Searching over 5,500,000 cases.


searching
Buy This Entire Record For $7.95

Download the entire decision to receive the complete text, official citation,
docket number, dissents and concurrences, and footnotes for this case.

Learn more about what you receive with purchase of this case.

PITTSBURGH & LAKE ERIE R.R. CO. v. UNITED STATES

November 25, 1968

The PITTSBURGH AND LAKE ERIE RAILROAD COMPANY and Pennsylvania New York Central Transportation Company, Plaintiffs,
v.
UNITED STATES of America and Interstate Commerce Commission, Defendants



The opinion of the court was delivered by: DUMBAULD

This action was instituted by the Pittsburgh and Lake Erie Railroad Company ("P. & L.E.") and Pennsylvania New York Central ("Penn Central") to set aside a report dated February 21, 1967, and an order issued pursuant thereto dated February 23, 1968, by the Interstate Commerce Commission authorizing the Chesapeake & Ohio Railway Company ("C. & O.") and the Baltimore & Ohio Railroad Company ("B. & O.") to acquire control of Western Maryland Railroad Company ("W.M.") through ownership of capital stock. The City of Hagerstown intervened as a party-plaintiff, and C. & O., B. & O., W.M., and the Maryland Port Authority have intervened as parties-defendant. A motion for issuance of a temporary restraining order pending final hearing and determination of the action was denied by order of Judge Willson on March 26, 1968, and on March 29, 1968, C. & O.-B. & O. acquired control of Western Maryland.

 Proceedings before the Commission

 C. & O.-B. & O. gained control of Western Maryland in the following manner. In 1927, B. & O. acquired about 43.9% of W. M.'s stock. Soon thereafter, the Commission brought a Clayton Act proceeding against B. & O., and ordered divestiture because it found that the effect of acquisition might be to substantially lessen competition. Interstate Commerce Commission v. Baltimore & O.R. Co., 160 I.C.C. 785 (1930). B. & O. forestalled divestiture by obtaining the Commission's acceptance of a proposal that the stock be trusteed with The Chase National Bank of the City of New York, now The Chase Manhattan Bank. Under the trust agreement, the trustee was required to exercise his best judgment in selecting suitable directors and in voting and acting upon other matters. The Commission also required that during the continuance of the agreement the stock should be voted so as to preserve the entire independence of directors and management between the B. & O. and Western Maryland, and to prevent the election of common officers or directors by the companies without the Commission's consent. The Commission also specified that the trust could not be dissolved except by its order or that of a court of competent jurisdiction.

 The crux of P. & L.E.'s complaint is that although it requested specific traffic conditions to be imposed in the event that the Commission granted the C. & O.-B. & O. application to assume direct control of Western Maryland, the traffic conditions which were actually imposed were not protective enough to prevent diversion of traffic from the Pittsburgh Dispatch Route to the B. & O. Route. These two routes largely parallel each other between Baltimore, Maryland, and Youngstown, Ohio. The difference between them is that the B. & O. route (known as Central States Dispatch Route) is a direct single-line service which can carry traffic the entire distance without turning it over to any other road; whereas, the Pittsburgh Dispatch Route is a joint route over P. & L.E. and Western Maryland, extending between Youngstown and Baltimore, with interchange at Connellsville, Pennsylvania. Traffic moving on Pittsburgh Dispatch Route is turned over by one road to the other at Connellsville, Pennsylvania.

 P. & L.E. professes to fear that since C. & O.-B. & O. now controls Western Maryland, C. & O.-B. & O. will divert traffic from the Pittsburgh Dispatch Route to its single line B. & O. route, and thereby severely diminish the amount of traffic that will be interchanged at Connellsville with the P. & L.E. This contention flies in the face of several provisions laid down by the Commission to prevent just such a practice. The Commission obligated the acquiring companies and Western Maryland to maintain and keep open all existing routes and channels of trade, to observe complete neutrality in handling traffic, and to continue present traffic and operating relationships with all connecting rail lines. By order of the Commission, C. & O., B. & O., and Western Maryland are further obligated to maintain schedules and rates as favorable as those over competitive routes in which they are presently participating. 328 I.C.C. at 706, 760.

 The Commission required of C. & O., B. & O., and W. M., as a condition to the acquisition of control, that they continue the Pittsburgh Dispatch as a fast, competitive route, to maintain "at least the same standards of service as prevail" presently, and to continue to publish or participate in rates over the Pittsburgh Dispatch Route competitive with those applicable via other routes. The roads were also forbidden, without Commission approval, to slow down transit time over the route or to impede the route in any manner. 328 I.C.C. at 757, 759. *fn1"

 The City of Hagerstown opposed the acquisition, but the Maryland Port Authority, designated by Governor J. Millard Tawes to represent the general interests of the State of Maryland (Tr. 165, 177) in pursuance of the provisions of 49 U.S.C. § 5(2)(b), supports the Commission's order.

 Contentions of the Parties

 Having in mind the classical criteria limiting the scope of judicial review of Commission orders [ I.C.C. v. U.P.R.R. Co., 222 U.S. 541, 547, 32 S. Ct. 108, 56 L. Ed. 308 (1912); Rochester Tel. Corp. v. United States, 307 U.S. 125, 138-140, 59 S. Ct. 754, 83 L. Ed. 1147 (1939); Penn-Central Merger, 389 U.S. 486, 499, 88 S. Ct. 602, 19 L. Ed. 2d 723 (1968)] in substance to determination whether there is error of law or lack of substantial evidence, the most superficially plausible contention here advanced against the Commission's order (by the City of Hagerstown) is the argument that the Appalachian Act (40 U.S.C. App. A § 2 et seq.) and other legislation for the benefit of distressed areas, being later in date than the pertinent parts of the Interstate Commerce Act, have amended the criteria of public interest contained in Section 5(2)(b) of that act.

 However, the attractiveness of this argument is dispelled by examination of the actual text of the subsequent legislation relied on. It becomes clear that such legislation gives effect to the policies it proclaims by means of the specific programs therein established, and not otherwise. The criteria for carrier mergers under Section 5(2)(b) remain unchanged. The most that can be said is that the economic welfare of distressed areas, like the antitrust laws, is merely one aspect or facet of the considerations to be taken into account by the Commission in evaluating the public interest.

 Moreover, this argument was even more vigorously urged by the City of Scranton in the Penn-Central merger than by Hagerstown in the case at bar, but neither the opinion of Mr. Justice Clark for the Court nor the concurring opinions of Brennan and Douglas, JJ., nor the dissenting opinion of Fortas, J., considered the point as being worthy of comment. B. & O. R.R. Co. v. United States, 386 U.S. 372, 87 S. Ct. 1100, 18 L. Ed. 2d 159 (1967).

 The Commission properly concluded (328 I.C.C. at 709-10) that no new statutory criteria have replaced the familiar provisions of Section 5.

 The applicable standards governing mergers are aptly summarized in the Commission's report (328 I.C.C. at 686-88). Besides the formula of "public interest" embodied in Section 5(2)(b), which includes the Congressionally-declared "national transportation policy" and the antitrust laws, the Commission must consider also certain specific considerations set forth in Sections 5(2)(c) and 5(2)(e). *fn2" No contention has been made in the case at bar that these last-mentioned provisions of Section 5 have been contravened by the Commission in its order. Section 5(2)(e) is clearly inapplicable, and the Commission so found (328 I.C.C. at 687), while the applicable parts of Section 5(2)(c) were adequately dealt with by the Commission in connection with pertinent portions of its report.

 Another contention advanced by Hagerstown is that the Commission cannot authorize control of Western Maryland by C. & O.-B. & O. because such control was obtained illegally in violation of Section 5(4) of the Interstate Commerce Act. That provision reads:

 
It shall be unlawful for any person, except as provided in paragraph (2), to enter into any transaction within the scope of subparagraph (a) thereof, or to accomplish or effecutate, or to participate in accomplishing or effectuating, the control or management in a common interest of any two or more carriers, however such result is attained, whether directly or indirectly, by use of common directors, officers, or stockholders, a holding or investment company or companies, a voting trust or trusts, or in any other manner whatsoever. It shall be unlawful to continue to maintain control or management accomplished or effectuated after the enactment of this amendatory paragraph and in violation of its provisions. As used in this paragraph and paragraph (5), the words "control or management" shall be construed to include the power to exercise control or management.

 It is of course true that there can be situations where control of a carrier has been obtained under circumstances evincing such a deliberate or flagrant violation of law that the Commission would be warranted in concluding that the continuance of such control by the party exhibiting such disregard for legality would not be consistent with the public interest. *fn3" No such conclusion, however, has here been made by the Commission, nor would such a conclusion be warranted by the facts.

 Moreover, the same result is corroborated by another course of reasoning. Historically, it must be remembered that Section 5 of the Interstate Commerce Act as originally enacted in 1887 was a precursor of the Sherman Act enacted three years later. Both statutes were inspired by the same policy of protecting competition and preventing monopoly. Erie-Lackawanna R.R. Co. v. United States, 279 F. Supp. 316, 327-328 (S.D.N.Y.1967). Later amendments to Section 5 relaxed the requirements of that policy in order to permit transactions deemed beneficial to the public in other respects outweighing the anticompetitive consequences. The present form of Section 5(11) of the Interstate Commerce Act confers upon participants in a transaction approved by the Commission as being consistent with the public interest plenary dispensation from the restraints of the antitrust and other laws.

 Section 5(11) provides:

 If, therefore, the Commission can relieve parties to a Section 5 transaction from the restraints of the Antitrust Laws, why should any different rule apply with respect to the effect of an approved transaction when the illegal control results by reason of the terms of Section 5(4) instead of by reason of the terms of the Sherman Act? Particularly when it is remembered that the original version of Section 5 was a law to protect competition and prevent monopoly, and that to the extent that a different policy has not been embodied in subsequent amendments to Section 5, the same policy is still inherent in those portions of Section 5 which do not comprise part of the dispensation procedure.

 If the Commission's approval under Sections 5(2)(a) and 5(2)(b) suffices to dispense with the Antitrust Laws in toto, then a fortiori it surely suffices to relieve from such residual vestiges of antitrust policy as remain inherent in the undiluted portions of Section 5, and in particular in the provisions of the present Section 5(4).

 Moreover, it is clear that to obtain the benefit of the immunity procedure under Section 5 in its present form, the provisions of the immunizing statute must be strictly complied with. United States v. Socony-Vacuum Oil Co., 310 U.S. 150, 225-227, 60 S. Ct. 811, 84 L. Ed. 1129 (1940). Nothing else will suffice. But if there is compliance, the dispensation is plenary. The parties are then "relieved from the operation of * * * all * * * restraints, limitations, and prohibitions of law, Federal, State, or municipal", including, indubitably, the provisions of Section 5(4).

 The Commission, in determining where the public interest lies, must, if occasion requires, weigh the importance of respect for and observance of law, in comparison with the improvements in transportation service and other benefits to be derived from the challenged control. Illinois Central R.R. Co. v. United States, 263 F. Supp. 421, 425-430 (N.D.Ill.E.D.1966), aff'd. per curiam 385 U.S. 457, 87 S. Ct. 612, 17 L. Ed. 2d 509 (1967). The Commission is not obliged to disapprove as a matter of law every transaction where there has been some degree of prior unlawful control.

 In any event, in the absence of collusion between the C. & O. or B. & O. and the trustee of the B. & O. stock held in trust (which is nowhere alleged), the Commission was clearly correct in concluding that the B. & O. stock was "sterilized" by the terms of the trust agreement, and that in fact there has been no violation by C. & O. or B. & O. of the provisions of Section 5(4).

 The Commission in its report stated that Chase Manhattan Bank, as trustee, voted 43.9% of W.M.'s stock, that 35.27% of the stock was in the hands of others unaffiliated with B. & O. or C. & O. and that there was no showing that C. & O. either acquired control of Western Maryland or power to exercise such control. 328 I.C.C. at 692.

 Whether one company controls another is "an issue of fact to be determined by the special circumstances of each case." Rochester Telephone Corp. v. United States, 307 U.S. 125, 145, 59 S. Ct. 754, 764, 83 L. Ed. 1147 (1939). Where the factual determination has been made by an administrative agency, the determination must stand so "long as there is warrant in the record for the judgment of the expert body". Ibid., 145-146, 59 S. Ct. 754. And the fact that reasonable men might differ over the conclusion to be drawn from the evidence provides no basis for reversal. Illinois Central R.R. Co. v. N. & W. Ry. Co., 385 U.S. 57, 69, 87 S. Ct. 255, 17 L. Ed. 2d 162 (1966); Consolo v. Federal Maritime Commission, 383 U.S. 607, 620, 86 S. Ct. 1018, 16 L. Ed. 2d 131 (1966). The Commission, under the Interstate ...


Buy This Entire Record For $7.95

Download the entire decision to receive the complete text, official citation,
docket number, dissents and concurrences, and footnotes for this case.

Learn more about what you receive with purchase of this case.