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CITY OF CHICAGO v. UNITED STATES

July 25, 1968

CITY OF CHICAGO AND BOARD OF TRADE OF THE CITY OF CHICAGO, PLAINTIFFS,
v.
UNITED STATES OF AMERICA AND INTERSTATE COMMERCE COMMISSION, DEFENDANTS.



Before Schnackenberg, Circuit Judge, and Perry and Will, District Judges.

The opinion of the court was delivered by: Will, District Judge.

OPINION

This is an action under the provisions of 28 U.S.C. sections 1336, 1398, 2284 and 2321-2325, and 5 U.S.C. § 1009, to set aside, annul, and permanently enjoin a report and order of the Interstate Commerce Commission (Commission), dated May 10, 1965, as amended, and a report and order dated March 13, 1967, both entered in a proceeding known as Docket No. 34348 Board of Trade of the City of Chicago v. Illinois Central Railroad Company, et al. The report and order of May 10, 1965 is reported at 325 I.C.C. 412, the order appearing on pages 421-422. The report and order of March 13, 1967 is reported at 329 I.C.C. 525, the order appearing on page 538.

At the time of the filing of the complaint before the Commission, the railroads who were defendants in the Commission proceeding, intervening defendants here, maintained rates on soybeans to Chicago, when for export, from origins in central and southern Illinois which, relative transportation services considered, were approximately 150 per cent of the level of the rates on soybeans to Gulf ports, when for export, from the same origins. From some origins in Southern Illinois, the rates to Chicago were actually higher in cents per 100 pounds than the rates to New Orleans, although the distances to New Orleans from such origins averaged about two and one-half times those to Chicago. The complaint of the Board of Trade of the City of Chicago (hereinafter sometimes referred to, with respect to the Commission proceedings, as the "complainant"), in which the Department of the Port of the City of Chicago intervened in support of the complainant, alleged that the rates maintained by the railroad defendants were unjust and unreasonable in violation of section 1(5) of the Interstate Commerce Act (the Act),*fn1 and were unduly prejjudicial to Chicago and unduly preferential of Gulf ports in violation of section 3(1) of the Act.*fn2

This case arose before the Commission upon the complaint of the Board of Trade of the City of Chicago, alleging that export rail rates on soybeans from Illinois origins to Chicago are unjust and unreasonable in violation of Section 1 of the Act, and are unduly prejudicial to Chicago and unduly preferential of Gulf ports in violation of Section 3(1). Interested parties intervened in support of both the complainant and the railroads, and hearings were held before an examiner of the Commission.

In his recommended reports and order, the Commission examiner concluded that the existing rates had not been shown to be unjust and unreasonable, but recommended that such rates be held to result in undue preference and prejudice, both where the rate to Chicago was higher than that to the gulf ports, and where it was lower.

On exceptions, Division 2 of the Commission agreed that complainant had failed to prove that the rates were unjust and unreasonable in violation of Section 1(5). In regard to Section 3(1), the Division concluded that the port of Chicago was entitled to rate parity with the Gulf ports, but had not shown that it was entitled to more favored rates. Accordingly, the Division held that undue prejudice to Chicago existed only where the rates were in fact higher than to the competing Gulf ports, and ordered the rates adjusted to eliminate the discriminatory treatment.

Petitions for reconsideration were denied by Division 2, acting as an Appellate Division, and a petition requesting that the case be found to involve an issue of general transportation importance was denied by the entire Commission. However, after the initial complaint had been filed with this Court, the Commission — with the consent of this Court — on its own motion reopened the proceeding for reconsideration on the existing record.

In its final decision, the entire Commission concluded that the rates had not been shown to be unjust and unreasonable, and that insofar as Chicago already enjoyed a rate advantage vis-a-vis the Gulf ports, complainant had failed to show that Chicago was under any undue prejudice. Any reduction in the rate to Chicago would, the Commission found, result in injury to the soybean processors located in central Illinois, putting them at a competitive disadvantage in foreign markets. The Commission further noted that under the rate level sought in the complaint, "the Gulf ports would be disadvantaged," and that this might well result in "creating a preferential situation in treating the one of which complaint is made" (329 I.C.C. at 535).

The relevant facts are that Illinois is the largest soybean producing state in the United States. Nearly one-fourth of the total national production emanates from Illinois. Seventy per cent of the Illinois production in turn is in central Illinois. The four railroads here involved serve 599 points of origin in central Illinois from which the average mileage to Chicago is 172 miles and the average mileage to New Orleans is 829 miles.

From the southernmost point of origin in Illinois, Cairo, the distance to Chicago is 365 miles and to New Orleans, 553 miles, the rate per hundredweight fixed by the Commission is 20.5¢ to both Chicago and New Orleans. From Marion, the respective distances are Chicago, 327 miles, New Orleans, 591 miles, and the rate fixed is 25.5¢ to both cities. Prior to the instant proceedings, the rate from Marion to Chicago was fixed at 36¢, that to New Orleans was, as it remains, 25.5¢. Centralia is 252 miles from Chicago, 666 miles from New Orleans, and the rate to both is 28.5¢. Prior to the Commission's action, the rate to Chicago was fixed at 32.5¢ while the New Orleans rate was then, as now, 28.5¢. Although Centralia is 113 miles closer to Chicago than Cairo, the rate from Centralia is 8¢ per hundred-weight higher than from Cairo. Centralia is 75 miles closer to Chicago than Marion, yet the rate is 3¢ per hundred-weight higher from the former. Decatur, which is 169 miles from Chicago and 749 miles from New Orleans, has been assigned a rate of 26.5¢ to Chicago and 38.5¢ to New Orleans. The same rates, 26.5¢ to Chicago and 38.5¢ to New Orleans, are provided for shipments from Champaign, 128 miles from Chicago and 790 miles from New Orleans; Gibson City, 110 miles from Chicago and 808 miles from New Orleans, and Gilman, 81 miles from Chicago and 837 miles from New Orleans. The most dramatic contrast in the rates is, of course, between Gilman to Chicago, a distance of 81 miles for which the rate is 26.5¢, or six cents more than the rate from Cairo to Chicago, a distance of 365 miles for which the rate is 20.5¢.

In contrast, the miles and rates to Chicago from points of origin generally north and west of those previously referred to are as follows: Pontiac, 106 miles, 15¢; Dixon, 114 miles, 13.5¢; Rockford, 87 miles, 13.5¢; Freeport, 114 miles, 15¢.

It is apparent from the foregoing that the rates approved by the Commission have at best a very remote relationship to services and mileage involved. Unfortunately, the Commission in its reports and orders, while concluding that this rate structure was just and reasonable and did not result in any undue prejudice or disadvantage, failed to elucidate any formula, philosophy or findings on which these conclusions ...


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