Amicus Curiae Brief — United States v. NY Central RR

Supreme Court brief1924

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JAN

THE INTERCHANGEABLE MILEAGE TI€KET CASE. 1924

WM. R. STANSBURY

CLERX i

———— |

No. 469.

IN THE

Supreme Court of the United States

Octoser Term, A. D. 1923.

UNITED STATES OF AMERICA, et al.,

Appellants,

NEW YORK CENTRAL RAILROAD COMPANY, et al.,

Appellees.

APPEAL FROM THE DISTRICT COURT OF THE UNITED STATES

FOR THE DISTRICT OF MASSACHUSETTS.

BRIEF ON BEHALF OF THE INTERNATIONAL FEDERATION

OF COMMERCIAL TRAVELERS ORGANIZATIONS,

AS AMICUS CURIAE.

CLIFFORD THORNE,

JAMES W. GOOD,

Of Counsel.

BARNARD & MILLER PRINT, CHICAGO,

TOPICAL INDEX.

STATEMENT OF THE CASE...................

gh ce gang MEETS TE OET TOE TELE ON

Decisions by Commission and Court.......

Postage Stamp Theory...................

Amendment to Section 22, Interstate Commerce

a RL ee 7

| Procedure before Commission................ 7

| Interrogatories by Commission....... 8

Injunction Proceedings ...................... 9

Record before Lower Court.............. 9

Table of Passenger Miles, total, per train,

NN Sdn cdncheekscaccies Jc... 10

Average Pre-war Reductions in Mileage

Books and amount of use of same........ 11

Carriers’ Petitich before Lower Court........ 13

Summary of Carriers’ Claim............. 19

ASSIGNMENT OF ERRORS.................... 20

<cpsrhapa nyt Poe OEY Coy OTe Ba 23

I. THE COMMISSION CORRECTLY INTERPRETED THE

LAW UNDER WHICH THE ORDER AT ISSUE WAS

REN. KERN UNA ive duch whinwbekssuhuhybicheevx. clas <.. 25

Court’s Interpretation of the law...... 27

Commission’s Interpretation of the law 27

Did Commission abdicate its Function? 27

Weight of Evidence.................. 30

I. THERE IS NO GOVERNMENT ESTABLISHED PASSEN.

GER FARE OF 3.6 CENTS PER MILE................ 32

Pp.

III. THE FARES ORDERED BY THE COMMISSION WILL

BE HIGHER THAN THE AVERAGE FARE PAID ON

THE REMAINING PASSENGER TRAVEL OF THE

UNITED STATES 2... .. cece cece ce scene nec ccescccenees

Remaining 75 per cent of Passenger Travel in

the United States have average fare today less

than that ordered by Commission in this pro-

WORE 50cd65. 640644 pene bask ceded ines tke

IV. PASSENGER FARES MAY BE ORDERED VARYING

IN ACCORDANCE WITH THE CIRCUMSTANCES AND

CONDITIONS SURROUNDING THE TRAFFIC IN.

WII iio an ckaddedkinionapenskibiabsesnssrale ens

(1) The Carrier cannot be heard in this

Court to complain of the Unconstitutional-

ity of an Act, or of an order thereunder,

because of discriminations created among

the patrons of as eee

(2) The Lake Shore Case and Other De-

cisions cited by the Carriers before the

lower Court are not controlling on the is-

sues in this proceeding.................

Basic Distinction between Lake Shore

Decision and present case...........

Other Differences Lake Shore Case and

promemt Proceeding .... wc. csc ceesss

In Re M. G. Gardner (Kas. Court).....

Classification of Militia Passenger

Traffic in Minnesota ...............

Review of Carriers’ so-called Mileage

Book Decisions

SE A heci ists ceeak pean deh wSA0s ses

Other Mileage Book cases............

(3) The Weight of Authority and the Best

Interests of the Community Support the

Validity of the Commission’s Order at Is-

sue in this Proceeding

The Towers Case

case

iii

PAGE

Commutation Rate Case.............. 80

Pee Wg kee ncvesnaunsenge 85

Hoover v. Penn. R. Co. case (Referee

POE a's vc ckon see kidineacwaws 88

Serip Books Justified................ 90

Average distance traveled per inhabi-

tant in the United States compared’

to minimum under scrip book....... 91

If our entire population traveled on an

average the amount those using the

scriy books must travel as a mini-

mum, the passenger revenues of our

railroads would be multiplied many

RaW iacues PU UNE OS Souk hw ees 92

Average distance 7 tc 8 times that of

average travei for rest of population 92

Expensive excursion traffic, ete., com-

pared to inexpensive scrip book travel 93

Competition as factor................ 95

Parties would normally pay standard

MER Sh nha Whi caw kul Wewetawcsnees 95

Travel in same car with those paying

MIEN Gs fc kc cUds a alone ks 96

No injury to parties not using scrip

eA CA CEMS GUM SK Gin RWaA 06 a4'200 43 97

Comment in Party Rate Case..... 99

History of Passenger Fares.............. 100

V. THE CARRIERS HAVE FAILED TO PROVE THAT THE

REDUCED FARES ORDERED BY THE COMMISSION

ARE NON-COMPENSATORY ...............00000c0c0e- 103

The rates at issue produce a substantial

profit above expenses................ 104

Mistake of Carriers concerning av-

erage cost per passenger mile

3.06 cents, whereas average rev-

enue 3.03 cents and average cost

WO OU iets readsascncein 105

; PAGE

Rates must yield some substantial profit

and the law does not require the same

profit on all traffic...............8.. 108

Prouty on Operating Ratios...... lll

ZO CNN GORD: can sncscececsss 112

The North Dakota case......... 113

Distinction between North Da-

kota case and Minnesota

OEE GOOD ove seven scesssccs 1B

Volume of traffic factor............... 1l4

Increases in Passenger Traffic......... 15

An increase of one Passenger Per Car

would More than Offset the Alleged

Reduction of $60,000,000 in Gross

Passenger Revenues due to the Order

of the Commission................. 17

Commission’s Finding as to prob-

ability of increased Passenger

ED duu Gh 408000 scanekadcenss 118

Carriers on the $60,000,000 factor... 120

Commissioner Daniels on the $60,-

EN occa eeeseanwed 123

Additional cost of $1,680,000.......... 126

VI. THE EXEMPTIONS FROM THE ORDER MADE BY THE

COMMISSION ARE REASONABLE AND JUST ........ 129

Carriers claim that more than twice as

many railroads were exempted, as

were included under order; these rail-

roads have less than 1.61 per cent of

net income of carriers in Eastern Dis-

SEUET SAR Sv cA AREKALENK ELE SERCO OS RaS 130

Delegation of legislative powers...... 132

Classification of railroads on earnings

AN a 0s%a's ChTLL cass bh hace nen 133

Cotting v. Kansas City Stock Yards

SE. nash KahAdnaceskusenennnts 133

Hight-Hour Law case ............ 134

C. B. & Q. v. Cutts case... ...... 135

PAGE

vil. A TEST OF THE RATES IS JUSTIFIED ................ 137

eT Terry eer Corre 138

Knoxville Water case................ 139

Consolidated Gas Company case...... 139

New England Divisions case.......... 140

VIII. THE ORDER OF THE COMMISSION SHOULD NOT BE

INTERPRETED AS APPLYING TO INTRASTATE PAS.

MI eee SO eT 142

IX. THE REQUIREMENT OF INTERLINE CREDITS DOES

NOT CONSTITUTE A TAKING OF PROPERTY WITH-

OUT DUE PROCESS OF LAW .............cccccccecss 144

NEE, 46.5 600054604506 00650 ¢kn0ehets45 oEas 148

CASES CITED.

Advances in Rates, Eastern Case, 20 I. C. C. 248.... 111

Akron ete. R. Co. v. U. S., .... U.S. ...., 67 L. Ed.

CRUEL DA yep kash cks bbbbckbicn kehekae 30, 140, 141

“rOo" Milling Co. v. St. L. S. W. Ry. Co., 249

MGWS Gh KG ceca cndbecncescindes 41, 42, 44, 53, 134

Atlantic a Line R. R. v. North Carolina Corpora-

Gn Wis Wk Bass biacdccexansenseaencane 63

Atlantic Coast Line v. Riverside Mills, 219 U. S.

PEED ruLshes seth sis 6heaedivke none kcek ce 145, 147

Attorney General v. Old Colony Railroad, 160 Mass.

LCUL eG acta in deb habicnnsanceve «k4caas 145, 146

Beardsley v. N. Y. L. E. & W. R. R., 162 N. Y. 230. .61,65

Burnham-Hanna Munger Case. See Interstate Com-

A, MI gan pec ansabccackece

Ches. & Ohio v. Conley, 230 U. S. 513.............. 134

Chicago, Burlington & Quincy v. Cutts, 94 U.S. 155.. 135

meee, M. & St. Paul R. R. v. Wisconsin, 238 U. S.

PAGE

Chicago, R. I. & P. Ry. Co. v. Ketchum, 212 Fed. 986

Commonwealth v. Atl. Coast Line R. R., 105 Va. 61..61, 65

Comm. v. Interstate Con. St. Ry. Co., 187 Mass. 436.. 57

Commission’s Decision. See Interchangeable Mile-

age Ticket Investigation.

Commutation Rate Case, 21 I. C. C. 428... .3, 74, 80, 81, &

Cotting v. Kansas City Stock Yards Co., 183 U. S.

ANNUM RAREWARONAOSAGELS AAACN AN OA OA4R 5 00483 41, 133

Dillon v. Erie R. Co., 43 N. Y. Supp. 320........... 143

Dow v. Beidelman, 125 U. S. 680................... 134

Duluth Street Railway Co. v. Railroad Commission

Er ig ox 5 WE ancy OE Bt We OD cacks casas 67

Eastern Advance Rate Dien: See Advances in Rates,

Eastern Case.

Ex Parte 74. See Increased Rates, 1920.

Fitzmaurice v. New York, N. H. & H. R. Co., 192

=. Sl Gx dak Obes Gad obade ene be ou babes ee 79 :

Horton v. : Ete, 65 App. Div. 587, 72 N. Y. Supp. 1018 6

Increased Rates, 1920, 58 I. C. C. 220.......... 32, 33, 46

In the Matter of Party Rate Tickets, 12 I. C. C.96.. 5

In re Mileage Books. See Mileage Books.

In re M. G. Gardner, 84 Kan. 264................. 56

Interchangeable Mileage Ticket Investigation, 77 I.

C. 200. . . .2, 25, 27, 28, 29, 51, 115, 117, 118, 124, 132, 141

Interstate C. C. v. B. & O., 145 U. S. 263............

Interstate Commerce Com. v. Louisville & Nashville

5 ee 2 tt Renee 31

Interstate C. C. v. Union P. R. Co., 222 U.S. 541.... 31

Jeffrey Mfg. Co. v. Blagg, 235 U. S. 571............ 43

Knoxville v. Knoxville Water Co., 212 U. 8. 1...... 139

Lake Shore Case. See Lake Shore & Michigan South-

ern R. Co. v. Smith.

ERE RE SD ie ee ERA a Pee eK eee

Vii

PAGE

Lake Shore & Mich. So. v. Smith, 173 U. S.

7 ie 3, 40, 41, 45, 50, 53, 55, 56, 57, 61, 68, 70,74

Manufacturers R. Co. v. U. S., 246 U. S. 457........ 30

Mass. v. Int. Com. St. Ry. Co., 207 U. S. 79........ 78

Massachusetts v. Inter. Com. St. Ry. Co., 187 Mass.

DA ARAn aNUM Oe RARE AW aNOUS Kiva ebenaddesacaas 76,78

Michigan R. Co. v. Michigan Railroad Com., 236 U. S.

SEL ERLLUN CRE A6UE AREA SLE GARR SASS OLK ORD Kas 147

Mileage Books (In re), 28 I. C. C. 218............. 60

Minn. & St. L. R. Co. v. Minn., 186 U. S. 257........ 113

ee a See 66

Missouri K. & T. R. Co. of Tex. v. L. C. Cade, 233 U.

DAS AtUR Eo GGWe ELS LSC ChS CE MAGNE WKS C rR Led 43

New England Divisions Case. (See Akron v. U. 8.)

New York Central R. Co. et al. v. U. S., 288 Fed.

DMRRSRG DH ANRKR oS ek OG KG bhG5 4664008 k4 Kas 2, 26, 27, 147

Norfolk & W. Ry. Co. v. West Virginia, 236 U.S. 605 63

Norfolk & W. R. Co. v. Conley, 236 U. S. 605........ 112

Northern Pacifie Ry. Co. v. North Dakota, 236 U. 8.

MA ead TTI cee. 3 63, 113

Northrup v. Richmond, 105 Va. 335............... 80

Omaha, etc., R. v. I. C. C., 230 U. S. 324............ 134

Party Rate Case. See Interstate Com. Commission

v. B. & O.

P.C.C. & St. L. v. B. & O., 2 I. C. Reports 729...... 5

Pennsylvania R. Co. v. Towers, 126 Maryland 59....

DEMENE ALAR GLOGERGKSNAUEAROK EO Cebus 68, 69, 138, 140

a ees ee 4, 45, 53, 56, 69, 74, 84

People v. Public Service Com., 159 App. Div. 531,

Ts s'c we wean adios sce << 72

Proposed Increase in New England, 49 I. C. C. 421.. 60

Purdy v. Erie Co.

(Purdy Case), 162 N. Y. 43................. 65, 66, 143

on a Le SS 66, 143

Railroad Com. of Georgia v. Louisville & N. R. R. Co.,

8 = ree 63

we z? af ett

viii

PAGE

Re Passenger Tariffs, 2 I. C. Reports 445......... 4

San Antonio Trac. Co. v. Altgelt (Tex. Civ. App.),

81 S. W. 106, affirmed in 200 U.S. 304............ 79

Seaboard Air Line v. U. S., 254 U. S. 57............ 30

Skinner, ete., v. U. S., 249 U.S. 557... 00. eee eee 30

Smyth v. Ames, 169 U.S. 466........... 22s eee ees 103

Sprigg v. B. & O., 81. C. C. 448......... 22. 4, 83, 84

State v. Great Northern Ry., 17 M.D. SFO... oases 62

St. Louis, I. M. & So. v. Ark., 240 U.S. 518......... 134

State v. Maine Central R. R. Co. (N. H.), 92 Atl. 837 64

State of Minn. v. C. M. & St. P. R. Co., 118 Minn.

| TRIAS Peers Terr sever ye eet T Tee yy 57,58

State v. Railroad, 77 N. H. 425...............008. 48, 49

Southern Railroad Co. v. Atlanta Stove Works, 128

En an cue hab dened se CUNEO ASR CE OES SONS fh)

St. Louis & S. W. Ry. Co. v. UL S., 245 U.S. 186...... 147

Tennessee v. U. S., 284 Fed. 371. ............ 0 ce ees %

Texas v. Eastern Texas R. Co., 258 U.S. 204........ 142

Towers Case. See Penn. R. Co. v. Towers.

Tilley v. Railroad Company, 5 Fed. 641......... 138, 139

United States v. Del., ete., 213 U.S. 366............ 142

Vandalia R. R. v. Sehmull, 255 U.S. 118............ 63

Wilson v. New, 243 U.S. 332. ........ 00 ccc e eee ees 134

Willcox v. Consolidated Gas Company, 212 U. S.

BP cd Caeih Cited ened ee Aoask 4ascbueane 58, 139, 140

ABBREVIATIONS:

FOR CONVENIENCE WE USE ‘‘COMMISSION’S DECI:

SION’’ TO REFER TO THE DECISION OF THE INTERSTATE

COMMERCE COMMISSION IN THE PROCEEDING ENTITLED

INTERCHANGEADULE MILEAGE TICKET INVESTIGATION,

DOCKET 14104, 77 I. C. C. 200, AT ISSUE IN THIS PROCEED-

ING.

‘«CARRIER’S BRIEF’? REFERS TO THE BRIEF FILED IN

THE DISTRICT COURT OF THE U. S. FOR THE DISTRICT

OF MASSACHUSETTS IN N. Y. C. ET AL. v. U. 8., IN EQUITY

1208, BY COUNSEL FOR THE NEW YORK CENTRAL, ET AL,

TIONERS BELOW.

IN THE

Suprene Court of the United States

OCTOBER TERM, A. D. 1923.

No.’ 469.

UNITED STATES OF AMERICA, et al.,

Appellants,

NEW YORK CENTRAL RAILROAD COMPANY, et ai.,

Appellees.

APPEAL FROM THE DISTRICT COURT OF THE UNITED

STATES, FOR THE DISTRICT OF MASSACHUSETTS.

BRIEF ON BEHALF OF THE INTERNATIONAL FEDERA-

TION OF COMMERCIAL TRAVELERS ORGANIZATIONS

AS AMICUS CURIAE.

STATEMENT OF THE CASE.

INTRODUCTION.

The power of Congress, and of the Interstate Com-

meree Commission, to prescribe lower passenger fares

than those applicable to ordinary one trip tickets when

a party purchases transportation aggregating 2,5

miles is, in substance, the chief issue in this proceeding.

To what extent does the Government have jurisdiction

over the passenger traffic of the country?

This case involves the validity of an order by the

Interstate Commerce Commission directing the sale of

woe

poms

nae

’

9°

non-transferrable interchangeable scrip coupon books for

passenger travel in the denomination of $90 at a reduo

tion of 20 per cent below the face value of the said tickets,

good for one year from date of purchase. Interchange.

able Mileage Ticket Investigation, Docket 14104, 77 I, ¢.

U. 200,647, hereafter referred to as: Commission’s de.

cision.

The Commission’s order was dated March 6, 1923, and

was made pursuant to the recent amendment of Section

22 of the Interstate Commerce Act. A permanent injune

tion against the enforcement of this order was granted

April 23, 1923, by the District Court of the United States

for the District of Massachusetts. New York C. R. Co,

et al. v. U. S., 288 Fed. 951.

The organization filing this brief has an aggregate

membership at the present time of approximately seven

hundred thousand commercial traveling men throughout

the United States, and these members are vitally con.

cerned in the outcome of the pending litigation.

In freight traffic, for many years, practically all of

us have recognized the propriety of adjusting rates on

different commodities or on the same commodity, in ac:

cordance withthe circumstances and conditions surround-

ing the traffic.

Some persons have insisted on the postage stamp basis

of making charges for both passenger and freight trafic,

making them uniform for all people regardless of vary-

ing conditions. The general concensus of opinion has

been that such a theory is impracticable, and a schedule

of rates so adjusted could not possibly meet the needs

of the public. A flat maximum rate per ton mile through-

out the United States, for all hauls, and for all com-

modities, regardless of conditions, is an unheard of thing,

MS ER EES ST ME GT IT AE FLIRT oS RS NR ge vs

and would meet with universal disapproval. And yet

that is the basic principle that counsel for the railroads

in this case desire to force upon Congress and the In-

terstate Commerce Commission, so far as their activities

are concerned in the passenger traffic of the United

States. They base their claim on dicta contained in Lake

Shore & Michigan Southern Railway Company v. Smith,

173 U. S. 684, hereinafter generally referred to as the

Lake Shore case, and certain decisions by state courts

which have followed that as a controlling precedent.

As to freight traffic the Commission for many years

had no power to fix maximum rates. It was held that

the Commission could recommend, but that the power to

fix rates would constitute an unwarranted interference

with the managerial activities of a private corporation;

and Congress declined to grant such powers to the Com-

mission for more than seventeen years after its creation.

Ultimately, however, it was felt that the railroad indus-

try, rapidly organizing into a single compact body, was

exercising a public function of such large importance to

the community, with the power to wreck or build up

enterprises and towns and cities, that it was wise to

have a disinterested tribunal with adequate power to

require the establishment of reasonable, just, and non-

discriminatory freight rates.

Other powers to make orders affecting safety appli-

ances, issues of stocks and bonds, ete., have been added

from year to year.

In this development, lasting more than a generation,

it is a noteworthy fact, cited by counsel for the Govern-

ment before the lower court, that no part of the Inter-

state Commerce Act, or any amendment thereof, has

ever been held to be unconstitutional.

a ar +-aeeer

In each advance step taken, as Congress has added this

power or that one, it has always met with determined re.

sistance on the part of the railroads as an unwarranted

invasion of their private domain.

Discriminations in charges between persons and |p.

ealities have constituted one of the chief causes for the

creation of the Interstate Commerce Commission, a tr.

bunal which has rapidly assumed a position of command.

ing importance in our commercial life.

It was early recognized by the Commission, as well

as by the Courts, that the Commission must exercise its

powers in regard to freight traffic with full recognition

of the varying conditions surrounding the traffic. A uni-

form ton mile rate has never been known in the industry.

Freight rates rightly vary with the distance, density of

traffic, character of commodity, etc., and when the Com-

mission has failed to consider the conditions surrounding

the traffic the courts have very promptly acted to correc

the situation. A mere comparison of rates without the

consideration of the attendant circumstances, is of no

consequence in a freight rate case, for it ignores the

fundamental clause of the entire law requiring equality

of charge for similar services under substantially sim.

ilar circumstances and conditions.

The same principle has been slower of recognition as

applied to passenger traffic, and some grievous errors,

consequently, have been made. Both the Supreme Court

and the Commission have been compelled to modify their

former conclusions, if not to reverse themselves. (The

Lake Shore case, supra, and Penn. R. Co., etc. v. Towers,

et al. 245 U.S. 6; Sprigg et al. v. B. € O., et al 81.6.0.

443, and the Commutation Rate Case, 21 I. C. ©. 428; Re

Passenger Tariffs, 2 I. C. Rep. 445; P. C. C. & St. LR

Co. v. B. d O. R. Co., 2 1. C. Rep. 729, and In the Matter of

Party Rate Tickets, 12 I. C. C. 96.) This is a natural

development, for passenger traffic does not present the

wide variation of freight traffic as to weight, bulk and

value. However, as time has passed on we have gradu-

ally learned that there are important basic differences in

the conditions surrounding passenger traffic, which must

be recognized if justice and the best interests of the com-

munity shall prevail. It is utterly idle and superficial to

prate about the passengers riding in the same cars, in

the same train, and on the same road bed. The same is

true as to freight traffic, and yet freight charges vary

in accordance with the conditions. The differences in

conditions are not of the same character in the passenger

traffic as in the freight traffic; and that has been the prin-

cipal source of confusion in our thought as to these prob-

lems.

In their zeal to have absolute equality regardless of

conditions, there were some at first who claimed the rail-

roads had no right to prescribe different charges per

passenger mile under different circumstances, although

the best interests of the public and the fair recognition

of the rights between individuals dictated that there

should be such a variation to meet conditions. The rail-

roads were the chief advocates this time, and they finally

succeeded in compelling the proper recognition of this

proposition. Then it was claimed—just as occurred orig-

inally relative to freight traffic—that while the railroads

could make these distinctions, the Government had no

tight to do so. This time the railroads were on the other

side. And today we are witnessing an exhibition of

their championing this impossible doctrine. We are told

that the Government can fix only one uniform fare for

Passenger traffic, the same charge for each mile a pas-

senger may travel throughout the United States, ang

then its task is completed; it must keep hands off yp.

less it wants to make a horizontal increase or decrease jy

that single rate. We are informed that the Government

in dealing with passenger matters must be blind to vary.

ing circumstances and conditions. All that must be re

served to the superior wisdom of our railroad friends,

and the Government must exercise no jurisdiction, we

are told, over the different classes of passenger traffic,

The very statement of the proposition would seem

to demonstrate its absurdity, without the need of argu.

ment. But we must carefully go through the record le.

fore us in order to demonstrate that there are genuine

differences in concitions surrounding passenger traffic,

that the railroads themselves have recognized this for

a half century, that there is no so-called single uniform

passenger fare which has been established by the Gor-

ernment throughout the nation thereby foreclosing fur.

ther action on the part of the Government. And we must

further consider the character of the investigation and

of the order made by the Commission, to see if there

was a mistake of law; and then an analysis of the facts

is necessary to test the soundness of the claim of con

fiscation advanced by the carriers in this proceeding.

Prior to August 18, 1922, Section 22 of the Interstate

Commerce Act contained certain permissive provisions

authorizing carriers to issue mileage, excursion and com-

mutation passenger tickets; but there was no affirmative

grant of power to the Commission in this section.

The following amendment of Section 22 was approved

August 18, 1922:

‘*(2) The Commission is directed to require, after

notice and hearing, each carrier by rail, subject to this

Act, to issue at such offices as may be prescribed by the

Commision interchangeable mileage or scrip coupon

tickets at just and reasonable rates good for passen-

ger carriage upon the passenger trains of all car-

riers by rail subject to this Act. The Commission

may in its discretion exempt from the provisions of

this amendatory Act either in whole or in part any

carrier where the particular circumstances shown to

the Commission shall justify such exemption to be

made. Such tickets may be required to be issued

in such denominations as the Commission may pre-

scribe. Before making any order requiring the is-

suance of any such tickets the Commision shall make

and publish such reasonable rules and regulations

for their issuance and use as in its judgment the

public interest demands; and especially it shall pre-

scribe whether such tickets are transferable or non-

transferable, and if the latter, what identification

may be required; and especially, also to what bag-

gage privileges the lawful holders of such tickets

are entitled.’’

PROCEDURE BEFORE THE COMMISSION.

Due process of law contemplates, among other things,

an orderly procedure in the determination of litigated

matters. After the enactment of the foregoing amend-

ment to Section 22 of the Act, the Commission issued a

notice calling for a hearing in which the following ques-

tions were proposed as subjects to be considered :

‘1, Shall both interchangeable mileage and scrip.

coupon tickets be issued and sold? (2) What rate

or rates shall be established as just and reasonably

for each or either form of ticket? (3) What con.

ditions, if any, should be attached to the issuance

and sale of such tickets by reason of the existencs

of different levels of passenger rates in different see.

tions of the country? (4) In what denomination

shall the ticket or tickets be issued? (5) In general,

at what offices of carriers shall the tickets to h

prescribed be available to the public? (6) What

rules and regulations for the issuance and use of

these tickets shall be required? (7) Shall the tick.

ets be transferable or non-transferable? (8) If non.

transferable, what identification may be required!

(9) To what baggage privileges shall the lawful hold.

on) of such tickets be entitled?’’ (Petition, pp. 36

37.

The order of investigation also called for a statement

from those desiring exemption from the order. This

notice was issued August 23, 1922, and the date of hearing

was fixed as September 26, 1922. The hearing was con-

ducted before Chairman Meyer of the Interstate Con.

merce Commission at Washington, D. C., and was par.

ticipated in by the representative railroad organizations

of all regions in the United States, and by many large

organizations of commercial traveling men and shippers

The case was submitted November 15, 1922. A decision

was rendered and issued January 26, 1923, fixing

March 15, 1923, as the effective date of the order whe

the carriers should establish the fares prescribed. h

the meantime another hearing was conducted as to the

rules and regulations to be prescribed as required by the

Act. The hearing was closed February 23, 1923. On

March 6, 1923, a supplemental report was issued pre

senting the rules and regulations which had been ap

proved.

a a a a a ; op

All the essential steps were taken which are necessary

under the orderly procedure of the Commission; and no

parties make claim, to our knowledge, that they were

denied a full hearing.

INJUNCTION PROCEEDINGS.

A petition was filed March 30, 1923, in the Federal

Court for the District of Massachusetts, by the carriers

earning in 1922 88.23 per cent of the passenger revenues

of all Class I railroads in the Eastern Group (as classi-

fied by the Interstate Commerce Commission), seeking

to enjoin the enforcement of the order of the Commis-

sion establishing these ‘‘scrip book”’ regulations provid-

ing for the issuance of interchangeable scrip coupon tick-

ets. Hearing was had and an opinion was rendered April

23, 1923, and the final decree was issued May 15, 1923,

ordering a permanent injunction against the enforcement

of the Commission’s order.

Qow &feitivT we = = F

The evidence offered before the lower court included

the following:

1, The record before the Interstate Commerce Com-

mission in the proceeding entitled, Interchangeable Mile-

age Book Investigation, No. 14104.

2. Two short affidavits by Julius H. Parmelee stating

the tatal income and expenses from all sources, without

separation as between freight and passenger traffic; also

the gross revenues from passenger traffic without any

statement as to expenses of the passenger traffic, and

without any statement of the value of the property de-

voted to passenger traffic; also the tentative findings con-

cerning the value of railroad property in the United

States, as made by the Interstate Commerce Commission

in 1920, with subsequent additions of property.

ee a Oe ee ; Oe eee ~ See

—-

The Parmelee aftidavits show that 98.39 per cent of the

total net railway operating income cf all railroads in

the Eastern Group was earned by Class I railroads.

3. One affidavit by Samuel Blumberg on behalf of

the National Counsel of Traveling Salesmen’s Associa-

tions, and Garment Salesmen’s Association, Incorpo.

rated describing the character of these organizations

and the manner in which they are concerned in the mat-

ter under consideration.

Some of the significant facts contained in the record

before the Interstate Commerce Commission and in the

decision of the Commission are as follows:

The passengers per train, per car, and the total pas-

senger miles over a period of years, are shown in the fol:

lowing table:

Passengers Passengers Revenue

per per Passenger.

Calendar year train car miles

er 56 16 34,586,000,000

RSS TI 65 17 39,477 000,000

rere 76 20 42,677,000,000

Me cit dcuceenesn 82 21 46,358,000,000

ee 80 20 46,849,000,000

Serr 67 16 37,329,000,00

1921 (first six mos.) 66 16 18,382,000,00

1922 (first six mos.) 60 15 16,487 ,000,00

(Commission’s decision, page 203.)

The total passenger revenue in the United States for

the first six months in 1922 aggregated approximately

$500,000,000 (being stated in a dissenting opinion by

Commissioner Daniels at page 219).

The carriers estimated the total passenger revenues

for the year 1922 in the United States to be approx:

mately $1,000,000,000; 30 per cent of which, or $300,-

000,000, will be affected, according to their claim, by the

order of the Commission in this proceeding. (See Car-

riers’ Brief before the Lower Court, p. 85.) The

carriers claim that the 20 per cent reduction or-

dered by the Commission will involve $60,000,000. (See

same page of said Brief; also see Appendix A, follow-

ing Commission’s decision at page 221 of the same.) The

figures for the nation were used by the carrier's to which

certain percentages were applied to secure an estimate

of the corresponding figures for the carriers involved in

this case.

The carriers claim that the additional expense of ac-

~ counting and policing the use of the scrip books for Class

I carriers in the United States will be approximately

$1,680,000 per annum. Commission’s Decision, 208

A digest of the record before the Commission as to the

reductions in effect in the mileage books which were

abolished by the Railroad Administration in 1918, to-

gether with a statement as to the amount the said mileage

books were used, is contained in the following extracts

from the brief filed on behalf of all carriers before the

Interstate Commerce Commission in the investigation

aforesaid, Docket 14104:

‘“‘When the mileage books were abolished by the

Railroad Administration, they were being sold at

reductions below the normal fare, ranging around

10 per cent, 16% per cent and 20 per cent. Thus

Mr. Fox states (385-386) that the discounts prior

to Federal Control were as follows:

‘In New England, 10 per cent;

In Central and Trunk Line Passenger Association

territories, 10 per cent;

In Southeastern Territory, 20 per cent; but in this

connection it must be remembered, as stated above,

(lsSsesesqqoqoooo!

that the Commission had authorized an increase

in the charge for the mileage book from 2 cents

to 2} cents per mile, so that this would have

become a discount of only 10 per cent but for the

action of the Administration in withdrawing the

mileage books entirely and reducing the discount

to nothing;

In Southwestern Territory, 16% per cent;

In the Central West, when the 2 cent rate vas effeo

tive throughout the country, there was no redue-

tion on the part of any line from the basic intra.

state fares by the use of mileage, and a very con-

siderable portion of the revenue of the carriers de.

rived from intrastate traffic in those States

(386).’’ Carriers’ brief before the Commission

in Docket 14104, pp. 14-15.

**The use .§ the old mileage books cannot be ac

curately stand because of the different conditions

in different sections of the country... At page 29

Mr. Fox said that some years ago about an aver-

age of not less than 20 per cent of the total pas.

senger revenue in certain sections of the country

was derived from mileage tickets; that, in fact, o

some lines as high as 60 a cent of the total pas-

senger traffic was so moved; and, in the first of these

instances, the use of the mileage tickets represented

this percentage of travel, although they were re

stricted to smaller territorial limits and were not

interchangeable as between all lines in the terri

tory (29). He also pointed out that in other sections

the percentage would not run as high (31-32). Mr.

Rose, the accounting witness on behalf of the car.

riers, stated that, during the period when inter.

changeable mileage books were used, the use in the

territory to which he referred (i. e., Southeastem

territory) was approximately 20 per cent (91). See

also the testimony of Mr. Fox at page 107 and of

Mr. Rose, at pages 220-221.

The scrip book currently in use which is sdli

on the basis of the normal one-way fares repre

sents about 1 per cent or less of the carriers’ pat

senger revenues (91, 139).’’ (Carriers’ Brief before

the Interstate Commerce Commission, pp. 15, 16.)

CARRIERS’ PETITION BEFORE THE LOWER COURT.

There are certain statements contained in the carriers’

petition and brief before the lower court that may be

presented to this tribunal, which deserve mention. There

is a large volume of duplication in different portions of

these documents. The petition has many of the charac-

teristics of an argument, and we shall attempt in the

following passages to discuss very briefly certain

propositions they have stated, this being done consecu-

tively in the order presented by the carriers. This plan,

unfortunately, will occasion a similar duplication, which

seems to be unavoidable. We shall endeavor to elimi-

nate as much of this as possible. (In future citations to

‘ the brief filed by the carriers before the lower court we

:- shall use the expression: Carriers’ Brief.)

4 At this time we shall not undertake tu place these

comments in order under the headings used in our gen-

eral argument, but shall simply attempt to recite them

in the order as they appear in the petition of the car-

riers in the first instance.

The first eight sections in Carriers’ petition before

the Lower Court are largely devoted to formal allega-

tions.

In paragraph IX of said petition the carriers allege

that the Commission established as the ‘‘just and rea-

sonable rate’’ for the transportation of passengers ‘the

rate of 3.6 cents per mile, which rate of fare accord-

ingly became the established just and reasonable rate for

this service.’

This is an erroneous allegation, due to a misconcep-

tion of counsel for the carriers, as to the character of tho

decision by the Interstate Commerce Commission in Ez

Parte 74. This will be presented fully in that portion

of this brief under the heading Argument.

Other references to the rate of 3.6 cents, repeatedly

made in the petition as being the ‘‘established just and

reasonable rate’’ are likewise erroneous.

Paragraph X of the Carriers’ petition before the lower

court alleges a variation between the findings of facet

and the conclusions of the Commission. The carriers,

aside from this general allegation, cite certain figures,

the additional costs being alleged to equal $1,600,000.

The Commission considers this as an offset to the in-

terest on the $300,000,000 which the carriers say they

will receive in advance of the use of these scrip books.

The propriety and sufficiency of this offset will be con-

sidered in conjunction with the other cost accounting

under the heading relating to the alleged confiscatory

character of the order of the Commission which will

be presented in that portion of this brief labeled, ‘Ar.

gument.’’

In paragraph XI, the carriers allege that the order

of the Commission at issue will require them to perform

service at rates which are noncompensatory. They then

refer in an argumentative manner to the operating ratio

on all passenger traffic and attempt to demonstrate tbe

net loss.

In paragraph XII of their petition, the carriers allege

that the physical conditions of transportation are the

same for the holder of the scrip coupon as for other pas-

senger travel under the standard fare in an ordinary

interstate train.

A similar comment could be made as to preachers,

railroad employees, tourists, excursionists, delegates to

political and church conventions, ete.

The significant factor is that the average inhabitant

travels only about 250 to 350 miles per year, whereas

the holders of these tickets must travel 2,500 miles or

seven or eight times as much; and on an average the

holder of these tickets will probably travel 5,000 miles

or more.

Paragraph XIII of the carriers’ petition raises a sim-

ilar issue as paragraph XII, except that it refers to the

unreasonable preference under Section 3 of the Act.

Paragraph XIV refers to the alleged erroneous in-

terpretation made by the Commission of Section 22 of

the Act.

The decision of the Commission must be interpreted

as a Whole. This particular phase of the subject. will

be considered in argument.

Paragraph XV of the carriers’ petition alleges the dis-

crimination between parties. The gravamen of the com-

plaint is that the ‘‘carriers are required to discriminate

in favor of such persons as contemplate 2,500 miles of

travel in one year and are in a position to pay $72

in advance for such transportation.’’ If such a dis-

crimination even existed the carrier is not the proper

party complainant. This paragraph raises another im-

portant legal issue relating to the power of the legis-

lative branch of the government.

Paragraph XVI protests against any period of experi-

ment in order to test the effect of the order on actual

traffic.

Paragraph XVII has to do with the alleged violation

of Section 15-A of the Interstate Commerce Act, which

ca |

requires the Commission to establish rates that will pro.

duce as nearly as possible a rate of return on the valne

of the property to be fixed by the Commission.

They claim that the present rates fail to produce the

return required hy statute and that the reduction in the

passenger revenue will therefore constitute a violation

of the requirements of the Act.

There is a confusion in the minds of the authors of

this paragraph.

Section 15-A of the Interstate Commerce Act refer

to net revenue, not gross.

It is our claim that the order at issue in this case

will increase the net revenues of the carriers and not

decrease them. It will initiate a greater volume of traffic

and help the commercial world to shake off this paraly-

sis in business that has followed in the wake of the

war. The trains and cars and the roadbed are all ready

for operation. The cars are almost half empty. Every

passenger added means practically a net increase in the

revenues of the carriers by the amount of the fare which

he pays.

In this paragraph counsel allege in regard to the sixty

million dollar loss in their net income: ‘‘This estimate

was not questioned by the Commission in its findings.”

The fact is the Commission did not mention this item

in any part of their decision. (They do quote from the

railroads in a table in the Appendix to the opinion.)

The fact that a claim made on the record is not mentioned

in the decision, is not a justification for the assertion that

the Commission adopted such a claim as correct; in

fact, the deduction is usually made by counsel in a case

that such an incident is evidence of directly the reverse,

that the Court or Commission declined to adopt the figure

as correct.

In paragraph XVIII of their petition, carriers again

argue that the Commission has adopted 3.6 cents as

the standard rate, and that the actual cost of transpor-

tation of passengers on the rates established in this

order at issue is no less than the cost of passengers

using tickets at the standard rate. Further they say:

“On the facts as found by the Commission a just and

reasonable fare for the holder of a scrip coupon ticket

good for ordinary transportation on all trains through-

out the United States cannot possibly be less than a

just and reasonable fare for the transportation of any

other passenger receiving the same service.’’

If they mean that travel in an ordinary train compels

the adoption of the so-called ‘‘standard rate’’ exclu-

sively, then practically all tourists’ rates, excursion

rates, etc. (and likewise commodity traffic in the f reight

service), are unreasonably low. Even though two parties

are on the same train just as two tons of freight are

being hauled in the same train, there are other factors

that must be considered in railroad transportation which

may justify a lower charge.

Carriers again say in paragraph XVIII of their peti-

tion that the Commission, by its decision in Increased

Rates, 1920, ‘‘established the basic rate of fare of 3.6

cents per mile as the just and reasonable basic rate of

fare generally throughout the United States.’’ It will

be found that the Commission made no such finding or

order in the said case.

Paragraph XIX refers to the credit one railroad com-

pany must give another by order of the Commission.

This involves one of the important issues which will be

discussed later.

Paragraph XX of carriers’ petition claims the require-

ment to transport passengers for less than the just aad

reasonable rate of fare as determined by the Interstate

Commerce Commission in the proceedings previously

described, constitutes a violation of the Fifth Amend-

ment, and is void, because a passenger may only use the

scrip coupon ticket for one trip on that particular rail.

road issuing the ticket. If we consider the railroads as

a whole, as a large system operating under joint ar.

rangements approved by the Interstate Commerce Com.

mission, this is a necessary incident—a detail. If a half

a dozen railroads join in the establishment of a through

commodity rate on coal or sandstone they would do

this very same thing under the same contingencies,

One carrier might obtain none of the commodity traffic

thereby inaugurated except one haul, and yet the rates

would become effective by voluntary action of the rail.

roads or by order of the Commission itself. It cannot

be otherwise, as a practical matter, if we are to have

joint rates and joint through routes.

Paragraph XXI relates to the authority of the Com-

mission to exempt one carrier from the provisions of

the order under consideration where the peculiar cir-

cumstances shown to the Commission shall justify such

exemption.

Paragraph XXII excepts to the order on the ground

that it affects state traffic as well as interstate traffic.

In reviewing the petition of the carriers it will be

seen that there are many duplications. In their brief

before the lower court these various propositions are

again argued in many different ways.

The claims of the carriers are stated at great length

under twenty-three sections of their petition, six head-

ings and nine subheadings in their brief. The _cincipal

claims can be summarized as follows:

First—That the Commission acted under an errone-

ous interpretation of the law, in that they considered

the congressional act required the establishment of in-

terchangeable tickets at reduced rates.

Second—That the order of the Commission creates an

unjust discrimination between passengers, and is there-

fore unlawful.

Third—That the passenger fares ordered by the Com-

mission are confiscatory, and the said order is therefore

void, taking the property of the carriers without due

process of law.

Fourth—That the order is void because of the exemp.

tions ordered by the Commission.

Fifth—That the order of the Commission is void be-

cause it applies to intrastate commerce.

Sixth—That the order of the Commission is void be-

cause it requires one carrier to give credit to another

carrier, thereby taking the carriers’ property without

due process of law.

Seventh—That the order is void because it violates

Section 15a of the Interstate Commerce Act.

Eighth—That the order is void because it is experi-

mental.

In addition, there is a general allegation made as to

several of the propositions just stated, to the effect that

the evidence does not support the conclusions of the

Commission.

The lower court sustained the earriers on the first

proposition, declined their claim as to the sixth proposi-

tion, and did not pass upon the others.

VENEER

M5 ES at ioltts Raps OA aaa Reg

ASSIGNMENT OF ERRORS.

Appellants’ assignment of errors is as follows:

The District Court erred:

I. In denying the motion of the United States to dis.

miss the petition and in not sustaining the motion.

II. In deciding, holding and adjudging as follows:

Although the carriers opposed any reduction in

rates for the scrip coupons below the standard rates,

it is elear from the record that the Commission pro-

ceeded on the assumption that the spirit and theory

of the Congressional amendment required them to

order the scrip coupons to be issued at reduced rates,

at least in so far as such rates could not be deemed

confiscatory. There is no finding in the record that

would indicate that the Commission, if it had exer.

cised an independent judgment apart from what 1

conceived to be the plain spirit and theory of the

amendment, would have ordered the scrip coupons

to be issued at reduced rates.

III. In deciding, holding and adjudging as follows:

The only finding of the Commission that could pos-

sibly be relied upon as indicating that the Commis-

sion exercised an independent judgment is the state-

ment in the majority report that ‘‘in addition to the

obvious spirit of the law, the record warrants the

view that a coupon ticket at a reasonably reduced

fare should be established, at least for an experi-

mental period.’’ But this finding is followed by the

statement that ‘‘in no other way ean the apparent

purpose of the law be given practical effect.’’ It

would seem fairly plain, therefore, that the furthest

the Commission goes in its finding is to conclude

that the record might justify the issuance of cou-

pons at reasonably reduced rates for an experimen-

tal period; but there is nothing to indicate that the

Commission, if it had felt free to exercise its own

judgment, would have assumed the responsibility

for establishing the reduced rate, even for an experi-

mental period.

IV. In deciding, holding and adjudging as follows:

It is not entirely clear whether the majority of the

Commisison acted under an interpretation of the

amendment that it was mandatory upon them so to

reduce the rates for interchangeable scrip coupon

tickets, or upon an assumed desire of the Congress,

though not expressed by the amendment in manda-

tory form, that they should so do.

VY. In not sustaining the order of the Interstate Com-

merce Commission.

VI. In not dismissing the petition.

VII. In issuing the permanent injunction.

(The National Council of Traveling Salesmen’s Asso-

dation, et al., added the following to the assignments

made by the Government and by the Commission: The

District Court erred: (V) In deciding, holding and ad-

judging as follows) :

That either ‘‘the Commission acted upon a differ.

ent interpretation of the amendment”’ and thus that

‘fan error of law was the basis of its action ang

order’’ or that it ‘‘based its conclusions not upon its

own independent judgment, but upon what it be.

lieved to be the spirit and purpose of the act, which,

if it means something other than a sound interpre.

tation of the act, must mean some supposed desire

of the Congress,’’ and thus ‘‘acted contrary to law in

abdicating the functions vested in it.’’

‘‘In either case its orders is without warrant of

law and for this reason it must be annulled.’’

The carriers have made no appeal from any portion

of the decision of the lower court.

ARGUMENT.

The order at issue in this proceeding was made by the

Interstate Commerce Commission, directing Class I rail-

roads (with certain exceptions specifically named) to sell

nontransferable, interchangeable scrip coupon tickets

(hereinafter generally called scrip books), of 2,500 miles

each, at a discount of 20 per cent below the fares on ordi-

nary one trip tickets, the same being good for one year

from date of purchase. Various rules and regulations

were specified, concerning which there seems to be no

substantial differences between the parties.

Many objections, which we have outlined in the State-

ment of the Case, were urged against the order by

counsel for the railroads, the petitioners below.

The carriers were sustained by the lower court on one

proposition only; and that related in substance to the

alleged misinterpretation by the Commission of the law

der which the order was issued.

The carriers gave chief attention in their brief and

argument before the lower court to the issues relating:

first, to the alleged discrimination created by the order

at issue, as between passengers holding the scrip books,

and those paying the ordinary fares: and second, to the

alleged confiscatory character of the order of the Com.

mission.

Counsel for the railroads have made two basic mistakes

of fact which permeate their entire argument.

We shall consider in argument: First, the proposition

on which the carriers have been sustained by the lower

court; Second, the two basic propositions of fact con-

cerning which the carriers are in error; and then we

shall proceed with a discussion of the other issues in-

volved.

|, TH:2 COMMISSION CORRECTLY INTERPRETED THE

LAW UNDER WHICH THE ORDER AT ISSUE WAS

MADE.

The lower court bases the injunction order upon what

iteonceives to be a misinterpretation by the Commission

of the Amendment to Section 22 of the Act to Regulate

(ommerce, under which the Commission rendered the de-

tision at issue.

The Court rests its conclusion enjoining this order of

the Interstate Commerce Commission, upon eight lines

in the decision of the Commission. The only places in

vhich the Commission makes reference to the ‘spirit

wrpurpose of the law” are in the five lines quoted by the

court, and in one other passage which contains one clause

vhich the Court uses. (Commission ’s decision, 209.) At

w other place in the entire decision of the Commission is

there any reference to this so-called purpose or spirit of

the law.

There is much force to the comments of the Commis-

ion as to the intent of Congress; but we believe a fair

rview by this court of the record and decision of the

Commission will not warrant the contention that the

Commission in this proceeding under investigation,

fielded its judgment as to what was the reasonable rate

fo any other tribunal, knowing as it did, the requirement

—

of the law that the discretion rested with the Commis.

sion.

We feel that it would hardly be proper to depend upon

a few selected passages of the Commission’s decision

to determine what it had in mind, and upon what it based

its conclusions. It is necessary for us to consider the

decision of the Commission as a whole, in order to reach

a fair determination of this issue.

From the few lines referred to above the Court con-

cludes that if the Commission acted upon some other

theory than that the determination of what should be

‘the just and reasonable rates for such coupons is placed

entirely upon the Commission,’’ then ‘‘an error of law

was the basis of its action and order.’’ But if the Com.

mission based its conclusion upon ‘some supposed desire

of the Congress, it acted contrary to law in abdicating

the functions vested in it.’ New York Central R. Co. et al.

v. U. S., 288 Fed. 951, 953, 954.

Let us consider, first, whether the Commission in-

terpreted the Act as mandatory or not; and second, did

the Commission undertake to assume the responsibility

put upon it by the law and to decide the issue, or did it

abdicate its functions?

(1) What was the Commission’s interpretation of the

law?

It would seem that if the court were right in its in

terpretation of the Act, then the Commission had a cor-

rect conception of the law, for at the very beginning of

its decision the Commission uses language concerning

the Act, which states in substance precisely the same

interpretation of the statute which the court itself de-

clared in its decision. These two passages evidence the

fact that the Court and the Commission had the same con-

ception of just what the law required.

The Court says:

“The fair and natural interpretation of the lan-

guage used by the Congress makes mandatory the

issuance of such coupons at just and reasonable

rates ; but the ultimate, if not the original, determina-

tion of what shall be just and reasonable rates for

such coupons is placed entirely upon the Commis-

sion.’’ (Zd., 953.)

The Commission says:

‘The act is mandatory in that it directs us, after

notice and hearing, to require each carrier by rail

subject to the act to issue ‘interchangeable mileage

or scrip coupon tickets.’ It is discretionary in that

we may prescribe either an interchangeable mileage

ticket or a serip coupon ticket. It is also left to our

judgment to determine after notice and hearing the

‘just and reasonable rates’ at which the form of

ticket prescribed shall be issued.’’ (Com. Dee. p.

202.)

The Court says:

“Tf, therefore, the Commission acted upon a dif-

ferent interpretation of the amendment, an error of

law was the basis of its action and order.”’ + ¢

C.v. U. S., supra, 953.)

But we have

make this error

interpretation o

Just seen that the Commission did not

of law, for it adopted precisely the same

f the law which the court itself adopts

(2) What course did the

investigating and deciding for

reasonable rates? Did it abdic

the Commission?

Commission follow as to

itself what were just and

ate the function vested in

At the very beginning of the investigation the Com-

uission issued a notice of a public hearing, and the sec

ond interrogatory proposed for consideration at that

hearing was:

‘What rate or rates shall be established as just

and reasonable for each or either form of ticket?”

(Commission’s decision, 201.)

Counsel for the carriers make claim that there were no

findings of fact made by the Commission in support of

its decision, and that there was no substantial evidence

of record in support of the same. This same thought is

suggested in the second observation by the Court quoted

above, and again where the Court says that there is

no finding in the record that would indicate the Commis.

sion, acting independently, would have ordered the serip

coupons at reduced rates.

It is true that the Commission states the facts cited

by the carriers tending to support their claims; but it

is also true that the Commission states the facts which

are opposed to the claims of the carriers, and which off.

set those presented by the railroads sufficient to justify

the decision of the Commission. <A few of the latter

group will be gathered together for convenient refer-

ence; it being remembered that the relative weight to

be attached to these as compared to the facts adduced

on the other side, rests with the Commission and not with

the Court.

Speaking of the claims of the traveling men, the Com-

mission says:

‘* All urge that the tickets should be sold at 334 per

cent less than the standard fare and that they would

stimulate travel to such an extent as to offset any

decrease of revenue that might result from the re

duction in the fare. They say that the stimulus from

the use of such a ticket would in all probability re-

sult in increased revenue. They also urge that sales-

men would by their sales stimulate the movement

of freight traffic and thereby augment freight rev-

enue.’’ (Com. Dee., p. 206.)

In its concluding paragraphs the Commission says:

“It is a well-recognized rule in trade and com-

merce that, other things being equal, as the price of

an article is lowered the sales increase. And the fact

that for many years prior to Federal control car-

riers voluntarily sold mileage books at discounts

ranging from 10 to 334 per cent is not without sig-

nificance. That commutation and excursion fares

create traffic is conceded by carriers. That some

additional traffic would be created by a scrip ticket

at reduced fares may fairly be assumed, although it

is impossible to determine how much. Many unused

coupons would not be redeemed while others which

remained in the hook near the end of the year or

season would undoubtedly be used for passenger

travel that would not otherwise occur. A scrip

ticket at reduced fares could not be justified solely

upon the theory that the cost per passenger-mile

might thereby be reduced, although it is apparent

that anything that will tend to cause a fuller utiliza.

tion of. passenger-train facilities without overcrowd-

ing will also tend to reduce the average cost per

passenger-mile.’’ (Com. Dee., 209.)

After reviewing the evidence, the Commission makes

the following unqualified and clear finding of fact:

‘‘We further find that the rates resulting from

that reduction will be just and reasonable for this

class of travel.’’ (Td., 210.)

We submit that there has not been an erroneous in-

terpretation of the Act, and that the Commission did not

abdicate.

As to whether the evidence adduced is sufficient ta

warrant the decision announced is not for the Court to

determine,

WEIGHT OF EVIDENCE.

In discussing the opinion of the Commission, counsel

for the carriers have urged as to many of their propogi-

tions, that there were no substantial findings of fact made

by the Commission in support of the conclusions ap.

nounced. That is also the burden of a large portion

of the Court’s opinion. As to orders of this character

the Commission is not required by statute to make de.

tailed findings in support of their conclusions. The Com.

mission has announced certain specific conclusions which

are sufficient to support its order. If there was no sub-

stantial evidence in support of those condlusions, of

course the order should fail. But if there was such evi-

dence, the order should stand. In considering the ree-

ord it is not within the province of the court to weigh

the evidence or to consider the wisdom of the order en-

tered. (New England Divisions Case—Akron, etc., R.

Co. v. U. S., .... U.S. ...., 67 L. ed. 308, 316; citing

Manufacturers R. Co. v. U. S., 246 U. S. 457; Skinner,

etc., v. U. S., 249 U. S. 557; Seaboard Air Line v. U. 8., 254

U S. 57.)

The probative weight attached to conclusions reached

by the Commission was expressed by Mr. Justice Lamar

in another proceeding, when an order of the Commission

was under attack, as follows:

The value of evidence in rate proceedings

‘necessarily varies according to circumstances but

the weight to be given it is peculiarly for the body

experienced in such matters and familiar with the

complexities, intracacies, and history of rate making

in each section of the country. * * *

‘It is true that the old low locals from Mobile

(west) to New Orleans were maintained, while those

POSE SAR Sey ey eT Oe pe een Se oe

from New Orleans (east) to Mobile were raised ig

not conclusive against the reasonableness of new

tariff put in force in 1907, But it was a fact tend-

ing to support the conclusion, unless the difference

was shown to have been warranted by proper rate.

making rules. * * *

“The order of the Commission restoring a local

rate that had been in force for many years, and mak-

ing a corresponding reduction in the through rate

was not arbitrary, but sustained by substantial,

though conflicting evidence. The courts cannot set-

tle the conflict, nor put their judgments against that

of the rate-making body, and the decree is reversed.’’

Interstate Commerce Commission v. Louisville &

Nashville R. R. Co., 227 U.S. 88, 57 L. ed. 431, .

436, 437.

In Interstate C. C. vy. Union P. R. Co., 222 U.S. 541,

the Court stated:

‘‘In determining these mixed questions of law and

fact, the Court confines itself to the ultimate ques-

tion as to whether the Commission acted within its

power. It will not consider the expediency or wis-

dom of the order, or whether, on like testimony, it

would have made a similar ruling. * * * Its con-

clusion, of course, is subject to review, but, when

supported by evidence, is accepted as final; not that

its decision, involving, as it does, so many and such

vast public interests, can be supported by a mere

scintilla of proof, but the courts will not examine

the facts further than to determine whether there

— evidence to sustain the order.’’ (Zd.,

548.

Under subsequent headings in this brief we shall have

weasion to review some of the essential facts tending to

apport the conclusions of the Commission.

Il. THERE IS NO GOVERNMENT ESTABLISHED PAS.

SENGER FARE OF 3.6 CENTS PER MILE.

Counsel for the railroads say in their brief before the

lower court:

‘“‘As stated above, by its decision in Inereased

Rates, 1920 (58 I. C. C. 220), the Commission had

established 3.6 cents per mile as the just and rea.

sonable rate for the transportation of passengers

throughout the United States. In Reduced Rates,

1922 (68 T. C. C. 676), the Commission, though im.

portuned to reduce passenger fares, reaffirmed its

decision that 3.6 cents per mile was just and rea.

sonable for the transportation of passengers,’’ Car.

riers’ Brief, p. 6,

This proposition is repeated in almost that same

phraseology 15 times in the carriers’ petition and brief

before the lower court.

The carriers have fallen into an error on this proposi-

tion. This constant reference by counsel to the estab.

lishment by the Commission of a 3.6 cents fare in 1920 is

fallacious in every instance where stated.

In the decision entitled ‘‘7nereased Rates, 1920,” supra,

to which the earriers refer, the Commission authorized

an increase of 20 per cent in all passenger fares, and the

term ‘‘passenger fares’’ was specifically interpreted to

mean not only the so-called standard local or interline

fares, but also excursion fares, convention fares, special

fares, commutation fares, ete. Consequently, instead of

establishing the rate of 3.6 cents the Commission in fact

established maximum fares for local, interline, excursion,

convention and other special occasions, for commutation

and other multiple forms of tickets, extra fares on lim-

ited trains and club car charges. (Jd., 242.)

The conclusions of the Commission in the said case as

to passenger fares were stated in the following language :

‘‘We conclude that increases as indicated next

below may be made by all steam railroads subject

to our jurisdiction serving the territory embraced

in the groups hereinbefore designated.

‘1, All passenger fares and charges may be in-

creased 20 per cent. The term ‘passenger fares,’

may be considered to include standard local or in-

terline fares; excursion, convention, ‘and other fares

for special occasions; commutation and other mul-

tiple forms of tickets; extra fares on limited trains;

club car charges,

"2. Exeess baggage rates may be increased 20 per

cent provided that where stated as a percentage of or

dependent upon passenger fares the increase in the

latter will automatically effect the increase in the ex-

cess-baggage charges,

3, A surcharge upon passengers in sleeping

and parlor cars may be made amounting to 50 per

cent of the charge for space in such cars, such charge

to be collected in connection with the charge for

space, and to accrue to the rail carriers.

“4. Milk and cream are usually carried in pas-

Senger trains, and the revenue therefrom is not in-

cluded in freight revenue. Rates on these commodi-

ties may be increased 20 per cent.’’ (Jd., 242.)

The average fare from all revenue passenger traffic

for the year 1919, which was available at the time of the

decision of the Commission in the case just cited,

amounted to 2.54 cents. In 1918, this was 2.42 cents;

and in 1920, it was 2.75 cents. (Basic figures are given

in the decision cited, Reduced Rates, 1922, 68 I. ¢. ¢.

676, 686, 727.)

Counsel for the railroads further say that in Reduced

Rates, 1922, supra, the Commission though importuned

to reduce passenger fares reaffirmed its decision tha

3.6 cents was ‘‘just and reasonable for the transportation

of passengers.’’ That statement is also erroneous. The

Commission recited extensive statements of fact, but

made no finding as to what would constitute reasonable

fares in the said case.

II]. THE FARES ORDERED BY THE COMMISSION WILL

BE HIGHER THAN THE AVERAGE FARE PAID ON

THE REMAINING PASSENGER TRAVEL OF THE

UNITED STATES.

The claim is made by counsel for the railroads that

the ‘established just and reasonable passenger fare’’ in

the United States is 3.6 cents per mile, that this is the

prevailing regular fare in all parts of the country, and

that the order of the Commision would produce an

exceptional class paying much less than practically all

the rest of the community,

The law is described prohibiting any discriminations:

“From time to time since the passage of the orig-

inal Commerce Act in 1887, Congress has by repeated

enactments and the most emphatic language prohib-

ited, with severe penalties, granting discriminatory

passenger rates under any terms or circumstances

to any persons whatsoever.”’ (Carriers’ Brief be-

fore the lower court, page 4.)

Then we are told that the only persons for whom ex-

eptions to these prohibitions have been allowed are min-

isters of religion, indigent persons hauled at the behest

of municipal governments, and inmates of national homes

for soldiers and sailors. The impression this recital

aves on one’s mind is that not all, but practically all

the people of the United States, with the few exceptions

of ministers, paupers, sailors and soldiers, must pay and

actually do pay the full 3.6 cents.

The carreirs claim that the particular type of scrip

book here ordered will affect travel now producing ap.

proximately $300,000,000 annually. If that be true jt

can be mathematically demonstrated that the reduced

fare paid by those who will use these scrip books js

higher than the average passenger fare paid by the re

maining 75 per cent of the travel in the United States,

In other words, 75 per cent of the passenger travel today

is on a lower plane, on the average, so far as charges

are concerned, than this decision of the Interstate Com.

merce Commission orders for those who must travel at

a minimum of 2,500 miles, which is approximately seven

or eight times the average travel per inhabitant of the

remaining people in the nation. This is a fact based upon

statistics of record and in the decision as follows:

Dividing $300,000,000 by 3.6 cents, we have the total

passenger miles thereby affected of 8,333,000,000. The

passenger miles for the first six months of 1922 were

16,487,000,000 (Ante, p. 10), and multiplying this by 2

makes the total of 32,974,000,000 for the year. (This is

the method adopted by the carriers to secure the esti-

mate for the year 1922.) Subtracting the 8,333,000,0M

from the total for the year leaves ?4,641,000,000 passen-

ger miles not affected by the Commission’s order.

(Please note, while 70 per cent of the revenue is not af-

fected by the order, approximately 75 per cent of the

travel—measured in passenger miles—will be unaffected;

24,641,000,000 compared to 32,974,000,000. )

It is stated by the railroads that the total passenger

revenue for the year 1922, was approximately $1,000,-

000,000. ‘Carriers’ Brief, page 85.) Subtracting the

$30,006,100, which the railroads say will be affected by

the Coimission’s order, leaves $700,000,000 unaffected.

Dividing this revenue of $700,000,000 by the passenger

miles not affected by the order (24,641,000,000) produces

2.84 cents as the average revenue per passenger mile of

the 75 per cent of the travel in the United States unaf-

fected by the order. This is lower than for the man

who purchases a scrip book and pays the fare on the

ordinary one trip ticket of 3.6 cents, less the 20 per cent

discount, or 2.88 cents per mile.

The foregoing computations are based upon the ecar-

riers’ own figures and estimates, not ours. Either they

are sound in every respect or the carriers’ estimates

are Wrong.

It is a striking fact that 75 per cent of the travel of the

United States is on a lower plane on an average today

than the fares ordered by the Commission at issue in this

proceeding. And yet we are told that this order creates a

preferred class and that those people purchasing the

srip book are going to have a lower charge than the

rst of the community obtains. There is an unfortunate

onfusion of terms here. Instead of using the phrase,

“standard ordinary’? fare, we ought to have used some

sich clause as the maximum or the highest charges for

passenger travel. The bulk of this travel that has to pay

the highest fare is made by the commercial traveling

wlesmen, these people who are so vitally necessary to

American industry; and in order to secure the fare sug-

gested, they must travel a minimum which is seven or

tight times the distance traveled by the average person

inthe United States, as will be demonstrated on a subse-

quent page.

ores gaa xb

There is no segregation of costs in the entire recor

to show how much of this 2.88 cents is profit, and how

much of the 2.84 cents is profit.

This computation demonstrates that instead of it being

the exceptional and the few who pay less than 3.6 cents,

the bulk of the traffic of the country today is hauled at

very substantially less than 3.6 cents per mile.

The expressions ‘‘standard fare’’ and ‘‘regular fare”

that the ordinary traffic pays are misnomers. The ayer.

age fare, the normal fare, in this country on which 75 per

cent of the travel moves today, is less than 2.9 cents

per mile.

It is true that widespread discriminations occasioned

the enactment of the Interstate Commerce law, and its

amendments. These discriminations existed in the freight

traffic as well as the passenger traffic. After the passage

of these laws, have we adopted a single ton mile revenue

in the United States for the freight traffic? Not at all,

Commodity rates exist in all parts of the nation, varying

with the character of the tonnage, the density and volume

of the tonnage, and many other factors.

When the Commission granted certain percentage in-

creases in freight rates in 1920, the resulting rates did

not become at that time a hard and fixed schedule, which

must be accepted as just and reasonable on all freight

traffic during the ensuing two years. If that were true,

the Commission could be excused from further perforn-

ance of their duties so far as hearing rate cases is cor-

cerned. As a matter of fact, the Commission has con

stantly received applications, taken evidence thereon, an

rendered decisions making both advances and reduction

in freight rates throughout all parts of the United State

Where the railroads or the C

lish commodity rates fair]

country, both the public

right that we should h

best interest of the ey

ommission fail to estab-

y reflecting the needs of the

and the railroads suffer. It is

ave these commodity

itire community,

that we should have our passenger f

fairly meet the needs of the public.

rates for the

‘And it igs right

ares adjusted to

IV. PASSENGER FARES MAY BE ORDERED VARYING

IN ACCORDANCE WITH THE CIRCUMSTANCES AND

CONDITIONS SURROUNDING THE TRAFFIC IN.

VOLVED.

. Counsel for the railroads state the following as their

leading proposition before the lower court:

‘In the resp? that the Commission’s order is an

arbitrary and unreasonable discrimination in fares

between scrip coupon passengers and regular fare

engers, it is beyond the power of the Commission

and lacks due process of law.’’ (Carriers’ Brief, 27.)

In support of this doctrine the carriers cite as their

leading case the Lake Shore decision. (Lake Shore ¢

Mich. So. v. Smith, 173 U.S. 684.)

Our reply to carriers’ proposition will be in substance:

1. A carrier cannot be heard in this Court to com

plain of the unconstitutionality of an Act, or of an order

thereunder, because of discriminations created among

the patrons of the railroad.

2. The Lake Shore Case and other decisions cited by

the carriers before the lowér court are not controlling

on the issues in this proceeding.

3. The weight of authority and the best interests of

the community support the validity of the Commission's

order at issue in this proceeding.

We shall discuss these propositions in the order named.

1, A CARRIER CANNOT BE HEARD IN THIS COURT TO COM-

PLAIN OF THE UNCONSTITUTIONALITY OF AN ACT, OR OF

AN ORDER THEREUNDER, BECAUSE OF DISCRIMINATIONS

CREATED AMONG THE PATRONS OF THE RAILROAD.

The railroad is not the injured party in any such dig

crimination as that described in the carriers’ proposi-

tion quoted previously; and the railroad therefore can

not be heard in this case to advance such an argument.

This principle has been constantly stated and reiterated

in the decisions of this Court. Various cases will be

described.

In Arkadelphia Milling Co. v. St. Louis S. W. Ry. Co.,

49 U. S. 134, it was claimed that the establishment of

lower than standard rates on rough material going to

companies later shipping finished products created an

wjust discrimination against shippers who did not ship

certain specific percentages of the finished product. The

benefit of the lower rough material rates accrued only

to those shippers who handled at least a certain percen

lage of the products manufactured from the rough mate-

al, over the line of the same carrier.

The district court sustained the defense upon the au-

thority of the Lake Shore Case, supra, and Cotting v.,

Kansas City Stock Yards Co., 183 U.S. 79.

The Supreme Court, however, stated that in its opinion

“the district court erred in its ruling. The rough

material rates were but parts of a general schedule

that covered a wide field. This schedule was estab-

lished in the exercise of the legislative authority of

the state, and could not be set aside by the court on

€ ground of discrimination unless it amounted to

a denial of the equal protection of the laws guaran.

teed by the Fourteenth Amendment.

“But there is nothing to show that the rough mate-

rail rates wrought any discrimination against the

railway companies. They were applicable upon all

railways alike. If there was—not in the least inti.

mating that there was—undue discrimination as

against small sbippers or those who had no occasiop

to obtain transportation for the manufactured prod.

uct over the line of the same carrier, this was not

a matter of which the railways could complain. It

is most thoroughly established that before one may

be heard to strike down state legislation upon the

ground of its repugnancy to the Federal Constitution

he must bring himself within the class affected by

the unconstitutional feature. Plymouth Coal Co. y,

Pennsylvania, 232 U. S. 531, 544; Jeffrey Mfg. Co.

v. Blagg, 235 U. S. 571, 576; Mallinckrodt Chemical

Works v. Missouri, 238 U. S. 41, 54; Cusack Co. y.

Chicago, 242 U. S. 526, 530.

“‘Lake Shore & Michigan Southern Ry. Co. y,

Smith, 173 U.S. 684, did not set aside this established

principle. The discrimination in favor of certain

patrons, there referred to, was laid hold of rather

as showing the unreasonable character of the regu-

lation. The authority of that case is not to be ex.

tended. Louisville & Nashville R. R. Co. v. Ken

tucky, 183 U. S. 503, 511; Pennsylvania R. Co. y,

Towers, 245 U.S. 6.’’ (Id., 148, 149.)

This same doctrine has been recognized repeatedly in

the decisions:

‘*So far as the present attack is founded upon

the commerce clause and the Act to Regulate Com.

merce, it is sufficient to say that the judgment under

review was not based upon a claim arising out of

interstate commerce, and hence plaintiff in error does

not bring itself within the class with regard to whom

it claims the act to be in this respect repugnant to

the Constitution and laws of the United States. Sea-

board Air Line R. Co. v. Seegers, 207 U.S. 73, 76;

Tyler v. Judges, 179 U. S. 405, 409; Hooker v. Burr,

194 U. S. 415, 419; Hatch v. Reardon, 204 U. S. 182,

160; Southern R. Co. v. King, 217 U. S. 524, 534;

Standard Stock Food Co v. Wright, 225 U. S. 540,

550; Rosenthal v. New York, 226 U. S. 260, 271.

peste

Farmers & M. Savings Bank v. Minnesota, 232 U. 8.

516, 530; Plymouth Coal Co. vy. Pennsylvania, 232

U.S. 531, 544." (MK. & 7. R. of Tex. v. L.C. Cade,

233 U. S. 648.)

‘‘The argument based upon such discrimination,

so far as it affects employes by themselves consid.

ered, cannot be decisive; for it is the well-settled

v. New York, 296 U.S. 260, 271; Darnell vy. Indiana,

226 U. S. 390, 398; Plymouth Coal Co, vy. Pennsyl-

vania, 232 U.S. 531, 544; Missouri, Kansas € Texas

Ry. v. Cade, 233 U. S. 642, 648.” (Jeffrey Mfg. Co.

v. Blagg, 235 U.S. 571, 576.)

In the Burnham, Hanna, Munger Case, the Interstate

Commerce Commission vy. Chicago, R. I. & P. et al., 218

U. S. 88, the carriers attempted to set up alleged dis-

criminations against certain trade centers that would be

caused by the order at issue. The Court was willing to

listen concerning the effect of the order on railroad rev-

enues, but declined to consider objections made by the

railroads because of the effect on shippers and trade

centers, saying:

‘““We have said several times that we will not lis-

ten to a party who complains of a grievance which

isnot his. Clark y. Kansas City, 176 U. §. 114, 118;

Smiley wv. Kansas, 196 U. S. 447." (Zd., 109.)

Counsel for the railroads in this ease recognized that

they would be subject to the same ruling relative to a

daim of discrimination were it not for the claim they

allege as to the confiseatory character of the schedule;

in fact, proof of the confiscatory or non-compensatory

character of the rates established becomes a necessary

part of the carriers’ case in this proceeding, as expressed

by counsel. After discussing the decision in Arkadelphig

Co. v. St. Louis S. W. Ry. Co., supra, counsel then pro-

ceed as follows:

‘*This case is no authority against our contention,

When the entire schedule of rates had been sustained

as not confiscatory, and hence not denying the rail-

roads due process of law, of course a railroad could

not raise the point that a particular class of shippers

was discriminated against and was denied the equal

protection of the laws. That is a question which the

shipper who was hurt must raise.’’ (Carrier’s Brief,

61.)

These comments of counsel for the railroads on the

Arakadelphia case are very significant, and almost de.

terminative in the disposition of the present proceeding.

This makes the controlling factor not the allegation of

discrimination, but the non-compensatory or confiscatory

character of the rates. This issue will be discussed

under a separate heading.

2. THE LAKE SHORE CASE AND OTHER DECISIONS CITED BY

THE CARRIERS BEFORE THE LOWER COURT ARE NOT CON.

TROLLING ON THE ISSUES IN THIS PROCEEDING.

The Michigan mileage book case to which we refer as

the Lake Shore Case, was quoted at great length and

relied upon by counsel for the carriers in their brief

before the lower court as the leading case on the issues

here involved. (Carriers’ Brief, 37-43-44-52-53-57-60-62.)

The Lake Shore decision is not in point. The court

there held that after the legislature had established by

statute one maximum rate on passenger traffic, the legis-

lature could not proceed to make exceptions. Congress

has never established any maximum passenger fare effec-

tive throughout the United States; nor has the Interstate

Commerce Commission.

Mr. Justice Peckham defined the issue in the Lake

Shore case in the following language:

‘“‘The question is presented in this case whether

the legislature of a state, having power to fix maxi-

mum rates and charges for the transportation of

persons and property by railroad companies, with the

limitations above stated, and having power to alter,

amend or repeal their charters, within certain limi.

tations, has also the right, after having fixed a maxi-

mum rate for the transportation of passengers, to

still further regulate their affairs and to discrimin-

ate and make an exception in favor of certain per-

sons, and give to them a right of transportation for

a less sum than the general rate provided by law.”’

Lake Shore Case, supra, 690.

This same thought is repeated several times in the deci-

sion.

The declaration of the Court was contingent on there

being such a general rate established by the state; and

that contingency has been restated in subsequent deci-

sions interpreting the Lake Shore Case.

The Court in restating the principle of the Lake Shore

case in Pa. R. Co. v. Towers, 245 U.S. 6, said:

“‘This court held that a maximum rate for passen-

gers having been established that rate was to be

regarded as a reasonable compensation for the ser-

vice and that the fixing of the less rate to particular

individuals was an arbitrary exercise of legislative

power and an unconstitutional interference with the

business of the carrier, the effect of which was to

violate the provisions of the 14th Amendment to the

Federal Constitution.” (Id., 10.)

Counsel for the railroads in this proceeding, realizing

the necessity to come under the rule of the Lake Shore

case, have stated and restated the following claim: The

Interstate Commerce Commission ‘‘established as the

just and reasonable rate for the transportation of pas.

sengers over the lines of your petitioners and other car.

riers the rate of 3.6 cents per mile, which rate of fare

accordingly became the established just and reasonable

rate for this service.’’ (Carriers’ Petition, 11.)

Counsel for the railroads have made a fundamental

mistake on this phase of the case. The claim that the

Commission had established a passenger fare of 3.6 cents

which was effective throughout the United States at

the time the order at issue was rendered, is erroneous, as

we have previously shown.

On June 24, 1918, the Director General of Railroads

ordered the so-called ‘‘minimum fare’’ of 3 cents per

passenger mile, at the same time cancelling mileage book

rates generally. However special fares were continued

or reinstated almost immediately, bringing the average

down to the figures previously quoted. Government con-

trol ceased February 29, 1920.

August 25, 1920, the Commission rendered a decision in

what is called Ex Parte 74, or ‘‘Increased Rates, 1920,”

supra. The Commission did not order a maximum

fare or a minimum fare of 3.6 cents per passen-

ger mile as counsel for the railroads declare 50

constantly, repeating the claim over and over again

in their petition and brief before the lower court. It

is true that they authorized certain increases in passenger

fares, but the percentage of increase was made applic.

cable not only to the 3 cent fare, but to the existing ex-

cursion, convention and other fares, commutation and

other multiple forms of tickets, extra fares on limited

trains, club car charges, also excess baggage rates; also

there was an advance of 50 per cent on surcharges in

sleeping and parlor cars. At no time has the Commission

singled out the 3.6 cent fare, “‘establishing that as the

just and reasonable passenger rate”? throughout the Uni-

ted States. Under a former heading we have reproduced

in full the conclus:uns of the Commission in that decision

o the subject of passenger fares,

A reading of this will show nothing approaching the

establishment of a single maximum passenger fare sim-

ilar to the action of the Michigan State Legislature.

It might be correct to Say that the average revenue

the Commission approved was 2.54 cents per passenger

nile (for the previous year) plus 20 per cent, or approxi-

mately 3.06 cents. That decision was rendered in 1920.

It happens that the average for the first six months of

1922 was 3.03 cents. But the Commission did not adopt

that flat figure, for there were very wide variations in the

fares approved by the Commission, which produced that

average.

There was a great volume of these passenger charges

ificially recognized and ordered by the Commission in

the paragraphs quoted which were below the 3 cent level.

They ranged from 2 cents to 3 cents per passenger mile.

At the time of this decision the Commission had before

it, a8 previously stated, the returns for 1919

vears,

and previous

The figures for 1918 and 1919, are contained in the

decision of the Commission in the case entitled, Reduced

Rates, 1922, 68 I. C. C. 676. Dividing revenue passenger

niles (p. 727) into passenger revenue (p. 686), it will be

noted that the average revenue per passenger mile in

119 was 2.54 cents: and in 1918, 2.42 cents. This will

demonstrate the wide range of passenger fares below the

Scent basis; and the Commission’s order in 1920 as

above quoted, authorized the 20 per cent increase in glj

of those fares, establishing the resulting figures ag the

maximum rates on passenger traffic. That decision was

rendered July 29, 1920, and was effective the latter part

of August, 1920. The decision in the case entitled Re.

duced Rates 1922, being Docket No. 13293, 68 I. C. ¢. 676,

was rendered May 16, 1922. In this last case, the Com.

mission presented an extended discussion of the passep-

ger revenues, but it made no order in regard thereto,

Instead of the present order constituting an exception

to a single mileage fare throughout the United States of

3.6 cents, we find ourselves confronted with an order

of the Commission which established maximum excursion,

convention, standard, local and interline fares and com.

mutation and other multiple forms of tickets throughout

the United States, 20 per cent greater than those pre-

vailing at the time of the decision.

Nationally, the situation is very analogous to the con-

dition existing in the State of New Hampshire reported

in State v. Railroad, 77 N. H. 425. In this case there

was an issue as to the constitutionality of the statute

establishing 500-mile mileage books at the rate of 2 cents

a mile, good for transportation of bearer over state rail-

road lines in the State of New Hampshire. The decision

of the Court in the Lake Shore Case was relied upon

as the controlling precedent against the validity of the

statute under consideration. However, the New Hamp-

shire court held that the circumstances were not the same,

the language of the court being as follows:

‘*From what has been said it follows that the case

Lake Shore etc. Ry. v. Smith, 173 U. S. 684, relied

upon by the defendants, is not now in point. That

case does not hold that a legislative enactment fix-

ing a maximum mileage rate is illegal, but expressly

admits the existence of such power, citing cases some

of which are hereinbefore referred to. In that case,

as stated in the opinion (p. 690), the question pre-

sented was ‘whether the legislature of a state, having

power to fix maximum rates and charges for the

transportation of persons and property by railroad

companies * * * hag also the right, after having

fixed a maximum rate for the transportation of pas-

sengers, to still further regulate their affairs, and

to discriminate and make an exception in favor of

certain persons, and give to them a right of trans-

portation for a less sum than the general rate pro-

vided by law’ and the point decided is expressed as

follows (p. 696): ‘The legislature having fixed a

maximum rate at what must be presumed, prima

facie, to be also a reasonable rate, we think the

company then has the right to insist that all per-

sons shall be compelled to pay alike—that no dis-

crimination against it in favor of certain classes

* * * shall be made by the legislature.’

“Tt is not alleged in the instant case that the

legislature has fixed any maximum rate which must

prima facie be considered reasonable. In fact, the

legislation as to mileage tickets is understood to

be the only instance of a legislative attempt to fix a

rate. Clough v. Railroad, ante, 222, 232. So far as

the legislature has acted, two cents a mile is the

maximum rate. If that is a reasonable rate, there

is no discrimination. If it is unreasonable, confisea-

tory, the defendants have a remedy upon proof of

the fact. As the record is now presented, it is un-

necessary to further consider the federal case cited

which binds this court so far as it correctly declares

the federal law as now expressed.’’ (Jd., 429, 430.)

In view of the error on the part of counsel as to the

existence of the nationally established fare of 3.6 cents

per mile, and the resulting mistake in attempting to

rly on the Lake Shore decision as a precedent, there is

little occasion for further consideration of the Lake Shore

Case,

However, such constant reference has been made to

the decision by counsel, that we feel constrained to fur.

ther discuss various other phases of this decision.

The Lake Shore case involved a law which is distip.

guishable from the order of the Commission now under

consideration for the following reasons, in addition to

those basic differences previously stated:

First: The Michigan act provided for the establish

ment of mileage books, while the present order concerns

scrip coupon tickets. These two have certain essential

characteristics which are similar; on the other hand, the

scrip book is different from the mileage book.

It was found that the scrip book had all the advan.

tages of the mileage books; and certain other practical

difficulties which would arise from the use of an inter.

changeable mileage ticket will not arise from the use

of an interchangeable scrip-coupon ticket. (Com. Dee,

202.) Illustrating this difference between the mileage

book and scrip book, we cite the following extract from

the brief filed on behalf of all the railroads before the

Interstate Commerce Commission, this extract being a

statement made before the House of Representatives by

Representative Huddleston, as appearing on page 10,455

of the Congressional Record of June 29, 1923:

‘*T suppose the committee thought the commercial

travelers were easy to fool, for they amended the

bill by inserting the language ‘or scrip coupon tick-

ets’ after the mileage-book phrase. This was a com

plete change in the purpose of the bill. for a serip

coupon ticket is as much like a mileage book as a

Kentucky saddle horse is like a spotted bull. They

have no relation to each other. The mileage book is

composed of units each of which is good for a mile

travel. A scrip coupon ticket is composed of units

to be used in place of money to purchase tickets.”

(Br. of Carriers, p. 83.)

aco WR

The carriers have scrip books in effect today. This

js shown on the record before the Interstate Commerce

Commission at pp. 91 and 139. (Same brief, p. 16.)

It is further shown that only 1 per cent of the carriers’

passenger revenues are derived from these serip books

which are currently in use. These were originally ‘‘es-

tablished by the director general and were perpetuated

by the carriers after Federal control partly to relieve

the congestion at ticket offices in the larger cities, and

partly to take the place of the mileage book and thus af

ford the public the convenience of boarding trains for

short trips without the necessity of purchasing a ticket

at the ticket office for each trip.’’ (Commission decision

page 205.)

At the time of the Commission’s decision these scrip

coupon tickets, in denominations of $15, $30 and 90, sold

at the standard fare and were interchangeable among

practically all carriers by rail, except electric and short

line carriers. (Com. Dec., 205.) The Commission’s

order in this proceeding also excepts the electric and

short line carriers.

Second: The Lake Shore case extended the time dur-

ing which the tickets should be in force for a period of

two years; while the present order is limited to one year.

Third: The Michigan statute permitted all members

of the family to use the mileage book; while the Commis-

sion’s order in this case makes no such broad extension

of the use of the tickets.

Fourth: The Michigan statute provided a different

basis for northern and southern Michigan; while the

present order makes no classification geographically or

territorially, but applies the 20 per cent to existing fares

as they are adjusted in the different parts of the country.

Fifth: The Michigan statute caused a reduction from

POR at an! Pom DE) aa ee “NESE oun Ry AT. wp M6 RY RD ory Oe

the so-called standard fare of 334 per cent; while the

order at issue in this proceeding involves a reduction of

20 per cent.

Siath: The record so far as shown in the decision jy

the Michigan case, evidenced an exception, a lower

charge for the special class described than for the regt

of the community; and that special rate was 334 per cent

below what all the rest of the community paid; whereas

the record in this case, as we have shown previously,

demonstrates that 75 per cent of the travel of today is

being carried at a lower rate, on an average, than the one

ordered by the Commission, and eonsequently the order

does not create an exception analogous to the circum.

stances in the Lake Shore case.

It would seem that the state legislature of Michigan in

allowing the ticket to be used by the entire family and

to last for two years, did in fact fail to create a fair, just

classification.

That some of the items of distinction listed above were

considered of importance by the Supreme Court in reach-

ing its conclusion in the Lake Shore case, supra, is evi-

denced by the following extracts from the Court’s deci-

sion:

‘*Tt assumes to regulate the time in which the tick

ets purchased shall be valid and to lengthen it to

double the period the railroad company has ever be-

fore provided. It thus invades the general right of

a company to conduct and manage its own affairs,

and compels it to give the use of its property for

less than the general rate to those who come within

the provisions of the statute, and to that extent it

would seem that the statute takes the property of the

company without due process of law. Jd. 691.

‘“‘The act also compels the company to carry, not

only those who choose to purchase these tickets, but

their wives and children, and it makes the tickets

good for two years from the time of the purchase.

If the legislature can, under the guise of regulation,

provide that these tickets shall be good for two

years, why can it not provide that they shall be

good for five or ten or even a longer term of years?”’

Both factors—the number of people who were to use

the ticket, and the length of time it was in foree—seemed

to impress the Court.

‘Regulations for maximum rates for present

transportation of persons or property bear no re-

semblance to those which assume to provide for the

purchase of tickets in quantities at a lower than the

general rate, and to provide that they shall be good

for years to come. This is not fixing maximum

rates, nor is it proper regulation. It is an illegal

and unjustifiable interference with the rights of the

company.’’ (Jd. 694.)

This Court has held the decision in the Lake Shore

case Shall not be extended beyond the circumstances in

that case (Arkadelphia Co. v. St. L. 8S. W., 249 U.S. 134;

Pennsylvania R. Co. v. Towers, 245 U. S. 6), and the

Court has also held that certain doctrines announced in

the Lake Shore case were to be considered overruled, if

in conflict with the decision of the case referred to.

(Pennsylvania R. Co. v. Towers, supra.)

Further, we believe that the principles stated in the

lake Shore case are not sound; that they are in con-

fict with the doctrines announced in many other decisions

which have become well established in the law; that the

wid principles are dicta so far as they extend beyond

the issues of the Lake Shore case; and lastly, that the

facts and circumstances in that case, as previously out-

lined, distinguish it from the one at bar.

The broad, sweeping generalizations used by Mr. Jy.

tice Peckham are of such a character that they would

very seriously embarrass the whole field of goverment

regulation of common carriers if they had become estab.

lished and recognized by subsequent decisions. Forty.

nately, they have not become the accepted law.

The decision rendered by Justice Peckham is based

upon the theory that no classification of passenger trafic

can be made, and not upon the claim that the case pre.

sented an unwarranted classification. This distinction

becomes very marked if one follows the reasoning of the

Court. We believe the correct doctrine recognized in

other decisions is that a variation in rates, though it con.

stitutes what we term a discrimniation, does not become

an unlawful discrimination by virtue of that fact, but

that there must be something more; and that it is just

and lawful for rates to vary with the circumstances and

conditions. If the rates are established by the Govern.

ment, there must be a justification for the classification

of the shipments or passengers; and if there is sucha

justification, the law is constitutional and valid.

Mr. Justice Peckham briefly mentions, in passing, the

arguments as to wrongful classification. The weight of

his entire discussion is concentrated, however, on the

proposition that the state once having established one

rate for all people to pay, the Government must then

rest, and can make no changes as to groups or classes

of shippers or passengers whether the classification is

just or unjust. The thought is reiterated over and over

in the decision.

This decision has never been followed as a controlling

precedent on the broad doctrine there stated.

Mr. Justice Peckham would have had it that if the leg-

islature or the Commission fixes one rate that rate must

be for the entire community, and then it must cease all

attempt to control the charges in the passenger traffic

until it makes another horizontal change for everybody.

Fortunately, no such theory has ever been injected into

our discussion of freigh: rates, and it is gradually being

abandoned in our discussion of passenger fares.

Illustrating the character of the principles upon which

Mr. Justice Peckham relied in the Lake Shore case, we

all attention to the following passages :

“The legislature having fixed a maximum rate

at what must be presumed, prima facie, to be also

a reasonable rate, we think the company then has

the right to insist that all persons shall be compelled

to pay alike, that no discrimination against it in

favor of certain classes of married men or families,

excursionists or others, shall be made by the legis-

lature.’’ (Jd., 697.)

“If the legislature can interfere by directing the

sale of tickets at less than the generally established

rate, it can compel the company to carry certain

persons or classes free.

“Tf the maximum rates are too high in the judg-

ment of the legislature, it may lower them, provided

they do not make them unreasonably low as that

term is understood in the law; but it cannot enact a

law making maximum rates and then proceed to

make exceptions to it in favor of such persons or

classes as in the legislative judgment or caprice may

seem proper.’’ (Jd. 694, 695.)

In contrast with the foregoing declarations, we call at-

tention to the later decision of this Court in the Towers

case, to the following effect:

“That the State may fix maximum rates govern-

ing one-way passenger travel is conceded. Having

the general authority to fix rates of a reasonable na-

ture, we can see no good reason for denying to the

State the power to exercise this authority in such

manner as to fix rates for special services different

from those charged for the general service.”’ (Pg,

R. R. Co. v. Towers, supra, p. 11.)

The principles stated above by Mr. Justice Peckham,

speaking for the Supreme Court in the Lake Shore cage,

do not constitute the recognized and established law

concerning this subject, and to the extent that such prin.

ciples go beyond the particular circumstances of that

case, the decision should certainly not be accepted as a

precedent; and further, where it is felt that the circun-

stances are analogous in another case in which the eyi-

dence tends to show a just classification of passengers or

shippers, then in such a case the Lake Shore decision

should be overruled as was done in the Towers case.

The decision in the Lake Shore case, supra, was ren-

dered by a divided court, the Chief Justice and Justices

Gray and McKenna dissenting.

The decision has been subjected to much criticism sub-

sequent to that date. An attempt to qualify and inter.

pret the decision was rendered by a western state court

in a case entitled Jn re M. G. Gardner, 84 Kan. 264, 113

Pace. 1054; 33 L. R. A. (N. 8S.) 956. The Supreme Court

of Kansas had under consideration and held invalid a

law of that state, requiring carriers to haul the Kansas

National Guard when in the performance of military

duty at the rate of one cent per mile; the court quoted

at length from the Lake Shore case, supra, and then

commented as follows:

‘‘This court is not inclined to the view that the

power of the legislature is completely exhausted by

a maximum rate regulation, and does not so inter-

pret the decision quoted. But members of the Na-

tional Guard cannot be segregated from the body of

the state’s citizens, and made a preferred class, unless

Be se Aces h ant es Pate ee eee aire reranain nance aeletne

PSR en: : , DATS

they sustain some relation to transportation by rail,

which, in the nature of things, indicates they should

have the benefit of an exceptional rate. Classification

to be valid must be based upon differences in char-

acter, condition, or situation which lead to that

difference in regulation which the statute undertakes

tomake.’’ (Jd., 958.)

The court then proceeded to discuss the case involving

reduced rates for school children on street cars entitled,

Comm. v. Interstate Colsolidated St. Ry. Co., 187 Mass.

436,11 L. R. A. (N. S.) 973, 73 N. BK. 530, Commenting

on it the Kansas court declared:

“This court neither approves nor disapproves the

conclusion reached in that case, but the method em-

ployed for testing the classification upon which the

rate was based is sound.’’ (Jd., 958.)

Subsequent events have confirmed the conclusion of

this court.

In another case involving special fares for the militia

wherein the defense that the law was non-compensatory

was waived, a decision was reached practically opposite

to that of the Kansas court just quoted.

The law required railroads to haul members of the Na-

tional Guard at the rate of one cent per mile. During

the trial no evidence was taken to sustain the allegations

made by the carrier that the rate was non-compensatory

ow confiscatory in character. At the opening of the trial

counsel stated: ‘‘The defendant at this time waives any

defense or contention made under paragraphs seventh

and eighth of its answer.’’ State of Minn. ex rel. v. Chi-

cago, M. & St. Paul R. Co., 118 Minn. 380, 137 N. W. 2,

WL, R. A. (N. S.) 524, 526,

The court very clearly recognized the propriety of a

tassification and the establishment of a lower rate for

a given class if that classication be just. On this propo.

sition the Court stated:

‘*We cannot conceive of any violation of any pro.

vision in either Federal or State Constitution where

the state requires a railway company to carry its mili-

tary force for a fair and reasonable compensation,

The mere fact that a maximum passenger rate has

been fixed at 2 cents per mile does not prove that a

lower rate is not compensatory or reasonable under

certain conditions. On the contrary, we think it

should be assumed, till the contrary appears, that

the rate of 1 cent per mile established by the act is

valid, and to be valid implies that the compensation

is a just and fair equivalent for the service required.

But the express waiver of inadequate compensation

as a defense takes out of the case the contentions

that the law deprives the railway company of its

property without due compensation or without due

process of law, and that defendant, for that reason,

is not given equal protection under the laws.”’’ State

of Minn. ex rel. v. Chicago, Mil. € St. Paul R. Co,

118 Minn. 380, 1387 N. W. 2, 41 L. R. A. (N.S) 524,

526.

On the further question of the discriminatory char.

acter of the act in question, the court said it presented a

more doubtful issue, but it held that the discrimination

could not be interpreted as against the railway company,

‘if this be discrimination at all it is against the travel-

ing public generally and in favor of the state.’’ The

court said that the Kansas court had overlooked the

finding of the Supreme Court of the United States to

the effect that a discrimination in favor of the state is

not illegal. It relied upon the decision of the Supreme

Court in the Consolidated Gas Company case.

**In Wilcox v. Consolidated Gas Co., 212 U. S. 139,

53 L. Ed. 382, 29 Sup. Ct. Rep. 192, 15 Ann. Cas.

1034, where a legislative act was attacked as dis-

criminatory, the syllabus, in part, is: ‘Provision in

a gas rate act establishing one rate for the munia-

pality and another for individual consumers is not

an unreasonable classification, and does not render

the act unconstitutional under the equal protection

clause of the 14th Amendment. Where none of the

different classes of consumers complain of differ-

ent rates, the corporations cannot complain of such

differences, provided the total receipts are sufficient

to yield an adequate return.’’’ (Jd. 527.)

The Massachusetts case cited above will receive fur-

ther consideration later. At this time we shall review

the extended list of mileage book cases which the counsel

for the carriers brought together in their brief, in an at-

tempt to indicate the wide acceptance of the doctrines

of the Lake Shore decision.

REVIEW OF CARRIERS’ SO-CALLED MILEAGE BOOK DECISIONS.

In the carriers’ brief, an attempt is made to present

an analysis of decisions concerning mileage books. The

review commences with the following declaration on

page 36:

“The principle of the mileage book or serip-cou-

pon ticket at a lower rate has been condemned as

an arbitrary and unjust discrimination in the fol-

lowing decisions.”’

After discussing numerous cases, counsel state on

page 53 :

‘The above are all the cases dealing directly with

mileage or scrip-coupon tickets. There are, how-

ever, a number of important decisions directly based

upon other special forms of passenger fares in

which this point has been considered.”’

Then follows a list of other cases. Counsel may not

have intended these comments as to all intermediate

tases cited ; and yet the text would so indicate.

We shall undertake a brief analysis of these so-called

mileage book cases in the order used by counsel:

1, Jn re Mileage Books, 28 1. C. C. 318, 323:

The charge made by counsel for the carriers that the

Commission in this case condemns the mileage book as

‘fan arbitrary and unjust discrimination,’’ is wholly un.

founded. If it were an unjust discrimination it would be

unlawful, and yet the Commission recognized the fact

that it was lawful. The Commission held that it had

no power to require the carrier to maintain such a tariff,

This was before the present statutory requirement.

2. Proposed Increases in New England, 49 I. 6. ¢

421:

In this case it is true that the Commission found great

abuse in the practice relative to mileage books in New

England, which was severely condemned. It is also true

that the Commission found party rate tickets subject

to great abuse in the same territory:

‘*The General Passenger Agent of the Boston and

Maine, testified that the 12-trip tickets, which are

said to be sold in no other part of the country, result

in greater abuse than any other form of ticket. ” (Id.

445.)

However, the Commission did not condemn the mile-

age books as constituting an unjust discrimination, but

instead they authorized a continuance of mileage books

at one-tenth to one-eighth cent below the standard fare,

so-called; and also the Commission authorized 25-trip

family tickets at one-half cent per mile below the regular

one-way ticket. These family tickets were to be usable

all over the Boston and Main Railroad and throughont

Massachusetts. (Jd. 445-446.)

3, Lake Shore & Michigan Southern Ry. Co. v. Smith,

173 U. S. 684:

The carriers describe this as ‘‘the leading case.’’ It is

not in point for the reasons which we have stated quite

extensively elsewhere.

4, Beardsley v.N. Y., L. E. dé W. R. R., 162 N. Y. 230;

56 N. E. 488:

This case involved a statute requiring the issuance

of mileage books for a thousand miles. Without dis.

massing the principles involved, the New York court ac-

cepted the decision in the Lake Shore case as controlling.

Ina concurring opinion, Mr. Justice Vann stated:

‘This case is necessarily governed by the princi-

ples laid down by the Supreme Court of the United

States in Railway Co. v. Smith, 173 U. S. 684, 19

Sup. Ct. 565, 43 L. ed. 858. While I do not yield

assent to the reasoning of that great court in that

case, I am compelled to yield to its power, and vote

for reversal, but not for a dismissal of the com-

plaint. As the action of the courts below was in

accordance with the law of this state as it was, ap-

parently, if not actually, when they acted, the re-

versal should be with leave to the plaintiff to apply

at special term for permission to discontinue with-

out costs, on the ground that the further prosecu-

tion of the action has been made impossible by a con-

trolling decision not rendered by a court of this

state.’’ (Id. 489.)

The carriers omit reference to another New York

tase involving mileage hooks, which is known as the

Purdy case, which we shall discuss later.

5. Commonwealth vy. Atlantic Coast Line R. R., 105

Va. 61; 55 S. E. 572:

In this case there were some very burdensome regula-

tions involved, requiring the carriers at all stations both

where they stopped regularly and where they stopped on

flag, to be kept open day and night for the sale of mile.

age books. The books were good for all members of

the family as well as for the purchaser.

6. State v. Great Northern Ry., 17 N. D. 370; 116 N.

W. 89:

This decision involved a statute providing a general

passenger fare of 24 cents, and a mileage book fare of 2

cents, and consequently is not in point in the present pro.

ceeding for the same reasons that the Lake Shore case

is not in point.

7. State v. Bonneval (La.), 55 So. 569:

This case is analogous to the Lake Shore ease, in part.

There was a maximum fare law prescribing a 3-cent fare.

The carriers were maintaining, voluntarily, a 24-cent

mileage book rate; but the state attempted to prescribe

certain rules and regulations, amongst which was the

requirement that the said mileage ticket should be good

for any member of the family of the holder of the book.

On the precedent of the Lake Shore case the court heli

the statute unreasonable. In the present controversy no

such issue is presented. The rules and regulations pro-

posed by the Commission have been accepted by all par-

ties.

8. Chicago R. I. & P. Ry. Co. v. Ketchum, 212 Fed.

986 :

This case does not involve mileage books, but con-

cerns excursion tickets to a state fair; further, the court

found the rates non-compensatory.

‘‘There is no conceivable chance of profit to the

railroad company which would make this law valid.”

(Carriers’ Brief, 45.)

9. Northern Pacific Ry. Co. v. North Dakota, 236 U. S.

585 :

This case involved coal rates and is not a mileage book

ease. Further, it involved a requirement, according to

the digest of the railroad counsel ‘‘to transport it (the

commodity) at a loss or without substantial compensa-

tion’? (Carriers’ Brief, p. 46.)

10. Atlantic Coast Line R. R. vy. North Carolina Cor-

poration Commission, 206 U.S. 1:

This ease did not involve mileage books at all, but con-

cerned train schedules.

ll. Vandalia R. R. v. Schnull, 255 U.S. 113, 119:

This case was not a mileage book case—it involved

freight rates on groceries,

12. Norfolk € W. Ry. v. West Virginia, 236 U.S. 605,

608, 609:

This case was not a mileage book case, but involved

aflat passenger fare on all traffic. The operating ratio

on passenger traffic was 97.42 per cent, and that included

express traffic. The leading witness for the state admit-

ted that if express traffic were excluded, the passenger

traffie would be handled at or about cost.

13. Chicago, Milwaukee & St. Paul R. R. v. Wiscon-

sn, 238 U. S. 491:

This is not a mileage book case, but involved a statute

virtually requiring the carrier to make a gift of an addi-

tional herth to a passenger if the upper were not oeen-

pied, which is rather far-fetched as a case in point in our

present discussion.

14. Railroad Commissioners of Georgia v. Louisville

é Nashville R. R. Co. (Ga.), 80 S. BE. 327:

This was not a requirement as to the establishment of

mileage books, but it did require the railroads to permit

the tearing off of the coupons on the trains where the

carriers themselves sold the mileage books or scrip-con.

pon tickets.

15. State v. Maine Central R. R. Co. (N. H.), 92 Atl,

837.

In this proceeding the carriers have sadly distorted

the findings of the Supreme Court of New Hampshire,

saying:

‘‘The only question raised or decided, however,

was as to the sufficiency of the fare, it being con.

tended that the statute was confiscatory.’’ (Car.

riers’ Brief, 53.)

As a matter of fact the New Hampshire court cites the

Lake Shore case, supra, and directs specific attention to

the distinguishing feature comparing the Michigan and

New Hampshire statutes in that the latter had not pre-

scribed any general maximum passenger fare prior to

the enactment of the mileage book legislation.

That concludes what the carriers say constitutes ‘‘all

the cases dealing directly with mileage or scrip-coupon

tickets.’’ This long list of so-called mileage book cases,

when simmered down, may be summarized as follows:

Seven of them, or almost one-half the total number,

do not concern the validity of requirements for the issv-

ance of mileage books.

Two of them—the Louisiana and the North Dakota

decisions—involve the validity of mileage book legisla-

tion, but like the Lake Shore case, they are not in point,

because there is also a general statutory maximum fare

in effect, thereby coming under the alleged rule of the

Lake Shore case, and by that very reason being dis-

tinguished from the pending litigation.

None of the cases cited by the carriers deal with inter-

changeable scrip-coupon books.

Only two of the decisions involved statutes relative to

mileage books not accompanied by a general law in the

same state prescribing a single maximum passenger fare.

One of these (State v. Maine Central, supra), held con-

trary to the claims of the carriers in the pending case;

and the other (Commonwealth vy. Atlantic Coast Line,

supra), held in their favor. The latter case, however, in-

volved a very unusual law, described as follows:

‘The Virginia mileage Act requires the companies

at all times, day and night, at all stations, regular

and flag, to keep on sale books of 500 miles and over,

and that ‘it shall be unlawful for any transportation

company or corporation operated by steam to charge

or collect a greater sum than two cents per mile on

such mileage books, and such mileage books shall be

good and valid for the use of any dependent house-

hold member of the family of the party to whom is-

sued, dwelling under the same roof, within one year

from the date of same.’’’? Commonwealth v. Atlantic

Coast Line R. Co., 105 Va. 61, 7 L. R. A. 1086, 1093.

We shall supplement the foregoing list of cases with

certain decisions that the carriers have omitted from

their list, and also with a few leading cases in which the

fundamental principles involved are very ably stated.

The force of the Beardsley, New York case is very ser-

iously weakened by the subsequent Purdy decision,

which carriers fail to mention in their analysis,

The Purdy Case, 162 N. Y. 42; 56 N. B. 508.

Counsel for the carriers cited the case of Beardsley v.

New York, etc., supra, but neglected to cite in their list

of mileage book cases another decision (Purdy v. Erie R,

Co., supra), rendered approximately at the same time by

the same court, (the Beardsley case being decided March

2, 1920, and the Purdy case, February 27, 1900). In this

later case the Court of Appeals of New York sustained

the constitutionality of the law establishing mileage

books in that state as applying to companies incorporated

subsequent to the enactment of the legislation. There

had been an amendment to the previous law passed in

1895, but the court found that all changes were favorable

to the railroads and held that the defendant company

should be required to keep mileage books for sale in ac

cordance with the provisions of the law. ‘‘The author.

ity to construct and operate a railroad is not the natural

right of a citizen, but a franchise proceeding from the

favor or grant of the state. As a condition of such grant,

the legislature might require the company to transport

passengers at any prescribed rate of fare.’’ (Jd., 45.)

The decision was concurred in by the Chief Justice,

Gray, Bartlett, Vann and Werner. Justice Martin con.

curred in the result. There was no dissent.

The Purdy case, supra, was appealed to the Supreme

Court of the United States. (185 U.S. 146, 46 L. ed. 847,

22 Sup. Ct. Rep. 605.) The Supreme Court did not pass

upon the alleged violation of the 14th Amendment be-

cause it was held that the issue had not been properly

raised in the federal courts.

Horton v. Erie, 72 N. Y. Supp. 1018.

Minor v. Erie, 171 N. Y. 566.

The precedent established in the Purdy case as de-

cided in the Supreme Court of New York was followed

in Horton v. Erie, 65 App. Div. 587, 72 N. Y. Supp. 1018,

and Minor v. Erie, 171 N. Y. 566, 64 N. E. 454, which the

carriers also omitted from their analysis.

Duluth Street Railway Co, v. Railroad Commission of

Wisconsin, .. Wise. .., 152 N. W. 887.

The principle of the mileage book as announced in the

Lake Shore case was invoke? vy the Duluth Street Rail-

way Company in a case ar.sing in Wisconsin, involving

an order that six tickets should be sold for 25 cents upon

the street railway. The Supreme Court of Wisconsin

refers to the ruling in the Lake Shore case concerning

discriminations against the purchasers of the ordinary

one trip ticket, and concerning the principle that the law

does not recognize wholesale and retail rates in matters

of transportation and then holds as follows:

‘“‘It is argued that here a discrimination is prac-

ticed between those who desire to purchase only a

single ride and in favor of those who are able and

willing to invest 25 cents in tickets. To so hold would

amount to carrying the doctrine of discrimination to

a ridiculous limit. The idea that it is a burden on any

one who desires to patronize the street railway com-

pany to invest 25 cents in tickets is pretty far-

fetched.’’ (Jd., 894.)

Counsel’s imposing list of mileage book cases becomes

rather weak on analysis. Only one of the decisions is by

the Supreme Court, and that one has been subjected to

very serious criticism by other decisions of this Court,

as well as by those of other courts, both state and federal.

Under the following heading we shall present a review

of a few of the leading decisions of the various courts

which have dealt with the basic issues involved in this

proceeding.

faba: Spas kita ah ahi 84g. 23 OE a

3. THE WEIGHT OF AUTHORITY AND THE BEST INTERESTs

OF THE COMMUNITY SUPPORT THE VALIDITY OF THE coy.

MISSION’S ORDER AT ISSUE IN THIS PROCEEDING.

In Pennsylvania Railroad Company v. Towers, 1%

Maryland 59, 94 Atl. 330, the power of the State Commis.

sion to establish rates after having once established a

maximum fare was squarely at issue; it was claimed that

the State Commision had thereby exhausted its authority

and could not make different rates under different con.

ditions. The court says the contention of the plaintiffs

may have been in this regard ‘‘that while it might be

within the power of the legislature and therefore by dele.

gation, within the power of the Public Service Commis.

sion, to regulate and establish the single rate fare, yet

when it had done so, it had exhausted its power and could

not thereafter make any regulation whatever to affect

either mileage or communtation rates, and for this claim

there is warrant to be found in the language used in the

decision of the Lake Shore & Mich. So. Ry. v. Smith, 173

U. S. 684, in which Mr. Justice Peckham elaborately dis-

cusses the question of the validity of an act of the Michi-

gan Legislature, which was intended to regulate the price

of 1,000-mile tickets, and holds that in attempting so to

do the Michigan Legislature had exceeded its powers.”

(Id., 94 Atl. Rep. 332.) Upon referring to the several de-

cisions, the Court said:

‘“‘Tt was contended in argument on behalf of the

Public Service Commision that, while not in terms

overruled, the effect of the decision in the Lake Shore

case, supra, had been very much weakened, if not

entirely done away with, by other and later deci:

sions. Since the argument of this case, however,

the Supreme Court of the United States has ren-

dered opinions in three cases, which clearly show

that in the view of that Court the decision in the

Lake Shore case is still in full foree.’’ (Jd., 94 Atl

333.)

However, after reviewing these decisions the Mary-

land Court concludes ‘‘From these citations it will

be apparent that the limitations placed upon legislative

action do not go to the extent of saying that the estab-

lishment by state authority of a maximum single rate ex-

hausts the power of state regulation, or that there may

not be different rates for different characters of serv-

ice”? (Id., 94 Atl. 335.)

Upon appeal to the Supreme Court of the United

States, the same leading issue was discussed and de-

cided.

In the Towers case, (Pennsylvania R. v. Towers, 245

U.S. 6), the basic question we have at issue was tersely

stated by the Court in the following words:

‘*The question, as counsel for plaintiff in error

states it, is whether a state legislature, either di-

rectly or through the medium of a public service

commission, under the guise of regulating commerce,

may compel carriers engaged in both interstate and

intrastate commerce to establish and maintain intra-

state rates at less than both the interstate and intra-

state standard and legally established maxima. It

is asserted that there is no constitutional authority

to compel railroad companies to continue the sale

of commutation or special class tickets at rates less

than the legally established standard or normal one-

way single passenger fare upon terms more favor-

able than those extended to the single one-way trav-

eler.’’ (Jd., 9.)

The Court through Mr. Justice Day then proceeds to

outline the position of counsel for the carrier:

“‘To maintain this proposition plaintiff in error

relies upon and quotes largely from the opinion of

this Court in Lake Shore € M.S. R. Co. v. Smith, 173

U.S. 684. In that case a majority of this court held

a statute of the State of Michigan to be invalid. 4

previous statute of the state had fixed a maximum

passenger rate of three cents per mile. The statute

in controversy required the issuing of mileage books

for a thousand miles, good for two years, at a legs

rate. This Court held that a maximum rate for pas-

sengers having been established, that rate was to be

regarded as the reasonable compensation for the

service, and that the fixing of the less rate to par.

ticular individuals was an arbitrary exercise of leg.

islative power and an unconstitutional interference

with the business of the carrier, the effect of which

was to violate the provisions of the Fourteenth

Amendment to the Federal Constitution by depriv-

ing the railroad company of its property without

due process of law and denying to it the equal pro-

tection of the law.

‘‘The Lake Shore Case did not involve, as does

the present one, the power of a state commission to

fix intrastate rates for commutation tickets where

such rates had already been put in force by the rail-

road company of its own volition, and we confine

ourselves to the precise question presented in this

ease, which involves the supervision of commuta-

tion rates when rates of that character have been

voluntarily established by the carrier. The rates

here involved are wholly intrastate. The power of

the states to fix reasonable intrastate rates is too

well settled at this time to need further discussion

or a citation of authority to support it.

‘In Interstate Commerce Commision v. Baltimore

€ O. R.Co., 145 U.S. 263, this Court held that a ‘party

rate ticket’ for the transportation of ten or more per-

sons at a less rate than that charged a single indi-

vidual did not make a discrimination against an in-

dividual charged more for the same service, oF

amount to an unjust or unreasonable discrimination

within the meaning of the Act to Regulate Commerce.

In the course of the opinion the right to issue tickets

at reduced rates good for limited periods upon the

—-. «sb —_ es —

principle of commutation was fully recognized. See

pp. 277-280.

‘‘Having the conceded authority to regulate in-

trastate rates, we perceive no reason why such power

may not be exercised through duly authorized com-

missions and rates fixed with reference to the par-

ticular character of the service to be rendered.

“In Norfolk & W. R. Co. v. Conley, 236 U. S. 605,

608, “ * * after making reference to Northern

P. R. Co. v. North Dakota, 236 U. S. 585, this Court

said :

‘“““Tt was recognized (in the North Dakota case),

that the state has a broad field for the exercise of its

discretion in prescribing reasonable rates for com-

mon carriers within its jurisdiction; that it is not

necessary that there should be uniform rates or the

same percentage of profit on every sort of business;

and that there is abundant room for reasonable

classification and the adaptation of rates to various

groups of services.’

‘That the state may fix maximum rates governing

one-way passenger travel is conceded. Having the gen-

eral authority to fix rates of a reasonable nature,

we can see no good reason for denying to the state

the power to exercise this authority in such manner

as to fix rates for special services different from

those charged for the general service. In our opin-

ion the rate for a single fare for passengers gener-

ally may be varied so as to fit the particular and

different service which involves, as do commutation

rates, the disposition of tickets to passengers who

have a peculiar relation to the service.’’

The Court outlines the differences in service due to the

wer cost of labor in making and selling a ticket of 100

ides, the commuter traveling many times for short-dis-

imees, and the public policy involved in the building up

fsuburbs dependent in part upon these commutation

fires,

‘After such recognition of the propriety and neec-

essity of such service, we see no reason why a state

may not regulate the matter, keeping within the lim.

itation of reasonableness.’’

The Court then makes an extract from a New York

decision (People v. Public Service Commission, 159 App,

Div. 531, 145 N. Y. Supp. 503), in which there is an ex.

tended review of the decisions dealing with this isgye

which is also pertinent to the present inquiry. The New

York Court said in part:

‘*The law at issue ‘empowers’ the Commission to fix

reasonable and just rates for such service. It is

urged, however, that the statute is invalid under the

rule of Lake Shore &d M.S. R. Co. v. Smith, 173 U.8,

684, 43 L. ed. 858, 19 Sup. Ct. Rep. 565. In that case

the statute of Michigan had fixed a maximum pas.

senger rate at three cents per mile. A subsequent

enactment required the issuing of mileage books for

1,000 miles, good for two years, at a less rate. The

court held that having fixed a uniform maximum rate

as to all passengers, such rate was the reasonable

compensation for the service, and that the fixing of

a less rate to particular individuals was an unrea-

sonable and arbitrary exercise of legislative power;

that it was not for the convenience of the public and

thus within the police power, but was for the con-

venience of certain individuals who were permitted

to travel upon the railroads for less than the reason-

able rate prescribed by law; that the law was, there-

fore, in violation of the Fourteenth Amendment of

the Federal Constitution in depriving the company

of its property without due process of law and by

depriving it of the equal protection of the laws:

‘‘In Beardsley v. N. Y., L. E. d W. R. Co., 182

N. Y. 230, the Court of Appeals felt constrained by

the Smith case to declare the Mileage Book Law of

this state invalid as to companies in existence at

the time of its passage, but in Purdy v. Erie R. Co,

162 N. Y. 43, that law was held valid as to companies

organized after the statute was passed.

“In Louisville & Nashville R. Co. v. Kentucky,

183 U. S. 503, after citing the Smith case and like

Sm ee eg =

= AT rieach [

ESS

eases, the court says (at p. 511): ‘Nor yet are we

ready to carry the doctrine of the cited cases beyond

the limits therein established.’

‘‘In the Minnesota Rate Cases (Simpson v. Shep-

ard), 230 U. S. 352, the legality of an order of the

Commission of that state was recognized which fixed

a maximum freight rate and passenger rate, the lat-

ter at 2 cents a mile, as the maximum fare for pas-

sengers twelve years of age or over, and 1 cent a

mile for those under twelve years of age.

‘*In Interstate Consol. Street R. Co. v. Massachu-

setts, 207 U.S. 79, * * * the Massachusetts law

prescribing special rates less than the maximum for

school children was held valid. These cases indi-

cate that the Smith case is not to be extended beyond

the facts upon which it rests.

“The Smith case distinguishes itself from this

case where the court (at p. 693) says: ‘This act is

not like one establishing certain hours in the day

during which trains shall be run for a less charge

than during the other hours. In such case it is the

establishing of maximum rates of fare for the whole

public during those hours, and it is not a discrimina-

tion in favor of certain persons by which they can

obtain lower rates by purchasing a certain number

of tickets by reason of which the company is com-

pelled to carry them at the reduced rate, and thus,

in substance, to part with its property at a less sum

than it would be otherwise entitled to charge. The

power to compel the company to carry persons un-

der the circumstances as provided for in this act,

for less than the usual rates, does not seem to be

based upon any reason which has hitherto been re-

garded as sufficient to authorize an interference with

the corporation, although a common carrier and a

railroad.

“Our flourishing cities owe their position and

prosperity, in part, to the commutation rates for su-

burban service; the health and welfare of the public

are concerned that people doing busines in laree

cities may live in the country where the surround-

ings are pleasanter. more healthy and to the advan-

tage of themselves and their families. It is a know,

fact that such rates exist upon all railways entering

large cities, and have usually been established by

the companies voluntarily in the interest of them.

selves and the public. The service is different ip

its nature from the other passenger service. It js

so universal, of such large proportion, has become

so necessary to the public that it cannot be said that

the fixing of reasonable and just rates for it is un.

usual or unreasonable, or the granting of a benefit to

individuals and not for convenience to the pub

lic.’’ (Id., 9-15.)

Public policy constituted an important factor in the

New York case.

Mr. Justice Day then cites the Commutation Rate

Case, 21 I. C. C. 428, wherein ‘‘the authority of the Con.

mission to fix reasonable rates was sustained.’’ An ex.

tract from the Commission’s opinion distinguishing that

case from the Lake Shore Case was quoted; and the

court concludes:

‘‘The reasoning of these decisions is sound and

involves no violation of the Federal Constitution

True it is that it may not be possible to reconcile

these views with all that is said in the opinion de.

livered for the majority of the court in the case of

Lake Shore & Michigan Southern Ry. Co. v. Smith,

supra. The views therein expressed which are in-

consistent with the right of the states to fix reason.

able commutation fares when the carrier has itself

established fares for such service, must be regarded

as overruled by the decision in this ease.’’ (Jd. 17.)

A subsequent appraisal of the situation has been made

by a Federal court, as follows:

‘“*Tf there was ever any doubt of the right of such

a commission to fix a rate for a particular servic

under special conditions at a figure less than the

maximum allowed for such general service (Lake

Shore Railroad v. Smith, 173 U. S. 684, 693, 19 Sup.

« aa

Ct. 565, 43 L. Ed. 858), that doubt cannot survive the

decision in Pennsylvania Railroad vy. Towers, 245

U. S. 6, 17, 38 Sup. Ct. 2, 62 L. Ed. 117, L. R. A.

1918C, 475.’ Tennessee v. U. S., 284 Fed. 371, page

375.

The principle of the Lake Shore case was invoked by a

railroad company in a case entitled The Southern Rail-

way Company v. Atlanta Stove Works, 128 Ga. 207. The

ourt held the Lake Shore ease was not in point.

While not dealing specifically with this case in the fol-

lowing extract, the language of the court explains very

aptly the power of a commission to deal with economic

and industrial conditions,

“We recognize the carrier’s right to manage its

internal affairs by reducing its tariff below the com-

mission rate, and that such low rate affords no basis

for an arbitrary reduction of the commission’s max-

imum standard to the voluntary low rate of the car-

rier. But we do contend that the commission, in the

discharge of its duty to fix reasonable rates, is not

precluded from the consideration of economic con-

ditions recognized by the carriers in the conduct of

their business. The full purpose of the creation of

the commission would be thwarted if it could not

consider and act on every economic or industrial

factor potentially influencing the operation of a rail-

road and the transportation of freight. It cannot

act arbitrarily, nor by edict produce abnormal con-

ditions of trade; it cannot display favoritism by ca-

priciously giving preferential rates to one locality

which are denied to another. It may, however, rec-

ognize the traffic conditions between given points,

and adjust its schedule to meet these conditions. If

this is done in good faith, and upon sufficient rea-

son, the rate fixed for the special conditions would

not be discriminatory, because not applied to other

localities, where the special conditions do not exist.

Circular 309 does not discriminate against persons

or classes of persons by charging one a greater or

less rate for the same service than is charged for

mor gts A Sieh. seen reanel 5 - ERE aaa = ‘

Webern Ae 8 ae MO at, pe aCe me te Cree Mts

all other persons similarly situated. It is an adapts.

tion of rates to meet certain economic and industrial

conditions in certain localities.’’

A ease that has attracted much attention in the vari.

ous decisions is entitled Massachusetts v. Interstate Con.

solidated Street Railway Co., 187 Mass. 436, 73 N. E.

530; 11 L. R. A. (N. S.) 973. Concerning the particular

issue in which we are here interested the court cited the

Lake Shore case as holding that ordinarily the legisla-

ture has not the power to compel an exception from the

ordinary rates in favor of.a certain class of citizens,

However, the Massachusetts court proceeded to say:

‘Tf the difference is founded on a reasonable dis.

tinction in principle such discrimination does not

deny the equal protection of the laws. Opinion of

Justices, 166 Mass. 589, 34 L. R. A. 58, 44 N. E. 625;

Pacific Exp. Co. v. Siebert, 142 U. 8. 339, 35 L. Ed.

1035, 3 Inters. Com. Rep. 810, 12 Sup. Ct. Rep. 250;

American Sugar Ref. Co. v. Louisiana, 179 UV. §.

89, 92, 45 L. Pd. 102, 103, 21 Sup. Ct. Rep. 43.’ (Id.

11 L. R. A. N. S. 973, 977.)

This is an extract from the opinion of the Massachv-

setts Supreme Court considering the constitutionality

of a statute requiring the carrier to haul school children

at half fare. The reasoning of the court upon this issue

is quite suggestive:

‘Tn this case the selection of a class is not entirely

arbitrary. The education of children throughout

the Commonwealth is a subject for legislation which

has occupied the thoughts of our lawmakers from

early times. The duty of legislatures and magis-

trates to be diligent in the promotion of education,

among all the people, is specially declared in Chap.

5, §2, of the Constitution of the Commonwealth.

Compulsory attendance of children in the schools is

provided for by our laws. Rev. Laws, Chap. 4,

{1. Money may be appropriated by cities and towns

for conveying pupils to and from the public schools.

Rev. Laws, Chap. 25, §15. It cannot be said that

the legislature may not concern itself with the trans-

portation of children to the public schools in the in-

terest of popular education, just as it provides such

children with books and other necessary articles.

Rev. Laws, Chap. 42, 35. So far as this statute

merely gives help to these pupils in connection with

their acquisition of knowledge in the schools, it is

justified. As a police regulation in the interest of

education, the law may well require street railway

companies to permit these children to ride to school

upon their cars, without profit to the companies, pro-

vided it can be done without causing them loss. But

if such a requirement involves expense, the cost can

only be put upon the general taxpayers. It cannot

be imposed upon the street railway companies, or

upon that part of the public which pays fares to

street railway companies. If, therefore, it plainly

appeared that the enforcement of this section would

cause expense to street railway corporations, which

they must bear themselves, or put upon other classes

of passengers in the form of increased fares to make

good the loss from carrying school children at half

rates, we should be obliged to hold that there was a

taking of property without due process of law,

through unconstitutional discrimination.

‘“We are, therefore, brought to the inquiry

whether it was possible for the legislature to con-

clude that this provision would entail no loss upon

the street railway companies. Was it not possible

for legislators to decide that pupils, in most cases,

go to and from the public schools at hours when the

cars are not in use by persons going to and from

their work, or by many persons; that the pupils gen-

erally are of such age and size as not individually

to occupy nearly so much space as other passengers;

that the difference between full fare and half fare

is of such importance to the parents of many of these

pupils, that the number who would ride at the half

rate, would be nearly if not quite twice as many as

at the regular rate; and that for these and other rea-

; ies As -

sons, railway companies would suffer no loss from

carrying the children at half the regular fare? Up.

less we can say as matter of law that such a view

: would be untenable, we cannot hold that the statute

is unconstitutional. Nothing less than a certain

that the provision would cause loss to the railway

companies, or to some of them, would enable us to

hold that the legislature was powerless to make the

requirement. The question is difficult and doubtful,

It involves the consideration of facts which primar.

ily are for the law-making power. All presumptions

are in favor of the validity of legislation. The evi-

dence offered by the defendant had no tendency to

show that it would suffer loss by carrying these

: pupils at half the regular rates. For all that appears,

it would be in better financial condition at the end of

) a year, if it carried the children in compliance with

the statute, than if it did not carry any of them. We

hesitate to say that our lawmakers could not pass

f the act as one which would put no financial burden

: upon anybody.

‘‘Tt has come to our notice in former cases, that

before this statute was passed, similar conditions

were sometimes imposed by towns in connection with

grants of locations, and were accepted with seeming

willingness by the railway corporations.

‘*We are of opinion that the law is constitutional.”

(Id., 977, 978.)

The decision of the Massachusetts Court was sustained

by the Supreme Court of the United States in Jnter.

state Cons. St. Ry. Co. v. Mass., 207 U. S. 79.

This Court affirmed the Massachusetts Court not on the

issue of the constitutionality of the act, but because the

company had accepted its charter ‘‘subject to all the du-

ties, liabilities and restrictions set forth in all general

laws now or hereafter enforced relating to street railway

companies’’ and so forth, and therefore the company

was bound by it in the opinon of the Supreme Court. Mr.

Justice Holmes, however, for himself, discussed the con-

stitutionality of the act; and Mr. Justice Harlan con-

carred in holding the law constitutional, as not denying

qual protection of the laws or taking property without

due process of law. Mr. Justice Holmes concurred hesi-

tatingly because of the revenue feature.

‘“‘The objection that seems to me, as it seemed

to the court below, most serious, is that the statute

unjustifiably appropriates the property of the plain-

tiff in error. It is hard to say that street railway

companies are not subjected to a loss.’’ (Jd., 86.)

—-— ’

The Justice refers to the conventional fare of 5 cents

adding :

‘Whatever fare, the statute, fairly construed,

means that children going to or from school must

be carried for half the sum that would be reason-

able compensation for their carriage if we looked

only to the business aspect of the question.’’ (Jd.,

86.)

—" owe SS Mw

In this discussion there is not a suggestion of the argu-

ment of counsel for the carriers in this case, that such

kgislation is unconstitutional because of discrimination

tetween classes. The revenue issue, the question of con-

fscation, was the factor that caused the hesitation on the

part of the Justice.

eS we er

The case was followed as a precedent in Fitzmaurice

\.New York, N. H. € H. R. Co., 192 Mass. 159, 6 L. R. A.

N.S.) 1146, 116 Am. St. Rep. 236, 78 N. BE. 418.

The principle of the Massachusetts case was followed

inSan Antonio Traction Co v. Altgelt, (Tex. Civ. App.)

18. W. 106, which was affirmed on appeal in 200 U. S.

iM, 50 L. ed. 491, 26 Sup. Ct. Rep. 261. The Texas law

mas similar to the Massachusetts statute. The company

‘

>»

Bearer:

did not raise the issue in its pleadings that the reduction

would seriously impair its revenues.

A city ordinance in Richmond, Virginia, requiring the

school children to be carried at a reduced rate, was con-

tested rather as to the interpretation of the ordinance

than as to its legality. The ordinance was sustained in

Northrup v. Richmond, 105 Va. 335, 53 S. E. 962.

In the Commutation Rate Case, 21 I. C. C. 428, decided

in 1911, these issues and most of the cases in point were

extensively considered by the Interstate Commerce Com.

mission. A commutation ticket has certain basic similari-

ties to a scrip coupon ticket. The distinguishing char-

acteristic is that the commutation ticket is usually ap-

plicable between two points only, in conjunction with

many other short hauls of like character close to some

large city, while the scrip coupon ticket is applicable

generally throughout the United States, or some large

portion of the same. The elements of similarity are that

both tickets provide rates lower than the ordinary sin-

gle trip charge; that the users of both of these tickets

travel in the same cars, and in the same trains as those

paying the full fare on each trip, and that both are jus-

tified on the grounds of public policy and because of

the larger volume of travel than that of the average

person paying the full fare, thereby reducing the cost per

unit.

Commutation fares were in force by the carrier prict

to the order by the Commission. The matter in contro-

versy in the Commutation Rate Case, supra, was de

scribed as follows:

‘‘Where, as in this case, the sole substantial ques

tion is as to the reasonableness of the commutation

fares offered by a carrier to the suburban communi-

ties which it serves, it is contended that the carrier

is not accountable to the Commission under the act

to regulate commerce so long as such fares are not in

excess of its maximum full fares between the same

points for its general passenger service, provided

the latter are in themselves reasonable. It is in-

sisted that a carrier fully meets its obligations to

the public by establishing a reasonable fare for a

single one-way passage, and that it cannot be com-

pelled to carry the public or any part of the public

at a wholesale or lower fare than is reasonable for

a single one-way journey; but that it may, at its

pleasure, and without interference by the Commis-

sion, sell transportation at certain times, or to cer-

tain points, or in a certain quantity, at less than

the normal fare, provided only that such special fares

are open to all persons who may wish to take advan-

tage of them.’’ (Jd., 432.)

Among the many cases cited and discussed in the Com-

mutation Rate Case, we find both the Party Rate Case

and the Lake Shore Case, involving the Michigan Statute

as to mileage books.

The real matter at stake in the Commutation Rate Case

is very similar to the principle we have under consid-

eration at the present moment. The Commission de-

scribed the issue very definitely:

“If the normal one-way fare between two points

is itself reasonable for the service performed on a

one-way journey, is the Commission excluded by the

terms of Section 22, as is contended, from the con-

sideration of the question whether under Section 1

the lower commutation fare is a reasonable charge

to make for the daily service back and forth between

the same points?’’ (Jd., 437.)

Concluding its discussion of the subject the Commis-

sion held :

“Tn Interstate Commerce Commission v. B. & O.

R. R. Co., 145 U. S. 263, it is intimated that in fram-

ing the act to regulate commerce the Congress did

not intend to ignore the principle that one can sell

at wholesale cheaper than at retail. * * This

being so, we see no reason why the reasonableness

of the fares demanded for the service may not be

looked into by the Commission under Section 1,”

(Id., 443.)

The Commission held it had jurisdiction over the sub.

ject. This decision has never been successfully attacked

and it has been constantly used as a precedent establish.

ing a basic principle in commerce practice. If the estab.

lishment of lower than maximum ordinary passenger

fares in and of itself creates an unlawful discrimination

this conclusion could not have stood the test. At the pres-

ent time the carriers have in effect interchangeable mile.

age scrip books, and the Commission, in the absence of

any additional legislation, might have prescribed reason-

able fares. But in addition to that we have the additional

statutory requirement that the Commission shall pre.

scribe such fares.

The Commission makes the following statement rela-

tive to mileage books:

“It seems to be settled under that section (22)

that a carrier may enter upon the policy and practice

of issuing mileage books and excursion tickets at less

than its regular normal fare for the one-way jour-

ney, and, having adopted such a policy, may subse-

quently withdraw from it and refuse longer to issue

such tickets.’’ (Jd., 437.)

This comment of the Commission in the Commutation

Rate Case was made, of course, prior to the amendment

involved in this proceeding.

If it be claimed that the comment of the Commission

went to the constitutionality of such a law, it may be

added that the Commission made a similar comment pre-

yiously as to both party rate tickets and as to commuta-

tion tickets. We shall discuss the party rate matter

later. In Sprigg v. B. d O.,8 I. C. C. 443, the claim of

the complainant was that if a carrier has sold commu-

tation tickets for a considerable period, it may be com-

pelled to continue to sell them at less than the gen-

eral public fares. Concerning this claim, the Commis-

sion stated :

‘‘There is no legal basis for such a contention.

If we had full rate-making power as ample and

complete as that possessed by the Congress, we

could not make such an order. We could in that

case prescribe a rate which would be reasonable for

everybody to pay * * * but we could not under

any circumstances compel the granting of a special

and lower rate for the benefit of a particular class.’’

Sprigg v. B. € O. R. R. Co., 8 1. C. C. 443, 452, 453.

And yet in the Commutation Rate Case, the Commis-

sion, citing this very paragraph ruled directly to the

contrary. The attitude of the carriers and their closely

knit compact organization, with the natural conse-

quences thereof, have compelled this gradual expansion

of the jurisdiction of the Commission.

Referring to the Sprigg case, the Commission said:

‘‘The report in the case seems to have been un-

derstood as a denial by the Commission of its au-

thority to control Commutation Fares.’’ (Jd., 435.)

At that time (in 1900) ‘‘the commission was without

authority to enter an order fixing a reasonable rate for

the future.’’ (Jd., 436.)

Summing up the decision in the Sprigg Case, the Com-

mission said :

“On the whole, we are unable to regard the case as

decisive of the question now before us, and, so far

Sk OSS eee ee ae SRE NTR I ON + PARE RST LAS ae

EEN J Rs et ee Oe 5 he > . -

as it conflicts with the conclusions here reached, must

be understood as now being overruled.’’ (Jd., 436.)

Prior to the enactment of the law here under consid.

eration it is possible that the Commission did not have

the affirmative authority to require scrip book coupon

tickets to be issued at reasonable rates. A develop.

ment of the law on this and kindred subjects has been

along the lines of granting adequate power to the Com.

mission to care for the interests of the public in a rea.

sonable manner.

The decision of the Court in the Towers case, supra,

and the decision of the Commission in the Commutation

Rate Case, supra, have been based upon the facts there

involved, which included the existence of commutation

fares at the periods when the decisions were rendered.

In other words the Court and the Commission did not go

to the extent of saying that in the absence of any com-

mutation fares being charged by the carriers the Com.

mission or the state would have the power in the first in-

stance of requiring the establishment of such fares. Hov-

ever, they have not held the Commission lacked the power

to make such orders. That issue was simply undecided

and was unnecessary to be decided upon the records pre-

sented.

In the Commutation Rate Case the Commission ex

pressed it as follows:

‘A carrier that has not undertaken a commuta-

tion service may possibly not be compelled to do so

under the present law; that question is not before

us and is not therefore considered.”’

That case, however, was decided on the basis of the law

as it was then worded and did not involve the constitu

tional issue. Since then we have this amendment to Seo

tion 22 of the Act under which the present order was

entered.

In freight traffic at no time, to our knowledge, has the

Court or the Commission ever held that the Commission

lacked the power to require a commodity rate to be estab-

lished. Class rates prevailing as the standard ordinary

charge for the movement of the many different articles

shipped may be modified at any time by the Commission

ordering the establishment of a commodity rate, provided

the facts and circumstances warrant the same. The power

exists, the sole question being the reasonableness of the

exercise of that authority. Likewise as to passenger

traffic, once the statute is enacted, certainly the power

exists.

The Party Rate case, 145 U. S. 263, 36 L. ed. 699 has

been pivotal in the handling of this subject, involving

the justice and reasonableness of the establishment of

lower than standard fares. The Interstate Commerce

Commission held ‘that so-called party rate tickets, sold

at reduced rates, and entitling a number of persons to

travel together on a single ticket or otherwise, are not

commutation tickets within the meaning of Section 22

of the Act te ReguJate Commerce, and that when the

rate at which such tickets for parties are sold is lower

for each member of the party than rates contemporane-

ously charged for the transportation of single passen-

gers between the same points, they constitute unjust dis-

imination, and are therefore illegal.’’ .

The Commission ordered the Baltimore & Ohio Rail-

toad Company to cease and desist from charging lower

tales for persons traveling together in one party than

those contemporaneously charged by the same carrier

for the transportation of single passengers between the

same points. But their conclusion was not sustained by

the Supreme Court. In freight traffic, for many years, all

have recognized the propriety of adjusting rates on dif.

ferent commodities or on the same commodity in accord-

ance with the circumstances and conditions surrounding

the traffic.

The propriety of applying the same basic principle to

passenger traffic was fully recognized by the Court re.

viewing the action of the Commission in the Party Rate

Case.

‘Tt is not all discriminations or preferences that

fall within the inhibition of the statute; only such

as are unjust or unreasonable. For instance, it would

be obviously unjust to ¢gharge A a greater sum

than B for a single trip from Washington to Pitts.

burgh; but if A agrees not only to go but to retum

by the same route, it is no injustice to B to permit

him to do so for a reduced fare, since the services

are not alike, nor the circumstances and conditions

substantially similar, as required by Section 2 to

make an unjust discrimination.’’ Interstate C. C.v.

B. & 0., 145 U. S. 268, 36 Law ed. 703.)

Specifically as to mileage tickets the Court said:

‘‘In other words, whether the allowance of a re-

duced rate to persons agreeing to travel one thov-

sand miles or to go and return by the same road isa

‘like and contemporaneous service under substan-

tially similar conditions and circumstances’ as is

rendered to a person who travels upon an ordinary

single trip ticket. If it be so, then, under state laws

forbidding unjust discriminations, every such ticket

issuéd between points within the same State must

be illegal. In view of the fact, however, that every

railway company issues such tickets; that there is

no reported case, state or Federal, wherein their

illegality has been questioned; that there is no such

case in England; and that the practice is universally

acquiesced in by the public, it would seem that the

issuing of such tickets should not be held an unjust

discrimination or an unreasonable preference to the

persons traveling upon them.’’ (Jd., 279.)

The Court even went further than is usual in freight

rate cases in declaring that no such injury would result

from the establishment of the lower basis of rates as to

passenger traffic which might result in a similar action as

to freight traffic:

The Court, in this case, quoted from several English

decisions in support of the doctrine adopted. The un-

derlying principle of the cases, is that in order to con-

stitute unjust discrimination, it must be ‘for a like and

contemporaneous service in the transportation of a like

kind of traffic, under substantially similar circumstances

and conditions.’’ (Jd., 281.)

In closing the Court says:

“In short, the substance of all-these decisions is

that railway companies are only bound to give the

same terms to all persons alike under the same con-

ditions and circumstances, and that any fact which

produces an inequality of condition and a change

of circumstances justifies an inequality of charge.

These traffic acts do not appear to be as comprehen-

sive as our own, and may justify contracts which,

with us, would be obnoxious to the long and short

haul clause of the Act, or would be open to the charge

of unjust discrimination. But so far as relates to the

question of ‘undue preference,” it may be presumed

that Congress, in adopting the language of the Eng-

lish Act, had in mind the construction given to these

words by the English courts, and intended to in-

corporate them into the statute. McDonald v. Hovey,

110 U.S. 619. * * *

“Upon the whole, we are of the opinion that party

rate tickets, as used by the defendant, are not open

to the objections found by the Interstate Commerce

ommission, and are not in violation of the Act to

ae RE NEPA PDI AR y Bony

Regulate Commerce, and the decree of the court be.

low is, therefore, affirmed.’’ (Jd., 284.)

If certain of the doctrines of the Lake Shore decision,

not necessary to the determinat

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