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New York v. United States and Interstate Commerce Commission

decided: May 7, 1979.


Petition for review of Interstate Commerce Commission order upholding proposed unit-train rates from Twin Ports and Twin Cities to Martins Creek. Petition denied.

Before Moore, Timbers and Van Graafeiland, Circuit Judges.

Author: Van Graafeiland

The State of New York seeks review of a 1978 order of the Interstate Commerce Commission*fn1 discontinuing its investigation of certain train rates alleged to discriminate against Great Lakes grain carriers in violation of 49 U.S.C. § 3(4).*fn2 In 1977, we reversed a prior Commission order which had held that the allegedly injured lake carriers were not protected by section 3(4) and remanded for the Commission to determine whether discrimination did in fact exist. State of New York v. United States, 568 F.2d 887 (2d Cir. 1977). The Commission has now found that the proposed rates are not discriminatory, and the matter is once again before us for review. The facts were discussed in our prior opinion and will be referred to herein only so far as is necessary to frame the issues.

The City of Buffalo is the flour milling center of the eastern United States. Grain is hauled into Buffalo from the midwest by rail, truck, and ship, stored there in elevators, and then distributed throughout the eastern states. Since 1964, much of the rail traffic into Buffalo has been by unit-train movements originating on the Soo, Burlington Northern, or Chicago & Northwestern and connecting at Chicago with either the Erie, Norfolk & Western, or Penn Central.

A unit-train consists of fifty or more cars, made up, transported, and delivered as a unit. Intertrain and intratrain switching are eliminated. The cars move under a single "gang" waybill. They are returned as a single intact group to the original point of shipment. Clerical work for routing and billing is minimal. Unit-train service permits better utilization of cars, and locomotive and crew needs can be planned with some predictability. It is an efficient and economical method of handling bulk shipments. However, it is not available for movements eastward from Buffalo to places such as Martins Creek, Pennsylvania.

For the first year after ConAgra opened its flour mill at Martins Creek in March 1973, it received its grain from Buffalo mills. That portion which had been delivered to Buffalo by rail had come over 1100 miles from Twin Ports or Twin Cities at a unit-train rate of 43 cents per 100 pounds. The 340-mile rail movement from Buffalo to Martins Creek was at a five-car rate of 40 cents per 100 pounds. Obviously, the latter rate was higher per mile than the former. The rate eastward from Buffalo was the same, however, regardless of whether the grain movement into Buffalo from the west was by ship, rail, or truck. Clearly, no carrier from the west could claim that it was being discriminated against because of the higher Buffalo to Martins Creek rate.

In September 1973, Soo and Erie published rates for unit-train movements from Twin Ports and Twin Cities, bypassing Buffalo and going directly to Martins Creek. The tariff, which became effective on June 1, 1974, called for open navigation season unit-train rates of 72.25 cents per 100 pounds and closed navigation season unit-train rates of 88 cents per 100 pounds. Petitioner contends that these rates, although more expensive per mile than the unit-train rates into Buffalo and more expensive overall than the lake-rail rates to Martins Creek, discriminated against lake carriers transporting grain into Buffalo.*fn3 The Commission disagrees.

Congress has committed to the Commission "the determination, by application of an informed judgment to existing facts, of the existence of forbidden preferences, advantages and discrimination." United States v. Chicago Heights Trucking Co., 310 U.S. 344, 352-53, 60 S. Ct. 931, 936, 84 L. Ed. 1243 (1940). Our review of the Commission's determination is limited in nature; we may not set it aside if it was within the Commission's statutory power to make and is supported by substantial evidence. United States v. Pierce Auto Freight Lines, Inc., 327 U.S. 515, 534-36, 66 S. Ct. 687, 90 L. Ed. 821 (1946); 5 U.S.C. § 706. Evidence may be substantial without being weighted in favor of the Commission's holding. Consolo v. Federal Maritime Commission, 383 U.S. 607, 620, 86 S. Ct. 1018, 16 L. Ed. 2d 131 (1966). If it would justify a trial court in refusing to direct a verdict, it will withstand judicial scrutiny on review of the Commission's order. Illinois Central Railroad Co. v. Norfolk & Western Railway Co., 385 U.S. 57, 66, 87 S. Ct. 255, 17 L. Ed. 2d 162 (1966). We think the evidence in the instant case satisfies these requirements.

Chicago, where ConRail's haul originates, is a common point of interchange for both lake and rail traffic. It is a large grain market with extensive storage facilities and elevators capable of loading unit-trains of fifty or more cars. ConRail may move unit-trains of grain from that connecting point directly to Martins Creek without going near the City of Buffalo. On the other hand, it may detour 200 miles into Buffalo, a second lake and rail connecting point, and go from there to Martins Creek. (See map in our prior opinion, 568 F.2d at 891).

On the first hearing before the Commission, the protestants challenged the proposed unit-train rates from Twin Ports and Twin Cities because similar unit-train rates were not made available to elevators in Chicago. Their contention that this unavailability violated sections 4(1) and 3(1) of the Act was rejected by the Commission. Following remand, however, the Commission held that operating conditions attending ex-rail and ex-lake movements of grain from Chicago to Martins Creek would be substantially similar and that it would be a violation of section 3(4) if ConRail refused to participate in joint rates and through routes with lake carriers at Chicago on the same basis as it did with the Soo Railroad. ConRail has indicated its willingness to do so. However, no request for such service has yet been made by any lake carrier.

In summary, then, the record shows ConRail moving grain between Chicago and Martins Creek, with two possible points of interchange with lake traffic, Chicago and Buffalo. At Chicago, ConRail is prepared to enter into equal rate arrangements with all connecting carriers. At Buffalo, all connecting carriers are already treated the same.

The Interstate Commerce Act's prohibition against discrimination requires that all should be treated the same under the same or similar circumstances. Pittsburgh & W. V. Ry. Co. v. United States, 41 F.2d 806, 810 (N.D.Ohio 1929), Aff'd, 281 U.S. 479, 50 S. Ct. 378, 74 L. Ed. 980 (1930). Put another way, "(section) 3(4) requires equality of treatment between connecting lines but equality of treatment involves comparable conditions . . . ." Atlantic Coast Line Railroad Co. v. United States, 205 F. Supp. 360, 365 (M.D.Ga.), Aff'd, 371 U.S. 6, 83 S. Ct. 42, 9 L. Ed. 2d 49 (1962) (per curiam). With respect to lake traffic, the yardstick for measuring discrimination is "the compensation received by the outbound rail carrier on ex-rail traffic from the same port to the same destination." Arrow Transportation Co. v. United States, 176 F. Supp. 411, 419 (N.D.Ala.1959), Aff'd, 361 U.S. 353, 80 S. Ct. 406, 4 L. Ed. 2d 362 (1960). The Commission was satisfied in this case that, where comparable conditions between lake and rail carriers existed, equal rate treatment was available and that, accordingly, there was no violation of section 3(4).*fn4

The Commission found that it would be inefficient and uneconomical for ConRail to institute unit-train service between Buffalo and Martins Creek that would be comparable to its unit-train service from Chicago. The Chicago unit-train rate is applicable to shipments consisting of at least three consecutive unit-trains of at least fifty cars each. ConAgra is the only shipper capable of receiving grain in such quantities at Martins Creek, the destination to which the proposed tariff applies. The Commission found that a "chaotic" traffic situation existed at the Buffalo terminal causing inordinate traffic congestion and delay on shipments to Martins Creek.*fn5 This, plus the lack of elevator and storage facilities at Buffalo capable of accommodating three consecutive fifty-car trainloads of grain, would prevent ConAgra from securing the constant flow of grain inventory necessary for efficient and competitive milling. The existence of such "operating deficiency", the Commission found, justifies a disparity in rates as between the connecting lines at Buffalo and those at Chicago.

ConAgra has not requested the installation of unit-train service between Buffalo and Martins Creek. Significantly, neither has petitioner nor any lake carrier. Petitioner simply requests this Court to order the cancellation of the unit-train rates from Twin Ports and Twin Cities to Martins Creek because the Buffalo to Martins Creek rates are proportionately higher and more profitable. However, there was substantial evidence to support the Commission's finding that unit-train service was more efficient and economical than movement in single or five-car lots*fn6 but that normal utilization of unit-train service was not available on the Buffalo to Martins Creek haul. This determination is properly entrusted to the enlightened judgment of the Commission. Mississippi Valley Barge Line Co. v. United States, 292 U.S. 282, 286, 54 S. Ct. 692, 78 L. Ed. 1260 (1934). Our judicial function is exhausted if ...

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