Southern Railway Company v. North Carolina/Opinion of the Court

by Potter Stewart

United States Supreme Court

376 U.S. 93

Southern Railway Company  v.  North Carolina

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

In 1959 the appellant Southern Railway Company filed a petition with the North Carolina Utilities Commission for an order permitting it to discontinue operation of two intrastate passenger trains between Greensboro and Goldsboro, North Carolina, a distance of about 130 miles. The trains in question are No. 16, which operates eastbound in the morning from Greensboro to Goldsboro, and No. 13, consisting of the same equipment, which operates westbound in the late afternoon. Since 1958 these two trains have provided the last remaining railway passenger service between the two communities. The State Commission denied the petition, and its decision was upheld by the North Carolina Supreme Court. State of North Carolina ex rel. Utilities Commission v. Southern Railway Co., 254 N.C. 73, 118 S.E.2d 21 (1961).

Thereafter the railway company filed a petition with the Interstate Commerce Commission pursuant to § 13a(2) of the Interstate Commerce Act, ^[1] seeking auth rity to discontinue operation of the trains. After a hearing at which several protestants, including the State of North Carolina, appeared, the examiner recommended that the petition be granted. Division 3 of the Commission agreed with the examiner and ordered discontinuance of the trains. The Division issued a report in which it found, inter alia, that the trains, which in 1948 had carried 56,739 passengers, carried only 14,776 passengers in 1960, the last full year for which figures were available; that the direct expenses of operating the trains during the latter year were over three times their total revenue; that discontinuance of the trains would result in savings of at least $90,589 per year; that the need shown for these trains was relatively insubstantial when viewed in light of the density of the population of the area served; that existing alternate transportation service by rail, bus, airline, and other means was reasonably adequate; and that the discontinuance of the passenger train service would not seriously affect the industrial growth of the area. Against the background of these findings, the examiner and Commission considered, but gave 'little or no weight' to the overall prosperity of the carrier. The Commission's basic conclusions were summed up as follows:

'that the public will not be materially inconvenienced by the discontinuance of the service here involved; that the savings to be realized by the carrier outweigh the inconvenience to which the public may be subjected by such discontinuance; that such savings will enable the carrier more efficiently to provide transportation service to the public which remains in substantial demand; and that the continued operation of trains Nos. 13 and 16 would constitute a wasteful service and would impose an undue burden on interstate commerce.' 317 I.C.C. 255, 260.

After a petition for reconsideration by the entire Commission had been denied, the protestants instituted an action in a three-judge District Court seeking to set aside the order of the Commission. The court held, first, that it was erroneous as a matter of law for the Commission to order discontinuance of passenger trains under the provisions of § 13a(2) without first determining whether, once the profits from freight operations on the same line were taken into account, 'the particular segment of the railway involved is contributing its fair share to the overall company operations * * *.' 210 F.Supp. 675, 688. The court also proceeded to find, inter alia, that 'Taking into account total operation of this line, there is a profit not a loss, a benefit, not a burden,' 210 F.Supp., at 688; that passenger traffic had slightly increased during the first five months of 1961; that the carrier had done little to promote the use of the passenger trains; that continued existence of the alternative of railway passenger service might be considered a necessity under such circumstances as airline strikes or bad weather; and that, in light of the overall prosperity of the Southern Railway Company, '(t)he effect of the losses of the Greensboro-Goldsboro passenger service on the financial structure of the railroad is inconsequential.' ^[2] 210 F.Supp., at 688. On this basis, although it explicitly refused to set aside any of the subsidiary findings of fact on which the Commission's order was based, 210 F.Supp., at 689, 690, the court held that 'the ultimate conclusions of the Interstate Commerce Commission that the service in question constitutes an undue burden on interstate commerce and that the present or future public convenience and necessity permits such discontinuance * * * are arbitrary and capricious because * * * not supported by substantial evidence,' 210 F.Supp., at 689. The court itself then concluded that discontinuance was not warranted. It therefore set aside the Commission's order, and perpetually enjoined the carrier from discontinuing the Greensboro-Goldsboro passenger trains. The United States, the Interstate Commerce Commission, and the carrier all appealed. We noted probable jurisdiction and consolidated the cases for argument. 373 U.S. 907, 83 S.Ct. 1296, 10 L.Ed.2d 410.

The District Court's action in setting aside the Commission's conclusions as to public convenience and necessity and undue burden on interstate commerce was explicitly based upon the court's view that the Commission had applied erroneous legal standards in reaching those conclusions. The court did not question that the Commission's subsidiary findings of fact were supported by a substantial evidentiary foundation. It simply disagreed with the Commission as to the kind of evidence required to support an order permitting discontinuance of an intrastate passenger train under § 13a(2).

The court reached its conclusion that the Commission had erred in not taking into account profits from freight operations along the Greensboro-Goldsboro line primarily in reliance upon this Court's decisions in Public Service Comm. of Utah v. United States, 356 U.S. 421, 78 S.Ct. 796, 2 L.Ed.2d 886, and Chicago, Milwaukee, St. P. & P.R. Co. v. Illinois, 355 U.S. 300, 78 S.Ct. 304, 2 L.Ed.2d 292. Both those cases dealt with § 13(4), which requires the Commission to change intrastate rates wherever such rates are found to discriminate against interstate commerce. This Court held in those cases that the Commission could not authorize higher intrastate rates either for passe ger or freight operations without first taking into account the revenues derived by the carrier from the totality of intrastate operations. In 1958, the year in which § 13a(2) was enacted, § 13(4) was amended to permit the Commission to act '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.' ^[3] The District Court's holding that the same kind of data should be considered in § 13a(2) proceedings was premised upon the fact that no language similar to that of the 13(4) amendment was included in § 13a(2), and that proceedings under the latter provision, which permits discontinuance of given operations, have a far more serious impact upon intrastate passengers than proceedings under the former, which provides only for an increase in the rates to be charged.

But when § 13(4) was amended in 1958 as a result of the two decisions relied on by the District Court, Congress was simply reaffirming what it conceived as the original intent of the section. ^[4] There is therefore no reason to assume that Congress regarded the new language as embodying a standard which had to be specifically incorporated into every statutory provision to which it was intended to apply.

The legislative history clearly indicates that Congress in enacting § 13a(2) was addressing itself to a problem quite distinct from that reflected by overall unprofitable operation of an entire segment of railroad line. The Commission already had authority prior to 1958, under §§ 1(18)-(20), ^[5] to authorize discontinuance of all services on any given intrastate line where continuance of such services would impose an undue burden on interstate commerce. Colorado v. United States, 271 U.S. 153, 46 S.Ct. 452, 70 L.Ed. 878. However, the Commission totally lacked power to discontinue particular trains or services while leaving the remaining services in operation. It was precisely this gap which § 13a(2) was intended to fill. New Jersey v. New York, S. & W.R. Co., 372 U.S. 1, 5-6, 83 S.Ct. 614, 616, 9 L.Ed.2d 541. As both the House and Senate Committee Reports on the legislation which became § 13a(2) make clear, Congress was primarily concerned with the problems posed by passenger services for which significant public demand no longer existed and which were consistently deficit-producing, thus forcing the carriers to subsidize their operation out of freight profits. ^[6] Far from permitting the carrier's need for discontinuanc of passenger services to be balanced against profits from other operations conducted along the same line, the bill as originally reported by the Senate Committee would have required the Commission to permit discontinuance, even if there was great public need for the service, so long as the continued operation of a particular service would result in a net loss to the carrier. ^[7] Senator Javits unsuccessfully attempted to amend the bill on the floor of the Senate to delete the net loss standard and to substitute a requirement that the Commission balance the public need for the service against the deficit resulting from it. ^[8] Such an amendment, proposed by Chairman Harris of the House Interstate and Foreign Commerce Committee, was adopted by the House, ^[9] and accepted by the Senate in conference. The deletion of the net loss standard, however, by no means implied that freight profits along a given line could be offset against deficits incurred by passenger services for purposes of determining whether the latter constituted an undue burden on interstate operations or commerce. As Congressman Harris made clear after his amendment had been accepted, the situation 'we are trying to get at' is that in which 'the (freight) shippers of this country are making up a deficit every year * * * in losses in passenger service.' ^[10]

The bill as originally reported by the Senate Committee would have applied the net loss standard to both interstate and intrastate operations, the Committee Report having concluded that state regulatory bodies required 'the maintenance of uneconomic and unnecessary services and facilities.' ^[11] The bill was amended on the Senate floor to limit the Commission's discontinuance authority to interstate trains, ^[12] and the House version of the bill was similarly limited. ^[13] In conference, however, the Commission's authority over intrastate trains was restored and, except for differences in the procedures prerequisite to a hearing in the case of a wholly intrastate train, ^[14] the Commission was required to apply the same standard to interstate and intrastate operations in determining whether discontinuance of a train or service is justified. ^[15] Contrary to the suggestion of the District Court that its interpretation of § 13a(2) must be accepted to avoid 'requir(ing) the intrastate operations to bear more than their share,' 210 F.Supp., at 680, the statutory scheme which Congress has embodied in § 13a thus prescribes precisely the same substantive standard to govern discontinuance of either interstate or intrastate operations. ^[16]

All that need properly be considered under this standard, as both the language and history of § 13a(2) thus make abundantly clear, is what effect the discontinuance of the specific train or service in question will have upon the public convenience and necessity and upon interstate operations or commerce. As the Commission has correctly summed up the matter in another case:

'The burden (upon the carrier's interstate operations or upon interstate commerce, as expressed in section 13a(2)) * * * is to be measured by the injurious effect that the continued operation of the train proposed for discontinuance would have upon interstate commerce. As is indicated by its legislative history, the purpose of section 13a(2) is to permit the discontinuance of the operation of services that 'no longer pay their way and for which there is no longer sufficient public need to justify the heavy financial losses involved.' (S.Rep. 1647, 85th Cong.). Nowhere in section 13a(2) or elsewhere in the law is there any requirement that the prosperity of the intrastate operations of the carrier as a whole, or any particular segment thereof, must be given effect in determining whether the operation of an individual intrastate train imposes an unjust and undue burden on interstate commerce. To hold otherwise would be contrary to the apparent intent of the Congress.' Southern Pac. Co., Partial Discontinuance, 312 I.C.C. 631, 633-634 (1961).

This Court has long recognized that the Commission may properly give varying weights to the overall prosperity of the carrier in differing situations. Thus, in Colorado v. United States, 271 U.S. 153, 46 S.Ct. 452, 70 L.Ed. 878, which also involved a situation in which the Commission was required to balance public convenience and necessity against undue burdens on interstate commerce, it was specifically noted that '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 * * * 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.' 271 U.S., at 168-169, 46 S.Ct. at 456, 70 L.Ed. 878. In cases falling within the latter category, such as those involving vital commuter services in large metropolitan areas where the demands of public convenience and necessity are large, it is of course obvious that the Commission would err if it did not give great weight to the ability of the carrier to absorb even large deficits resulting from such services. But where, as here, the Commission's findings make clear that the demands of public convenience and necessity are slight and that the situation is, therefore, one falling within the first category delineated in Colorado, it is equally proper for the Commission, in determining the existence of the burden on interstate commerce, to give little weight to the factor of the carrier's overall prosperity.

Whatever room there may be for differing views as to the wisdom of the policy reflected in § 13a(2), it is the duty of the Commission to effectuate the statutory scheme. We cannot agree with the District Court that the Commission departed in any respect from that duty here. We therefore reverse the judgment of the District Court and remand with instructions to reinstate the report and order of the Commission.

Reversed.

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

Notes

1. Section 13a(2) of the Interstate Commerce Act, 49 U.S.C. § 13a(2), provides in pertinent part:
2. It should be noted, in connection with the findings made by the District Court, that the Commission had noted that the increase in passenger traffic during 1961 was largely due to group movements of school children; that, as to Southern's failure to seek passengers, 'prospective patrons who must be coaxed to use a service have no urgent need for it'; and that, after a broad study and investigation in 1959, the Commission had concluded that 'public convenience and necessity' does not require the maintenance of deficit passenger services as a standby service for travelers who customarily travel by highway or by air. Railroad Passenger Train Deficit, 306 I.C.C. 417, 482.
3. 49 U.S.C. § 13(4), as so amended, provides in pertinent part:
4. '(I)t is the possible interpretation of these recent court decisions that would create a change in the present regulatory scheme.' H.R.Rep. No. 2274, 85th Cong., 2d Sess., 12; U.S.Code Congressional and Administrative News, 1958, p. 3485.
5. 49 U.S.C. § 1(18) provides in pertinent part:
6. 'A major cause of the worsening railroad situation is the unsatisfactory passenger situation. Not only is the passenger end of the business not making money-it is losing a substantial portion of that produced by freight operations.
7. S. 3778, 85th Cong., 2d Sess., 6. See also the remarks of Senator Smathers, Chairman of the Surface Transportation Subcommittee, who made it clear that the net loss standard did not refer to all operations on a line or all operations within a State but rather to 'the loss from the particular operation the railroad is rendering.' 104 Cong.Rec. 10849.
8. See 104 Cong.Rec. 10846-10849. See also pp. 10838-10839.
9. 104 Cong.Rec. 12547-12548.
10. 104 Cong.Rec. 12551.
11. S.Rep. No. 1647, 85th Cong., 2d Sess., 22.
12. 104 Cong.Rec. 10862, 10864.
13. H.R. 12832, 85th Cong., 2d Sess., 10.
14. Under § 13a(2), which applies solely to intrastate trains, the Commission may not authorize discontinuance until after the appropriate state regulatory agency has been given an opportunity to act and has failed or refused to authorize discontinuance. See New Jersey v. New York, S. & W.R. Co., 372 U.S. 1, 4, 83 S.Ct. 614, 615, 9 L.Ed.2d 541.
15. See 49 U.S.C. § 13a(1), (2).
16. The fact that Congress intended the same substantive standards to be applied both to intrastate and interstate discontinuances wholly vitiates appellees' argument that the Commission is required to take into account, wherever presented, the profitability of intrastate operations as a whole or any segment thereof whenever an intrastate service is sought to be discontinued. Thus, consideration of the overall prosperity of the carrier is necessarily relevant to a determination of the degree to which a deficit resulting from a given service constitutes an undue burden on interstate commerce. But neither the profitability of such freight operations as are fortuitously conducted on the same line as a given passenger service nor the profitability of all operations within any given State bears any practical relationship either to the public's need for the service in question or to the burden which the deficit imposes on interstate commerce.