UNITED STATES v. INTERSTATE COMMERCE COMMISSION ET AL.
APPEAL FROM THE UNITED STATES DISTRICT COURT FOR THE DISTRICT OF COLUMBIA.
Argued October 11, 1956.
Decided December 17, 1956.
Since May 1, 1951, railroads serving the port of Norfolk, Va., have refused to pay an allowance to the Army for the wharfage and handling services the Army performs for itself on military export traffic passing through Army base piers. In their tariffs the railroads assumed the obligation to furnish such services for all shippers that complied with the tariffs, and accordingly furnished the services for commercial shippers at public sections of the same piers without additional charge. Because the Army provides these services itself, it claimed a right to the $1.00 per ton paid by the railroads on behalf of commercial shippers. A complaint charging the railroads with violating the Interstate Commerce Act was dismissed by the Interstate Commerce Commission, and the United States sued to set aside the order. Held: In the circumstances of this case, the refusal of the railroads to make the allowance to the Army did not subject the Government to unjust discrimination and did not constitute an unreasonable practice in violation of the Interstate Commerce Act. Pp. 160-176.
Ralph S. Spritzer argued the cause for the appellant. With him on the brief were Solicitor General Rankin, Assistant Attorney General Hansen and Daniel M. Friedman.
Robert W. Ginnane argued the cause for the Interstate Commerce Commission. With him on the brief was B. Franklin Taylor, Jr.
Windsor F. Cousins argued the cause for the railroad appellees. On the brief were Charles P. Reynolds and James B. McDonough, Jr., for the Seaboard Air Line Railroad Co., Richard B. Gwathmey for the Atlantic Coast Line Railroad Co., A. J. Dixon and William B. Jones for the Southern Railway Co., John P. Fishwick for the Norfolk & Western Railway Co., Martin A. Meyer, Jr., for the Virginian Railway Co., and Hugh B. Cox and Mr. Cousins for the Pennsylvania Railroad Co. [352 U.S. 158, 160]
MR. JUSTICE REED delivered the opinion of the Court.
This appeal requires a determination of whether railroads serving the port of Norfolk, Virginia, must grant the United States an allowance for the Government's performance of certain wharfage and handling services on its own export freight. For shippers who conform to the requirements of the tariff, the railroads assume these charges as a part of the rate. The United States, however, found it impractical to conform to the tariff requirements.
The present litigation was instituted pursuant to 28 U.S.C. 2325 in a three-judge District Court of the District of Columbia by the United States, through its Department of the Army, against the Interstate Commerce Commission and the United States, to set aside the Commission's order in United States v. Aberdeen & Rockfish R. Co., 289 I. C. C. 49. That order dismissed a complaint filed by the United States on November 20, 1951, against several named railroads charging them with violations of the Interstate Commerce Act. The District Court, one judge dissenting, dismissed the complaint. 132 F. Supp. 34. We noted probable jurisdiction. 350 U.S. 930 .
Since May 1, 1951, the railroads have refused to pay an allowance to the Army for the wharfage and handling 1 services the Army performs on military export traffic passing through Army base piers in Norfolk, Virginia. The railroads have assumed in their tariffs the obligation to [352 U.S. 158, 161] furnish these accessorial services for all shippers that comply with their tariffs. And, in accordance with these tariffs, the railroads have furnished the services for commercial shippers at public sections of the same piers without additional charge. These services were performed for the Army and the railroads by the same private company - for the Army under contract to carry out its orders for terminal and storage services; for the railroads by contract to act as the carriers' agent in accordance with their tariffs.
The Army sought a determination that the railroads' refusal to make an allowance to it to the same extent that the railroads paid the private company, Stevenson & Young, for handling of private shipments subjected the Government to unjust discrimination and constituted an unreasonable practice in violation of 1, 2, 3, and 6 of the Interstate Commerce Act. 2 The Army also requested [352 U.S. 158, 162] an order that the railroads cease and desist from such refusal in the future. 3
The transfer of export freight from rail carriers to outbound water carriers is made on piers or wharves that allow the unloading of freight from railroad cars to within reach of ships' tackle. Railroads are under no statutory obligation to furnish such piers or to unload carlot freight, Pennsylvania R. Co. v. Kittanning Co., 253 U.S. 319, 323 . 4 In general the railroads have taken on the duty of wharfage and handling for freight consigned for overseas shipment. 5 In some instances railroads have charged for the use of the piers ("wharfage") and the necessary "handling" separately from their charge for [352 U.S. 158, 163] line-haul transportation. In other cases there has been only a single factor export rate (one inclusive charge) providing for limited shipside delivery with the railroad furnishing these accessorial services pursuant to their tariffs at no extra charge to the shipper. The latter practice has been generally followed by railroads serving North Atlantic ports. Where railroads do not have their own piers, they have provided these services by contracting with commercial terminal operators.
The Norfolk piers, involved in this matter, were managed by such operators. They were built by the United States after World War I and have been leased in part or in whole to a series of commercial operators since then. The leases were cancelled during World War II but they were leased to Stevenson & Young, a private terminal operator, at the end of that war. The railroads here involved, using the single factor shipside rate described above, contracted with Stevenson & Young, as their agent, to perform the wharfage and handling for 25› per ton for wharfage and 75› per ton for handling, on both commercial and military freight. But with the advent of the Korean hostilities, the Government again cancelled the leases and the Army took entire control of the piers. Apparently the military shipments require special handling and storage. To assure its complete satisfaction, the Army hired Stevenson & Young to perform those services under a general pier-operating contract for the Army. 6 [352 U.S. 158, 164] The unused portions of the piers were later released by the Government, by a contract dated December 28, 1951, for the commercial operations of Stevenson & Young. By that contract Stevenson & Young leased the unused parts for 1952 from the United States, for a public commercial maritime terminal. It was over these leased portions of the piers that the lessee carried on its public warehousing activities in accordance with the railroad tariffs.
A typical tariff arrangement appears in the note below. It is the basic exhibit in this case. 7 It was bottomed on [352 U.S. 158, 165] a contract of April 5, 1947, between the Pennsylvania Railroad and Stevenson & Young. By that contract Stevenson & Young, as a public wharfinger, agreed to act "as directed by the Railroad" and as its agent for wharfage and handling of "export, import, coastwise and intercoastal freight" in accordance with the tariff upon the facilities it acquired on the Army base. The agent assumed responsibility for freight charges and care of freight in its charge. It agreed, paragraph 4, that:
The result of the Army's insistence on operating its own pier facilities is that the Army pays the same export rates without receiving wharfage and handling services as commercial shippers do for whom the railroads provide those services at no additional charge. Because the Army provides these services itself, it claims a right to the $1.00 per ton payment paid by the railroads on behalf of the commercial shippers.
In terms of the Interstate Commerce Act, the Government bases its argument on two grounds:
This controversy is similar to one that arose out of the Army's cancellation of the Norfolk pier leases during World War II, United States v. Aberdeen & Rockfish R. Co., 269 I. C. C. 141. Interpreting railroad practices much like those now before this Court, the I. C. C. determined that the Army was not being discriminated against. However, on review, the Court of Appeals for the District of Columbia remanded the case to the I. C. C. for further exposition and clarification. 91 U.S. App. D.C. 178, 198 F.2d 958. On remand the I. C. C. reaffirmed its earlier determination and no appeal has been taken from that order. 294 I. C. C. 203. Because the question of whether the Army was discriminated against following the Government's World War II lease cancellation has never been finally passed upon, the District of Columbia ruling is not inconsistent with the Commission's conclusion in this litigation.
The Government asserts that it is charged more on its export shipments through the Norfolk Army Base than commercial shippers under substantially similar circumstances. Such an exaction would be, of course, an unjust and unreasonable practice of discrimination. But it seems apparent that the circumstances of Army shipments are markedly different from those of private shippers that receive wharfage and handling services. Moreover, it seems equally clear that the Army is treated identically with those shippers who for business reasons do not care to comply with the tariff requirements.
The Army routed its export shipments direct to itself at the Army base as consignee. As is shown by the contracts summarized above, the entire Army base property was under military control except for the commercial [352 U.S. 158, 169] operations of Stevenson & Young. The base included piers, bulkheads, railways and storage warehouses, and railroad switches, tracks and yards. The Commission found that the Army had determined "that ports of embarkation must be operated by personnel of the military service and civilian employees of the Government." 289 I. C. C., at 53. 10
Although the Army hired the Stevenson company to operate the Army portion of the base, the Army's control was "absolute."
The fact that the Army controls its areas of the base, and the fact that the railroads handle their own wharfage and switching on their portions as they choose, are not mere formal differences. They are factors in traffic movement.
It is obvious that the method of handling government freight does not comply with the tariff requirements. It does not move over wharf properties owned, leased and operated by the Stevenson company "as a public terminal facility of the rail carriers." Rule 47 (b), n. 7, supra.
The Government actually is being treated just as any shipper who decides not to take advantage of the services offered in the tariff. It seeks a preference over these other shippers who take deliveries of export rate traffic at piers under their own control, so-called private piers. The general practice at North Atlantic ports is to refuse to absorb handling charges at private piers, even though they are absorbed where the carriers have control of the facilities. [352 U.S. 158, 173] The record shows 84 private piers along the Atlantic Coast where the railroads make no allowance or compensation for handling or wharfage. It was testified:
There is no objection to such a practice generally, whether the line-haul rates and the handling rates are stated in a single factor rate or separately. To require the carriers to furnish such accessorial services at every private pier would disperse the traffic, cause the maintenance of more crews or watchmen, and thus add to the cost of transportation.
The Government contends that it is not in the same position as other shippers who control private piers, because it took control of the Norfolk piers to meet a national emergency. But we think that the emergency cannot convert the Government's operation of its private piers into a category different from that of private shippers. 13 [352 U.S. 158, 174] And, the fact that the operations of the Government and the railroads are in the same pier area seems to us immaterial. If the railroads gave an allowance here, excepting one given under 22 of the Act, they would have to give it at all private piers where the shipper wanted to handle wharfage at its own discretion. Cf. Merchants Warehouse Co. v. United States, 283 U.S. 501 ; Weyerhaeuser Timber Co. v. Pennsylvania R. Co., 229 I. C. C. 463.
The Government has the right to have its shipments accorded the same privileges given others. Moreover, in emergencies its traffic may have "preference or priority in transportation," 49 U.S.C. 1 (15) (d), and it may be granted and may accept preferences in rates. 14 But the Government cannot otherwise require extra services or allowances. In the situation here presented, it could have used the same facilities as commercial shippers and obtained the benefits of the tariff. The evidence to this effect is uncontradicted. 15 The Commission accepted it as a fact. 289 I. C. C., at 58, 60-61, 63. [352 U.S. 158, 175]
The Commission drew from the above circumstances a conclusion that the tariffs and conduct of the railroads are not shown to have been unlawful.
The United States argues that carriers cannot perform accessorial services in such a way that "some shippers would pay an identical line-haul rate for less service than that required by other industrial plants." United States v. United States Smelting Co., 339 U.S. 186, 197 . To do so would indeed violate 2 of the Interstate Commerce Act. 16 But the Smelting case is not apposite. We affirmed a Commission order enjoining intra-plant car switching and spotting services after termination of the line haul. It terminated at a "convenient point" on a siding at consignee's plant. Our decision there turned on and upheld the Commission's power to determine the end point of the line haul. Because the line-haul tariffs included only car movement to and from that convenient point, some shippers received more service than others for the line-haul rate. P. 197. 17 Thus our determination was based on the unlawful preference allowed some shippers by the tariffs since those discriminated against could not get the same service as other shippers.
Furthermore, whether the circumstances and conditions are sufficiently dissimilar to justify differences in rates [352 U.S. 158, 176] or charges is a question of fact for the Commission's determination. 18
The District Court dismissed the complaint on the record before the Commission, and we affirm.
[ Footnote 2 ] "It is made the duty of all common carriers subject to the provisions of this chapter to establish, observe, and enforce just and reasonable classifications of property for transportation, with reference to which rates, tariffs, regulations, or practices are or may be made or prescribed, and just and reasonable regulations and practices affecting classifications, rates, or tariffs . . . which may be necessary or proper to secure the safe and prompt receipt, handling, transportation, and delivery of property subject to the provisions of this chapter upon just and reasonable terms, and every unjust and unreasonable classification, regulation, and practice is prohibited and declared to be unlawful." 49 U.S.C. 1 (6).
[ Footnote 3 ] No reparations were requested in this proceeding. However, as the Government indicates, if the railroads' refusal to pay for wharfage and handling is held to be a violation of the Act, the Government may deduct the prior "overpayments" from future sums due the railroads. See 49 U.S.C. 66.
[ Footnote 4 ] See 289 I. C. C., at 61.
[ Footnote 5 ] They can assume such and similar accessorial services by tariffs approved by the Commission as fair. See Baltimore & Ohio R. Co. v. United States, 305 U.S. 507, 524 . It is discrimination or unfairness in the tariffs that calls for correction. United States v. United States Smelting Co., 339 U.S. 186, 194 -197. Such determinations are on a case-by-case basis. See, e. g., United States v. Wabash R. Co., 321 U.S. 403 .
[ Footnote 6 ] It called for performance of "all terminal and pier warehouse intransit storage services excluding physical plant facilities (piers, warehouses, etc.); all checking and clerking services in connection therewith; all policing (sweeping and cleaning) services; and such other terminal services (excluding vessel checking and stevedoring; watchmen and guard service; utilities and maintenance of premises service) as may be designated herein, and, in connection therewith, [352 U.S. 158, 164] . . . [the performance of] all the duties of a terminal operator in such areas of the Norfolk Army Base or at any pier in or about the Hampton Roads harbor area as may be designated by the Contracting Officer . . . ."
[ Footnote 7 ] "Statement of Excerpts from Penna. R. R. Tariff ICC 3007, Setting Forth the Regulations and the Compensation Which the Penna. R. R. Will Pay to the Norfolk Terminals Division of Stevenson & Young, Inc., for Wharfage Facilities Furnished and Handling Services Performed at Norfolk, Va.
[ Footnote 8 ] See United States v. Aberdeen & Rockfish R. Co., 289 I. C. C., at 61. It seems clear that such an attack could be made if present conditions justified a re-examination. The War Department attacked the practice in 1921 but its objection was overruled by the I. C. C. in 1929 after a thorough investigation in a 6-5 vote. Wharfage Charges at Atlantic and Gulf Ports, 157 I. C. C. 663, 678-686. Separation was sought largely to force the railroads to increase terminal charges so that competitive municipal and other nonrailroad wharfingers might expand to develop better port facilities. The Commission reached the conclusion that such separation was inadvisable, as there was no evidence of injury from such practice.
[ Footnote 9 ] Such an exception is beyond the requirements of 6 (8) of the Act that provides for preference and precedence for United States shipments in emergencies.
[ Footnote 10 ] This conclusion was amply supported by testimony of a Government witness, the Commanding Officer, Hampton Roads, Port of Embarkation:
[ Footnote 11 ] The Government's request for export rates on its war shipments was granted by the railroads so that commercial and government export freight had the same rates. Cf. War Materials Reparation Cases, 294 I. C. C. 5. This was a substantial concession by the railroads, contrary to their tariffs, and done only because of 22 of the Interstate Commerce Act, 49 U.S.C., allowing concessions to the United States. 289 I. C. C., at 63. The railroads have also spotted cars for the Army after delivery in the storage yards without [352 U.S. 158, 172] extra charge. Other shippers would be charged for such service. 289 I. C. C., at 55. See United States v. American Tin Plate Co., 301 U.S. 402 . Such relaxation of possible additional charges by the railroads does not decide the Army's claim for allowances for handling. The Commission did take the concessions into consideration, however, as to the fairness of the refusal to grant the claimed allowances. 289 I. C. C., at 64.
[ Footnote 12 ] Although the Government seeks only an allowance of the published charge absorbed by the carriers of $1.00 per ton, the kind of service it requires in its area is illustrated by the fact that it pays $2.87 for handling. 289 I. C. C., at 61 et seq.
[ Footnote 13 ] The Army's reliance on Atchison, T. & S. F. R. Co. v. United States, 232 U.S. 199 , is misplaced. There this Court sustained the Commission in granting a shipper of fruit the right to precool the car and contents, although the carriers were in a position to refrigerate, though not in the better way. As the carriers were not in a position to perform the service properly, they could not by a tariff deny the consignor such right.
[ Footnote 14 ] "Nothing in this chapter shall prevent the . . . handling of property free or at reduced rates for the United States . . . ." 49 U.S.C. 22.
[ Footnote 15 ] "If it were not for the fact that the Government has reasons for handling its water-borne traffic differently from commercial shippers, there would be no reason why the Government should not use public piers like other shippers. There is no question but that a private shipper operating his own pier and handling his own traffic in a manner similar to the operation of the Norfolk Army Base today would not be entitled to the port rates."
289 I. C. C., at 63: "Evidence presented by the defendants supports their position that it is not unreasonable to refuse to extend wharfage and handling services to traffic handled over private piers when the shipper does not wish to use adequate facilities of the defendants. The defendants serving the Norfolk port area have had available port facilities more than ample to handle all the military traffic moving over the Army Base at Norfolk, at least on and since May 1, 1951."
[ Footnote 16 ] 49 U.S.C. 2, n. 2, supra.
[ Footnote 17 ] A typical tariff reads:
MR. JUSTICE BLACK, with whom THE CHIEF JUSTICE concurs, dissenting.
From the very beginning the Interstate Commerce Act has made it unlawful for railroads to discriminate by charging some shippers more than others for carrying the same kind of freight the same distance. The provisions of the Act make it clear that the ban on such discrimination cannot be evaded by any contrivance or guise that [352 U.S. 158, 177] accomplishes the prohibited end. In the present case the undisputed evidence, as well as the Interstate Commerce Commission's findings, convinces me beyond doubt that the railroads are subjecting the United States, as a shipper, to precisely the kind of discrimination which the Act prohibits. When the mass of verbiage which has befogged this case is stripped away, the issues are not complex and no expert guidance is needed for their proper resolution.
The Government owns several piers at Norfolk, Virginia which are connected by tracks with the main lines of certain major railroads. Storage space is provided on the piers for freight. For many years the piers were leased to a private terminal operator. This operator has a contract with the railroads hauling to the piers to perform handling and wharfage services with respect to their freight. The railroads pay the operator $1 per ton for these services. They do not charge shippers separately for this handling and wharfage but instead include the cost with the transportation charges in a single line-haul rate.
Shipments by the United States through the piers were handled exactly the same as any other shipment. The operator, acting under contract with the railroads, performed the necessary unloading and storage; the railroads paid it $1 per ton for these services; and the Government paid the railroads the single rate covering both transportation and pier services. The Government was not required to pay anything in addition to this single rate.
In 1951, however, with the outbreak of the Korean conflict, the Government found it necessary to operate directly certain portions of the piers in order to facilitate the shipment of military supplies. The Government hired the same operator who was acting for the railroads to perform the same services in handling government shipments as he had before. The sole difference was that the operator acted under contract with the Government and [352 U.S. 158, 178] was paid by it rather than by the railroads. The railroads continued to charge the same line-haul rate as before, however, on government shipments. The Government requested that the railroads continue to pay the $1 per ton for handling and wharfage of its shipments. The railroads refused. The net result is that the Government receives less services from the railroads than other shippers although it pays the same rate. Or stated in a more familiar manner it is compelled to pay more than other shippers for the same transportation even though they all ship the same kind of freight from the same points to the same pier.
Nothing in the record below or in the arguments presented to us justifies this plain discrimination. There is no finding, nor even any indication, that it costs the railroads one penny more to transport freight to the portions of the pier operated by the Government than to the immediately adjacent parts of the pier operated by their agent. And the mere fact that a discriminatory rate is embedded in a tariff does not make it legal.
It is claimed that the railroads can establish a general rule that they will not pay for wharfage and handling costs at private piers. This is undoubtedly true, but it does not follow that they can include within the line-haul rate charges for handling services at such piers that the railroads do not perform. Under any realistic appraisal, the railroads' costs for handling and wharfage services in the present situation are included as a part of their line-haul rate and are in no sense a "free service." The Government is compelled to pay this rate to get its goods transported. But, as the Interstate Commerce Commission expressly found, wartime conditions make it wholly impractical for the Government in shipping certain military goods to use the wharfage and handling services provided by the railroads under this rate. The Government is entitled to recover that portion of the "line-haul" [352 U.S. 158, 179] rate which it is charged for services that it cannot use. That is all it claims. There is no reason why the railroads should be allowed to operate in a manner that exacts a transportation charge from all shippers for benefits that some can enjoy and others, although in exactly the same situation, cannot. As this Court said in Union Pacific R. Co. v. Updike Grain Co., 222 U.S. 215, 220 , "A rule apparently fair on its face and reasonable in its terms may, in fact, be unfair and unreasonable if it operates so as to give one an advantage of which another similarly situated cannot avail himself."
I would reverse the judgment below. [352 U.S. 158, 180]