THE OPINION AND DECISION OF THE THREE-JUDGE DISTRICT COURT IN THE O'FALLON CASE

...The decision of the Court was a sweeping victory for the Government...

...Nevertheless, it is highly significant that when the railroad attorneys attempted to press their interpretation of the Transportation Act to its logical conclusion, so as to require the "monstrous inequity" of a strict application to the reproduction cost theory, three judges, for one reason or another, declined to give judicial sanction to the selfish, short-sighted contentions of the railroads...

...He disagreed with the majority opinion, in holding that it was net necessary to pass upon the valuation question, and he presented a mathematical computation, demonstrating that,, in his opinion, if the methods of valuation used by the Commission were not in accord with the "law of the land," th«re was a clear confiscation of at least $11,000 of the income of the O'Fallon Railway Company...

...Therefore, the opinion held "that the verity of the Commission's valuation herein need not be examined, and cannot affect this recapture order, and, therefore, that such order is not open to attack upon the ground of wrongful valuation...

...Therefore, in order to agree with the majority opinion as to the proper decision of the case, Judge Faris found it necessary to Approve specifically of the valuation made by the Inter-Mate Commerce Commission...

...In regard to the latter, he held that "the United States went into a sort of partnership with all of the carriers affected by the Interstate Commerce Act...

...His most important conclusion was that "a valuation arrived at by the sole use of either the prudent investment theory bottomed upon cost when constructed, or upon the theory of the present cost of reproduction new, less depreciation, would work presently to the public and eventually to the carriers themselves such monstrous inequity as to preclude wholly the use of either of such methods exclusively, and eliminate the notion that Congress contemplated the exclusive use of either of such methods...

...He held, in brief, that the Transportation Act contemplated the making of "one basic valuation which shall stand as such so long as the law itself shall continue in force...

...There is in this decision of the lower court at least ground for believing that the Supreme Court of the United States will never sustain the valuation contentions of public utility counsel, as they have been advanced with increasing vigor in recent years, and with increasing disregard for the public interest...

...Judge Faris, in his opinion, also made a distinction between the valuation of properties of local public utilities and the valuation of the railroads of the United States...

...It will be apparent from the above quotations that the opinion of the Three-Judge Court gives only limited comfort to either side of the great valuation controversy...

...In his separate opinion...

...and that "to this basic valuation and in order to keep it up to date, there must be annually added increments accruing to capital on the basis of the prudent investment value of such increments...

...The opinion of the Court was delivered by Circuit Judge Stone and held that the amounts of money to be recaptured by the Government, under the order of the Commission, would not reduce the net earnings of the railroad below a fair return upon even the value claimed by the carrier for its property...

...A separate concunin...

...Judge Faris did nit review exhaustively the legal arguments presented orally and in briefs of counsel, but contented himself by stating his opinicn in a series of interesting and well-phrased observations regarding the law...

...On the other hand, the opinion and decision of the Court have undoubtedly dealt a severe blow to the reproduction cost theory of valuation...

...opinion was filed by District Judge Faris...

...But the opinion of the Court was not an endorsement of the prudent investment theory of valuation...

...If this be true, it is unneccessary to examine and determine the various contentions made by the parties and amieii curiae concerning the proper manner of ascertaining value herein...

...By DONALD R. RICHBERG ON DECEMBER 10, 1027, the three judges composing the statutory court, organized to review the order of the Interstate Commerce Commission in the O'Fallon Case, handed down their opinion sustaining the order of the Commission...