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September 24, 1958

UNITED STATES of America, Defendant, and Property Owner's Committee, The Interstate Commerce Commission, The Chesapeake and Ohio Railway Company, Norfolk and Western Railway Company, and the Virginia Railway Company, Intervening Defendants

The opinion of the court was delivered by: GOURLEY

The statutory court has for determination the legality of varying proportional railroad rates which poses the question -- Do proportional railroad rates violate the provisions of Sections 2 and 3(1) of the Interstate Commerce Act where the rail rates for transporting like commodities between identical points vary depending upon the ultimate destinations? *fn1"

 The Interstate Commerce Commission answered in the negative and after full and complete hearing sustained the rates. The statutory court agrees.

 The proceeding is filed under Sections 1336, 1398, 2321, 2322 and 2323 of the United States Code, Title 28, which provides, inter alia, for suits to enjoin, set aside, annul, and suspend orders of the Interstate Commerce Commission. It came on to be heard before a specially constituted court, pursuant to provisions of Title 28 U.S.C.A. Sections 2284 and 2321-2325.

 The complainant asks for the setting aside and enjoining the enforcement of an order of the Commission, entered March 20, 1958, in which the Commission dismissed the complaint in a proceeding before It, Docket No. 31264, Koppers Company, Inc., The Chesapeake & Ohio Railway, Co., et al., 301 I.C.C. 284.

 No material issues of fact have been raised by the pleadings, and the original parties and all intervening defendants have filed Motions for Summary Judgment.

 We find that the statutory court has jurisdiction of the subject matter of this suit, that the amount in controversy exceeds the sum of $ 3,000 exclusive of interest and costs, and that venue is properly laid because the plaintiff, Koppers Company, Inc., has its principal offices within this district. 28 U.S.C.A. Section 1398.

 Motions for Summary Judgment presented by the complainant, respondent and intervening defendants have been heard through extended arguments, and briefs have been submitted by counsel for all the parties.

 The facts are not in substantial dispute and may be summarized as follows:

 Koppers owns and operates a merchant coke plant at Kearny, New Jersey, hereinafter referred to as the New York Seaboard. One of its competitors, the Connecticut Coke Company, owns and operates a merchant coke plant at New Haven, Connecticut hereinafter referred to as the New England Seaboard. Coal is the basic raw material which is converted into coke and other products at these plaints. Both of these companies acquire their coal from the same southern mines and transport said coal over the same southern railroads to Hampton Roads. This rail transportation is regulated by the Interstate Commerce Commission under 49 U.S.C.A. Sec. 1(1)(a). The coal is then trans-shipped by water carriers from Hampton Roads to the New York and New England Seaboards. The water transportation is not subject to regulation by the Interstate Commerce Commission. 49 U.S.C.A. Sect. 903(b). The service which the southern railroads perform with regard to this coal is identical between southern mines and Hampton Roads.

 The coal is billed from the mines to Hampton Roads to Eastern Gas and Fuel Associates. Eastern Gas and Fuel Associates not only pay the coal producers for the coal, but also the railroad charges. Contractual understandings exist between Koppers, its competitors and Eastern whereby Eastern sells the coal on both the New York and New England Seaboards. Eastern directs the railroads to dump the coal into colliers owned by a subsidiary of Eastern and uses the same ocean-going facilities whether the destination of the coal is the New York Seaboard or New England Seaboard. Although Koppers and its competitors do not pay the railroad charges or the cost of the coal, or the payment of the water transportation charges directly to those performing the services or producing the commodity, each of the consignees on either the New York or New England Seaboard absorb said charges and costs paid or furnished by Eastern or its subsidiary to the competitors.

 Prior to May 2, 1952, the rates charged the plaintiff and its New Haven competitor for the southern mines-Hampton Roads transportation of the coal was the same. Since May 2, 1952, with the permission of the Commission, the railroads have been charging Koppers twenty cents per ton more for the southern-mines-Hampton Roads transportation of coal destined for the New York Seaboard than they have been charging the Connecticut Coke Company as to coal destined for the New England Seaboard.

 The plaintiff contends the rates permitted by the Commission are illegal and discriminatory on two separate and distinct legal theories:

 1. They are illegal under Section 2 because they impose a higher rate on complainant Koppers than they impose upon their competitors for the same rail service. That the commission in allowing this differential bottomed its decision upon impermissable grounds; the different ultimate destinations, and commercial and competitive circumstances affecting the movement of the traffic after it leaves the terminal at Hampton Roads.

 2. The rate is illegal under Section 3(1) because it causes plaintiff an undue and unreasonable prejudice and disadvantage by the higher rate it charges above the rate of its competitors and, in particular, above the rate of the Connecticut Coke Company, which higher rate has lost complainant business and has caused it to suffer a loss of profits.

 The defendants and intervenor defendants contend:

 2. The Supreme Court of the United States has consistently held that proportional rates which vary depending upon circumstances or origin, destination, competition and commerce are not unlawful.

 3. Proportional rates which vary depending upon the origin or destination of traffic are integral parts of the rate structure at the present time.

 4. Plaintiff's allegation that the varying proportional rates here in issue violate Section 3(1) of the Act is without foundation.

 5. Varying proportional rates, such as those here involved, are a necessary instrument of the national transportation policy.

 Under either of these two sections issues of fact are presented for the determination of the Interstate Commerce Commission. If the Commission find that, in light of all the circumstances and conditions surrounding the transportation, there is no violation of these sections, and if its findings are supported by substantial evidence in the record as a whole and ...

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