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American Short Line Railroad Association v. United States and Interstate Commerce Commission

decided: December 18, 1984.

THE AMERICAN SHORT LINE RAILROAD ASSOCIATION, ET AL., PETITIONERS,
v.
UNITED STATES OF AMERICA AND INTERSTATE COMMERCE COMMISSION, RESPONDENTS, CANADIAN PACIFIC LIMITED AND THE CHESAPEAKE AND OHIO RAILWAY COMPANY, ET AL., INTERVENING PETITIONERS, CONSOLIDATED RAIL CORPORATION AND CHEMICAL MANUFACTURERS ASSOCIATION, INTERVENING RESPONDENTS



Appeal from a decision of the Interstate Commerce Commission which denied petitioning railroads' request to delay implementation of certain provisions of the Staggers Rail Act of 1980, limiting permissible collective rate actions by railroads.

Pierce and Pratt, Circuit Judges and Palmieri, Senior District Judge.*fn*

Author: Pierce

PIERCE, Circuit Judge:

This is an appeal from a decision of the Interstate Commerce Commission ("ICC" or "Commission"), Ex Parte No. 447, Petition to Delay Application of Direct Connector Requirement to Joint Rail Rates in General Increases, 367 I.C.C. 886 (1983), entered December 28, 1983, denying petitioning railroads' request to delay implementation of the "direct connector standard" of the Staggers Rail Act of 1980, Pub. L. No. 96-448, 94 Stat. 1895, amended 49 U.S.C. § 10706(a) (3) (B) with regard to inflationary cost recovery. Petitioners allege that the ICC misinterpreted the "feasibility" criterion and that the direct connector standard is presently not feasible. They therefore seek a three year delay in its implementation.

Intervenor Chesapeake and Ohio Railway Company ("CSX") generally supports the decision but requests a proceeding to consider antitrust immunity for alternative plans submitted to implement the direct connector standard. Intervenor Canadian Pacific Limited ("CP") supports petitioners' position and requests reversal because of the ICC's failure expressly to have allowed Canadian carriers to negotiate as a group with their direct connectors within the United States.

We hold that the ICC did not err in its interpretation of the feasibility standard and that it properly exercised its discretion in denying petitioners' request for a delay. We also hold that CSX' request for an additional proceeding is unripe and moot and that its claim may not be considered by this court since it was not raised before the Commission. In sum, we affirm the decision of the ICC.

BACKGROUND

Petitioners, twenty large and small railroads and the American Shortline Railroad Association, representing an additional 266 railroads operating in the United States, sought a finding by the ICC that current implementation of the Staggers Act restriction on collective ratemaking with regard to inflationary cost recovery is not feasible.

Under 49 U.S.C. § 10701(a), the ICC is authorized to determine whether railroad rates are reasonable. Toward this end, tariffs establishing or changing rates are filed by each railroad with the Commission. These rates can be for either a single-line or joint-line, i.e., they can apply either to a single route of an individual carrier or to a joint route in which more than one railroad participates. For joint-line or interline routes, in which traffic moves over two or more railroads, "single factor" or "joint rates" are calculated to provide shippers with a single fee.

Prior to enactment of the Staggers Act, railroads subject to regulation by the ICC were permitted to set rates collectively with other carriers. See Section 5a Application No. 2, Western Traffic Ass'n -- Agreement, 276 I.C.C. 183, 185-91 (1949). The carriers established rate bureaus to facilitate negotiation of these collective rates and to ensure rate uniformity. H.R. Rep. No. 1035, 96th Cong., 2d Sess. 119-21 (1980), reprinted in 1980 U.S. Code Cong. & Ad. News 4063-65. Provided the agreement establishing a rate bureau was approved by the Commission, the carriers' activities in a rate bureau were not considered to be violative of the antitrust laws. 49 U.S.C. § 10706(a) (2) (A). For example, railroads were given antitrust immunity to determine through the rate bureaus how much of an increase was necessary to offset their inflationary costs. The rate bureaus acted as their members' agents and filed petitions for rate increases with the Commission, demonstrating the impact of inflation on the railroads' costs. Shippers then had the opportunity to object. A single railroad could not, however, alter a rate without the "concurrence" of all participating carriers. 49 U.S.C. § 10762(b) (2). See 49 U.S.C. § 10705(a) (1), (c)-(f); H.R. Rep. No. 1430, 96th Cong., 2d Sess. 111-12 (1980), reprinted in 1980 U.S. Code Cong. & Ad. News 4143.

Pursuant to the Railroad Revitalization and Regulatory Reform Act of 1976, Pub. L. No. 94-210, 90 Stat. 35 (the "4R Act"), the forerunner of the Staggers Act, Congress amended the ICC's authority to regulate railroad rates. Green Bay and Western Railroad Co. v. United States, 644 F.2d 1217, 1227 (7th Cir. 1981). Introducing the concept of "market dominance," the 4R Act permitted rate regulation by the ICC only in the "absence of effective competition," 49 U.S.C. § 10709(a), and, to encourage such competition and individual ratemaking, the Act prohibited certain collective action. Rate bureaus were precluded from allowing their members to vote on or discuss single line rates established by member carriers or joint rates in which members did not "practically participate," § 208(b) of the 4R Act; H.R. Rep. No. 781, 94th Cong., 2d Sess. 153-54 (1976). In accordance with the Act's procompetitive thrust, four years after passage of the 4R Act, the Commission, in Section 5b Application No. 2, Western Railroads -- Agreement, 364 I.C.C. 1 (1980), stated that collective action was contrary to the public interest.*fn1

In 1980, Congress enacted the Staggers Act, 49 U.S.C. § 10101 et seq., which expanded the 4R Act and continued its policy of encouraging competition.*fn2 Essentially, railroads were permitted to discuss rate changes only with their "direct connectors" in a particular joint-line movement, i.e. with those railroads that "practically participate[d]" with them in handling traffic over a particular route. 49 U.S.C. § 10706(a)(3)(A) (ii), (A)(iii) & (B). See Section 5b Application No. 2, Western Railroads -- Agreement, 364 I.C.C. 635, 651 (1981).

The statute draws a distinction between, on the one hand, collective activity concerning single line rates (§ 10706(a)(3)(A)(i)), interline rates in which the carriers do not practically participate (§ 10706(a)(3)(A)(ii)), and interline rates for alternative routes between any two points (§ 10706(a)(3)(A)(iii)), and, on the other hand, collective activity involving general increases to cover inflationary costs (§ 10706(a)(3)(B) (i)) or broad tariff changes (§ 10706(a)(3)(B)(ii)). The restrictions on carriers which do not practically participate were to be effective immediately. The provisions prohibiting collective activity on single line rates and on rates for alternative routes were to become effective unless the Commission were to find implementation not feasible, in which case it could suspend or delay implementation.*fn3

For the remaining two provisions, prohibiting collective activity with regard to broad tariff changes and prohibiting collective activity to cover inflationary cost increases, the provision at issue in the instant case, Congress granted a three-and-one-quarter year grace period until January 1, 1984. Moreover, Congress also gave the Commission discretionary power to ...


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