Southern Railway Company v. North Carolina/Dissent Goldberg

by Arthur Goldberg

United States Supreme Court

376 U.S. 93

Southern Railway Company  v.  North Carolina

 Argued: Jan. 14 and 15, 1964. --- Decided: Feb 17, 1964

Mr. Justice GOLDBERG, with whom THE CHIEF JUSTICE joins, dissenting.

This case involves more than the fate of the 6:10 between Greensboro and Goldsboro, North Carolina. It is the first litigation to reach this Court concerning the criteria to be applied by the Interstate Commerce Commission in proceedings seeking discontinuance of intrastate passenger trains under § 13a(2) of the Interstate Commerce Act, 72 Stat. 571, 49 U.S.C. § 13a(2). This section provides that where a State has failed or refused to allow discontinuance of an intrastate passenger train, the ICC may authorize the intrastate discontinuance if it finds 'that (a) the present or future public convenience and necessity permit of such discontinuance * * * and (b) the continued operation * * * will constitute an unjust and undue burden upon the interstate operations of such carrier * * * or upon interstate commerce.' The Court sustains the ICC in interpreting this provision to mean that, in determining whether an unprofitable intrastate passenger train shall be discontinued, the Commission need give: (1) 'little or no weight' to the overall prosperity of the carrier, ante, at 96, and (2) no consideration whatsoever to the profitability of 'the intrastate operations of the carrier as a whole, or any particular segment thereof,' ante, at 104. ^[1] In my view the standards employed by the Commission were not the proper ones. Consequently, without intimating any opinion as to the merits of the discontinuance application, I would remand the case to the Commission for further consideration and appropriate findings. See, e.g., Interstate Commerce Comm. v. J-T Transport Co., Inc., 368 U.S. 81, 93, 82 S.Ct. 204, 7 L.Ed.2d 147.

Since '(p)assenger deficits have become chronic in the railroad industry,' Chicago, M., St. P. & P.R. Co. v. Illinois, 355 U.S. 300, 307, 78 S.Ct. 304, 309, 2 L.Ed.2d 292, the Court's decision will allow the Commission to authorize the Nation's railroads to discontinue virtually all intrastate passenger service-including most commuter services. It is difficult to conceive of a situation in this era of widespread bus, airline and automobile transportation in which the Commission cannot find that alternative services are more or less available to handle the diminished railroad passenger traffic. Such a finding coupled with a 'net loss' on the passenger trains will meet the discontinuance standard approved by the Court. The Court concludes that this result has been mandated by Congress. If this were so, there would be no basis for dissent, since I agree entirely with the Court that '(w)hatever room there may be for differing views as to the wisdom of the policy * * *, it is the duty of the Commission (and the Court) to effectuate the statutory scheme.' Ante, at 105. I do not believe, however, that it can be fairly concluded from the statute or from its legislative history that Congress intended, despite the ruling of a state authority, that intrastate passenger trains could be discontinued on the basis of the slender showing required by the ICC and approved by this Court.

The case turns upon the language and purpose of § 13a(2) of the Interstate Commerce Act. This section was first enacted as part of the Transportation Act of 1958. It is true, as the Court points out, that this legislation reflects concern with 'the worsening railroad situation.' Ante, at 101, n. 6. But it is far from accurate to conclude that Congress was oblivious of the needs of the passenger public and of the primary responsibility of state commissions for the regulation of purely intrastate service. Under § 13a(2) a railroad seeking to discontinue an intrastate passenger train, as distinguished from an interstate operation, must first apply to the appropriate state commission. Only after the state commission has been given the opportunity and has failed or refused to act is the ICC authorized to intervene. The Commission may reverse the decision of the state agency only upon findings, supported by substantial evidence, that the service is not required by public convenience and necessity and that its continuance will constitute 'an unjust and undue burden * * * upon interstate commerce.' Senator Smathers, one of the bill's sponsors, explained that § 13a(2):

'protected the right of the States, * * * by leaving to the State regulatory agencies the right to regulate and have a final decision with respect to the discontinuance of train service which originated and ended within one particular State, except when it could be established that intrastate service was a burden on interstate commerce.' 104 Cong.Rec. 15528.

In this case the State of North Carolina points out that etween 1951 and 1956, of 44 requests for discontinuance of intrastate passenger trains, some emanating from appellant Southern Railway, 42 were approved by the State. Indeed, on the line between Greensboro and Goldsboro, Southern operated three pairs of passenger trains until September 1954. The State, on Southern's application, authorized discontinuance of one pair of trains in 1954 and another pair in 1958. The two trains in question, No. 13 and No. 16, are the last remaining pair of east-west passenger trains between the two communities. They are the only interconnecting service at Greensboro for passengers from Goldsboro and intermediate points with north-south trains on Southern's main line. For such passengers, they furnish a convenient overnight pullman service to Washington, New York and other east coast cities and conserve working time for the traveler having business at the north or south terminal cities. Trains 13 and 16 run on tracks leased by Southern from the state-owned North Carolina Railroad Company. The lease clearly contemplates both passenger and freight service. Furthermore, as the Court recites in its opinion, while during the relevant year Southern sustained a loss on its passenger service on the line of approximately $90,000, it made a profit of over $600,000 on freight on the same leased line and an overall profit on its entire system in excess of $36,000,000. While passenger traffic on this line has declined in recent years, the traffic is still substantial-14,776 passengers used the two trains in 1960, an increase of more than 500 over the previous year-and the area served has been growing in population and industrial importance. On these facts, the state agency denied Southern's request to discontinue the two trains. In overruling the decision of the State, the ICC, as already stated, gave 'little or no weight' to Southern's overall prosperity and no consideration whatsoever to its freight profits on the line. In my view, the Commission wrongfully ignored these factors and the Court errs in approving this action of the Commission.

I read the Act and its history to require the Commission to take into account all material factors established by evidence presented by the parties and bearing on the issues of public need and burden on interstate commerce. The three-judge District Court properly observed that these issues are 'not susceptible of scientific measurement or exact formulae but the questions of degree and involve the balancing of conflicting interests.' 210 F.Supp. 675, 684. I cannot comprehend how the Commission can achieve a proper balance without fully considering the railroad's relevant profit data. The issues-whether the public need will allow discontinuance of the passenger service and whether continued operation will unduly burden interstate commerce-are interrelated. Under any common-sense view of the statute, the amount of the railroad's financial loss on the two intrastate passenger trains cannot be considered in isolation from its freight profits on that line, its intrastate profits, or its overall prosperity. The words 'unjust' and 'undue' clearly indicate that Congress intended that the mere fact that a particular passenger train is operating at a loss i.e., is a burden-would not in itself justify discontinuance of that train. The burden must be 'unjust' and 'undue,' and whether this is so cannot be determined except in light of the total circumstances. The final determination must be made by balancing all the relevant factors-'the effort being to decide what fairness to all concerned demands.' Colorado v. United States, 271 U.S. 153, 169, 46 S.Ct. 452, 456, 70 L.Ed. 878. As the decisions of this Court plainly indicate, this does not mean that discontinuance is prohibited unless intrastate passenger and freight service considered together show a net loss or overall profits are substantially impaired. Colorado v. United States, supra; Transit Comm. of the State of New York v. United States, 284 U.S. 360 52 S.Ct. 157, 76 L.Ed. 342. Rather, freight profits and overall profits are merely factors to be considered by the Commission in determining whether the particular passenger loss constitutes an unjust and undue burden on interstate commerce when balanced against the public need. ^[2] Such profits may not be the controlling factors but, when presented, they are to be considered.

The Court dealt with an aspect of the intrastate passenger problem in Chicago, M., St. P. & P.R. Co. v. Illinois, 355 U.S. 300, 78 S.Ct. 304, 2 L.Ed.2d 292, and Public Service Comm. of Utah v. United States, 356 U.S. 421, 78 S.Ct. 796, 2 L.Ed.2d 886. These cases involved the construction of § 13(4) of the Interstate Commerce Act which authorizes the Commission to change intrastate rates whenever such rates discriminatorily burden interstate commerce. In the Chicago case the Court said:

'(W)e do not think that the deficit from this single commuter operation can fairly be adjudged to work an undue discrimination against the Milwaukee Road's interstate operations without findings which take the deficit into account in the light of the carrier's other intrastate revenues from Illinois traffic, freight and passenger. The basic objective of § 13(4), applied in the light of § 15a(2) to this case, is to prevent a discrimination against the carrier's interstate traffic which would result from saddling that traffic with an undue burden of providing intrastate services. A fair picture of the intrastate operation, and whether the intrastate traffic unduly discriminates against interstate traffic, is not shown, in this case, by limiting consideration to the particular commuter service in disregard of the revenue contributed by the other intrastate services.' 355 U.S., at 307-308, 78 S.Ct. at 309, 2 L.Ed.2d 292.

The major premise of the opinion of the Court today, however, is that Congress expressly overruled the Chicago and Public Service Commission cases by amending § 13(4) in the Transportation Act of 1958. It is, of course, true that § 13(4) was amended after these decisions to allow the ICC to determine that intrastate railway rates discriminated against interstate commerce '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.' 72 Stat. 570, 49 U.S.C. § 13(4). I cannot agree, however, with the Court's view that Congress by so amending § 13(4), which deals solely with rate cases, intended that there be read into § 13a(2), which deals solely with disco tinuances, language which was not similarly incorporated. Section 13a(2) was initially enacted at the same time that § 13(4) was amended. If Congress had intended that the ICC need not consider all relevant factors in discontinuance cases, the proposed § 13a(2) could easily have been altered to include the language that was added to § 13(4) by amendment.

In any event, even if the differing language is to be understood as importing the same standards, it seems to me that the Court reads the amendment to § 13(4) too broadly. The legislative history shows that Congress intended the amendment to allow the ICC to make a decision under § 13(4) without considering the totality of the carrier's operations when the parties have not presented these facts to the Commission. When these data are presented, however, and put in issue the amended section would not permit the Commission to ignore the evidence. The amendment provides that the Commission may make its determination without a separation of revenues. The permissive 'may,' read in light of the legislative history, reflects the intent of Congress 'that a decision of the Commission will not be upset simply because it fails to find specifically these facts where they have not been put in issue by the evidence before the Commission, but this does not mean that such facts where relevant and pertinent are not to be considered.' 210 F.Supp. 675, 682. This interpretation of the amendment is supported by this Court's affirmance of the decision of the threejudge District Court in Utah Citizens Rate Ass'n. v. United States, 192 F.Supp. 12, aff'd per curiam, 365 U.S. 649, 81 S.Ct. 834, 5 L.Ed.2d 857. The District Court there said:

'We believe that a matter of procedure rather than any substantive change in the basic transportation policy of the Congress is involved. If this were not so, serious conceptual and constitutional, and further practical difficulties, would be invited. But there seems no reason why Congress cannot provide or clarify a procedural factor to render more practical the formula it has theretofore established, and which was, under existing law appropriately considered by the majority in (Public Service Comm. of Utah v. United States, 356 U.S. 421, 78 S.Ct. 796, 2 L.Ed.2d 886). In our opinion the amendment in this area does no more than to obviate the previously determined necessity of affirmative findings or evidence showing that the intrastate passenger deficit is not lower than the interstate or concerning the profitableness of, or circumstances surrounding, segments of intrastate operations with which the Commission was not immediately concerned. The legislative history of the amendment bolsters this view. There is nothing therein inconsistent with the further recognition that to rebut the prima facie presumption resulting from the amendment those who claim intrastate traffic as a whole is not discriminating against interstate commerce may show as an affirmative matter favorable aspects of intrastate operations. The dissenting opinion to this effect referred to the then pending bill couched in the same language as that later adopted in the Transportation Act of 1958, and the Committee, considering the pending legislation, cited the dissenting opinion with apparent approval.' ^[3] 192 F.Supp., at 18-20.

The dissenting opinion referred to by the court had said:

'Of course, those who contend that intrastate traffic as a whole is not discriminating against interstate traffic may come forward and show, as they may in respect to any claimed dissimilarity of conditions surrounding interstate and intrastate traffic, some favorable aspect of intrastate operations that the Commission should take into account. In the absence of such a showing, however, the Commission should be able to assume that discrimination shown to exist as to the particular segments of intrastate and interstate traffic with which the § 13(4) proceedin is concerned is not offset by other conditions that this Court speculates may affect wholly different segments of intrastate commerce.' Public Service Comm. of Utah v. United States, supra, 356 U.S. at 462-463, 78 S.Ct. at 818, 2 L.Ed.2d 886.

It necessarily follows that if § 13(4), with its amendatory language, does not permit the Commission to ignore evidence of all relevant facts actually offered by the parties in a rate case, such evidence cannot be disregarded in a discontinuance proceeding under § 13a(2) which lacks even the amending language.

Finally, the legislative history of § 13a(2) plainly demonstrates that the Court has mistaken the intent of Congress. The bill initially considered by the Senate provided that discontinuance would be denied and the continuance approved if the Commission found that:

'the operation or service of such train * * * is required by public convenience and necessity and that such operation or service will not result in a net loss therefrom to the carrier or carriers and will not otherwise unduly burden interstate or foreign commerce * * *.' S. 3778, 85th Cong., 2d Sess. (Emphasis added.)

As the Court notes in its opinion, Senator Javits opposed this 'net loss' standard. Ante, at 102. The Court, however, misses the import of Senator Javits' view, which, since it ultimately prevailed, is highly significant. The Senator objected on the ground that the net loss criterion would authorize the discontinuance of any intrastate commuter train which, considered by itself, showed a net loss. He noted that under the proposal, whenever a net loss was shown, discontinuance could follow regardless of whether that loss unduly burdened interstate commerce. The Senator analyzed the proposed bill in a manner most relevant to the present case:

'It is my view, as the bill is now written, that question of law (as to the meaning of 'net loss therefrom') will be decided in terms of a net loss on the particular section of a railroad which is sought to be discontinued, rather than the net loss on the total operations of the carrier of which that section of the road is a part.' 104 Cong.Rec. 10847.

Senator Javits concluded that the bill should be amended to insure that the ICC be given a 'balanced authority to deal with the situation, both in respect to losses and in respect to the public in the wasy of convenience and necessity.' Id., at 10848. (Emphasis added.) Senator Smathers, a sponsor of the proposed bill, did not deny the accuracy of Senator Javits' interpretation. Indeed, Senator Smathers responded: 'We construe the words 'net loss' to mean the loss from the particular operation the railroad is rendering.' Id., at 10849. Although Senator Javits was initially unsuccessful in his efforts to defeat the passage of the net loss provision, his arguments prevailed, as the Court notes, both in the House and in the final bill.

On the floor of the House, Representative Harris, Chairman of the House Interstate and Foreign Commerce Committee, offered an amendment deleting the net loss clause. It was argued that the bill would:

'without this amendment, put the public entirely at the mercy of the railroad by establishing a new standard for the discontinuance of train service by a mere showing of a loss in the operation of any train. * * * We cannot go so far afield as to say that unless every single item of service shows a profit the railroad can discontinue any service regardless of public convenience and necessity.' Id., at 12547-12548.

The deleting amendment prevailed in the House, and at Conference the 'net loss' provision of the Senate bill was abandoned in favor of the House proposal. Congress, therefore, in acting on the recommendations of Senator Javits and Congressman Harris specifically rejected the proposed net loss standard. The Court today, however, appears to adopt in substantial measure the rejected standard. ^[4] If, as the Court holds, the Commission need give 'little or no weight' to the overall prosperity of the carrier and no consideration whatever to the profitability of its total intrastate operations, it would seem that the governing criterion in determining whether interstate commerce is unduly burdened is the 'net loss' on a particular passenger train. ^[5] This certainly does not allow the ICC 'a balanced authority to deal with the situation, both in respect to losses and in respect to the public in the way of convenience and necessity.'

The result intended by Congress certainly cannot be achieved by allowing the Commission to make a final ruling on a discontinuance application without considering the question of undue or unjust burden. ^[6] A 'balanced authority' for the ICC surely means that before overriding state action and authorizing the discontinuance of a wholly intrastate passenger train, the Commission must consider all substantial evidence presented by the parties and bearing upon whether the discontinuance is consistent with public necessity and whether the continued operation will constitute an unjust and undue burden upon interstate commerce. In making this determination the factors for the Commission to consider necessarily include the character and population of the territory served; the passenger traffic or lack of it; the alternative transportation facilities; the losses on the passenger operatio as compared with the revenue from freight on the particular line and the revenue from intrastate business as well as the profitability of the railroad as a whole. ^[7]

The requirement that the Commission consider such factors certainly does not mean that it is precluded from authorizing the abandonment of an uneconomic passenger train because the remainder of the railroad's intrastate or overall operations are profitable. ^[8] It means only that in making its determination the Commission shall give appropriate consideration to all relevant factors. One factor or a combination may prove controlling but all must be considered in making the statutory determination. This the Commission refused to do and, therefore, its isolated finding that public convenience and necessity would permit a discontinuance was insufficient, absent an appropriate consideration of the burden on commerce, to sustain its conclusion.

Although I agree, for the reasons stated, with the three-judge District Court in its interpretation of § 13a(2), I am nevertheless of the view that that court misconstrued its reviewing role in finding that the operation of the two trains between Greensboro and Goldsboro served the public need and constituted no burden on interstate commerce. The court should not have determined this issue on the record before it but should have remanded the case for further proceedings by the Commission under the correct legal standard. See, e.g., Interstate Commerce Comm. v. J-T Transport Co., Inc., 368 U.S. 81, 93, 82 S.Ct. 204, 7 L.Ed.2d 147.

Notes

1. See the statement of the hearing examiner set forth in note 4, infra.
2. See Colorado v. United States, 271 U.S. 153, 168-169, 46 S.Ct. 452, 456, 70 L.Ed. 878 (Brandeis, J.): 'In many cases, it is clear that the extent of the whole traffic, the degree of dependence of the communities directly affected upon the particular means of transportation, and other attendant conditions, are such that the carrier may not justly be required to continue to bear the financial loss necessarily entailed by operation. In some cases, although the volume of the whole traffic is small, the question is whether abandonment may justly be permitted, in view of the fact that it would subject the communities directly affected to serious injury while continued operation would impose a relatively light burden upon a prosperous carrier. The problem and the process are substantially the same in these cases as where the conflict is between the needs of intrastate and of interstate commerce. Whatever the precise nature of these conflicting needs, the determination is made upon a balancing of the respective interests-the effort being to decide what fairness to all concerned demands. In that balancing, the fact of demonstrated prejudice to interstate commerce and the absence of earnings adequate to afford reasonable compensation are, of course, relevant and may often be controlling. But the Act does not make issuance of the certificate dependent upon a specific finding to that effect.'
3. See the Conference Report, H.R.Rep. No. 2274, 85th Cong., 2d Sess.
4. The report of the hearing examiner, which was accepted by the Commission and is now approved by the Court, made it clear that a net loss standard was utilized:
5. This does not imply that either the Commission or the Court has failed to acknowledge that a carrier must show that public convenience and necessity will permit the requested discontinuance. However, as I have indicated, supra, at 107, unless the Commission relates this finding as to public convenience to an appropriate consideration of the burden issue, the availability of alternative means of transportation coupled with the fact of losses on diminished passenger traffic will suffice to sanction discontinuances in virtually all cases.
6. Colorado v. United States, 271 U.S. 153, 168, 46 S.Ct. 452, 456, 70 L.Ed.2d 878, 'The benefit * * * of the abandonment must be weighed against the inconvenience * * *. Conversely, the benefits to particular communities and commerce of continued operation must be weighed against the burden thereby imposed upon other commerce.'
7. The conclusion that § 13a(2) contemplates the weighing of such factors is reinforced by the use of the same balancing approach under §§ 1(18), 1(20), of the Interstate Commerce Act, 41 Stat. 477, 478, as amended, 49 U.S.C. §§ 1(18), 1(20). These provisions, enacted in 1920, empower the ICC to permit abandonment of lines (as distinguished from particular trains), where continued operation of the entire intrastate line would burden interstate commerce. See Colorado v. United States, supra; Transit Comm. of the State of New York v. United States, 284 U.S. 360, 52 S.Ct. 157, 76 L.Ed. 342.
8. The ICC has never been precluded from authorizing abandonment of an uneconomic branch line (as distinguished from the particular trains) merely because the remainder of the railroad's intrastate operations were profitable. See note 7, supra.