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. * * *
"Proceedings legislative in nature are not proceedings in a
court within the meaning of the Revised Statutes, section 720,
no matter what may be the general or dominant character of the
body in which they may take place. * * * That question depends
not upon the character of the body, but upon the character of
the proceedings. (Ex parte Va., 100; U. S., 339-348.) They are
not a suit in which a writ of error would lie under Revised
Statutes, section 709, and act of February 18, 1875. (C. 80
Stat., 318.) * * * Litigation can not arise until the moment
of legislation is passed. * * * We may add that when the rate
is fixed a bill against the commission to restrain the members
from enforcing it will not be bad as an attempt to enjoin
legislation or as a suit against a State, and will be the
proper form of remedy."
The recent decision of the Supreme Court in the case of Public
Service Commission _v._ Consolidated Gas Co. of New York, in which
the opinion was delivered by Mr. Justice Peckham, in deciding what is
known as the Eighty-Cent Gas Case from the southern district of New
York, is instructive upon the question discussed in this objection.
In that case, the parties had gone to issue upon the question as to
whether the rate of 80 cents enjoined by the court from taking effect
was confiscatory. After deciding the case upon the merits in favor of
the commission, the court was unwilling, upon the supposed effect of
a rate which had never been in operation, to bar the parties of their
right when the same became effective from asking the protection of
the court against its practical results. The memorandum announcing
the position of the court upon that question is as follows:
"As it may possibly be that a practical experience of the
effect of the acts by actual operation under them might
prevent the complainant from obtaining a fair and just return
upon its property used in its business of supplying gas, the
complainant, in that event, ought to have the opportunity
of again presenting its case to the court. Therefore, the
decree is reversed, with direction to dismiss the bill without
prejudice."
This case simply illustrates the fact that the court was unwilling
to decide the question finally until the rate contested had become
effective. This was a suit involving a schedule of rates, and the
question made by the record was that these rates would result in
the confiscation of the property of the complainant in violation
of the Federal Constitution. Where that question can be properly
made, the courts have intervened upon clear proof and sustained
their jurisdiction to prevent such a violation of the constitutional
protection. In this case, although the court held that the evidence
developed the fact that this allegation of the bill was not
sustained, it was so reluctant to give effect to testimony as to what
might be the effect of the rates before they were made operative that
it preserved the rights of the parties by authorizing a new suit
after the rate should become effective. Under the act to regulate
commerce, such a constitutional question could hardly be practically
raised, and the rights of the court to intervene must depend upon
the limit placed upon the power of the commission by Congress in the
enactment of the law, in fixing the standard which should guide the
commission in its action.
BURDEN IMPOSED ON THE COMMISSION.--CONFLICT OF JURISDICTION.--HOW
RATES ARE MADE.
5. Your committee has deemed it proper that it should report to the
Senate the legal objections to the incorporation of this amendment in
the sixth section of the act of the 29th of June, 1906, but although
giving due weight to these objections, the committee has been more
strongly influenced in its adverse report upon this bill because
of the strong and forcible practical objections which have been
urged to the adoption of this amendment as a part of the interstate
commerce law.
Should this amendment become a part of the law, it would be in the
power of any shipper, whether interested or not in the result, to
file a protest against the advance of the rate which under the
proposed amendment would at once suspend its going into effect,
and under the amendment offered in committee would place it in the
power of the commission to order its suspension, if a prima facie
case was presented in the protest. The shipper in filing a protest
assumes no responsibility, either as to the effect of his action
upon the carrier or liability in any way for cost accruing during
the proceeding. Considering the thousands of articles transported
by the carriers of the country, the hundreds of thousands of rates
published for the transportation of these articles, and the thousands
of shippers interested in their movement, some idea of the number of
protests that probably would be filed on the advance of rates can
be imagined. The burden that would be thrown upon the commission in
its effort to meet this responsibility would, as Judge Cooley well
remarked, require "superhuman" efforts on its part. He said:
"Moreover, an adjudication upon a petition for relief would in
many cases be far from concluding the labors of the commission
in respect to the equities involved, for questions of rates
assume new forms, and may require to be met differently from
day to day; and in those sections of the country in which the
reasons or supposed reasons for exceptional rates are most
prevalent the commission would, in effect, be required to
act as rate makers for all the roads and compelled to adjust
the tariffs so as to meet the exigencies of business while
at the same time endeavoring to protect relative rights and
equities of rival carriers and rival localities. This in any
considerable State would be an enormous task. In a country so
large as ours, and with so vast a mileage of roads, it would be
superhuman. A construction of the statute which should require
its performance would render the due administration of the law
altogether impracticable, and that fact tends strongly to show
that such a construction could not have been intended."
If the advance of rates was ultimately decided to be reasonable, the
carrier would have been deprived during the period of suspension of
the additional earnings to which it was entitled, and under such a
provision of law would be required to maintain, at enormous expense,
a large force of attorneys to answer and defend these protests. It
would confer upon the commission the powers now exercised by the
courts, and the jurisdictions over the same subject by both the
courts and the commission would necessarily produce conflict and
confusion.