PORT OF PORTLAND v. UNITED STATES
Legal provision: Interstate Commerce, as amended
Argument of Lofton L. Tatum
Chief Justice Warren E. Burger: We will hear arguments in number 31 Port of Portland against the United States.
Mr. Tatum, you may proceed whenever you are ready.
Mr. Lofton L. Tatum: Mr. Chief Justice may it please the Court.
This case is before the Court upon appeal from a Three-Judge Court of the District of Oregon, affirming a division of Interstate Commerce Commission.
Jurisdiction of this Court is conferred by 28 U.S.C. 1253.
This case arose when two of the four railroads serving Portland filed an application with the Commission for authority to acquire control of Peninsula Terminal Company under Section 5 (2) of the Interstate Commerce Act.
The two acquiring railroads were Union Pacific and Spokane, Portland & Seattle Railway.
The latter, SP&S, at the time of the application was a subsidiary of Great Northern and Northern Pacific.
It is now a part of the Burlington Northern System under the approval granted by this Court in the Northern Lines merger.
I shall hereafter refer to them as Burlington Northern.
In their application, the acquiring railroads stated that it was anticipated that within the foreseeable future substantial new traffic and revenues would be derived from Peninsula Terminal as a result of the development of the Rivergate Industrial track by the Port of Portland.
It is thus substantial new traffic and revenues which will be generated by Rivergate that is prompted the great interest in this case.
Rivergate is the key to the public interest here.
It is an area of approximately 3,000 acres located at the confluence of the Willamette and Columbia Rivers.
We have a --
Justice Potter Stewart: This map on Page 354 of the Appendix that --
Mr. Lofton L. Tatum: That is a more --
Justice Potter Stewart: That would be helpful to me in understanding --
Mr. Lofton L. Tatum: That is a much more detailed map Your Honor.
If you would refer to the schematic which we have appended to the end of our brief, I think it will be simpler to follow than that complicated map, which you have before you.
At the end of our brief there is a simple schematic.
Rivergate is marked on this at the confluence of the Willamette and Columbia rivers.
It is owned and it is being developed by the Port of Portland for whom I am general counsel.
I am also appearing today for the Milwaukee and Southern Pacific as who are joint appellants and for the Oregon Public Utility Commissioner.
A great amount of time and money has been invested by the Port Authority in planning this modern, attractive, industrial and port complex to provide for the future economic development of the area.
Here is where all modes of transportation will meet to provide efficient and economical interchange of goods.
The port has already invested more than $5 million of public fund, and it estimates that will expend a minimum of $15 million in the full development of Rivergate.
A conservative estimate in the record of the public and private investment in this area exceeds $500 million.
With further evidence which is undisputed is that Rivergate at full development will require the handling of some 500-600 railroad cars per day.
In order to orient the Court with various railroads involved here, I would refer again to our schematic which is appended to our brief.
The Peninsula Terminal Company, the railroad in question here, is marked in yellow at the upper northern end, just south of the Columbia River.
The record shows it is a railroad of sum 3.79 miles.
Its importance is not its size but its strategic location as a gateway to Rivergate.
To the south and west, there is another Rivergate entrance which is shown as number 9 on our schematic.
There is a small mark in the one corner of north.
North is at the top of the page, Your Honor.
Number 9 is Barnes Yard which is owned by the Union Pacific, that Burlington Northern has an agreement for use of that yard and access to Rivergate over the track shown in red.
Where the track enters Rivergate, as it is shown in blue, the track has been built and is owned by the Port.
The record also shows that the railroad pattern in Rivergate will essentially be a loop system around the periphery of the entire district, with one outlet through the south in Barnes Yard which now shows in red, and the other through the northern outlet which is where the Peninsula Terminal Company acquires its importance.
To achieve with Rivergate’s goal, it is necessary that --
Unknown Speaker: I am trying to (Inaudible) on your map.
Mr. Lofton L. Tatum: Yes sir, excuse me.
Unknown Speaker: I am lost on Peninsula Terminal.
It is up here in the corner.
Mr. Lofton L. Tatum: Peninsula Terminal is marked yellow.
Unknown Speaker: Yes, I see it now.
One another question that I have interrupted you, now where is the Milwaukee to come in on this?
Mr. Lofton L. Tatum: I have discussed the Milwaukee’s entry to Portland sir but they come down the green line which is the Burlington Northern main line into Portland.
Unknown Speaker: Right.
Mr. Lofton L. Tatum: And go right by Rivergate.
Go right by this yellow line and the red line.
Unknown Speaker: And on the left they are entirely using that trackage, are they not?
Mr. Lofton L. Tatum: Yes sir.
And I come into Hoyt Yard which is mark number 3 on the map down in the lower right hand corner.
Unknown Speaker: Thank you.
Mr. Lofton L. Tatum: To achieve Rivergate’s goal, it is necessary that all modes of transportation be afforded the most modern methods of bringing goods to and from the District.
All shipping lines that serve Portland may bring their vessels to Rivergate’s docks.
All truck lines that serve Portland may bring their vehicles to their customer’s doors in Rivergate.
So, also it is our contention that the public interest requires that all four line-haul railroads serving Portland must also have direct access to Rivergate shippers and receivers.
Accordingly when Union Pacific --
Chief Justice Warren E. Burger: Could you pinpoint for me where that connection would be on your plot here?
Mr. Lofton L. Tatum: At point E, Your Honor.
Point E, which is described as a testimony of Crown Zellerbach poleyard just south of what is marked Hayden Island, is actually in Rivergate and the track will take off form there in a loop system.
There is some discussion in the record about another potential access which I will cover later in my remarks.
Chief Justice Warren E. Burger: Now would they connect on the markings which are already shown here by the yellow or does that come out with the green line which is Burlington Northern, is that right?
Mr. Lofton L. Tatum: Yes sir.
Chief Justice Warren E. Burger: And is there a line on here which shows the actual connection or --
Mr. Lofton L. Tatum: There are three lines, the red one, the green one and the yellow one, which indicate the interchange between Union Pacific, Burlington Northern and Peninsula Terminal.
There is considerable controversy in the case of whether or not mere equal ownership of Peninsula would permit Southern Pacific or Milwaukee actually to get to Peninsula.
So to be very careful, both counsel for both of those lines filed applications under Section 3 (5).
Justice Byron R. White: Now, why did Milwaukee happen to have a piece of Peninsula's order to get into the Rivergate?
Does not the right to use the SP&S trackage given access to Rivergate over Peninsula Terminal?
Mr. Lofton L. Tatum: No sir, the possession has been taken they have no rights on the jointly owned tracks --
Justice Byron R. White: Yes.
Mr. Lofton L. Tatum: -- which are those three different colors there.
Justice Byron R. White: And therefore no right to use those tracks?
Mr. Lofton L. Tatum: They therefore have no right to use those anymore than --
Justice Byron R. White: You mean under the decision, under the merger proposal, they do not have the right to come in on, say, the Burlington Northern?
Mr. Lofton L. Tatum: Well --
Justice Byron R. White: I thought from Hoyt Yard down here three -- they do not -- can they get trackage rights overBurlington Northern and come up something near to the Peninsula?
Mr. Lofton L. Tatum: I think in attempting to make our schematic simple, we may have misled.
These lines that you see marked in the different colors up there by Peninsula are actually all the joint ownership line.
They are owned jointly by Burlington Northern, Union Pacific and Peninsula or combinations of them.
So that under the language of Condition 24 of the Northern Lines which starts out to the extent that the new company is unable to do so, they will grant trackage.
They now take the possession that because Union Pacific is a partner in this, Burlington Northern does not have the right under Condition 24 of the Northern Lines to grant them access.
Justice Byron R. White: You mean from point 3 on the Burlington Northern all the way to point 8, Milwaukee has no rights now?
Mr. Lofton L. Tatum: Yes, they can go over it, Your Honor.
But the testimony is that in order to get a car form Milwaukee to Peninsula, they will have to bring that car into point 3 and then turn it over to Burlington Northern to switch it back to Peninsula Terminal.
This is one of the real arguments in this case.
Justice Byron R. White: Well that is not there. I gather that is not exactly what your opponent says so.
Mr. Lofton L. Tatum: Well --
Justice Byron R. White: Well alright go ahead.
Mr. Lofton L. Tatum: Our opponent says, it does not make any difference.
I shall not continue further with the discussion of how the case got here.
I think the Court is informed of the facts of how we are here.
When we went into the District Court with the complaint by the Port and the Public Utility Commissioner, the Southern Pacific and Milwaukee joined us.
The United States as nominal defendant filed the brief in support, saying the case should be remanded.
In this case the United States has likewise filed a brief in support of remand.
Let us turn to the Milwaukee ownership which we discussed under the Northern Lines case.
We contend that by refusing Milwaukee a part ownership in the Peninsula Terminal, the Commission has turned its back on what it said in approving the Northern Lines merger.
Namely that competition loss between Great Northern and Northern Pacific would be substantially offset by a greatly enhanced competition from Milwaukee.
And here in the very first time, this comes up in the very first context as they come into Portland, they are told you have to go right by in (Inaudible) Hoyt Yard and come back.
The entire purpose of Condition 24, as I read it in the Commission’s decision and in this Court’s decision, was to permit Milwaukee to become a line-haul competitive carrier with the new Burlington Northern replacing the Northern Pacific and Great Northern.
This was going on at exactly the same time as the Commission was handling the Great Northern merger case.
In fact, we contend, and it is set forth in very brief summary in the Justice Department's brief on Page 14, that this agreement and this acquisition of Peninsula Terminal may well have been done to thwart what was coming in Condition 24 of the Northern Lines agreement.
Justice William J. Brennan: Does condition 24 assure Milwaukee of trackage rights on that green line from 3 to 8?
Mr. Lofton L. Tatum: Yes sir.
It assures them a trackage lines from 8 --
Justice William J. Brennan: Well that was --
Mr. Lofton L. Tatum: Yes sir.
Justice William J. Brennan: Is not 3 to 8 also jointly owned by --
Mr. Lofton L. Tatum: No, there are some joint uses, but it is not jointly owned.
Justice William J. Brennan: Oh! The only one that is jointly owned is which, Just Peninsula?
Mr. Lofton L. Tatum: No, some of those three turnouts that we have by Peninsula Terminal, all of them are jointly owned, and it is because of that joint ownership that they say they can keep it up.
Let me point out that down at point 9, which is Barnes Yard which is a Union Pacific facility, in May of 1967, Exhibit 39 which is in the Appendix at Page 303, a contract was entered into between Union Pacific and Burlington Northern.
By virtue of that contract, Union Pacific permitted Burlington Northern to get into Rivergate through the south entrance through point 9, but in that they agreed that they would let no one else in unless they had the approval of the other party.
So they have effectively foreclosed Milwaukee at that point.
As a further provision in that agreement, they said if there was ever a new line which pulls off of the Burlington Northern main line and goes into Rivergate at the Northern end forgetting about Peninsula, if there is a new line that goes in there, that too will be subject to the same terms.
It will be only BN and UP and no one else can be admitted without their concurrence.
That was -- the Peninsula contract was signed in February 1967.
This agreement I have just referred to, Exhibit 39, was signed in May, 1967.
In July, 1967, they filed the petition for acquisition which is now before the Court and in November, 1967, Condition 24 was imposed in the Northern Lines -- by the ICC.
And certainly it is apparent to us that this was well in the mind of all of the parties at the time the transaction was being taken up with Peninsula Terminal.
Chief Justice Warren E. Burger: Are you saying that they are now giving effect to agreements that pre-dated the final Burlington Northern Lines merger agreement?
Mr. Lofton L. Tatum: Yes sir, and the condition, as I said earlier, starts out with the parenthetical statement to the extent that Burlington Northern or NewCo is permitted to do so, it shall permit Milwaukee in, and yet their hands in Portland have been effectively tied certainly as far as this great public industrial development at Rivergate is concerned by the restrictive agreements that they have entered into, and we contend that therefore Milwaukee in this acquisition case should be granted the right to control Peninsula or have a share in the control of Peninsula and also should have a right to get trackage rights to get in there under the Northern Lines decision.
We also feel that the public interest requires Southern Pacific to get in there so that all four major line-haul carriers will be able to serve Portland.
Unknown Speaker: Mr. Tatum, if you prevailed here, would this be a precedent with respect to any other industrial development wherever instituted?
Mr. Lofton L. Tatum: We feel that cases that we have cited in our brief and which Justices cited in theirs, that similar kind of port developments have been granted equal access by all of the line-haul carriers in there.
The Calumet Port case was one which comes to my mind immediately that was cited.
Unknown Speaker: Well suppose this was not the case here, one railroad was into the middle in creating the industrial development, would it have to share it then with everybody else?
Mr. Lofton L. Tatum: That is the circumstance that we do not have, and therefore I do not know.
This is not a railroad development; this is a public development.
The railroads just happened to go by at the time and it is only through the confusion of public money that this low-lying land is being able to be developed into this excellent port and industrial facilities, so therefore it belongs to no railroad.
This is one of the points that the Commission got off on as deciding that this was an invasion of Union Pacific in Burlington Northern’s territory.
Unknown Speaker: Let me ask on the other side of the question then.
I take it that Rivergate was very little developed if at all at the time of the Northern Lines agreement?
Mr. Lofton L. Tatum: It was just getting underway Your Honor; that is correct.
Unknown Speaker: Do you think if it had been brought along four or five years further at its development at that time, it would have been taken into consideration then in the Northern Lines development agreement?
Mr. Lofton L. Tatum: I do not know whether it would have been taken into consideration in the Northern Lines case, but I think had the Peninsula Terminal acquisition come up four or five years after the Northern Lines had been implemented, the Commission would have taken more cognizance of Rivergate and its importance than it did in its decision.
It is one of our contentions that all the Commission did was concentrate on this little 3.79 mile railroad with a declining number of cars.
I think only 2700 in 1967 the evidence here of which Southern Pacific had about 17% and Milwaukee had about 1% and the ICC said or the Commission said, well such a little railroad is this and such a small amount of traffic, let us not worry about this industrial development, and in so doing cut Milwaukee out of the single biggest industrial area that possibly could be in Portland.
Unknown Speaker: Will you then making same argument I suppose that Milwaukee and the Northern owned jointly that trackage in three days?
Mr. Lofton L. Tatum: Well --
Unknown Speaker: You would be making the same argument that it is entitled to jointly own the Peninsula?
Mr. Lofton L. Tatum: Yes sir.
It is not only its access but joint ownership enables them to participate in routes and divisions and rates which they could not do it.
They merely have to have --
Unknown Speaker: But is Peninsula not obligated as a common carrier to serve Milwaukee like any other road at the same rate?
Mr. Lofton L. Tatum: Yes sir, but this is a peculiar hybrid type of railroad and --
Unknown Speaker: So they could get in there if -- so they can get the switching service to get into Rivergate from Peninsula?
Mr. Lofton L. Tatum: Yes sir.
Unknown Speaker: At the same rates as anybody else?
Mr. Lofton L. Tatum: Yes sir.
Unknown Speaker: Well then --
Mr. Lofton L. Tatum: They can switch --
Unknown Speaker: -- what is the importance of the joint ownership?
Mr. Lofton L. Tatum: Well, they can go to Barnes --
Unknown Speaker: I know it, but what if it is passable railroad that sharing the profit.
That is the sure.
Mr. Lofton L. Tatum: They can go to Hoyt Yard and switch back to Peninsula and absorb the switching charge and lose a day as advantage over the other.
Unknown Speaker: Let us talk or let us assume that the Northern and the Milwaukee jointly owned the track in 3 to 8, then you would still be making the same argument about jointly owning.
Mr. Lofton L. Tatum: No, I will try to address myself to that.
The Peninsula Terminal Company as the record shows does not get its money by a switching charge.
There is a switching charge from point 3 to point -- to Peninsula road that is the switching charge.
But when it gets to Peninsula then it is a division rate which is a negotiated rate.
Now there is a lot of confusion in this in the Commission’s brief.
Unknown Speaker: I know but, does it not have to have the equal terms with everybody?
Mr. Lofton L. Tatum: No sir, no sir.
We cite case to you Your Honor, the L&N Railroad Company against the United States 242 U.S. 69.
We are told that a railroad in this situation does not have to treat others on the same basis as they treat their owners.
Justice Byron R. White: So I think what you are saying is that it will cost -- because the joint ownership of the Union Pacific and Northern, it may cost to Milwaukee more to get that switching service than --
Mr. Lofton L. Tatum: Yes sir.
And also joint ownership will permit every industry that locates in Rivergate and is served by Milwaukee to be an online Milwaukee industry if there is joint ownership.
Justice Byron R. White: Well we have it, but that is not -- it is only online at the sense that they jointly own another railroad company.
Mr. Lofton L. Tatum: But they are then entitled to publish their true rates, they issue the billing, it is handled as if it is their own car, and it is getting into different parts of my argument.
Justice Byron R. White: Well I am sorry.
I am sorry.
Mr. Lofton L. Tatum: That is alright Your Honor.
It will be single carrier routing.
It will be improved terminal service if they are part of the owner.
Common ownership assures the use of modern railroad technology and there will be rate benefits by them all three being common owners.
I should also like to comment on the strange procedure that Burlington Northern and Union Pacific adopted in this case.
In their brief which is field to this Court, they made a settlement offer to Milwaukee which is in the extremely strange place in the proceeding to try to make the settlement offer.
We contend that it is a last minute recognition of the fact that the Commission was wrong, when it decided there would be no detriment to the public.
This offer really does not give Milwaukee anything other than the saving of an unnecessary switch charge -- this goes to Mr. Justice White’s question -- to deliver cars to Peninsula and possibly a savings in time.
However, Burlington Northern and Union Pacific, under the offer they made, will still control Peninsula.
They can control its development as well as the development of Rivergate.
They have still been able to insert themselves between Milwaukee and Rivergate by this controlled company.
We think that this recognition of -- their own recognition certainly demands that it be remanded.
I spoke in a great deal about Milwaukee in this argument because they are in a slightly different factual situation because of the Northern Lines merger case.
But we feel the public interest equally require Southern Pacific to have access to this industrial area.
Same benefits of single routing, improved terminal service, modern technology and rate benefits would apply if the Southern Pacific was equally there.
The testimony in this case is that there is an upholding over 30-hour delay in delivering a Southern Pacific car from point 6 to point 7.
It takes them over 30 hours to traverse that 5.2 miles.
Obviously that traffic is not being handled as expeditiously as it can even on this little small volume that the Peninsula Terminal carries now.
How can they possibly handle 500-600 cars a day with delays like that?
Mr. Chief Justice, I would like to reserve the balance of my time for rebuttal.
Chief Justice Warren E. Burger: Very well.
Argument of Fritz R. Kahn
Mr. Fritz R. Kahn: Mr. Chief Justice and may it please the Court.
Peninsula is a very small terminal railroad, which runs a few hundred feet inland of the Columbia river more precisely the Oregon’s Loop in the Northern part of Portland and the distance from the one extremity and I personally prefer using the map in that Appendix 273 rather than just analyzing map in the brief of the appellants.
And the map at 273 indicates that Peninsula extends a distance of about a mile-and-a-half and from the Multnomah County fair grounds and on the East, and two a pole in debarking and storage facility of the Crown Zellerbach Corporation on the West.
If that railroad were super imposed on Pennsylvania Avenue, entire railroad would not extend from the capital to the White House.
Chief Justice Warren E. Burger: How does that have very much to do with ot when we are talking about strategic location Mr. Kahn?
Mr. Fritz R. Kahn: And I shall be getting into the alleged strategic location in just a moment Your Honor.
Justice Byron R. White: At this map here?
Mr. Fritz R. Kahn: Yes, Your Honor.
There are some 13 industries that are served by the Peninsula in a way together and generate approximately 10 cars a day.
But the interest is not so much in the Peninsula as it is presently organized in industries it presently serves, but rather the interest stands from the adjacent North Rivergate industrial and District property and the expectation that it might be developed and that Rivergate -- and that the Peninsula might be a railroad access to a portion of that property so-called North Rivergate.
Rivergate is an area of about four-and-a-half square miles situated at the confluence of the Willamette and the Columbia Rivers.
And it is indeed and being developed as a Port and industrial facility and it is expected and that upon completion it will generate approximately five million tons of railroad traffic annually acquiring the use of 100 car trains totaling about 500-600 cars a day.
In their briefs the appellants fall the Commission for seemingly ignoring in the potential growth of Rivergate and its needs for railroad service.
We respectfully submit that the Commission’s report recites the evidence, the summary of the evidence pertaining to that.
We submit that the appellants quarrel really is what the Commission is waiting of that evidence and matter clearly for the agency.
Against that evidence and there -- it was evidence of record and that the Rivergate currently is a Marshland and it is subject to flooding periodically.
Practically all of it remains to be filled graded.
Practically all that remains to be supplied with utilities, roads, piers and docks, and the completion of the plans for Rivergate is on 15 or more years distant and will require the expenditure of an excess of $500 million.
But even if we were to assume and that the Rivergate District were to be developed and were to become the source of traffic that its developers hope, is by no mean certain and that this railroad Peninsula Terminal Company will be the access into North Rivergate.
For one thing -- and Peninsula provides only one of three routes into the area.
The first route to which the North Rivergate area would be in extension of an industrial spur that is already on the Rivergate property.
The industrial spur that already serves and most of the plants presently situated there.
Justice Potter Stewart: That is owned by the Port of Portland?
Mr. Fritz R. Kahn: Yes, Your Honor.
A second alternative would be a spur to be built and directly from the main line of the Burlington.
Rustically directly into the North Rivergate property and that land for that has been acquired, much of it has been filled and graded to permit the construction.
The witnesses for the Port of Portland brotherly acknowledged that they were in these alternatives and that no selection of the route into North Rivergate had been made.
The condition of the Peninsula Terminal Company and its structural limitations suggest that it really will never become the route into North Rivergate.
Its tracks which are of relative light weight are built upon sand.
Its clearances passing as it does dust and through a trestle, carrying the main line of the Burlington Northern overhead and has a limited dimension, and finally the line itself is loaded by the heavy curvatures.
As the Peninsula line leaves the trestle beneath the -- in Burlington Northern, it crosses at great and without electric warning device under the North Portland road which connects just a few blocks away with Interstate Highway 5.
Indeed the leading witness for the Port of Portland, Dr. Grober Plymann (ph) acknowledged that Peninsula could not handle the projected traffic to and from Rivergate.
He acknowledged on cross examination that Peninsula would have to be redesigned, rebuilt, and the fact establishes that the 100 car trains, which he indicated the development of Rivergate required, could not even fit upon the tracks of the Peninsula Terminal Company.
Chief Justice Warren E. Burger: Well, I assume now you are trying to get this to a point (Inaudible), but how this relates to whether it should be owned in a limited way or a broad way.
Mr. Fritz R. Kahn: Yes.
Mr. Chief Justice the significant thing in this case really is that affected service on a terminal company does not require ownership.
An enjoined and equal ownership of a terminal company has never been required to enable connecting trunk line railroads ineffectively and to serve industries upon that terminal company.
Just within the Portland area, and I would like to at this point refer the Court into the map which is at Appendix 355.
Unknown Speaker: You are talking about the stock ownership?
Mr. Fritz R. Kahn: Stock ownership is not required to permit effective service upon a terminal company.
Unknown Speaker: The Commission went further than that on its decision.
Mr. Fritz R. Kahn: In this case Your Honor it simply held that Southern Pacific and Milwaukee should not be included as equal owners together with the Burlington Northern and the Union Pacific.
Unknown Speaker: Only the stock ownership is involved?
Mr. Fritz R. Kahn: That is correct Your Honor, yes sir, right.
There are two other terminal companies in the Portland area.
On the west side of the Willamette River, there is the Portland Terminal Company which is owned jointly by the Southern Pacific, Burlington Northern and Union Pacific.
And on the other side of the river crossing the steel bridge and going somewhat south on the east side of the Willamette River is another terminal company, the Portland Traction Company which is owned only by the Southern Pacific and the Union Pacific.
Now there is not the slightest suggestion in this case that these terminal companies performed any less effectively for the other trunk line railroads in reaching Portland than they do for their owners.
This comes about, because the trunk line railroads serving Portland to get in cooperation with the terminal railroads have entered into every term a reciprocal switching arrangement.
Under the reciprocal switching arrangement in Portland which is not at all unlike those that exist at most major railroad terminals.
The cars of any one railroad can reach the industries of all of them upon the line-haul rate and with the switching charges being absorbed by the railroads not being added as an added burden upon the shippers.
Unknown Speaker: What about the argument that held that it is not so it is, but has to be in agreement upon a division first.
Mr. Fritz R. Kahn: I beg to differ with the counsel on the other side.
We respectfully submit that the Milwaukee and the Southern Pacific stand competitively, and these would be shippers in trying to reach Portland, trying to ship from Portland, exactly as do the Burlington Northern and the Union Pacific.
The situation will be --
Chief Justice Warren E. Burger: What you are saying is they are getting exercised over nothing here.
Mr. Fritz R. Kahn: I am afraid so Your Honor.
Chief Justice Warren E. Burger: Well, was that a finding?
Mr. Fritz R. Kahn: In the finding of the Commission it was expressed in terms of no showing really having been made in any advantages, and they might float to the Southern Pacific in the Milwaukee as a result of four part ownership.
Justice Harry A. Blackmun: Do you have any comment about the delay 24 hours or 30 hours from one point to the other?
Mr. Fritz R. Kahn: Yes.
This comes about as follows: The lines that the Southern Pacific terminate in East Portland, some distance from the Peninsula Terminal Company for its cars to reach the Peninsula Terminal Company requires that the Southern Pacific turn over its cars to the Union Pacific, and that transfer occurs at the so-called Albina Yard.
The cars as they are turned over by the Southern Pacific to the Union Pacific include cars destined to other points and other industries on the Union Pacific Lines, they are mingled in the transfer trains with other Union Pacific cars.
The train then proceeds to affect the deliveries to the various industries along the line goes to the Canton Yard and eventually does wind up at Peninsula.
Now at such times as the Southern Pacific tenders sufficient traffic to justify it and the Union Pacific is perfectly delighted that they could train all through and affect that connection more rapidly.
Finally I submit Mr. Justice Blackmun now there is simply was no complaint by any shipper that's on the Peninsula under the service currently being received.
I started to say that the Peninsula at its dealings with the trunk-line railroads reaching Portland will be no different following the ownership by the Burlington Northern and the Union Pacific than obtains presently on the Portland Traction Company or the Portland Terminal Company.
And the Southern Pacific and the Milwaukee no less and the Burlington Northern and the Union Pacific they will be able to publish single line rates turned from Portland, and under such rates render service to industries on the Peninsula.
In fact, they had done so as I hope to develop later on Southern Pacific has participated to the extent that 20% of all Peninsula’s traffic.
I think that the appellant railroads misconceived in what are the rights and the opportunities afforded to the Union Pacific and the Burlington Northern as a result of their ownership of the Peninsula Terminal Company.
And the support of the public bodies I think is equally incorrectly premised.
First, they contend that as owners of the Peninsula, Burlington Northern and Union Pacific and will be able to operate their trains on the Peninsula tracks, thereby avoiding a time consuming interchange and their switch of equipment.
We submit they are wrong.
The record shows Peninsula Terminal Company will remain a separate company.
That in order for the Union Pacific and the Burlington Northern to get on the tracks of the Peninsula and they will need to file an application with the Interstate Commerce Commission for trackage rights under Section 5 (2) of the Interstate Commerce Act and protestants will have an opportunity to be heard at that time.
Justice Harry A. Blackmun: Currently the Department of Justice is agreed with your --
Mr. Fritz R. Kahn: I think the Department of Justice with all due respect did not understand as a result of this transaction the Burlington Northern and the Union Pacific were not accorded trackage rights upon the Peninsula trackage.
That is correct sir Your Honor.
Justice Harry A. Blackmun: They would have to get the stock ownership to get trackage right?
Mr. Fritz R. Kahn: No sir.
The trackage --
Justice Harry A. Blackmun: Absent the bilateral agreement?
Mr. Fritz R. Kahn: Conceivably even on the absence of the acquiescence of the owning road, another road can acquire trackage rights through authorization of the Interstate Commerce Commission.
Justice Potter Stewart: Then are you saying that stock ownership does not automatically give them those trackage rights?
Mr. Fritz R. Kahn: That is correct Your Honor.
Justice Potter Stewart: And that you can acquire those in a separate ICC proceeding?
Mr. Fritz R. Kahn: Yes sir.
Justice Potter Stewart: Under Section 5 (2) or whatever it is.
Mr. Fritz R. Kahn: Yes sir, right.
Justice Potter Stewart: Even though they do solely own.
Mr. Fritz R. Kahn: That is correct sir.
Justice Potter Stewart: They do not get trackage rights because it is a separate corporation, am I right?
Mr. Fritz R. Kahn: Yes sir.
Justice Potter Stewart: Is that what you are saying?
Mr. Fritz R. Kahn: That is it exactly.
Justice Potter Stewart: And though Burlington Northern, Union pacific will jointly own Peninsula, they will not be able to operate on the Peninsula tracks because they will not have gotten trackage rights.
Chief Justice Warren E. Burger: It means are you saying that they must apply to the ICC just as so they were strangers in the same way as the Southern Pacific and Milwaukee?
Mr. Fritz R. Kahn: Yes Mr. Chief Justice.
They would indeed.
Chief Justice Warren E. Burger: Then they would appear to be exercised over nothing.
Mr. Fritz R. Kahn: I am afraid so.
Justice Byron R. White: Yes, but if the Union Pacific and the Burlington Northern apply for the trackage rights, it maybe the Peninsula's incline to oppose it during --
Mr. Fritz R. Kahn: Oh! [Laughter] I suspect that is right.
Justice Byron R. White: And if that is right too, I gather that if the Milwaukee applies for the trackage rights, it may well be that Peninsula will oppose it.
Mr. Fritz R. Kahn: Right and I think in the --
Justice Byron R. White: (Inaudible)
Mr. Fritz R. Kahn: I think the record shows Mr. Justice White that --
Justice Byron R. White: Maybe and may not be my question in light of Condition 24.
Mr. Fritz R. Kahn: Condition 24 --
Justice Byron R. White: I mean is that not intended to get Milwaukee into this port initially?
Mr. Fritz R. Kahn: Milwaukee is there.
Its trains run daily into the Portland.
Justice Byron R. White: Yeah, but if they cut out -- if they were not allowed rights over Peninsula tracks, speaking for that of the Burlington Northern and Union Pacific, would that not be questionable under Condition 24?
Mr. Fritz R. Kahn: Very possibly and in fact if the circumstance ever arose the Commission would be receptive into reopening the Northern Lines case.
It is expressly reserved that in this report, in the report in order.
I start to say that a second advantage that the appellant’s claim, that the Burlington Northern Union Pacific will have through their ownership of Peninsula, is that somehow Peninsula will accord them more favorable rates and more favorable divisions, but I think as Mr. Justice White I believe it was pointed out, Peninsula will remain in a separate railroad.
It is subject to all the provisions of the Interstate Commerce Act and the Commission has many times held and we have discussed that fully at Page 23 of our Brief that a terminal railroad simply cannot, under Section 3 (4) of the Interstate Commerce Act, assess one connecting carrier on higher charge than another for like services.
And finally with respect to the suggestion and that somehow Burlington Northern and Union Pacific as owners of the Peninsula railroad will be able to more favorably allocate traffic, I beg to invite the Court’s attention to the fact that the Commission attached conditions, conditions which require that the past policy of neutrality in the allocation of traffic, a policy of neutrality to which the new owners have committed themselves must be observed.
These conditions are enforceable and if need be they can be stricken by the Commission.
Chief Justice Warren E. Burger: If this is the law of the situation, the legal posture of these parties by that they need any agreement about neutrality, if the statute requires them to give the same service to strangers as to their corporate parents?
Mr. Fritz R. Kahn: This was just to pin it down further Mr. Chief Justice.
They need to publish --
Chief Justice Warren E. Burger: That did not satisfy your opinion.
Mr. Fritz R. Kahn: I doubt very much that they are that much concerned about the allocation of traffic.
I think ultimately this comes down to the price at which the Milwaukee gets onto the Peninsula.
This thing as we see it is the essence of the case.
Unknown Speaker: Does it pay the switching charges?
Mr. Fritz R. Kahn: It pays the switching -- it does not pay a switching charge to reach the interchange tracks.
That work is being done for the Milwaukee by the Burlington Northern under contractual arrangement that they entered into.
It is a so called injoint facility and the contract charge is considerably less than the switch charge and of course as Mr. Tatum has indicated the Southern Pacific and the Union Pacific have agreed, have offered to permit the cars to go directly onto the interchange tracks up, so that a direct physical connection with Peninsula can be made under a similar joint facility contract arrangement.
Justice Harry A. Blackmun: Mr. Kahn this comes down to whether -- how much it is going to cost Milwaukee to get on the Peninsula and is related to what is going to cost Burlington and the other one.
Mr. Fritz R. Kahn: Yes.
Justice Harry A. Blackmun: Now what is answer, what is it?
Mr. Fritz R. Kahn: A share of going to Peninsula approximately $30 per car is identical.
Justice Harry A. Blackmun: For everyone?
Mr. Fritz R. Kahn: Everyone.
Justice Harry A. Blackmun: Well, then the Commission grants (Inaudible).
Mr. Fritz R. Kahn: Yes sir.
Justice Harry A. Blackmun: Well of course there is an interest that Peninsula is going to be a profitable railroad.
Mr. Fritz R. Kahn: There is no --
Justice Harry A. Blackmun: Well, let us assume it were -- I suppose Milwaukee would have an interest in carrying those profits, they may not have much to do with serving this Rivergate area but it certainly would be an advantage.
Mr. Fritz R. Kahn: I do not think the case was possible for the commission or is it being presented to this Court in terms of deriving an ownership profit from the railroad.
Well, I think that the real concern is whether Milwaukee and the Southern Pacific can reach the Peninsula industries hopefully to develop Rivergate upon equally competitive, equal competitive terms.
Justice Byron R. White: What was the Commission's approach here?
This was an agreement that had to be approved by the Commission.
Mr. Fritz R. Kahn: And the inclusion of the Milwaukee --
Justice Byron R. White: No I mean the purchase of the Peninsula by the two railroads.
Mr. Fritz R. Kahn: Yes sir.
Justice Byron R. White: Now is it Commission’s approach that well we have to approve that unless there is something illegal about it?
Mr. Fritz R. Kahn: No sir.
Justice Byron R. White: What would contrary to the public interest in letting the Milwaukee have a share?
Mr. Fritz R. Kahn: Oh!
Justice Byron R. White: What was the reason the Commission decided against the Milwaukee?
Mr. Fritz R. Kahn: The articulated reason of the Commission’s report -- the Commission I think beginning at Page 31 and it was certainly a fact that in Peninsula and the Union Pacific in Burlington Northern had developed this area and they should not be deprived of the fruits of their labors if you will.
Justice Byron R. White: And the profits?
Mr. Fritz R. Kahn: Yes sir.
Justice Byron R. White: Well the profits are right but --
Mr. Fritz R. Kahn: Profits from the operations of the Peninsula.
But certainly --
Justice Byron R. White: And I gather though that you were telling there are not going to be profits for Peninsula anyway, and that it is a swampy railroad that cannot carry any traffic anyway.
Mr. Fritz R. Kahn: I would not have invested on this but the Union Pacific and Burlington Northern felt as they say.
Unknown Speaker: They must have had a reason.
It was only the profits they might realized?
Is that the reason they want to invest?
Mr. Fritz R. Kahn: That and of course in the event that the railroad were rebuilt, were redesigned and did indeed become the access to Rivergate, I am sure that Burlington Northern and Northern Pacific would want its share of the traffic.
Justice Byron R. White: Yes, but they also wanted to be in the position to control whether or not Peninsula is going to rebuild or expand.
Mr. Fritz R. Kahn: And that would be one of their great opportunities as owners.
Justice Byron R. White: Yeah, but that is just all the way another possible entry into Rivergate.
Mr. Fritz R. Kahn: But the selection of the two other alternatives would be beyond their control.
Justice Byron R. White: Well --
Mr. Fritz R. Kahn: And the loop --
Justice Byron R. White: That maybe true but this is still of third entry that they can decide whether or not to spend their money to make Peninsula an effective entry way or gateway of the Rivergate.
Mr. Fritz R. Kahn: Yes Your Honor.
Justice Byron R. White: Well now, why should Milwaukee not have a share of that decision making?
Justice William J. Brennan: With another way, why is it in the public interest that can be monopoly in just in the hands of two connecting carriers?
Mr. Fritz R. Kahn: The response in the Commission was that the close working relationship between the Peninsula, Burlington Northern and Union Pacific extending back to the turn of this entry entitles these carriers in the area to the present and potential traffic so long as the Milwaukee and the Southern Pacific were not disadvantaged and they are competing for the traffic in and out of the Peninsula industries or the Rivergate industry.
Justice William J. Brennan: Just as Justice Douglas suggesting, to extend it as whether it is in the public interest not whether they are entitled to something so long as others are not disadvantaged.
Mr. Fritz R. Kahn: That is Right.
The Commission viewed it in terms of the national transportation policy and assuring that in Peninsula the railroads connecting whether they will remain viable industries, railroads.
Chief Justice Warren E. Burger: Well, the details of the Northern Lines merger are certainly not (Inaudible) right now, but Milwaukee of course was under appellate (ph) was very much concerned about the great manufacturers including things just like this.
Their oppositions finally, as I recall, drawn away by the conditions including particularly Condition 24.
Is this not generally within the reach of the time or the thing that was contemplated to reassure Milwaukee?
Mr. Fritz R. Kahn: The promise of the Northern Lines case made to the Milwaukee, made to this Court, we submit, has been kept and Milwaukee is on Portland, it is in Portland as an effective competitor.
It can compete for traffic, turn from Peninsula on its local rates and on rates that are a little higher than the rates of the Burlington Northern and the Union Pacific.
That promise has been kept and the ownership of Peninsula by two of these roads in no way will diminish Milwaukee’s opportunity.
Justice William J. Brennan: Any reasons, any idea why the District Court did not write an opinion in this case?
Mr. Fritz R. Kahn: None Your Honor.
With respect to Mr. Tatum’s reference and to late Calumet Harbor case and in the proceedings of the Commission where it has permitted --
Justice William J. Brennan: Is that happened during (Inaudible)?
Mr. Fritz R. Kahn: The no opinions?
Justice William J. Brennan: Yes, the three-judge courts?
Mr. Fritz R. Kahn: Hopefully not too often Mr. Justice Brennan.
Justice William J. Brennan: Well, I suppose that those opinions contemplate in way it shall be and save us from trouble of having to do everything that three-judge court should have done.
Mr. Fritz R. Kahn: I was going to say that the Calumet Harbor case that is known before you is, and Illinois Central versus Norfolk & Western case 385 U.S. 57, is distinguishable in that and there as this Court noted, one trunk line railroad actually operated into the port area under consideration and all other trunk line railroads are seeking to serve that Port had to depend on the facility of that one railroad.
That situation does not here obtain.
The Burlington Northern and Union Pacific will not operate on the tracks of the Peninsula.
Their cars just as the cars of the Milwaukee and the Southern Pacific will need to be interchanged to switch into the Peninsula and the solicitation efforts of the four railroads each will stand on equal footing.
Southern Pacific as I indicated earlier therefore has participated in 20% of the traffic to and from Peninsula.
Even it was a disadvantage of its lines terminating 5-6 miles from Peninsula at East Portland and it is being dependent on intervening movement by the Union Pacific or the Burlington Northern to reach the Peninsula industries.0
I think the hard facts of this case show that we have a little railroad with light traffic and little prospect for great expansion and the Commission on balance determined that there simply were not sufficient advantages in a four part ownership to be able to find and that inclusion of the Milwaukee and the Southern Pacific would be consistent with the public interest.
Chief Justice Warren E. Burger: What would be bad about -- what are the negatives on or ownership as against to -- just from the public interest standpoint, forget about the parties?
Mr. Fritz R. Kahn: Certainly as the applications were postured Mr. Chief Justice such ownership included the right to operate and of course and that was part of the application and you have decided disadvantages of congestion and the disruption of the operations of that small railroad.
Chief Justice Warren E. Burger: Well when you say congestion, do you mean that the corporate owners are going to get preference?
Mr. Fritz R. Kahn: No, I meant by that Mr. Chief Justice that the track simply is not incapable of sustaining the operations of four railroads.
Chief Justice Warren E. Burger: Mr. Tatum you have five minutes left.
Rebuttal of Lofton L. Tatum
Mr. Lofton L. Tatum: Mr. Chief Justice and may it please the Court.
I will just very briefly answer a few comments.
I referred the Court to take the time we have allotted to our brief and the Justice Department brief which points out what the Commission did and did not find as contrasted to what have the Commission now argues before this Court.
They have made no findings similar to what is being argued here today and I commend our briefs to you on that point.
Counsel has made much in his brief and much in his argument of matters that are entirely outside the record in this case.
He spends a great deal of time in his brief and in his argument on the reciprocal switching arrangement which was not entered into at all, before this case was decided and on its way up here.
So how can the Commission have taken into account the reciprocal switching arrangement when it was not even entered into.
I am also advised by a counsel for Milwaukee that my statement that I made on Peninsula and insisting upon the division rates is absolutely accurate.
And it has had great deal of difficulty in publishing these rates upon its entry to Portland that is outside the record.
But we have been arguing outside the record as counsel has begun.
Unknown Speaker: Was there oral argument before the District Court?
Mr. Lofton L. Tatum: Yes sir there was.
Unknown Speaker: Any reasons why they did not write an opinion?
Mr. Lofton L. Tatum: None that I know of sir.
Chief Justice Warren E. Burger: May I inquire, how long the case was before those three judges, how much time did you spend actually in the hearing?
Mr. Lofton L. Tatum: We must spend a couple of hours Your Honor.
We were each granted a half an hour and I took my full time and Mr. Shapiro of the Department of Justice was granted about the same time.
The Commission and Union Pacific each presented arguments and we all ran over our allotted 30 minutes, I think we must have spent close to two hours in arguing.
Justice Byron R. White: Did anyone ask to three-judge court if they came down with that order for re-hearing in an opinion or something?
Mr. Lofton L. Tatum: No sir.
I have practiced before that Court Your Honor.[Laughter]
Justice Byron R. White: And I gather that two of them are retired already.
Mr. Lofton L. Tatum: Judge Kilkenny was the Circuit Judge assigned to that case.
He has just taken retirement within the last 30 days.
Judge Stolman (ph) was Chief Judge of the Oregon Court and he has gone to Senior Judge Status within the last 30 days.
Chief Justice Warren E. Burger: But they are still as available as they ever were?
Mr. Lofton L. Tatum: Yes sir, yes sir, they are still in Court.
Our real summary of this case Your Honor, gentlemen, is that the real issue in this case is not the right of the railroads to serve.
The real issue, as we see it, is the right of the public to be served in this great Rivergate area.
Chief Justice Warren E. Burger: Thank you Mr. Tatum, Mr. Kahn.
The case is submitted.