from Doub and 6.3 miles from Buckeystown. In a route via Hyndman rather than via Frederick the Penn Central's on-line haul to the interchange point would be 173 miles rather than 313 miles. No explanation is given why Penn Central published the rate to Point of Rocks; such a route (short-hauling Penn Central) would probably not be established by Commission action under Section 15(4) of the Act; but, having been voluntarily established by the carriers, may legitimately be taken by plaintiff as a basis of rate-comparison of rates for comparable distances as a standard of determining reasonableness. However, plaintiff's inference is weakened by the fact that no traffic in the involved commodity is shown to have moved to Point of Rocks over this route.
The actual route of movement was 297 miles to Buckeystown and 294.1 miles to Doub. The route was Penn Central to Hyndman, Pa. (173 miles) thence B&O to destination (124 and 121.1 miles). The rate collected was calculated as a combination rate of 118.25 cents, being the sum of 56.5 cents from Trafford to Hyndman, and 51.5 cents from Hyndman to Buckeystown and Doub (plus certain applicable general increases). With respect to the circuit breaker shipments the carriers contend that the legal rate of $1.1825 is lower than the maximum reasonable rate of $1.25 calculated by applying the Class rates,
and hence that no reparation is due.
With regard to the generator (disregarding special train charges, which were separately paid and as to which there is no contest), a single-factor column 2380 rate of $1.33 is applicable from origin to destination over Penn Central.
This route would have been 319 miles.
The actual route of movement was 476.9 miles; Penn Central 323 miles to Cumbo, W. Va. (involving a local rate of 92 cents); thence B&O. 97.9 miles to Ft. George Meade, Md. (local rate 66 cents); and thence 56 miles to destination over Penn Central to destination (local rate 57 cents); for a total rate of $2.15.
The carriers indicated willingness to make reparation to the Class 45 rating in Item 34760 over the mileage estimated by plaintiff (476.9 miles) resulting in a rate of $1.57 as against the $1.33 calculated by plaintiff using the Column 2380 basis (equivalent to 38% of first class, rather than 45% as sought by the carriers).
It may also be accepted as an uncontradicted fact that at no time have the commodities involved ever moved in Eastern territory at class rates, or at rates exceeding the Column rate basis.
It is also a fact that on a number of previous occasions the carriers have voluntarily made reparation to the level of the Column rates in so-called "Special Docket" proceedings before the Commission. The printed form prescribed by the Commission for use in such proceedings since 1934 contains an admission that the legal rate collected was unreasonable: "It is admitted that the rates or rules legally applicable at the time and over the route shipment moved were, under all the circumstances and conditions then existing, excessive and unreasonable."
Two instances in which such disposition was made involved a movement for account of Westinghouse using the very car (WECX-101) in which the generator moved in the shipment involved in the case at bar.
However, apparently at some date in 1969, the rate bureau for eastern territory [Traffic Executive Association -- Eastern Railroads, or TEA-ER] adopted the position that carriers should not voluntarily make reparation in special docket proceedings except by application of the class rates.
A letter of E. J. O'Connor (Penn-Central Manager-Commerce) dated August 5, 1969, states that "in view of the action recently taken by the Traffic Executive Association -- Eastern Railroads with respect to disposition of Bucyrus - Erie reparation claims, eastern carriers are henceforth unable to progress such claims on any basis other than obtained by use of the classification ratings and resultant rates based on actual route of movement distance."
The actual terms of the docket item before TEA-ER and its disposition notice do not appear in the record before this Court. Presumably there was compliance with appropriate procedures pursuant to the "Bulwinkle" provisions of 49 U.S.C. 5b (added in 1948) so as to obtain dispensation from the strictures of the Antitrust laws. U.S. v. Trans-Missouri Freight Assn., 166 U.S. 290, 341, 41 L. Ed. 1007, 17 S. Ct. 540 (1897); U.S. v. Joint Traffic Assn., 171 U.S. 505, 565, 43 L. Ed. 259, 19 S. Ct. 25 (1898); U.S. v. Socony-Vacuum Oil Co., 310 U.S. 150, 225-27, 84 L. Ed. 1129, 60 S. Ct. 811 (1940); Sunshine Coal Co. v. Adkins, 310 U.S. 381, 396, 84 L. Ed. 1263, 60 S. Ct. 907 (1940); P.&L.E.R.R. Co. v. U.S., 294 F. Supp. 86, 93 (W.D. Pa. 1968); Dumbauld, "Rate-Fixing Conspiracies in Regulated Industries", 95 U. of Pa. L.R. 643-60 (May, 1947).
The carriers now contend [Brief p. 12] that:
In progressing special docket applications on Bucyrus-Erie type shipments prior to 1969, the railroads in Eastern Territory admittedly misinterpreted the Bucyrus-Erie principle in failing to observe the prescribed class rate basis as the reasonable basis.
However, it would seem that the carriers did not "misinterpret" the Bucyrus-Erie principle,
but rather they "reinterpreted" it in a manner that would bring in more revenue.
Their "eisegesis" of the principle may have had an economic rather than juridical motivation. "Simply because bankruptcy and other adverse conditions have caused the carriers to shift from a time honored position to seek a higher level of rates for reparation purposes", as the examiner concluded in No. 35568,
the proper interpretation of the Bucyrus-Erie principle does not necessarily fluctuate.
The Bucyrus-Erie principle, it should be explained, is that a shipper is entitled to a reasonable rate over the actual route of movement when the normal route between origin and destination can not be used because the weight or dimensions of the shipment make transportation over the normal route impossible.
This principle was enunciated in Bucyrus-Erie Co. v. N.Y. Central R.R. Co., 196 I.C.C. 1 (1933).
It would have been conceivable for the Commission in that case to have established the rule (contended for by the complainant there, and favored by Commissioner McManamy) that the normal rate should have been "protected" over the route of movement (just as where for "carrier convenience" or "carrier disability" a passenger entitled to a lower berth is given a drawing room without additional charge, as is said to have often occurred in the case of high-ranking military personnel during World War II). As stated by Commissioner McManamy:
I disagree with the restricted interpretation of the tariff here made under which the shipper is required to pay a higher rate because the carrier is unable to handle the shipment over the usual route. Certainly restricted clearances which require diversion of shipments from the usual route is one of the "exigencies of carriers" intended to be covered by the so-called emergency clause in the tariffs for which the shipper should not be penalized.
However, the decision reached by the Commission was justified by its closer conformity to the realities of the situation. The shipment in fact did move over the actual route of movement, rather than over the normal route for which the applicable tariff rate was constructed. A reasonable rate over the route of movement seems to be a result eminently fair both to carrier and shipper. The Commission declared: "We have frequently said that regardless of a choice of available routes, a shipper is entitled to a reasonable rate over the route of movement" (199 I.C.C. at 2).
The article involved in the Bucyrus-Erie case was a power shovel, rated fifth class. Over the normal route of 593 miles a joint fifth-class rate of 36.5 cents applied via New York Central to Buffalo, N.Y., Erie to Binghamton, N.Y., and Delaware and Hudson to destination. The route of movement was 520 miles via N.Y.C. to Norwood, N.Y., the Rutland to Rouses Point, N.Y., and D.&H. to destination. From Syracuse to Norwood the movement was over a mountainous and sparsely settled branch line haul.
The Commission found that in the eastern-class rate proceeding a maximum of 40 cents had been prescribed as a fifth class rate for a haul of 520 miles in the territory involved. Adding an arbitrary for the D. & H. branch-line haul from Bluff Point, N.Y., to Dannemora made a fifth class rate of 41 cents for the distance over the route of movement. Reparation to the 41 cent level was ordered.
It will be noted that in the Bucyrus-Erie case the level used for reparation was the class rate; but it will also be noted that the tariff applicable over the normal route was also a class rate.
There has been considerable discussion of the effect of cases under Special Docket procedure. On the one hand, technically, such cases rest upon the same legal basis as contested cases. Swift & Co. v. C.&A. R.R. Co., 16 I.C.C. 426, 428-29 (1909); Tennessee Eastman Corp. v. L.&N. R.R. Co., 198 I.C.C. 639, 640 (1934). On the other hand, orders made in such cases are not controlling precedents binding upon the Commission as prescribed maximum reasonable rates in litigated formal cases. Pullman-Standard Car Co. v. P.R.R. Co., 281 I.C.C. 445, 449 (1951).
This issue is substantially similar to that with respect to the precedential effect of denial of certiorari as compared with affirmance upon motion and without argument of a direct appeal (as from a three-judge court). U.S. v. Carver, 260 U.S. 482, 490, 67 L. Ed. 361, 43 S. Ct. 181 (1923) [certiorari]; Edelman v. Jordan, 415 U.S. 651, 671, 39 L. Ed. 2d 662, 94 S. Ct. 1347 (1974) [summary affirmance]. See also Fusari v. Steinberg, U.S. decided January 14, 1975 [Chief Justice Burger, concurring]. Undoubtedly the force of a case is strengthened when there has been full argument and a detailed opinion (or opinions) written. Since Lord Coke's time the virtues of oral argument have been recognized as a means of divinely illuminating the minds of the tribunal. Pref. to 9 Rep.
The chief value of the uniform course of Special Docket cases is as evidence of reasonableness. Such evidence is highly persuasive in that it manifests the expert opinion of the railroad managements in a matter constituting an admission against interest. As such, it should be given great weight with respect to the issue of reasonableness of rates.
As pointed out in the case at bar (in No. 35439 by Review Board No. 4, "it is well established that there is no precise mathematical formula or method for determining a maximum reasonable rate."
The Board then goes on to say that "To the extent there is a general guide in determining maximum reasonableness in Bucyrus-Erie type cases, it appears to be the class-rate scale applied to the distance over the route of movement."
In support of this conclusion that class rates should be applied Westinghouse Electric Corp. v. P.R.R.Co., 323 I.C.C. 503, 506-507 (1964), is cited. Other cases to the same effect, relied on by defendants, include Union Iron Works v. N.Y.C.R.R. Co., 218 I.C.C. 607, 609 (1936); Hudson Pulp & Paper Corp. v. Boston & Maine R.R., 276 I.C.C. 668, 670 (1950) [here the rate over the normal route was itself a class rate as in Bucyrus-Erie ]; and the current cognate cases of Westinghouse Electric Co. v. Penn Central Transportation Co., No. 35568, Feb. 14, 1974 [generators to Newport News, Va.]; McGraw-Edison Co. v. B&O. R.R. Co., No. 35580, Feb. 11, 1974; McGraw-Edison Co. v. B&O. R.R. Co., No. 35417, June 8, 1973.
On the other hand, plaintiff cites cases where rates lower than prescribed rates were accepted as reasonable maxima for computing reparation. These cases involve voluntarily established rates intended to apply on building materials shipped to construction sites. However, because of inadvertence or technical reasons these rates were not in fact effective at the time when the movement took place. In C.A. Wagner Construction Co. v. C., M., St. P. & P. R.R. Co., 219 I.C.C. 317, 318 (1936), Division 4 said:
The rate sought is somewhat lower than rates we have prescribed or approved on sand for similar distances in this territory. However, in view of the unusually heavy loading, volume of movement, and other special circumstances previously referred to herein, we are of opinion that the applicable rate was unreasonable.
This reasoning was followed in Booth & Olson Inc. v. C., B&O. Ry. Co., 222 I.C.C. 569, 570 (1937); and North American Cement Co. v. W. Md. Ry. Co., 235 I.C.C. 27, 28 (1939).
It is a basic principle of rate regulation that there exists an extensive "zone of reasonableness", within which a carrier is ordinarily free to exercise its discretion in initiating rates. U.S. v. C., M., St. P. & P. R. Co., 294 U.S. 499, 506, 55 S. Ct. 462, 79 L. Ed. 1023 (1935). Only when a complaint is filed by a shipper or competing carrier, or an investigation is instituted by the Commission on its own motion, does the Commission's power to prescribe maximum or minimum, or maximum and minimum, or specific rates, come into play.
Hence before a carrier can be required to make reparation for an unreasonably high rate, it must be shown by the shipper that the rate charged exceeds the maximum reasonable rate appropriate under the circumstances. This can best be shown by demonstrating that the rate charged exceeds the maximum reasonable rate prescribed by the Commission under Section 15(1), if that happens to be the fact.
Where no prescribed Commission rate is available to establish the maximum reasonable rate, the complainant may fail to meet the burden of showing the unreasonableness of the challenged rate. A commodity rate is often a carrier-initiated rate, and may have been for various reasons of business expediency
established at a lower plane in the zone of reasonableness than at the maximum reasonable level.
Hence it is more difficult to prove that a commodity rate (if not Commission-prescribed) is a maximum reasonable rate. However, the task is not an impossible one.
There are many customary criteria which the Commission and carriers apply in evaluating the reasonableness of rates. These include, inter alia, cost of service (car-mile costs and revenue are frequently examined in this connection); value of service (what the traffic will bear); the existence vel non of competition; the transportation characteristics of the commodity (weight, size, density: gold vs. feathers is an example often used as an illustration by rate economists; likewise sand and gravel vs. perishable fruit or vegetables); the anticipated volume of shipments; the distance of the haul; the availability of return loads in the type of equipment used; the economic status of the industry served; the rate level required in order to move the traffic; comparison of the rate under consideration with established rates for comparable shipments in the territory involved; and other pertinent considerations. These criteria are habitually employed by the Commission when making a determination of reasonableness.
Applying the foregoing doctrines of rate regulation law to the action of the Commission in the case at bar, what conclusions emerge?
In the first place it seems clear that what the Bucyrus-Erie principle requires is that the carrier charge a reasonable rate over the route of movement (not necessarily a class rate).
In the next place, it would seem that the reasonableness of a rate (more specifically the maximum reasonable rate for purposes of reparation) must be determined by the Commission by applying the traditional and usual criteria which it habitually uses in making such determinations. As previously indicated, there are many factors to be considered. As Review Board No. 4 itself pointed out in the case at bar (in No. 35439), "there is no precise mathematical formula or method for determining a maximum reasonable rate."
However, what the Commission actually did in the case at bar was to utilize a mechanical formula, instead of making the judgmental determination which would have followed from consideration of the traditional pertinent rate - making criteria in their application to the circumstances involved in the case at bar. In opting for the automatic application of class rates, the agency abdicated its discretionary expertise. Perhaps for the sake of adopting a simple rule for dealing with a complex question,
because conducive to administrative economy or uniformity in application, the Commission neglected to exercise its function of evaluating the specific situation presented for its determination.
Plaintiff also argues that the Commission "has not adequately explained its departure from prior norms." Sec. of Agriculture v. U.S., 347 U.S. 645, 653, 98 L. Ed. 1015, 74 S. Ct. 826 (1954). See also A.T.&S.F. Ry. Co. v. Wichita Board of Trade, 412 U.S. 800, 808, 37 L. Ed. 2d 350, 93 S. Ct. 2367 (1973). This contention is not convincing. It is not necessary that Commission decisions be consistent. Virginian Ry. Co. v. U.S., 272 U.S. 658, 666, 71 L. Ed. 463, 47 S. Ct. 222 (1926); Virginia Stage Lines v. U.S., 48 F. Supp. 79, 83 (W.D. Va. 1942). Indeed, to hold otherwise would be to condemn the practice of the United States Supreme Court, and now, indeed, since 1966, that of the English House of Lords.
There is nothing obscure or unclear about the Commission's action. Cf. U.S. v. C., M., St. P.& P.R.R. Co., 294 U.S. 499, 511, 55 S. Ct. 462, 79 L. Ed. 1023 (1935). What the Commission did is plain. The trouble is that what it did was wrong. The Commission did not depart from the Bucyrus-Erie principle; it acknowledged that plaintiff was entitled to a reasonable rate over the route of movement. The inadequacy was in the procedure adopted for determining what constitutes a reasonable rate: the traditional tests of reasonableness were not applied and the pertinent factors considered and evaluated; the class rate level was swallowed at a gulp without chewing.
The rates which the Commission chose for reparation purposes, although they appear to have been prescribed rates, were nevertheless prescribed as class rates. The evidence in the case at bar, however, clearly shows that in eastern or Official Territory the commodities involved never had moved on the basis of class rates. Hence those rates, for ought we know, were simply paper rates, and may have been as inappropriate for reparation purposes as the prescribed rates on building materials which the Commission disregarded as maximum reasonable rates in the cases cited by plaintiff. In many cases cited by defendant, where class rates were found to be the reasonable maximum rates, careful examination will indicate that the Commission did independently test the appropriateness of the class rates by the traditional criteria. In many of those cases, moreover, careful examination will indicate that the traffic in question normally moved at class rates over the usual tariff routes; under such circumstances they were found to constitute an appropriate standard for application over the route of movement under the Bucyrus-Erie principle. That principle, it will bear repeating, calls for a reasonable rate over the route of movement, not necessarily a class rate. The class rate, when tested by the traditional criteria, having regard to the commodity and territory involved, might be utterly unsuitable as a reasonable maximum for reparation purposes.
Clearly, additional findings are needed. It would not be too harsh to say that, in the legal sense, the Commission's action is arbitrary, and constitutes a departure from applicable legal standards. Hence we conclude that the challenged orders in No. 35439 and No. 35415 must be set aside, and the cases remanded to the Commission for further consideration in accordance with applicable law.
AND NOW, this 4th day of February 1975, for the reasons set forth in the foregoing opinion, IT IS ORDERED, ADJUDGED, AND DECREED that judgment be and it hereby is rendered in favor of plaintiff, Westinghouse Electric Corporation, and against defendants United States of America and the Interstate Commerce Commission, and intervening defendants Baltimore and Ohio Railroad Company, and George P. Baker, Richard C. Bond, and Jervis Langdon, Jr., Trustees of the property of Penn Central Transportation Company, debtor;
AND that the orders of the said Interstate Commerce Commission attacked in the above-styled cause, to wit those dated April 4, 1972, (reconsideration denied November 22, 1972, and December 27, 1974) in No. 35415, and dated April 4, 1972 (reconsideration denied November 22, 1972 and December 27, 1972) in No. 35439, respectively, be and they hereby are set aside and for nought holden; and that said matters be and they hereby are remanded to said Commission for further consideration in accordance with applicable law.
Dumbauld / UNITED STATES DISTRICT JUDGE