Burlington Northern Inc. v. ICC

• Citation: 323 F. Supp. 273
• Decision Date: 13 January 1971
• Docket Number: Civ. A. No. 3471-70.
• Parties: BURLINGTON NORTHERN INC., Plaintiff, v. INTERSTATE COMMERCE COMMISSION and Matthew Paolo, Director, Bureau of Accounts, Defendants, and United States of America, Intervening Defendant.
• Court: U.S. District Court — District of Columbia

323 F. Supp. 273

BURLINGTON NORTHERN INC., Plaintiff, v. INTERSTATE COMMERCE COMMISSION and Matthew Paolo, Director, Bureau of Accounts, Defendants, and United States of America, Intervening Defendant.

Civ. A. No. 3471-70.

United States District Court, District of Columbia.

January 13, 1971.

Richard J. Flynn, Sidley & Austin, Washington, D. C., Robert W. Ginnane, Galland, Kharasch, Calkins & Brown, Washington, D. C., for plaintiff.

Fritz R. Kahn, Bernard A. Gould, Leonard S. Goodman, Interstate Commerce Commission, Washington, D. C., for defendant Interstate Commerce Commission.

Robert Werdig, Asst. U. S. Atty., U. S. District Court, Washington, D. C., for the United States.

FINDINGS OF FACT AND CONCLUSIONS OF LAW

PARKER, District Judge.

This cause having come before the Court on December 22, 1970, for hearing on cross motions for summary judgment filed on behalf of plaintiff, Burlington Northern Inc. and on behalf of defendants and the intervening defendant; and the Court having considered said motions, the affidavits and other materials filed in support of and in opposition to each motion, and the memoranda and oral argument submitted by counsel for each of the parties, the Court makes the following findings of fact and conclusions of law:

1. Plaintiff Burlington Northern Inc. is a Delaware Corporation having its principal place of business at St. Paul, Minnesota. Burlington Northern Inc. is a common carrier by railroad within the meaning of Section 1(1) of the Interstate Commerce Act, 49 U.S.C. § 1(1), and, accordingly is subject to the regulations provided in Part I of that Act (49 U.S.C. §§ 1-26).

2. W. N. Ernzen is a resident of the State of Minnesota, and is Vice President —Finance of Burlington Northern Inc. In that capacity, he is the senior corporate officer having direct responsibility for the creation and custody of the documentary materials which are the subject of this suit.

3. Defendant Interstate Commerce Commission is an agency of the United States, created pursuant to Section 11 of the Interstate Commerce Commission Act (49 U.S.C. § 11), and having its principal offices of business at Washington, D. C. By statute (49 U.S.C. § 12(1)), the Commission is charged with the responsibility for executing and enforcing the provisions of Part I of the Interstate Commerce Act, and is authorized to request that any United States Attorney institute and prosecute proceedings necessary to enforce the provisions of Part I of the Act and for punishment of all violations thereof. Upon request of the Commission, any United States Attorney is required to institute and prosecute such proceedings.

4. Under Section 20(5) of the Interstate Commerce Act, the Commission is authorized to prescribe the form of any and all accounts, records, and memoranda to be kept by carriers, and to inspect and copy "accounts, books, records, memoranda, correspondence, and other documents of such carriers." Section 20(9) authorizes the Attorney General at the request of the Commission to seek a writ of mandamus to compel compliance with Section 20(5). Section 20(7) (a) provides for a forfeiture of not to exceed $500 per day if a carrier fails or refuses to submit the materials covered by Section 20(5) to the Commission or its authorized agents, accountants, or examiners, to be recovered in a proceeding instituted in the name of the United States pursuant to Sections 20(7) (e), 16(9), and 16(10) of the Act.

5. Defendant Matthew Paolo, a resident of the State of Maryland, is Director, Bureau of Accounts, Interstate Commerce Commission, and, in that capacity, is the administrative official charged with carrying out the Commission's responsibilities under Section 20 of the Interstate Commerce Act (49 U.S.C. § 20) in accordance with the directions of the Commission.

6. On or about September 4 and September 25, 1970, Matthew Paolo, in his capacity as Director, Bureau of Accounts, Interstate Commerce Commission, and relying upon the provisions of Section 20(5) of the Interstate Commerce Act, requested Burlington Northern Inc. to furnish to the Commission certain materials relating to budget forecasts. The request dated September 4, 1970, recited that the inquiry related to certain dividend action taken by Burlington Northern Inc. and sought forecast data for the years 1970 and 1971. The request dated September 25, 1970, related to a request for forecast information directed to 73 railroads on July 17, 1970. Burlington Northern Inc. responded to this inquiry on August 4, 1970, but in the September 25 letter, Mr. Paolo sought further details as to forecasts for the year 1970 and for the fourth quarter of 1970. Plaintiffs objected to the production of forecasts, contending, inter alia, that the materials did not constitute "accounts, books, records, memoranda, correspondence, and other documents" within the meaning of Section 20(5), and that the Commission had no lawful authority to demand their production.

7. On or about October 30, 1970, plaintiffs, in support of their objections, submitted to defendant Paolo an opinion of their counsel, Anthony Kane, Vice President—Law, a copy of which is attached to the amended verified complaint as Exhibit A. At that time, plaintiffs furnished to defendant Paolo excerpts from meetings of the Board of Directors of Burlington Northern Inc. on February 25, 1970, June 15, 1970 and August 21, 1970 at which dividend action was taken. The excerpts consisted of the resolutions passed by the Board and the financial statements presented to the Board. Plaintiffs also offered to provide the Commission with monthly financial reports (as distinguished from budget forecasts) providing the same detail as now furnished in quarterly reports filed with the Commission.

8. On November 18, 1970, Thomas A. Stachowicz and Raymond A. Youngbauer, representing themselves as duly-authorized Auditors of the Commission, and bearing credentials in the form prescribed by the Commission (49 C.F.R. § 1000.5(d)), served upon Mr. W. N. Ernzen a "Formal Demand For Examination of Records", a copy of which is attached to the amended verified complaint as Exhibit B, demanding, pursuant to Section 20(5), to inspect and examine the following materials:

(1) Burlington Northern, Inc., 1970 budget forecast including but not limited to items pertaining to cash flow forecast and income forecast, together with associated working papers and interpretative material including but not limited to summarizations of any phase of the forecast.

(2) Burlington Northern, Inc., most current budget forecast including but not limited to items pertaining to cash flow forecast and income forecast, together with associated working papers and interpretative material including but not limited to summarizations of any phase of the foregoing forecast.

(3) Burlington Northern, Inc., all analyses, working papers, preliminary studies, interpretative material and summarizations presently on hand and in the making as the subject matter for the next budget forecast of the nature indicated in (1) and (2) above.

(4) All documents showing variances between the Burlington Northern, Inc., budget forecasts and actual performance for each month and/or quarter of the calendar year 1970.

9. The "Formal Demand For Examination of Records" stated in part:

"This demand is in the nature of a continuing demand and shall continue for each and every day until such time as the aforesaid records are submitted for examination to the undersigned pursuant to this demand.

"Your attention is specifically directed to Section 20(7) (a) of the Interstate Commerce Act which provides that in case of failure or refusal on the part of carriers or other persons subject to the provisions of this Act to submit for examination the aforesaid documents, the carrier and/or such persons shall forfeit to the United States not to exceed $500.00 for each such offense and for each day during which such failure or refusal continues. This continuing demand shall terminate upon receipt of advice from Burlington Northern, Inc. that it and its Vice President—Finance, W. N. Ernzen will immediately comply with the demand as aforesaid * *."

10. Messrs. Stachowicz and Youngbauer, in serving the "Formal Demand For Examination of Records," were acting at the direction and under the control of defendant Paolo. The "Formal Demand For Examination of Records" recites that it is based upon Section 20(5) of the Act, and it has not been issued pursuant to an order of the Interstate Commerce Commission.

11. On November 25, 1970, Burlington Northern Inc. and W. N. Ernzen filed a verified complaint for a declaratory judgment and for injunctive relief seeking primarily a declaration that the materials demanded in the "Formal Demand For Examination of Records" served November 18, 1970, do not constitute "accounts, books, records, memoranda, correspondence, and other documents" within the meaning of Section 20(5) of the Interstate Commerce Act, and that the failure or refusal of plaintiffs to furnish such materials to the Interstate Commerce Commission or its duly authorized representatives does not constitute a violation of said section or subject plaintiffs to the forfeitures prescribed in Section 20(7) (a) of the Act. On December 8, 1970, the Interstate Commerce Commission filed its answer praying that the Court enter an order dismissing the complaint. On December 10, 1970, the United States of America, acting at the request of the Commission, moved for leave to intervene as a defendant in this proceeding and to assert a counterclaim under Sections 20(5), 20 (7), and 20(9) of the Act, declaring plaintiffs' refusal to comply with the demand to be a violation of Sections 20(5) and 20(7), commanding plaintiffs to comply with the demand, and assessing against plaintiffs a forfeiture of $500 per day from November 18, 1970, until the demand was satisfied. By stipulation of the parties, the motion to intervene was granted on...