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December 9, 1965

UNITED STATES of America and Interstate Commerce Commission, Defendants

The opinion of the court was delivered by: BEEKS

This is a proceeding under 28 U.S.C. § 2321 for review of an order of the Interstate Commerce Commission, Division No. 2, which dismissed the complaint filed herein.

 Petitioner, Saskatchewan Minerals, Sodium Sulphate Division, is a Crown corporation organized under the laws of the Province of Saskatchewan, Canada. Its place of business is at Chaplin, Saskatchewan and it engages in the production and sale of natural sodium sulphate, more commonly referred to as salt cake. The subject of this review is an order of the Commission denying petitioner relief under 49 U.S.C. § 3(1) *fn1" relative to alleged unduly prejudicial, preferential, unreasonable and unjust all-rail joint through rates for salt cake from Chaplin to particular points in Washington and Oregon.

 Intervening defendant railroads are involved in the transportation of salt cake either from Chaplin, Saskatchewan or from points in California to certain Washington and Oregon destinations. Intervening defendants American Potash & Chemical Corporation and Stauffer Chemical Company, located at Trona and Westend, California, respectively, are petitioner's major competitors for the Pacific Northwest salt cake market.

 All bulk salt cake shipments from California and from Chaplin to the destination points in question have moved and now move by rail only. There have been no movements to those points by truck or water in the past 20 years. Petitioner's plant at Chaplin, Saskatchewan is north of the State of Montana and approximately 1,000 miles from Vancouver, British Columbia. Stauffer, at Westend, California, and American Potash, at Trona, California, are in such close proximity to each other that they may be considered as having a common origin point for the purposes of this case. They are located approximately 200 miles from tidewater at Long Beach Harbor, California. Both firms ship via the Trona Railway Company to the connecting Southern Pacific Company line which transports the product to Portland, Oregon from where it is transferred by other railroads to destination. Most of the salt cake shipped into the Washington-Oregon area is used in the kraft pulp industry and the balance is used in the manufacturing of glass.

 Virtually all of the salt cake traffic moves in shipper-supplied "jumbo hopper" rail cars at minimum 170,000 pound incentive rates. The record shows that to points which are substantially equidistant from Chaplin and Trona the all-rail rates for such shipments favor the California shippers by $0.11 per 100 pounds or $2.20 per ton. Intervenors sought to justify the rate disparity on the basis of actual or threatened competition by water carriers from Long Beach Harbor, California to points on the Columbia River and Puget Sound in the States of Washington and Oregon.

 It is not disputed that the Commission is empowered to prevent undue prejudice to Canadian shippers caused by a disparity in rates for transportation of the character herein involved. *fn2" Thus, relief under § 3(1) is available to petitioner in the form of an alternative order requiring the railroads either to reduce the Chaplin rates to the level of the Trona rates or to increase the Trona rates to the level of the Chaplin rates. The issue on this review is whether the Commission properly denied such relief.

 The Hearing Examiner, in his recommended report and order which was adopted by the Commission, found, and this Court agrees, that the all-rail rates from Trona at the commencement of salt cake movement in 1933 were depressed by the availability of water carrier transportation between California and Pacific Northwest ports which flourished until the advent of World War II. Since that time such water carriage on the Pacific Coast has been dying by degrees and we take judicial notice of the fact that at the present time it has almost ceased to exist. Whether enough remains to justify the rate disparity in question is the crux of this dispute. The Examiner concluded that:

"The defendants have proved that the influence and compulsion exerted by the coastwise waterway has depressed the level of the all-rail rates from the California origins to the Pacific Northwest destinations."

 Three issues are presented on this appeal. All deal with the question of water competition. It is contended, first, that the Examiner committed an error of law in failing to consider the character and extent of water competition; second, that if he did consider the character and extent of water competition his conclusion was erroneous as a matter of law; third, that his findings of the cost of water transportation are not based on substantial evidence.

 Petitioner's first contention is that the Examiner erroneously held as a matter of law that "the existence of water competition at one point, and its absence at the other, creates a substantial dissimilarity of circumstances" which justifies the rate disparity. Petitioner relies in this regard on Atchison, Topeka & Santa Fe Ry. Co. v. United States, 218 F. Supp. 359, 367 (N.D.Ill.1963), in which it is said: "the mere fact of competition alone does not necessarily justify a rate preference or prejudice; the character and extent of the competition may be such as not to warrant the disparity." Although we are in accord, *fn3" a perusal of the Examiner's report convinces us that he did consider the "character and extent" of water competition in his determination that there was a "substantial dissimilarity of circumstances."

 The Examiner made specific findings as to the character and extent of water competition. He found that "no water service can compete with the present rail rates," but if the railroads choose to increase the Trona rates to the level of the present Chaplin rates, as they have the right to do under an alternative order, "there would be an opportunity for competing water carriage" and "a possibility " of the "transportation of salt cake by water from the California origins to almost all destinations involved."

 Petitioner next contends that as a matter of law a "possibility" of water movement is too speculative and uncertain to constitute competition in justification of the disparity between the Chaplin and Trona rates. In argument as to the appropriate standard of certainty of future water movement of salt cake if the Trona rates are adjusted, both sides cite the case of Rags and Paper to Newark, N.Y., 208 I.C.C. 327 (1935). Although this was a case arising under 49 U.S.C. § 4, it was relied upon by the Commission in the Section 3(1) case of Abingdon Sanitary Mfg. Co. v. Chicago, B. & Q.R., 256 I.C.C. 281 (1943). Petitioner quotes from Rags and Paper as follows:

"The essential elements of competition are all present when a going water carrier has made a bona fide offer to perform a competitive service and is ready, willing and able to carry the traffic if the offer is accepted, especially if ...

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