## Facts

- A financially distressed railroad system (the Orient) could not meet operating expenses, though it operated efficiently and its continued service was found to be in the public interest.
- The Interstate Commerce Commission (ICC), acting under § 15(6) of the Interstate Commerce Act as amended by the Transportation Act of 1920, investigated the Orient’s financial needs and the divisions of joint interstate rates on traffic interchanged with thirteen directly connecting carriers.
- The ICC ordered a readjustment of divisions for all such interchanged traffic by reducing the connecting carriers’ existing divisions by a fixed percentage and increasing the Orient’s share by the amount taken from those connections.
- The order required periodic financial reporting, permitted a carrier to seek exemption by an adequate showing, and reserved ICC jurisdiction to modify divisions based on reported results.
- The thirteen affected carriers participated in the administrative process and supplied statistical material but presented no evidence or argument and did not seek rehearing or exemption.
- ICC staff referenced annual reports filed with the ICC under statute; those reports were not formally introduced into the evidentiary record.
- Before the order took effect, the carriers sued in a three-judge federal district court to enjoin enforcement; the court permanently enjoined the order.
- The United States and the ICC appealed directly to the Supreme Court.

## Issues

1. Whether the district court had jurisdiction to entertain a suit to enjoin enforcement of an ICC division order, and whether seeking rehearing before the full Commission was a mandatory prerequisite to judicial relief.
2. Whether carriers participating in the joint rates whose divisions were not changed were necessary parties to the injunction suit.
3. Whether the ICC’s prescribed divisions were arbitrary or exceeded statutory authority by considering the Orient’s financial needs and using percentage-based reductions on the revenues of immediate connecting carriers.
4. Whether the ICC unlawfully relied on carriers’ annual reports in its files without formally introducing them into the record, resulting in findings without evidence.

## Decision

- The Supreme Court reversed the district court’s injunction and upheld the ICC order.
- The district court had jurisdiction; requiring a rehearing application before granting equitable relief was a matter of judicial discretion, not a jurisdictional bar.
- Carriers whose divisions were not altered by the challenged order were not necessary parties.
- The ICC acted within its statutory discretion in setting “just, reasonable, and equitable” divisions, including considering the financial needs of a weaker road and the public interest in continued service.
- The order was not invalid merely because the Orient’s increase was measured by percentage reductions of immediate connections’ joint-traffic revenues or because reductions were confined to immediate connections.
- Although the ICC may not treat unintroduced file materials as record evidence and may not make findings without evidence, the Court concluded the record contained sufficient support for the order as applied here.

## Legal Principles

- A federal court may hear a suit to enjoin enforcement of an ICC division order; insistence on exhaustion through ICC rehearing procedures is discretionary in equity.
- In a challenge to a division order affecting specified carriers’ shares, more remote joint-rate participants whose divisions are unchanged are not indispensable parties.
- In prescribing divisions of joint rates, the ICC may consider relative cost of service, each carrier’s role in the movement, efficiency of operation, needed revenues for operating expenses, taxes, and a fair return, the public importance of the service, and other relevant circumstances; the financial needs of a weaker carrier may be considered.
- A division order increasing one carrier’s share is not arbitrary solely because corresponding decreases are imposed on immediate connections, which may seek later readjustment as to remoter carriers.
- Administrative evidentiary practice is more flexible than judicial evidence rules, but an agency may not base findings on no evidence and may not treat file materials (such as annual reports) as evidence against an opposing party unless introduced into the record in the proceeding.

## Conclusion

The Supreme Court held that the ICC lawfully readjusted divisions of joint rates to support a financially distressed carrier whose continued operation served the public interest, that the injunction suit was within district court jurisdiction without mandatory rehearing exhaustion, and that while agencies cannot rely on nonrecord file materials as evidence, the order was supported by the record and therefore enforceable.


United States v. Abilene & S. Ry. Co., 265 U.S. 274 (1924)