This controversy began in 1931, when respondent's
Through all these years the carrier and the Commission have been at odds over whether the railroad is entitled to an increase in the rates prescribed for its service for the period beginning April 1, 1931, and ending, as covered by the present suit, February 28, 1938. The case is now here on certiorari to the Court of Claims, 335 U.S. 883, which has rendered a judgment awarding respondent $186,707.06 as increased compensation due for the years 1931 to 1938, Griffin v. United States, 110 Ct. Cl. 330, contrary to the findings and orders of the Commission denying any increase beyond the amounts already paid for that service under the rates fixed by it. Railway Mail Pay, Georgia & Florida R. Co., 192 I.C.C. 779; id., 214 I.C.C. 66.
A statement of the background and course of the litigation will aid in understanding the rather complicated problems presented, both on the merits and affecting jurisdiction.
The Commission was authorized to prescribe "the method or methods by weight, or space, or both, or otherwise, for ascertaining such rate," 39 U.S.C. § 542, and for the same purpose "to make such classification of carriers as may be just and reasonable and, where just and equitable, fix general rates applicable to all carriers in the same classification." 39 U.S.C. § 549. Other sections specify and define four classes of service, namely, full railway post-office car service, apartment service, storage-car service and closed-pouch service. 39 U.S.C. §§ 525-530.
On December 23, 1919, after extended investigation and hearings, the Commission entered its first general mail rate order. Railway-Mail Pay, 56 I.C.C. 1. This
At that time it applied to the Commission for a reexamination of the rates as applied to itself. The application was heard and determined by Division 5. On May 10, 1933, the Commission denied any increase, holding the general rates established by the order of July 10, 1928, fair and reasonable as applied to this carrier. Railway Mail Pay, Georgia & Florida R. Co., 192 I.C.C. 779. This order is in substance, though not technically, the one now involved.
After the Commission had denied reconsideration, the railroad sued in the United States District Court for the Southern District of Georgia to set aside the Commission's order. A special three-judge court was convened, cf. The Urgent Deficiencies Act, former 28 U.S.C. §§ 41 (28), 47; held the order unlawful; and remanded the case to the Commission for further proceedings. This decree was filed on January 23, 1935.
Thereupon the full Commission conducted further hearings and in a report filed February 4, 1936, again found the rates previously fixed to be fair and reasonable in their application to the Georgia & Florida Railroad. The order therefore denied any increase. Railway Mail Pay, Georgia & Florida R. Co., 214 I.C.C. 66.
Again the carrier resorted to the District Court, filing a supplemental bill. And again that court, composed of the same three judges, held the Commission's order unlawful in a decree filed on February 23, 1937. The Government appealed directly to this Court, which, in United States v. Griffin, supra, held that the order was not of a type reviewable under the Urgent Deficiencies
After nearly four years the receivers renewed the litigation by filing this suit in the Court of Claims. The amended petition sets forth in some detail the history of the previous stages of controversy before the Commission and the courts. The carrier's basic claims on the merits are substantially the same as in those proceedings. They are, in effect, (1) that the Commission's orders denying any increase are confiscatory, in that the rates prescribed by the general rate order of July 10, 1928, and continued in effect specifically as to this carrier by the orders of May 10, 1933, and February 4, 1936, do not afford just compensation under the Fifth Amendment on the ground that they do not provide for payment of the cost of the service rendered plus a reasonable return upon invested capital allocated to that service; and (2) that the Commission's orders do not afford the "fair and reasonable" compensation required by the Railway Mail Pay Act.
To sustain jurisdiction in the Court of Claims, respondent rests upon § 145 of the Judicial Code, 28 U.S.C.
Although the Railway Mail Pay Act contains no explicit provision for judicial review of orders of the Interstate Commerce Commission fixing rates of pay for transporting the mails pursuant to authorizations of the Postmaster General for such service, it had been thought, until the decision in United States v. Griffin, supra, that such orders were of the kind reviewable under the Urgent Deficiencies Act. The effect of that decision, however, was to rule out such orders as those now in question from the jurisdiction conferred by the latter Act.
While the "negative order" basis for the Court's ruling is no longer effective, Rochester Tel. Corp. v. United States, 307 U.S. 125, the alternative grounding remains in full force. 303 U.S. at 234.
The Court in the Griffin case, however, was not content to rest merely with this negative jurisdictional ruling. In part Fourth of the opinion the Court went on to say that its ruling did not "preclude every character of judicial review." 303 U.S. at 238. The opinion then suggested three possible other methods, two in the Court of Claims and one in the district courts.
Without doubt it was due to these suggestions that respondent's predecessors chose to bring this suit in the Court of Claims. The language in which the suggestions were made has assumed such importance, in view of the problems raised by the receivers' choice in following them, that it seems wise here to quote in full what the Court said:
Respondent and the Court of Claims are at odds over whether the carrier's claims now asserted fall under the first or the second class of cases of which this Court said the Court of Claims would have jurisdiction. Respondent insists, both in the complaint and in the brief filed here, that his claim is grounded on the basis that the Commission's orders are confiscatory and have the effect of depriving the carrier of its property and services without just compensation due under the Fifth Amendment.
On the other hand, the Court of Claims expressly disclaims that it was exercising any jurisdiction over constitutional matters. This was done in denying the carrier's claim to interest on the award.
The Government, however, insists that the Court of Claims did not exercise jurisdiction under this category.
Ordinarily it would be sufficient for us to take the Court of Claims at its word and accept its stated view of the nature of the jurisdiction it was exerting. But the three differing views of its action taken by itself, by the Government, and by the respondent, together with the difficulties each raises on the record for disposing of the cause, compel us to examine those claims.
If, as the court asserts, it was "giving effect" to the Commission's order and doing so without substituting its own judgment for the Commission's as to what was a "fair and reasonable rate," there should be little difficulty in sustaining the jurisdiction;
On the other hand, if the Government is correct in the view that the court did not give effect to the Commission's order, but instead disregarded that order and
The Railway Mail Pay Act gives the Interstate Commerce Commission exclusive jurisdiction to determine "fair and reasonable rates." The Urgent Deficiencies Act provided for judicial review of the Commission's rate orders in "cases brought to enjoin, set aside, annul or suspend" such orders. No power was given the reviewing court to revise them when found invalid, or to render judgment for any amount thought to be due under such a revision.
It would be strange, indeed anomalous in the extreme, if this Court by its Griffin pronouncements intended to confer on the Court of Claims, by implication in the cases there held not reviewable under the Urgent Deficiencies Act, a broader, more conclusive and final power of judicial review than that Act expressly provided for like orders within its purview. The assumption is hardly tenable that Congress intended such a result when it enacted the Railway Mail Pay Act or the Urgent Deficiencies Act or both. Congress in no instance has expressly empowered the Court of Claims to review rate orders of the Commission,
Thus, when these very orders were twice before the district court, under the assumption that it had jurisdiction, that court found the orders invalid. But in each instance it remanded the cause to the Commission for further proceedings; there was no attempt to render a money judgment for the carrier.
Necessarily this restraint reflected the jurisdictional limitations placed upon the court by the Urgent Deficiencies Act. But those limitations themselves reflected another policy, quite apart from and in addition to that giving effect to the constitutional limitations of Article III.
Hardly can it be conceived therefore that Congress would have provided expressly for review of the Commission's rate-making orders by the Court of Claims; or that, if it had done so, it would have authorized a money judgment for such amount as that court in its own judgment considered the rate should have produced.
It is equally significant, we think, that when the three-judge district court twice set aside the Commission's order it did so on grounds substantially similar to those used by the Court of Claims in this case for holding the order invalid. In other words, what the district court did by way of examining the orders on their merits, factual as well as legal, the Court of Claims has done in this case. Indeed, it has gone much further, since it has rendered a money judgment for the carrier covering the period 1931-1938, having the effect in the particular circumstances of a new and final order.
A full understanding of the Commission's orders and of the effects of the action taken regarding them, both by the three-judge district court and by the Court of Claims, can be had only by reading and comparing the reports and opinions.
We note, to begin with, that the court awarded to the respondent $186,707.06, or some 87 per cent more than the amount allowable under the Commission's orders.
Moreover, the Commission's task in fixing that rate was both gigantic and complex. It was authorized to make classification of carriers where "just and reasonable" and, "where just and equitable," to "fix general rates applicable to all carriers in the same classification." 39 U.S.C. § 549. That authority of course was not to be ignored in applying the requirement for compensation of carriers at "fair and reasonable rates." 39 U.S.C. § 542. The two were not entirely separate, but were merely different prongs of the same fork.
In its first general rate proceeding the Commission classified the nation's carriers, for mail-pay compensation purposes, placing the Georgia & Florida Railroad in Class I.
Railroad accounting, however, does not, and concededly cannot, accurately reflect actual operating costs of each type of service rendered, or the proportionate amounts of capital employed in rendering each service. The Commission therefore sought a method or methods for making such allocations tentatively as the initial stage of performing its rate-making function. This required, first, segregating freight service from passenger train service; then dividing the latter into three categories:
The problem arose both in the proceedings culminating in the first general rate order, 56 I.C.C. 1, and in those resulting in the general rate increase of 1928. 144 I.C.C. 675. In the latter the initial separation of total operating expenses between freight and passenger services was made on the basis of the Commission's rules governing such separation on large steam railways. Id. at 685-688. But, for determining the cost of service in respect to the further allocation and apportionment of passenger-train service among its three components, the Commission, having determined upon the space basis for this initial stage in fixing "fair and reasonable rates," was faced with the problem of what should be done with unused space.
That problem presents the crux of this case, as it did of the Commission's action. In the proceedings leading to the 1928 order, three general plans were given primary consideration for distributing space. They are described in the report last cited. See id. at 681, 689. In general they were alike in allocating full-car
The Commission rejected Plan 3 because, it said, that plan had departed from the car-operating unit which it had adopted for making space allocations. 144 I.C.C. 689-691. While not specifically eliminating Plan 1 from consideration for purposes of comparison, the Commission primarily rested its allocations of space for purposes of tentative or preliminary apportionment of costs and capital on Plan 2. Id. at 691.
In utilizing the ratios derived from using Plan 2, however, the Commission expressly stated:
The Commission proceeded to consider the results obtained by the use of the Plan 2 formula in the light of other circumstances and considerations deemed relevant, including comparison with results obtained upon the basis of the total equated 60-foot-car miles (see 144 I.C.C. at 692), the fact that there was no such incentive to limit the amount of space utilized for passenger, baggage and express services as existed in the case of mail service, id. at 693, and other factors. The Commission then concluded:
In this suit and in the prior proceedings since 1931, no attack has been made on the validity of these rates as general rates applicable to Class I carriers. But the 1931 proceedings challenged their validity as applied to this particular carrier. This has been the bone of contention throughout the subsequent phases of controversy.
When in 1931 the carrier's application for reexamination was filed, the Commission by its Division 5 first proceeded to make a cost study of the railroad's individual operations, conducted along the same lines as the cost studies in its general rate hearings. A test period of 28 days from September 28 to October 25, 1931, was selected for obtaining space and other data. Space ratios were determined on the data secured, applied to expenses, and the resulting expense ratios used to apportion investment, all under Plan 2. After adjustments made to reflect the year's operations for 1931, the Plan 2 formula worked out to show a net operating deficit for mail service of $4,945, which, together with a return of 5.75 per cent on the capital allocated by the formula to mail service, brought the carrier's claim for increased compensation for that year to $31,227. 192 I.C.C. 779, 781. To meet this, an increase of 87.40 per cent would have been necessary.
As in the general rate investigations and for the same reasons, the Division was unwilling to rest exclusively upon the results obtained by the computations under Plan 2, and went on to consider other factors which it deemed relevant in determining the fairness and reasonableness of the rates. It found that of the three component services in passenger-train service, "the mail service makes the best showing with respect to revenue."
Pointing out that the carrier's claim was based on the special cost study and the fact that "because of its low traffic density and low earnings per mile of road, it is not comparable with many class I roads which receive the same rates of pay," the Division reiterated that "The cost study is not considered to be an accurate ascertainment of the actual cost of service. It is an approximation to be given such weight as seems proper in view of all the circumstances. See Railway Mail Pay, supra." 192 I.C.C. at 783. It then concluded:
When the cause was returned to the Commission by the Georgia District Court in 1935, the full Commission reopened the proceeding and held a further hearing at which further evidence was received. In remanding the cause the district court had stressed the computed finding under Plan 2 that "The distribution of expense upon the space ratios shows that the operating ratio for mail service was 102.79"
Counsel for the carrier stressed this before the Commission as "an adjudication" that the previous rates of pay were "totally inadequate." But the Commission rejected the apparent district court inference that abandonment of mail service would save the carrier money: "Considering the character of the expenses included in the study it is clear that no such saving could be made. The importance of the operating-ratio figure has been overemphasized. Relative costs derived from a series
The Commission then again repeated its insistence that cost computed under such a formula as Plan 2 "is a hypothetical cost and not an actual cost," ibid.; that in other mail-pay proceedings consideration had been given to other factors;
On return of the cause, the district court disclaimed entertaining the view "that the hypothetical cost is `necessarily conclusive.'" Rather, the court said, "It is merely the fairest method that has been devised." It held inapplicable to the carrier the considerations utilized by the Commission to qualify the results computed by
It is obvious, from the foregoing account, that the basic difference between the Commission and the district court lay in whether the Commission's statistical and mathematical computations under Plan 2 alone should be taken as determinative of costs and thus of fair and reasonable rates
This is exactly the question which was crucial in the judgment rendered by the Court of Claims. In its opinion, much more extended than either of those rendered by the district court, it said:
"Under finding 16 herein, it is shown that the Interstate Commerce Commission found and determined that plaintiff would require an increase in its mail revenue of 87.4% in order to secure for itself, under Plan 2 adopted by the Commission, a return of 5.75% theretofore fixed by the Commission, on its investments in road and equipment engaged in mail traffic. . . . The Commission has, by its
The court then quoted the Commission's concluding language in 192 I.C.C. 779, 783, set out above in the text, and said:
"We are of the opinion that the `approximation' [Plan 2] should be given greater weight than the Commission affords it, because, as we have said, and the Commission in effect admits, there is no such thing as certainty in actual cost. Approximate, or as it is called, `computed' cost must be relied upon, and as a matter of law must be decisive. There is no alternative, at least no satisfying alternative. Of course there were other methods of computing cost, but the Commission, put to the choice, selected Plan No. 2." 110 Ct. Cl. at 370.
Then followed rejection of the factors considered by the Commission in qualifying the computations obtained under Plan 2 as "not convincing or even persuasive." Id. at 372. According to the court: "It was for the Commission to demonstrate that the general rates prescribed gave the plaintiffs a fair and reasonable return. This the Commission failed to do. More than that, the Commission has by its findings, using its adopted plan and its own methods as applied to plaintiffs' circumstances, proved that plaintiffs have been underpaid $186,707.06 in fair and reasonable compensation for the period in question." Ibid.
In view of these groundings, the court's decision tied the Commission exclusively and finally to the results
In doing all this the court substituted its own judgment for the Commission's concerning the relevance of facts to be taken into account in fixing a fair and reasonable rate; the weight to be given to those facts, including the computations under Plan 2 as well as the other facts utilized to check and qualify them; and the burden of proof on the whole case.
In the latter respect the court disregarded not only the general rule which gives administrative determinations in such matters presumptive weight,
We cannot say that the Commission acted arbitrarily or unreasonably in respect to its use of Plan 2 or of the factors used in checking the plan's results and qualifying them. Contrary to the court's conclusion, Plan 2 was never intended or accepted by the Commission as furnishing a final and exclusive basis for fixing rates. Certainly it was not arbitrary or unreasonable to use such a plan, which proceeded step by step upon "various theories and assumptions," as merely a preliminary and wholly tentative step in the process of rate making; or to check its results against those produced by other such plans differing in detail of theories and assumptions employed; or to qualify the computations by the factors which the Commission took into account in the final stages of judgment.
In holding the initial formula conclusive, the court has disregarded the Commission's informed contrary judgment in matters committed to its special competence. This the court did in the guise of "giving effect" to the Commission's "finding," namely, its preliminary computations under Plan 2, and by disregarding all else the Commission took into account as "error of law." The "finding" was in fact no finding at all, but only a preliminary figure. And the matters thrown out as "error of law" were matters of fact and expert judgment, not legal questions.
We think the carrier has not sustained its burden of showing that the Commission acted arbitrarily or unreasonably and we conclude that the general rates fixed by its 1928 order are, upon the record made, fair and reasonable as applied to the Georgia & Florida Railroad. But
In sustaining its jurisdiction, the Court of Claims stated: "As the Supreme Court has said, this Court has jurisdiction to render judgment of recovery for an amount sufficient to constitute fair and reasonable compensation under the facts as found by the Commission, unpaid through failure of the Commission, because of an error of law, to order payment thereof." 110 Ct. Cl. at 366. (Emphasis added.) That language on its face seems fully in accord with the Griffin pronouncement. As will be recalled, it was: "If the Commission makes the appropriate finding of reasonable compensation but fails, because of an alleged error of law, to order payment of the full amount which the railroad believes is payable under the finding, the Court of Claims has jurisdiction of an action for the balance, as the claim asserted is one founded upon a law of Congress." (Emphasis added.)
On its face this language does not authorize revision of the Commission's findings or of the rate it prescribes by the Court of Claims. The claim of which it is said to have jurisdiction is one for "the full amount which the railroad believes is payable under the finding," some part of which the Commission has failed to order paid by reason of an error of law. There was no intimation of authority for the court to reexamine the facts or to substitute its own judgment concerning the facts to be considered or the weight to be given them in determining the rate. True, the wording reads "appropriate" finding. But we cannot construe that single word to mean that this Court intended the Court of Claims to reopen the entire question of the order's appropriateness and substitute
Such a construction is sustained by none of the cases cited in the Griffin opinion to support the statement
We think the Griffin language contemplated a much narrower jurisdiction. The purpose was, in our judgment, to indicate that review might be had of the carrier's claim whenever it does not run in the teeth of the Commission's findings or order or seek revision of that order. In other words, the claim must be one consistent with the Commission's order fixing the rate, but asserting underpayment by reason of some error of law in its application which would not require the Commission's further consideration for fixing a new rate. This view is consistent with all of the authorities cited in Griffin to sustain the first category of jurisdiction said to reside in the Court of Claims. It is the view we think this Court meant to be taken.
As we have pointed out, however, here the Court of Claims, though asserting the contrary, has not "given effect" to the rate order, but in the guise of finding "error of law" has set it aside, together with the Commission's findings; has substituted "findings" of its own; and has made, in effect, a new order by its judgment. It follows, in our view of what was intended by the Griffin statement, that the Court of Claims had no jurisdiction in this case, since it involves no such "error of law" as that statement contemplated, but relates only to questions essentially of fact going to the order's appropriateness on the merits. The case is wholly unlike Missouri Pacific R. Co. v. United States, 271 U.S. 603; United States v. New York Central R. Co., 279 U.S. 73, and other cases cited in the Griffin opinion.
The same result would follow if, contrary to the Court of Claims' disclaimer, the suit could be regarded as one for just compensation under the Fifth Amendment, as
Moreover, in view of the fact that the Court of Claims has jurisdiction only to render a money judgment against the United States and none to remand to the Commission for further consideration a rate order which it might find confiscatory, we do not think the Griffin ruling can be taken to have contemplated that upon such a finding, made after reviewing the Commission's order on the merits, the Court of Claims could foreclose the Commission from further consideration of the order and render
There remains the third remedy suggested in the Griffin opinion, namely, by suit in the district court as one at law or in equity "arising under the postal laws," former 28 U.S.C. § 41 (6) (cf. present 28 U.S.C. § 1339), where the Commission is alleged to have acted in excess of its authority, or otherwise illegally. Strictly speaking, it is not necessary to consider whether this remedy would have been available to respondent, since it has not been followed.
However, notwithstanding some obvious difficulties in making district court jurisdiction available for review in such a proceeding as this,
Since the Griffin case was decided, Congress has adopted the so-called Administrative Procedure Act,
This provision, we think, adds force to the suggestion made in the Griffin case concerning the jurisdiction of the district courts in relation to review of rate orders like those now in question. Such review under the equity or declaratory jurisdiction of those courts would seem to afford a remedy consonant with § 10 of the Administrative Procedure Act and also more nearly like that afforded by the Urgent Deficiencies Act, though without its expediting features. The relief afforded, unlike that required in the Court of Claims, could thus be limited to setting aside or enjoining the Commission's order and remanding the cause to it for further consideration, as
These suggestions, as we have said, are not strictly necessary for disposition of this case. But we think them appropriate in order to prevent a recurrence in the future and in other cases of long and chiefly jurisdictional litigation such as this cause has involved with profit to no one.
The judgment is reversed, and the cause is remanded to the Court of Claims with instructions to dismiss it.
Reversed and remanded.
MR. JUSTICE REED and MR. JUSTICE JACKSON took no part in the consideration or decision of this case.
Court of Claims mail pay decisions cited in a footnote, 303 U.S. at 238, n. 10, included: Chicago & E.I.R. Co. v. United States, 63 Ct. Cl. 585; Nevada County N.G.R. Co. v. United States, 65 Ct. Cl. 327; Chicago & E.I.R. Co. v. United States, 72 Ct. Cl. 407; Macon, D. & S.R. Co. v. United States, 78 Ct. Cl. 251; 79 Ct. Cl. 298. In each of these cases the claimant carrier recovered compensation in excess of that allowed it by the Postmaster General, but in each case the dispute centered around the meaning of a Commission rate order or the Commission's power to enter the order made; in none was there any challenge to the rate itself: Thus, in the first Chicago & E.I.R. Co. case, supra, the question was whether the Commission had, in accordance with 39 U.S.C. § 535, ordered compensation for the return to their departure points of mail storage cars. In the second Chicago & E.I.R. Co. case, supra, the question was whether "closed-pouch space" was a "lesser unit" within the meaning of a rate order setting compensation for a "storage car or lesser unit." The Nevada County N.G.R. Co. case, supra, was a companion to New York Central R. Co. v. United States, 65 Ct. Cl. 115, affirmed 279 U.S. 73, holding that the Commission had power to order a rate increase effective as of the date of the application for such increase. Similarly, the two opinions in Macon, D. & S.R. Co., supra, held that the Commission had power retroactively to reclassify the claimant carrier in a higher compensation bracket as of a date prior to the carrier's application for reclassification so as to impose on the United States liability for additional compensation from that retroactively determined date of reclassification.
With the prefatory admonition, "Compare," the Griffin footnote, 303 U.S. at 238 n. 10, cited two other Court of Claims railway mail pay decisions, Pere Marquette R. Co. v. United States, 59 Ct. Cl. 538, and New Jersey & N.Y.R. Co. v. United States, 80 Ct. Cl. 243; these decisions held the court powerless to fix mail pay rates or classifications, both functions being found to be within the exclusive purview of the Commission. See note 27 infra.
"The act of July 28, 1916, clearly intended that all questions of the compensation to be paid railroad companies for carrying the mails should be determined by the Interstate Commerce Commission. The commission having acted within the scope of its authority, having fixed the reasonable compensation to which the plaintiff is entitled, this court can not review the action of the commission and undertake to fix a different compensation from that arrived at by the commission. If the plaintiff has performed any service which the commission has failed to provide for in its order fixing compensation, then the plaintiff's remedy is before the Interstate Commerce Commission and not in this court."
In New Jersey & N.Y.R. Co. v. United States, 80 Ct. Cl. 243, the Court of Claims dismissed a claim for compensation based on a classification which had been denied the carrier by the Commission; the dismissal was grounded on the proposition that "This court has no jurisdiction to classify railroads or to fix the compensation for the carrying of the mails." 80 Ct. Cl. at 248. Of the cases allowing money judgments for compensation, discussed in note 26 supra, the court observed that there "the recovery in this court merely carried into effect the Commission's determination, that is to say, this court did not undertake to make a classification or to fix a rate of compensation." 80 Ct. Cl. at 248. Cf. Denver & Rio Grande R. Co. v. United States, 50 Ct. Cl. 382, 391.