Court: Supreme Court of Virginia; August 28, 1974; Virginia; State Supreme Court
Norfolk and Western Railway Company sought to modify its station service at Long Island, Campbell County, by replacing the full-time station agent with a mobile agent serving multiple small stations and proposed to remove the station building. The State Corporation Commission denied the application on October 26, 1973, with Commissioner Shannon dissenting. The Railway appealed, arguing the Commission's decision was unjust, unreasonable, and contrary to law. Long Island, a small community with a population under 100, had an agent who worked five 8-hour days, with time studies revealing significant idle periods—averaging 6.5 to 7 hours each day. The station's operational costs were $10,425.27 in 1971 and $11,740.21 in 1972, while gross revenues were $36,924.11 and $38,682.70 respectively. Chesapeake Corporation was the primary patron, responsible for the vast majority of shipments. A mobile agent stationed at Brookneal, 12 miles away, effectively managed other stations and could add Long Island to his route, covering a total of 82 miles daily. The mobile agent demonstrated more efficiency and personal service, which was reportedly favored by shippers, making Long Island suitable for such service as it did not require loading duties for outbound pulpwood shipments.
Cars are weighed, freight charges calculated, and collected at the destination, minimizing agency service needs at Long Island. Burkhart testified that replacing the Long Island agent with a mobile agent from Brookneal would not breach the Railway's union contract, allowing the current agent to assume the mobile position with a salary increase due to seniority. This change could save almost the station cost of the Long Island agency. Assistant Manager-Costs N. F. Weber noted that in 1972, the variable cost of transporting pulpwood from Long Island to West Point exceeded revenue by $13.83 per car, with full-time agent costs at $31.14 per car compared to an average clerical cost of $7.83. A switch to a mobile agent could yield a profit of $23.31 per car.
Two opposing witnesses appeared: Ray Wood, a pulpwood dealer, who noted that the Chesapeake Corporation yard manager coordinated with the station agent for shipping services, and Russell R. Simpson, a local farmer, who argued that replacing the full-time agent would hinder industrial development, despite prior unsuccessful attempts to spur such growth. Simpson also highlighted the agent's assistance in safely crossing cattle and expressed dissatisfaction with the Railway's claims process for cattle killed by trains. Opposition to the Railway's application included resolutions from local Boards of Supervisors and a petition from 51 residents. The Commission's decision is presumed correct and will not be overturned unless contrary to evidence or unsupported by it.
The Commission has the authority to require railroads to provide services deemed 'reasonable and just,' without a fixed formula for determining the extent of such services. In certain instances, a railroad may be mandated to offer services at a loss to avoid adversely impacting public convenience and necessity. Key factors in these determinations include the nature and population of the area served, public patronage, existing facilities, operational costs versus revenue, and overall operations of the carrier.
In this case, the Commission's decision was found unsupported by the record, particularly regarding the inclusion of Long Island in the Brookneal mobile agency. The majority opinion suggested insufficient evidence to prove that this change would negatively affect public service, yet the evidence indicated that the only anticipated impact would be a reduction in the presence of a railway agent, not the quality of service itself. Moreover, previous approval of mobile agency concepts by the Commission further undermined the position against this modification.
Testimony from the primary objector, Ray Wood, revealed that he relied on the Long Island yard manager for shipping arrangements and had not shipped outbound freight by rail in the prior year. Thus, neither Wood nor another witness would suffer significant inconvenience from the proposed changes. While there was opposition from local citizens, the majority's concerns about the mobile agent's capacity to fulfill new duties were unfounded and contradicted by evidence showing that the mobile agency’s idle time could accommodate the necessary responsibilities. The lack of objection from Chesapeake Corporation, a principal patron, was also noted as a relevant consideration.
On the days of time studies, the mobile agent’s assistance to the Brookneal agent was classified as Railway work before assessing the mobile agent's idle time, which exceeded five hours daily. The majority incorrectly concluded that the Railway failed to provide sufficient evidence demonstrating that a mobile agency would yield savings. Railway witness Weber indicated that the mobile agency would eliminate losses at Long Island and potentially generate profit, estimating savings comparable to the cost of maintaining the full-time Long Island agency, minus the mobile agent's travel expenses. The Commission dismissed this uncontradicted testimony as inadequate, mistakenly comparing gross revenues from Long Island solely with station expenses while ignoring the Railway's operational costs associated with transporting pulpwood from Long Island to West Point.
Weber revealed that, if all costs were accounted for, the Railway incurred a loss of $13.33 per car in 1972 for the Long Island-West Point route. Although the Commission noted that the proposal would not reduce train services at Long Island, they overlooked the necessity of considering these additional costs. Recognized accounting practices should be employed to assess the operational costs, as supported by case law from other jurisdictions allowing railroads to present comprehensive cost evidence.
The Commission's decision neglected to evaluate all evidence of costs presented by the Railway regarding the Long Island station's profitability. While public convenience may be prioritized, it is imperative that all actual costs are considered. The Railway is effectively compelled to retain an idle full-time agent at Long Island solely for one shipper's benefit, while also employing a mobile agent in Brookneal who works less than half the required hours but could service Long Island patrons. Eliminating one of these positions would yield significant savings with minimal impact on public convenience.
Denying the Railway’s application would set a precedent that could impede future mobile agency service applications whenever there is opposition, despite the agency's revenues outpacing direct costs. There is a clear need to encourage mobile agency service for efficiency in railway operations, especially when public convenience can still be reasonably maintained. The majority's decision lacks evidentiary support and is reversed, with the case remanded for further consideration. Weber’s cost analysis was based on specific operational costs, not systemwide allocations, and he indicated that fully allocated costs would surpass revenues by a larger margin.
