292 U.S.

498
54 S.Ct. 792
78 L.Ed. 1388

STATE OF OHIO et al.

v.
UNITED STATES et al. UNITED STATES et al. v. STATE OF
OHIO et al.
Nos. 868, 886.
Argued May 8, 1934.
Decided May 28, 1934.

Appeals from the District Court of the United States for the Southern
District of Ohio.
[Syllabus from 499 intentionally omitted]
Mr. John W. Bricker, of Columbus, Ohio, for appellant State of Ohio.
Mr. Ernest S. Ballard, of Chicago, Ill., for appellants Eastern Ohio Coal
Operators Ass'n et al.
Messrs. Clan Crawford and Andrew P. Martin, both of Cleveland, Ohio,
for appellant Wheeling & Lake Erie Ry. Co.
Mr. H. Austin Hauxhurst, of Cleveland, Ohio, for appellant Empire Sheet
& Tin Plate Co.
The Attorney General and Mr. J. Stanley Payne, of Washington, D.C., for
appellees United States and Interstate Commerce Commission.
Mr. August G. Gutheim, of Washington, D.C., for appellees Western
Pennsylvania Coal Traffic Bureau et al. and Public Service Commission
of Commonwealth of Pennsylvania.
Mr. Alexander M. Bull, of Washington, D.C., for appellees Robert C. Hill
et al., receivers of Consolidation Coal Co. et al.
Mr. Guernsey Orcutt, of Pittsburgh, Pa., for appellees Pennsylvania R. Co.

et al.
Mr. Justice ROBERTS delivered the opinion of the Court.

These are appeals from orders of a statutory court of three judges, convened in
the Southern District of Ohio, in two suits, one brought by the state of Ohio and
the Public Utilities Commission of Ohio, and the other by the Wheeling & Lake
Erie Railway Company against the United States and the Interstate Commerce
Commission, to enjoin and set aside two orders of the commission. The suits
were consolidated for trial. The first of the commission's orders, that of May 2,
1933, required the increase of Ohio intrastate rates on bituminous coal from
certain mining districts in Eastern and Southern Ohio to destinations in the
northeastern portion of the state. The second order, that of May 9, 1933,
required the rates prescribed by the first to be increased by the amount of the
surcharge authorized upon interstate rates on bituminous coal in the Fifteen Per
Cent Case, 1931, 178 I.C.C. 539, 179 I.C.C. 215, and 191 I.C.C. 361. While the
causes were under submission, the period during which the surcharge was
authorized expired, and it was discontinued. The court, therefore, refrained
from any adjudication as to the order of May 9, 1933, and no issue is here
raised concerning it.

The court granted preliminary injunctions, but after a hearing on the merits,
dissolved them and dismissed the bills. It, however, stayed the operation of the
order of May 2, 1933, for a period of sixty days, so that the plaintiffs might
perfect an appeal to this Court. Upon the allowance of an a peal (No. 868) the
defendants took a cross-appeal (No. 886) assigning as error the entry of the stay
order. By decree of February 12, 1934 (291 U.S. -, 54 S.Ct. 452, 78 L.Ed.
-), the stay was vacated. The appeal in No. 886 will, therefore, be dismissed
as moot.

The commission's order of May 2, 1933, requiring the rates intrastate from
points in Southern and Eastern Ohio to destinations in Northeastern Ohio, on
bituminous coal in carload lots, to conform to those in effect prior to June 30,
1932, was entered under section 13(3) and (4) of the Interstate Commerce Act.1
The commission found that the reduced rates put into effect on the intrastate
traffic in question as a result of orders or permission of the Public Utilities
Commission of Ohio were unduly preferential of persons and localities in Ohio,
unduly prejudicial to persons and localities without the state, and that they cast
an undue revenue burden upon interstate commerce.

The appellants, conceding the commission's power under section 13(3) and (4)

of the act (Florida v. United States, 282 U.S. 194, 208, 51 S.Ct. 119, 75 L.Ed.
291; United States v. Louisiana, 290 U.S. 70, 54 S.Ct. 28, 78 L.Ed. 181; Florida
v. United States, 292 U.S. 1, 54 S.Ct. 603, 78 L.Ed. -), claim the dismissal of
the bills was erroneous for these reasons: (1) The commission did not afford
them the full and fair hearing to which they are entitled by section 13 of the act.
(2) There is no evidence to support the finding that restoration of the state rates
to their former level was required to avoid undue preference and prejudice
between persons and localities. (3) The commission exceeded its authority in
requiring the state rates to be raised, without first having found reasonable, or
made reasonable, all substantially competitive interstate rates to the same
destinations.
5

The District Court held the order justified by reason of undue preference and
prejudice, but did not pass upon the lawfulness of the commission's action in
respect of revenue discrimination. We hold the decision of the court was right
and we need not discuss the arguments presented as to revenue burden.

The litigation does not involve state-wide rates, but only those on bituminous
coal in carloads from producing fields in Ohio to destinations in that portion of
the state lying northwardly of a line drawn east and west through Columbus,
and eastwardly of a line drawn north and south through Galion and Sandusky
and Columbus. The latter territory is highly industrialized, and great quantities
of coal are there consumed for manufacturing and domestic purposes. This
comes from the producing districts in Eastern Ohio and from those to the east
and south in Pennsylvania, West Virginia, Kentucky, and adjoining states. The
rates are group rates from each mining district; all mines within a single district
enjoying the same rate to a given destination. As found by the court below,
prior to August 1, 1932, there was maintained what it described as 'a finely
balanced and nicely adjusted schedule of interstate and intrastate rates on
bituminous coal from the Western Pennsylvania, Northern West Virginia, and
Ohio coal mining districts, to Northeastern Ohio, with fixed differentials which
have been regarded as essentially reasonable, in view of all the elements which
must be considered in rate making.' These differentials had been maintained
long prior to the year 1932; the rates being based upon that from the Pittsburgh
district to Youngstown. With that rate fixed those from more remote producing
districts, such as Connellsville, immediately south of the Pittsburgh district, and
Fairmont, south of Connellsville, in Northern West Virginia, were made by
adding a differential; and rates to Cleveland and other more distant destinations
also by adding a differential.

In 1932 the Ohio Commission ordered a reduction in the rates from two Ohio
producing districts (Middle-Massillon and Ohio No. 8) to Canton and to

Massillon. ' Thereafter the Wheeling & Lake Erie Railway sought and
8
obtained
permission to extend the reductions to other destinations. The result was
lowered scales to important coal consuming points such as Cleveland and Lorain.
The New York Central, the Pennsylvania, the Baltimore & Ohio, and the Pittsburgh
& West Virginia, as well as the Wheeling & Lake Erie, serve the Ohio producing
territory. They resisted the proposed reductions of the Wheeling & Lake Erie, but
without success. In order to meet competition, they reduced the rates between No. 8
District in Ohio and Northeastern Ohio destinations. Thereafter, in order to preserve
rate relationships, the Ohio Commission compelled reductions from mines in the
Cambridge, Hocking, and Pomeroy districts. Thus, by November 1, 1932, all of the
intrastate rates between origins in Ohio and destinations in the territory above
mentioned had been substantially lowered. This threw out of relation the interstate
rates from the Freeport, Pittsburgh, Connellsville, and Fairmont districts.
9

Several proceedings before the Interstate Commerce Commission resulted. In

September and October, 1932, twelve carriers serving the Ohio districts and
other origin territory in Pennsylvania, Maryland, and nearby states complained
that the reductions gave an undue advantage and preference to persons and
localities in Ohio to the prejudice of persons and localities outside the state, and
charged also unreasonable and unjust discrimination against, and undue burden
upon, interstate commerce. The commission ordered an investigation, and
named as respondents all railroads operating in Ohio subject to its jurisdiction.
Subsequently four complaints were filed on behalf of operators of mines in
Pennsylvania, Maryland, and West Virginia. These alleged that the reduced
Ohio rates in their relation to interstate rates were unduly preferential of Ohio
shippers and localities, and unduly prejudicial to interstate shippers and
localities, and unjustly discriminated against interstate commerce. Three of the
complaints asserted that the interstate rates to Northeastern Ohio from mines in
the Pittsburgh, Freeport, Connellsville, and Fairmont districts were
unreasonable and in violation of section 1 of the Interstate Commerce Act (49
USCA 1). After the Ohio rates were reduced the P. & W. Va. Railroad
lowered its rates from the Pittsburgh district. The commission suspended these
rates, but by a subsequent order permitted their continuance subject to further
investigation. The complaint cases and the investigation and suspension case
against the P. & W. Va. Railroad were consolidated with the thirteenth section
investigation and heard upon a single record.

10

The commission found that Northeastern Ohio is served principally by the

Pennsylvania, New York Central, Baltimore & Ohio, Wheeling, and Nickle
Plate-Erie systems; that all of these carriers participate in the rates and
transportation of bituminous coal from the Ohio mines and mines in

Pennsylvania, West Virginia, and other states, to the same destination, and that
there is a large movement of coal from the Ohio, Pennsylvania, and West
Virginia mines to Northeastern Ohio. From the record it concluded that coal is
transported from the Ohio mines to the destinations in question 'at intrastate
rates which are generally substantially lower, distance considered, than are the
reasonable interstate rates herein provided, under which such coal is moved to
such destinations from Pennsylvania and West Virginia'; and that 'this disparity
in rates is greater than is warranted by differences in transportation conditions
from the Ohio mines on the one hand and the Pennsylvania and West Virginia
mines on the other.'
11

There was evidence in substantial volume bearing upon the issue of the
reasonableness of the existing interstate rates from the Freeport, Pittsburgh,
Connellsville, and Fairmont districts to the destination territory involved. Much
evidence was adduced as to rates approved by th commission in other
proceedings for approximately similar hauls, under similar transportation
conditions. The Wheeling & Lake Erie introduced a cost study, and the state
and other parties produced evidence as to coal rates in Illinois, fixed by the
commission, and a comparison of the conditions in that territory and those
found in Ohio, all for the purpose of demonstrating that the reduced Ohio rates
were maximum reasonable rates. There was evidence in opposition to this
contention. The testimony showed that coal had moved freely from all
producing areas, intrastate and interstate, under the old rates, and tended to
prove that the unbalancement of the relation between the state and interstate
rates had retarded and prohibited the shipment of a large quantity of coal from
the other states to Northeastern Ohio. The commission in its report discusses
this evidence in detail, and, based upon it, makes findings to the effect that the
interstate rates from the Freeport, Pittsburgh, Connellsville, and Fairmont
districts are reasonable; the system of differentials between the nearer state
origins and the more remote interstate origins is proper, distance and other
conditions considered; the reduced state rates are unduly preferential of persons
and localities in Ohio and unduly prejudicial to persons and localities in the
Freeport, Pittsburgh, Connellsville, and Fairmont districts; and in order to
remove the undue discrimination between persons and localities the intrastate
rates should be increased to the former level, and the pre-existing interrelationship re-established.

12

1. The assertion that appellants were denied a fair hearing rests not upon any
refusal to receive evidence tendered, but upon the commission's alleged
misconception of the rules as to burden of proof. It is said that from the outset
the commission acted upon a presumption that the reduced Ohio rates were
unlawful and cast on the appellants the burden of overcoming it by a

preponderance of proof impossible of production. This complaint is founded

upon a portion of the opening sentence of the report and two sentences near its
close and by an analysis of the remainder of the report intended to show that
the commission gave too little weight to appellants' evidence and too much to
that in opposition. On examination of the record, the report, and the findings,
we are satisfied there is no adequate foundation for the contention. The
excerpts from the report which are cited, when read in their context, indicate
only that the commission intended fairly to inquire with respect to the
lawfulness of the attacked rates and, after evaluating all the proofs on both
sides, concluded that the preponderance was heavily against the appellants. The
hearing was fair.
13

2. Untenable, also, is the position that there was no sufficient evidence to

support the finding of preference and prejudice. We agree with the District
Court that the proof of discrimination against interstate shippers and localities
was convincing. Upon the issue whether the preference and prejudice was
undue, that is, whether the interstate rates were reasonable, whether the
attacked intrastate rates were reasonabe maxima, and what the proper
relationship between the two scales shold be, a large amount of evidence was
taken and considered in detail. There was ample support for each of the
findings. In effect, we are asked to re-examine the evidence, appraise it, and
hold the commission erred in its judgment as to the facts. We have often said
that we have no such power.

14

3. The claim is that the commission exceeded its authority in requiring state
rates to be raised without having found or made reasonable all substantially
competitive interstate rates. This contention requires the statement of certain
matters in addition to those above recited. As we have seen, the coal which
reaches Northeastern Ohio comes from mines within and without the state.
Those within Ohio are grouped in eight origin districts lying in the eastern and
sou hern portions of the state. Those without Ohio lie in two rough arcs known
as the inner and outer crescents. The inner includes the Pittsburgh district in
Western Pennsylvania contiguous to the Ohio river, the Connellsville
immediately to the south, the Fairmont to the south of that, and eleven others to
the southwestward through Northern West Virginia, Eastern Kentucky and
Tennessee. The outer crescent is composed of districts extending in a wider are
eastward and southward of the inner crescent from the Altoona in Pennsylvania
at the northeastern extremity to the Rathburn in Southern Tennessee at the
southwestern extremity.2

15

The mines in each district enjoy the same rate to a single destination, but the
rates from the more remote districts are higher than those from the Ohio

districts and from the more northerly districts in the inner crescent. In the
proceedings before the commission the only attack upon the reasonableness of
interstate rates was leveled at those from the Pittsburgh, Connellsville, and
Fairmont regions. The complainants did not plead or offer proof that the rates
from the more southerly districts in the inner crescent, or from those in the
outer crescent, were unreasonably high. Nor did the appellants, who were
respondents before the commission, assert or attempt to prove that they were
too low. These rates were put in evidence by the appellants, but only for the
purpose of showing, by comparison of the ton-mile earnings under them, that
the reduced Ohio rates were reasonable maxima.
16

The argument is that by confining its investigation of the reasonableness of the

interstate rates to those from the Freeport, Pittsburgh, Connellsville, and
Fairmont origins and neglecting to investigate the reasonableness of those from
the inner and outer crescents generally, the commission exposed intrastate
commerce to unjust discrimination in relation to competitive interstate
commerce originating in the inner and outer crescents. Support for the
argument is drawn from the assertion first, that the existing interstate rates from
the crescents are lower than those from the Ohio mines, and, secondly, that the
entire crescent adjustment has always been made and regulated so as to
represent a reasonable average level, and therefore any consideration of the
Ohio rates should rest upon a comparison of the average reasonableness of the
entire interstate adjustment.

17

The appellants fail to call attention to anything in the record which supports
either of these statements, and we have been unable to find anything of the sort.
The fact is that the rates from the southern inner and from the outer crescent
territory are much higher than those from Ohio mines, and considerably in
excess of those from the Freeport, Pittsburgh, Connellsville, and Fairmont
districts. It is undoubtedly true that the former show lower earnings per tonmile than the latter. This, however, is in entire accord with the theory of rate
making, namely, that the longer haul may be expected to yield a lower ton-mile
return. But entirely apart from this, the record not only does not disclose that
the entire adjustment of interstate rates from the Appalachian district is upon an
average basis, but shows the contrary. Coal moves from Ohio origins and from
both the crescents to destinations in territory other than the destination area
here involved. Rates upon these movements have been the subject of repeated
investigations by the commission. Examination of the record and of the various
proceedings with respect to these interstate rate adjustments discloses that there
are four major adjustments on northwestward-bound coal from Ohio and the
crescents. One is the lake cargo go adjustment, applicable on coal moving to
lower Lake Erie ports for transshipment by water. The rate from any origin

district is the same to all ports to hich rates are published, but there are
differentials in favor of Ohio origins and against inner and outer crescent
districts.3 A second embraces rates to Northwestern Ohio, Northeastern
Indiana, and the southern peninsula of Michigan. The third is to territory west
of that just mentioned, in which Chicago is a typical destination point. To the
destination territory covered by the last-mentioned areas the adjustments are
similar, though the differentials from various points of origin are not the same.
Five of the Ohio districtsNo. 8, Cambridge, Hocking, Pomeroy, and Jackson
have the same rate to any given destination; the other Ohio districts take
differentials under the rates from the former. All inner crescent districts have
the same rate to a given destination. It is 50 cents over the Hocking rate to a
destination in the first mentioned territory, and 35 cents over the Hocking rate
to Chicago. The outer crescent has differentially higher rates than those
applicable to the inner. The base rate for these two adjustments is the rate from
Hocking to Toledo.4
18

The fourth adjustment is that to Northeastern Ohio. It differs from the three
previously mentioned. On shipments from Crooksville, Pomeroy, and Hocking
in Ohio, and from Kanawha and other southern inner crescent districts,
Northeastern Ohio prior to August 1, 1932, was included in the Toledo group,
Cleveland taking the same rate as Toledo from those Ohio districts, and a rate
50 cents higher from the named inner crescent districts. On the other hand,
from Middle, Massillon, No. 8, and Cambridge in Ohio, and from Freeport,
Pittsburgh, Connellsville, and Fairmont in the northern part of the inner
crescent, the adjustment was quite distinct. The base for these rates was not the
Hocking-Toledo rate, but the Pittsburgh-Youngtown or Pittsburgh-Cleveland
rate. The rate from Ohio district No. 8 to Cleveland was 10 cents under the
Pittsburgh-Cleveland rate. The rate from Connellsville is 9 cents, and from
Fairmont 15 cents, over the Pittsburgh-Cleveland rate. The more southerly
Ohio districts have always had a rate differentially higher than No. 8. Thus it
appears that the adjustment from the crescent districts has not been, as appellant
asserts, based on an average principle or average rates of all origin territory
shipping coal to Northeastern Ohio.

19

The appellant's argument, then, comes to this: That if a commodity is shipped

in large quantities in interstate commerce from certain districts without Ohio to
a destination in that state, and if it happens that the commodity also reaches the
same destination from wholly different regions whose rates have been built
upon a different key rate, the commission cannot abate a discrimination
between the first-named group of rates, found to be reasonable, and the
intrastate rates, without first finding that the rate from every other region to the
same destination in Ohio is reasonable. To state the proposition is to answer it.

The commission has found the interstate rates from the Freeport, Pittsburgh,
Connellsville, and Fairmont districts to Northeastern Ohio destinations are
reasonable. It cannot remove a preference and prejudice due to the reduction of
the Ohio intrastate rate, so the argument runs, unless it finds also that the rate
from a district in Eastern Tennessee, close to the Alabama border, to the same
destination, is also reasonable. Where rates are uniform from a group of origins
to a given destination, it is necessary for the commission to find that the rates
from the group as a whole are reasonable, before it can raise the intrastste rates.
Compare Georgia Public Service Comm. v. United States, 283 U.S. 765, 51
S.Ct. 619, 75 L.Ed. 1397; State Corporation Commission v. Aberdeen & R.R.R.
Co., 136 I.C.C. 173. But it by no means follows that that body, before it can
remove discriminat on against the district of origin whose rates are under
consideration, must find or make reasonable rates adjusted to a different base
rate and applying from districts lying in comparatively distant areas.
20

The commission has found that the interstate rates from four districts of origin
are reasonable. It has found that Ohio intrastate rates, the transportation
conditions being similar, are, distance considered, out of relation to these
interstate rates, so as to create undue preference and prejudice. These findings,
supported by evidence, fully justified the order with respect to the intrastate
rates under section 13 of the Act (49 USCA 13). Compare Louisiana
Commission v. Texas & N.O.R. Co., 284 U.S. 125, 52 S.Ct. 74, 76 L.Ed. 201.

21

No. 868, judgment affirmed.

22

No. 886, appeal dismissed.

U.S.C. 49, c. 1, 13(3, 4), 49 USCA 13(3, 4).

A map showing the area and location of the Ohio districts and most of those in
the inner and outer crescents will be found in 46 I.C.C. opposite page 158.

See Lake Cargo Coal Cases, 1930, 181 I.C.C. 37.

Compare Bituminous Coal to C.F.A. Territory, 46 I.C.C. 66; Ohio-Michigan

Coal Cases, 80 I.C.C. 663.