Petitioners Reply in Brief — Arrow Transportation Co. v. Southern Railway Co.

Office-Supreme Court, U.S,

FILED

e

LWKARY

JOHN F. DAVIS, CLERK

IN THE

Supreme Gourt ofthe Waited State

Ocroser TERM, 1962

No. 430

” a

ARROW TRANSPORTATION Company, a corporation,

O. J. Watts, d/b/a O: J. Watts Company, ~

JOHN D. BAGWELL FarMs AND HATCHERY, INc.,

a corporation, :

Crry OF GUNTERSVILLE, ALABAMA, 28

Petitioners

v.

SouTHERN Rai.war CoMPANY, a corporation,

_ LovrmsvILLe & NASHVILLE Rarroap CoMPANY, ;

a corporation,

Sr. Loun-Bin FRANCISCO RAILWAY COMPANY,

a corporation,

. Sr ABOARD ATR LINEs RatLroaD CoMPaNy, a corporation,

: tee : Respondents

y fees

4

PETITIONERS’ BRIEF IN REPLY TO BRIEF OF ©

SOUTHERN RAILWAY COMPANY

OPPOSING CERTIORARI

Of Counsel: Donat MAcCLEAY ‘ ks

Sirote, Permutt, Friend Macleay, Lynch, Channing &

and Friedman Bernhard :

First Federal Building 1625 K Street, N. W.

Birmingham, Alabama Washington 6, D. C.

ARNES OHN C. LovertT.

pir Sg Ait hee Lovett and Lovett —

Gun ille, Alabama - Benton, Kentucky

Attorneys for Petitioners

Pazss or Braos 8S. Apans, Wasuineron, D. C.

— 4;

et enn

IN THE

— Court of the United States

OcToBER TERM, 1962 ° ;

No. 430

ARROW TRANSPORTATION COMPANY, a corporation,

O.2 J. WALLS, d/b/a O. J. WALLS Company,

JOHN D. BAGWELL FARMS AND HATCHERY, Ie,

a corporation,

City OF GUNTERSVILLE, ALABAMA,

Petitioners

v.

SoUTHERN RamWway ComMPANY, a corporation,

LOUISVILLE & NASHVILLE RAILROAD COMPANY,

a corporation,

Sr. Lovuis-San FrRANcIsco RAILWAY COMPANY,’

a corporation,

Srapoarp Air Lines RAtLRoAD COMPANY, a corporation,

Respondents ]

/

4

ee

PETITIONERS’ BRIEF IN REPLY TO BRIEF OF

SOUTHERN RAILWAY COMPANY

OPPOSING CERTIORARI |

d STATEMENT /

Southern’s brief contains numerous /

fact which are so foreign to the record and so grossly

counsel may be

s

(* ‘

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9

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below ,and before the L.C.0>° Southern’s effort to

“minimize the importance and novelty of: the legal issue

2

presented evidences a-decided reluctince to face up to

ong of the, most’ important, and as yet unanswered,

legal questions.which have grown out of the“regulation

of rail rates sinee enactment of the National Trans-

portation Policy. This importance is underscored by.

the Commission’s*declaration on January 5, 1962, that

issues involved in the suspended Yates are of general

991 ¢ ;

transportation importance’’. e

a

7 THE RATES INVOLVED

The rates under suspension are not the product of

laudatory benevolence as Southern contends. Rather

{hey represent a cold blooded effort to destroy com-

petition and monopolize the grain traffic into the

Southeast. Southern is not mefely- passing on to the

public legitimate savings which acerue from genuine

technological developments and a ‘far reaching trans-

portation innovation”, Technological progress and

transportation innovations have not yet wrought

changes in railroading which make it cheaper to haul

grain by rail than by barge.» And it is not a fact that

the destruction of barge transportation, the elimination?

of waterways as arteries of commerce? and the’ aban-

donment of communities, facilities, and’ industries

. % . a .

geared to barge transportation are simply the inevitable

results of progress in transportation.

On the contrary, the proposed rates, which are 65%

below the level of existing rail rates-on which millions

°

1 Evidently the other ecieeeliaaas do not intend to oppose the

issuance of the writ. This reply, therefore, is being filed prior to

the expiration of the period allowed by Rule 24(1) for filing of

Respondents’ briefs in opposition to the petition.

7]

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ce)

of bushels of grain move, are a classic example of that

tvpe of selective ‘rate é¢utting which the National:

Transportation Policy has outlawed, The proposed.

rates apply only from specified origins on the Ohio

and Mississippi Rivers to specified destinations in the

Southeastern states and intermediate points; they do

not apply to rail shipments from the Tennessee River

portsjand thus discriminate against those ports. They

apply only to shipments of 450 tons or more; thus,

those small businessmen who are unable to receive,

unload, stor and pay’ for 450 tons (about 16,000

bushels) of rail grain at one time will be seriously

prejudiced vis a vis their larger and wealthier com-

petitors.? The tariffs provide a $2.40 per ton minimum

rate which is absolute up to 346 miles; hence, the short

haul shipper is vietimized by discriminatory rates

Which require him to pay the same rate as the.Jong haul

shipper“. And, contrary to the statement on page 9

_of Southern’s brief, the rates are not limited to grain

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in the “Big John’? cars. For every other railroad

serving the South they would apply to \ordimary

hopper and standard box cars.

An single exaniple will demonstrate the destructive

effect of these rates. In Arrow Transportation Co. v.

United States, 176 F. Supp. 411 (N.D. Ala. 1959),

aff'd per curiam, 361 U.S, 353 (1960), the three judge

court used Orangeburg, S.C. as a typieal destination

for illustrative purposes. Let us.use the same city.

3 bay present rail rate from the Mississippi River

pe

rt of St. Louis to Orangeburg, a distance of 847

2 376 grain operators in 8 southern states formed an Association

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‘soley to’ protest the proposed rates. Most were concerned about

the threat to the small businessman.

3 See King Aff. P. 49.

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miles, is $12.50 per ton. Southern’s proposed rate is

$5.27. The rail rate from the Tennessee River port

of Guntersville, Alabama, to Orangeburg, a distance on

only 385 miles, is $6.00 per ton. It would not be

changed by the suspended tariffs. Under the suspended

rates, if Arrow made the 586 mile barge haul from St.

Louis to Guntersville without charge and, in addition,

transferred the grain from barge to rail car without

charge, the barge-rail movement would still cost the

shipper 63 cents per ton more than the all-rail haul

(King Aff. R. 50). al

The struggle between the barge lines and the rail-

roads is not a struggle between equals. Arrow handles

few commodities (of which grain is by far the most

important) and these only between river ports. On the

other hand, the traffie Southern handles in competition

with Arrow is a very small proportion of its total traffic.

It can carry this-traffic at a loss for the short time

necessary to destroy its competition. This is not a new

tactic by any means. It has been used before with

very great success.‘ If the equity court is impotent,

4In Petroleum Products from New Orleans, La. Group to

Memphis, Tenn. Group River Points 194 LCC. 31 (1933) Com-

missioner Eastman described this success:

“The railroads in their early years encountered stiff opposi-

tion from many steamboat lines plying upon these waters.

They proceeded to meet this competition ruthlessly. Eventually

they swept the waters clean of the competing craft, except on

the ocean and the Gulf, and even there the competition was

greatly weakened.

‘*This was done by cutting rates where the competition ex-

isted, to whatever extent was necessary to paralze it, at the

same time maintaining rates at a very high level elsewhere.

The steamboats did not have this reservoir of non-competitive

traffic to help them out and hence perished in the unequal

struggle (p. 44).”’

»

the tactic can be used again and again, and the competi-

tion destroyed while the Commission investigates the

lawfulness of the means used to accomplish the destrue-

tion, Southern knows this as well as petitioners.

These proposed rates are not, as Southern declares,

truck competitive rates. While evidence before the

Commission is in conflict, it is clear that Southern has

vastly overstated the volume of truck movement The

rates when first proposed were aimed at barge trans-

portation.” The truckers became the quarry as an after

thought.

REPLY TO SOUTHERN’S ARGUMENT

Southcrn (p. 11) takes solace from the fact that the

narrow issue involved here has never arisen before.

At the same time, it denies that the issue has novelty.

The fact is that the essential issue (whether theecourt

can restrain drastie rate reductions after the suspen-

sion period and prior to a final, reviewable Commission

order) has arisen twice before and each time was de-

cided adversely to the railroads without appeal to this

Court.®

In Board of Railroad Commissioners of North

Dakota v. Great Northern Railway Co., 281, U.S. 412

(Southern’s brief p. 12), the Court, prior to the en-

aetment of the National Transportation Policy, was

confronted with a delicate federal ‘state, relationship.

The Court took pains to point out that the 10% redue-

tion in intrastate rail rates ordered by the North

* In its reply to the petition for suspension, jled August 3, 1961,

Southern stated that ‘*The bulk of the grain traffic to the involved

area is presently moving by unregulated water transportation,

public and private, and to a lesser degree by unregulated trucks."’

® See page 8, original Petition.

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Dakota Commission was not claimed by the railroad to

be confiscatory or destructive. Therefore, it refused to

interdict the state prescribed rate until the railroad

pursued its remédy before the I.C.C.. In the case at

bar, however, the rate reductions are bow destructive

and confiseatory.

Southern urges that in: Section 15(7) Congress

delicately balanced conflicting interests. This is true

as far as it goes.Congress recognized that the rail-

roads would be deprived of revenues fiom increased

rates if the suspension period continued for more than

7 months. It intended that they go into effect, subject

to refund if the increases were later declared unlawful.

There is, however, no evidence of Congressional intent

to balance the conflicting interests of competing ear-

riers when the proposal is destructive of competition.

Nor is there any sound public policy which dictates that

competition be destroyed while the Commission de-

liberates. :

Southern insists, and the Court of Appeals found,

that to extend the suspension period is to determine

rates in the interim, a legislative function. It should

be noted that the Court will legislate by non-action as

well as by action; in either event, the interim rates

will have been fixed by the exercise or non-exercise

of a judicial function. The question is whether Con-

gress intended that the carrier’s right to initiate rates

be paramount to the Court’s right to enjoin if the rates

are outside what the Court in 7./.M.E. Inc. v. United

States, 359 U. S. 464 (1959) ealled the ‘‘zone of rea-

sonableness’’, i.e. will defeat the purpose of Congress,

destroy competition, monopolize traffic, and inflict

irreparable injury.

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Southern’s insistence that it will be irreparably in-

jured if it is not permitted to effectuate these drastic

‘ate reductions ignores the fact that maintenance of

the status quo simply keeps Southern in the same rate

position it created for itself years ago, while to permit

the rates to go into effeet prior to Commission action

will utterly destroy petitioners. Southern seeks a new

status; petitioners seck to preserve the existing status

pendente lite.

Southern’s lament for ‘‘the many shippers and con-

sumers to whom the new rates will be a great boon’’

has-a hollow sound, coming as it does from a railroad

which has consistently refused to cooperate with the

barge lines in reducing transportation costs on grain

into the southeast. Significantly, Southern does. not

bleed for the other railroads who published the same

‘ates but who obviously are not enthusiastic about the

rates and do not anticipate any damages from their

continued abeyanee. They have not supported the

rates before the Commission, and have not opposed

granting of the writ. In any event, one fact is erystal

clear; the District Court balanced the equities and

found them to weigh heavily on the side of petitioners.

That Court’s memorandum (App. CR. 73-77) makes

it abundantly plain that but for its doubts as to its

jurisdiction, it would have issued the status quo in-

junction so as to serve “the ends of justice’’.

Southern claims that the writ should be denied be-

eause the issue may become moot before this Court

ean decide it. Of course, a degree of potential moot-

ness is inherent in this and every other issue. If the

Writ is denied on this ground, however, it is difficult

t: see how this issue, which is crucial to the preserva-

s

tion and implementation of the National Transporta-

tion Policy, can ever reach this Court for decision.

None of the petitioners seeks freedom from = com-

petition, None has or desires a monopoly: hence Ten-

nessee Power Cory. TVA, cited on page 1 of South-

ern’s brief, isinapplicable. Petitioners seek protection

against unfair, destructive competition — from below-

cost rates proposed by its competitor... Southern has

never claimed, either before the Commission or before

the Courts, that the proposed rates will pay the full

cost. .

CONCLUSION

For the reasons heretofore stated, the Petition should —

be granted.

Respectfully submitted,

Donato Macias

~Macléay, Lynch, Channing &

, Bernhard

1625 K Street, NOW)

Washington 6, D.

Jonx CC. Loverr

_ Jovett and Lovett

Benton, Kentucky

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Attorneus for Pefitionbrs

Of Counsel:

Sirote, Permutt, Frend

and Friedman { en

First Federal Building ; ;

Birmingham, Alabama e

Jon STarnes, Jr.

City Attorney

Guntersville, Alabama