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SOUTHERN RAILWAY CO. v. NORTH CAROLINA ET AL.

decided*fn*: February 17, 1964.

SOUTHERN RAILWAY CO
v.
NORTH CAROLINA ET AL.



APPEAL FROM THE UNITED STATES DISTRICT COURT FOR THE MIDDLE DISTRICT OF NORTH CAROLINA

Warren, Black, Douglas, Clark, Harlan, Brennan, Stewart, White, Goldberg

Author: Stewart

[ 376 U.S. Page 94]

 MR. JUSTICE STEWART delivered the opinion of the Court.

In 1959 the appellant Southern Railway Company filed a petition with the North Carolina Utilities Commission for an order permitting it to discontinue operation of two intrastate passenger trains between Greensboro and Goldsboro, North Carolina, a distance of about 130 miles. The trains in question are No. 16, which operates eastbound in the morning from Greensboro to Goldsboro, and No. 13, consisting of the same equipment, which operates westbound in the late afternoon. Since 1958 these two trains have provided the last remaining railway passenger service between the two communities. The State Commission denied the petition, and its decision was upheld by the North Carolina Supreme Court. State of North Carolina v. Southern Railway Co., 254 N. C. 73, 118 S. E. 2d 21 (1961).

Thereafter the railway company filed a petition with the Interstate Commerce Commission pursuant to § 13a (2)

[ 376 U.S. Page 95]

     of the Interstate Commerce Act,*fn1 seeking authority to discontinue operation of the trains. After a hearing at which several protestants, including the State of North Carolina, appeared, the examiner recommended that the petition be granted. Division 3 of the Commission agreed with the examiner and ordered discontinuance of the trains. The Division issued a report in which it found, inter alia, that the trains, which in 1948 had carried 56,739 passengers, carried only 14,776 passengers in

[ 376 U.S. Page 961960]

     , the last full year for which figures were available; that the direct expenses of operating the trains during the latter year were over three times their total revenue; that discontinuance of the trains would result in savings of at least $90,589 per year; that the need shown for these trains was relatively insubstantial when viewed in light of the density of the population of the area served; that existing alternate transportation service by rail, bus, airline, and other means was reasonably adequate; and that the discontinuance of the passenger train service would not seriously affect the industrial growth of the area. Against the background of these findings, the examiner and Commission considered, but gave "little or no weight" to the overall prosperity of the carrier. The Commission's basic conclusions were summed up as follows:

"that the public will not be materially inconvenienced by the discontinuance of the service here involved; that the savings to be realized by the carrier outweigh the inconvenience to which the public may be subjected by such discontinuance; that such savings will enable the carrier more efficiently to provide transportation service to the public which remains in substantial demand; and that the continued operation of trains Nos. 13 and 16 would constitute a wasteful service and would impose an undue burden on interstate commerce." 317 I. C. C. 255, 260.

After a petition for reconsideration by the entire Commission had been denied, the protestants instituted an action in a three-judge District Court seeking to set aside the order of the Commission. The court held, first, that it was erroneous as a matter of law for the Commission to order discontinuance of passenger trains under the provisions of § 13a (2) without first determining whether, once the profits from freight operations on

[ 376 U.S. Page 97]

     the same line were taken into account, "the particular segment of the railway involved is contributing its fair share to the over-all company operations . . . ." 210 F.Supp. 675, 688. The court also proceeded to find, inter alia, that "Taking into account total operation of this line, there is a profit not a loss, a benefit, not a burden," 210 F.Supp., at 688; that passenger traffic had slightly increased during the first five months of 1961; that the carrier had done little to promote the use of the passenger trains; that continued existence of the alternative of railway passenger service might be considered a necessity under such circumstances as airline strikes or bad weather; and that, in light of the overall prosperity of the Southern Railway Company, "the effect of the losses of the Greensboro-Goldsboro passenger service on the financial structure of the railroad is inconsequential."*fn2 210 F.Supp., at 688. On this basis, although it explicitly refused to set aside any of the subsidiary findings of fact on which the Commission's order was based, 210 F.Supp., at 689, 690, the court held that "the ultimate conclusions of the Interstate Commerce Commission that the service in question constitutes an undue burden on interstate commerce and that the present or future public convenience and necessity permits such discontinuance . . . are arbitrary and capricious because . . . not supported by

[ 376 U.S. Page 98]

     substantial evidence," 210 F.Supp., at 689. The court itself then concluded that discontinuance was not warranted. It therefore set aside the Commission's order, and perpetually enjoined the carrier from discontinuing the Greensboro-Goldsboro passenger trains. The United States, the Interstate Commerce Commission, and the carrier all appealed. We noted probable jurisdiction and consolidated the cases for argument. 373 U.S. 907.

The District Court's action in setting aside the Commission's conclusions as to public convenience and necessity and undue burden on interstate commerce was explicitly based upon the court's view that the Commission had applied erroneous legal standards in reaching those conclusions. The court did not question that the Commission's subsidiary findings of fact were supported by a substantial evidentiary foundation. It simply disagreed with the Commission as to the kind of evidence required to support an order permitting discontinuance of an intrastate passenger train under § 13a (2).

The court reached its conclusion that the Commission had erred in not taking into account profits from freight operations along the Greensboro-Goldsboro line primarily in reliance upon this Court's decisions in Public Service Comm'n of Utah v. United States, 356 U.S. 421, and Chicago, M., St. P. & P. R. Co. v. Illinois, 355 U.S. 300. Both those cases dealt with § 13 (4), which requires the Commission to change intrastate rates wherever such rates are found to discriminate against interstate commerce. This Court held in those cases that the Commission could not authorize higher intrastate rates either for passenger or freight operations without first taking into account the revenues derived by the carrier from the totality of intrastate operations. In 1958, the year in which § 13a (2) was enacted, § 13 (4) was amended to

[ 376 U.S. Page 99]

     permit the Commission to act "without a separation of interstate and intrastate property, revenues, and expenses, and without considering in totality the operations or results thereof of any carrier . . . wholly within any State."*fn3 The District Court's holding that the same kind of data should be considered in § 13a (2) proceedings was premised upon the fact that no language similar to that of the § 13 (4) amendment was included in § 13a (2), and that proceedings under the latter provision, which permits discontinuance of given operations, have a far more serious impact upon intrastate passengers than proceedings under the former, which provides only for an increase in the rates to be charged.

But when § 13 (4) was amended in 1958 as a result of the two decisions relied on by the District Court, Congress was simply reaffirming what it conceived as the original intent of the section.*fn4 There is therefore no reason to

[ 376 U.S. Page 100]

     assume that Congress regarded the new language as embodying a standard which had to be specifically incorporated into every statutory provision to which it was intended to apply.

The legislative history clearly indicates that Congress in enacting § 13a (2) was addressing itself to a problem quite distinct from that reflected by overall unprofitable operation of an entire segment of railroad line. The Commission already had authority prior to 1958, under §§ 1 (18)-(20),*fn5 to authorize discontinuance of all services on any given intrastate line where continuance of

[ 376 U.S. Page 101]

     such services would impose an undue burden on interstate commerce. Colorado v. United States, 271 U.S. 153. However, the Commission totally lacked power to discontinue particular trains or services while leaving the remaining services in operation. It was precisely this gap which § 13a (2) was intended to fill. New Jersey v. New York, S. & W. R. Co., 372 U.S. 1, 5-6. As both the House and Senate Committee Reports on the legislation which became § 13a (2) make clear, Congress was primarily concerned with the problems posed by passenger services for which significant public demand no longer existed and which were consistently deficit-producing, thus forcing the carriers to subsidize their operation out of freight profits.*fn6 Far from permitting the carrier's need for discontinuance of passenger services to be balanced against profits from other operations conducted

[ 376 U.S. Page 102]

     along the same line, the bill as originally reported by the Senate Committee would have required the Commission to permit discontinuance, even if there was great public need for the service, so long as the continued operation of a particular service would result in a net loss to the carrier.*fn7 Senator Javits unsuccessfully attempted to amend the bill on the floor of the Senate to delete the net loss standard and to substitute a requirement that the Commission balance the public need for the service against the deficit resulting from it.*fn8 Such an amendment, proposed by Chairman Harris of the House Interstate and Foreign Commerce Committee, was adopted by the House,*fn9 and accepted by the Senate in conference. The deletion of the net loss standard, however, by no means implied that freight profits along a given line could be offset against deficits incurred by passenger services for purposes of determining whether the latter constituted an undue burden on interstate operations or ...


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