Appendix — Erie Railroad v. Baltimore & Ohio Railroad

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APPENDIX A

Filed 26 April, 1957.

UNITED STATES DISTRICT COURT FOR THE

DISTRICT OF MARYLAND

Civil Action No. 9237

Tue BaLTimore AND Onto RatLroap CoMPANY, ET AL,

Plaintiffs,

Vv.

Tue Unitep States or America, ET AL., Defendants.

~

(Argued January 21 and 22, 1957. Decided 26 April, 1957.)

Before Soper, Cireuit Judge, CHesnur and R. Dorsey

Watkins, District Judges.

Edwin H. Burgess (William C. Purnell, Jervis Langdon

Jr., Anthony P. Donadio, John 8. Stanley, Charles J.

Henry Jr., on brief), for plaintiffs.

Harry C. Ames, Washington, D.C. (Thomas N. Biddison,

F. Clifford Hane, attorneys for Mayor and City Council

of Baltimore, on brief), for Baltimore Association of

Commerce and other Baltimore Commercial Interests,

plaintiffs.

J. Crossan Cooper Jr. (Francis D. Murnaghan Jr., on

brief), for Canton Railroad Company, plaintiff.

William L. Marbury (Donald Macleay, Washington, D.C.

and Franklin G. Allen, Baltimore, Md., on brief), for

Maryland Port Authority, plaintiff.

2a

John H. D. Wigger, Attorney, Department of Justice

(Victor R. Hansen, Assistant Attorney General; Walter

Ki. Black Jr., United States Attorney; James FE. Kilday,

Attorney, Department of Justice; Robert W. Ginnane,

General Counsel and I. K. Hay, Assistant General

Counsel, Interstate Commerce Commission, on brief), for

defendants.

John F. Donelan, Washington, D.C. (Dickson R. Loos,

Washington, D.C., Wendell D. Allen, Baltimore, Md., on

brief), for Armco Steel Corporation, M. A. Hanna

Company, Iron Ore Company of Canada, National Steel

Corporation (Weirton Steel Company Division),

Republic Steel Corporation, Wheeling Steel Corporation,

and the Youngstown Sheet and Tube Company,

intervenors.

Henry KE. Foley, Boston, Mass. (Herbert M. Brune,

Baltimore, Md. and Clarence I. Peterson, Boston, Mass.,

on brief), for Port of Boston Commission, intervening

defendant.

William Q. Keenan, New Haven, Conn. (Herbert M.

Brune, Baltimore, Md. and Robert Bleakney, Boston,

Mass., on brief), for the New York, New Haven &

Hartford R.R. Co. and for the Boston & Maine R.R. Co.,

defendants.

Richard M. Murphy, Chicago, Ill. and Samuel H. Moer-

mar, Washington, D.C. (M. C. Smith Jr., Cleveland,

Ohio; Robert D. Brooks, New York, N. Y.; Sidney

Goldstein, New York, N. Y.; Francis A. Mulhern, Wilbur

La Roe Jr., Arthur L. Winn Jr., J. Stanley Payne,

Walter J. Myskowski, all of Washington, D.C.: Nicholas

G. Penniman ITI, Baltimore, Md., on brief), for the Erie

Railroad Company, defendant; the New York Central

Railroad Company and the Port of New York Authority,

intervening defendants.

3a

Guernsey Oreutt, Philadelphia, Pa. (Richard R. Bongartz,

Philadelphia, Pa.; William Pepper Constable and George

W. Constable, Baltimore, Md., on brief), for The Penn-

sylvania Railroad Company and ©. W. Boin, Agent,

defendants.

David E. Pinsky, Assistant City Solicitor (David Berger,

City Solicitor, on brief), for the City of Philadelphia,

intervening defendant.

(George M. Radcliffe, Baltimore, Md. and Frederick I.

Knight, Philadelphia, Pa., on brief for Chamber of

Commerce of Greater Philadelphia, intervening defend-

ant.)

Warren Price Jr., Washington, D.C. (George M. Radcliffe,

Baltimore, Md.; Morris Duane, Philadelphia, Pa.; Bruce

A. Wallace, Camden, N.J., on brief), for the Delaware

River Port Authority, intervening defendant.

Soper, Cireuit Judge:

This suit was brought by the Baltimore and Ohio Rail-

road Company, Western Maryland Railway Company,

Canton Railroad Company and certain eivie authorities

and commercial organizations of Baltimore, Maryland, to

set aside decisions and orders of the Interstate Commerce

Commission which prescribed parity of railroad rates on

imported iron ore from the ports of Baltimore, Phila-

delphia and New York to seventeen destinations in the

eastern portion of the so-called differential or Central

Freight Association territory. This area lies west of a

line from Buffalo, New York to Pittsburgh, Pennsyivania

and includes Youngstown, Ohio on the north, Wheeling,

West Virginia on the south and other intervening steel

fa

producing points in western Pennsylvania, eastern Ohio

and northern West Virginia.’ The defendants, in addition

to the United States and the Interstate Commerce Com-

mission, include as original or intervening defendants the

Pennsylvania Railroad Company which serves the port of

Baltimore as well as the ports of Philadelphia and New

York, the New York Central Railroad Company and the

Erie Railroad Company which serve the port of New

York, the Port of New York Authority, the New York,

New Haven and Hartford Railroad Company and_ the

Boston and Maine Railroad Company which serve the

Port of Boston, the Port of Boston Commission and divers

producers and fabricators of steel in the differential

territory.

The decisions of the Commission which are challenged

in this proceeding mark the departure from a long estab-

lish 1 practice which has kept the rates applicable to both

import and export traffie to and from differential territory

lower as to Baltimore than the other Atlantic ports. The

differentials were first established in 1877 by agreement

of the carriers serving the territory in order to avoid mis-

understandings in respect to the geographical advantages

of Baltimore, Philadelphia and New York, as affected by

rail-and-ocean transportation, so as to equalize the

aggregate cost of transportation between competing

points in the west and the domestie and foreign ports

reached through those cities. The differentials were

arbitrary in a measure since they reflected only in part the

lesser distances to Baltimore and Philadelphia as com-

pared with the distances to New York and Boston, but

' Differential territory is defined in Baltimore Chaimber of Com-

merce ¥. Ann Arbor R. Co., 159 1.C.C. 691, 692. The seventeen

points, all consuming or storage centers for iron ore, are Midland.

Farrell, Sharon and Sharpsville, Pa.; Martins Ferry, Mingo Jet..

Steubenville. Lowellville, Niles, Struthers, Warren, and Youngs-

tewn, Ohio; Benwood, E. Steubenville, Follansbee, Weirton and

Wheeling, W. Va.

oa

they were established by compromise as the oniy means

of averting rate wars.? The differentials aypiied to all

traffic eastbound and westbound, domestie and export-

import, between Central territory and the north Atlantic

ports. The differential on eastbound export traffic from

the differential territory was 60 cents per ten less to

Baltimore and 40 cents per ton less to Philadelphia than

the corresponding rates to New York. On westbound

import traffic the same differential applied to third or

fourth class and = special commodity rates. Rates to

Boston were not to be less than those to New York on

domestie or foreign freight. In 1880 an attempt was made

to modify the agreement on the ground that changes had

substantially equalized ocean freights but after arbitra-

tion by the Thurman Advisory Commission the differentials

established in 1877 were reaffirmed.

While this arrangement originated in a voluntary agree-

ment of the earriers it has been considered by the Com-

mission from time to time during the past 60 years when

it was brought to the Commission’s attention by com-

mercial interests in Boston, New York, Philadelphia and

Baltimore, and in each instance has been found lawful.*

2 See Maritime Asso., Boston Chamber of Commerce vy. A.A. RR.

Co., 95 1.0.0. 539, 567; 126 1.C.C. 199.

* For a resume of the history of the differential, see In the Matter

of Differential Rates, 11 L.C.C. 12 (1905); Albany Port District

Comm. v. Ahnapee & W. Ry. Co., 219 1.C.C. 151 (1936). Tt was

also considered under varying cireumstances in New York Produce

Exchange v. Baltimore & O. R. Co., 7 1.C.C. 612 (1898) ; In the

Matter of Relative Rates upon Export and Domestic Traffic in

Grain and Grain Products, 8 1.C.C. 214 (1899) ; Cham"er of Com-

merce of N.Y. v. N.Y.C. & H.R. R.R. Co., 214 1.0.0. 155 (1912) ;

In the Ma:ter of Import Rates, 24 1.C.C. 78 (1912); Baltimore

Chamber of Commerce vy. Ann Arbor R. Co., 159 L.C.C. 691 (1929) ;

Lighterage Cases, 203 1.0.C, 481 (1934); City of Philadelphia v.

Baltimore & O. R. Co., 231 1.C.C. 21 (1938); State of New Jersey

v. Baltimore & O. R. Co., 24 L.C.C. 581 (1941); Port of New York

Authority v. Baltimore & O. R. Co., 248 L.C.C. 165 (1941); Ev-

Parte Grain from Buffalo to N.Y., 278 1.C.C. 31 (1950).

6a

Prior to 1930 the differential was applicable to both

domestic and import-export traffic. In that year the

Commission removed all domestie class rates from the

scope of the differential rate structure and _ prescribed

new scales of class rates from tke several ports, based

primarily on distance.t. Under this new arrangement the

longer distances from the three other ports resulted in a

differential on domestic traffe to and from Baltimore,

which exceeded the long established differential in its

faver on import and export traffic. The domestic first-

class rates to Youngstown from Baltimore were fixed at

2.01 per hundred pounds, from Philadelphia $2.16 per

hundred pounds, from New York $2.31 per hundred

pounds, and from Boston $2.70 per hundred pounds.

Since these rates did not cover import and export traffie

the railroads in 1932 published new import and export

class rates. These were made the same as the new

domestic rates so far as Baltimore was concerned and the

standard differentials in favor of Baltimore of 20 cents

a ton with respect to Philadelphia and 60 cents a ton with

respect to New York and Boston were preserved. The

import-export class rates from the three cities last men-

tioned thus became generally lower than their domestic

rates.

For some reason, that is not explained, the rates on iron

ore from Philadelphia to Pittsburgh have been the same

as those from Baltimore to Pittsburgh sinee 1903. This

parity, however, prior to the present controversy, has

been only a paper equalization since there has been

practically no movement from Philadelphia to Pittsburgh

and no attempt has been made by the Baltimore railroads

to set up a differential on this traffie.*

4 Fastern Case Rates Investigation, 164 1.C.C. 314.

“In the seven vears from 1946 to 1952 inclusive, 2,160,000 gross

tons moved from Baltimore to the steel mills in Pittsburgh, and

652,500 tons frou: Baltimore to Johnstown. No tonnage moved

Ja

In 1949, in response to complaints from steel producers

in the interior calling attention to the increased volume

of movement and other changed conditions, the carriers

undertook a study of the rate structure and as a result

the Baltimore and Ohio, the Western Maryland, the

Pennsylvania and connecting lines established, as of

October 9, 1950, reduced rates on iron ore from Baltimore

to Pittsburgh and also to steel mills in differential territory

to the west. The Pennsylvania made a like reduction on

iron ore from Philadelphia to Johnstown and Pittsburgh.

The new rates retained the regular port differential to

destinations in differential territory and parity between

Baltimore and Philadelphia on traffic moving to Johns-

town and Pittsburgh. No action was taken at this time

to establish revised rates on iron ore moving from ports

other than Baltimore to differential territory, bui the

record of the conference of railroads shows that ‘‘it was

understood the usual port differentials should be observed

from the other north Atlantic ports.’’

In August 1951, the Pennsylvania, anticipating an in-

crease in the volume of imported iron ore and conscious

that it could not expect to share in the transportation of

the commodity from Philadelphia to the interior witheut

adequate unloading facilities at this port, announced that

it would erect a modern unloading facility at Greenwich

in South Philadelphia designed to cost not less than

$10,000,000. It proceeded to erect such facility and had

spent the greater part of this sum before publishing

reduced rates on iron ore, effective February 9, 1953, to

which reference will now be made. Unloading facilities

were installed in Baltimore by the Canton Railroad in 1917.

It was against this background that the Interstate

Commerce Commission, in the decisions now under review,

from Philadelphia to Pittsburgh and only 8333 tons, comprising

one cargo, to Johnstown. During the six years from 1946 to 1953

inclusive, approximately 647,000 tons moved from Baltimore to

the steel mills in the Youngstown area and none from Philadelphia.

8a

gave its approval to parity of rates on iron ore moving

from New York, Philadelphia and Baltimore to Central

territory, but denied parity to Boston. The case grew out

of the publication by the Pennsylvania of reduced rates

on iron ore, effective February 9, 1953, from Philadelphia

to the seventeen points in differential territory, and the

simultaneous publication of like rates by the New York

Central from the ports of New York and Boston. and by

the Erie Railroad from New York to destinations in the

Youngstown area on their lines. The effect of these

publications was to reduce the rates on iron ore from

Philadelphia, New York and Boston to Youngstown to

$2.71 per gross ton, the same rate which applied to

Baltimore.” In order to meet this reduction and to

preserve at least in part the historic differential, the

Baltimore and Ohio and the Western Maryland then pub-

lished, to be effective February 16, 1953, a redueed rate

of $2.51 per ton on iron ore from Baltimore to those of

the seventeen points on their lines, thus restoring a 20-cent

differential in favor of Baltimore as compared with the

other three ports. No attempt was made by the Baltimore

railroads to restore the standard differential of 60 cents

over New York and Boston.

The Baltimore and Ohio and the Western Maryland also

published a reduction of 20 cents per ton, effective Feb-

ruary 16, 1953, to Pittsburgh, Johnstown, Donora and

Monessen in order to establish a differential on shipments

of ore to Pittsburgh in accordance with the general port

differential structure and to preserve a proper rate

relationship between Pitsburgh and the other named cities.

The Pennsylvania countered with a rate reduction of

20 cents per ton, effective February 16, 1953, from Phila-

delphia and Baltimore to the four named eities, and a

further reduction of 20 cents in its rates from Philadelphia

*The rates are stated without the general increase approved in

Ex-Parte No. 175.

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and Baitimore to the seventeen points in differential ter-

ritory, effective March 11, 1953.

The Baltimore and Ohio, the Western Maryland and

divers Baltimore interests protested the rate reductions

by the other railroads and all of the above-mentioned

reductions were suspended by the Commission pending an

investigation instituted on February 6, 1953. This was

followed by a hearing and oral argument, and an order

of Division 2 of the Commission on February 5, 1954,

which approved the reduction originally published by the

Pennsylvania, effective February 9, 1953, giving Phila-

delphia a parity with Baltimore, but cancelled the tariffs

of the New York Central and the Erie equalizing rates

from New York and Boston with Baltimore. Division 2

also found that the February 16, 1953 tariffs of the Balti-

more and Ohio and the Western Maryland, and_ the

March 11, 1953 tariffs of the Pennsylvania were not just

and reasonable and ordered them to be cancelled. The

Pennsylvania then published a supplementary tariff

making the equalization of rates effective February 19,

1954, whereupon the Baltimore interests filed suit in this

court asking a restraining order pending reconsideration

by the entire Commission. The court refused to issue the

order on the ground that the administrative process had

not been completed, with the result that parity rates from

Philadelphia went into effect and have since prevailed.

The full Commission, on July 30, 1954, stayed its order

cancelling the rates from Baltimore, New York and Boston

and reopened the procecding. Finally, on October 1, 1956,

the Commission rendered its decision, finding that the

February 9, 1953 rates from Philadelphia and New York

were justified but that the February 16, 1950 rates from

Raliimore, the March 11, 1950 rates from Philade!phia,

and the February 9, 1953 rates from Boston were not

justified and ordered them caneciled. In this proceeding

we are concerned with the propriety of the Commission's

AV

action as to the rates from Baltimore, Philadelphia and

New York.

The modification of rates on iron ore by the railroads

which serve the Atlantic ports in competition with Balti-

more was brought about by important changes in business

conditions involving an inereased demand for steel and

an inerease in the importations of iron ore which thereto-

fore had contributed little to the total volume of com-

modities transported by the railroads from the coast to the

interior. The origins of the ore that has been and will be

imported through the Atlantic ports have an important

bearing on the controversy. No figures are available for

the vears 1955, 1956 or 1957 since the record before the

Cor:mission was closed on December 21, 1954, and the ease

is submitted to this court on the Commission’s record. An

outline of the conditions prevailing prior to and after

World War TT and until the Commission’s record was

closed is set out in the following exeerpt from the report

of Division 2 of the Cornmission :

‘Mines in northern Minnesota, Wisconsin, and upper

Michigan have for many years been the sole or principal

souree of supply fer the iron-ore requirements of. steel

mills in central and trunkline territories, the pre-

ponderance of the ore moving by rail to Lake Superior

docks, thenee by water to lower Lake Erie ports, and by

rail beyond. Prior to the end of World War IT in 1945,

importation of iron ove was comparatively light and the

preponderance of the ore imported was_ consumed = in

furnaces at or near the eastern seaboard. Some imported

ore moved to steel mills in the Johnstown and Pittsburgh,

Pn. areas but little, if any, moved to mills west thereof.

A few shipments which moved to interior points were con-

signed to manufacturers of paint or other commodities not

produced by the steel mills.

‘*Sinee the end of World War II, steel producers have

developed sources of supply for iron ore in Venezuela,

7 By a subsequent decision filed on March 19, 1957, the Commis-

sion reaffirmed its decision as to the Boston rate.

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Chile, Liberia, Brazil, Sweden, and Cuba, and this basie

raw material of the steel industry has been imported in

large volume. Mines now being developed in Labrador

by the Tron Ore Company of Canada will supply large

quantities of iron ore for the furnaces of five steel mills

in central territory which own stock in that corporation,

and to other consumers. During the 6-year period from

1936 through 1941) from approximately 2,000,000 to

2,900,000 tons of iron ore were imported annually. The

import movement declined drastically during’ World

War IT, reaching a minimum of 402,096 tons in 1943, most

of which originated in Canada. Following the war, im-

portation of iron ore increased from 1,189,300 tons in 1945

to 10,145,415 tons in 1951, the latter figure equivalent to

over 4 times the prewar tonnage. In 1952, a- strike

oceurred in the steel industry and approximately 9,760.300

tons of iron ore were imported during that vear. It is

estimated that within a few years 20,000,000 tons of iron

ore will be imported annually, a substantial portion of

which will move to furnaces in central territory. While

ex-lake ore will continue to move from the Lake Erie ports

in large volume, it will be replaced by imported ore to a

greater extent than in the past.’’

The full Commission, in its report of October 1, 1956,

commented upon the increase in importations of iron ore

into the United States in the following excerpt from its

decision:

‘‘Tron ore imported into the United States in 1948

originated in 28 foreign countries and aggregated 6,091,677

gross tons. By 1952 the tonnage had increased to

11,074,035 gross tons. The principal exporting countries

in this period were Chile, Sweden, Venezucla, Brazil.

Liberia, and Peru. On and between August 26 and

October 6, 1954, a total of 1,511,875 eross tons of ore

were shipped from 13 foreign ports to north Atlantie ports.

Of this amount, 776,851 tons (51 percent) entered the Port

of Baltimore, 718,809 tons (48 percent) entered the Port

of Philadelpbia, and 16,215 tons (1 percent) entered the

Port of Boston. There was no reported entry of ore at

New York during this period. Approximately one-third

of this ore originated at Seven Islands, Labrador, from

which no tonnage moved prior to 1954.’ :

Statistics furnished to the Commission show that during

the years 1952, 1953 and eight months of 1954, 94% of all

the ore imported through the north Atlantic ports came

from Venezuela, Chile, Sweden, Peru, Brazil and Liberia,

amounting to 7,229,903 tons in 1952; 8,065,922 tons in

19538 and 6,746,335 tons in 1954. Bethlehem Steel Cor-

poration and United States Steel Corporation consumed

most of the imports. Thus, in the eight months of 1954

the aggregate imports of these two corporations amounted

to 77% of the total. Imports to these corporations are

not delivered to the railroads but are consigned to their

own facilities: at Sparrows Poiit for the Bethlehem Steel

(Corporation and Fairless (Morrisville, Pa.) for the United

States Steel Corporation. The facilities at Sparrows

Point have a capacity of 6,000,000 tons and those at Fair-

less have a capacity of 2,000,000 tons annually. None of

the ore delivered to Sparrows Point moves to differential

territory. We are concerned primarily with the importa-

tions of iron ore that are delivered to the railroads for

transportation to interior points subject to the published

rates.

Looking into the future, the most striking factor to be

considered is the assured prospect that importations of

iron ore from Labrador will dominate the situation. From

July 31, 1954, when these shipments began, to December

of that year, 1,375,747 tons were unloaded at Baltimore

and Philadelphia; and it seems certain that this was

merely a beginning for, as the Commission said in its

final report, the evidence leaves no doubt that ‘Labrador

tonnage will increase to 10,000,000 tons in 1956) and

probably to a greater extent in later years.’’ In short,

importations from Labrador may be expected to constitute

at least one-half of all the ore imported, The proportion

of this business which will come to Baltimore and

Philadelphia, respectively, is foreshadowed, although im-

perfectly, by what happened in the last six months of

1954. In that period 744,017 tons came to Baltimore and

Atte

631,750 tons to Philadelphia. The Philadelphia tonnage

would have been greater and the Baltimore tonnage less

by 113,210 tons but for a strike which caused a diversion

to Baltimore to tonnage consigned to Philadelphia.

The effect of the abolition of the differential between

Philadelphia and Baltimore, which became effective on

February 19, 1954, is shown to some extent by comparison

of deliveries of foreign ore from all sources to railroad

piers at the two ports in 1953 and 1954. In the first year

Baltimore reeeived 1,813,512 tons of whieh SO8,875 were

delivered to the railroads for shipment to the differential

territory, while Philadelphia reeeived 1,113,917 tons of

which 687,994 tons were delivered to the railroads to be

delivered, 20,561 tons to Pittsburgh and 667,433 tons to

points east of Pittsburgh—none of it going to the

differential territory. In 1954, Baltimore — reeeived

1,644,294 tons and of this 1,070,457 tons went to destina-

tions west of Pittsburgh; while in this year Philadelphia

received 1,564,844 tons of which 681,599 tons went to the

differential territory.

The future movement of foreign ore to this country,

especially ore from Labrador, is the all-important cireum-

stanee in this case. The Labrador deposits are owned by

the Iron Ore Company of Canada, of which 27% is owned

by the M. A. Hanna Coal and Ore Company and _ the

balance by five steel producers® owning plants west of

Pittsburgh, including twelve or thirteen” plants in

differential territory. These corporations are entitled to

share in the product in proportion to their interests. The

steel producers in differential territory will use their

shares and the balance will be sold, for the most part, to

the Bethlehem Steel Corporation. All of the ore is shipped

from Seven Islands, Quebee. While some of it will move

by routes not involved in this proceedings, five or six

S Nationa! Steel Co., Republie Steel Corp., Armco Steel Corp..

Youngstown Sheet and Tube Co., Wheeling Steel Corp.

5 l4a

million tons will move annually through Atlantic ports

to inland furnaces. The ore will be carried in ships owned

or chartered by the [ron Ore Company of Canada or

the participating companies; and the record shows that,

in order to save transportation costs by sea, the ore will

be delivered, in case of parity of railroad rates, to the

nearest port equipped with efficient unloading facilities.

The Commission found that the one-way ocean distances

from Seven Islands to the four Atlantic Coasts to be:

Boston, 950 miles; New York, 1187 miles; Philadelphia,

1320 miles, and Baltimore, 1475 miles. If the Chesapeake

and Delaware Canal were used the excess distance to

Baltimore over Philadelphia would be 26 miles, but the

Commission found that the larger ore vessels cannot use

the canal at present and probably would not use it if the

canal were deepened. The evidence shows that a 20,000 ton

ore carrier with a speed of 14 knots requires three days

less steaming time on a round trip basis from Seven

Islands to Boston, two days less to New York and twenty-

one hours less to Philadelphia than to Baltimore; and that

it costs $2,000 per day to operate such a ship. Abolition

of the differential of 20 cents per ton in favor of Baltimore

and the establishment of parity of railroad rates between

Philadelphia and Baltimore would cause shippers to route

Labrador ore destined for aifferential territory through

the Port of Philadelphia.

Sinee the Commission’s decision of October 1, 1956 took

no account of any shipments subsequent to December

1954, the effect of the parity of rates between Philadelphia

and Baltimore in the intervening period was not ascer-

tained, although it might have been done before the

decision was rendered. The record, however, throws some

light, as we have seen, on the shipments in the limited

period between February 19, 1954, when the Pennsylvania

mut the parity rates into effect, and December 1954. The

evidence directed to this period, although necessarily

meager, tends to confirm the opinion of experienced wit-

ee ee ee ee i a ee ee ee ee ee

ee eT

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nesses heard by the Commission, that under parity rates

Labrador ore destined for differential territory will move

through Philadelphia and not through Baltimore. The

experience of the Canton Railroad emphasizes this con-

clusion. ‘Chis is a shipping road with 37 miles of track in

the Port of Baltimore, connecting with the Baltimore and

Ohio and the Pennsylvania by rail and the Western Mary-

land by float. It constructed the first unloading facilities

‘1 Baltimore in 1917, in which it has invested $5,000,000

in reliance upon the differential. It is largely dependent

upon the importations of ore. In 1952, its tonnage of

imported ore comprised 90% of its total of which 39%

was iron ore: and in 1953, the corresponding percentages

were 66% and 28%, respectively. In the first nine months

of 1953, it received 499,000 tons of iron ore but in the same

period in 1954 under parity this amount had diminished

to 239,000 tons, a decrease of 52%.

A similar situation exists with regard to the much

smaller amount of ore which is brought to this country

from the Port of Monrovia in Liberia. This ore is con-

trolled by the Republic Steel Corporation, which has

furnaces in dilferential territory and carries the ore in

its own ships. In 1952, 420,000 tons were imported and

it was estimated that in 1953 the amount would be some-

what larger. Heretofore all or nearly all of this ore was

delivered at the Port of Baltimore. The ocean distances

(miles) from Liberia to the Atlantic ports are as follows:

Boston, 3920; New York, 3973; Philadelphia, 4074, and

Baltimore, 4194.

The iron ore brought in from South America and

Scandinavia has little bearing on the question at issue.

The Commission found that, in the first nine months of

1954, 94% ef the ore which originated in Venezuela, Chile,

Pern and Sweden was consigned to the United States Steel

Corporation and the Bethlehem Steel Corporation.

Bethlehem received about 6,000,000 tons, none of which

l6a

moves to differential territory. It is estimated that United

States Steel will receive about 7,000,000 tons annually, of

which 2,000,000 tons will enter the United States through

the Gulf ports and 2,000,000 tons more will be consumed

at Fairless. There will be a substantial movement from

the docks owned by the corporation at Fairless by rail to

Pittsburgh. Facilities at Fairless permit the blending of

the iron before shipment to Pittsburgh and this service

will be improved, and when this is done the United States

Steel Corporation will abandon its practice of importing

through Baltimore the iron ore for use at Pittsburgh. The

corporation is not interested in the rate from Baltimore

but desires a lower rate fren, Fairless to Pittsburgh.

Baltimore has an advantage as to distances over the other

ports with respect to shipments of ore from South

America, except Brazil, but a disadvantage with respect to

the shipments from Seandinavia.

Adequate unloading facilities are essential to the

delivery of iron ore at a point of entry. Canton Railroad,

as we have seen, was the first to establish such a facility

in Baltimore in 1917. The Western Maryland followed in

1930, and its facility with subsequent improvements can

now handle three ships at a time. The Baltimore and

Ohio pier was built in 1950 and 1951 and cost $5,000,000.

The capacity of these three piers in Baltimore is 15,500,000

tons per year, based on’ a 15% use of specially designed

ore earrier type ships, and if the use of such ships is

raised to 659% the total capacity will be increased to

22,275,000 tons per year. These facilities were constructed

while the differential was in effect.

In March 1954, the Pennsylvania completed the first

stage of its unloading facility at a cost of $11,000,000. The

capacity is from 3,000,000 to 6,000,000 tons of ore, depend-

ing on the type of ship. An enlargement, which would

have increased the capacity of the facility by 50%, was

ordered in 1954 and scheduled to be finished in 1955. The

lia

Pennsylvania contemplates an ultimate expansion which

would enable it to treble its original capacity. It

estimated that it needed 2,500,000 additional tons of ore

per year to maintain its Philadelphia pier profitably.

These facilities were established while there was parity

of rates between Baltimore and Philadelphia on traffic

moving to Pittsburgh.

Bethlehem at Sparrows Point and the United States

Steel at Fairless each has its own unloading facility. The

first has been in operation since 1946 and the latter since

January 1993.

New York and Boston have no modern ore unloading

facilities and only a very small tonnage of iron ore passes

through these ports. Without parity of rates with Phila-

dephia and Baltimore no facility is planned at either lo-

eation,.

The relation of the rates to the distances for which

iron ore is transported from the Atlantic ports to the dif-

ferential territory is a factor necesse*y to be considered

in this case since § 3 of the statute forbids a carrier to

vive any undue or unreasonable preference to any port or

locality, or to subject any port or locality to any undue

or unreasonable prejudice. The short line distances of the

raifroads from the several ports to Youngstown, Ohio,

that is, the shortest physical routes over which traffic may

he moved without transfer of lading, although through

rates and routes may not be published, are as follows:

To Youngstown, Ohio

Difference in

Short Line Distance Over

Distance Baltimore

From miles miles

ns a haw ans see eS 378 oa

Philadelphia ........-+-0+00+55 424 46

MR OrteWTE. Sok cass <a dduaneces 437 59

ee. re ee er ees 490 112

DRRMAME feo oe ee 646 268

18a

The short tariff route distances between these points,

that is to say, the shortest routes from each port over

which rates on iron ore are actually published, are as

follows:

To Youngstown, Ohio

Exeess over

the Shortest

Tariff Route

from

Short Tariff Baltimore

Route (W. Mda.—

From miles 381 Miles)

Philadelphia :

P.R.R. 428 47

Morrisville:

P.R.R. 44] 60

New York:

Erie 269 188

N.Y.C. 612 231

Boston:

& Soe 670 289

B&M 661 280

NY., NH., & H. 692 $11

For reasons of convenience, the Pennsylvania moves iron

ore traffe over longer and more circuitous routes from

both Philadelphia and Baltimore to Youngstown. The

route which it uses from Philadelphia (434 miles) is prae-

tically the same as its short tariff route therefrom (428

miles); but instead of using its short tariff route of 404

miles from Baltimore, it carries the shipments 423 miles

through Perryville, Maryland. If its actual operating route

from Philadelphia is compared with its actual operating

route from Baltimore, the difference in distance is only 11

miles; but if this operating route from Philadelphia is

compared with the short operating route from Baltimore—

19a

that of the Western Maryland Railroad Philadelphia’s

exeess distance is 53 miles.

The decisions of the Commission are set forth in the

report of Division 2 on February 9, 1954, 291 I1.C.C. 327,

and the report of the full Commission on October 1, 1996,

299 T.C.C. 195. The latter dealt principally with additional

evidence adduced in the interval and seems to have adopted

the report of Division 2 except that it approved the new

schedules from New York to the Youngstown area which

Division 2 had rejected. The reports recite in considerable

detail the history of the differential, hereinbefore set out,

and the contentions of the opposing sides*; and the findings

* The Commission notes the contentions of the Pennsylvania

that parity between Baltimore and Philadelphia is necessary

so as not to stifle the importation of iron ore through Phila-

delphia and so as to enable the steel producers to make proper

use of the new facilities at Philadelphia; that the differential

was never intended to apply to low-grade bulk material and

hence parity did not constitute a departure from the former

practice; that Baltimore did not object to parity with Phila-

delphia on traffic moving to the Pittsburgh area for 50 years

and that all imported iron ore moves through Pittsburgh; that

the commercial interests of Baltimore will not be injured since

parity as far as the Pittsburgh area has not disrupted the

general port differential adjustment and the great increase in

imports of iron ore will provide ample tonnage for Baltimore’s

unloading facilities. On the other hand, the C ommission takes

cognizance of the contentions that interests serving the port

of Baltimore are entitled to reap the natural advantages flow-

ing from its location; that parity would deprive Baltimore of

these advantages and place the entire port differential rate

structure in jeopardy by giving rise to demands for reduced

rates on other imported bulk commodities; that the earnings

on tonnage carried from Baltimore was substantially greater

than tonnage carried from Philadelphia to the differential

territory because of the shorter distances from the former

port; that parity of rates on iron ore from Baltimore and

Philadelphia to Pittsburgh during the past 50 years should

be disregarded because there was no movement from Phila-

delphia to Pittsburgh under this schedule.

20a

of the Commission, which are sometimes mingled with the

statement of the contentions of the parties, and the ulti-

mate conclusions of the Commission are then set forth.

They may be summarized as follows:

It is shown by a statement filed by the Pennsylvania in

support of its claim to parity, which the Commission seems

to have found correct, that parity of rates on iron ore ap-

plies both from Baltimore and Philadelphia to Steeltown,

Pennsylvania, a steel producing point east of Pittsburgh;

also from Baltimore and Philadelphia to Buffalo, although

the route from Baltimore over the Baltimore and Ohio is

190 miles and that over the Western Maryland is 165 miles

longer than the route from Philadelphia over the Pennsyl-

vania. A similar comparison is made between routes from

Baltimore and routes from Norfolk to steel mills in Ohio

and Michigan as to which parity prevails, although the dis-

tances from Norfolk are from 25 to 192 miles longer than

the distances from Baltimore. Likewise parity of rates but

disparity of distances exist in rates from Lake Erie ports

to steel mills in the Youngstown and Wheeling areas, as to

which reference is made to the decision of the Commission

in Tron Ore Rate Cases, 41 1.C.C. 181, in which the Com-

mission pointed out that blast furnaces must be operated

continuously and that it is of advantage to the steel pro-

ducers and elso to the operators of the vessels to have

more than one port available. It was also shown that there

is a movement of large quantities of easthound ore from

Erie and Buffalo to the steel mills at Bethlehem, Fairless,

Philadelphia and Sparrows Point under a parity rate of

#2.71—notwithstanding the inequality of distances: and it

was said that the earnings under the proposed rates from

Philadelphia to steel mills in the Youngstown area compare

favorably wit) the earnings under the $2.71 rate from Erie

and Buffalo ro eastern furnaces.

In both reports the Commission seers to have approved

the contention of the Pennsylvania that there are only 11

2la

miles difference between the transportation routes from

Philadelphia and Baltimore to the differential territory and,

therefore, the services from both ports are substantially

identical. In its final report the Commission said:

‘‘The Pennsylvania urges also that rates from Phila-

delphia the same as those from Baltimore are justified

by mileage and service factors. The average tariff-

route distances over the Pennsylvania to the 17 desti-

nations in differential territory are 422 miles from

Philadelphia and 398 miles from Baltimore. Based on

these distances, the equalized rates vield average ton-

mile revenues of 6.4 mills from Philadelphia and 6.7

mills from Baltimore. The actual operating route of

the Pennsylvania from Philadelphia is only 11 miles

greater than its actual operating route from Balti-

more. In both instances, the movement is via Pitts-

burgh, and approximately 75 percent of either haul is

over the same tracks. Thus, the service over the Penn-

sVlvania is substantially identical from both Philadel-

phia and Baltimore.’’

This statement seems to say that, in considering differ-

ence of distance between Baltimore and Philadelphia, the

comparison should be made between the Pennsylvania’s

direet route from Philadelphia and its unnecessarily long

route from Baltimore via Perryville, rather than between

the tariff route of the Pennsylvania from Baltimore and

the corresponding routes of the Baltimore railroads from

Baltimore.

Division 2 of the Commission had little to say about the

movement of the Labrador deposits because they had not

hegun to move prior to February 5, 1954, when the report

was filed. The Commission merely quoted an owner of

stock in the Iron Ore Company of Canada as saying that

five or six million tons of ore will be available for shipment

in 1955 and that 10,000,000 tons are likely to be shipped in

22a

1956. It is also pointed out that vessels of eighteen to

twenty-eight thousand tons capacity will be used in trans-

porting the ore to the north Atlantic ports; that a large

number of railroad cars will be required; that economic

necessity will require the movement to take the route from

Seven Islands to the mills entailing the lowest transperta-

tion costs; and that alternate ports at equal rates are re-

quired in order to avoid congestion and to give the steel

mills the opportunity to select the port to be used.

In the Commission’s report, reference is made to its opin-

ion In the Matter of Rate Differentials, 11 LCC. 13, which

considered the Baltimore differential in 1905. The Com-

mission said that that that time ocean rates favored

the northerly ports but now iron ore moves in both char-

tered vessels and vessels owned by steel companies, and

since 1920 ocean rates generally have been equalized with

respect to voyage charters to the north Atlantic ports, but

in some circumstances there is a saving of cost in routing

the ore to the port nearest point of origin and that this

might be true on a time charter arrangement or for an

integrated shipper. The Commission then pointed out

the approximate ocean distances from various points of

origin to the Atlantic ports and also set out the figures

which showed ihe atnounts of Labrador ore received at

Baltimore and at Pmiladelphia in the period from July 31

to De »mber 5, 1954. The Commission, however, made no

specific findings as to the ownership of the vessels in which

this ore was carried to the two ports or as to the difference

in cost between a voyage to Philadelphia and a vovage to

Baltimore. The Commission’s figures as to the tonnage

received at these two ports is limited to the period from

July 31 to December 5, 1954, and no evidence was offered

or considered as to the shipments during the vear 1955 and

1906 preceding the date of the Commission's decision. The

Commission did not pass on the testimony heretofore re-

ferred to in his opinion indicating that Labrador ore would

seek the port offering the lowest cost of transportation from

23a

the point of origin to the destination in steel producing

territory.

The Commission did not undertake to appraise the rela-

tive weight of the various factors entering in its decision,

but Division 2 stated the following general conclusions

with respect to ine proposed rates from Philadelphia, New

York and Boston:

“The evidence in support of the proposed adjust-

ment from Philadelphia is substantially stronger than

that offered in behalf of the proposed rates from New

York and Boston. We are convineed that, in view of

the earnings that would be yielded by the suspended

rates from Philadelphia, such rates av not below a

minimum reasonable level. We are of the view further

that establishment of the proposed rates from Phila-

delphia will not result in disrupting the existing port

relationship on traffic generally to destinations in dif-

ferential territory. As indicated, the rates on iron ore

from Baltimore and Philadelphia to the Pittsburgh

area have been on a parity for over 50 years without

disturbing the port relationship on the other commodi-

ties, and no good reason appears why the extension

of this parity to ore-consuming points beyond Pitts-

burgh should change this situation. The record is per-

suasive that the iron ore tonnage through Baltimore

will probably continue to increase regardless of the

movement through Philadelphia.

‘‘Moreover, in administering the provisions of the

act the Commission is required to carry out the na-

tional transportation poliey, which has for its ultimate

objective the development, coordination, and preser-

vation of a national transportation system adequate to

meet the needs of the ecommerce of the United States,

of the Postal Service, and of the national defense. The

evidence is certain that in the years to come a large

proportion of the iron ore used in this country will

24a

originate in foreign countries. This iron ore is and

will be an important factor in national defense. Espe-

cially in case of national emergency, it is highly desir-

able that the needs of the steel industry be not jeopar-

dized by forced reliance upon one port which could be

incapacitated through congestion or other cause, and

that, in the interest of national defense, Philadelphia

and Baltimore be placed on a rate parity on imported

iron ore as proposed in the schedules filed to become

effective on February 19, 1953. Such a parity would

not result in undue preference or prejudice.”’

Division 2 reached the ultimate conclusion that the pro-

posed rates from Philadelphia to the differential territory

were just and reasonable but that the rates from New York

and Boston were not shown to be just and reasonable

The general conclusions of the full Commission reaffirmed

Division 2 with respect to rates from Philadelphia. They

found that a substantial increase in iron ore imports would

continue in that Labrador tonnage would inerease to 10,-

000,006 tons in 1996 and to a greater extent in later years,

and that the tonnage through Baltimore would probably

continue to increase notwithstanding the maintenance of a

parity rate with Philadelphia and also with New York. The

Commission also reaffirmed the conclusions of Division 2

with respect to the necessity for parity in carrying out the

national transportation policy. In this respect it said:

‘*As stated in the prior report, we are required to

administer the act so as to carry out the national trans-

portation policy, which has for its ultimate objective

the development, coordination, and preservation of a

national transportation system adequate to meet the

needs of the commerce of the United States, of the

Postal Service. and of the national defense. Iron ore

is a commodity which not only is of importance to the

carriers in that it can and should reasonably bear its

Zou

full share of the transportation burden, but it is of

vital importance to the national defense. Thus, it is

highly desirable that the carriers be permitted, within

lawful bounds, to establish rates which will permit the

movement of this traffie through several ports. These

matters, among others of record, have been given con-

sideration in reaching our conclusions herein.”

New York and Boston rates:

The railroads serving New York and Boston pointed out

the importance of being allowed to share in the new traffic

based upon the importation of iron ore so as to replace the

large revenues now received from domestic iron ore moving

eastward from the Minnesota-Michigan ranges. The rail-

roads also stressed the fact that business interests could

not be expected to invest capital in constructing unloading

facilities at New York or Boston unless parity of rates was

established with Baltimore and Philadelphia, enabling the

more northerly ports to share in the business ; and they also

emphasized the importance of having one or more ports

available to handle the new importations.

Division 2 of the Commission, however, pointed out the

greater distances from New York and Boston to the differ-

ential territory and resulting in the smaller earnings at

those ports under parity of rates. It said:

‘> From New York and Boston to the 7 destina-

tions in the Youngstown area, the short-line distances

average 487 and 642 miles, respectively, whereas to the

same destinations the short-line distances average 424

miles from Philadelphia and 380 miles from Baltimore.

The average short line distance from Philadelphia ex-

ceeds that from Baltimore by only 11.6 percent whereas

the like distances from New York and Boston are great-

er by 28 and 70 percent, respectively, than the distance

from Baltimore.

26a

“The proposed rates from Philadelphia compare

favorabiy with rates applicable on iron ore from and

to points in central and trunkline territories and thus

come within the ‘zone of reasonableness’ to which ref-

erence is made in New York Centrai R. Co. v. United

States, supra. The proposed rates from New York and

Boston would produce substantially lower revenues

from those from Philadelphia. Moreover, the record

shows that the facilities at New York and Boston are

not adequate for the unloading of iron ore in substan-

tial lots, and there is no positive indication that ade-

quate facilities would be constructed thereat or that any

substantial movement through those ports under the

proposed rates could be expected. We conclude that, in

the circumstances, the proponents of the proposed rates

from New York and Boston have not sustained the

statutory burden placed upon them to prove that these

rates are just and reasonahle.’’

Subsequent to the decision of Division 2 additional testi-

mony was taken in which witnesses for the Boston and

Maine and the New York, New Haven and Hartford indi-

cated that unloading facilities would be established at Bos-

ton if equal rates with Baltimore were permitted, and sim-

ilar representations as to the establishment of facilities at

New York were made by persons interested in the develop-

ment of that port. It was however made clear by all uf the

witnesses that facilities would not be cstablished without

assurances of parity of rates.

The Commission then made a comparison of revenues

from the four north Atlantic ports to destinations in the

Youngstown area. In one computation, using short-line Cis-

tances, the following tabulation was made of the ear-mile

and ton-mile revenues on an average load of 62 gross tons

and the rate from Baltimore of $3.035, which included the

Hx-Parte No. 1%) increase, Le., a general increase applied

by the Commission to ali the rates:

PE Rk BREA ABCD cmc wh EIT Ge

Zia

Short-Line

Distances Car-Mile Ton-Mile

From miles cents mills

Baltimore 378 49.8 8.0

Philadelphia 424 44.4 7.2

New York 490 38.4 6.2

Boston __. eo 646 29.1 4.7

The Commission then considered certain cost studies sub-

mitted by the Erie Railroad for the single line haul from

New York to Youngstown and for the joint haul with other

railroads from Boston, and stated the final conclusion:

‘‘We have carefully considered all of the evidence

pertaining to the estimated out-of-pocket cost from

New York and Boston. After restating the costs on the

hases indicated, including the distribution of the costs

of freight-train repairs, depreciation, and rentals of

other than mileage cars over freight-train ear-miles,

loaded and empty, and the application of the unit cost

to the loaded and empty car-miles of the imported ore

traffic, we conclude that $2.647 and $3.42 would more

nearly approximate the out-of-pocket costs per gross

ton from New York and Boston, respectively. On these

hases, the rate of #3.035 would exceed the cost from

New York by 38.8 cents per gross ton, but would be

885 cents less than the costs from Boston.’’

On this basis the Commission found that the Baltimore

rate would be just and reasonable as applied to New York,

but would not be just and reasonable as applied to Soston.

The Commission also found that the $2.51 rate from

Baltimore to Youngstown proposed by the Baltimore rail-

roads as of February 16, 1953, would not be just and rea-

sonable despite the fact that a comparison of the car-mile

and ton-mile revenues via short line distances under the

4271 rate (without the Ex-Parte No, 170 increase) from

28a

New York to Youngstown, with similar revenues under the

#2.51 rate from Baltimore, shows that the latter would

exceed the former. The comparison is shown by the fol-

lowing table:

To Youngstown, Ohio

Car-Mile Ton-Mile

From Rate cents mills

Baltimore | $2.51 41.2 6.6

New York Phy) 43 2.71 34.3 2.0

In general, the Commission concluded that the natural

advantages to which the Port of Baltimore would ordinar-

ily be entitled were outweighed by the need to maintain

ports of entry for iron ore at Philadelphia and New York

and that this should be accomplished by diverting traffic

from Baltimore to the other ports to such an extent that the

facilities already established at Philadelphia may be more

extensively and profitably used, and so that New York

would be encouraged to build facilities which it does not

low possess.

The weight to be given to the administrative findings of

the Commission and the scope of the authority of the re-

viewing court are well established. The expert judgment

of the Commission in respect to matters in the field com-

mitted to it by Congress must be recognized and its con-

clusions, if supported by substantial evidence on the whole

record, must be accepted. The Court is not at liberty to

substitute its judgment for that of the Commission. As

was said in Interstate Commerce Commission v. Union

Pacific R. Co., 222 U.S. 541, 547:

‘‘In determining these mixed questions of law and

fact, the court confines itself to the ultimate question

as to whether the Commission acted within its power.

It will not consider the expediency or wisdom of the

order, or whether, on like testimony, it would have

made a sinilar ruling. ‘The findings of the Commission

ava

are made by law prima facie true, and this court has

ascribed to them the strength due to the judgments of

a tribunal appointed by law and informed by experi-

ence.’ Il, Cent. v. 1.C.C., 206 U.S. 441. Its conclusion,

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 inter-

exts, can be supported by a mere scintilla of proof—

but the courts will not examine the facts further than

to determine whether there was substantial evidence

to sustain the order.”’

The Commission is not required to make detailed findings

of fact but must make the basis of its decision clear so that

the reviewing court may perform its function. The matter

was well stated by Judge Magruder in New York Cent. R.

Co. v. United States, 99 F.Supp. 394, 400, affirmed, 342

U.S. 890:

‘‘In Beaumont, S. L. & W. Ry. Co. v. United States,

1930, 282 U.S. 74, 86-87, 51 S.Ct. 1, 75 L.Ed. 221, the

Supreme Court, while upholding a Commission order,

took occasion to criticize the Commission for the un-

necessary burden cast upon the reviewing court by

failure of the Commission to include in its report a

complete statement showing the grounds upon which

its determinations rested. Just how far the Commis-

sion is obliged by statute to go in this particular is not

so clear as it might be. The Commission does have the

duty to set forth in its report the ‘basic’ or ‘essential’

or ‘quasi-jurisdictional’ findings necessary to support

its ultimate conclusion, though it must be recognized

that such requirement is sometimes obscured in vague

questions of degree. Uniied States v. Chicago, M., St.

P. & Pac. Railroad (o., 1935, 294 U.S. 499, 55 S.Ct. 462,

79 L.Ed. 1023; United States v. Baltimore & Ohio

Railroad Co., 1935, 298 U.S. 454, 465, 09 S.Ct. 268, 79

L.Ed. 587: Florida v. United States, 1931, 282 U.S. 194,

215, 51 S.Ct. 119, 75 L.Ed. 291.”

30a

See also United States v. Chicago, M., St. P. € P. R. Co.,

994 U.S. 499, 504-5; Eastern-Central Motor Carriers Asso-

ciation v. United States, 321 U.S. 194, 211-2; and Secretary

of Agriculture v. United States, 347 US. 645, 653, where

the failure of the Commission to explain adequately its

departure from prior norms led to a remand of the case

for more explicit findings.

The specific question which the Commission decided was

whether the prospective increase in the importation of

iron ore, especially ore from Labrador, requires or justifies

the striking down of the long established differential in

favor of Baltimore in order to enable Philadelphia and New

York to have a share of the traffic and thereby insure their

maintenance as ports of entry for the product.

The Commission in reaching its conclusions must of

course give effect and adhere to the national transportation

policy declared by Congress, which provides for the pro-

motion of sound economie conditions among the several car-

riers and the establishment of reasonable charges for trans-

portation services without unjust discrimination, undue

preferences or advantages and without unfair or destruc-

tive competitive practices, to the end that a national trans-

portation system may be built up, adequate to meet the

needs of the commerce of the United States and of the

Postal Service and of the national defense. See Preamble

to 49 U.S.C. $61, 301, 901 and 1101. However, in effecting

this policy it is made unlawful for any carrier to give any

undue or unreasonable preference to any person, locality

or port, or to subject any person, locality or port to undue

or unreasonable prejudice or disadvantage. 49 U.S.C. $3

(1). The statute also provides that when any schedules

stating a new rate are filed the Commission is required to

have a hearing as to the lawfulness of the rate and the bur-

den of proof is upon the carrier, proposing the rate to show

that it is just and reasonable. 49 U.S.C. § 15.

dla

In this case the Commission has coneluded that the

burden was met and we must determine whether the Com-

mission has made basic findings sufficient to support its

conclusions and whether there was substantial evidence

to support the findings. In upholding parity of rates for

Baltimore, Philadelphia and New York the Commission

has disregarded the disparity of distances and thus in

effect has approved a lower rate from Philadelphia and

New York than the rate from Baltimore. This ruling,

moreover, has upset a railroad and Commission practice

of many years duration in which the factor of distance

was given effect. Such discrimination is not of itself

illegal, for there are numerous instances amongst the

myriad rates on file in which disparity of distances are

necessarily disregarded in the operation of transportation

systems. To condemn a rate on this score it must be

shown that, in violation of Section 3 of the statute, the

rate results in undue or unreasonable preference or inflicts

undue or unreasonable prejudice upon certain territory

involved. See New York v. U nited States, 331 U.S. 284,

305; United States v. Illinois Central, 263 U.S. 515, 524.

What are the findings upon which the Commission relies

as the basis for its conclusion that there should be parity

of rates between the ports notwithstanding the factor of

distance?’ As to ‘Philadelphia and Baltimore they seem

to be:

1. That there is parity tm respect of rates between

Baltimore and Philadelphia as to other routes

which involve differences in distance ;

9 That in any event the difference in distance to the

differential territory, measured from Philadelphia

and Baltimore, is so insignificant that it should be

disregarded, and

o-

—~

That the needs of the producers of steel and the

requirements of the Postal Service and of the

national defense make essential the maintenance

of a plurality of ports for the importation of iron

ore into the United States.

32a

The propriety and sufficiency of these findings must be

appraised against the historie backg: »und in which the

differential in favor of Baltimore has been maintained.

Undoubtedly it originated in the natural advantages de-

rived from the shorter distance of the port to destinations

in the west and for this reason has been recognized for

many years as a dominant factor in the rate relationships

between the competing ports not only by practical railroad

men but by impartial governmental authority in control.

This practical solution of the difficulties arising from

competition was based on solid legal ground. for it. is

settled that the law does not attempt to equalize oppor-

tunities among localities and that the natural advantage

which belongs to a locality does not constitute a prefer-

ence, United States v. Mlinois Cent. RR. Co., 263 US. O15,

924; New York v. "nited States, 331 U.S. 284, 331-2:

Alabama G. S. RB. Co. v. United States, 340 U.S. 216, 229,

The Commission itself is without authority to adjust rates

and differentials for the purpose of diverting traffic from

one locality to another simply on the ground that too much

traffic passes through one gateway and too little through

another. Texas and Pacific R. Co. y. United States, 289

U.S. 627, 639.

This does not mean, of course, that rates are to be

rigidly proportioned to respective distances or that a car-

rier may not reduce its rates to meet competition within

the zone of reasonableness, but differences in rates based

upon differences in length of haul, density of traffie and

other elements of the cost of service are within a long

standing practice of rate making, and a rate may not be

filed for the purpose of diverting traffic from one locality

in order to build up another. Texas and Pacific R. Co. v.

United States, 289 U.S. 627, 636, 639. Even if a reduced

rate is reasonable, it is unlawful if it results in undue

prejudice. New ork v. United State., 331 US. 284, 297,

298. The Commission in reaching its conclusion must

consider all of these faetors and may not condemn a

33a

difference in rates ‘‘unless it is shown not to be justified

by the cost of the respective services, by their values, or

by other transportation conditions.”’ United States v.

Illinois Cent. R.R. Co., 263 U.S. 515, 524.

In passing upon the merits of the case, the Commis-

sion gave no consideration to the cost or value of the

services of the railroads competing for traffic at Phila-

delphia and Baltimore. No evidence on these points was

offered or required; but the ultimate finding of the Com-

mission as to distances from Philadelphia and Baltimore

to Central territory was that the difference is so insignifi-

cant that the service from both ports is substantially iden-

tical. Evidence to support this finding seems to us to be

lacking. Not only does the disparity, which had been con-

sidered substantial for many years, still exist, but the only

standard of measurement proffered by the Commission for

its finding was obviously incorrect. The Commission de-

clared that the actual operating route from Philadelphia

to Central territory is only 11 miles greater than the

operating route from Baltimore. This seems convincing

until it appears, from a careful reading of the decision,

that the Commission is comparing the distance via the

Penusylvania from Baltimore with the distance via the

Pennsylvania from Philadelphia and that in doing so it

measures the distance from Philadelphia over a direct

route, but measures the distance from Baltimore over a

-ireuitous line through Perryville, which the railroad com-

pany adopts for its own convenience. Clearly the treat-

ment was wrong. The comparison should be made on the

same basis in each instance, for example, between the

short line distances or between the short tariff distances

from both ports, which shows a difference of 47 miles in

the one ease and 24 miles in the other. It is fair to say

that the Commission, conirary to its former policy, either

eave no weight whatever to the factor of distance or

found that it was overborne by the general policy of sup-

plying the needs of national commerce and the require-

ments of national defense.

34a

We do not overlook the existence of parity of rates

despite disparity of distances in respect to other commodi-

ties over other routes to which the Commission referred

in its decision, seemingly as precedent for its present

action. There was nothing new in this situation. These

other rates had long existed but in spite of them the dif-

ferential in favor of Baltimore on traffic moving to the

Central territory had been maintained and carriers serv-

ing the port in reliance upon it had adjusted their rates

and provided and maintained adequate facilities. We

think that these other rates furnish no reasonable basis

for change of view on the part of the Commission.

It is obvious that the principal basis for the Commis-

sion’s decision was its finding that parity of rates on

imported iron ore moving westerly from the Atlantic

Coast to the interior was necessary to insure the mainte-

nance of New York, Philadelphia and Baltimore as ports

of entry in furtherance of the policy of Congress to build

up a national transportation system. How far the Com-

mission’s authority extends in this direction is an inter-

esting and important question. The respondents stress

the passage of the Act of September 18, 1940, 54 Stat.

899, whereby the Act to regulate commerce was amended

to include the introductory declaration of the national

transportation policy. This amendment has been cited in

a number of decisions which hold that the Commission

must fellow it as a guide in the enforeement of all the

provisions of the statute."°. No one suggests, however,

that the Commission has general authority to build up the

transportation system of the country as it deems best in

disregard of the right of a locality to enjoy its natural

advantages, or in disregard of Section 3 of the statute

1° Luckenbach S.S. Co. v. United States, 122 F.Supp. 824, af-

firmed, 347 U.S. 984; .Atlunta & St. Andrew's Bay Ruy. Co. v.

United States, 104 F.Supp. 193; United States v. Great Northern

R. Co., 8438 U.S. 562, 576; Pacific Inland Tariff Bureau vy. United

States, 129 F.Supp. 472.

30a

which prohibits unlawful preferences and unlawful dis-

crimination. At most the national needs constitute one of

the factors to be considered while che other factors which

have entered into the practice of rate making from the

beginning must still be taken into account, the Commis-

sion retaining its power to give appropriate weight to

each of them.

For our purposes it is enough to determine whether

there is substantial evidence to support the finding that

a radical change in the rates was needed to support the

national policy. In the first place, it iseto be noted that

there is no evidence of financial weakness on the part of

the railroads involved as has led the Commission in some

eases to fix rates in aid of the financial necessities of cer-

tain carriers. See New England Divisions ease, 261 U.S.

184. The decision of the Commission is based on the

general conclusion that the northerly ports will have no

share in the transportation of imported iron ore so long

as the differential exists because ocean freights have been

generally equalized sinee 1920 and the ore will inevitably

be shipped to the port which enjoys the cheapest rail-

road rate to the interior.

Definite findings are made as to the ocean distances

from major sources of iron ore fo the north Atlantic ports,

which show the distances fro... Labrador to be 950 miles

to Boston, 1187 miles to New York, 1320 miles to Phila-

delphia and 1470 miles to Baltimore; and it is said that

a round trip between Labrador and Baltimore requires

about three more days than a round trip between Labra-

dor and Boston. The Commission, however, does not at-

tempt to review the considerable body of testimony bear-

ing on the relative costs of ocean travel to the several

destinations. A witness is quoted as saying that at the

present time iron ore from foreign ports moves both in

vessels owned by the steel companies and in chartered

vessels: that charter agreements may he voyage charters

or time charters; that the ocean rates of voyage charters

36a

are equalized to all North American ports; but that in

some instances there is a cost saving in routing ore to

the nearest port ‘‘on a time charter or for an integrated

shipped.’’

These findings are vague and inconelusive for they do

not show to what extent differences in distance by sea will

influence the movement of the ore. There was direct

testimony that water costs bear a direct relationship to

the time spent in transit; that the investments in large ore

carrying vessels are substantial and operating costs are

high, ranging from $1000 to $2000 per day; that the

shipipng season from Labrador is short and that time

consumed in making round trips is an important element

in moving the maximum tonnage to the destination; that

vessels under a time charter and vessels owned by the

steel companies would be routed to the nearest port, all

other factors being equal; and that the ownership of ves-

sels by the steel companies is expanding. The weight of

all this testimuny tends strongly to support the view

that ocean costs will be an influential if not a determining

factor in selecting the ports of destinations, which basis

is lacking for the genera] conclusion of the Commission

that without parity of rates Philadelphia will have no

share in the traffic. On the contrary, shipments during

a few months in 1954, the only period considered, indicate

that under parity the ore will go to Philadelphia rather

than to Baltimore, since Philadelphia enjoys the double

advantage of smaller ocean costs and the most modern

unloading facilities.

Iu the absence of specific findings, it does not seem

reasonable to destroy a long established differential on

the strength of which the railroads serving Baltimore

have made large investments and the commercial inter-

ests of the port have made their arrangements. Ob-

viously it is no answer to prophesy that the chances are

that Baltimore will not suffer a loss of total tonnage

under parity because the volume of imports is expected to

dia

greatly increase. The port will still be entitled to the

benefits of its geographical position and the expected

profits of the new business may not be diverted merely

to satisfy the desire of other ports to share therein.

We think, however, that the record furnishes a reason-

able basis for the decision of the Commission to retain

parity of rates between Baltimore and Philadelphia in

respect to traflie to Pittsburgh. Similar reasons for the

maintenance of the status quo apply as in the case of

Baltimore. It is true that, so far as iron ore is con-

cerned, only a paper rate was involved until recently ;

nevertheless, parity has existed for more than 50 years

with the acquiescence of Baltimore, and it was retained

without objection in the revision of rates in 1950 when

the rate of imported iron ore from Philadelphia to the

Pittsburgh area was reduced by the same amount as the

rate from Baltimore. While there has been no signifi-

cant movement of iron ore from Philadelphia to the steel

mills in the Pittsburgh area during this period, there was,

as the report of Division 2 of the Commission shows, a

substantial movement from Baltimore to this district.

The Pennsylvania Railroad announced its intention, in

August 1951, to erect a modern unloading facility in South

Philadelphia with the obvious purpose to share in this

trafic and in its expected increase, but no objection to

the existing parity of rates came from the Baltimore rail-

roads until they made their tactical move in 1953 in order

to preserve the consistency of their position.’ In our

11'The respondent railroads contend that parity as to Pitts-

burgh is inconsistent with the differential as to the Central terri-

tory, pointing out that Youngstown, one of the points in that ter-

ritory, is 66 miles distat from Pittsburgh over the Pennsylvania

Railroad as compared to 76 miles over the Baltimore and Ohio.

This ineongruity, however, does not present a new element for it

has existed throughout the history of the differential and, in any

event. we are coneerned not with the comparative distances from

Pittsburgh but with comparative distances from the ports of

Philadelphia and Baltimore.

38a

\

opinion, it is of great significance that Phiiadelphia inter-

ests have made a large capital investment in providing

unloading facilities in the\belief that the historie situation

would be retained; and it\would be unreasonable at this

time to deny them the opportunity to make use of the

structure which they have A% up.

The lack of substantial basis for the allowance of par-

ity to the Port of New York is shown by what has already

been said; but it may be added that the approval of parity

hetween New York and the more southerly ports, notwith-

standing considerable differenges in distances, strengthens

the impression that the Commission holds the view that

the conventional factors of rate making must yield to con-

siderations of the general welfare. Aside from these con-

siderations the New York decision rests on certain cost

data showing that on the Baltimore level a rate from New

York would exceed the costs by'38.8 cents per ton. For

this reason alone the rate was found to be just and rea-

sonable; and yet in the same opinion the Commission

found that the rate of $2.51 from Baltimore, proposed by

the Baltimore railroads to take effeet February 16, 1953,

that is to say, 20 cents under the current rate, would not

be just and reasonable, although the evidence shows that

the return thereon would exceed the return on the New

York rate which the Commission approved. As the four

dissenting commissioners point ont, the only justification

in the record for the proposed rates from New York ‘‘is

hottomed solely on the desire to meet the competition of

Philadelphia and Baltimore.’’

We conelude (1) that the orders of the Commission

should be affirmed insofar as they disapprove the sched-

ules filed te become effective on February 16, 1953, pro-

posing reduced rates from Baltimore to the Pittsburgh

and Central areas, and the schedules filed to heeome ef-

fective on February 16, 1953, and Mareh 11, 1953 from

Philadelphia to the Pittsburgh and Central areas, respec-

ofa

tively; and (2) that the orders be vacated insofar as

they approved the schedules filed to become effective on

February 9, 1953, proposing reduced rates from New York

to destinations in the Central area, and that the continu-

ance of such schedules should be enjoined; and (3) that,

insofar as the orders approved the schedules to become

effective February 9, 1953, for reduced rates from Phila-

delphia to Central territory, the case should be remanded

to the Commission to make explicit findings as to the rela-

tive costs of ocean shipping of imported iron ore to the

ports of Baltimore and Vhiladelphia and as to the traffic

therein to be reasonably expected at these ports, if parity

is continued or if the differential is restored, taking into

consideration the volume of traffic that has passed through

these ports since February 19, 1954, when parity went

into effect; and (4) that, pending said findings and a

decision based thereon, parity between the ports of Phila-

delphia and Baltimore be retained upon the assumption

that steps be taken to secure a prompt determination.

The orders of the Commission are modified and the

ease is remanded to the Commission for further’ proceed-

ings consistent with this opinion.

We concur in this opinion:

W. Carvin CHESNUT

United States District Judge.

R. Dorsey WarkINs

United States District Judge.

40a

APPENDIX B

In the District Court of the United States for the

District of Maryland

Civiz Acrios No. 9237

THe Bautimore ANd Onto RatLroap ComMPANy, CAnTON

Raruroap Company, Western MARYLAND RatLway Com-

PANY, BALTIMORE Pa or COMMERCE, THE BAL-

TIMORE CHAMBER OF COMMERCE, THE STEAMSHIP TRADE

AssocrIaTION OF Bautimore, [xc., Battrmorn Custom

House Brokers ann Forwarpers ASSOCIATION, THE

Mayor ANpD City Councin or BALTIMORE, PLAINTIFFS

Us.

Unitep States or America, Lyterstate CoMMERCE ComMis-

SION AND THE PENNSYLVANIA RAILROAD CoMPANY, AND

C. W. Bory, AGENT, AND THE New York CEentTRAL ey

ROAD COMPANY AND Erte Rattroap CoMPANY, DEFENDANTS

(Filed 22d May 1957)

Decree

This 22d day of May 1957, the Court adopts the find-

ings of fact and conclusions of law appearing in the Opin-

ion filed herein on Apri! 26, 1957, and holds that the

Interstate Commerce Cummission’s Order of October a,

1956 in its Investigation and Suspension Docket No. 6074,

Tron Ore from Eastern Ports to Central Freight Associa-

tion Points, should be (1) in part vaeated and the eon-

tinuance and enforcement of said part enjoined, (2)

part remanded to the said Commission to make more

explicit findings, and (3) in part affirmed: to wit, it is:

4la

ORDERED, ADJUDGED, AND DECREED

1. That the order of the Interstate Commerce Commis-

sion dated October 1, 1956, is vacated insofar as it ap-

proves the tariff schedules on iron ore from New York

tiled to be effective February 9, 1953, and authorizes the

establishment of the rates on iron ore named in said

schedules.

2. That the Temporary Restraining Order issued by

the Court on October 26, 1956, enjoining the United

States and the Interstate Commerce Commission from

taking, authorizing, approving, or permitting any action,

by any railroad company, particularly the New York

Central Railroad Company and the Erie Railroad Com-

pany, which would have the effect of establishing or mak-

ing effective the tariff schedules on iron ore from New

York filed to be effective February 9, 1953, is made

permanent.

3. That the Interstate Commerce Commission shall

make and enter an appropriate order requiring the New

York Central Railroad Company and the Erie Railrvad

Company to cancel their tariff schedules on iron ore from

New York published to be effective February 9, 1953.

4. That the order of the Interstate Commerce Commis-

sion dated October 1, 1956, insofar as it approves the

iariff schedules of the Pennsylvania Railroad Company

on iron ore from Philadelphia filed to become effective

February 9, 1953, is not supported by essential basic find-

ings, and therefore is remanded to the Interstate Com-

meree Commission to make more explicit findings as in-

structed by the Court in the Opinion filed herein.

5. That the rates named in the tariff schedules of the

Pennsylvania Railroad from Philadelphia published to

become effective on February 9, 1953, be permitted to

remain in effect pending said reconsideration and final

decision by the Interstate Commerce Commission.

42a

6. That the order of the Interstate Commerce Commis-

sion dated October 1, 1956, is affirmed insofar as it dis-

approves tariff schedules on import iron ore from Balti-

more published to be effective February 16, 1953.

‘. That the order of the Interstate Commerce Commis-

sion dated October 1, 1956, is affirmed insofar as it dis-

approves tariff schedules on import iron ore from Phila-

delphia published to be effective February 16, 1953, and

Mareh 11, 1953.

(S) Morris A. Soper,

United States Circuit Judge.

(S) W. Carvin Cuesnut,

United States District Judge.

(S) RR. Dorsey Warkrys,

United States District Judge.

43a

APPENDIX C

The National Transportation Policy (Preamble to 49

U.S.C. 1) and the Interstate Commerce Act, 24 Stat. 379,

as amended (49 U.S.C. 1 et seq.), provide as follows:

NATIONAL TRANSPORTATION POLICY

It is hereby declared to be the national transporta-

tion policy of the Congress to provide for fair and im-

partial regulation of all modes of transportation sub-

ject to the provisions of this Act, so administered as

to recognize and preserve the inherent advantages of —

each; to promote safe, adequate, economical, and effi-

cient service and foster sound economic conditions in

transportation and among the several carriers; to en-

courage the establishment and maintenance of reason-

able charges for transportation services, without un-

just discrimination, undue preferences or advantages,

or unfair or destructive competitive practices; to co-

operate with the several States and the duly authorized

officials thereof; and to encourage fair wages and equit-

able working conditions ;—all to the end of developing,

coordinating, and preserving a national transporta-

tion system by water, highway, and rail, as well as

other means, adequate to meet the needs of the com-

merece of the United States, of the Postal Service, and

of the national defense. All of the provisions of this

Act shall be administered and enforced with a view to

carrying out the above declaration of policy.

See. 1. * * * (5) All charges made for any service

rendered or to be rendered in the transportation of

passengers or property, or in connection therewith,

shall be just and reasonable, and every unjrst and

unreasonable charge for such service or any part

thereof is prohibited and declared to be unlawful.

See. 3. (1) It shall be unlawful for any common car-

rier subject to the provisions of this part to make,

give, or cause any undue or unreasonable preference

or advantage to any particular person, company, firm,

corporation, association, loeality, port, port district,

gateway, transit point, region, district, territory, or

i

44a

any particular description of traffic, in any respect

whatsoever; or to subject any particular person, com-

pany, firm, corporation, association, locality, port,

port district, gateway, transit point, region, district,

territory, or any particular deseription of traffie to

any undue or unreasonable prejudice or disadvan-

tage in any respect whatsoever: Provided. however,

That this paragraph shall not be construed to apply

to discrimination, prejudice, or disadvantage to the

traffic of any other carrier of whatever cdeseription.

See. 15. (1) That whenever, after full hearing, upon

a complaint made as provided in section 13 of. this

part, or after full hearing under an order for investi-

gation and hearing made by the Commission on its

own initiative, either in extension of any pending

complaint or without any complaint whatever, the

Commission shall be of opinion that any individua! or

joint rate, fare, or charge whatsoever demanded,

charged, or collected by any common carrier or ecar-

riers subject to this part for the transportation of

persons or property as defined in the first section of

this part, or that any individual or joint classifica-

tion, regulation, or practice whatsoever of such ear-

rier or carriers subject to the provisions of this part,

is or will be unjust or unreasonable or unjustly dis-

criminatory or unduly preferential or prejudicial, or

otherwise in violation of any of the provisions of this

part, the Commission is hereby authorized and em-

powered to determine and prescribe what will be the

just and reasonable individual or joint rate, fare, or

charge, or rates, fares, or charges, to be thereafter

observed in such case, or the maximum or minimum,

or maximum and minimum, to be charged, and what

individual or joint classification, regulation, or prac-

tice is or will be just, fair, and reasonable, to be

thereafter followed, and to make an order that the

carrier or carriers shall cease and desist from such

violation to the extent to which the Commission finds

that the same does er will e) ist, and shall not there-

after publish, deraand, or collect any rate, fare, or

charge for such transportation other than the rate,

fare, or charge so prescribed, or in excess of the

45a

maximum or jess than the minimum so prescribed, as

the case may be, and shall adopt the classification and

shall conform to and observe the regulation or prac-

tice so prescribed.

- * *

Sec. 15. * * * (7) Whenever there shall be filed

with the Commission any schedule stating a new in-

dividual or joint rate, fare, or charge, or any new

individual or joint classification, or any new indi-

vidual or joint regulation or practice affecting any

rate, fare, or charge, the Commission shall have, and

it is hereby given; authority, either upon complaint or

upon its own initiative without complaint, at once,

and if it so orders wthout answer or other formal

pleading by the interested carrier or carriers, but

upon reasonable notice, to enter upon a hearing con-

cerning the lawfulness of such rate, fare, charge,

classification, regulation, or practice; and pending

such hearing and the decision thereon the Commis-

sion, upon filing with such schedule and delivering to

the carrier or carriers affected thereby a statement

in writing of its reasons for such suspension, may

from time to time suspend the operation of such

schedule and defer the use of such rate, fare, charge,

classification, regulation, or practice, but not for a

longer period than seven months beyond the time

when it would otherwise ge into effect; and after full

hearing, whether completed before or after the rate,

fare, charge, classification, regulation, or oractice

goes into effect, the Commission may make such order

with reference thereto as would be proper in a pro-

ceeding initiated after it had become effective. If

the proceeding has not been concluded and an order

made within the period of suspension, the proposed

change of rate, fare, charge, classification, regulation,

or practice shall go into effect at the end of such

period; but in the case of a proposed increased rate

or charge for or in respect to the transportation of

property, the Commission may by order require the

interested earrier or carriers to keep accurate account

in detail of all amounts received by reason of such

increase, specifying by whom and in whose behalf

such amounts are paid, and upon completion of the

hearing and decision may by further order require

46a

the interested carrier or carriers to refund, with

interest, to the persons in whose behalf such amounts

were paid, such portion of such increased rates or

cuarges as by its decision shall be found not justified.

At any hearing involving a change in a rate, fare,

charge, or classification, or in a rule, regulation, or

practice, after the date this amendatory provision

takes effect, the burden of proof shall be upon the

carrier to show that the proposed changed rate, fare,

charge, classification, rule, regulation, or practice is

just and reasonable, and the Commission shall give

to the hearing and decisions of such questions prefer-

ence over all other questions pending before it and

decide the same as speedily as possible.

* - a

See. 15a. * * * (2) In the exercise of its power to

prescribe just and reasonable rates the Commission

shall give due consideration, among other factors, to

the effeet of rates on the movement of traffic by the

earrier or carriers for which the rates are pre-

seribed; to the need, in the public interest, of ade-

quate and efficient railway transportation service at

the lowest cost consistent with the furnishing of such

service; and to the need of revenues sufficient to en-

able the carriers, under honest, economical, and eft-

cient management to provide such service.

FILED.

NOV 6 195)

_—_—__— | “FEY, Clerk

IN THE

Supreme Court of the United States

Octroper Term, 1957

No. 465

ERIE RAILROAD COMPANY AND THE PORT OF ~

NEW YGRK AUTHORITY, Appellants

wu

THE BALTIMORE AND OO RAILROAD

COMPANY, ET AL., Appellees

No. 466

THE NEW YORK CENTRAL RAILROAD COMPANY,

Appellant

THE BALTIMORE AND OTTO RATLROAD

COMPANY, ET AL., Appellees

On Appeal from the United States District Court for the

District of Maryland

BRIEF IN OPPOSITION TO MOTION TO AFFIRM

M. C. SMITH, JR. SAMUEL IH. MOERMAN

SIDNEY GOLDSTEIN 745 Investment Building

FRANCIS A. MULHERN Washington, D. C.

. Ee oa eae R. Attorney for Erie Railroad

Company and The Port

Appellants

Of Counsel for Erie Railroad

Company and The Port of

New York Authority

ROBERT D. BROOKS RIC i ARD J. MURPHY

466 Lexington Avenue 1225 fee aSalle St. Station

New York 17, New York Chicago 5, Illinois

Of Counsel for The New Attorney for The New York

York Central Railroad Central. Railroad Com-

Company pany, Appellant

Press oF Byron S. Apamse Wasnnctres ©

INDEX

TABLE OF CONTENTS

Page

ee ROPE EP PE SE EO OE Te DRED ee z

EE hoo ar Peas He CRA A ORNS wee as 5)

ee BPE eR tr ene Ie er CIP NE aE a gree 15

TABLE OF CASES

Alabama G.S.R. Co. v, United States, 340 U.S. 216 .. 11

Boston and Maine Railroad v. United States, 153 F.

a aaah s a nee RSC aA RN Cee e 8 2

Interstate Commerce Commission v. Intand Waterways

ee Ghee AA ie rar ure yee 12

Interstate Commeree Commission v. New York Central

ie Oe Oe er es bio es 15

New York Central R, Co. v. United States, 99 F. Supp.

| MEARS AS par Ae Roney 4 Spr Ow ttre hae, aaa Do ram nd 15

United States v. Chicago, M., St. P. & P. R. Co., 294

pT Bele he Se ek ene re wee Wa ey Seen ee 12

Virginian Ry, Co. v. United States, 272 U.S. 658 .... 15

TABLE OF STATUTES CITED

Pe Fy 8 LS De arr rey ror rire er rr a 11

OP aie, Mt BUR bio vcd moecceien 8, 9, 10, 11, 12, 13, 14

Oe er oo os cane oc ceck pe enavebugue ds 10

ee 7 EE pk ons Se hcke da kaaas cers bees 2

er ee I os a oh ks ace ae 2, 5, 6, 10

a I A Scien h vegas ed oe 11

National Transportation Policy (49 U.S.C. preceding

a” BS) NEES aia preeeus eee ats MaDe inn sy rena, ae: 2,7,8

IN THE

Supreme Court of the United pus

Octoper Term, 1957

No. 465

ERIE RAILROAD COMPANY AND THE PORT OF

NEW YORK AUTHORITY, Appellants

v.

THE BALTIMORE AND OHIO RAILROAD

COMPANY, ET AL., Appellees

No. 466

THE NEW YORK CENTRAL RAILROAD COMPANY,

Appellant

Ve

THE BALTIMORE AND OHIO RAILROAD

COMPANY, ET AL., Appellees

On Appeal from the United States District Court for the

District of Maryland

BRIEF IN OPPOSITION TO MOTION TO AFFIRM

—_———_—_

STATEMENT

These appeals present novel and important questions

arising out of the following proceedings:

In February 1953, the railroads serving the ports of

Philadelphia, New York and Boston published re-

duced rail rates on imported iron ore to certain points

in the Youngstown, Ohio, area on the same level as

those applying from Baltimore in an attempt to share

in a new and expanding movement of iron ore from

2

foreign sources to the Youngstown area. The reduced

rates from Baltimore had been made effective in

October, 1950. Almost immediately, the Baltimore

rail carriers, which had theretofore enjoyed a mo-

nopoly on this new traffic, published 20-cent reduc-

tions in their rates, and the Philadelphia carrier did

likewise. The Interstate Commerce Commission sus-

pended all of the proposed schedules and entered into

an investigation concerning the lawfulness of the pro-

posed rates under the provisions of Section 15(7) of

the Interstate Commerce Act.

After lengthy proceedings, the Commission in Octo-

ber 1956 approved the equalizing rates published by

the Philadelphia and New York carriers to the Youngs-

town area. The proposed equalizing rates from Boston

were found not to be compensatory and were ordered

eancelled.* The subsequently published 20-cent re-

duetions from Baltimore and Philadelphia were also

disapproved, the Commission finding that little if any

evidence was offered to justify them. The New York

rates were approved by the Commission after they were

found to he compensatory, competitively necessary,

not otherwise unlawful and consistent with the Na-

tional Transportation Policy—the tests usually em-

ployed by the Commission in determining the Jawful-

ness of carrier-proposed rates. Although the Commis-

sion was requested by the New York railroads to

exercise its powers under section 15(1) to prescribe a

parity of rates and by the Baltimore carriers to pre-

* A statutory three-judge District Court for the District of

Massachusetts affirmed the Commission’s disapproval of the rates

proposed from Boston in Boston and Maine Railroad v. United

States, 103 F. Supp. 952, and those rates are not in issue here.

3

seribe differentially related rates, it refused to pre-

scribe any rates, merely approving those rates which

it found had been justified and disapproving those

which had not been justified.

In a suit brought by the Baltimore railroads and

supporting civic and commercial interests, a statutory

three-judge District Court for the District of Maryland

affirmed the Commission’s orders insofar as they dis-

approved the subsequent 20-cent reductions from

Baltimore and Philadelphia and, since no appeal was

taken from that finding, the lawfulness of those rates

is no longer in issue. With respect to the equalizing

rates from Philadelphia, the District Court ordered

the case remanded to the Commission to make explicit

findings as to the relative costs of ocean shipping of

imported iron ore to Baltimore and Philadelphia and

as to the volume of such traffic passing through those

two ports.* Pending such findings, the District Court

order permits ihe equalizing Philadelphia rates to re-

main in effect.

The District Court vacated the Commission’s orders

insofar as they approved the equalizing rates from

New York to the Youngstown area and permanently

enjoined the Commission from ‘‘taking, authorizing,

approving or permitting any action, by any raiiroad

eompany’’ which would have the effect of establishing

or making such rates effective. Thus, the equalizing

rates from New York have never been allowed to be-

come effective and under the District Court order

could not be established now or in the future.

*The equalizing rates from Philadeiphia became effective on

February 19, 1954, after Division 2 of the Commission unanimously

approved the Philadelphia rates but by a 2-to-1 vote disapproved

the New York rates.

4

The opinion of the District Court makes it clear that

it did not understand the nature or effect of the Com-

mission’s action which it was reviewing. In this pro-

ceeding the Commission merely passed upon the law-

fulness of earrier-proposed rates and refused to pre-

scribe any rates. The District Court, however, con-

strued the Commission’s decision as determining the

proper rate relationship between the ports and as pre- -

scribing a parity of rates to be observed in the future.

In the opening paragraph of its opinion, the District

Court states that the suit was brought to set aside de-

cisions and orders of the Commission ‘‘which pre-

scribe parity of railroad rates.’’*

The District Court, obviously failing to appreciate

the distinction between voluntary rate action by ear-

riers and prescription of rates by the Commission over

earrier objections, held that the Commission did not

make the necessary findings to justify its action, which

the District Court variously characterized as a ‘‘strik-

ing down of the long established differential in favor

of Baltimore’’** or as an adjustment of ‘‘rates and

differentials for the purpose of diverting traffic from

one locality to another.’’ In its opinion the District

Court refers to and evidently accepts the Commission’s

* In other parts of its opinion, the District Court correctly states

that the Commission merely approved equalizing rates from

Philadelphia and New York, but the District Court) makes it

clear that it considers this to be tantamount to or in effect a

prescription of parity rates.

** The District Court erroneously holds that the differential-

rate adjustment applying from the four ports of Baltimore, Phila-

delphia, New York and Boston to the Youngstown area on mer-

chandise traffic also applied on iron ore traffic, although the Boston

rate on iron ore has never been related to the others and no iron

ore ever has moved through New York to the Youngstown area.

findings which justified and required approval of the

earrier-proposed New York rates, but holds these

findings insufficient to justify the prescription of rate

parity by the Commission, which the District Court

erroneously assumes was the Commission’s action.

ARGUMENT

1. In their Motion to Affirm,* the Baltimore rail-

roads, who are mainly responsible for the District

Court's confusion as to the nature of the Commission’s

action, for the first time correctly describe the Com-

mission’s action with respect to the New York rates as

‘follows (Motion to Affirm, p. 23):

In this proceeding the only action taken by the

Commission was to approve as ‘‘just and reason-

able’? under Section 15(7) a reduced rate from

New York which was the same as the rate from

Baltimore. The Commission did not prescribe

parity as a principle to govern future rate-making,

nor did it make any findings which would pre-

clude rates on different levels if. justified by a

different record.

With this statement, these appellants have no quar-

rel.** What follows, however, is subject to serious

objection. On the next page of their Motion to Affirm,

the Baltimore railroads go on to say:

*The arguments and contentions in all three Motions to Affirm

are substantially the same and this brief is in reply to all three,

although specific reference is made herein only to that filed by

the Balt: nore & Ohio Railroad and the Western Maryland Railway.

** With respect to the Philadelphia equalizing rate, the Balti-

more railroads still try to argue at page 13 of their Motion to

Affirm that ‘‘the Commission required (or ‘prescribed’) parity.’

UV

Accordingly, the effect of the District Court’s

judgment is to preclude from New York the same

rate as from Baltimore on the basis of the present

record. In no way, however, would the order of

the District Court operate to prevent the New

York appellants, if they should want to try again,

from seeking to justify on a different record the

same rates which, on this record, the District Court

enjoined. Nor would the order of the District

Court stand in the way of the Commission’s re-

opening the proceeding either on petition or by

its own initiative. Thus a continuance of the ad-

ministrative process is not cut eff. On the con-

trary, its continuance depends on the initiative of

the New York appellants in bringing another pro-

ceeding under Section 15(7), or action by the

Commission in continuing the present proceeding.

Having misled the District Court into believing that

the Commission had prescribed a parity of rates and

having secured a reversal by the District Court, the

Baltimore railroads now urge this Court to affirm the

District Court decision by attempting to mislead it

as to the nature of the District Court’s decree. The

District Court’s decree (Jurisdictional Statement of

these Appellants, Appendix B, page 41a) in the first

paragraph vacates the Commission’s order insofar as

it approves the equalizing rates from New York and

in the third paragraph directs the Commission to make

and enter an appropriate order requiring the New

York railroads to cancel their schedules. If, as the

Baltimore railroads contend, the Distriei Court in-

tended to leave the New York carriers free to file new

schedules proposing equalizing rates and justify them,

these two paragraphs would have sufficed. But the

District Court, in the second paragraph of its decree,

makes permanent a restraining order which enjoins

the Commission ‘‘from taking, authorizing, approving

or permitting any action, by any railroad company’”’

which would have the effect of establishing or making

effective the equalizing rates from New York. Thus,

contrary to the contention of the Baltimore railroads,

the New York carriers would never be able to make

effective equalizing rates from New York if the Dis-

trict Court’s order is affirmed.

The argument of the Baltimore railroads only makes

it clear that the District Court’s decision should be

reversed and the Commission’s decision should be

affirmed. Although the District Court’s decree pre-

vents the New York carriers from publishing equal-

izing rates, there is nothing in the decisions or orders

of the Commission or the District Court which prevents

the Baltimore carriers from publishing any reduced

rates they desire and making effective any reduced

rates whose lawfulness they can prove. The 20-cent

reductions proposed by the Baltimore carriers were

disapproved by the Commission because no serious

attempt was made to justify them, and in fact the

Baltimore carriers themselves urged their disap-

proval.* There is nothing to prevent the Baltimore

earriers from filing new reduced rates, and if they can

prove that such rates would be compensatory, no lower

than necessary to meet the competition, not otherwise

unlawful, and in accord with the National Transporta-

tion Policy, the Commission would of course have to

approve such rates. The New York railroads who have

successfully met these tests before the Commission in

* The Baltimore carriers urged the Commission to disapprove

all of the proposed schedules and to prescribe differentially higher

rates from Philadelphia, New York and Boston than from

Baltimore.

—

justifying their own rates should not be denied the

right to participate in the movement of imported iron

ore merely because the District Court did not under-

stand the nature of the Commission’s action.

If the District Court’s decision is reversed and the

Commission’s decision is affirmed, the necessary facility

could be built at New York and the iron ore traffic could

start to move through that port. Unless the District

Court’s decision is reversed, the carriers serving New

York are permanently deprived of their right to com-

pete because of the Baltimore carriers’ unsupported

claims that such competition, if authorized, would be

too keen.

2. After finally admitting the nature of the Com-

mission’s action and the principles under which the

lawfulness of the rates from New York are to be

determined, the Baltimore railroads now urge that cer-

tain tests were not met* or that the Commission’s

findings were not sufficiently specific. They argue that

the Cormmission’s findings were either inadequate or

erroneous on the questions whether the New York rates

are (a) lower than necessary to meet the competition,

(b) in violation of the provisions of section 3(1), and

(c) in aecord with the National Transportation Policy.

Now that they have been foreed to admit the true

nature of the Commission’s action, the Baltimore

carriers cannot successfully make such arguments.

Even the District Court in its opinion referred, without

apparent criticism, to the Commission’s findings which

the Baltimore railroads now claim were inadequate or

not made at all. In its opinion (Jurisdictional State-

* Even the Baltimore railroads evidently concede that the New

York rates are compensatory and just and reasonable per se.

ment of these Appellants, Appendix A, page 34a), the

District Court states:

It is obvious that the principal basis for the

Commission’s decision was its finding that parity

of rates on imported iron ore moving westerly

from the Atlantic Coast, to the interior was neces-

» sary to insure the maintenance of New York,

Philadelphia and Baltimore as ports of entry in

furtherance of the policy of Congress to build up

a national transportation system.

The District Court, however, was of the opinion that

such findings did not justify the prescription of parity

rates by the Commission (which it erroneously believed

the Commission’s action to be). It is too late for the

Baltimore carriers now to claim that no such findings

were made.

3. The argument on which the Baltimore railroads

seem to place the heaviest emphasis is.that in order to

approve the equalizing rates from New York, the Com-

mission had to make a specific finding that such rates

would be in compliance with the provisions of section

3(1) of the Interstate Commerce Act and that it failed

to do so. The District Court on the other hand, evi- |

dently felt that the Commission had made the neces-

sary finding on this point as to the New York rates,

but that the Commission erred in finding that section

3(1) would not be violated by a parity of rates which

it erroneously believed the Commission had prescribed.

The fact that the District Court reversed the Com-

mission’s decision and vacated the order as to the New

York rates, instead of remanding for additional find-

ings as it did with respect to the Philadelphia rates,

seems to confirm this.

aJ

In a complaint brought under section 13 of the

Interstate Commerce Act alleging that certain rates

violate section 3(1), the Commission would of course

have to make a specific finding that the rates do or do

not violate section 3(1). An investigation under section

15(7) concerning the lawfulness of carrier-proposed

rates of the type here involved, however, is a totally

different proceeding. Section 15(7) provides that in

such a proceeding ‘‘the burden of proof shall be upon

the carrier to show that the proposed changed rate

. is just and reasonable.’’ In the ultimate con-

clusions in its report, the Commission found that the

equalizing rates from New York and Philadelphia

‘fare just and reasonable.’”’ (299 I.C.C. 210) The

carrier’s burden to prove a proposed rate is ‘‘just and

reasonable’? does not mean that rates shown to be

just and reasonable under section 1 will automati-

cally be approved by the Commission. Where evi-

dence is introduced tending to show that proposed

rates would violate any other provisions of the act,

the ecarrier’s burden of proving the proposed rates

‘*just and reasonable’’ includes the burden of rebutting

such evidence, and the Commission must find the rates

not otherwise unlawful before approving them as just

and reasonable. In the same way that the ecarrier’s

statutory burden of proving proposed rates ‘‘just and

reasonable’’ includes the burden of proving them not

otherwise unlawful, so the Commission’s formal find-

ing that rates are ‘‘just and reasonable’’ necessarily

includes a finding that they are not otherwise unlawful.

Although the Commission must, of course, make the

‘*hasic’’ or ‘‘quasi-jurisdictional”’ findings essential to

the statutory validity of its order, the essential findings

will vary with the context of the situation presented.

~

Alabama G.S.R. Co. v. United States, 340 U.S. 216.

Here there can be no question that the Commission

made the essential! findings.

The proposed equalizing rates from New York to

Youngstown were alleged not enly to be in violation

of section 3(1), but were attacked before the Com-

mission on several other grounds. In addition to the

allegation that the equalizing rates would result in

undue preference of New York and undue prejudice

to Baltimore, the rates were objected to on such various

grounds as (a) being unduly low, (b) constituting 2

threat to the port-differential adjustment applicable

on other import traffic, and (c) jeopardizing the entire

iron-ore rate structure in violation of various sections

of the act. To the extent that evidence was introduced

to support these allegations, such evidence was con-

sidered by the Commission and was discussed in the

Commission’s two reports. After considering all the

evidence, the Commission concluded that the rate re-

duetions proposed by the New York and Philadelphia

carriers were not unlawful. The Commission stated

in its report (299 I.C.C. 208) :

It has long been recognized that carriers may,

within lawful bounds, so adjust their rates as to

secure a fair proportion of the traffic, as well as

reasonably to foster the ports which they serve.

That appears to be what the respondents here

have attempted to do. (Emphasis added)

Obviously this meant that the proposed rates did not

violate section 3(1), or section 1(5), or section 15a(2),

or any other section on which the allegations were

based. It was clearly unnecesssary for the Commission

to refer to each section by number and make a separate

finding that that particular section would not be vio-

lated.

12

There was no showing that equalized rates from New

York would cause such a drastic diversion of traffic

from Baltimore as to work undue prejudice to that

port in violation of section 3(1). In fact, the Commis-

sion coneluded that traffic at Baltimore will increase,

even with equalized rates from New York. The Com-

mission stated (299 I.C.C. 209):

As stated by the division in the prior report,

at page 554, the record is persuasive that the iron-

ore tonnage through Baltimore will probably con-

tinue to increase even though rate parity is main-

tained at Philadelphia and this appears to be a

reasonable assumption with rate parity also at

New York.

Any contention that the Commission did not consider

or pass upon the question of undue prejudice to Balti-

more is obviously without merit.

It should be borne in mind that a rate schedule

initiated by a carrier must be upheld as lawful by the -

Commission unless adequate reasons are presented for

setting it aside. United States v. Chicago, M., St.

P. d& P. R. Co., 294 U.S. 499. Also, where the Com-

mission finds rates under suspension not shown to be

unlawful, the finding does not constitute approval or

a prescription of the rates under suspension and they

stand only as earrier-made rates. Interstate Commerce

Commission Vv. Inland Waterways Corp., 319 U.S. 671.

If, after equalized rates are made effective and the

necessary unloading facility is built at New York, it

appears that Baltimore cannot compete with New York

under equal rates, there would be nothing to prevent

the Baltimore interests from publishing and making

effective such lower rates as they can justify or filing

a complaint against the New York rates as being in

violation of section 3(1). But there was no evidence

13

on which the Commission could find that 2 violation

of section 3(1) would result at the present time.

Although these rates apply on iron ore from all

sources, from many of which New York is more dis-

tant than the competing ports, the Baltimore carriers

tried to make it appear that only ore from Labrador

was involved and argued that New York, being a

shorter distance from Labrador, would have an undue

advantage over Baltimore in the form of lower water

costs to New York. Then, the Baltimore carriers

failed to introduce any evidence by which the Com-

mission could compute the amount, if any, of this

claimed water-cost disadvantage. Now they are trying

to capitalize on their failure to put in such evidence by

contending that the Commission’s report is deficient

because it made no specific finding as to the amount of

this claimed water-cost disadvantage.

Even if there were some substance to the Baltimore

elaim of a water-cost disadvantage on Labrador ore,

the evidence made it clear that the New York carriers

would have a chance to compete under equalized rates

only for a small fraction of the Labrador ore. The

New York equalizing rates would apply to only 7

points, while those of the Baltimore and Philadelphia

earriers apply to 17 points. About 90 percent of the

Labrador ore production is controlled by steel com-

panies whose plants are located at points not reached

by the New York carriers and by a company tied to

Philadelphia by virtue of its operation of the ore-un-

loading facility at that port. The New York carriers

would have a real opportunity to compete only with

respect to the remaining 10 percent of the Labrador ore.

In the present factual situation, the Commission

made all the findings which it was possible for it to

14

make and all the findings which are essential to the

statutory validity of its order.

The Baltimore carriers’ contention that the Com-

mission did not make the necessary findings is incon-

sistent with the District Court’s opinion, which seems

to hold that the Commission made a finding on the

section 3(1) question as to the New York rates, but

that the finding was incorrect. The District Court

does not say so in so many words, but in various parts

of its opinion, makes general statements of principle

such as:

Even if a reduced rate is reasonable, it is unlawful

if it results in undue prejudice. (Jurisdictional

Statement of these Appellants, Appendix A, page

32a)

Since the District Court did not remand the cause

to the Commission with respect to the New York rates,

it must be concluded that the Court believed the neces-

sary findings had been made, but that the section 3(1)

finding was erroneous.

The District Court’s opinion makes clear its con-

clusion that the prescription of parity rates, which the

Court erroneously believed the Commission had specifi-

eally or in effect accomplished in this proceeding, would

violate section 3(1). The two main reasons for this

conclusion seem to be the Court’s belief that (1) rates

must reflect differences in distance and (2) carriers

eannot be forced to depart from voluntarily main-

tained, long-established differential rate relationships.

Whatever may be the weight to be accorded such argu-

ments where the Commission prescribes rates over

earrier objections, they obviously do not apply where,

as here, the carriers themselves wish to disregard differ-

ences in distance for competitive reasons and publish

15

equalized rates without which they could not compete.

See New York Central R. Co. v. United States, 99 F.

Supp. 394, affd. Interstate Commerce Commission V.

New York Central R. Co., 342 U.S. 890.

It has long been established that the question of

whether undue preference or prejudice exists is for the

Commission and its finding, supported by substantial

evidence, is conclusive unless there was some irregu-

larity in the proceeding or some error in the application

of rules of law. It is beyond the province of the Court

to consider the weight of the evidence before the Com-

mission or the soundness of the reasoning by which its

conclusions were reached. Virginian Ry. Co. v. Umted

States, 272 U.S. 658. Here, the District Court has

violated this long-established principle and substituted

— its own judgment for that of the Commission.

CONCLUSION

It is therefore respectfully submitted that the Motion

to Affirm sould be denied and that this Court should

note probable jurisdiction.

M. C. SMITH, JR. SAMUEL H. MOERMAN

SIDNEY GOLDSTEIN 743 Investment Building

FRANCIS A. MULHERN Washington, D. €.

ARTHUR L. WINN, JR. ; aes

J. STANLEY PAYNE Attorney for Erve Railroad

WALTER J. MYSKOWSKI Company oud The Fort

NICHOLAS G. PENNIMAN, IIT free Fae Aaney,

Appellants

Of Counsel for Erie Railroad

Company and The Port of

New York Authority

ROBERT D. BROOKS RICHARD J. MURPHY

466 Lexington Avenue 1225 LaSalle St. Station

‘New York 17, New York Chicago 5, Illinois

Of Counsel for The New Attorney for The New York

York Central Railroad Central Railroad Com-

Company pany, Appellant

4

i —

'

MAY 2 |]

WJ JOHN |. FEY, Clerk

IN THE

Supreme Court of the Anited States

October Term, 1957.

ERIE RAILROAD COMPANY AND THE PORT OF NEW )

YCRK AUTHORITY, Appellants,

eins > No. 465

THE BALTIMORE AND OHIO RAILROAD COMPANY,

Et Al., Appellees, |

THE NEW YORK CENTRAL RAILROAD COMPANY, 7

Appellant,

; ™ > No. 466

THE BALTIMORE AND OHIO RAILROAD COMPANY,

Et AL., Appellees, )

ON APPEAL FROM THE UNITED STATES DISTRICT COURT

FOR THE DISTRICT OF MARYLAND.

APPELLANTS’ MOTION AND BRIEF TO RECALL

AND CLARIFY THE JUDGMENT.

M. C. SMITH, JR., SAMUEL H. MOERMAN,

SIDNEY GOLDSTEIN, 743 Investment Building,

FRANCIS A. MULHERN, Wain B.C

ARTHUR L. | .

J. STANLEY PAYNE, it~ " .

NICHOLAS G. PENNIMAN,, III, Appellants. :

7 ~ Py ee

ompany . oo © RICHARD J. MURPHY,

New York Authority 1225 po St. Station,

Chicago 5, Illinois

ROBERT D. BROOKS, Attorney for The New York

DANIEL J. SWEENEY, prow Railroad Company,

ellant.

466 Lexington Avenue,

New York 17, New York

Of Counsel for The New York

Central Railroad Company

INDEX.

PAGE

Appellants’ Motion to Recall and Clarify the Judgment 1

Brief in Support of Motion to Recall and Clarify the

ME adit terac-o a ceopascds dessins sacnenneren salience ecesasinaibataanhbiaandsids 3

EEL GRR SIERO RE MEENA RN Se OPIE RE PED 3

NE crankcase cians a seulasabilenneneaiouaialasseainade 3)

I. Issuance Of An Injunction Against The New

York Rates Is Contrary To The Plain Meaning

Of The Order And Judgment Of This Court........ hy)

II. By Necessary Implication The Order Of This

Court Has Precluded The District Court From

Enjoining Rate Schedules Which Were Ordered

Remanded To The Commission For Further Con-

INN sore eas sc ticsssccanacactctan tid cekaneecean ches eordgsasebataiauionrens 6

NR gsi cds casa chsniuceskaculanscagnensvimnuncasiboonetbsaniacuinieins 11

I IN Go i hcaiiay to eeancurnstatiisisdsenacitiecicmsaaaataatan 12

I i faa Fant ckica dawaranevoiehacerediuarsctancetesacaaisckesabonieds 15

SR hata apa aacnicinelinmdic esi akeGouanesedeenemaina ae 17

TABLE OF C'ASES CITED.

PAGE

Algoma Coal & Coke Co. v. U. S., (E. D. Va., 1935) 11 F.

Supp. 467 .................. eka ie teh etssiameiaabhseenecgalbesesipsenbecesien 9

Arizona Grocery Co. v. Atchison, T. & S. F. R. Co., 284

em I ain hannacessstilonacansesesssencione eluldaailanmicediies 8

Board v. G. N. Ry., 281 U.S. 412 (19380) ..........cecesesreeseee 8

Cahill v. N. Y. N .H. & H. R. Co., 351 U.S. 1838 ................ 4

Carlsen v. U. S., (S. D. N. ¥Y. 1952) 107 F. Supp. 398...... 9

Columbus Iron & Steel v. Kanawha & M. Ry. Co., (S. D.

TE FE acstsnsonsincnccsctngnscsstecnscsccesssssecseeseese 6

Director General v. Viscose Co., 254 U.S. 498 (1921)... 9

Great Northern Ry. Co. v. Kalispell Lumber Co., (9

a ea stad acsccuiBneveetoovescanvenvtcnvesecesnicons 8

Houston Coal & Coke Co. v. Norfolk & W. Ry., (W. D.

rE. WUD ix snesGhssevectivonesonceseisnecossnensescssscerssoesen 7

Kentucky v. Powers, 201 U.S. 1 .........c.cccscscsscscsscsssscsecssssees 6

M. C. Kiser Co. v. Central of Georgia Ry. Co. (S. D. G. A.

Ry ee Oe E.G Bs TRG ic cnccscsecssascscmeseceerscsccees 8

National Bus. Traffic Ass’n. v. U. 5S., (D. N. J. 1954)

BE I TR MRE is conccecincscennssnsexascesusacescaccnsececcctasesaces 7

Palermo v. Luckenbach S. S. Co., 355 U.S. 910 wo... eee 40

Procter & Gamble v. Coe (D. C. Cir. 1738) 96 F. 2d 518,

I RN ok scscscncssarnsvaneevusessssuscecccecseconace 9

Thornton v. Carter, (8 Cire. 1940) 109 F. 2d. 316 ............ 6

United States v. Chicago, M., St. P. & P. R. Co., 294 U.S.

cake ecu sisrastesnducastonedoneesesessieane 19

Statutes CITED.

I a cio ccrcah scaeehsirsndesongdssacheseussmsnnasaceneepencntcesness 6

Section 15(7) Interstate Commerce ACt. .......ccecseeeeeeeeees 8

IN THE

SUPREME COURT OF THE UNITED STATES

October Term, 1957.

ERIE RAILROAD COMPANY AND THE PORT OF NEW )

YORK AUTHORITY, Appellants,

v6. > No. 465

THE BALTIMORE AND OHIO RAILROAD COMPANY,

Et Al., Appellees, |

THE NEW YORK CENTRAL RAILROAD COMPANY,

Appellant,

vs. > No. 466

THE BALTIMORE AND OHIO RAILROAD COMPANY,

Et Al., Appellees, |

ON APPEAL FROM THE UNITED STATES DISTRICT COURT

FOR THE DISTRICT OF MARYLAND.

2

APPELLANTS’ MOTION TO RECALL AND

CLARIFY THE JUDGMENT.

Appellants, Erie Railroad Company, The New York

Central Railroad Company and The Port of New York

Authority, move to recall this Court’s judgment issued to

the United States District Court for the District of Mary-

land on January 9, 1958, for the reason that the District

Court has interpreted said judgment and this Court’s order

of December 9, 1957, to authorize the issuance by the

District Court of an injunction against making effective

reduced rates on iron ore from New York to the Youngs-

town area on a level with those applicable from Philadel-

phia ane Baltimore, pending reconsideration and _ final

decision by the Interstate Commerce Commission pursuant

to the remand of the District Court, whereas appellants

say that said judgment and order should be interpreted

so as to prohibit any such action by the District Court.

Appellants respectfuily request that said judgment of this

Court be recalled and clarified accordingly.

Respectfully submitted,

SamMvuEL H. MogrrmMan

Ricuarp J. MurpHy

Attorneys for Appellants.

BRIEF IN SUPPORT OF MOTION

TO RECALL AND CLARIFY THE JUDGMENT.

STATEMENT.

In February, 1953 the rail carriers serving the ports of

Philadelphia and New York published reduced rates from

those ports on imported iron ore to the Youngstown area,

equalizing their rates with those applying from Baltimore

to the same area. After suspension and investigation, Divi-

sion 2 of the Interstate Commerce Commission, in a report

dated February 5, 1954, found the rates from Philadelphia

lawful but by a 2-to-1 vote disapproved the rates from New

York. The Philadelphia carrier published a supplementary

schedule making the equalizing rates effective February 19,

1954, whereupon the Baltimore interests filed suit in the

Maryland District Court asking a restraining order pend-

ing reconsideration by the entire Commission. That court

refused to issue the order on the ground that the admin-

istrative process had not been completed, with the result

that the equalizing rates from Philadelphia went into effect

and have since prevailed. On reconsideration the entire

Commission not only affirmed the Division’s decision as to

the lawfulness of the Philadelphia rates but also approved

the New York rates. Upon the filing of a suit by the

Baltimore interests to set aside the Commission’s order,

the Maryland District Court issued a temporary restrain-

ing order against the New York rates. After hearing, the

District Court issued its decree, appended hereto as Ap-

pendix A, ordering the Commission’s order to be vacated

insofar as it approved the New York rates and permanently

enjoining such schedules from being made effective. Upon

appeal, this Court’s order, appended hereto as Appendix B,

vacated ‘‘so much of the decree of the District Court as did

not affirm the order of the Commission’’ and remanded the

cause ‘‘for appropriate disposition not inconsistent with’’

its opinion.

Upon remand, the District Court issued a new ‘*Decree,”’

appended hereto as Appendix C, providing in part as

follows:

0. That pending reconsideration and final decision

by the Commission pursuant to the remand, the tariff

schedules on iron ore from New York filed to become

effective February 9, 1953 shall not be made effective

or permitted to become effective.

Thus, although the District Court correctly declined to

enjoin the Philadelphia rates before completion of the

administrative process, it now refuses to do the same with

respect to the New York rates, even though the Commission

had found the New York rates lawful and this Court

ordered vacated ‘‘so much of the decree of the District

Court as did not affirm the order of the Commission.”

More than 5 years after the New York rail carriers orig-

inally published equalizing rates to the Youngstown area

they are still unable to make such rates effective and to

share in the tremendous volume of import iron ore which

their Philadelphia and Baltimore competitors have been

monopolizing for the past 4 years. Unless this Court recalls

and clarifies its judgment as requested, the New York rail

carriers will be effectively blocked from participating in

this traffic for several more years, even though there is

now little or no doubt that their proposed reduced rates

will ultimately be found lawful.

It is submitted that the issuance of a new injunction by

the District Court is (1) contrary te the plain meaning of

the order and judgment of this Court and (2) outside the

jurisdiction of the District Court in the present circum-

stances.

The relief sought by this motion has been granted in

other cases, Cahill v. New York, NI. & H.R. Co., 351 US.

183; Palermo v. Luckenbach S.S. Co., 355 U.S. 910, decided

January 6, 1958.

|

|

|

|

|

|

ARGUMENT.

I.

ISSUANCE OF AN INJUNCTION AGAINST THE NEW

YORK RATES IS CONTRARY TO THE PLAIN MEAN.

ING OF THE ORDER AND JUDGMENT OF THIS

COURT.

In its opinion and order issued in this case, 350 US. 175,

on December 9, 1957, this Court ordered that:

‘« on the appeals before us, so much of the decree

of the District Court as did not affirm the order of the

Commission is vacated, and the cause is remanded for

appropriate disposition not inconsistent with this

opinion.”’

It is clear then that the above order required the District

Court to vacate its decree of May 22, 1957, except insofar

as it had affirmed a portion of the Commission’s order. The

original decree of the District Court had vacated the Com-

mission’s order insofar as it had approved the New York

rates and expressly enjoined their effectiveness. Since this

Court’s order provided that ‘‘so much of the decree of the

District Court as did not affirm the order of the Commission

is vacated’’, the injunction against the New York rates, as

one part of the District Court’s decree of May 22, 1957

which ‘‘did not affrm’’ the Commission’s order, should

have been vacated. That part of the decree which enjoined

the New York rates clearly did not ‘‘affirm’’ the Commis-

sion’s order and it is not susceptible to such an interpreta-

tion by any mode of construction. Since, as is apparent

from the original District Court decree set forth in Ap-

pendix A, infra, P. 1a, the injunction was an integral part

of the ‘‘decree of the District Court’’ and one which ‘‘did

not affrm the order of the Commission’’, it ‘‘is vacated’’

and it should be so indicated by this Court.

Thus, since the meaning of this Court’s order was clear,

it was incumbent upon the District Court ‘‘not to alter it

or give any further or other relief?’ not directed by the

order such as imposing an injunction against the rates which

are now before the Commission on reconsideration. See

Thornton v. Carter. (8th Cire., 1940) 109 F.2d 316.

II.

BY NECESSARY IMPLICATION THE ORDER OF THIS

COURT HAS PRECLUDED THE DISTRICT COURT

FROM ENJOINING RATE SCHEDULES WHICH

WERE ORDERED REMANDED TO THE COMMIS.

SION FOR FURTHER CONSIDERATION.

The construction of this Court’s order contended for by

appellants is the only construction consistent with the juris-

diction of the Federal District Court. The Federal Distvict

Courts of the United States can constitutionally exercise

only such jurisdiction as may be granted to them by Con-

gressional enactment. Kentucky v. Powers, 201 U.S. 1

(1906). Thus there is no inherent power in the federal

judiciary to enjoin the publication, filing or effectiveness

of rates.

Prior to the passage of the Interstate Commerce Act

no jurisdiction existed with respect to that subject because

Congress had not exercised its right to so regulate rates.

Columbus Iron & Steel vy. Kanawha & M. Ry. Co., (S.D.

W.Va., 1909) 171 F. 713. At the present time the Federal

Courts have the power to enjoin rates but they may exer-

cise this statutory power only as anciliary relief where the

Court has jurisdiction over an order! of the Interstate

Commerce Commission which concerns the rates enjoined

128 U.S.C. § 1336

“Interstate Commerce Commission’s Orders. Except as otherwise pro-

vided by Act of Congress, the District Courts shall have jurisdiction

of any civil action to enforce, enjoin, set aside, annul or suspend, in

whole or in part, any order of the Interstate Commerce Commission.”

and in which the Court finds the Commission order to be

invalid. There is, therefore, no jurisdiction in the Federal

Courts to enjoin the publication or effectiveness of a rate

apart from the jurisdiction to enjoin a Commission order.

Houston Coal & Coke Co. v. Norfolk & W. Ry., (W.D. Va.,

1909) 171 F. 723.

In the course of its opinion, this Court summarized the

previous proceedings before the District Court as follows:

‘« an appropriate District Court held that the Com-

mission’s approval of parity between New York and

Baltimore was without basis in the record and ordered

that portion of the Commission’s order vacated. The

Court further held that the Commission’s approval of

parity between Philadelphia and Baltimore was not

supported by essential findings as to ocean freight

costs and remanded that portion of the Commission’s

order for more explicit findings. The Court also

granted other relief subsidiary to these actions.’

(Emphasis supplied)

Clearly this Court considered the action of the District

Court in ordering vacation of that part of Commission’s

order which approved the rates from New York as the prin-

cipal relief granted and considered the injunction against

the tariffs naming rates from New York as only subsidiary

or ancillary relief necessary to implement the principal

relief. But now this case has been remanded to the Com-

mission for a new order. The order of this Court termi-

nated this litigation and withdrew the Commission order,

which was the basis for the District Court’s jurisdiction,

from the further consideration of that Court. Any further

judicial action concerning a Commission order with respect

to the involved rates would have to be invoked by a new

action, which of course can not be brought until the Com-

mission enters a further order in regard to these rates.

National Bus. Traffic Ass’n. v. U.S., (D. N.J., 1954) 122 F.

Supp. 876, 878. Since by this Court’s order the proceeding

was returned to the jurisdiction of the Commission, there

is no longer any ‘‘order’’ before the District Court to which

an injunction of the involved rates can be ancillary. More-

over, the District Court has not by its order reserved any

jurisdiction over the subject matter, i.e., the Commission

order. It is evident then that such an injunction was an

assumption by the District Court of the bare power to sus-

pend rates while they are before the Commission for its

administrative determination of their reasonableness.

But such an injunction cannot be issued by a District

Court. -The power to suspend the effectiveness of rates

prior to the final order of the Commission is one which has

been entrusted exclusively to the Commission by Section

15(7) of the Interstate Commerce Act which is set forth in

Appendix D, infra, P. 12a. The controlling rule of law that

the Federal Courts have no power to enjoin rates inde-

pendently of an injunction against an Interstate Commerce

Commission order is a corollary of the fundamental prin-

ciple that the fixing of rates for the future is an adminis-

trative function of a legislative nature. Arizona Grocery

Co. v. Atchison, Topeka, é Santa Fe Railroad Co., 284 U.S.

370 (1932); Great Northern Ry. Co. v. Kalispell Lumber

Co., (9th Cire., 1908) 165 F. 25. A determination by a

Court, acting prior to the Commission’s finding of the facts

as directed by the remand, that the rates should be enjoined

would be the farthest thing from the traditionally limited

judicial power to test the legality of final Commission

orders.

The law is to the contrary. The power to suspend rates

prior to the entry of the final administrative decision is one

exclusively entrusted to the Commission. In Board v. Greai

Northern Ry., 281 U.S. 412 (1930), Chief Justice Hughes

stated that, ‘‘This power of suspension was entrusted to

the Commission only.’’ In M. C. Kiser Co. v. Central of

Georgia Ry. Co., (S.D. G.A., 1916) 236 Fed. 573, aff’d 239

Fed. 718, in concluding that the Commission’s power to

suspend rates is exclusive, the Court held that this statu-

tory power of the Commission ousts the United States

Courts of their general equity jurisdiction of that particu-

lar subject. To the same effect are Director General v.

Viscose Co., 254 U.S. 498 (1921) and Algoma Coal and Coke

Co. v. U. S., (E.D. Va., 1935) 11 F. Supp. 487. Since the

Commission has not as yet completed its consideration of

these rates and has yet to enter its final order pertaining

to them, the District Court lacked jurisdiction jto enjoin

these rates. Carlsen v. U.S., (S.D. N.Y., 1952) 107 F. Supp.

398.

Again, the well settled rule is that the Federal Courts

have not the power to interfere by injunction wh le a mat-

ter committed to the jurisdiction and control of an adminis-

trative agency is pending before that agency. Procter &

~ Gamble v. Coe, (D.C. Cir., 1938) 96 F.2d 518, cert. den. 305

U.S. 604. The considerations which have given rise to the

doctrine of ‘‘primary jurisdiction’’ can never be more com-

pelling than they are in this case. For, inasmuch as this

Court had ordered that the reasonableness of these rates

must be reconsidered by the Commission in the light of the

interrelationship between the three ports it is an a fortiori

proposition that the case at this stage presented at least

an ambiguous case with respect to the lawfulness of the

New York rates. It was, therefore, incumbent upon the

District Court to stay its hand after this Court had decided

that the validity of these rates was still an open question

and that the answer to that question must be provided by

the Commission in the first instance.

The regulatory scheme as created by Congress is such

that the carriers have the right to initiate rates which be-

come effective by their own force unless the Commission in

its exclusive discretion chooses to suspend them pending its

final determination of their reasonableness. United States

v. Chicago, M., St.P. & P. R. Co., 294 U.S. 499. Moreover,

Section 15(7) specifically provides that if the proceeding

has not been concluded witkin the suspension period the

proposed rate ‘‘shall go into effect at the end of such

period.’? Thus if there can be said to have been a degree

of ambiguity present in the opinion and order of this Court

there can be no doubt that the doctrine of ‘primary juris-

diction’? and the Constitutional inhibitions on the juris-

diction of federal district courts dictate that the order be

interpreted as necessarily implying that there be no in-

junction against any of the rates which were remanded to

the Commission for further consideration.

CONCLUSION.

For the foregoing reasons, appellants respectfully pray

that their motion be granted.

Dated: Chicago, llinois

April 30, 1958

Samvuet H. Moerman

743 Investment Building

Washington, D. C.

Attorney for Erie Railroad

Company and The Port of

New York Authority,

Appellants.

Ricuarp J. Murpry

1225 LaSalle Street Station

Chicago 5, Illinois

Attorney for The New York

Central Ratlroad Com-

pany, Appellant.

M. C. Smita, Jr.

Sipney GoLpsTein

Francis A. MULHERN

Artuur L. Wrixy, Jp.

J. Srantey Payne

Nicnoias G. Penntmay, III

Of Counsel for Erie Railroad

Company and The Port of

New York Authority.

Rosert D. Brooxs

Danie. J. SWEENEY

466 Lexington Avenue

New York 17, New York

Of Counsel for The New York

Central Railroad Company.

de

APPENDIX.

APPENDIX A.

In tHE District Court oF THE UNITED Statrs

FOR THE District oF MARYLAND.

CIVIL ACTION NO. 9237.

The Baltimore and Ohio Railroad Company, Cantor: Rail-

road Company, Western Maryland Railway Cor pany,

Baltimore Association of Commerce, The Baltimore

Chamber of Commerce, The Steamship Trade Association

of Baltimore, Inc., Baltimore Custom House Brokers and

Forwarders Association, The Mayor and City Council of

Baltimore, Plaintiffs.

Vs.

United States of America, Interstate Commerce Commission

ard The Pennsylvania Railroad Company, and C. W.

Boin, Agent, and The New York Central Railroad Com-

pany aud Erie Railroad Company, Defendant-.

(F'tLep 22p May 1957)

* * * &

DECREE.

This 22d day of May, 1957, the Court adopts the findings

of fact and conclusions of law appearing in the Opinion

filed herein on April 26, 1957, and holds that the Inter-

state Commerce Commission’s Order of October 1, 1956

in its Investigation and Suspension Docket No. 6074, Iron

Ore from Eastern Ports to Central Freight Association

Points, should be (1) in part vacated and the continuance

and enforcement of said part enjoined, (2) in part remanded

to the said Commission to make more explicit findings, and

(3) in part affirmed: to wit, it is:

iv

ORDERED, ADJUDGED AND DECREED.

1. That the order of the Interstate Commerce Commis-

sion dated October 1, 1956, is vacated insofar as it approves

the tariff schedules on iron ore from New York filed to be

effective February 9, 1953, and authorizes the establishment

of the rates on iron ore named in said schedules.

2. That the Temporary Restraining Order issued by the

Court on October 26, 1956, enjoining the United States and

the Interstate Commerce Commission from taking, author-

izing, approving, or permitting any action, by any railroad

company, particularly the New York Central Railroad Com-

pany and the Erie Railroad Company, which would have

the effect of establishing or making effective the tariff

schedules on iron ore from New York filed to be effective

February 9, 1953, is made permanent.

3. That the Interstate Commerce Commission shall make

and enter an appropriate order requiring the New York

Central Railroad Company and the Erie Railroad Company

to cancel their tariff schedules on iron ore from New York

published to be effective February 9, 1953.

4. That the order of the Interstate Commerce Com-

mission dated October 1, 1956, insofar as it approves thé

tariff schedules of the Pennsylvania Railroad Company on

iron ore from Philadelphia filed to become effective Feb-

ruary 9, 1953, is not supported by essential basic findings,

and therefore is remanded to the Interstate Commerce Com-

mission to make more explicit findings as instructed by the

Court in the Opinion filed herein.

5. That the rates named in the tariff schedules of the

Pennsylvania Railroad from Philadelphia published to be-

come effective on February 9, 1953, be permitted to remain

in effect pending said reconsideration and final decision by

the Interstate Commerce Commission.

i¢

6. That the order of the Interstate Commerce Commis-

sion dated October 1, 1956, is affirmed insofar as it dis-

approves tariff schedules on import iron ore from Baltimore

published to be effective February 16, 1953.

7. That the order of the Interstate Commerce Commis-

sion dated October 1, 1956, is affirmed insofar as it dis-

approves tariff schedules on import iron ore from Phila-

delphia published to be effective February 16, 1953, and

March 11, 1953.

/8/ Morris A. Soper,

United States Circuit Judge.

/8/ W. Catvin CuHEsnvt,

United States District Judge.

/8/ HR. Dorsey Warkxrns,

United States District Judge.

io

APPENDIX B.

ORDER.

Per Curiam.

This litigation involves the validity of an order of the

Interstate Commerce Commission dealing with the proper

relationship, under the National Transportation Policy (§1

of the Transportation Act of 1940, 54 Stat. 899, 49 U.S.C.,

at p. 7107), of railroad tariffs on imported iron ore shipped

to a steel-producing area in Pennsylvania, Ohio and West

Virginia (the so-called ‘‘differential territory’’ of the

Central Freight Association) from the ports of New York,

Philadelphia and Baltimore. A tariff differential in favor

of Baltimore had existed prior to this controversy. In a

succession of tariff reductions, railroads serving New York

and Philadelphia filed schedules designed to establish parity

of rates among the several ports, while railroads serving

Baltimore filed schedules designed to maintain the differ-

ential. Upon protest against the New York and Philadelphia

schedules by Baltimore civic and commercial interests and

railroads serving that port, the Interstate Commerce Com-

inission instituted an investigation as a result of which

Division 2 of the Commission filed a report approving the

tariff schedules giving Philadelphia parity with Baltimore

but finding all other schedules that had been issued in this

series of reductions to be not just and reasonable. 291

I.C.C. 527. On petition of various parties, the Commission

reopened the proceedings, and on October 1, 1956, the full

Commission modified the findings of the Division 2 report

to the extent of finding the New York schedules, as well as

the Philadelphia schedules, to be just and reasonable, 299

I.C.C. 195. The full Commission’s order was challenged in

a proceeding instituted under 28 U.S.C. §1336, and an ap-

propriate District Court held that the Commission’s ap-

proval of parity between New York and Baltimore was

16

without basis in the record and ordered that portion of

the Commission’s order vacated. The court further held

that the Commission’s approval of parity between Phila-

delphia and Baltimore was not supported by essential find-

ings as to ocean freight costs and anticipated traffic and

remanded that portion of the Commission’s order for more

explicit findings. The court also granted other relief sub-

sidiary to these actions. 151 F. Supp. 258. These are the

only portions of the decision below with which we are here

concerned. We put to one side those provisions of the

decree below in which the District Court affirmed other por-

tions of the Commission’s order.

From what appears, it is not precluded that the Commis-

sion may find an interrelationship, within the purview of

the National Transportation Policy, supra, among lawful

tariffs to be established between these three ports and the

‘‘differential territory.’’ In this light we deem it appro-

priate that, in reconsidering the relationship between the

Philadelphia and Baltimore schedules pursuant to the re-

mand of the District Court, the Commission should be free

to reconsider and take action upon the New York schedules.

In carrying out the District Court’s direction regarding the

Philadelphia rates, the Commission should be permitted to

take into account the effect of New York rates on the tariff

relationship between Philadelphia and Baltimure and the

effect of that relationship on New York and to enter such

orders with respect to all three ports as the Commission

may find to be required by their interrelationship. Accord-

ingly, on the appeals before us, so mnch of the decree of

the District Court as did not affirm the order of the Com-

mission is vacated, and the cause is remanded for appro-

priate disposition not inconsistent with this opinion.

It is so ordered.

Tue CuHreFr Justice anp Mr. Justice Buack would affirm

the judgment of the District Court.

17

APPENDIX C.

IN THE

DISTRICT COURT OF THE UNITED STATES

FOR THE DISTRICT OF MARYLAND.

The Baltimore and Ohio Railroad Com- |

pany, Canton Railroad Company, Western

Maryland Railway Company, Baltimore

Association of Commerce, The Baltimore

Chamber of Commerce, The Steamship

Trade Association of Baltimore, Inc.,

Baltimore Custom House Brokers and

Forwarders Association, The Mayor and

City Council of Baltimore, Civil Action

Plaintiffs, { Wo. 9937

vs.

United States of America, Interstate

Commerce Commission and The Pennsy]l-

vania Railroad Company, and C. W. Boin,

Agent, and The New York Central Rail-

road Company and Erie Railroad Com-

pany,

Defendants.

J

DECREE.

The decree of this Court entered herein on May 22, 1957

having been appealed to the Supreme Court of the United

States, and that Court by its Order entered December 9,

1957, in Interstate Commerce Commission et al. v. Baltimore

&€ Ohio R.R. Co. et al., Nos. 463, 464, 465, 466, 467, 468 and

473, October Term, 1957, having held that it is not pre-

cluded that the Interstate Commerce Commission may find

an interrelationship within the purview of the National

Transportation Policy, among lawful tariffs to be estab-

lished on imported iron ore from the ports of New York,

Philadelphia and Baltimore to steel producing areas in

1s

Pennsylvania, Ohio and West Virginia, that in this light

it is appropriate that, in reconsidering the relationship be-

tween the Philadelphia and Baltimore tariffs pursuant to

the remand of this court, the Commission should be free

to reconsider and take action upon the New York tariffs,

aud that in carrying out this court’s direction regarding

the Philadelphia rates, the Commission should be permitted

to take into account the effect of New York rates on the

tariff relationship between Philadelphia and Baltimore and

the effect of that relationship on New York, and to enter

such orders with respect to all three ports as the Com-

mission may find to be required by their interrelationship,

and the Court having ordered vacated so much of the decree

of this court as did not affirm the order of the Commission

of October 1, 1956 in Iron Ore from Eastern Ports to

Central Freight Association Points, 299 I.C.C. 195, and the

Court having remanded the cause to this court for appro-

priate disposition not inconsistent with its opinion of De-

cember 9, 1957, and counsel for the parties in interest

having been heard.

Therefore this 18th day of March 1958, the Court adopts

the findings of fact and conclusions of law, appearing in

the Opinion filed herein on April 26, 1957, except as modi-

fied by the Opinion and Order of the Supreme Court; and

holds that the Interstate Commerce Commission’s Order of

October 1, 1956 in its Investigation and Suspension Docket

No. 6074, Iron Ore from Eastern Ports to Central Freight

Association Points, should be (1) in part remanded to the

said Commission to make more explicit findings, and (2)

in part affirmed:

To Wrr it is:

iv

ORDERED, ADJUDGED AND DECREED.

i. That the decree herein of May 22, 1957 be, and it

hereby is, vacated.

9. That the order of the Commission dated October 1,

1956 insofar as it approves the tariff schedules of the

Pennsylvania Railroad Company on import iron ore from

Philadelphia filed to become effective February 9, 1953, is

remanded to the Commission to make more explicit find-

— ings in accordance with the opinion of this Court filed here-

in as modified by the order of the Supreme Court.

3. That the rates named in the tariff schedules of the

Pennsylvania Railroad from Philadelphia published to be-

come effective on February 9, 1953 be permitted to remain

in effect pending said reconsideration and final decision by

the Interstate Commerce Commission, and that pending said

reconsideration and final decision, rate parity on iron ore

between ports of Baltimore and Philadelphia and the des-

tinationa here involved be retained.

4. That the order of the Commission dated October 1,

1956, insofar as it approves the tariff schedules on import

iron ore from New York filed to become effective February

9, 1956, is remanded to the Commission to reconsider the

lawfulness of such tariff schedules.

5. That pending reconsideration and final decision by

the Commission pursuant to the remand, the tariff schedules

on iron ore from New York filed to become effective Feb-

ruary 9, 1953 shall not be made effective or permitted to

become effective.

6. That the order of the Interstate Commerce Commis-

sion dated October 1, 1956 is affirmed insofar as it dis-

approves tariff schedules on import ore from Baltimore

published to become effective February 16, 1953.

“vu

7. That the order of the Interstate Commerce Commis-

sion dated October 1, 1956 is affirmed insofar as it dis-

approves tariff schedules on import iron ore from Phila-

delphia published to become effective February 16, 1953

and March 11, 1953.

POSSE S EAE E TEESE EE ETEEEETESO SEES SESE EEEE ESSE OEE HE SESE EEE HESS

/8/ Morris A. Soper

Morris A. Soper

United States Circuit Judge.

/s/ W. Catvin CHEsNvuT

W. Calvin Chesnut

Umited States District Judge.

/s/ RR. Dorsey Watkins

R. Dorsey Watkins

United States District Judge.

21

APPENDIX D.

The Interstate Commerce Act, Sec. 15 (7):

(7) Whenever there shall be filed with the Commission

any schedule stating a new individual or joint rate, fare, or

charge, or any new individual or joint classification, or any

new individual or joint regulation or practice affecting any

rate, fare, or charge, the Commission shall have, and it is

hereby given, authority, either upon complaint or upon its

own initiative without complaint, at once, and if it so orders

without answer or other formal pleading by the interested

carrier or carriers, but upon reasonable notice, to enter upon

a hearing concerning the lawfulness of such rate, fare,

charge, classification, regulation, or practice; and pending

such hearing and the decision thereon the Commission, upon

filing with such schedule and delivering to the carrier or

carriers affected thereby a statement in writing of its rea-

sons for such suspension, may from time to time suspend

the operation of such schedule and defer the use of such

rate, fare, charge classification, regulation, or practice,

but not for a longer period than seven months beyond the

time when it would otherwise go into effect; and after full

hearing, whether completed before or after the rate, fare,

charge, classification, regulation, or practice goes into

effect, the Commission may make such order with reference

thereto as would be proper in a proceeding initiated after

it had become effective. If the proceeding has not been

concluded and an order made within the period of suspen-

sion, the proposed change of rate, fare, charge, classifica-

tion, regulation, or practice shall go into effect at the end

of such period; but in case of a proposed increased rate or

charge for or in respect to the transportation of property,

the Commission may by order require the interested car-

rier or carriers to keep accurate account in detail of all

amounts received by reason of such increase, specifying by

22

whom and in whose behalf such amounts are paid, and upon

completion of the hearing and decision may by further

order require the interested carrier or carriers to refund,

with interest, to the persons in whose behalf such amounts

were paid, such portion of such increased rates or charges

as by its decision shall be found not justified. At any hear-

ing involving a change in a rate, fare, charge, or classifica-

tion, or in a rule, regulation, or practice, after the date this

amendatory provision takes effect, the burden of proof

shall be upon the carrier to show that the proposed changed

rate, fare, charge, classification, rule, regulation, or prac-

tice is just and reasonable, and the Commission shall give

to the hearing and decision of such questions preference

over all other questions pending before it and decide the

same as speedily as possible.

28 U.S.C. Sec. 1336.

§ 1336. Interstate Commerce Commission’s orders.

Except as otherwise provided by Act of Congress, the

district courts shall have jurisdiction of any civil action to

enforce, enjoin, set aside, annul or suspend, in whole or

in part, any order of the Interstate Commerce Commission.

June 25, 1948, c. 646, 62 Stat. 931.

| MAIL 2U 19

In THE

JO

|_soHN 1. FEY, a

Supreme Court of the United States

OcTOBER TERM, 1957

ERIE RAILROAD COMPANY AND THE)

PORT OF NEW YORK AUTHORITY

VS. Appellants,

THE BALTIMORE AND OHIO RAIL-

ROAD COMPANY, Et AL., Appellees,

THE NEW YORK CENTRAL RAIL->

ROAD COMPANY, Appellant,

VS.

THE BALTIMORE AND OHIO RAIL-

No. 465

. No. 466

ROAD COMPANY, Er AL., Appellees.

On APPEAL FROM THE UNITED STaTeEs District Court

FOR THE DISTRICT OF MARYLAND

BRIEF OF MARYLAND PORT AUTHORITY, BALTI-

‘' MORE ASSOCIATION OF COMMERCE AND THE

MAYOR AND CITY COUNCIL OF

BALTIMORE,

APPELLEES, IN OPPOSITION TO APPELLANTS’

MOTION TO RECALL AND CLARIFY THE JUDG-

MENT

WILLIAM L.

MARBURY,

DONALD MACLEAY,

FRANKLIN G. ALLEN,

JOHN MARTIN JONES, JR.,

900 First National

Bank Building,

Baltimore 2,

Attorneys

Md.,

for Maryland

Port Authority.

HARRY C. AMES,

CHARLES McD. GILLAN,

Attorneys for Baltimore

Association of Commerce.

THOMAS N. BIDDISON,

F. CLIFFORD HANE,

Attorneys for Mayor and

May 20, 1958.

City Council of Baltimore.

Sy DET

INDEX

TABLE OF CONTENTS

STATEMENT

ARGUMENT:

I. The District Court’s Decree Is Reviewable

Only On Direct Appeal

II. A Motion To Recall Lies Only To Correct Er-

rors or Jurisdictional Defects In The Judg-

ment or Mandate Sought To Be Recalled

III. The District Court’s Decree Is In Strict Con-

formity With This Court’s Order.

IV. No Rehearing Is Available At This Time Or At

This Stage Of The Proceedings

CONCLUSION

TABLE OF CITATIONS

Cases

Balto. & Ohio Railroad Company v. United States, 279

U.S. 781 "

Bank of Ky. v. Wistar, 3 Pet. 431

Boudoin v. Lykes Brothers Steamship Co., Inc., 350

U.S. 811 Vets. HARD LAG aD OE |

Browder v. M’Arthur, 7 Wheat. 59

Cahill v. New York, N. H. & H. R. Co., 351 U.S. 183

Cannon v. United States, 116 U.S. 55

Central National Bank v. Stevens, 171 U.S. 108

Chicot Co. Drainage Dist. v. Baxter State Bank, 308

U.S. 371

City National Bank v. Hunter, 152 U. S. 512

Ex Parte Crenshaw, 15 Pet. 119

PAGE

13

14

12

on

li

PAGE

Elizabeth v. American Nicholson Pavement Co., 131

UW. ©. CoRbCE Pos se eee 13

Ese Porte Fbae, Sie Wi: ts ae oases os enamanin 7

Gardner v. Goodyear Co., 131 U.S. cili App... .......... 8

Killian v. Ebbinghaus, 111 U.S. 798..............0..0.0...... ‘ 9

Matter of "THUG y Be W).. Thy Dike esi ic crc Giricinacaiiets 7

Palermo v. Luckenbach Steamship Co., Ine., 355 U.S.

RE RP a RIP es errr aire gl bie he Th han eagh 9

Peck v. Sanderson, 18 How. 42. ..................:.66::ccesssecees 14

Re Potts, 160 T. By. Dee osc es. 6

Re Sanford Fork & Tool Company, 160 U. S. 247........ 6

Schell v. Dodge, 107 UB ni i acon g

Shawkee a Co. v. Hartford- viata Co., 322 U. S.

MMs. Ses nace ee usun 8

Sibbald v. U.S., 12 Pet. 488 i att... Teraeeea ee 8,14

Stoll v. Gottlieb, 305 U. S. 165 Saeed ees 12

United States v. United States Smelting, R. & M. Co.,

SO TF Te TI ek. eee, eee es 6

U. &.-¥. Glomees, Ze THROW. Bae... oc. oso - g

Statutes

Title 28:

Sec. 1253 = ae, ee Were ee 6

Sec. 2101(b) Nica anh ele ae 7

Rules of The Supreme Court

Rule 58 nie "ci Biya ee Ly an eee 13

In THE

Supreme Court of the United States

OcTOBER TERM, 1957

ERIE RAILROAD COMPANY AND THE,

PORT OF NEW YORK AUTHORITY

vs. Appellants, L No, 465

THE BALTIMORE AND OHIO RAIL-

ROAD COMPANY, Er Au., Appellees,

J

THE NEW YORK CENTRAL RAIL-»

ROAD COMPANY, Appellant,

vs. (| No. 466

THE BALTIMORE AND OHIO RAIL-

ROAD COMPANY, Et AL., Appellees.

On APPEAL FROM THE UNITED STATES District Court

FOR THE DISTRICT OF MARYLAND

BRIEF OF MARYLAND PORT AUTHORITY, BALTI-

MORE ASSOCIATION OF COMMERCE AND THE

MAYOR AND CITY COUNCIL OF BALTIMORE,

APPELLEES, IN OPPOSITION TO APPELLANTS’

MOTION TO RECALL AND CLARIFY THE JUDG-

MENT

The above-rsmed appellees contend that the appellants’

motion to recall and clarify this Court’s judgment is an

attempt to evade well-established limits on the jurisdiction

2

of this Court. The relief sought by the appellants is of

the type obtainable, if at all, only by way of a direct appeal

from the District Court’s decree or by way of a timely

motion for rehearing addressed to this Court. The time

for taking either of such measures has already expired. In

any event, the motion lacks merit for the reasons stated

in the brief filed by the Baltimore and Ohio Railroad in

opposition to the motion. We adopt that brief and endorse

the argument there made.

STATEMENT

On October 1, 1956, the Interstate Commerce Commission

entered an order approving certain railroad tariff schedules

and disapproving others, all dealing with the shipment

of imported iron ore from the Ports of New York, Phila-

delphia and Baltimore to seventeen points in so-called Cen-

tral Territory. The effect of this order was to deprive

Baltimore of the standard freight differential vis-a-vis New

York and Philadelphia which had existed since 1877 and

which had been repeatedly examined and approved by

the Commission throughcut the years. This result was

accomplished by approving tariffs filed by the railroads

serving New York and Philadelphia which disregarded the

established uifferential while disapproving lower tariffs

filed by certain of the railroads serving Baltimore which

were designed to reinstate, at least partly, the differentiai.

Upon entry of the Commission’s order, the Baltimore

interests filed suit in the appropriate federal court to have it

set aside to the extent that it approved the New York and

Philadelphia tariffs and disepproved the Baltimore tariff.

Afier extended hearings, the three judge District Court

entered a decree on May 22, 1957 affirming the Com-

mission’s order insofar as it disapproved the Baltimore

3

tariff and vacating it to the extent that it approved the

New York and Philadelphia tariffs.

For the reasons set forth in its opinion, the District Court:

(1) held that essential findings necessary to support the

Commission’s approval of the Philadelphia tariff had not

been made, (2) remanded the case to the Commission to

make further findings and to reconsider the lawfulness of

the Philadelphia rates in the light of such findings, (3)

permitted the Philadelphia tariff to remain in effect pend-

ing such reconsideration by the Commission, and (4) en-

joined the Commission from approving the New. _ k tariff.

The New York and Philadelphia interests (including the

parties making the present motion to recall) perfected an

appeal to this Court. On the basis of the jurisdictional

statements and motions, this Court entered a per curiam

opinion and order dated December 9, 1957. It stated that,

upon the remand of the case to the Commission, that body

ought to be free to consider the interrelationship cf the

rates from New York with those from Baltimore and Phila-

delphia “and to enter such orders with respect to all three

ports as the Commis:‘on may find to be required by their

interrelationship.”

This Court, therefore, upheld the decision of the District

Court that the New York and Philadelphia rates had not

been shown to be lawful, but it directed the District Court

to remand the New York rate to the Commission along with

the Philadelphia rate and to make the terms of the remand

broad enough to authorize the Commission to reconsider

the relationship between all three ports and in the light of

that reconsideration to take action upon the rates from each

ot the ports. This Court’s opinion concludes with the state-

ment that “so much of the decree of the District Court as

did not affirm the order of the Commission is vacated, and

4

the cause is remanded for appropriate disposition not in-

consistent with this opinion.”*

No motion for rehearing or clarification of the order of

this Court was filed by any of the parties to the appeal.

The parties then submitted to the District Court their

respective versions of the form of decree that ought to be

entered consistently with this Court’s opinion and order,

and on March 18, 1958, the District Court entered a decree

remanding the cause to the Commission as to both the

Philadelphia and New York rates. In addition, the District

Court directed that pending the Commission’s reconsidera-

tion the Philadelphia rate, which was already in effect,

should remain in effect, but that the New York rate, which

had never gone into effect, should not be permitted to be-

come effective.

Thereafter, the appellants tiled the pr

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