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CHICAGO & EASTERN ILLINOIS R. v. UNITED STATES

United States District Court, Northern District of Illinois, E.D


November 7, 1974

CHICAGO & EASTERN ILLINOIS RAILROAD COMPANY ET AL., PLAINTIFFS,
v.
UNITED STATES OF AMERICA AND INTERSTATE COMMERCE COMMISSION, DEFENDANTS, AND BOARD OF TRADE OF THE CITY OF CHICAGO ET AL., INTERVENING DEFENDANTS.

Before Sprecher, Circuit Judge, Perry, Senior District Judge, and Marshall, District Judge.

The opinion of the court was delivered by: Per Curiam.

OPINION AND ORDER

This proceeding commenced on October 23, 1963, when the Board of Trade of the City of Chicago filed a complaint with the Interstate Commerce Commission, alleging that certain rates on soybeans maintained by four railroads*fn1 were unjust and unreasonable in violation of section 1(5) of the Interstate Commerce Act,*fn2 and were unduly prejudicial to Chicago and unduly preferential to Gulf ports in violation of section 3(1) of the Act.*fn3

When the complaint was filed in 1963, the rail carriers maintained rates on soybeans, when for export, from origins in central and southern Illinois to the port of Chicago on a level approximately 150 percent of the level of the rates on soybeans, when for export, from the same origins to Gulf ports, relative transportation services considered. The rates from southern Illinois to Chicago were actually higher in cents per 100 pounds than the rates to New Orleans although the distances to New Orleans averaged about two and one-half those to Chicago.

The initial report of the Commission Division 2, dated May 10, 1965, affirmed the finding of an administrative law judge that the export rates on soybeans to Chicago were not shown to be unjust and unreasonable under section 1(5), but found such rates unduly prejudicial to the port of Chicago and unduly preferential of the Gulf ports to the extent that the rates to Chicago were higher than the corresponding export rates on soybeans from the same origins to the Gulf ports. Board of Trade of the City of Chicago v. Illinois Central R.R. Co., 325 I.C.C. 412 (1965).

The proceeding was reopened for reconsideration by the Commission on its own motion. On March 13, 1967, the entire Commission affirmed the Division 2 findings. Board of Trade of the City of Chicago v. Illinois Central R.R. Co., 329 I.C.C. 529 (1967).

The Board of Trade and City of Chicago brought an action under 28 U.S.C. § 1336 to set aside, annul and enjoin the Commission's reports and orders of 1965 and 1967. The three-judge court required under 28 U.S.C. § 2325, vacated and remanded the Commission's orders on July 25, 1968, for failure to make adequate findings to justify its conclusions. City of Chicago v. United States, 291 F. Supp. 858 (N.D.Ill. 1968), aff'd per curiam, 394 U.S. 717, 89 S.Ct. 1457, 22 L.Ed.2d 672 (1969).

The Commission reopened the proceeding for further hearing, whereupon the record was updated by rate and statistical data. The Board of Trade sought rates on soybeans for export to Chicago based upon 7 percent of the docket No. 28300 first-class rates.

The Commission issued its current report and order on December 4, 1973. It concluded that "the assailed export rates on soybeans from central and southern Illinois to Chicago are not shown to exceed a maximum reasonable level in violation of section 1(5) of the act." Board of Trade of the City of Chicago v. Illinois Central R.R. Co., 344 I.C.C. 818, 830 (1973).

To support a finding of a violation of section 3(1), it must be shown (1) that there is a disparity in rates, (2) that the complaining party is competitively injured, actually or potentially, (3) that the carriers are the common source of both the allegedly prejudicial and preferential treatment, and (4) that the disparity in rates is not justified by transportation conditions. The complaining party has the burden of proving the presence of the first three factors and the carriers have the burden of justifying the disparity, if possible, in connection with the fourth factor. Big River Industries, Inc. v. Aberdeen & Rockfish R.R. Co., 329 I.C.C. 539 (1967).

(1) The Commission found that a disparity in rate levels existed. Relying upon its decision in Cudahy Packing Co. v. Akron, C. & Y.R. Co., 318 I.C.C. 229 (1962), it concluded that comparisons with docket No. 28300 first-class rates were proper inasmuch as "a class-rate structure affords a standardization of rate relationships, and . . . where an assailed misalinement [sic] of rates is shown to be unjustified, recourse may be had to such a structure to determine a proper basic relationship." Cudahy Packing Co., supra at 245. On this factor, the Commission concluded:

  The docket No. 28300 scale primarily reflects
  distance, but it gives proportionate effect to
  terminal expenses, so that the scale progresses
  at a slower rate as distance increases; in other
  words, the rate per mile is higher for shorter
  distances. Distance, other things being equal, is
  the best measure of the transportation service
  actually performed, recognizing, of course, that
  carriers are free to group points for rate
  purposes within reasonable limits.

344 I.C.C. at 833.

(2) The Commission noted that in 1968, 16.3 million bushels of soybeans moved through Chicago for export while in the same year 46.8 million bushels moved through New Orleans, and concluded that "the gulf ports and Chicago are in a competitive posture for export traffic from . . . [Illinois] origins, and we so find." Id. at 833.

(3) The Commission said that "[t]here is no dispute concerning the existence of common control . . . and we find that there is common control." Id. at 834.

(4) The Commission found "that there are insufficient differences in . . . [transportation] conditions and circumstances to justify the disparity in rates;" the fact that processors at central Illinois origins often outbid Chicago exporters for the soybeans are "[m]arketing practices . . . subject to change" and not a difference in transportation conditions; and the carriers "have not established that the disparity in rates here assailed is justified by different transportation conditions or circumstances. . . ." Id. at 835.

The Commission ordered the carriers to cease and desist from practicing further undue prejudice and preference and that they maintain and apply rates which will prevent and avoid the undue prejudice and preference found to exist. Id. at 837.

This action was brought by the railroads to set aside the Commission's December 4, 1973 report and order.

Where adequate findings supported by substantial evidence upon the record as a whole are made by the Commission, a reviewing court must affirm.*fn4 The Commission's findings are adequate and are supported by substantial evidence upon the record as a whole.

The complaint is dismissed and the Commission's report and order, 344 I.C.C. 818-51 are affirmed.


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