Early Limitations on Review.

Even while reviewing the rea-sonableness of rates, the Court recognized some limits on judicial review. As early as 1894, the Court asserted that “[t]he courts are not authorized to revise or change the body of rates imposed by a legislature or a commission; they do not determine whether one rate is preferable to another, or what under all circumstances would be fair and reasonable as between the carriers and the shippers; they do not engage in any mere administrative work; but still there can be no doubt of their power and duty to inquire whether a body of rates . . . is unjust and unreasonable, . . . and if found so to be, to restrain its operation.”165 One can also infer from these early holdings a distinction between unreviewable fact questions that relate only to the wisdom or expediency of a rate order, and reviewable factual determinations that bear on a commission’s power to act.166

Further, the Court placed various obstacles in the path of the complaining litigant. Thus, not only must a person challenging a rate assume the burden of proof,167 but he must present a case of “manifest constitutional invalidity.”168 And, if, notwithstanding this effort, the question of confiscation remains in doubt, no relief will be granted.169 Moreover, even the Court was inclined to withhold judgment on the application of a rate until its practical effect could be surmised.170

In the course of time this distinction solidified. Thus, the Court initially adopted the position that it would not disturb findings of fact insofar as such findings were supported by substantial evidence. For instance, in San Diego Land Company v. National City,171 the Court declared that “the courts cannot, after [a legislative body] has fairly and fully investigated and acted, by fixing what it believes to be reasonable rates, step in and say its action shall be set aside and nullified because the courts, upon a similar investigation, have come to a different conclusion as to the reasonableness of the rates fixed. . . . [J]udicial interference should never occur unless the case presents, clearly and beyond all doubt, such a flagrant attack upon the rights of property under the guise of regulations as to compel the court to say that the rates prescribed will necessarily have the effect to deny just compensation for private property taken for the public use.” And, later, in a similar case,172 the Court expressed even more clearly its reluctance to reexamine ordinary factual determinations, writing, “we do not feel bound to reexamine and weigh all the evidence . . . or to proceed according to our independent opinion as to what were proper rates. It is enough if we cannot say that it was impossible for a fair-minded board to come to the result which was reached.”173

These standards of review were, however, abruptly rejected by the Court in Ohio Valley Water Co. v. Ben Avon Borough174 as being no longer sufficient to satisfy the requirements of due process, ushering in a long period during which courts substantively evaluated the reasonableness of rate settings. The U.S. Supreme Court in Ben Avon concluded that the Pennsylvania “Supreme Court interpreted the statute as withholding from the courts power to determine the question of confiscation according to their own independent judgment . . . .”175 Largely on the strength of this interpretation of the applicable state statute, the Court held that, when the order of a legislature, or of a commission, prescribing a schedule of maximum future rates is challenged as confiscatory, “the State must provide a fair opportunity for submitting that issue to a judicial tribunal for determination upon its own independent judgment as to both law and facts; otherwise the order is void because in conflict with the due process clause, Fourteenth Amendment.”176


Reagan v. Farmers’ Loan & Trust Co., 154 U.S. 362, 397 (1894). And later, in 1910, the Court made a similar observation that courts may not, “under the guise of exerting judicial power, usurp merely administrative functions by setting aside” an order of the commission merely because such power was unwisely or expediently exercised. ICC v. Illinois Cent. R.R., 215 U.S. 452, 470 (1910). This statement, made in the context of federal ratemaking, appears to be equally applicable to judicial review of state agency actions. back
This distinction was accorded adequate emphasis by the Court in Louisville & Nashville R.R. v. Garrett, 231 U.S. 298, 310–13 (1913), in which it declared that “the appropriate question for the courts” is simply whether a “commission,” in establishing a rate, “acted within the scope of its power” and did not violate “constitutional rights . . . by imposing confiscatory requirements.” The carrier contesting the rate was not entitled to have a court also pass upon a question of fact regarding the reasonableness of a higher rate the carrier charged prior to the order of the commission. All that need concern a court, it said, is the fairness of the proceeding whereby the commission determined that the existing rate was excessive, but not the expediency or wisdom of the commission’s having superseded that rate with a rate regulation of its own. back
Des Moines Gas Co. v. Des Moines, 238 U.S. 153 (1915). back
Minnesota Rate Cases (Simpson v. Shepard), 230 U.S. 352, 452 (1913). back
Knoxville v. Water Co., 212 U.S. 1 (1909). back
Willcox v. Consolidated Gas Co., 212 U.S. 19 (1909). However, a public utility that has petitioned a commission for relief from allegedly confiscatory rates need not await indefinitely for the commission’s decision before applying to a court for equitable relief. Smith v. Illinois Bell Tel. Co., 270 U.S. 587 (1926). back
174 U.S. 739, 750, 754 (1899). See also Minnesota Rate Cases (Simpson v. Shepard), 230 U.S. 352, 433 (1913). back
San Diego Land & Town Co. v. Jasper, 189 U.S. 439, 441, 442 (1903). See also Van Dyke v. Geary, 244 U.S. 39 (1917); Georgia Ry. v. Railroad Comm’n, 262 U.S. 625, 634 (1923). back
Moreover, in reviewing orders of the Interstate Commerce Commission, the Court, at least in earlier years, chose to be guided by approximately the same standards it had originally formulated for examining regulations of state commissions. The following excerpt from its holding in ICC v. Union Pacific R.R., 222 U.S. 541, 547–48 (1912) represents an adequate summation of the law as it stood prior to 1920: “[Q]uestions of fact may be involved in the determination of questions of law, so that an order, regular on its face, may be set aside if it appears that . . . the rate is so low as to be confiscatory . . . ; or if the Commission acted so arbitrarily and unjustly as to fix rates contrary to evidence, or without evidence to support it; or . . . if the authority therein involved has been exercised in such an unreasonable manner as to cause it to be within the elementary rule that the substance, and not the shadow, determines the validity of the exercise of the power. . . . In determining these mixed questions of law and fact, the court confines itself to the ultimate question as to whether the Commission acted within its power. It will not consider the expediency or wisdom of the order, or whether, on like testimony, it would have made a similar ruling . . . [The Commission’s] conclusion, of course, is subject to review, but when supported by evidence is accepted as final; not that its decision . . . can be supported by a mere scintilla of proof—but the courts will not examine the facts further than to determine whether there was substantial evidence to sustain the order.” See also ICC v. Illinois Cent. R.R., 215 U.S. 452, 470 (1910). back
253 U.S. 287 (1920). back
253 U.S. at 289 (the “question of confiscation” was the question whether the rates set by the Public Service Commission were so low as to constitute confiscation). Unlike previous confiscatory rate litigation, which had developed from rulings of lower federal courts in injunctive proceedings, this case reached the Supreme Court by way of appeal from a state appellate tribunal. In injunctive proceedings, evidence is freshly introduced, whereas in the cases received on appeal from state courts, the evidence is found within the record. back
253 U.S. at 289. Without departing from the ruling previously enunciated in Louisville & Nashville R.R. Co. v. Garrett, 231 U.S. 298 (1913), that the failure of a state to grant a statutory right of judicial appeal from a commission’s regulation does not violate due process as long as relief is obtainable by a bill in equity for injunction, the Court also held that the alternative remedy of injunction expressly provided by state law did not afford an adequate opportunity for testing a confiscatory rate order. It conceded the principle stressed by the dissenting Justices that, “[w]here a State offers a litigant the choice of two methods of judicial review, of which one is both appropriate and unrestricted, the mere fact that the other which the litigant elects is limited, does not amount to a denial of the constitutional right to a judicial review.” 253 U.S. at 295. back