& Youngstown Railway and 43 other carriers joined as plaintiffs, suing on behalf of themselves and others similarly situated. The United States alone was named as defendant. But the Interstate Commerce Commission and 10 New England carriers intervened as such and filed answers. The case was then heard, on application for an interlocutory injunction, by three judges, under the provisions of Urgent Deficiencies Act Oct. 22, 1913, c. 32, 38 Stat. 208, 219 (Comp. St. § 998). The full record of the proceedings before the Commission, including all the evidence, was introduced. The injunction was denied ([D. C.] 282 Fed. 306), and the case is here by direct appeal. Plaintiffs urge six reasons why the order of the Commission should be held void.

First. It is contended that the order is void, because its purpose was not to establish divisions just, reasonable, and equitable, as between connecting carriers, but, in the public interest, to relieve the financial needs of the New England lines, so as to keep them in effective operation. The argument is that Congress did not authorize the Commission to exercise its power to accomplish that purpose. An order, regular on its face, may, of course, be set aside if made to accomplish a purpose not authorized. Compare Southern Pacific Co. v. Interstate Commerce Commission, 219 U. S. 433. But the order here assailed is not subject to that infirmity.

Transportation Act 1920, introduced into the federal legislation a new railroad policy. Railroad Commission of Wisconsin v. Chicago, Burlington & Quincy R. R. Co., 257 U. S. 563, 585. Theretofore, the effort of Congress had been directed mainly to the prevention of abuses, particularly those arising from excessive or discriminatory rates. The 1920 act sought to insure, also, adequate transportation service. That such was its purpose Congress did not leave to inference. The new purpose was expressed in unequivocal language. And, to attain it, new rights,

The number of carriers named as respondents in the order entered by the Commission is 617. Only 44 of these originally joined as plaintiffs in this suit. One of these, the Illinois Central, withdrew; 39 intervened later as plaintiffs. Leading trunk lines- the New York Central, the Pennsylvania, and the Baltimore & Ohio - by which a large part of all traffic interchanged with the New England railroads was carried, acquiesced in the Commission's order.

8 Thus: To enable the carriers "properly to meet the transportation needs of the public, " section 422, p. 491; to give due consideration to "the transportation needs of the country, and the necessity . . . of enlarging [transportation] facilities," section 422, p. 488; to "best meet the emergency and serve the public interest," section 402, p. 477; to "best promote the service in the interest of the public and the commerce of the people." section 402, pp. 476, 477; "that the public interest will be promoted," section 407, p. 482.

new obligations, new machinery, were created. The new provisions took a wide range. Prominent among them are those specially designed to secure a fair return on capital devoted to the transportation service. Upon the Commission new powers were conferred, and new duties were imposed.

The credit of the carriers, as a whole, had been seriously impaired. To preserve for the nation substantially the whole transportation system was deemed important. By many railroads funds were needed, not only for improvement and expansion of facilities, but for adequate maintenance. On some, continued operation would be impossible, unless additional revenues were procured. A general rate increase alone would not meet the situation. There was a limit to what the traffic would bear. A 5 per cent. increase had been granted in 1914, The Five Per Cent. Case, 31 I. C. C. 351; Id., 32 I. C. C. 325; 15 per cent. in 1917, The Fifteen Per Cent. Case, 45 I. C. C. 303; 25 per cent. in 1918, General Order of Director General No. 28. Moreover, it was not clear that the people would tolerate greatly increased rates (although no higher than necessary to produce the required revenues of weak lines), if thereby prosperous competitors earned an unreasonably large return upon the value of their properties. The existence of the varying needs of the several lines and of their widely varying earning power was fully realized. It was necessary to avoid unduly burdensome rate increases and yet secure revenues adequate to satisfy the needs of the weak carriers. To accomplish this two new devices were adopted: The group system of rate making and

h Among them are the establishment of the Railroad Labor and the Adjustment Boards. Title III, pp. 469-474. See Pennsylvania R. R. Co. v. United States Railroad Labor Board, decided this day. The provisions for raising capital, by new government loans, section 210, pp. 468, 469; by loans from the railroad contingent fund (the recapture provision), section 15a (10, 16), pp. 490, 491; those placing the issue of new securities under the control of the Commission, unaffected by the laws of the several states, section 439, pp. 494-496; the provision for consolidation of railways into a limited number of systems, section 407, pp. 480-482; provisions for securing adequate car service, Lambert Run Coal Co. v. Baltimore & Ohio R. R. Co., 258 U. S. 377; for joint use of terminals; for routing; for interchange of traffic between railroads, and between a railroad and water carrier, section 402, pp. 476-478: section 405, p. 479; sections 412, 413. p. 483.

1 Section 422, pp. 488, 489. To this end, also, the Commission was empowered, among other things, to permit pooling of traffic or earnings, section 407, pp. 480, 481; to authorize abandonment of unprofitable and unnecessary lines, section 402, p. 477; Texas v. Eastern Texas R. R. Co., 258 U. S. 204; to fix minimum as well as maximum, rates; and thus prevent cut-throat competition and the taking away of traffic from weaker competitors, section 418, p. 485; to prevent the depletion of interstate revenues by discriminating intrastate rates, Railroad Commission of Wisconsin v. Chicago, Burlington & Quincy R. R. Co., 257 U. S. 563; New York v. United States, 257 U. S. 591; and to determine the division of joint rates.

the division of joint rates in the public interest. Through the former, weak roads were to be helped by recapture from prosperous competitors of surplus revenues. Through the latter, the weak were to be helped by preventing needed revenue from passing to prosperous connections. Thus, by marshaling the revenues, partly through capital account, it was planned to distribute augmented earnings, largely in proportion to the carrier's needs. This, it was hoped, would enable the whole transportation system to be maintained, without raising unduly any rate on any line. The provision concerning divisions was, therefore, an integral part of the machinery for distributing the funds expected to be raised by the new rate-fixing sections. It was, indeed, indispensable.

Raising joint rates for the benefit of the weak carriers might be the only feasible method of obtaining currently the needed revenues. Local rates might already be so high that a further increase would kill the local traffic. The through joint rates might be so low that they could be raised without proving burdensome. On the other hand the revenues of connecting carriers might be ample; so that any increase of their earnings from joint rates would be unjustifiable. Where the through traffic would, under those circumstances, bear an increase of the joint rates, it might be proper to raise them, and give to the weak line the whole of the resulting increase in revenue. That, to some extent, may have been the situation in New England, when, in 1920, the Commission was confronted with the duty, under the new section 15a, of raising rates so as to yield a return of substantially 6 per cent. on the value of the property used in the transportation service. Ex parte 74, Increased Rates, 1920, 58 I. C. C. 220.'

The deficiency in income of the New England lines in 1920 was so great that (even before the raise in wages ordered by the Railroad Labor Board) an increase in freight revenues of 47.40 per cent. was estimated to be necessary to secure to them a fair return. On a like estimate, the increased revenues required to give the same return to carriers in Trunk Line Territory was only 29.76 per cent. and to carriers in Central Freight Association Territory 24.31 per cent. To have raised the additional revenues needed by the New England lines wholly by raising the rates within New

There is evidence that the rate per ton per mile received by the New Haven from freight local to its lines was four times as high as the rate per ton per mile, under existing divisions, on freight interchanged by it with carriers west of Hudson river.

k What is known as Official Classification Territory comprises the three subdivisions. New England Freight Association Territory, Trunk Line Association Territory, and Central Freight Association Territory. See map, The Five Per Cent. Case, 31 I. C. C. 350.

England - particularly when rates west of the Hudson were raised much less might have killed New England traffic. Rates there had already been subjected (besides the three general increases mentioned above) to a special increase, applicable only to New England, of about 10 per cent. in 1918. Proposed Increases in New England, 49 I. C. C. 421. A further large increase in rates local to New England would, doubtless, have provoked more serious competition from auto trucks and water carriers. For hauls are short and the ocean is near. Instead of erecting New England into a separate rate group, the Commission placed it, with the other two subdivisions of Official Classification Territory, into the Eastern Group, and ordered that freight rates in that group be raised 40 per cent. At that rate level the revenues of the carriers in Trunk Line and Central Freight Association territories would, it was asserted, exceed by 1.48 per cent. what they would have received if they had been a separate group. It was estimated that the excess would be about $25,000,000. Substantially that amount (besides the additional revenue to be raised otherwise) was said to be necessary to meet the needs of the New England lines.

m

Plaintiffs insist that Transportation Act 1920, did not, by its amendment of section 15 (6) change, or add to, the factors to be considered by the Commission in passing upon divisions; that it had theretofore been the Commission's practice to consider all the factors enumerated in section 15 (6); that this enumeration merely put into statutory form the interpretation theretofore adopted; that the only new feature was the grant of authority to enter upon the inquiry into divisions on the Commission's initiative; that this authority was conferred in order to protect the short lines, which, because of their weakness, might refrain from making complaint, for fear of giving offense; and that the power conferred upon the Commission is coextensive only with the duty imposed on the carriers by section 400 of Transportation Act 1920, which declares that they shall establish "in case of joint rates . . just, reasonable, and equitable divisions thereof as between the carriers subject to this act participating therein which shall not unduly prefer or prejudice any of such participating carriers." It is true

1 Estimated on the volume of traffic moving in 1919.

m Citing Star Grain & Lumber Co. v. Atchison, Topeka & Santa Fé Ry. Co., 14 I. C. C. 364, 370; Manufacturers' Railway Co. v. St. Louis, Iron Mt., & Southern Ry. Co., 21 I. C. C. 304, 313: Investigation of Alleged Unreasonable Rates on Meats, 23 I. C. C. 656, 661; Class Rates from Chestnut Ridge Railway Stations, 41 I. C. C. 62; Western Pacific Co. v. Southern Pacific Co. 55 I. C. C. 71, 84. See Low Moor Iron Co. v. Chesapeake & Ohio R. R. Co., 42 I. C. Ć. 221.

a Citing H. R. No. 456, pp. 9, 10, 66th Congress, 1st Session; Conference Report No. 650, 66th Congress, 2d Session: MR. ESCH, 59 Cong. Rec. part 4, p. 3268; SENATOR ROBINSON, 59 Cong. Rec pt. 4, p. 3331.

that section 12 of the Act of June 18, 1910, c. 309, 36 Stat. 539, 551, 552 (Comp. St. § 8583), which first conferred upon the Commission authority to establish or adjust divisions, did not, in terms, confer upon the Commission power to act on its own initiative. The language of the act seemed to indicate that the authority was to be excised only when the parties failed to agree among themselves, and only in supplement to some order fixing the rates." The extent of the Commission's power was a subject of doubt, and Transportation Act 1920 undertook by section 15 (6) to remove doubts which had arisen. But Congress had, also, the broad purpose explained above. This is indicated, among other things, by expressions used in dealing with joint rates. By new section 15 (6), p. 486, the Commission is directed to give due consideration, in determining divisions, to "the importance to the public of the transportation services of such carriers"; just as by new section 15 (3), p. 45, the Commission is authorized upon its own initiative when "desirable in the public interest" to establish joint rates and "the divisions of such rates."

Second. It is contended that if the act be construed as authorizing such apportionment of a joint rate on the basis of the greater needs of particular carriers it is unconstitutional. There is no claim that the apportionment results in confiscatory rates, nor is there in this record any basis for such a contention. The argument is that the division of a joint rate is essentially a partition of property; that the rate must be divided on the basis of the services rendered by the several carriers; that there is no difference between taking part of one's just share of a joint rate and taking from a carrier part of the cash in its treasury; and, thus, that apportionment according to needs is a taking of property without due process. But the argument begs the question. What is its just share? It is the amount properly apportioned out of the joint rate. That amount is to be determined, not by an agreement of

• Power to establish through routes and joint rates had been conferred by section 4 of the Hepburn Act, June 29, 1906, c. 3591, 34 Stat. 584, 589 (Comp. St. § 8583).

P Compare Morgantown & Kingwood Divisions, 49 I. C. C. 540. The section was involved in Tap Line Cases. 234 U. S. 1, 28; O'Keefe, Receiver, v. United States, 240 U. S. 294, 300; Manufacturers' Railway Co. v. United States, 246 U. S. 457, 480, 483; Louisiana & Pine Bluff Railway Co. v. United States, 257 U. S. 114.

In thus making clear that in fixing divisions as well as rates the public interest should be considered, Congress doubtless had in mind expression to the contrary in opinions of the Commission. See Germain Co. v. New Orleans & Northeastern R. R. Co., 17 I. C. C. 22, 24; Board of Trade of Chicago . Atlantic City R. R. Co., 20 I. C. C. 504, 508; In re Divisions of Joint Rates on Coal. 22 I. C. C. 51, 53; Morgantown & Kingwood Divisions, 49 I. C. C. 540, 550.