U.S. Supreme Court
ICC v. Union Pacific R. Co., 222 U.S. 541 (1912)
Interstate Commerce Commission v.
Union Pacific Railroad Company
Argued October 18, 19, 1911
Decided January 9, 1912
222 U.S. 541
The Act to Regulate Commerce makes the findings of the Interstate Commerce Commission as to reasonableness of a rate prima facie correct. Cincinnati &c. Ry. v. Interstate Commerce Commission, 206 U. S. 154.
Orders of the Interstate Commerce Commission are final unless beyond the power that the Commission can constitutionally exercise, beyond its statutory power, or based upon a mistake of law.
An order of the Commission, regular on its face, may be set aside if it appears that the rate is so low as to be confiscatory and in violation of the constitutional prohibition against taking property without due process of law, or if the Commission acted so arbitrarily and unjustly as to fix rates contrary to evidence or without evidence to support its conclusions, or if the authority was exercised in an absolutely unreasonable manner.
This Court, in determining the validity of an order of the Interstate Commerce Commission, confines itself to the ultimate question as to whether the Commission acted within its power. It will not consider expediency, nor will it consider facts further than to determine whether there was sufficient evidence to support the order.
Where, as in this case, there is testimony as to value of the roads, amounts expended, dividends, ratio of earnings and expenses, and other matters, there is evidence to support the conclusions, and the findings of the Commission on such facts are conclusive.
Reasonableness of railroad rates cannot be proved by categorical answers like those given in regard to value of articles of merchandise; too many elements are involved which require consideration. chanroblesvirtualawlibrary
Quaere whether the maintenance of an admittedly low rate for a long time raises a presumption of reasonableness because the carriers realized a profit thereon.
An order of the Interstate Commerce Commission is not to be considered by itself alone, but must be considered in the light of all the testimony, and when carriers themselves maintain a ratio of difference, a rate fixed by the Commission maintaining the same ratio of difference cannot be said to be beyond its power.
An order of the Interstate Commerce Commission within its power cannot be held invalid because it appears that possibly the Commission considered other subjects than the reasonableness of the rate, and, in this case, held that an order fixing a rate on lumber was not invalid because the Commission examined into the effect of the rate on the lumber business and on the industries of the various points affected.
These three appeals are brought by the Interstate Commerce Commission from a decree enjoining a reduction of lumber rates named in tariffs filed by the Great Northern, the Northern Pacific, and the Union Pacific Railroads.
The tariffs under consideration involve rates on lumber from the coast, Spokane District, and Montana-Oregon points to St. Paul, Omaha, and Chicago. It is admitted that the rates on shingles, hemlock, cedar, and other forest products have a fixed relation to those on fir lumber, and that the differentials from Spokane and the Montana-Oregon Territory have a like fixed relation to those from the coast.
The summary of these very lengthy records will therefore be limited to a statement of those facts bearing directly on the pivotal question as to the validity of the order fixing a rate of forty-five cents per hundred pounds on fir lumber from the coast to St. Paul.
In 1893, the rate, from the coast, on fir lumber, over the two northern lines to St. Paul, was fixed at forty cents, and since 1901 the rate to Omaha at fifty cents.
In 1907, the three carriers concurrently filed new tariffs, making the rate from the coast to St. Paul sixty cents, to Omaha fifty-five cents, and to Chicago sixty cents. Thereupon chanroblesvirtualawlibrary
various corporations filed complaints before the Commission, alleging that the proposed rates were unreasonable and would seriously affect the lumber industry. The carriers emphatically denied both of these allegations, and, in explanation of the causes leading up to the advance, showed that when the Great Northern was completed to the coast, about 1893, almost all of the freight shipped over its line went from the East to the West -- cars being hauled back empty to St. Paul, its eastern terminus. In order to correct this expensive and unremunerative situation, the Great Northern decided to put in a rate on lumber so low that mill men on the Pacific coast might compete with dealers in white and yellow pine in the Chicago market, 2,500 miles distant. It thereupon reduced the existing rate to forty cents. That cut was met by the Northern Pacific, which also reached St. Paul, but the Union Pacific at that time made no change in its rate. The reduction opened up new markets, and was soon followed by heavy shipments of lumber to the East. The business grew steadily, and prior to the filing of the tariffs in 1907, the empty-car movement had been completely reversed, many cars being hauled empty from St. Paul to the coast, and returning to the East loaded with lumber.
Traffic increased to such an extent that it became necessary to open up new tunnels, construct additional passing tracks, and reduce grades and curves. There was a constant increase in gross earnings, but the carriers contended that there had been such an enormous and disproportionate increase in the cost of operation that it was absolutely necessary to discontinue the unremunerative forty-cent rate and advance it to fifty cents, which they insisted was just and reasonable.
There was no finding as to the effect on gross earnings which would result from the proposed advance of ten cents. But, as the Great Northern, in one year, hauled 1,765,095,997 tons one mile, equivalent to about 30,000 chanroblesvirtualawlibrary
cars, of the average load of 58,000 pounds, transported 2,000 miles from the coast to St. Paul, the advance of ten cents per hundred, or $58 per car, would represent a gross annual increase, for that company alone, of $1,740,000.
An immense amount of evidence was offered by both parties in support of their respective contentions. The Commission rendered an elaborate opinion (14 I.C.C. 1) and concluded by finding that the old rates were just and reasonable, and should be restored to all points on and west of the Pembina line, which ran from the Canadian line almost due south through Fargo, Omaha, to Port Arthur, Texas. As Omaha was on this line, the effect of that part of the order was to prohibit the fifty-five-cent advance, and to restore the old rate of fifty cents to Omaha, which had been in force since 1901. As to rates east of the Pembina line, the Commission held that
"they might reason