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PENNSYLVANIA R.R. CO. v. UNITED STATES

June 15, 1965

The PENNSYLVANIA RAILROAD COMPANY et al., Plaintiffs,
v.
UNITED STATES of America and the Interstate Commerce Commission, Defendants



The opinion of the court was delivered by: HASTIE

HASTIE, Circuit Judge.

 This action by several railroads seeks judicial invalidation of an order, issued by the Interstate Commerce Commission under sections 1(5) and 3(1) of the Interstate Commerce Act. In substance, the order requires the plaintiffs to cease, desist and abstain from charging new and increased rates for long haul shipments of fresh fruits and vegetables from the southern and southwestern areas of the country to stations in New York City, which are higher than their rates applicable to transportation from the same points of origin to northern New Jersey stations. Port of N. Y. Authority v. Aberdeen & Rockfish R.R., 1964, 321 I.C.C. 738, 755.

 The affected New York and New Jersey stations are all within a single metropolitan area and heretofore have constituted a rate group within which there has been parity of long haul rates. The long haul concept is limited to transportation over distances greater than 150 miles. The disputed order neither fixes rates nor precludes any increase or decrease of group rates. It merely invalidates a newly created rate differential between different destinations within the metropolitan area.

 The order is based upon an accompanying report wherein the Commission has found that the new rate differential unjustifiably disrupts the integrity of a long-established rate group and, therefore, is both "unjust and unreasonable", within the meaning of section 1(5) of the Interstate Commerce Act, and "unduly preferential" to the New Jersey area and "unduly prejudicial" to the New York area, within the meaning of section 3(1) of the Act.

 The new tariffs involved in this case have the effect of splitting the New York rate group into two rate areas, one of which includes some 100 stations in New Jersey and the other, some 25 stations in New York. *fn1" Before this innovation, group rates for shipments of various vegetables from a representative Florida station to the New York metropolitan area had been approximately $400 per carload, with minor variations for different commodities. The challenged new tariffs increase the rates for representative carload shipments to New York stations by $57. However, even with this increase it is undisputed, and the Commission has found, that the revenue produced by the new New York rates is less than the carriers' out-of-pocket expenses for transportation and delivery to certain New York stations.

 Certainly these differences are substantial, since in the aggregate they amount to about 15% of the total charge for transporting vegetables from the south to New York. Moreover, as has been pointed out, the increased rates, while compensating for this differential, will still yield the carrier less than the actual cost of the services rendered.

 On the other hand, the Commission expressed its proper concern to avoid, if it fairly could, the sacrifice of general advantages inherent in group rates as well as the imposition of any demonstrable particular disadvantage upon the New York area through an increase in fruit and vegetable rates applicable to New York stations only.

 The history and general advantages of the rate group concept, with its requirement of long haul rate parity for all stations within a single metropolitan area, have been frequently expounded. In The New York Harbor Case, 1917, 47 I.C.C. 643, the Commission recognized as a fact the essential industrial and commercial unity of the metropolitan district centering on the Port of New York, saying:

 
"The industrial district of northern New Jersey is so near the city of New York and so densely populated that the whole region, both in New York and in New Jersey, is commonly referred to as 'the metropolitan district'. Many thousands of people who are employed in New York have their homes in New Jersey, and every morning and evening the ferries, subway 'tubes,' and suburban trains are crowded with commuters traveling between their homes and their places of business. In this respect northern New Jersey is quite as much a part of New York as is Brooklyn or Staten Island. Moreover * * * throughout the metropolitan district there are industries engaged in the manufacture of the same articles, drawing their raw materials from the same source, and disposing of their products in common markets." 47 I.C.C. at 668-669.

 It then pointed out that the establishment and maintenance of parity of long haul freight rates to and from numerous stations dispersed throughout such an extensive industrial or commercial center is a widespread practice of long standing. Thus, group rates, applicable throughout the Oakland - San Francisco area, the area around Hampton Roads which includes the cities of Norfolk, Portsmouth and Newport News, and the great industrial and commercial complex centering on Chicago are examples of this nationwide, long continued and judicially approved practice. See Ayrshire Collieries Corp. v. United States, 1949, 335 U.S. 573, 69 S. Ct. 278, 93 L. Ed. 243; Lighterage Cases, 1934, 203 I.C.C. 481; City of Newport News, Va. v. Aberdeen & Rockfish R.R., 1929, 159 I.C.C. 159; Oakland Chamber of Commerce v. Southern Pac. Co., 1925, 100 I.C.C. 55. The Commission also set out certain justifying general advantages that inhere in group rates:

 In addition to these general considerations, the Commission found that at least one significant economic consequence, peculiar to this case, was likely to result from the challenged differential rate increase. The matter involved is the location of a principal metropolitan center for the wholesale marketing of fruits and vegetables. The record shows that, for various reasons, the relocation of the Washington Market, a 35 acre marketing complex in lower Manhattan, is under serious consideration and is likely to occur. Moreover, in the Commission's words, "both the City of New York and the favored [by the new rates] New Jersey municipalities hope to secure the wholesale produce market for the metropolitan area for their respective localities". The Commission also found that a $57 per carload rate ...


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