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tions by the Interstate Commerce Commission.

(2) They require the exercise of non-judicial
functions by the courts.

I. In the preceding statement of the limitations
of federal power the following principles were stated
as the result of the previous examination : ^

^ See page 225.



244 AMERICAN RAILROAD RATES

(i) Determining in a controversy the reasonableness
of an existing rate is a judicial function.

(2) Judicial and legislative functions cannot be com-
bined.

(3) Judicial functions can only be exercised by judges
holding their offices during good behavior and receiving
a compensation which cannot be diminished during their
continuance in office.

Applying these principles to the proposed meas-
ures, it seems clear that they are unconstitutional
because they attempt to confer judicial powers upon
the Interstate Commerce Commission. The Com-
mission is not a court. Its members hold office for
a limited term. It is vested with numerous non-
judicial powers which it could not exercise if it were
a court. Judicial powers cannot constitutionally be
conferred upon it. Now repeating the language of
the Supreme Court of the United States — "to in-
quire whether the rates which have been charged and
collected are reasonable — that is a judicial act. . . .
For more than a hundred years it has been the
affirmative duty of the courts to execute and en-
force the common law requirement that all charges
shall be reasonable and just." ^ Therefore, the
power to determine the reasonableness of charges
and to grant relief being a judicial power, it cannot
constitutionally be conferred upon or exercised by
the Interstate Commerce Commission, as contem-
plated in the proposed measures.

1 Maximum Rate Case, 167 U. S. Rep. 479, 501.



FEDERAL REGULATION OF RATES 245

It may be urged, however, that a finding by the
Commission under the proposed acts that rates are
unreasonable merely makes prima facie evidence of
that fact — that the whole question of reason-
ableness must finally be determined by the courts.
This clearly is not what the measures contemplate.
The Esch-Townsend bill provides for a revision of
the action of the Commission by the courts, but this
manifestly proceeds upon the theory that the deci-
sion of the Commission has binding effect until
reviewed and set aside. In fact the bill expressly
provides that the order of the commission making a
substitute rate shall " take effect and become oper-
ative thirty days after notice thereof." Now the
fact that a decision is subject to review makes it
nevertheless judicial. The decisions of most courts
are subject to review by a superior tribunal.

But it may be sought to differentiate between the
finding of unreasonableness and the order making
the substitute rate. It may be said that the order
is subject to review, but that the finding — like other
findings of the Commission — has only a probative
effect ; that it comes before the courts for enforce-
ment, not review. If this suggestion be well
founded one court might rule that the finding of
unreasonableness should not be enforced ; another
court might determine that the order making a new
rate should not be set aside. In this way a railroad
might be prevented by one court from charging a
rate found by another court to be entirely reason-



246 AMERICAN RAILROAD RATES

able and just. Manifestly, the finding and the order
— the one dependent upon the other — must be
considered together. And if the finding and order
be effective and operative until reviewed, the making
of the finding involves the exercise of a judicial
power, which cannot be exercised by the Interstate
Commerce Commission. If an attempt be made
to avoid this conclusion by making both the find-
ing and the order inoperative until enforced by
the courts, we have a measure which is not only
ineffectual, but which runs against the objection that
it directly requires the courts to exercise legislative
powers. We shall later notice this objection with
respect to the provisions for review, and it, of course,
applies with still greater force if the courts are called
upon to really make the rates. And even if this
were done it is not clear that the function of the
Commission, in passing upon the reasonableness of
a rate complained of, would not be judicial in its
nature. The question is a judicial question. It is
presented by interested parties. The decision of
the Commission, at the least, has the effect of
shifting the burden of proof upon a complex ques-
tion. The function of the Commission in the
matter clearly is not legislative or executive. If it
be not judicial what is it ? Some of the books call
it quasi-judicial; but the word "quasi'' is often
used merely to cover a doubt.

But there is another and more serious objection
to our claim that the proposed measures are uncon-



FEDERAL REGULATION OF RATES 247

stitutional. It may be said that while determining
the reasonableness of an existing rate may be a
judicial, it may also be a legislative, function. And
it must be admitted that this is true. The exercise
of legislative power always involves a determination
that action is required. If Congress were to under-
take the making of new rate schedules it might well
inquire whether existing charges were just and
reasonable and required change. Similarly power
might be conferred upon the Interstate Commerce
Commission to make any changes in rates which in
its judgment were conducive to reasonable charges.
Notice and hearing would not be necessary, because
not essential to legislative action. If any hearing
were had it would be for the purpose of obtaining
information for general action and not for affording
relief in particular cases. But no such procedure
is contemplated in the proposed measures. The
Esch-Townsend bill only authorizes the Com-
mission to act upon complaint of a party aggrieved
and after a full hearing.^ The Interstate Commerce

1 Under the Esch-Townsend bill the Interstate Commerce Com-
mission can act only " upon complaint duly made under section
thirteen of the Act to regulate commerce." The section referred
to reads as follows : "That any person, firm, corporation, or associa-
tion, or any mercantile, agricultural, or manufacturing society, or any
body politic or municipal organization complaining of anything done
or omitted to be done by any common carrier subject to the provisions
of this act in contravention of the provisions thereof, may apply to
said Commission by petition, which shall briefly state the facts,
whereupon a statement of the charges thus made shall be forwarded
by the Commission to such common carrier, who shall be called upon



248 AMERICAN RAILROAD RATES

Commission in its last report^ said with respect to
the proposed procedure : " After service of com-
plaint upon the carrier or carriers, after full hearing
of each carrier and shipper interested, and careful
investigation, a report and opinion would be ren-
dered, and if the decision should be against the
carrier an order would be entered directing it to
cease and desist from charging the rate complained
of, and to substitute therefore a rate found, upon the
evidence before the Commission to be reasonable
and just. This procedure is essentially judicial in
character and form y

The procedure outlined by the Commission and
required by all the proposed measures conferring
additional powers upon it is essentially judicial. All
the forms of legal controversies are present: (i) the
complaint, (2) the notice to the adverse party, (3)
the hearing, (4) the judgment. The fact that a
decision of the Commission finding that an existing
rate cannot longer be charged because it is unreason-
able may be far-reaching and affect other persons

to satisfy the complaint or to answer the same in writing within a
reasonable time, to be specified by the Commission. If such com-
mon carrier, within the time specified, shall make reparation for the
injury alleged to have been done, said carrier shall be relieved of lia-
bility to the complainant only for the particular violation of law thus
complained of. If such carrier shall not satisfy the complaint within
the time specified, or there shall appear to be any reasonable ground
for investigating said complaint, it shall be the duty of the Commis-
sion to investigate the matters complained of in such manner and by
such means as it shall deem proper."

^ Report of Interstate Commerce Commission, 1904, p. 8.



FEDERAL REGULATION OF RATES 249

than the particular complainant, does not render it
non-judicial. Such is often the effect of judicial
decisions. Nor does the fact that the Commission
might be empowered to act in a non-judicial way
— to inquire Into the reasonableness of existing
rates merely for the purpose of obtaining Informa-
tion upon which to base future charges — change
the character of Its act when It is authorized to
exercise a judicial function in a judicial way.

n. The second reason why the proposed meas-
ures of rate regulation are unconstitutional Is that
they impose non-judicial functions upon the courts.
The various bills suggested contemplate a judicial
review of the action of the Interstate Commerce
Commission. The Esch-Townsend bill provides
that after the order of the Commission making a
new rate is entered, proceedings may be Instituted in
a special court of transportation " to have it reviewed
and its lawfulness, justice, or reasonableness inquired
into and determined." These provisions for re-
view by the courts are essential features of the pro-»
posed measures ; and without which they could not
have received anything like the support given them.
A fundamental idea of the proposed legislation has
been the judicial review of the action of the Commis-
sion. And yet it seems clear that the courts cannot
exercise the proposed power of review and that It
cannot constitutionally be conferred upon them.
Let us recur to the principles which we have already
found established :



250 AMERICAN RAILROAD RATES

(i) Making rates for the future is purely a legisla-
tive function}

(2) Rates made by Co7igress directly or through a
commission have the force of law. Making a rate in
effect is making a law that such shall be the rate.

(3) Law-made rates only conflict with the Fifth
Amendment when they deprive the railroad of its prop-
erty without just compensation or due process of law^
i. e. when they are confiscatory.

(4) Schedules of rates may be confiscatory. Theoreti-
cally^ individual rates may be; practically, they cannot be?

Applying these principles to the proposed meas-
ures their unconstitutionality is apparent. It seems
impossible to draw a constitutional statute confer-
ring upon a court power to review upon the facts
the action of the Interstate Commerce Commission
in making a rate. The courts could not make a
rate, for rate-making is not and cannot be a judicial
function. They cannot supervise the action of the
Commission for precisely the same reason. There
is no difference in principle between making a rate
and reviewing, upon its merits, the action of a com-
mission in making a rate. In both cases the exercise
of legislative, not judicial, discretion is required. A
statute requiring the courts to participate directly or
indirectly in making rates for the future would impose
non-judicial functions, and would be unconstitutional.

To repeat what we have already pointed out —
it cannot be too clearly borne in mind that while

1 See page 224. ^ See p. 226.



FEDERAL REGULATION OF RATES 251

the courts can determine the reasonableness of a car-
rier's charges, they cannot, in the same way and from
the same point of view, determine the reasonableness
of commission-made rates. When a rate is made by
a commission under a law it has the effect of a law
which the courts can only review upon constitutional
grounds. The distinction is between the reasonable-
ness of a charge and the reasonableness of a law.

But it may be said that the courts always have
examined rates made by commissions to determine
whether they are reasonable, and decisions of the
Supreme Court of the United States may be pointed
out where the enforcement of commission-made
tariffs has been enjoined because the rates were un-
reasonable. But, as we have already seen, the word
" unreasonable " in the sense of these decisions means
confiscatory. The only ground upon which the
courts could interfere with rates made by the Inter-
state Commerce Commission would be that they
violated the Fifth Amendment of the Constitution
— that they deprived the railroad of its property
without just compensation or due process of law.
And they could only have that effect when they
were confiscatory.

It is sometimes urged, however, that if rates
made by a commission are declared to be merely
prima facie reasonable that the courts may be em-
powered to review them.^ But this runs against

^ It has been held that a statute authorizing a commission to prescribe
charges to have the effect of prima facie evidence of reasonable rates



252 AMERICAN RAILROAD RATES

our first objection, that the rate-making power
cannot be exercised, directly or indirectly, by the
courts. There seems to be no escape from these
two conclusions :

( 1 ) The courts can only interfere with commission-
made rates when they are confiscatory ;

(2) Supervisory power over future rates made by
a commission cannot be conferred upon the judiciary
because it is non-judicial.

Morever, the constitutional protection against
confiscatory rates is practically applicable only to
tariffs in the whole or substantial part. Even if
a commission make an individual rate extremely
low it can rarely be declared confiscatory. The
railroad may have an ample income from other
rates. It does not follow from the fact that a
commission reduces one charge that it is going to
reduce others. Railroads themselves often reduce
particular rates for particular reasons. As a practi-
cal matter it is difficult to see how any measure
whatever of judicial review can be provided for
individual rates fixed by a commission. The situa-
tion should be fairly faced, that judicial review of
rates must take place, if at all, before and not after

in suits involving the question whether a charge made by a railroad is
reasonable is constitutional. (Chicago etc. R. Co. 'v. Jones, 149
111. Rep. 361.) Such a statute, however, has merely the' effect of
shifting the burden of proof upon the railroad. It may make its own
rates, regardless of the action of the commission, but must justify them
when questioned. The rate reviewed by the courts is that of the
railroads and not that of the commission.



FEDERAL REGULATION OF RATES 253

the action of a commission having rate-making
power.

in. Other measures of rate regulation — ehmi-
nating any rate-making commission — have also
been proposed. Thus while recognizing that rate-
making is a legislative function it has been sug-
gested that in case a complaint be made to a court
that a given charge is unreasonable the court may
enjoin the collection of anything in excess of a
reasonable rate. But what the courts cannot do
directly they cannot accomplish by indirection. A
carrier may be enjoined from collecting an unrea-
sonable charge for a particular service, but the courts
cannot go further and determine what a reasonable
charge would be, and enjoin the collection of more
than that in the future. This would be equivalent
to exercising the legislative power of making future
rates.^

But the suggestion goes further. It is said that
Congress might pass a law requiring the courts,
when determining that an existing rate is unrea-
sonable, to go further and find what would be
a reasonable charge for the particular service, and
that thereupon the rate so found should be the
future charge. In such a case the finding would
merely furnish a basis for the operation of the

^ In so far as the case of Janvrin, 174 Mass. Rep. 514, is in con-
flict with the principle stated in the text, it seems opposed to the weight
of authority. It is not believed that the power to make future rates,
whether with regard to interests before the courts or not, can be exer-
cised by the judiciary.



254 AMERICAN RAILROAD RATES

statute. The rate for the future would take effect
by virtue of the act of Congress and not of the
finding of the court. Such a law would undoubt-
edly be constitutional with respect to the operation
of the rate found by the court. Congress could
declare that rates fixed by the courts should be
the future charges. But it is not so clear that the
courts could be required to furnish the basis for
the operation of the statute. Only in the case
of a suit for the recovery of excessive charges paid
to the carrier is there any necessity for a finding
of reasonableness after a finding of unreasonable-
ness. The courts might enjoin the collection of
a rate of one dollar as an unreasonable charge.
There would be no necessity for determining whether
eighty or ninety cents would be reasonable. While
the courts, in determining that a charge is unrea-
sonable, undoubtedly go through the process of
determining what is reasonable, there is no neces-
sity, for the purposes o^ 2i judicial decision, for them
to record such process. The determination of a
reasonable rate in the plan suggested would be for
the sole purpose of furnishing the basis for the
operation of the statute. The courts would really
be taking the first step in making a rate. They
would be called upon to exercise a function not
clearly judicial, because not essential to a judicial
decision. It seems probable that they would de-
cline to exercise it.

We have now seen that any effective regula-



FEDERAL REGULATION OF RATES 255

tion of rates requires that after an existing charge
has been declared unreasonable another should be
substituted in its place for the future. ^

J^ , Form addi-

We have also seen that the function of tionai legis-

, ... , , f. lature can

determining the reasonableness or rates and ought
in a controversy between shipper and
carrier is judicial ; while the function of making a
new rate is purely legislative. We have further
seen that judicial and legislative powers cannot be
granted to one tribunal.

It follows, therefore, that any effective measure
of relief requires the progressive action of two
tribunals :

(i) The judicial question of the reasonableness
of the rate complained of must be determined.

(2) If a rate be judicially found to be unreason-
able the legislative power of making a new rate
should be administered.

There is no difficulty in outlining a plan of pro-
cedure for the determination of the necessary ques-
tions in an orderly and speedy way — a plan which
steers clear of all possible constitutional questions
and which, in its essence, is merely a reversal of
the procedure of the proposed measures.

First. A special court should be created in ac-
cordance with the constitutional provisions concern-
ing the federal judiciary. Complaints made by
persons aggrieved — or in their behalf by a public
official or board — that specific railroad rates upon
interstate traffic are unreasonable and unjust should



256 AMERICAN RAILROAD RATES

be presented to this court. After speedy notice to
the carrier the court should summarily inquire into
the reasonableness of the rate complained of. If
found reasonable, the complaint should be dis-
missed ; if found unreasonable, the court should
enjoin its further collection. This would end the
function of the court.^

Second. In case a rate were found unreasonable all
the papers in the case, together with the evidence,
should be certified to the Interstate Commerce Com-
mission which should be empowered, upon an inspec-
tion of the papers, to then make a maximum rate
to take the place of that found unreasonable by the
court.^ The rate prescribed should remain in force
a prescribed time but should be subject to modifica-
tion bythe Commission. No hearingbeforethe Com-
mission would be necessary or expedient. Speedy
action would be possible and should be required.^

^ While a special court would for many reasons be more desirable,
the same procedure could be provided for by a simple amendment of
the Elkins law authorizing the circuit courts of the United States to
pass upon the reasonableness of rates made by carriers and to enjoin
those found unreasonable, just as they pass upon questions of discrim-
ination under that law, and according to the same summary course of
procedure.

' The Commission should only be empowered to fix maximum
charges. Rigid rates which could not be reduced when occasion
required would operate prejudicially to the railroad and would be of
no corresponding advantage to shippers. It is true that maximum
rates leave the railroad power to reduce charges to some shippers and
not to others. Discriminations, however, can be effectively dealt
with in another way.

8 The Commission might be authorized to itself present the com-



FEDERAL REGULATION OF RATES 257

The advantages of this method of procedure are :
(i) It avoids all constitutional and legal objec-
tions. The principle that rates shall be reasonable
and just being embodied in a federal statute, pro-
ceedings to enforce the principle present a contro-
versy under the laws of the United States cognizable
before the federal courts and which Congress could
create a special court to determine/ The court
when created would exercise a strictly judicial func-
tion in passing upon the reasonableness of the rate.
The Commission would then act entirely within its
own province in making the new rate.

(2) It follows a natural course. We have seen
that it is inexpedient that any commission should
have the initiative in rate-making — that new rates
should only be made when existing charges have
been found to be unjust. Action by the court then
must precede action by the Commission. After the
Commission has acted there is nothing to review
except the constitutionality of its act.

(3) It is the only way in which there can be any
action by the courts with respect to changes in

plaint of the unreasonableness of the rate to the court. In this way
the Commission would be apprised of tlie nature of the case from the
beginning, and would be able to make the substitute rate following
the decision of the court with extremely little delay. The objection
to this procedure is, however, that often made to other measures,
that the Commission should not be required to act in inconsistent
capacities — that having acted as prosecutor it could not approach the
rate-making function with the strict impartiality required.
1 See Tift v. Southern R. Co., 123 Fed. Rep. 790.

17



258 AMERICAN RAILROAD RATES

rates. Proposals for the review of the doings of
the Commission cannot fail to prove illusory. If a
judicial check to rate-making by the Commission
be expedient it must be afforded by determining
the necessity for changes before they are made, and
not by setting them aside afterwards.

(4) It would be as expeditious as any other
method. Procedure could readily be devised for
speedily bringing on causes for hearing before the
court. There should be no more delay in obtain-
ing the determination of the reasonableness of a rate
before a court than before the Commission — es-
pecially before a court created to determine such
matters. The Commission in making the substi-
tute rate should be required to act with expedition.
When the Commission acts the matter is ended.
Of course, if the rate made by the Commission be
confiscatory the railroad has, and should have, its
remedy — but this is true in the case of any rate made
by any commission or by Congress itself But, as
we have seen, it is seldom that an individual rate
can be confiscatory.

(5) It is fair to both shipper and railroad. The
shipper can only expect that new rates will be made
when the old ones are unreasonable. He must be
satisfied with the decisions of the courts — the tri-
bunals appointed to settle controversies. The car-
rier cannot find fault that the courts pass upon the
reasonableness of charges. They have always had
and exercised that power. When the railroad has



FEDERAL REGULATION OF RATES 259

been found to make an unreasonable charge, It is
not for it to complain that the legislature then steps
in and says through its commission what the charge
shall be in the future. Such a limited exercise
of the rate-making power cannot be prejudical to
any interest, and cannot fail to be effective in grant-


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Online LibraryWalter Chadwick NoyesAmerican railroad rates → online text (page 16 of 17)