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10/15/78 National Small Shipments v. Te Commerce Commission and

October 15, 1978

NATIONAL SMALL SHIPMENTS TRAFFIC CONFERENCE, INC., ET AL., PETITIONERS

v.

INTERSTATE COMMERCE COMMISSION AND UNITED STATES OF AMERICA, RESPONDENTS 1978.CDC.171



Before BAZELON, McGOWAN and WILKEY, Circuit Judges.

UNITED STATES COURT OF APPEALS, DISTRICT OF COLUMBIA CIRCUIT

Date Decided: 26 October 1978; As Amended December 29, 1978.

Petition for Review of an Order of the Interstate Commerce commission.

APPELLATE PANEL:

Opinion for the Court filed by WILKEY, Circuit Judge.

DECISION OF THE COURT DELIVERED BY THE HONORABLE JUDGE WILKEY

Petitioners seek review of an order of the Interstate Commerce Commission *fn1 (Commission) which allegedly contradicts the mandate of this court issued upon earlier review of the case. *fn2 Because we agree with petitioners' principal allegations, we have set aside the order in question and have remanded for proceedings consistent with this opinion. I. BACKGROUND

In light of the relevance of the history of this controversy to the case's present posture, and because our previous memorandum opinion is unpublished, we set out in some detail the course of this litigation.

A. National Small Shipments I and the First Remand

The controversy underlying this case arose from the 1969 filing of the so-called Tariff 5003 by the Eastern Central Motor Carriers Association, Inc. (Eastern Carriers). The novel structure of that tariff purported to allocate costs more fairly among individual shipments according to their weight.4 It was believed that for some time the rates charged for heavier shipments effectively had been subsidizing the smaller shipments which were relatively costlier to handle; the tariff revision was predicated on the unexceptionable principle that each shipment should bear its "true" portion of the costs. Thus the rates for shipments weighing between 100 and 500 pounds were substantially increased and those for heavier shipments were reduced.5

The tariff revisions provoked innumerable protests, among which were those of petitioners in this case.6 Pursuant to section 216(g) of the Interstate Commerce Act, the Commission suspended the tariff for seven months,7 the maximum time permitted by the statute,8 to permit inquiry into the lawfulness of the rates. Following extensive hearings, the Commission found the proposed tariff to be "just, reasonable, and otherwise lawful."9

Petitioners then brought suit in the District Court for the Southern District of New York seeking to have the Commission's order set aside. While the three-judge District Court was without power to enjoin application of the tariff,10 it did set aside the finding in the Commission's report that the rates had been shown to be just and reasonable.11 Of the grounds for reversing the finding of reasonableness, the material one here is the flaw in the methodology for figuring the proper allocation of costs. The District Court remanded the case with instructions to resume the investigation into the already effective tariff.

Upon remand, in order to shelter petitioners from the expense of an arguably unlawful tariff, the Commission directed the Eastern Carriers either to cancel the tariff or to amend it to include a refund provision whereby shippers would be made whole in the event that the tariff were later found unlawful. The Eastern Carriers complied by canceling the tariff.12

Despite the withdrawal of particular rates from controversy, the Commission maintained that the proceeding was not moot,13 its still live purpose being the inquiry into the validity of certain rate-making principles. The Commission noted that from its inception the tariff proceeding had focused on just those dispositive questions of methodology and that future rate-making would depend on the outcome of its investigation.

At the resumed hearing, the Eastern Carriers buttressed their reliance on the suspect methodologies with certain assumptions alleged to "prove" that their statistics were unbiased.14 As part of the defense of the altered rate structure, the carriers introduced a new study of the costs of handling shipments of various sizes at carriers' terminal platforms.15 Previously platform costs had been allocated on the basis of average cost per hundredweight, without regard to shipment size. It was argued, however, that the prior practice was deficient insofar as it ignored the constant time or cost element incurred in the handling of Any shipment. The carriers used the data from the platform study to calculate the allegedly higher platform costs per pound of the smaller shipments.

Following hearing, the Commission again concluded that the Eastern Carriers had validated their general cost allocation methodology,16 and further that the platform study, although concededly flawed, was "clearly useful to the Commission, and its use (was) preferable to ignoring differentials in platform time and costs among various sizes of shipments."17

B. National Small Shipments II

This court reviewed and vacated the Commission's order in September 1977.18 It is our mandate in that case which petitioners allege the Commission has disregarded. In an unpublished memorandum accompanying our order in that case, we held that "there (was) not a sufficient evidentiary basis in the record to support the Commission's approval of the methodologies" underlying either the "through-basis" cost-revenue study or the platform study.19 With respect to the platform study we observed that although it was ostensibly based on the "judgment of experts," there was nothing in the record which assured the ...


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