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New York v. United States and Interstate Commerce Commission

UNITED STATES COURT OF APPEALS FOR THE SECOND CIRCUIT


decided: March 2, 1977.

STATE OF NEW YORK, PETITIONER, AND S & E SHIPPING CORPORATION, INTERVENOR,
v.
UNITED STATES OF AMERICA AND INTERSTATE COMMERCE COMMISSION, RESPONDENTS, AND COMMONWEALTH OF PENNSYLVANIA, PENNSYLVANIA PUBLIC UTILITIES COMMISSION, SOO LINE RAILROAD COMPANY AND CONAGRA, INCORPORATED, INTERVENORS

Petition to review an order of the Interstate Commerce Commission, 351 I.C.C. 470 (1976), approving unit train rates on wheat.

Hays, Anderson and Timbers, Circuit Judges.*fn*

Author: Timbers

TIMBERS, Circuit Judge

On this petition to review, petitioner State of New York (New York) challenges an order of the Interstate Commerce Commission (the Commission), 351 I.C.C. 470 (1976),*fn1 which approved certain "unit train rates" of two railroads for the transportation of wheat from points in the midwest to Martins Creek, Pennsylvania.

The essential questions presented by the petition to review are (1) whether the Commission's order failed to protect certain lake carriers against allegedly discriminatory and prejudicial rail rates in violation of § 3(4) of the Interstate Commerce Act (the Act);*fn2 and (2) whether the Commission's order failed to protect the lake carriers, the Port of Buffalo and other Buffalo interests against such rail rates which allegedly would divert wheat traffic away from Buffalo in violation of § 3(1) of the Act.*fn3 A further question with respect to this Court's jurisdiction is raised by respondents' motion partially to dismiss the petition to review for lack of timeliness.

For the reasons below, we hold that we have jurisdiction to review the order of the Commission; we affirm the Commission's order that the proposed rates do not violate § 3(1) of the Act; but, with respect to the § 3(4) claim, we set aside the order and remand the case to the Commission for the limited purpose of determining whether the proposed rates discriminate against the lake carriers as connecting lines.

I. FACTS AND PRIOR PROCEEDINGS

After the Commission's initial report and order of June 18, 1974, 346 I.C.C. 814 (1974), the State of New York was granted leave to intervene to consolidate and represent various New York interests which had opposed the proposed rates in question. New York's position on the instant petition to review is supported by intervenor S&E Shipping Corporation.

Respondents are the United States and the Commission. Their position is supported by intervenors Commonwealth of Pennsylvania, Pennsylvania Public Utility Commission, Soo Line Railroad Company (Soo) and ConAgra, Incorporated (ConAgra). Soo and Erie Lackawanna Railway Company (Erie), supported by ConAgra, were the original proponents of the proposed rates.*fn4

The proceedings before the Commission involved proposed unit train rates*fn5 on wheat transported in bulk over an all rail route from Minneapolis and St. Paul, Minnesota (Twin Cities) and Duluth, Minnesota, and Superior, Wisconsin (Twin Ports), to Martins Creek, Pennsylvania. The shipper, ConAgra, has its mill at Martins Creek.*fn6

The following straight line diagram shows the rail routes as well as the lake route referred to below:

[]

The proposed rates are summer and winter rates from Twin Ports and Twin Cities to Martins Creek. Soo carries the wheat from the points of origin to Chicago. Erie carries the wheat from Chicago to Martins Creek.

The summer rate from each point of origin (72.25 cents per hundredweight) is the lower rate. It applies during the season when the Great Lakes are open to navigation by lake carriers. It is designed to compete with rates on the lake-rail route from Twin Ports to Buffalo by lake carrier and thence by rail to Martins Creek.

The winter rate is higher (88 cents per hundredweight). It applies only during the season when the Great Lakes are closed to navigation. It is designed to compete with rates on an all rail route, used by shippers when the Great Lakes are closed, from Twin Ports and Twin Cities via Buffalo to Martins Creek.

The proposed rates were protested by various shipper, port, carrier, and community interests.*fn7 By an order dated October 31, 1973, the Commission instituted an investigation of the lawfulness of the rates and suspended their operation through May 31, 1974. The Commission's initial order of June 18, 1974, 346 I.C.C. 814, found the summer and winter rates from Twin Ports and the winter rate from Twin Cities to be lawful; but it found the summer rate from Twin Cities to be unduly preferential to Twin Cities and unduly prejudicial to Twin Ports in violation of § 3(1) of the Act.*fn8

Following the Commission's initial order, New York was granted leave to intervene as stated above. Both sides thereupon filed petitions for reconsideration. On June 27, 1975, the Commission denied reconsideration of its order with respect to the three rates it had approved; but it granted reconsideration of its order with respect to the unlawfulness of the Twin Cities summer rate and "reopened [the proceeding] on the present record." Meanwhile, all four rates remained in effect. Upon reconsideration, the Commission issued its final order of January 27, 1976, 351 I.C.C. 470, affirming the lawfulness of the three approved rates and reversing its prior finding that the Twin Cities summer rate was unlawful. In short, all rates were approved and the investigation was discontinued.

It is the Commission's final order of January 27, 1976 to which the instant petition to review is addressed, invoking the jurisdiction of this Court under 28 U.S.C. § 2342(5) (Supp. V., 1975), amending 28 U.S.C. § 2343 (1970). New York seeks to have the summer and winter rates from both Twin Ports and Twin Cities declared unlawful on the ground that they violate §§ 3(1) and 3(4) of the Act.

II. JURISDICTION

Before turning to the merits of the petition to review, we are presented with a threshold question with respect to this Court's jurisdiction. The Commission and intervenors Soo and ConAgra (referred to as "respondents" in this section of our opinion) claim that, because of the asserted lack of timeliness of the petition to review, we have jurisdiction to review only the Twin Cities summer rate, not the other three rates. We disagree.

It is common ground that a petition to review a final order of the Commission must be filed within sixty days of the entry of the order, 28 U.S.C. § 2344 (1970), and the timeliness requirement is jurisdictional. See, e.g., Microwave Communications, Inc. v. FCC, 169 U.S. App. D.C. 154, 515 F.2d 385, 389 & n. 24 (D.C. Cir. 1974).

Respondents argue that the sixty day period began to run on August 5, 1975, the date of service of the Commission's June 27, 1975 order. That order denied petitioners' request for reconsideration of the Commission's initial decision of June 18, 1974 which approved three of the four rates here in question. Respondents contend that the denial of reconsideration was a final order with respect to the three rates which earlier had been approved, in that the denial of reconsideration "imposed an obligation, denied a right, or fixed some legal relationship as a consummation of the administrative process." C & S Air Lines v. Waterman Corp., 333 U.S. 103, 113, 68 S. Ct. 431, 92 L. Ed. 568 (1948); see Isbrandtsen Co. v. United States, 93 App. D.C. 293, 211 F.2d 51, 55 (D.C. Cir.), cert. denied sub nom. Federal Maritime Board v. United States, 347 U.S. 990, 98 L. Ed. 1124, 74 S. Ct. 852 (1954). Respondents stress particularly that "a final order need not necessarily be the very last order." Isbrandtsen Co. v. United States, supra, 211 F.2d at 55.

Respondents' argument would be persuasive if all the petitions for reconsideration had been denied in all respects. Respondents contend that the order of June 27, 1975 terminated the proceedings as to all but the Twin Cities summer rate as completely as if the Commission had not agreed to reconsider that rate. Whatever might be said as to this theoretical contention, it wholly ignores the essential nature of the proceedings. The rates were proposed as an interrelated set of rates, not as independent tariffs. Although the Commission denied reconsideration of the three rates previously approved and granted reconsideration of the one previously disapproved, all four rates continued in effect pending reconsideration. The rate initially found to be unlawful was not cancelled, and new schedules were not filed.

Moreover, the Commission itself seems to have viewed the proceeding as still pending as a whole, notwithstanding its denial of reconsideration. In its final report and order of January 27, 1976, it discussed all the rates and affirmed and adopted the conclusions previously made with respect to the three rates as to which reconsideration technically had been denied. This was necessary because the Twin Cities summer rate was tied to the Twin Ports summer rate.*fn9

As a practical matter, it would have been judicially imprudent for us as a reviewing court to consider piecemeal the initial order while the proceeding as a whole remained pending before the Commission. Indeed the Commission acknowledges in its brief before us that "should a court action be commenced under these circumstances, the Court could, in its discretion, decide to stay proceedings pending completion of the ancillary administrative proceedings." That hardly comports with our view of finality.

Even assuming that petitioners could have filed a petition to review the order approving three of the four rates immediately after denial of their petition for reconsideration, a point upon which we express no view, we are satisfied that they were justified in awaiting the outcome of the proceeding as a whole. Respondents have not shown that they were prejudiced by the passage of time. Especially in view of the deeply rooted policies of the federal courts against piecemeal appeals and in favor of allowing administrative proceedings to run their course without interference from the courts, we hold that the instant petition to review was timely with respect to the four rates in question.*fn10

III. SECTION 3(4) CLAIM

Turning to the merits of the petition to review, we shall consider first the claim that the Commission's order failed to protect certain lake carriers against allegedly discriminatory and prejudicial rail rates in violation of § 3(4) of the Act.*fn11

Section 3(4) prohibits carriers from "discriminating in their rates, fares, and charges between connecting lines . . . ." The term "connecting line" as used here means "the connecting line of any carrier subject to the provisions of [part I] or any common carrier by water subject to [part III]."

The Commission did not reach the question whether the proposed unit train rates discriminate against the lake carriers because it found that the lake carriers are not entitled to the protection of § 3(4). 346 I.C.C. at 852. The Commission ruled that the lake carriers are outside the scope of the protection of § 3(4) because "so far as the record shows, protestant's members are not regulated carriers and, therefore, not entitled to protection under section 3(4)." The Commission also ruled that the lake carriers are not "connecting lines" within the meaning of the statute.

We hold that the Commission erred with respect to both branches of its § 3(4) ruling.*fn12

(A) Exempt Water Carriers Are Entitled to Section 3(4) Protection

The basis of the Commission's ruling on this issue is unclear. Its ruling and supporting reasoning is confined to the following two sentences:

"Insofar as is pertinent to the issues in this proceeding, a connecting line is defined as a common carrier by water subject to part III of the act. So far as the record shows, protestant's members are not regulated carriers and, therefore, not entitled to protection under section 3(4)." 346 I.C.C. at 852.

Intervenor Soo, in its brief before us, argues that the Commission meant that there was no evidence in the record that the protesting lake carriers are subject to part III of the Act. The Commission, however, was fully aware that some water carriers on the Great Lakes are subject to Part III.*fn13

We interpret the Commission's ruling on this issue to mean that carriers exempted from regulation when they carry commodities in bulk*fn14 are not "subject to part III" for purposes of protection under § 3(4). We disagree. Just because a water carrier is exempt from regulation when it transports commodities in bulk does not mean that it is not subject to part III.*fn15

We hold that the water carriers here involved on the Great Lakes are entitled to the protection of § 3(4) although their carriage of wheat in bulk exempts them from regulation under § 303(b) of the Act. See ICC v. Mechling, 330 U.S. 567, 576, 91 L. Ed. 1102, 67 S. Ct. 894 (1947) (Black, J.); ICC v. Inland Waterways Corp., 319 U.S. 671, 697, 87 L. Ed. 1655, 63 S. Ct. 1296 (1943) (Black, J., dissenting) (an earlier proceeding which eventually led to the Mechling decision); Valley Line Co. v. United States, 390 F. Supp. 435, 438-39 (W.D.Pa. 1975) (three-judge court); Seatrain Lines, Inc. v. United States, 233 F. Supp. 199, 210 (D.N.J. 1964) (three-judge court); Atchison, Topeka & Santa Fe Ry. v. United States, 194 F. Supp. 438 (D.Kan. 1961) (three-judge court); Arrow Transportation Co. v. United States, 176 F. Supp. 411, 419 (N.D.Ala. 1959) (three-judge court), aff'd sub nom. State Corporation Commission v. Arrow Transportation Co., 361 U.S. 353, 4 L. Ed. 2d 362, 80 S. Ct. 406 (1960) (per curiam).*fn16

(B) Meaning of "Connecting Line "

The Commission ruled that, even if protestants were entitled to the protection of § 3(4), there would be no merit to their argument. The Commission went on to state, "Section 3(4) is designed to discourage unequal treatment of connecting carriers at a given point. The proposed all-rail route passes well south of Buffalo and Erie does not extend unequal treatment at Buffalo as between carriers." 346 I.C.C. at 852. In its brief before us, the Commission supplemented this with the following explanation: "The all-rail route here involved does not reach Buffalo, the point at which New York says its connection within the meaning of section 3(4) takes place. The fact that Erie serves Buffalo on other routes does not change this conclusion." We disagree.

Respondents concede that a common point of interchange is not a prerequisite to the applicability of § 3(4).*fn17 Rather, they argue that somewhere along the all rail route there must be a point of interchange with the water carrier. In other words, so the argument goes, the point need not be the same as the point of interchange with a connecting rail line, but the respective rail and water interchanges at least must be located on the same route. We decline the invitation to adopt this construction of the statute. Respondents have not cited any authority for their interpretation. Petitioner's interpretation, on the other hand, finds persuasive support in Seatrain Lines, Inc. v. United States, supra,*fn18 and in the Commission's own decision in Ingot Molds, Ohio & Pa. to Cypress, Texas, 349 I.C.C. 102 (1975).*fn19

We hold, on the facts of this case, that the lake carriers are connecting lines, because they serve a point also served by the railroad so that interchange at that point can be, and in fact is, effected. See note 19 supra.

(C) Discriminatory Rates

The Commission, having decided that the lake carriers are not "connecting lines" within the meaning of § 3(4), and that they would not be protected by that section even if they were, did not reach the question whether the rates were discriminatory.*fn20 We therefore remand the case to the Commission for the limited purpose of determining whether the proposed rates discriminate against the lake carriers as connecting lines.

IV. SECTION 3(1) CLAIM

Petitioner claims that the Commission erred in failing to protect the lake carriers, the Port of Buffalo and other Buffalo interests from prejudicial and discriminatory rail rates and practices allegedly designed to divert wheat traffic away from Buffalo in violation of § 3(1) of the Act. Petitioner's argument in support of this claim is in two branches, one of which we decline to rule upon because it was not presented to the Commission, and the other we reject on the merits.

(A) Prejudice to Water Carriers

This branch of petitioner's § 3(1) argument (upon which we decline to rule) is based on the same facts which it urged in support of its claim of discrimination against the lake carriers under § 3(4). See note 20, supra. Here New York argues, on behalf of the lake carriers, that Erie's failure to provide a unit train rate from Buffalo to Martins Creek is prejudicial to the lake carriers in violation of § 3(1). Primary reliance is placed on Lake Carriers' Association v. United States, 399 F. Supp. 386 (N.D. Ohio 1975) (three-judge court).

This branch of petitioner's argument was not presented to the Commission for consideration in connection with its initial order or its order on any of the petitions for reconsideration. It appears to have been raised before us as an afterthought. In contrast to what we have said above regarding the § 3(4) claim and in contrast to what was said in the Lake Carriers ' case, 399 F. Supp. at 395-96, we decline to rule upon that issue here. The Supreme Court has admonished that "[a] reviewing court usurps the agency's functions when it sets aside the administrative determination upon a ground not theretofore presented and deprives the Commission of an opportunity to consider the matter, make its ruling, and state the reasons for its action." Unemployment Compensation Commission v. Aragon, 329 U.S. 143, 155, 91 L. Ed. 136, 67 S. Ct. 245 (1946). We find no exceptional circumstances which would impel us to consider the issue here despite the failure to present it to the Commission.

(B) Prejudice to Buffalo Shippers

As the other branch of its § 3(1) argument, New York argues, as did the Buffalo flour milling interests in the proceedings before the Commission, that they are unduly prejudiced while ConAgra is unduly preferred by Erie's failure to publish a unit train rate from Twin Ports and Twin Cities to Buffalo that is competitive with the open season lake rates. The rate Erie makes available to ConAgra during the open season is water-competitive. Petitioner argues that the Buffalo shippers are prejudiced because the open season unit train rate available to them is higher than, and therefore not competitive with, the lake vessel rate (43 cents as opposed to 26.67 cents). Petitioner contends that equal treatment requires that open season water-competitive rates be available to Buffalo as well as to Martins Creek.*fn21

The requisite elements of a § 3(1) violation have been stated succinctly as follows:

"It must be shown (1) that there is a disparity in rates, (2) that the complaining party is competitively injured, actually or potentially, (3) that the carriers are the common source of both the allegedly prejudicial and preferential treatment, and (4) that the disparity in rates is not justified by transportation conditions. The complaining party has the burden of proving the presence of the first three factors and the carriers have the burden of justifying the disparity, if possible, in connection with the fourth factor." Chicago & Eastern Ill. R.R. v. United States, 384 F. Supp. 298, 300-01 (N.D.Ill. 1974) (three-judge court) (per curiam), aff'd mem., 421 U.S. 956, 95 S. Ct. 1943, 44 L. Ed. 2d 445 (1975).

See Louis Dreyfus Corp. v. United States, 401 F. Supp. 919, 926-27 & n. 4 (S.D.N.Y. 1975) (three-judge court).

On the facts of this case we find petitioner's claim to be particularly weak. The 72.25 cents open season unit train rate to Martins Creek is about 68% higher than the 43 cents unit train rate which is available to Buffalo shippers. The rail distances from the origins to Martins Creek exceed the rail distances to Buffalo by slightly over 200 miles or about 20%. The unit train rate to Buffalo therefore is less expensive per mile than the unit train rate to Martins Creek. Furthermore, Buffalo has available to it the original water rate with which the all rail rate from Twin Ports and Twin Cities to Martins Creek is intended to compete. Petitioner nevertheless contends that the availability of a water-competitive all rail rate to Martins Creek gives ConAgra an undue advantage over the Buffalo mills because Martins Creek will have two alternative means of transportation from which to choose.*fn22 The Commission rejected petitioner's claims as speculative. We agree.

We hold that petitioner has not shown a disparity in rates; nor has it shown that it will be injured by the unavailability of an open season water-competitive unit train rate to Buffalo.

To summarize:

We grant the petition to review; we affirm the Commission's order that the proposed rates do not violate § 3(1) of the Act; but, with respect to the § 3(4) claim, we set aside the order and remand the case to the Commission for the limited purpose of determining whether the proposed rates discriminate against the lake carriers as connecting lines.

Disposition

Petition Granted; Order Affirmed in Part and Set Aside in Part; and Case Remanded in Part.


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