Motion to Affirm — Maintenance Employes v. United States

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INDEX

Page

| ERE Ge ba ee Uri a ert ey eee et ee ee l

LER ee ne Se rere Pate Pres Pe reer Te ey 7

EPP eEy ree ee ba ewiasees oo SEER ET ET ERS 22

CITATIONS —

Cases: aad

Alleghany Corp. v. Breswick & Co., 352 U.S. 151....... 8

Alton R. Co. v. United States, 315 U.S. 15............ 11

Baltimore Transfer Co. v. interstate Commerce Commis- :

sion, 114 F. Supp. 558, aff'd mem., 346 U.S. 890...... 8

Canadian Pacific Railway Company v. United States,

oe 2 Se) Sr Serre eer ere ee 12,17, 22

Chicago, St. P., M. & O. R. Co. v. United States, 322

ME Aa seks eh ath Uucus Pasaeks Map wd Ra seeees fue 11

Communications Comm'n v. WJR, 337 US. 265....... 18

Detroit, T. & I. R. Co. Control, 275 1.C.C. 455........ 17

Bie B, Co. Masrger, StS BCC We ec ooo vb s te cecyce ss 13

Federal Comm'n v. Pottsville Broadcasting Co., 309 U.S.

BERR ER Rg apie ten RE GAA 1p ae ea a eee ty ae 18

Herrin Transp. Co. v. United States, 108 F. Supp. 89,

OE I ee A er ih ins wiv dccolncweeee ss 8

Maintenance of Way Employes v. United States, 366 U.S.

RR RRRRE TSE Ramin er sear age wy Pamper = pt Tem eI Ara 8, 13, 21

Marin, County of v. United Stdtes, 356 U.S. 412....... 8, 16

McLean Trucking Co. vo United States, 321 U.S. 67.. a

Minneapolis & St. Lows R. Co. v. United States, 361

ce tare is Sadik Sb winine Chis SO ee ee KOO oe 8, 21

Missouri Pac. R. Co. v. United States, 4 F. Supp. 449,

ee Se Ae, Rh oa os ae eee va hee ona wee ees 8,107

M. & M. Transportation Company v. United States, 128

F. Supp. 296, aff’d mem., 350 U.S, 857.............. s

Nashville, City of, Tennessee v. United States, 155 F.

Supp. 98, aff’d mem., 355 U.S. 63.................. 7-8

New York, C. & St. L. R. Co. v. United States, 95 F.

Supp. 811..... PE ee COLLET PEP Ore ee TESTES 12,17

N. Y. Central Securities Co. v. United States, 287 US.

BD GAR Ad steer V eek aris cant Oteaburesoheercecas 21,22

Cases—Continued

Power Reactor Co. v. Electricians, 367 US. 396........ 21

Railway Labor Association vy. United States, 399 U.S. 142 8

« St. Joe Paper Co. v. Atl. Coast Line R. Co., 347 US. 298 = 17

Schwabacher v. United States, 334 US. 182........... 17

Spokane International R. Co. Control, 295 1.C.C. 425.. 17

United States v. Capital Transit Co., 338 U.S. 286..... 9

United States v. Carolina Freight Carriers, 315 US.475 = I

United States v. Lowden, 308 US. 225.........-++005 21,22

United States v. Tucker Truck Lines, 344 US. 33...... 9

Miscellaneous:

Hearings on 8. 3067 Before a Subcommittee of the Senate

Committee on the Judiciary, 87th Cong., 2d Sess.

RE calanoid ng 20

Report of the Senate ‘Subcommittee on Antitrust and

Monopoly on The Railroad Merger Problem, 88th

Se I CD oo veh ovdensessintcnnacdeces 20

Inthe Supreme Court of the United States

Ocroper TerM, 1963

Nos. 510 & 511

BrorHERHOCD OF MAINTENANCE OF Way EMPLOYEs,

ET AL., APPELLANTS

v.

Unrrep STATES OF AMERICA AND INTERSTATE COMMERCE

COM MISSION, ET AL.

BROTHERHOOD OF RAILWAY AND STEAMSHIP CLERKS,

Freight Hanpiers, Express aND STATION EMPLOYEsS,

ET AL, APPELLANTS i

UnNItrep STATES OF AMERICA AND INTERSTATE COMMERCE

COMMISSION, ET AL.

ON APPEAL FROM THE UNITED STATES DISTRICT COURT FOR

THE EASTERN DISTRICT OF MICHIGAN, SOUTHERN ‘DIVISION

MOTION TO AFFIRM

Pursuant to Rule 16, paragraph 1(c) of the Revised

Rules of Ahis Court, the Interestate Commerce Com-

mission moves that the judgment of the district court

be affirmed.

STATEMENT

These are direct appeals, by organizations represent-

ing railr ad employees, from the final judgment of the

three-judge district court dismissing their complaints

(1)

2

seeking to set aside the order of the Commission ap-

proving, subject to specified conditions, the application

of The Chesapeake and Ohio Railway Company to ae-

quire control through stock ownership of the Baltimore

and Ohio Railroad Company.

The application, filed with the Commission on June

14, 1960, was opposed by, among others, The New York

Central Railroad Company, which filed rival applica-

tions to acquire control of B & O or, in the alternative,

- to participate with C & O in the joint control of B & O.

The several applications were consolidated for hearing,

the hearings lasting 37 days and consuming 5,686 pages

of transcripts, and throughout the hearings Central

remained an active opponent of C & O control of B & O.

Additionally, the United States Department of Jus-

tice, the States of Massachusetts, Michigan, New York

and Ohio, the Maryland Port Authority, cities such as

Battle Creek, Mich., Cleveland, Ohio, Erie, Pa., Evans-

ville, Ind., and New York, N. Y., dozens of shippers.

aud the Chicago and Eastern Illinois Railroad Com-

pany, Boston and Maine Railroad Company. New York,

New Haven and Hartford Railroad Company and The

Pittsburgh and Lake Erie Railroad Company, as well

as the B & O and Central, intervened and participated

in the proceedings, as did the Railway Labor Execu-

tives’ Association, one of the appellants herein.

Following the submission of briefs, the examiner's

repor. and recommended order conditionally approving

* Central withdrew from ihe proceeding after the hearings were

completed. The statement by the appellants in JS. No. 531, p. 14,

that as a result “the hearing, and in effect the record. collapsed,”

is erroneous.

3

the applications, exceptions and replies, and while the

matter was pending for decision before the Commission,

The Delaware and Hudson Company and The Delaware

and Hudson Railroad Corporation, neither of which

had been a party to the proceedings, on August 31,

1962, petitioned the Commission to consolidate the

C & O application proceedings for decision with two

merger proceedings instituted in the interim, Finance

Docket No. 21510, et al., Norfolk & Western Ry. Co.

and New York, C. & St. L. R. Co.-Merger, and related

cases (the N & W-Nickel Plate merger case), and

Finance Docket Nos. 21989 and 21990, Pennsylvania

R. Co.—Merger—New York Central R. Co. (the PRR-

Central merger case). In the former proceedings, the

hearings had been completed and an examiner’s report

and recommended order awaited, which report and

~ recommended order subsequently were served April 17,

1963, and in the latter proceedings, the hearings were

in progress, as they continued to be, with intervening

recesses, until October 2, 1963. The consolidation was

urged so that ‘‘the most soundly conceived alignment

of all the various railroads in the East will be accom-

plished”’ and was supported in principle by the Depart-

ment of Justice, the Railway Labor Executives’ Asso-

ciation and others. On October 24, 1962, the day fol-

lowing oral argument on the merits of the C & O's

application, the entire Commission heard oral argu-

ment on the proposal forthe consolidation of the cases.

The Commission entered its report and order on

December 17, 1962. It said that it did not appear that

the C & O's acquisition of control of the B & O would

*)

4

result in any undue diversion of traffic or otherwise

injure any railroad and that any benefits which might

be expected from the joint consideration of the three

cases would be more than offset by the harm to the

B & O, and ultimately the public, that the attendant

delay in passing upon the C & O’s application would

occasion. 317 L.C.C. 265. Accordingly, the Commission

denied the petition for consolidation, but without preju-

dice as to whether the N & W-Nickel Plate and PRR-

Central merger cases should be consolidated or jointly

considered at some later date. 317 L.C.C. 266.

Turning to the merits of the C & O's application, the

Commission found that the physical plant and rolling

stock of the B & O had greatly deteriorated, and that

the requisite replacements and improvements were be-

yond the means of the B & O to attain by itself. 317

1.C.C, 275, 279, 290-91. It found that the C & O had

the financial ability to aid B & O, as it was prepared

to do, and that the affiliation would have no material

adverse effect upon any other railroads. 317 I.C.C.

282, 290-91. Subject to conditions requiring the main-

tenance of existing routes and channels of trade and

conditions to protect the interests of employees of the

two railroads who otherwise might be prejudiced by

the transaction, the Commission concluded that ap-

proval of the C & O’s application would strengthen

the B & O, enhance its ability economically and effi-

ciently to meet the needs of the populous and indus-

trially significant portion of the Nation which it serves

and be beneficial to the public. 317 I.C.C. 291, 293.

Suit to set aside the Commission’: order was brought

5

January 25, 1963, by the Brotherhood of Maintenance

of Way Employes, one of the constituent organizations

in the Railway Labor Executives’ Association, which

was permitted to intervene as a plaintiff a few days

later. Three other constituent organizations, the

Brotherhood of Railway and Steamship Clerks, Freight

Handlers, Express and Station Employees, The Inter-

national Association of Machinists and the Brotherhood

of Railway Carmen of America, subsequently filed neir

separate complaint in intervention on April 25, 1963.

The Department of Justice answered the original

complaint, neither admitting nor denying its allega-

tions, except insofar as the Commission’s report was

alleged to have been unsupported by adequate findings

upon substantial evidence of the effect of the proposed

transaction upon other railroads and ‘upon the struc-

ture of the railroad industry in ,the Eastern United

States.”’

The district court noted, however, that the Depart-

ment’s briefs and arguments made clear that in urging

the remand of the case to the Commission for further

proceedings, the Department intended ‘‘that such fur-

ther proceedings include the consolidation of the C & O

application with two railroad merger applications now

before the Commission, and to withhold decision of the

C & O matter until conclusion of the hearings on such

other applications, to the end that a contemporaneous

decision might be made of all the pending contre] and

merger applications which involve the eastern rail-

roads.’ J.S. No. 510, pp. 2a-3a; J.S. No. 511, pp. 26-27.

Since the entry of the district court’s judgment, the

6

United States has reappraised its position on the Com-

mission’s order, and it now offers no opposition to it.

In his.prepared statement of October 1, 1963, in the

PRR-Central merger application hearing, Assistant

Attorney General William H. Orrick, Jr., declared,

‘The United States supported ‘® labor union appeal

of the I.C.C. order approving C & O’s acquisition of

control of B & O in the District Court, because of con-

cern that the Commission had not adequately analyzed

the impact of C&O-B&0 affiliation upon other railroads.

On the basis of its study [of pending merger proposals],

the United States now believes that the acquisition of

control is in the public interest, and, if the case were

remanded to the Commission, the United States would

not oppose approval of the transaction.’’* The with-

drawal of the Department’s opposition is reflective of

the conclusion of the President’s Interagency Commit-

tee on Transport Mergers, as expressed October 14,

1963, by its Chairman, Undersecretary of Commerce

for Transportation Clarence D. Martin, Jr., who said

in a prepared statement, *‘ We believe the Chesapeake

and Qhio-Baltimore and Ohio combination to be in the

public interest, particularly in the light of a stipulation

allowing the re-opening of the case should an undue

diversion of traffic occur.’’*

*Concurrently, the Department announced that it had entered

into a stipulation with the C&O and B&O in substance providing

that the application proceedings may be reopened for the imposition

of further conditions in the event the control shall be found by the

Commission to have resulted in undue diversion of traffic. See

p. 12, infra

3 Remarks before Board of Directors, Transportation Association

of America, Ponte Vedra Beach, Florida.

7

The district court’s decision reveals a thoroughgoing

canvass of the voluminous record developed before the

Commission and a careful review of the Commission’s

report and order, in the light of the applicable statutory

standards. Without reiterating the district court’s seri-

atim consideration of the several contentions advanced

by the plaintiffs, it suffices here to observe that the dis-

trict court determined that the Commission’s findings

sufficiently exposed its view of the evidence and the

basis upon which it reached its u'timate conclusion that

C & O’s‘acquisition of control of B & O was warranted

by the statutory criteria and the evidence adduced at

the extended hearings. J.S. No. 510, pp. 12a-13a; J.S8.

No. 511, p. 36. Moreover, the district court stated that

it was satisfied that the Commission committed no

errors of law, that its actions were not arbitrary, ¢a-

pricious or in abuse of discretion and that its findings

were supported by substantial evidence on the whole

record. J.S. No. 519, pp. 19a-20a; J.S. No. 511, p. 42.

ARGUMENT

These appeals present no substantial question war-

ranting plenary consideration by this Court. Whether

it should authorize one carrier’s acquisition of control

of another as being consistent with the publie interest

is a matter of regulatory policy peculiarly within the

province of the Commission. Since, as the district

court determined, the order of the Commission came

within its sftutory authdrity and was based upon ade-

quate findings supported by substantial evidence, there

is no oeeasion for further hearing by this Court. City

of Nashville, Tennessee v. United States, 155 F. Supp.

4

*.

8

98, 103-104 (M.D. Tenn. 1957), aff’d mem. 355 U.S. 63

(1957); M. & M. Transportation Company v. United

States, 128 F. Supp, 296, 298-99 (D. Mass. 1955), aff’d

mem., 350 U.S! 857 ( 1955) ; Baltimore Transfer Co. v.

Interstate Commerce Commission, 114 F. Supp. 558,

563-64 (D. Md. 1953) ; aff’d mem., 346 U.S. 890 (1953) ;

Herrin Transp. Co. v. United States, 108 F. Supp. 89,

93 (E.D. La. 1952), aff’d mem., 344 U.S. 925 (1953) ;

Missouri Pac. R. Co. vy. United States, 4 F. Supp. 449,

452 (E.D. Ky. 1933), aff’d mem., 293 U.S. 524 (1934).

The appellants raise no question as to the sufficiency

of the conditions imposed by the Commission for the

protection of their members or other employees of C&O

and B&O who may be adversely affected by the trans-

action.* Cf. Maintenance of Way Employes v. United

States, 366 U.S. 169 (1961) ; Railway Labor Association

Vv. United States, 399 U.S, 142 (1950). Nor do they

assert that the considered transaction poses an irrecon-

cilable conflict with the principles of the antitrust laws,

cf., Minneapolis & St. Louis R. Co. vy. United States,

361 U.S. 173 (1959) ; McLean Trucking Co. v. United

Stutes, 321 U.S. 67 (1944), or that it lay beyond the

scope of the Commission’s jurisdiction to approve. Cf.,

County of Marin vy. United States, 356 U.S. 412 (1958) ;

Alleghany Corp, y. Breswick & Co., 353 U.S. 151 (1957).

As the district court incisively observed, J.S. No. 510,

p. 7a; J.S. No. 511, pp. 30-31:

The primary question before us is whether the

findings of the Commission are supported by sub-

* The alleged error of the Commission in not imposing conditions

affording “protection to employees of any but the carriers directly

9

stantial evidence on the whole record. As discussed

more fully below, we hold that they are.

1. The record evidence of the distress of the B & O

was overwhelming, and it stood largely unrefuted.

Operating personnel of both the B & O and C & O and

an independent consulting engineer testified at great

length on the financially-compelled deferred mainte-

nance on the lines of the B & O and of the manifest

needs for replacing rails, cross-ties and ballast merely

_ to permit the safe operation of its trains. They testi-

fied also with respect to B & O’s diminishing fleet of

serviceable freight cars and of the need for enlarging

tunne} clearances, installing effective signaling systems

and otherwise modernizing the piant and facilitics of

the B & O to enable it efficiently and economically to

meet the needs of the shipping public, in competition

with other carriers.

They and other witnesses testified in detail of B &

O’s inability alone to finance the urgent and massive

rehabilitation program and of the aid that C & O could

and would extend to B & O as an affiliated company.

The district court summarized this evidence and, at

J.S. No. 510, p. 8a; J.S. No. 511, pp. 31-32, concluded:

The Commission found, on the evidence, that

‘Strengthened as a result of control, B & O’s

ability to meet the needs of commerce and the na-

tional defense will be enhanced.”” We are ii-

involved in the transaction”, J.S. No. 510, p. 23, was neither pre-

sented to the Commission nor urged before the district court and,

hence, cannot now be raised for the first time. United States v.

Tucker Truck Lines, 344 U.S. 33,37 (1952) ; United states v. Capital

Transit Co., 338 U.S, 286, 291 (1949).

10

pressed that there was substantial evidence in the

record to support such findings and that such find-

ings add weight to the Commission’s ultimate con-

elusion that the C & O-B & O affiliation was con-

sistent with the public interest.

Appellants offer no serious challenge to these basic

considerations motivating the Commission’s actions,

though, in a play on words, they say, at J.S. No. 511,

p. 20, ‘*B & O’s financial and physical condition [did

not] require said Order approving control.’’ [Empha-

sis added.]. The Commission approval of the trans-

action, of course, was not dependent upon a finding by

it that there were no other alternatives for coping with

the B & O’s ills but merely that the proposals advanced

by C « O were “‘consistent with the public interest’’,

the statutory standards, among others, considered.

‘“‘It was unimportant that there were other sources.

Even if there were, it was not improper that the ,ac-

quiring railroad} should furnish it. Indeed, in view

of the considerations making for the unification it was

the logical party to dogo,” Missourt Pac. R. Co. v.

United States, supra, at § F. Supp. 459.

2. Abundant testimony related to the probable effect

of C & O’s acquisition of control of B.& O upon the

other railroads in the Kast. Much of it related to the

Central, the Central having been the most outspoken

opponent of the proposed transaction and the com-

peting carrier assertedly most likely to suffer any less

of traffic if that were the result of the affiliation.

Traffic divertibility studies were introduced hy Cen-

tral and C & O and B & O, and the assumptions under-

11

lying their studies were subjected to penetrating cross-

examination. While recognizing that these estimates

of traffic diversion ‘*were prepared on different bases”’

and ‘‘fi]n many respects were not comparable’’, 317

1.0.C, 282, the Commission, after discussing the prem-

ises upon which the Central study was bised, con-

cluded, that ‘‘[b]ecause the assumptions indulged in

by Central are highly speculative, its divertibility

study has little probative value.”’ 317 i.C.C. 281° The

appellants contended that ‘the studies offered by Cen-

tral had more probative vaiue than those of the appli-

eant.”’ J.S. No. 510, p. 21. However, as this Court

said in Alton R. Co. v. United States, 315 U.S. 15, 23

(1942), ‘The weighing of such evidence involves in

part a judgment based on the characteristics of the

highly specialized transportation service imvolved.

Thus, as we have said, that function is peculiarly one

for the Commission, not the courts.’’ Accord, Chicago,

St. P., M. d& O. R. Co. v. United States, 622 U.S. 1, 2-3

(1944); United States v. Carolina Freight Carriers,

315 U.S. 475, 484, 489-90 (1942).

Wholly tncontested was the testimony of the many

responsible shipper witnesses who testified, both with

respect to the Central and the other railroads in the

East, that the acquisition by C & O of control of the

B & O would occasion no change in their allocation °

5 Central assumed much more than merely a strengthened C&O-

B&O system. J.S. No. 510, p. 21. It assumed as well a competi-

tively impotent Central and a mammoth PRR-N&W-Nickel Plate

combine confronting it.

6 The right of shippers to route their traffie is found in Sectior

15(8) of the Interstate Commerce Act, 49 U.S.C. § 15(8).

12

of freight among the railroads serving them and that

they could not foresee any diversion of traffie from

competing lines as a result of the affiliation of the C &

QM and B&O. Also unrebutted was the testimony of

(& Oand B & O executives that the railroads would

refrain from a deliberate policy of preferential routing

or of otherwise raiding the traffie of other railroads in

the Kast in favor of their affiliate.

Also, the Commission imposed conditions upon its

approftal of the proposed transaction designed to as

sure the maintenance of existing routes in which the

B & O and C & O have participated with competing

railroads. 317 LC.C. 245. Similar conditions pre-

viously have been imposed by the Commission and held

by the courts as efficacious in preventing diversion of

large volumes of traffic following Commission ap-

proval of a merger or control application. Canadian

Pacific Railway Company v. United States, 158 F.

Supp. 248, 254 (D: Minn. 1958); New York, C. d& St.

L. Rk. Co. vy. United States, 95 F. Supp. 811, 814 CN.D.

Ohio 1951). Moreover, since the date of the district

court’s decision, the C & O and B & O, by stipulation

with the United States filed with the Commission, have

agreed that, if the Commission’s order is sustained,

‘the Commission shall retain Jurisdiction to impose

further conditions aud orders as may he necessary and

appropriate and in the public interest in the event that

the said control shall be found by the Commission to

have resulted in undue diversion of traffic from any

other railroad in the territory involved in such traus-

action”.

‘Such conditions are designed to maintain and keep

13

open all routes and channels of trade via existing junc-

tions and gateways, protect traffic and operating rela-

tionships, to preserve the routing rights of shippers,

and to keep o7 <n to all parties the right to return to

this Commission for such modifications or supplemen-

tation of the conditions as developments may show to

be required in the publie interest.’ Erie R. Co. Mer-

ger, 312 1.C.C, 185, 191 (1960), sustained, Maintenance

Employees v. United States, supra. That the Commis-

sion in.its repert did. not attempt to forecast. the. precise

tonnage that might be diverted, notwithstanding such

conditions, or identify the carriers in the East who

might suffer some loss of freight or to fix the exact

point for each where a tolerable diversion of traffic

resulting from the transaction might become ‘tundue’’

does not render its findings deficient. as appellants

allege. J.S. No, 510, p. 22; J.S. No. 511, pp. 17-18.

In disposing of appellants’ contentions, the district

court excerpted from the Commission's report and at

JS. No. 510, pp. 9a, 12a; J.S. No. 32-33; 35, stated:

The Commission was not required to engage in

speculation and guesswork te come up with a pre-

cise percentage prediction. In its findings, the

Commission carefully reviewed the testimony

given by Central’s witnesses, gave its reasons why

it found their estimates unreliable, and reviewer |

the evidence supportive of its conclusion thet the

claimed diversion of traffic from Central would

not be undue.

14

‘ We hold that the Commission did give consid-

eration to the effect of the affiliation on other rail-

roads, that it made adequate findings on the sub-

ject and that such findings were supported by

substantial evidence.

In view of such imponderables as the shippers’ right

to route traffic and the effectiveness of traffic solicita-

tion efforts, we submit that the court below was clearly

correct in refusing to hold the Commission to a delu-

sive standard of precision in appraising possible di-

version of traffic.

3. Appellants allege, at J.S. No. 511, p. 13, that the

Conimission ‘abandoned its statutory duty’? in not

ordering its staff to undertake *‘an independent inves-

tigation of the impact of these applications on the pub-

lic interest.”’

The revord having been developed exhaustively,

both in support of the © & O’s applications and in op-

position thereto, no need was evident, however, for

the Commission sua sponte to direct its staff to partici-

pate in the proceedings. Neither these applicants nor

any other party, including the Department of Justice,

suggested at any time during the long course of the

hearings thot the record was deficient, that they lacked

the necessary resources and expertise and that they

required the assistance of the Commission’s staff to

prepare and submit data indicating where the balance

of the publie interest in the considered transaction lay.

To allege, as the appellants now do, that ‘*[b]Joth the

Commission and the court below treated the absence of

opposing evidence as tantamount to proof that the pro-

es)

posed control transaction was consistent with the pub-

lic interest’, J.S. No. 510, p. 20, and that [t]he ap-

plications herein were thus granted almost by default”’,

J.S. No. 511, p. 14, certainly minimizes, if it doesn’t

impeach, the testimony of the 16 witnesses which the

appellants presented, as it casually dismisses the testi-

mony of the more than 300 other witnesses pfesented

in opposition to the transaction. Of the Commission's

authority, in addition, to hire independent counsel or

experts, the district court, at J.S. No. 510, pp. l4a-1ia,

J.S. No. 511, pp. 37-38, said:

A Jack of confidence in the reliability and ade-

quacy of the showing made before it may, indeed,

prompt it to take such action. In this case, how-

ever, there were extended hearings with able ad-

versaries exploring all facets of the issues in-

volved; in addition to the Commission's own con-

cern for it, the public interest was represented by

the office of the Attorney General of the United

States; the Commission found that the evidence

supporting the application was of such quality,

credibility and accuracy as to persuade it that the

public interest would be served by approving such

application’ In this context, it eam hardly be said

that the Commission's discretion was abused in its

failure to have undertaken, by counsel and experts

eiuployed by it, an adversary attack upon the case

made before it.

The request made at the conclusion of the hearings

that the proceedings be consolidated with those in the

N & W-Niekel Plate and PRR-Central merger cases

16

was not made to fill an evidentiary void but to assure

that ‘*the most soundly conceived alignment of all the

various railroads in the Kast will be accomplished”’.

However, it no longer is for the Commission to accom-

plish the restructuring of the railroads ‘in accordance

with its concept of the optimum allocation of lines.

As this Court well stated in County of Marin v. United

States, 356 U.S. 412, 416-17 (1958) :

The. congressional purpose in the sweeping re-

vision of §5 of the Interstate Commerce Act in

1940, enacting §5(2)(a) in its present form, was

to facilitate merger and consolidatéon in the na-

tional transportation system. In the ” ransporta-

tion Act of 1920 the Congress had directed the

Commission itself to take the initiative in devel-

oping a plan ‘*for the consolidation of the railway

properties of the continental United States into

a limited number of systems,’’ 41 Stat. 481, but

after 20 years of trial the approach appeared in-

adequate. ‘The Transportation Act of 1940 ex-

tended $5 to motor and water carriers, and re-

lieved the Commission of its responsibility to ini-

tiate the unifications. ‘‘Instead, it authorized

approva! by the Commission of carrier-initiated,

voluntary plans of merger or consolidatw. if,

subject to such terms, conditions and modifications

as the Commission might prescribe, the proposed

transactions met with certain tests of publie inter-

est, justice and reasonableness . . .’’ (Emphasis

added.) Schwabacher v. United States, 334 U.S.

182, 193 (1948).

Accord, St. Joe Paper Co. y. Atl. Coast Line R. Co.,

347 U.S. 298, 305, 310 (1954) ; Schwabacher v. United

States, 334 U.S. 182, 193 (1948).

Moreover, the proposed transaction was not for the

permanent integration of the B & O into the C & O.

On the contrary, as the Commissior found, its approval

would not effect the existence of the two railroads as

separate corporate entities, with separate sales and

operating departments and with their separate cor-

porate. policies to pursue. Thus, if there was a need

for an overall view of the effect upon the Eastern rail-

roads of the merger of the C & O and the B & ©, the

N & W and the Nickel Plate and the PRR and the

Central, it could not then be taken, for a proposal for

the merger of the C & O and the B & O was not (and

is not) yet before the Commission. The approval of

the stock acquisition in no way committed the Com-

mission to approve the eventual merger of the B & O

and the C & O or, for that matter, that of the N & W-

Nickel Plate or the PRR-Central. The merits of any

application to merge the two roads will have to await

consideration by the Commission, and whether the

Commission at such time will undertake the joint hear-

ing or consideration of such a merger application pro-

ceeding with the then pending merger cases remains

to be seen. Cf., Spokane International R. Co. Control,

295 L.C.C, 425, 438 (1956), sustained, Canadian Pace fic

Railway Co, vy. United States, 158 F. Supp. 248 (D.

Minn. 1958) ; Detroit, T. 0. R. Co. Control, 275 LC,

455, 489 (1950), sustained. New York, C. & St. L. R.

Co. v. United States, 95 F. Supp. 811 (N.D. Ohio 1951).

18

It is well settled that whether an administrative

agency, such as the Commission, orders the consolida-

tion of proceedings is a matter left to its discretion.

Communications Comm'n v. WIR, 337 U.S. 265, 283

(1949); Federal Comm’n vy. Pottsville Broadcasting

Co., 309 U.S. 134, 138 (1940). Certainly, the Commis-

sion did not abuse that diseretion here. As previously

stated, at the time tie petition seeking consolidation of

the proceedings was filed, the applications of the C & O

were before the Commission for its decision. The ex-

aminer’s report in the N & W-Nickel Plate merger

case had not yet been served and the hearings in the

PRR-Central merger cases remained in progress. By

any fair estimate, to have held up the decision on the

C & O's applications until the two merger cases were

ripe for decision hy the Commission would have meant

a delay of approximately two vears (and perhaps a

deiay of several years pending a complex judicial re-

view )—a delay which the record before the Commis-

sion established neither the B & O nor the public which

it serves could afford.

The evidence before the Commission established that

the B & O equipment and plant were in poor condition ;

that with little prospect of replacing cars and tracks

out of current earnings, the cost of attempting to main-

tain them only sufficiently to meet the present needs of

the railroad was a tremendous strain upon the B & QO.

The delay in the infusion of financial aid, such as

the C & O was prepared to extend, which would have

been occasioned by the grant of the petition to consoli-

19

date the proceedings with those in the N & W-Nickel

Plate and ?RR-Central merger cases would have been

injurious to the B & O, and, ultimately, to the public.

The record demonstrated a need on the part of the

B & O for the prompt financial succor of the C & O.

Denial of the petition accordingly was reasonable an2

proper; it certainly was not an abuse of the Commis-

sion’s discretion.

The district court in the pungent penultimate para-

_ graph of its opinion, at J.S. No. 510, p. 19a; J.S. No.

O11, p. 42, said:

The evidence in this ease shows that the B & O,

one of the very great railroad systems of the

United States, is in critical condition. We think

that it would be a disservice to the national policy

to hazard the exposing of this railroad to contin-

uing crises by postponing the help that appears to

he available to it in the control proposal of the

C&O. We cannot predict at this time how many

months or years would be consumed in trving to

find the perfect, or merely a better, solution of the

problems of our eastern railroads, large and small.

As stated by Justice Jackson, reviewing the fail-

ure of a nationwide plan, ‘*waiting for the perfect

official plan was defeating or postponing less am-

bitious but more attainable voluntary improve-

ments.”’ Schwabacher v. United States, supra, 334

ULS. at p. 193. The Commission is satistied that

the approval of the application before it involving

20

the C & O and B & O will be a definite step forward

in solving this great uational problem. We are

not persuaded that the Commission is wrong. In

all events, it is not our function to substitute our

judgment for that of the Commission. Minne-

apolis d& St. Lows R. Co. v. United States, 361

U.S. 173, 188. The Commission’s wisdom and ex-

perience, not ours, must determine whether its ap-

proval of the C & O-B & O affiliation is consistent

with the public interest. McLean Trucking Co. v.

United States, 321 U.S. 67, 87.

4. Appellant’s generalized criticism of the Commis-

sion’s handling of control and acquisition proceedings,

J.S. No. 510, pp. 18-19; J.S. No. 511, pp. 10-12, is

better addressed to the Congress, as, ined, it was

only last year. Hearings on 8. 3097 Before a Subcom-

mittee of the Senate Committee on the Judiciary, 87th

Cong., 2d Sess. (1962); Heport of the Senate Subcom-

mittee on Antitrust and Monopoly on The Railroad

Merger Problem, 88th Cong., Ist Sess. (1963).

There, as here, the appeliants professed concern that

the proposal of the C & O to acquire control of the

B & O, together with the proposals of the N & W-

Nickel Plate and PRR-Central, would accomplish a

far-reaching realignment of the railroads in the East

without any design or plan; there as here the charge

was made that these carriers had entered into a con-

spiracy of silence which prevented the Commission

from getting all of the facts necessary for a meaning-

ful determination of the issues; there as here it was

21

:

contended that the enormity and interrelation of the

problems posed by these cases required the proceedings

to be consolidated or, at least, simultaneously consid-

ered. The Congress, however, seems to have been un-

impressed, for no legislative change was enacted.

‘*{W Je think it fair to read this history as a de facto

acquiescence in and ratification of the Commission’s

... procedure by Congress.”’ Power Reactor Co. v.

Electricians, 367 U.S. 396, 409 (1961).

5. The Commission requires no reminder of the

grave responsibilities entrusted to it under seetion 5

of the Interstate Commerce Act and the National

Transportation Policy. Maintenance Employes v.

United States, supra; Minneapolis d& St. Louis R. Co.

v. United States, supra. Its report and order approv-

ing the C & O’s acquisition of thie B & O amply demon-

strate that it approached its task with concern not only

for the welfare of the employees affected, the commun-

ities served by the railroads and the shippers and re-

eeivers dependent upon their services and those of

competing carriers but also for the adequacy of rail-

road service in the area, its economy and its efficiency.

United Staates v. Lowden, 308 U.S. 225, 230 (1939) ;

N.Y. Central Securities Co. v. United States, 287 U.S.

12, 25-26. It reveals that the Commission fully con-

sidered all of the. factors to which, under the statute

and this Court’s decisions, it must give effect in de-

termining whether a proposed transaction is consis-

tent with the public interest; it reveals that the Com-

mission neither exceeded the limits of its dele-

22

gated authority’ nor fell short of discharging fully

its task. es

CONCLUSION

For the foregoing reasons, we respectfully submit

that the judgment of the district court should be

affirmed.

Rospert_W. GINNANE,

General Counsel.

FRITZ R. Kany,

Assistant General Counsel,

Interstate Commerce Commission,

Washington 25, D.C.

October, 1963.

™The Act has been held not to violate the due process clause,

United States v. Lowden, supra, at 308 U.S. 239-40; Canadian Pacific

Ry. Co. v. United States, 158 F. Supp. 248, 256 (D. Minn. 1958),

or to exceed the limits of delegable authority. N. Y. Central Se-

curities Co. v. United States, supra, at 287 U.S. 24-25.

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