and the nature of the order or final decisions in the general revenue proceeding.
The Government would require by its position that commission procedures and findings as to diversion of traffic and the reasonableness of commodity rates.
If I understand the Government's position correctly and I'm sure Mr. Springer will correct me later if I'm wrong would have to be re-litigated in such proceedings.
Now, we respectfully submit as I believe Mr. McCarthy has already advised the Court that neither Sections 13 or 15 contemplates the review of determinations of such broad questions as are considered in general revenue proceedings at which the commission has setup to deal with special economic problems of the railroads on a nationwide basis.
Those sections are designed to review the particular rate of a particular shipper for particular traffics in particular localities.
The commission is -- after hearings on these matters as to specific rates, then has the power to make reparations or adjustment.
They are not designed to consider the question of the kind that the railroads would have referred to them or that the Government would have referred to them and we note that the commission itself in 1958 I believe, decided a specific case, the Koppers coal case at 303 ICC where it refused to review general revenue findings in a Section 13 proceeding brought by coal shipper and we believe that decision is correct within the proper statutory scheme and the Government is in agreement with us on this point.
Now, these -- if Your Honors could contemplate the situation where all the issues in this general revenue proceedings were to be re-litigated in a Section 13 and section 15 proceeding, if the statute permitted it.
The evidence to be presented by the shippers would have to be the same as it was presented in the earlier cases and rejected by the commission in its order in the general revenue proceedings on these broad issues and with the same evidence presented can it be reasonably contemplated that the commission would then conclude that it had previously committed error.
We respectfully submit that we think none but --
Justice Hugo L. Black: May I ask you when these proceedings started first.
Mr. James O’malley: Mr. Justice Black this -- the hearings of the Interstate Commerce Commission were in 1968, commenced in 1968.
Justice Hugo L. Black: Is that when it was filed?
Mr. James O’malley: It was filed in 1968 Your Honor and in March of 1968 and the first of the two final orders, if we made the total final order was issued in November of ‘68 and the second in January of '69, the final order of two parts.
Justice Hugo L. Black: Do all parties agree that it is a final order?
Mr. James O’malley: No Your Honor, I believe that the railroads take the position that it is not a final order and seek affirmance of the court below to that effect and the Government, the commission and Department of Justice of United States take the position that part of the order is not final.
It is our position Your Honor that all of the order is final.
Justice Hugo L. Black: All evidence final and you would do to get a court judiciary hearing on the whole order?
Mr. James O’malley: Yes Mr. Justice Black.
Justice Byron R. White: Now, what if the railroads dismissed this whole proceeding and just filed a specific rate with respect to the commodities your clients are interested in?
Mr. James O’malley: Well Your Honor, I think that --
Justice Byron R. White: What would you do then, you would have to challenge the rate wouldn't you?
Mr. James O’malley: We would have to challenge the rate just because --
Justice Byron R. White: What would be the issues in that proceeding?
Mr. James O’malley: I am not completely clear from your question Mr. Justice White.
Justice Byron R. White: Suppose let's assume this whole proceeding had never started and the railroad simply come forward and filed a new specific rates on specific commodities that your clients are interested in.
Mr. James O’malley: And the commission had let it go into effect.
The procedure then Your Honor would be the -- to make a complaint in Section 13 --
Justice Byron R. White: And what would be the issues in that proceeding?
Mr. James O’malley: The issues in that proceeding would be those specified in the statute whether the particular rate over that particular route with that particular traffic is unjust, unreasonable, discriminatory, preferential.
Justice Byron R. White: And doesn't the statute tell the commission some factors to take into account in deciding those issues?
Mr. James O’malley: Although it's not very specific beyond that Your Honor but beyond the provision except that it does require.
I believe that they consider diversionary effects with respect to those particular rates but here Your Honor we're talking about --
Justice Byron R. White: How about the revenue needs of the railroad?
Mr. James O’malley: No, I don't believe, well yes under section 1582 for that particular traffic, I believe that -- that I would have to answer yes.
The revenue needs the railroad.
Justice Byron R. White: Why should you get any broader review in this proceeding than you would in a 152, if the railroad had just started out filing specific rates rather than the general rate, what's that?
Mr. James O’malley: Thank you, I'm not, I will continue --
Chief Justice Warren E. Burger: We will continue after lunch counsel.
Mr. James O’malley: May it please the Court.
Chief Justice Warren E. Burger: Proceed.
Mr. James O’malley: If I may, I'd like to return to Mr. Justice White's question just before the recess which I don't believe I have explored sufficiently for his purposes.
As I understood it, the question was whether if the carriers had filed specific rates on our traffics, the coal and grain traffics, could we obtain review?
And of course if that had happened, one of two things would have taken place.
Either the commission would have suspended and investigated those rates in a same way as it did here for the general investigation and then decided the case and if it decided adversely.
We believe that there would be no question that the order would have been reviewable by a three-judge court just as we feel this order here should be reviewable by three-judge court under the Administrative Procedure Act in the city of Chicago.
In fact, all we're asking for here is exactly the same review Your Honors to which we would have been entitled in the situation which Mr. Justice White hypothesized.
Justice Byron R. White: What would be the issues, if they had filed specific tariffs and neither one of the alternative things would have happened.
What would have been the issue?
Mr. James O’malley: The issues would have been --
Justice Byron R. White: Just as unreasonable for the rates.
Mr. James O’malley: That's right, that just as unreasonable for the rate and the factors that would have been opened would have been to the extent of those particular rates a diversionary effect of the increases on those particular traffics, which would not have taken into account the total diversionary effects that we feel have been decided in this case on a nationwide basis and to the extent it was possible in this miniscule section of the total revenue picture of the railroads.
To determine the revenue needs related to those particular tariffs perhaps but not the broad based kind of hearing that we had in the -- what we have before us in this case where all the nationwide statistics and commodities are involved and the commission has authorized a raise in rates across the country which affects every tariff in the country based on the premises determined in the investigation and hearing they started here in Section 157, which indeed is determinative of these issues to the point of authorizing the railroads to raise their rates on all these commodities.
There is where our point of review comes, I submit.
Justice Byron R. White: Are your files clear and the rates are there exactly?
Mr. James O’malley: Well, the interest in our clients are really in getting a judicial review of the acts of the commission in making determination that results in an increase across the board on the rates of our traffic and if that is properly -- sorry sir.
Justice Byron R. White: (Inaudible)
Mr. James O’malley: We are interested in our own traffic ultimately yes Your Honor but we are interested --
Justice Byron R. White: (Inaudible)
Mr. James O’malley: No Your Honor, we are interested in litigating the entire in having a review of the entire proceeding which happened to impinge on us to the extent of many millions of dollars by virtue of an overall decision which we claim is unsoundly based in fact and law.
Justice Byron R. White: (Inaudible)
Mr. James O’malley: We want to argue that it's unsound with respect to our traffic of course but we want to also argue that -- and our traffics --
Justice Byron R. White: (Inaudible).
Mr. James O’malley: If Your Honor please I believe the kind of proceeding that would take place were just sent back for review by the three-judge court would review the issues in the big proceeding that impinged on the traffics, we were concerned with and would order if any refunds or the refunds related to our traffics.
Not the entire order, I would assume that the Court would limit the impact of its findings to the situation of the complainants.
That would be my interpretation of what would happen.
Chief Justice Warren E. Burger: But then it isn't the broad attack that we had discussed this morning, really is it?
Mr. James O’malley: Yes Your Honor because Mr. Chief Justice the only reason these rates have been raised and the reason we ask a review of this investigation of the commission which determined these rates could be raised by this much was on the basis of a record which we claim as deficient, improperly assembled and evidence insubstantially founded and that there were proper considerations as the statute requires under Section 1582 of diversion where a final finding suit have been made as to diversion and were as we contend and we feel that we have been misdealt with our clients have been misdealt with by the commission in the way it conducted its proceeding.
Chief Justice Warren E. Burger: Well, if you can do so, could you give me any idea of what percentage of the total order would be reviewed under this attack?It is either tons of dollars or --
Mr. James O’malley: I think that would be difficult to do except to say that our clients perhaps are involved in something of the order of five million dollars a year of rate increases in a very broad sense against maybe 400 million dollars worth of rate increases on the total authorized by the commission but this is a very difficult figure to arrive at with any precision Mr. Chief Justice.
If I may, I would like to conclude my argument if I may and leave to whatever minutes are left to Mr. McCarthy who has reserved it for rebuttal simply asking that we urge the Court to reverse the order of the lower court and remand for trial.
Chief Justice Warren E. Burger: Mr. Springer you may proceed whenever you're ready.
Argument of Springer
Mr. Springer: Mr. Chief Justice, may it please the Court.
I'm here on behalf of three distinct Federal Government parties.
First the United States which was a statutory defendant in the District Court as it is in most ICC review proceedings.
Second, the commission itself whose order is in question and third the Secretary of Agriculture who has an independent statutory responsibility in ICC proceedings involving rates on farm products.
The secretary was a party in the commission proceedings below and he intervened as a plaintiff in the District Court proceedings in the District of Columbia case that is the Alabama Power case.
Though he did not become a party, as the secretary in the Atlantic City Electric case which was subsequently began in New York.
Because of their differing responsibilities, these three federal parties have taken different positions on the merits of the ICC order.
Secretary of Agriculture generally cites but the plaintiffs in the Alabama Power case.
The commission of course defends its order on the merits and the United States though a statutory party concluded that it could neither support nor oppose the commission's order in the District Court proceedings.
That the courts below did not reach the merits and so we submit they are not in issue here since the courts below both dismissed the complaints before them on the ground that the plaintiffs had failed to state a claim for relief that is a claim for judicial review.
So the only question here is whether the threshold question, whether the commission's order was reviewable, is reviewable and if so to what extent.
Justice Hugo L. Black: What is your position?
Mr. Springer: As to that I'm just going to say Mr. Justice Black the -- my three clients are substantially in agreement on that which is why I think I can appropriately speak for all of them.
We believe that the Alabama Power case complaint in the Columbia District Court does state a claim for judicial review and so we agree, I think completely with Mr. McCarthy's clients in that case.
In the Atlantic City Electric case there is to be sure a relatively minor disagreement between the United States and the commission which are the only two federal parties in that case but in terms of the relief we suggest a remand of that case.
This difference becomes of relatively little importance.
Both the United States and the commission do however disagree significantly with the plaintiffs in the Atlantic City Electric case as I shall elaborate in a minute.
I think it's fair to say to that the only disagreement among any of the parties including the railroads on this reviewability question is a disagreement as to whether the various aspects of the general revenue order have sufficient pragmatic finality to make review appropriate now or whether on the other hand, review should be differed until shippers have exhausted further administrative remedies of challenging particular rates by complaints under section 13 of the Act which the commission would then consider under section 151 after the rates have gone into effect.
We think that it's clear from both the Court's decision last term in the City of Chicago case and more particularly on this issue from the decision several years ago in Abbot Laboratories against Gardner that this is the only question.
Abbot Laboratories, I think established the proposition that review should be available at the earlier stage at which the agency has made a final determination and a controversy as to the validity of that determination has rightly as to the existence of controversy.
I think there's no question here.
The shippers are paying higher rates because of the commission's decisions so the only question I think fairly is finality which as the Court again indicated in Abbot laboratories, there is a pragmatic question based upon a careful analysis of what the agency has actually done and what kind of attack, the parties seeking review are making upon what the agency is done.
So that I think I should proceed now to review once again and perhaps from a somewhat different aspect.
The issues that were before the commission in this general revenue proceeding and what the commission did with those issues.
The general revenue proceeding is an investigation under Section 157 of the Interstate Commerce Act which generally permits the commission to make a final determination in advance of the effectiveness of new rates as to whether those rates are lawful or not.
Section 157 explicitly permits the commission to do an advance.
Everything that it could do after the effectiveness of new rates under Section 151 and the 151 proceeding could be either on the commission's own motion or in response to a complaint by shipper under Section 13.
Both therefore -- both of these subsections contemplate that the commission will make the same kind of inquiry that is it will determine whether the rates are just unreasonable and further whether they are called unjustly discriminatory or unduly preferential or prejudicial and Section 1582 expands upon just and reasonable standard, so that that inquiry in substance includes two questions.
First, what are the railroads revenue needs if they are to provide adequate and efficient service at the lowest cost consistent with the furnishing of such service and under honest economical and efficient management.
And the second question under the just and reasonable rubric is what effect will an increase in whatever rates are in question have upon the movement of traffic, more particularly will they -- will such an increase divert traffic from the rail carriage to such an extent as to defeat the purpose of the increase.
Now when all the rail roads in the country want to as they did here and as they have previously and subsequently want to increase all of their freight rates to compensate for increased costs.
It's obvious that the commission cannot feasibly make all of these determinations within the seven month suspension period that is allowed under Section 157 before the new rates can be allowed to come into effect.
And of course the railroads claim and the commission has to give effect to their claim that they have an urgent need for an increase when this kind of situation comes up.
On the other hand the commission frequently concludes as it did here that it should not allow the railroads to increase their rates generally without some prior investigation.
In consequence, many years ago the commission developed the general revenue proceeding which is a limited kind of Section 157 proceeding in which the commission generally examines the proposed across the board tariff increases but expressly refrains from determining the lawfulness of each and every rate that would be increased.
Justice Byron R. White: (Inaudible)
Mr. Springer: That's true Mr. Justice White.
What it does it -- and I will elaborate on this, it gives a kind of --.
It may determine as to some rates that they are unjust and unreasonable and therefore should be lowered and in fact they did that in a limited number of instances in this case but it does not exhaustively look at each and every grade under --
Justice Byron R. White: I take it (Inaudible) whether the issues that the commission does determine in this general proceeding are foreclosed from free examination and subsequent specific rate proceeding.
Mr. Springer: Yes, well in a nutshell, I don't think any of them are necessarily legally foreclosed.
However as to the general revenue needs question, practically they are foreclosed.
Justice Byron R. White: You mean that if shippers fails to act the particular determinations of this general revenue proceeding now by seeking review.
Even if they were entitled they wouldn't be foreclosed from raising the same issues in a specific rate proceeding.
Mr. Springer: Not as a matter of strict law, practically speaking though as to the general revenue needs question that is a question which we agree with the Alabama Power plaintiffs has been thoroughly considered and thoroughly decided by the commission.
Justice Byron R. White: The commission probably would take this first and you would have the record but the same issues could be reviewed formerly.
Chief Justice Warren E. Burger: There is no res judicata aspect to it?
Mr. Springer: No, it is a matter, I suppose of stare decisis as to --
Justice Byron R. White: Do you get the same -- later in Court on the same record as you you can get the thing that you are claiming --
Mr. Springer: Yes but in the pragmatic terms in which we're talking, that subsequent Court review of this question would be in no way, no realistic way aided by the fact that there had been an additional agency proceeding in the interim as to the general revenue needs question.
Justice Byron R. White: How was the matter to this specific that's true?
Mr. Springer: Yes, and now as to other issues --
Justice Byron R. White: As to other issues?
Mr. Springer: Yes.
Justice Byron R. White: And the Court will look at them all at once.
Mr. Springer: As to that rate except to that --
Justice Byron R. White: The cost of the general determination.
Mr. Springer: Yes.
That certainly could be done but our position basically as to the general revenue proceeding is that since the Court should review as soon as it can, as soon as there is sufficient administrative finality, it should not be required to wait, it might wait but it would be better policy and it's not necessary to wait as to the issues that have been finally decided in the general proceedings though I agree it would be possible for the Court to review it later on.
Justice Byron R. White: How long is it after commission makes the determinations like this well, immediately at that specific rates taken in to account --
Mr. Springer: Yes, and frankly the time table of this proceeding was dictated by the fact that the commission suspended the rates.
It's allowed under the statute to suspend only for seven months.
The commission's decision came, final order came down, I think six-and-a-half months or perhaps a little more after the proceeding had began and at that point the --
Justice Byron R. White: At that point the shipper gets a specific rate would you say?
Mr. Springer: Yes, by instituting a new proceeding which of course would take some time and it might be a year or two later by the time judicial review could be had as to that.
Justice Potter Stewart: The commission itself as I understand it in the Koppers Company case 303 Interstate Commerce Commission has taken the position that in a later proceeding attacking a specific rate, the general authorization or a rate increase is just not at all relevant, am I mistaken about that?
Mr. Springer: That's what the language in that opinion.
I would not want to -- I don't think the commission would want me to hang too much on the relatively brief language in that opinion.
Justice Potter Stewart: But it simply declined to consider it.
Mr. Springer: Yes.
Justice Potter Stewart: Didn't they?
Mr. Springer: And as to the general revenue.
Justice Potter Stewart: To oppose or to admit any evidence or argument about it and --
Mr. Springer: Yes and as to the general revenue findings, the only thing it could do in such a further proceeding would be a kind of reconsideration of what it had already decided for.
Justice Potter Stewart: Now, if the commission declined to give you that much to reconsider even perform reconsideration, am I mistaken?
Mr. Springer: Yes, it's true in that case though again it's -- I think I do have honestly I have to say that that does not reflect a fully fleshed out and thought out commission consideration of exactly the kind of problem that we have here.
And of course, the Administrative Procedure Act says that the fact that reconsideration by the administrative agency is available does not preclude judicial review before such reconsideration.
So that we agree that as to the general revenue questions, which are essential underpinnings of the great increase, if the commission had disagreed with the railroads submissions that they needed more revenue, the commission would have not allowed the increase.
So that's an essential condition to the increase, one that the commission considered separately, considered finally to the extent if at all there are any further administrative proceedings possible as to that issue.
They're only in the nature for reconsideration and the availability of such reconsideration if there is such availability is not a part to judicial review.
This brings me then to the other issues.
The issues with which at least in large part, the New York plaintiffs are concerned having concluded that the railroads revenue needs justified an increase to a certain average level.
The commission went on to consider the propriety of the allocation of the additional revenues among various shippers and various commodities.
In particular, it had to consider or that Section 151 and 7 contemplate that it would consider whether the rates would have adverse effects on the movement of traffic, that is diversion and whether the rates are discriminatory or preferential.
Here the question is not what the railroads need but what individual shippers and shipping various things in various places are willing to pay rather than decide not to ship by rail and what they can fairly be required to pay considering the relationships among the various rates and other matters.
As I say the commission has given some consideration to these matters and the general revenue proceeding and it did throw out a relatively small number of the particular rates because of defects that became apparent to the commission.
And it's kind of preliminary once over on these detailed rate by rate or rate group by rate group issues.
But it certainly did not conclude exhaustively that no rate might have such a defect and therefore expressly left open as it does in these general rate proceedings.
Left it open for shippers to institute subsequent proceedings by complaints under Section 13 which could result in Section 151 proceedings to attack particular rates of interest to them.
Specifically with reference to this Court's decision many years ago in the Arizona Grocery case, the commission said that we are not hereby prescribing all of the rates which we are in this kind of limited proceeding allowing the railroads to increase generally.
So that we think that the complaint in the Atlantic City case is in large measure an attack on this second aspect of the general revenue proceeding that the commission had it once over on particular rates and this are matters which while the commission has considered them, it has not considered them finally and could not on the record that the commission had before it and could have it before it and a proceeding under the kind of time pressures if there are in a general revenue proceedings.
In short, these shippers have not exhausted their administrative remedies and we think that judicial review should not be available.
As I indicated there is a minor disagreement in framework -- in the terms of the framework of this case between the commission and the United States.
The Secretary of Agriculture not being a party in this case.
The United States believes that the Atlantic City complaints can be read perhaps as raising an attack on the general revenue needs findings and perhaps also as raising an attack upon the general nature of the kind of proceeding that the commission has had.
That of course is -- the commission has finally decided what kind of proceeding it's going to have.
And I think to the extent that shippers may want to raise the question whether the commission can have a general revenue proceeding without finally determining all of the multitude of rates involved.
That theoretically at least is a question that is right for judicial review after the general review proceeding is over.
But the commission of United States does agree that under all the circumstances as to the New York case, it is appropriate to remand that case so that the parties can amend their -- plaintiffs can amend complaints if they wish and that the District Court can shape the litigation in accordance with the general principles that we have suggested.
Let me say a further word about relief --
Justice Hugo L. Black: Does that put you in sympathy with Judge Wright's dissent?
Mr. Springer: Yes, completely in sympathy in the Alabama Power case which was the case he was focusing on.
Justice Hugo L. Black: But he also referred to the other case.
Mr. Springer: Yes he did.
A problem with the Atlantic City case is that that District Court in New York seems to have read the complaint as having the generality that what we believe the Alabama Power complaint has and dismissing it on the same theory that the majority of the District Court and the District of Columbia dismissed the complaint there and I think they have improperly read the complaint and also reached and in terms of that judgment -- in terms of that reading made an improper judgment.
There is the problem to which Mr. Justice Stewart has adverted a multiple District Court proceedings and matters of this kind.
Accordingly, we would suggest that in this case, the New York Court might well be instructed to stay its hand until the District Court proceeding and the District of Columbia is completed.
That case was filed first, it involves I think a larger number of shippers and it involves more clearly the general issues which might in practical terms make the New York case moot.
Justice Hugo L. Black: Why do you say it should be stayed?
Mr. Springer: Just in the interest of orderly judicial review, this would frankly be a judicial construct quite analogous to what the Hobbs Act provides with respect to those administrative agencies.
Justice Hugo L. Black: So that you would be tried with two issues in two Courts?
Mr. Springer: At the same time when they're overlapping and when one proceeding might well resolve all of the issues in the other --
Justice Potter Stewart: It could well be many more than just two Courts, couldn't it?
It could be in every District Court in the United States.
Mr. Springer: Yes, it certainly could.
Justice Potter Stewart: Very easily.
I mean that's not a --
Mr. Springer: Yes, but I think as the Court pointed out in the --
Justice Potter Stewart: It's not a hypothesis at all because they're obviously shippers in every Federal District are there not?
Mr. Springer: Yes, yes, it certainly are Mr. Justice but as the Court pointed out in Abbot Laboratories, there are remedies for this kind of problem.
Transfers of venue under section 1404 (a) states the possibility suggested by the complaint of the Alabama Power case of treating this cases as class actions so that we think that it is appropriate that efforts be made and we think it's feasible to confine this kind of general review that we would allow under the principles we suggest in a single three-judges court leaving any additional matters that might come up for subsequent litigation perhaps in other Courts.
Justice Potter Stewart: Let us say a single three-judge court disposed of it must prevent another shipper thereafter bring a brand new proceeding in another three-judge court in some other district.
There's no statute of limitations I understand and it would not be res judicata.
Mr. Springer: Yes, as I think as Mr. O'Malley suggested, there is the aspect of latches and I think --
Justice Potter Stewart: And along with there will be Equal Protection, isn't it?
Mr. Springer: Well the other protection is the judgment of that three-judge court that it should not --
Justice Potter Stewart: Of confidential value?
Mr. Springer: Yes and the Court --
Justice Potter Stewart: It is not res judicata?
Mr. Springer: Yes and these are equitable proceedings of course and the Court is expected to exercise its deal of equitable expression.
Justice Hugo L. Black: Are the increased rates now in effect?
Mr. Springer: Yes Mr. Justice and in fact there had been three subsequent increases which are in effect in whole or in part since the 1968 proposal.
Justice Hugo L. Black: What is your proposal -- there should be done about that, any thing?
Mr. Springer: About the additional increases?
Justice Hugo L. Black: The increased rates.
Mr. Springer: Well those rates of course --
Justice Hugo L. Black: Are you going to take care of that one way or the other, would you suggest?
Mr. Springer: No, we have not suggested any effort to undo those increases.
I think there is the problem of interlocutory relief about which the railroads talk.
Of course the standards for such interlocutory judicial pending review are stringent and probably in the ordinary case it would not be appropriate to stay such an enormous broad ranging perpetrating increases as are involved here.
Chief Justice Warren E. Burger: Mr. Springer, you're familiar with the existence of the Committee of the Judicial Conference of the United States on multi district litigation.
I do not have it in mind frankly but as the scope of the jurisdiction of that committee broad enough to reach the three-judge court cases as well as all other types of multi district litigation?
Mr. Springer: I think so Mr. Chief Justice though as I am not fully familiar with this.
As I understand the particular section in the judicial code relating to multi district litigation, I believe deals only with discovery and doesn't go beyond that to the matter of trial.
But this is a multi district problem very much likely problems giving rise to that committee and to the legislation that's now in the books.
Chief Justice Warren E. Burger: Very well, thank you Mr. Springer.
Argument of Hugh B. Cox
Mr. Hugh B. Cox: Mr. Chief Justice, may it please the Court.
I appear in this case to railroads.
I think I should like to begin by commenting briefly on some aspects of the statutory plan that were touched upon this morning but which I think perhaps I should like to ask the Court to remember while I give my version of what happened in this case and what the case is really about.
The point that I should like to particularly make is that when a carrier initiates a rate.
The only authority that the commission has to interfere with a tiny of that rate increase prior to a final determination that a particular rates involved are unlawful is power to suspend the rates for seven months.
At the end of that time the rates become effective by operation of law not by virtue of any order that the commission.
That's what section 157 provides and they remain effective until the commission has made a final determination that the particular rates involved in a rate change are unlawful.
This is the basic statutory plan that was involved and discussed in the Earl case and as the opinion there pointed out.
It was an accommodation between the interest of those who sought that the railroad should not be able to change any rate without prior approval of the commission and the position of the railroads who wanted to be able to change the rates without any interference by the commission subsequent only to a subsequent determination of their lawfulness.
And under this accommodation, the railroads bear irreparably the losses occasioned by the seven month suspension period.
If the rates thereafter held be lawful, the railroads have no way of recovering that money.
On the other hand, the shippers -- if the rates go into effect at the end of the seven months period are protected by their right to recover reparations or by the normal refund provisions of the commissions attached under 157.
Now with that preface, I should like to state what I think happened in this case and what the real pragmatic consequences to take Mr. Springer's words over this commission orders were.
As it's been said the case started with a petition asking for leave to file a single master tariff which the commission granted.
Now, no review has been sought of that order and after they got the permission, the railroads filed a tariff which I think was to become effective on the 24th of June 1968.
It had to make it that far ahead because the commission has a condition of getting the permission requiring it to do so.
The first thing that the commission did was to suspend that first master tariff for the entire seven months period and at the same time however, it said to the railroads “now if you want to file another tariff that makes only a 3% increase.”
The increases in the master tariffs have been three to six, said to the railroads “if you wish to file another tariff, it makes only a 3% increase, we will not suspend that tariff.”
And the railroads did so and that 3% tariff went into effect, and the time the commission did this, it said to the railroads in effect in its order “now we are investigating this matter and we may decide later on that we should have suspended these rates even as to the 3% and if we decide that we should have done that as to any or all of these rates, then you are going to have to restore the situation to what it would have been if we had suspended the rates by making refunds.”
The next thing that the commission did was to issue an issue an order in November which has been called its interim order and in that order it decided in effect that it should not have suspended the any part of the rate increase and that it would permit the entire rate increase to go in to effect at the end of November.
At the same time again saying to these carriers and a way it did that again was to say “you can file another tariff” which the railroads did which put the additional 3% into effect.
At the same time, it said to the railroads “we're still looking at this and when we come to our final conclusion, if we decide that we should have suspended some or all of these rates for the entire statutory period, you are going to have to restore the situation to what it would have been if there had been such a suspension.”
And in the end there in January it issued a final order in which it said some of these rates, few of them, I think there are about nine instances should have been suspended otherwise we think that our orders can stand.
So I submit to the Court that the issue in this case, my view of what's happened is simply whether an order of the commission which refuses to suspend a proposed rate increase for the entire seven months period but does not determine the lawfulness of all or any of the rates involved but leaves that to be determined in subsequent proceedings is reviewable.
Because we believe that was the only consequence of what this commission did here.
To put the matter in other way, we say that what the actual pragmatic effect of these orders does not differ significantly from an order that a commission enters in any ordinary suspension case in which it refuses to suspend rates for all or any part or some part of the seven months suspension period.
Now, we believe that an order of that kind which we think this order is, should not be reviewable and our reasons rest both upon analysis of statute and upon certain practical considerations.
The commission has been issuing these general revenue orders for more than 50 years and in the line of cases that we have cited and discussed in our brief from pages 24 to 25.
The Courts have held that these orders are not reviewable and that the shipper has an adequate remedy by way of complaint and reparation.
The Courts have also held relates to what I said a moment ago about the effect of this order and its relationship to a suspension proceedings and they have held I think uniformly that an order of the commission that refuses to suspend rates is not reviewable.
Now, both of these lines of cases, those cases by the way are collected in the opinion in Long Island case in 193 Federal sub which is cited in our brief, at least the cases up to 1961.
Since that time there have been a number of other cases refusing to review, orders that refuse to suspend.
Now both of these groups of cases, those that are refused to review the general revenue orders and those that have refused to review the orders declining to suspend, to examine the opinions.
It seems to me to rest on two related considerations, one rests on the structure of the Act and particularly on Section 157 because it seems clear and this was the purpose of my preliminary statement that under that section, the question whether the commission should interfere with the timing of a proposed rate increase by suspending the rates is not a matter that is appropriate for judicial review because it is committed to the commission's discretion.
The commission when it refuses to suspend a rate is not required to make any findings, not required by the statute to have any hearing, it's not required to give anybody any reasons for its action.
The statute permits it to do that and along ago in the board against the great northern case which I think is 281 U.S. the Court -- this Court said that the power suspension is entrusted to Congress or to the commission only.
Now, we submit when you look at this, I'm going to come to the practical considerations in a moment but when you look at this body of authority and consider it has existed with the length of time that it has, we submit that there is no reason to depart from it in the case of these general revenue determinations.
They do not and I will discuss this point in a moment also, they do not determine the lawfulness at any or all of these rates but railroads may increase as a result of the order and as I think they do not preclude the shipper from litigating any issue that is relevant in any Section 13 proceeding.
These orders, and I want to say a word about this.
Now, I think it is clear, do not determine the lawfulness of any of the rates and I'm not sure that appellants dispute that fact but there isn't any room to dispute it because the commission says right in its report that it is not determining that any of these rates are reasonable rates that everyone of them is subject to correction and that they are in all respects and I emphasize in all respects and this is the commission's language.
They all are in all respects subject to complaint and investigation and again long ago, this Court in the Brimstone case and talking about orders of the very kind that are here involved said “those orders do not approve or fix any rate, they do not determine that any rate is reasonable.
They do not approve in advance any rate that may be filed as a result of the orders.
Justice Potter Stewart: Mr. Cox.
Mr. Hugh B. Cox: Yes?
Justice Potter Stewart: As I understood you told us that this body of authority with respect to the non-reviewability of refusal to suspend is based upon two foundations?
Mr. Hugh B. Cox: I think yes, I think --
Justice Potter Stewart: One 157?
Mr. Hugh B. Cox: One is the idea that the --
Justice Potter Stewart: And what is the other idea?
Mr. Hugh B. Cox: The other idea is that the shipper has inadequate remedy under the complaint proceeding to which he should resort before seeking judicial review.
You'll find those two notions implicit --
Justice Potter Stewart: And it's a slap over under non finality I suppose or some sort of that.
Mr. Hugh B. Cox: Yes, I have difficulty I must confess to the Court with a concept of finality.
It's always a question of what order is final about.
Now I would -- I'd be prepared to concede that this order is final so far as it refuses to suspend rates but it isn't final as to lawfulness of any rate.
Justice Potter Stewart: Or prematurity --
Mr. Hugh B. Cox: Yes.
Justice Potter Stewart: Some lack of maturity.
Mr. Hugh B. Cox: That's right.
But it's a combination of those things that you will find in these opinions and you find them both in their reach in the opinions that relate to simple refusals to suspend and any opinions that have to do with the general revenue orders.
Justice Potter Stewart: Now that I have interrupted you, I think you told us that this --the general revenue orders go back 50 years or so?
Mr. Hugh B. Cox: Oh yes.
That seemed to be (Inaudible) when I answer this question because I have recently read all of them.
The first general revenue proceeding was really I think in 1910 or 1911 just after the Mann- Elkins Act was passed but I would say that this form of proceeding that we have before us today, really began after the transportation act of 1920 and with the general rate increase of 1920.
The decisions was that the general rate proceedings before the Kaiser war are I think in somewhat a different category but after 1920 this thing developed until it -- and by early in the 30's it reached about kind of form and substance it now has.
Justice Potter Stewart: Because it's really a procedure not -- certainly not explicitly contemplated by the legislation, is it?
Mr. Hugh B. Cox: That's right, this is an administrative mechanism which the commission --
Justice Potter Stewart: Based upon necessity I suppose.
Mr. Hugh B. Cox: Yes sir.
You might save to paraphrase Sir Henry that it's been secreted in the interspecies of the procedure that is provided by Section 157 but it's quite different kind of development that rests on that but is in certain respect different.
I may say since you have raised this question that the commission itself has in its orders, didn't in these orders but in the other general revenue orders, it is recognized the -- what I've said about the similarity between this and the suspension case in the 1920 general rate increase.
Commissioner Eastman in his concurring opinion said “essentially what we have here is a proceeding like a suspension proceeding.
There's no finality about it, we're just deciding whether we should allow these rates to go into effect.
And in two later decisions, I get -- I cannot be certain about these but I think it was a general rate increase of 1958 and the general rate increase in 1960, the commission made somewhat comparable statements comparing this to what goes on in ordinary suspension case.
I think in one of those opinions they quoted a Mr. Eastmans's statement in the 1920 case.
Now, as I understand the appellant's position, they do not deny that they have another remedy.
They argued that the remedy is not adequate and so far as I could understand, I think that argument rests essentially on the contention that because of the commission's determinations in a general revenue proceeding.
They will be precluded either by something like the doctrine of res judicata or as a practical matter from re-litigating these issues or relevant issues in a complaint proceeding.
Now, we submit that they are simply wrong about that and that there is no warrant in authority or logic or in the commission precedent or practice for the view they take.
I think, I should say this in candor about these general revenue determinations that are made in a general revenue order.
They relate of course to all rates and to all carriers as a group and they're made on the basis of typical evidence but in a very general way.
Now the determinations that the commission makes on that kind of evidence and that kind of proceeding may have only a limited relevance in a proceeding relating to particular rates but although in commission in those proceedings does often give consideration to revenue needs of the carriers.
Sometimes in general terms, sometimes simply in terms of the revenue needs as related to the particular traffic involved.
But of course that – these revenue needs in a particular rate proceeding have only one several factor.
The commission has often told the railroads that they can't justify a rate -- particular rate just because they need money.
They have to justify it -- it's reasonableness on other grounds and the commission looks at comparisons with comparable rates, with a nature of commodity, with a cost involved, to what degree there is competition.
Whereby other modes of transportation, the suggestion that these particular rate cases that commission doesn't examine the problem of diversions, this I think as mistaken and look at all they seem.
Now to the extent that any issue that is determined on revenue needs or anything else is relevant in a particular rate proceeding, complaint proceeding.
We submit that the commission will look at it, the shipper is not precluded from raising it and litigating it and getting entitled to have judicial review of any determination the commission makes about it.
Now they have cited this, there had been some discussions of Koppers case, 303 ICC, I think Mr. Springer is quite candid in indicating and I joined with him that no one quite knows what that murky passage in the opinion means.
I think I know what it means but I can't be sure about.
I think all it meant was that the commission wasn't going to litigate in that case whether it made a mistake in refusing to suspend the rates.
Justice Potter Stewart: You're telling about the Koppers case?
Mr. Hugh B. Cox: Koppers case, yes, I think that's what it means.
There are other cases and we have cited them in our brief, one is the Gold Soap case where the railroads try to justify a rate on the ground that it had been issued pursuant to a general revenue order.
And the commission said “no, you can't do that, that's no justification whatsoever to this rate.
We didn't approve this rate, we didn't fix this rate, you have got to justify it” and I think what is more significant is that the commission has awarded reparation.
Bound rates were unjust to be unjust and unreasonable and awarded reparation with respect to rates that were established pursuant to these general revenue orders and when the carry railroad who tried to argue that those orders of justification for the rates that commission has said “no,” they are not a justification and at least in one instance the Court said that that was quite correct.
That's the Cotton Valley Oil Company case, I think which is against the Southern Railway which I think is in 51 Federal supplement.
So as a practical matter and I accept the pragmatic test has a practical matter in these complaint proceedings, even though the rate is at the level fixed by or level that the railroads is fixed pursuant to some general revenue order.
The commission has looked at the rates, held they were unjust and unreasonable and given the shippers reparation.
Now I must confess that I am not altogether -- I'm not sure.
I altogether understand the argument that the appellant made on this point of the adequacy of remedy.
They have referred to the fact that the commission did say in its report when it decided that not to suspend these rates for a full period that it found that the general level of the rates was be just and reasonable.
Filed an statement which it immediately qualified by saying we're only talking about the general basis of the rates.
We're not holding that any of the rates are lawful and they are all subject to investigation and complaint in all respects.
But then the appellants say that in a complaint proceeding they can't attack the general level of these rates.
And at that point, either because of some weakness of the flesh or infirmity of the mind, I cannot follow because I had assumed perhaps in blindness that what a shipper pays is the rate that is applicable to his shipments and his commodities.
He doesn't pay any general rate level and that under the statute, if he has a remedy that will give him a just and reasonable rate which he has in this case that that satisfies the statute and if he gets judicial review in that proceeding that that is an adequate remedy.
Now I think if you look and you could only do what I think by random sampling, you will see that when the commission determines the justness and reasonableness of particular rates.
This abstraction of the general rate level does not have any weight in these deliberations.
It considers and deals with those cases on the basis of the facts including the revenue needs that the evidence before it and it relates to those rates and to the extent as far as I can tell reading from reading the reports of the commission that it relies on president, it relies only on cases in which it has actually prescribed or determined that a rate that is lawful.
Justice Byron R. White: I suppose these shippers could win this case here, it these rates set aside and then turn right around and then lose a case in which the railroads filed specific rates on their commodity.
Mr. Hugh B. Cox: That's right, same rates or possibly higher rates.
Now I said a moment ago that in discussing reviewability, I was going to come to the practical considerations that we think supports our analytical argument based on the statute.
First to those practical considerations has to do with this matter of injunctive relief.
Now, I have to say that in discussing these problems, I find them very puzzling and that I feared going to be more adept of raising them and I am answering them.
The trouble is that because these general revenue orders are never been reviewed and the orders refusing to suspend rates have never been reviewed.
There simply is many precedent where this is a very uncharted line of country.
Justice Byron R. White: Well Mr. Cox isn't it -- doesn't it really sound as though the just and reasonableness language is just inappropriate for those.
Mr. Hugh B. Cox: It is inappropriate and --
Justice Byron R. White: I mean this -- they're really saying that probable cause to increase these rates.
There's enough evidence not to suspend.
Mr. Hugh B. Cox: That's right or you could say this, say we had a look at them and doesn't appear to us as any reason why we should suspend them for the full statutory period.
We will allow them to go in effect and they'll determine whether --
Justice Byron R. White: It's as though the commission hasn't said anything.
Mr. Hugh B. Cox: The odd thing is Mr. Justice White that in an ordinary suspension case --
Justice Byron R. White: They don't say that.
Mr. Hugh B. Cox: They do say that.
They use this same kind of justness and reasonableness language.
Justice Byron R. White: In a specific rate case?
Mr. Hugh B. Cox: In a specific rate cases although if there's anything it's well settled.
It is that when they suspend or refuse to misspend a rate they are not making any determination about its lawfulness.
If you would like to look at a case where they used that kind of language in a specific rate case, I think --
Justice Byron R. White: Well it doesn't bar anything in a subsequent proceeding.
Mr. Hugh B. Cox: No, no.
This bureaucratic language tends to repeat itself when they ship from place to place some times without too much consideration whether it's appropriate but they use this just and reasonable language even in an ordinary.
Justice Potter Stewart: But those, generally they didn't say anything in the suspending or refusing to suspend.
Mr. Hugh B. Cox: Well, they can do that, they don't have to say anything and they can do that and as a matter of fact in one of the success, the rate increases that followed this one.
The one in 1969, they just -- they let that go into effect at once.
They refused to investigate anything except questions of discrimination and preference.
They wouldn't investigate reasonableness and they did this in an order that's a page and a half, they didn't go through this elaborate discussion to make these findings and all these reasons and under the statute they can do that.
They have developed a practice over the years of writing these elaborate dissertations in these general revenue cases and this and why they used the language in the suspension cases, I could not attempt to explain but if I may go back to the problem of injunctive relief.
I think the appellants have not quite met the real problem there which is a problem I think that suggests that the kind of relief that they really want on judicial review can't be obtained without doing violence to the statutory plan.
Now what I mean by that is this, these general rate proceedings frequently consume a large part of the statutory seven months suspension period and people can't go into Court until the commission is finished.
Now when somebody goes into Court and wants interlocutory relief and it's natural for him to do so because that's one of the purpose of judicial review.
The Court is going to be faced with a problem of whether it can enjoin the rate increase beyond the seven months period.
Because in some cases by the time they get to Court, the seven months period will expire or nearly expire and the same question will arise as to and it was raised this morning I think or after lunch as to what the Court does after a final hearing.
If it finds that there was some infirmity in the commissions order, does it enjoin the rates for more than seven months period?
Now, the position of the railroads is that neither the commission nor a Court even as an incident to judicial review can enjoin or suspend rates if not been adjudicated to be unlawful as such beyond the seven months period.
But the law on that point is not yet clear and what the railroads with a reason apprehend is that first it can't be certain how the question must be settled and second until the question is settled and settled applies -- as soon a way that applies to all the possible situations that these general rate increases are going to be indefinitely delayed in many cases beyond the seven months period by interlocutory and final injunction.
As has been observed these suits can be brought in any district in the country, they could involve different commodities, different shippers, different argument could be made about the general rate increase.
The Government recognizes this problem and it's attempted to make some palatine suggestions which we have discussed in our brief but I think when you look at those suggestions.
Consider all of them you can see that it is not, they are not likely to really solve this problem.
And of course if the problem as I cannot get relief beyond the seven months period which is our position, then one of the principle purposes of judicial review I suppose is gone at this point.
The judicial review of these orders also creates a difficult problem about the refund provisions of the commission's general revenue orders.
Now we have discussed that matter in our brief and I should like to refer the Court to that discussion.
I simply like to say this about it that that is a difficulty that arises because these refund provisions and these general revenue orders are little peculiar.
Unlike the normal refund provision in an ordinary Section 157 case.
They do not come in to operation or the operation does not depend I should say upon a final determination that that the particular rates are unlawful.
Their operation simply depends upon the determination by the commission that it made a mistake in allowing the rates to become effective or not to suspend the rates.
So that under these provisions the railroads could and do at times have to refund money that they have collected from rates that are never been determined to be unlawful and which they have to be determined to be unlawful simply because the commission has determined that the rate should have been suspended.
Justice Thurgood Marshall: Mr. Cox.
Mr. Hugh B. Cox: Yes.
Justice Thurgood Marshall: Give me a minute.
The refund comes by order of the commission.
Is that by rule or how does that come about?
Mr. Hugh B. Cox: Mr. Justice Marshall I think that these refunds I am speaking of are refunds that the commission attaches as condition to its refusal to suspend the rates.
Justice Thurgood Marshall: Thank you.
Mr. Hugh B. Cox: And when the railroads take advantage of that refusal of course, they have to accept the conditions.
They are bound by them.
Now if these refunds is here to for, there's been uncertainty about these refunds but the railroads have at least been certain that the time within which the liability would accumulate would be limited at the time that the commission was required to consider the matter.
And while there was uncertainty it was an uncertainty that arose from the uncertainties about what one agency would do.
Now there has to be judicial review of these orders, of course the times in which this uncertainty will continue and that length of time in which these contingent liabilities will accumulate will be extended and the uncertainties will be increased by the facts that there you have two agencies and instead of one and his views on these matter may differ.
Now that means that when the railroads get a general rate increase if there is to be judicial review, they are going to have a very great problem about whether they can use this money or how much of it they can use or whether they have to setup a contingent reserve to take care of this contingent liability.
They can't very well plan or make definitive plan that may hamper the ability to use the money for permanent purposes.
In the present cash position of many of the railroads this is rather a serious problem.
I have so far in this argument talked about the commission's order simply in terms of what its consequences are on the general level of rates or on rates generally.
I would now like to say something about the -- I think a minor point really about the provisions of the orders that grant relief under the fourth section and from outstanding order.
Those provisions of the order affect only a very small number of the rates and they do not have much economic significance.
I am told that the rate experts in the rate conferences say that even without that relief, they could generally achieve the economic results of a -- one of the general revenue orders by excluding those rates and making them the subject of separate proceedings.
But for purposes of this afternoon I'm going to assume that orders that grant fourth section relief and it relieve from outstanding orders are in an appropriate case reviewable but my submission is that this in this case, it is not, this is not an appropriate case to review the provisions of those provisions of the orders that are here before the Court.
The appellants here haven't not alleged in any of the named appellants are affected in any degree by those provisions.
They have not argued that they are affected and when you look at their arguments, they aren't directed to fourth section problems or to any problems that arise under outstanding rate orders.
They're directed to the general revenue determinations of the commission in a way that it made them.
Now in a precisely similar situation, one of the Algoma case in 11 Federal supplement where the same kind of an argument that was made, the Court said “Well these shippers haven't shown they're affected, these provisions are simply incidental to the main purpose of the order and we won't refuse them and we submit that that should be the conclusion here.”
I am not going to say anything about the assertion that some of these appellants represent all shippers, all commodities in the United States except to say that in this, there is some -- this vague indication that who these members of this enormous class maybe and that are affected by the fourth section orders.
I shouldn't think that justify judicial review.
And finally if the Court should think that it has to look at that part of these orders and I suggest that the review should extend only to those rates that are covered by the fourth section provisions and the relief from outstanding orders and not extend to the generality of rates or the general revenue determination that are here involved.
I think that I should like to conclude by saying something about the merits of this case, we have asked this Court if it -- and the unhappy event that it should determine that these orders are reviewable to consider the merits of the orders and affirm them.
Now, we knew and we made that request that this Court has often said that will not or is it reluctant to consider agency orders, findings that have not been reviewed by lower court.
But that I assume is not a iron-clad rule and this Court has sometimes departed from it.
And I am obliged to say that there are very urgent and powerful considerations in the present situation that would suggest that it would be appropriate for this Court to determine the validity of this order.
For one thing this contingent liability under the refund provisions is accumulating.
It accumulates possibly at the rate of 400 million dollars a year and if the railroads are going to have to give some or all of that back, it seems to me the sooner they know about it better.
But apart from that as it has been stated.
There have been three rate increases since this rate increase that is here involved and in the showing that the railroads made to the commission on those rate increases.
They of course assume the availability of this rate increase and the income it produces and presumably in granting relief of the commission itself assumed the same thing.
Now, again if this rate increase has to be invalidated in some way or the railroads are going to have to give back any or all of the large amounts of money involved, the sooner the railroads and I should suppose the commission know that the better so that they can decide whether they have to take any steps in view of that situation with respect to the revenue situation of the railroad.
Now, as far as the merits are concerned, we argue them in our briefs and in its reply the appellants in Alabama Power made an argument on the merits.
The appellants in the Atlantic City case have refused to argue in their briefs in this Court although we tendered the issue to them.
But they insisted that there be included in the Appendix, a memorandum that they submitted to the District Court below and that memorandum contains their arguments on the merits so they are before the Court.
Now we have discussed this matter of the merits to the commission's order in detail in our brief and I shall merely like to say this.
I think when you look at the appellants arguments and consider the nature of the proceeding was here involved which was a proceeding as I have said really is essentially devoted to the question whether these rates should be suspended for the whole seven months period.
That those arguments do not provide any basis for over turning the commissions' judgment, apart from certain procedural arguments which really relate to how the commission manages its internal business, they are simply arguments that attack the commission's judgment on the evidence on the weight it gave to conflicting evidence on the inferences and conclusions it drew from the evidence and on the wisdom of its final determination not to spend these rates for the entire seven months period.
I think the arguments that are set forth in the reply of the Alabama Power appellants indicate that they say the commission shouldn't have authorized it nationwide, that it shouldn't have used 1966 as a test year for the increase in the expenses and other arguments that kind of matters about which reasonable men may differ but there are also matters as to which the commission has an area of judgment and which its judgment I suppose will be respected unless it's shown to be arbitrary and capricious and I think when you read the commission's report in this case.
The interim report, the final report, the parent commission considered all the evidence, gave a reasoned statement for its conclusions and I think it is not impermissible for me to say at this point finally, that anyone who reads the facts that are set forth in the commission's reports in three succeeding general increase cases.
That have come along since these orders are involved.
Anyone who looks to those reports and reads the facts they will contain, they contain I think would be led to the conclusion that when the commission decided in 1968 that the railroads were in immediate and drastic need of increased freight revenue.
That experience has shown that the commission was not acting arbitrarily and unreasonably when on the basis of that conclusion.
It declined to differ or suspend this rate increase.
Justice Potter Stewart: Mr. Cox can you say off hand how many general revenue orders have there been since 1920 or whatever the beginning date was?
Mr. Hugh B. Cox: There have been I think around 15 Mr. Justice Harlan of course some of those orders have involved more than one report and are reported in more than one place because some of them went on for a time.
I once had them all on a book rack and it was a depressing sight there that many of them but I think there have been 12 or 15 of them.
Justice Potter Stewart: Do they always involve all the railroads or just -- or sometimes just a group of railroads or railroads of certain region?
Mr. Hugh B. Cox: In the cases since 1920 Mr. Justice Stewart, my present recollection is maybe a little blurred that I think they have usually involved all the railroads.
Now before 1920, my recollection is that there were some cases which involved only the Eastern Railroads, and some cases which involved only the Western Railroads but I feel thoroughly confident that in the last 20 years, they have involved all the railroads.
Now sometimes the railroads ask for different amounts increases and they may have filed different applications but when the commission gets to consider them and usually treats as one big decision.
Chief Justice Warren E. Burger: When you said in response the last 20 years, did you misspeak yourself or did you mean 1920?
Mr. Hugh B. Cox: Well I will tell you what I meant was precisely that Mr. Chief Justice, I have somewhat clear recollection of the cases since about 1950 than I have with the cases before that and I -- there may have been some cases that before that where perhaps not all the railroads were involved.
But I think since 1920 and most of them I remember they were all the railroads in the United States.
Justice Potter Stewart: Where is the Aberdeen and Rockfish railroads?
Mr. Hugh B. Cox: I thought I prepared thoroughly but I --
Chief Justice Warren E. Burger: It's not one of the large carriers.
Mr. Hugh B. Cox: It's not one of large.
Chief Justice Warren E. Burger: Thank you Mr. Cox.
Rebuttal of Charles J. Mccarthy
Mr. Charles J. Mccarthy: If the Court please, this effort to equate suspension with the order in this case is pretty far fetched.
Suspension is something an order not to suspend is an order which the commission makes without any record on a basis of a casual observation of the contentions of the parties.
Here, we have an order made after extensive hearings and on the basis of detailed findings.
That's the distinction between a suspension order and this type of order.
The suspension order is discretionary and that's the reason it's not reviewable.
Now the mere fact that an order doesn't finally fix the lawfulness of rates does not stop it from being reviewable.
In both interstate -- well, the McClain case and the Waterways case, the orders there involved did not finally fix the lawfulness of rates.
The Court commented that the rates were still subject to reparation but there was no question about them being reviewable.
Finally, I don't think I have been able to make myself clear as to the relationship between a general level of rates and a particular rate.
When the commission fixes this general level and I go back in with a complaint against a particular rate.
That general level is a standard against which my rate is measured.
I don't get a chance to litigate that question again.
And if I am raising no question as I am about how a particular rate should be related to that general level, I have nothing to go back to the commission with.
It's a waste of my time, a waste of the commission's time.
Justice Byron R. White: Is that critical to your argument?
Mr. Charles J. Mccarthy: Yes it is Your Honor.
Justice Byron R. White: Will you lose the case if you are wrong?
Mr. Charles J. Mccarthy: No Your Honor, because we have here an order modifying outstanding orders.
We have a class action on behalf of all shippers.
The railroads concede that there are such outstanding orders.
It concedes that fourth section relief is necessary.
Justice Byron R. White: Well is it critical?
Mr. Charles J. Mccarthy: Well it's -- except for that point there.
I think we can win either on the basis that we have no administrative remedy and we don't.
All we can win on the basis that there is an order setting, modifying outstanding orders and granting fourth section relief which cannot be done without a hearing.
Chief Justice Warren E. Burger: Thank you Mr. McCarthy.
The case is submitted gentlemen.