Part 28

It has in all these acts recognized the right of the responsible managers of the transportation interests of the country to fix the rates for transportation, as upon its revenue must rest the efficiency of its service to the public and the value of its property to its holders, subject only to those wise limitations which prohibit the exercise of these property rights to the injury of the public. Congress has appreciated the magnitude of the vast interest affected by such legislation. With 230,000 miles of track, with millions of rates published in accordance with the statute, with changes of rates numbering between 600 and 700 a day, and reaching the enormous sum of 225,000 a year, it has, with the practical experience of twenty-two years, refused to take the initiation of rates from the carrier and impose it upon its administrative tribunal. Congress and the Supreme Court have adopted the construction of the act to regulate commerce, announced by Judge Jackson (Interstate Commerce Commission _v._ B. & O. R. R. Co., 43 Fed. Rep., 37, and affirmed, 145 U. S., 263):

Subject to the two leading prohibitions that their charges shall not be unjust or unreasonable, and that they shall not unjustly discriminate, so as to give undue preference or disadvantage to persons or traffic similarly circumstanced, the act to regulate commerce leaves common carriers as they were at the common law, free to make special contracts looking to the increase of their business, to classify their traffic, to adjust and apportion their rates so as to meet the necessities of commerce, same principles, which are regarded as sound, and adopted in other trades and pursuits.

This policy, we believe, has been approved by the country during that period. Pending the elaborate investigation of this subject prior to the passage of the act of June 29, 1906, no crystallized sentiment was manifested, either in the press or during the hearings, that indicated a public sentiment that this policy should be departed from. Since this bill has been before your committee no such public sentiment has been shown to exist by those who appeared before it.

The conferring upon the commission the power to suspend a rate advanced, either upon the filing of a protest by a shipper or in the discretion of the commission, taken in connection with the provision of the statute which gives to the commission the power to fix a rate and to designate the time, not longer than two years, that it should remain in force, would ultimately turn over to that administrative body the function of initiating the rates of the entire country. It would offer a premium to every shipper to enter a protest to the advance of rates, whether they were reasonable or unreasonable, even if discretion was vested in the commission. The protest, prepared by skilled attorneys, presenting a prima facie case of unreasonable advance of the rate, with no opportunity for an investigation before it must be acted upon, an official body, on which was imposed the responsibility to act would be constrained to suspend the rate until a final determination of the complaint.

The existing law permits any shipper to protest any rate that has gone into effect, the hearing on the protest is made without formal pleadings, and the commission is authorized then to determine the question whether the rate put in effect by the carrier was a reasonable rate or not, and, if not, to make the rate reasonable. So far, in the practical operation of the act of June 29, 1906, this provision of law has worked satisfactorily, and but comparatively few of the decisions of the commission have been contested by the carriers. Under existing law both parties are protected. If the decision is that the rate is unreasonable a judgment may be rendered in favor of the protestant for the difference between what the commissioners determine is a reasonable rate and the rate fixed by the carrier, with 6 per cent interest from the date of the overcharge. If, on the other hand, this amendment should receive the approval of Congress and the rate filed by the carrier should be protested and then suspended by the commission (in the multiplicity of duties imposed upon that tribunal), considerable time would elapse before a final determination of the question could be reached. During that period the carrier would be receiving only the old rate, and if the commission finally decided that the advance was reasonable no reparation in any way could be awarded.

It was alleged before the committee that this last result would not be very injurious to the carrier, for the reason that it would be receiving the rate which it had fixed as a fair compensation for the service performed prior to the change. The answer to this seems reasonable, which was, that conditions had so changed that it required an advance of the rate to meet those new conditions. Otherwise the advanced rate would have no justification. That traffic officials fully appreciate the fact that, with the watchful eyes of every shipper affected by an advanced rate and the authority of the commission to determine and fix a just and reasonable rate (as a general rule), rates would not be advanced by such officials without a belief upon their part that there were sufficient reasons to sustain them, if protested.

The attention of the committee has been called to the attitude of the commission in its rulings upon the advance of rates, even where the facts have shown that the rates have been lowered with a view of developing a particular industry. In the case of the New Albany Furniture Company against Mobile, Jackson and Kansas City Railroad Company, etc., decided June 2, 1908, the commission held:

"The rates were low before the increase, but having been established, after prolonged negotiations, especially for the purpose of permitting complainant to reach a particular market, and in preference to making a readjustment in some other direction or territory, and complainant having adjusted its business thereto, defendants may not by an arbitrary advance in those rates destroy complainant's business, there being no evidence that the rates advanced were less than the cost of service."

A similar decision was rendered on the 1st of June in the case of Western Oregon Lumber Manufacturers' Association against the Southern Pacific Company.

Knowledge of the views held by the commission by the traffic officials and shippers will serve as the most effective check upon the part of the carrier in advancing rates over those which have been in existence for any considerable period of time, unless they can support the advance by the most satisfactory reasons.

WOULD THE AMENDMENT PROPOSED BE IN CONFLICT WITH THE FIFTH AMENDMENT TO THE CONSTITUTION?

2. An objection urged to the approval of this amendment, even though modified as suggested in committee, was that it conflicted with the fifth amendment in depriving the carrier of its property without due process of law.

The existing law authorizes carriers to make reasonable rates. Congress recognizing the right of control by the carrier has provided reasonable regulations to safeguard the interests of the public in the exercise of that right. It authorizes a protest after the rate had gone into effect; it provides for a full hearing after notice by the commission; it has further extended the time when the rate shall be made effective to thirty days from the filing of the schedule with the commission. These were held to be reasonable regulations, but it is claimed that under the amendment proposed to the sixth section, that if the rate is suspended from going into effect at the end of the thirty days by a protest, there is no limitation in the act fixing the time when the commission shall determine the question of the reasonableness of the advance; that the period is therefore indefinite, depending upon numerous considerations which might extend the time when the rate would be effective, if it was finally held to be reasonable, to six months or a year.

That the act of suspension either by the operation of the statute or by the commission is without notice or hearing to the carrier; that Congress has no greater right to authorize an administrative tribunal to suspend indefinitely the taking effect of a reasonable rate without notice or hearing than it has the right to provide that an administrative tribunal may authorize a rate which would yield less than the cost of the service.

It was decided in the case of Chicago, M. & St. P. R. R. Co. against Minnesota, 134 U. S., 418, that the right to make a reasonable rate was a property right. In the case of Interstate Commerce Commission _v._ Chicago Great Western Ry., 209 U. S., 118, the Supreme Court said:

"It must be remembered that railroads are the private property of their owners; that while from the public character of the work in which they are engaged the public has the power to prescribe rules for securing faithful and efficient service and equality between shippers and communities, yet in no proper sense is the public a general manager."

Justice Brewer, in the above case, page 108, speaking for the court said:

"It must also be remembered that there is no presumption of wrong arising from a change of rate by a carrier. The presumption of honest intent and right conduct attends the action of carriers as well as it does the action of other corporations or individuals in their transactions in life. Undoubtedly when rates are changed the carrier making the change must, when properly called upon, be able to give a good reason therefor, but the mere fact that a rate has been raised carries with it no presumption that it was not rightfully done. Those presumptions of good faith and integrity which have been recognized for ages as attending human action have not been overthrown by any legislation in respect to common carriers."

It is claimed that the indefinite suspension of the rate until final hearing is to deprive the carrier, if the rate advanced is reasonable, of its right of property during the period of suspension, without having given it any opportunity to be heard prior to the act of suspension. Due process of law must precede, and should not follow, the suspension. To set aside the carrier's act in fixing the rate pending the investigation required by due process of law is to deprive the carrier, pro tanto, of its property right to charge a reasonable rate. The fact that the statute requires an investigation after the suspension of the rate does not avoid the constitutional inhibition, as that provision can only be satisfied when the investigation precedes any disturbance of property rights. The carrier is entitled to the investigation before it is restrained in the _exercise_ of its property rights; the theory of the amendment suggested is that the shipper is entitled to an investigation before the carrier can _exercise_ its property rights.

Those contending for this objection to the amendment assumed that the indefinite suspension without hearing of the act of the carrier which deprived it, beyond a reasonable time, of the benefit of the advanced rate, was in effect the same as that which was condemned by the Supreme Court in the case of the Chicago, M. & St. P. R. R. Co. against Minnesota. Under the statute of that State, a carrier had the right to initiate the rate, and to put it in effect, and, under the law, the commission was authorized to make such changes as it deemed proper in the schedule so filed, and to direct the carrier to modify or change the schedule in accordance with the decision of the tribunal. In the one case the going into effect of the rate is suspended indefinitely without notice or hearing; in the other, the rate is changed or modified without hearing. On page 418 the court condemns this in the following language:

"No hearing is provided for, no summons or notice to the company before the commission has found what it is to find and declared what it is to declare, no opportunity provided for the company to introduce witnesses before the commission, in fact, nothing which has the semblance of the process of law."

On page 458 the court said:

"If the company is deprived of the power of charging reasonable rates for the use of its property, and such deprivation takes place in the absence of an investigation by judicial machinery, it is deprived of the lawful use of its property, and thus, in substance and effect of the property itself without due process of law and in violation of the Constitution of the United States."

This view of the law as announced in 134 U. S. was affirmed by the Supreme Court in the case of Louisville and Nashville Co. against Kentucky, 183 U. S., 510.

It was further suggested that if this amendment was incorporated in the sixth section, that it was so fundamental in its character, that if the court should hold that it was an unconstitutional exercise of power by Congress, that it might have the effect of destroying the entire value of this remedial legislation, as it would be impossible to separate the clause from those provisions of the law directly controlling the subject of rates.

The committee, without expressing any opinion upon the constitutional questions suggested, feels that it is of sufficient importance and gravity to cause it to hesitate to incorporate such amendment into the sixth section, especially in view of the other objections to such legislation.

COULD THE COMMISSION, UNDER THE AMENDMENT, FIX A REASONABLE RATE, IF IT HELD THE PROPOSED ADVANCE RATE UNREASONABLE?

3. One of the most serious objections to this measure, if the contentions of those who oppose it are well founded, is the assertion that the adoption of this amendment would, in reference to advanced rates that were protested, deprive the commission of the power conferred upon it by the fifteenth section of the act of June 29, 1906, empowering it, if on protest and hearing it found a rate to be unreasonable, to fix a reasonable rate.

The authority to the commission proposed in the amendment "to hear and determine the matter in all respects as it was required to do by sections 13 and 15 of this act," can only be construed to refer to the procedure as provided in the thirteenth and fifteenth sections of the interstate commerce law. There is no attempt to amend the provisions of section 15, which confers upon the commission the right to declare a rate unreasonable, and when so declared to fix a reasonable rate. There are no provisions found in the amendment suggested to the sixth section conferring upon the commission the power, when it finds a rate proposed to be advanced unreasonable, that it may then proceed to fix a reasonable rate.

An examination of section 15 in reference to the power of the commission to fix a rate depends upon a condition precedent that is clearly set forth in said section. It is, that before the commission has the authority to fix a rate it must first reach the opinion that--

"The rates, or charges whatsoever, demanded, charged, or collected by any common carrier or carriers, * * * or that any regulation or practice whatsoever of such carrier or carriers affecting such rates, are unreasonable, or unjustly discriminatory, or are unduly preferential or prejudicial, or otherwise in violation of the provisions of this act."

When this conclusion has been reached as to existing rates the section then authorizes the commission--

"to determine and prescribe what will be the just and reasonable rate or rates, charge or charges, to be thereafter observed in such cases as the maximum to be charged; and what regulations or practice in respect to such transportation is just, fair and reasonable to be thereafter followed."

To leave no doubt of the true construction of this section, an examination of the order required to be entered by the commission is conclusive of the meaning and intention of Congress in the enactment of this portion of the fifteenth section. It provides:

"And to make an order that the carrier shall cease and desist from such violation to the extent to which the commission finds the same to exist, and shall not thereafter publish, demand, or collect any rate or charge for such transportation in excess of the maximum rate or charge so prescribed."

An analysis of this order of the commission which requires it to provide "that the carrier shall cease and desist from such violation, to the extent to which the commission finds the same to exist," recognizes the fact that the rate is an existing rate, is an effective rate, is a rate in full operation, and cannot, therefore, be applied under the provisions of the amendment suggested to the sixth section, as no rate has gone into effect and become operative.

The subject we are considering as affected by the proposed amendment and the provisions of the fifteenth section, do not rest upon any principle of the common law, but are purely statutory enactments to carry out a policy in reference to interstate commerce deemed wise by Congress. The construction, therefore, of the statute in this respect cannot be aided by any principles of the common law, and the conclusion as to its meaning must rest entirely upon the intention of the legislature as expressed by the language of the act.

If this view of the fifteenth section is correct, the adoption of the amendment to the sixth section would change one of the most effective provisions of the act of June 29, 1906, and which was contended for with such earnestness in its passage through Congress.

Under the amendment to the sixth section, if adopted, and a protest was made to the advanced rate, or the commission under a protest was authorized in its discretion to suspend the advanced rate, until hearing as to its reasonableness, the only decision that could be made under that amendment would be, that the rate proposed to be advanced was either reasonable or unreasonable, but there would exist no power in the commission, if they found the rate unreasonable, to fix what in its judgment would be a reasonable rate. The committee does not believe that it is the desire of Congress, in view of the sentiment of the country as expressed in the press and before it, to pass additional legislation which would invite and suggest such confusion and legal difficulties in the construction of an act which has not yet been put in full operation by the tribunal charged with that duty.

COULD THE DECISION OF THE COMMISSION, CONDEMNING AN ADVANCE OF RATES, BE REVIEWED BY THE COURTS?

4. It was suggested to the committee that the incorporation of this amendment to the sixth section of the act of June 29, 1906, would deprive the carrier of the right to review by a bill in equity a decision of the commission which denied to the carrier the right to advance a rate. This contention is based upon the ruling of the courts, that the making of a future rate is a legislative act, and not a question for judicial review, and that until the rate is fixed and becomes effective it is purely one within the legislative function, and presents no subject cognizable by the court.

Under the amendment proposed a carrier would file a schedule of advanced rates; a shipper enters a protest to the rate taking effect; either by operation of the statute or the exercise of discretion by the commission, the rate is suspended until final hearing; subsequently there is a notice of the hearing and a decision rendered adverse to the contention of the carrier seeking an advance of the rate. Under these circumstances there is no remedy of review of that act of the commission provided for by existing law or under the principles of equity.

Existing law, providing for a review of a decision of the commission, does not by its terms enlarge the subject of equitable jurisdiction. The provision of the statute confers upon the court the right to take jurisdiction of a case against the commission and to review its decision when based upon an existing rate. There is no provision of the statute that contemplates the exercise of a jurisdiction by the courts in a case arising under a provision of law similar to the amendment sought to the sixth section of the act of June 29, 1906. In the decision rendered by the commission denying the right to advance the rate, the question of the reasonableness of the former rate or of any existing rate is not involved in the order to be entered by the commission. Under this proposed amendment the carrier submits a proposition to advance the rate, which has never become effective. The order of the commission would simply approve the proposition or deny the advance of the rate. This, under the proposed amendment, would be the extent of the authority and act of the commission.

In the case of McChord _v._ L. & N. R. R. Co. (183 U. S., 483), followed by the case of L. & N. R. R. Co. _v._ Ky. (183 U. S., 503), the court sustains the doctrine announced, and held that before a court of equity can intervene, the administrative body must do some act that advances beyond the legislative function. (Reagan _v._ Farmers' Loan & Trust Co., 154 U. S., 362; Interstate Commerce Commission _v._ Railway Co., 167 U. S., 479.)

It is contended that the decision of the commission prohibiting the advance is a legislative act, and that under the decisions of the courts the order simply prohibiting the taking effect of a proposed advance could not be the subject of equitable cognizance. If this view is not correct, it is contended that the courts by overruling the order of the commission would in effect be putting in force a future rate. Under existing law, however, if the rate has taken effect its reasonableness is a matter of judicial review, and should the commission after protest and hearing declare it to be an unreasonable rate and set the same aside in its order, that decision is reviewable by the courts, as it presents a judicial question. The statute conferring upon the commission the power to determine whether an existing rate is reasonable or unreasonable has fixed the standard which must determine the jurisdiction of the administrative tribunal, and the courts have a right to review the act of the commission, with a view of ascertaining whether it has acted within the limitations of the power conferred upon it.

In the case of the State Corporation Commission of Virginia against Railways, decided by Mr. Justice Holmes November 30, 1908, speaking of the power of the commission to fix a rate and the appeal from its decision to the court of appeals of Virginia, the court said:

"A judicial inquiry investigates, declares, and enforces liabilities as they stand on present or past facts and under laws supposed already to exist. That is its purpose and end. Legislation, on the other hand, looks to the future and changes existing conditions by making a new rule to be applied thereafter to all or some parts of those subject to its power. The establishment of a rate is the making of a rule for the future, and therefore is an act legislative, not judicial, in kind. * * *