United States v. New York Central Railroad

Background

Railroad companies filed applications with the Interstate Commerce Commission on February 25, 1921, and June 30, 1921, asking for higher compensation for carrying the mail. The Commission initially thought it could set rates only for the future but made orders finding certain rates fair and reasonable after its orders took effect. On later hearings it issued new orders declaring the same rates to apply back to the times when the applications were filed. The railroads asked the Postmaster General to pay under those orders, were refused, sued in the Court of Claims, and obtained judgments based on the Commission’s last orders. The United States then brought the case to this Court, challenging the Commission’s authority to change past payment rates.

Reasoning

The legal question was whether the Commission could set compensation effective from the date the railroads filed for relief. The Court explained that the 1916 statute made carrying the mail a required service and guaranteed reasonable compensation, so the companies have a constitutional right to be paid for past service. Filing an application shows present dissatisfaction and a demand for more pay, so it is reasonable to treat the Commission’s decision as controlling from the filing date. The Court found it intended the Commission to resolve the whole dispute and that denying this power would leave companies’ rights uncertain. On that basis the Court affirmed the judgments for the railroads.

Real world impact

Because the Commission may award rates retroactively to the filing date, railroads can recover back pay without separate lawsuits for the same period. The ruling puts the Interstate Commerce Commission in charge of setting both future and, in effect, past payment rates for mail carriage under the statute. That reduces additional expense and delay for the carriers and ensures that the companies’ constitutional right to reasonable compensation is protected while the agency completes its lengthy investigations.