Southern Railway Co. v. United States (166 F. Supp. 78, 1958)

J. SKELLY WRIGHT, District Judge.

In this action, the Southern Railway System lines, hereafter called “Southern,” seek to have set aside the report and order of the Interstate Commerce Commission in Docket No. I. & S. 6588, Cotton From the Southwest to Southern Territory, 302 I.C.C. 637. That order directed Southern to cancel the restrictive routing provisions which Southern had included in the tariff schedules establishing reduced joint rates on cotton moving from the southwest, across the Mississippi, to points in Southern Territory. These reduced rates had been agreed upon by the southwestern and southern rail carriers in order to meet motor truck competition. Southern, acting unilaterally, proposed to restrict the application of the lower rates to a limited number of the existing routes east of the Mississippi, chiefly to those routes which gave Southern its maximum haul. This action was protested by one cotton shipper and by a number of southern railroads whose participation in the cotton traffic would have been reduced if the restrictive routing became effective. The Commission allowed the reduced joint rates to go into effect on July 6, 1956, but suspended, and later can-celled, Southern’s routing restrictions. The only issue in the present suit is whether the Commission’s order of cancellation was, as Southern insists, “contrary to law, illegal and arbitrary.”

A very large part of the cotton transported in the United States is grown in the southwest and moves across the Mississippi through five gateways, St. Louis, Memphis, Vicksburg, Natchez and New Orleans, to manufacturers in the southeast. From the farm the cotton goes to a compressor where it is sold to a cotton shipper. The shipper sends cotton from various origins to a warehousing point where it is graded, usually into 100-bale lots of even grade and staple. Thereafter it is shipped to southern mills according to market demand. Title passes to the manufacturer by negotiation of the bill of lading while the cotton is in transit. A majority of the manufacturers are located at destinations in Alabama, Georgia, South Carolina and North Carolina. The shippers’ warehouses are found at numerous intermediate points throughout southern territory.

This cotton traffic is handled by an elaborate complex of connecting and competing railroads. Usually, several carriers participate in the long haul from farm to factory, and a given destination can generally be reached by a number of routes consisting of different combinations of competing lines. Instead of charging the shipper a “combination rate” representing the sum of the local rates of each railroad participating in a given route, the carriers have established lower “joint rates” for most of the routes over which cotton moves east. For over 25 years the railroads have followed an “open routing” policy, giving the shipper a wide variety of routes over which cotton can be carried at the joint rates. The difference between the combination rate and the joint rate is great enough to make it uneconomic for the shipper to use a route to which no joint rate applies.

Over half the cotton manufacturers in southern territory are located at stations served only by the Southern Railway System lines. The principal feature of Southern’s routing proposals was that the joint rates to these destinations, local to Southern, would apply only to that route which included the maximum amount of Southern track east of the Mississippi gateways. The practical effect of the proposals would have been to close all the other existing routes to stations served only by Southern. The loss of traffic to the protestant rail carriers which participate in these other routes, and the gain to Southern, was estimated by the parties at between 1,500 and 2,000 carloads per year.

The only guiding principle underlying this wholesale elimination of intermediate carriers appears to be Southern’s intent to secure its longest possible haul to destinations which it controls. Southern attempts to justify this restrictive routing by saying that the routes over these intermediate carriers involve “unnecessary and wasteful transportation.” However, where another railroad serves the destination mills, either alone or in conjunction with Southern, Southern will bridge any portion of the traffic it can get, regardless of the length of the haul. Apparently, under those circumstances, the interpolation of Southern as the intermediate carrier involves neither unnecessary nor wasteful transportation, or so it seems to Southern.

When Southern published its restrictive routing proposals without the consent of the other carriers affected, the Commission suspended the new tariff schedules and set the matter for hearing. Under these circumstances, the Interstate Commerce Act, 49 U.S.C.A. § 15 (7), imposes on Southern the burden of showing that its proposals are “just and reasonable,” and 49 U.S.C.A. § 15(3) requires Southern to prove that the cancellation of joint rates over existing routes is “consistent with the public interest.” “The term public interest ‘as used in the statute, is not a mere general reference to public welfare, but, as shown by the context and purposes of the act, “has direct relation to adequacy of transportation service, to its essential conditions of economy and efficiency, and to appropriate provision and best use of transportation facilities.” ’ ” United States v. Lowden, 308 U.S. 225, 230, 60 S.Ct. 248, 251, 84 L.Ed. 208; State of Texas v. United States, 292 U.S. 522, 531, 54 S.Ct. 819, 78 L.Ed. 1402; New York Central Securities Co. v. United States, 287 U.S. 12, 25, 53 S.Ct. 45, 77 L.Ed. 138. Stated more specifically, Southern had the burden of showing that the interests, not only of Southern, but of the transportation service in general and the shipping public in particular would best be served by closing over seventy-one of the routes presently available for cotton traffic.

Southern did not attempt to show that each and every route to be closed was less efficient than a retained route over the Southern system. It offered evidence that some of the Southern routes were shorter and had fewer interchanges than the competing routes, and supplemented this with a parade of statistics showing the large sums spent by Southern in recent years on new yards and equipment to improve the efficiency of the system as a whole. The protestant carriers’ evidence demonstrated that some of the routes to be closed were shorter than the retained Southern routes and involved no more interchanges, and that the competing carriers had also expended large sums on improvements.

The Commission held, not that consideration of the public interest required that all of the existing routes be maintained, but that Southern had failed to sustain the burden of showing that each of its routes was more advantageous to the public than the routes to be closed. It stated that Southern could not, “by one sweep of a tariff schedule” and “without serious regard for the needs of the shipping public” close “numerous routes which had long been available for general use.” Since Southern made no effort to justify the closing of each route separately, or to divide its proposed tariff into groups of routes which could be considered separately, the entire schedule was cancelled. The Commission’s findings and conclusions are summarized in the final paragraphs of its report.

The function of this Court here is limited to determining whether, considering the record as a whole, the findings of the Commission are supported by substantial evidence, Universal Camera Corp. v. National Labor Relations Board, 340 U.S. 474, 71 S.Ct. 456, 95 L.Ed. 456, and whether the Commission’s conclusions from those findings have a rational basis. Mississippi Valley Barge Line Co. v. United States, 292 U.S. 282, 54 S.Ct. 692, 78 L.Ed. 1260; New York Central R. Co. v. United States, D. C., 99 F.Supp. 394. There is no contention that the Commission failed to make subordinate findings of fact to support its ultimate findings. The suggestion simply is that the findings as made by the Commission are not supported by the record.

As to the relative efficiency of the particular routes in question, the Commission found that the routes to be closed were not shown to compare unfavorably with the routes to be retained and remarked that Southern had made no senous effort to prove its assertion that the closed routes involved wasteful transportation. The uncontradicted evidence of the protestant carriers demonstrated that many of the routes to be closed were shorter and that some of these involved no greater number of interchanges than the Southern routes. Southern stated in its brief that distance was no real criterion of efficiency, but no evidence of other factors was offered with reference to any particular route. The system-wide statistics which were intended to demonstrate the general efficiency of operations on the Southern were not related to the individual routes. To compare specific routes, Southern offered only one exhibit which listed the distances over various lines from Memphis and New Orleans to five destinations in Virginia, North Carolina, South Carolina, Georgia and Florida. Inasmuch as none of these destinations was a station local to Southern, the Commission was justified in finding that these few routes were not representative,

Moreover, it may be observed that there was no indication in Southern’s exhibit as to which of these routes were actually in use and no comparative analysis of the delays involved in interchanges and other stops over the various routes. In an attempt to fill this gap in the evidence Southern offered, for the first time, in its brief to this Court, averages of the distances over closed and retained routes based on two of the exhibits filed by the protestant carriers. ^Ith°ugh these averages are favorable to ?°uthern on the question of distance, the^ are at suggestive, rather than PfbatlVe’ °f tbe comparative efficiency of ^ Particular route. The Commis-S10n s bndlag that+ S°utbem, failed to pr°T that tbe rout4efe; be cl°s,ed were lneib