Chesapeake and Ohio Railway Co. v. United States

• Decision Date: 22 April 1975
• Docket Number: Civ. A. No. 74-0370-R.
• Citation: 392 F. Supp. 358
• Court: U.S. District Court — Eastern District of Virginia
• Parties: The CHESAPEAKE AND OHIO RAILWAY COMPANY et al., Plaintiffs, v. UNITED STATES of America and Interstate Commerce Commission, Defendants.

392 F. Supp. 358

The CHESAPEAKE AND OHIO RAILWAY COMPANY et al., Plaintiffs, v. UNITED STATES of America and Interstate Commerce Commission, Defendants.

Civ. A. No. 74-0370-R.

United States District Court, E. D. Virginia, Richmond Division.

Argued December 20, 1974.

Decided April 22, 1975.

Owen Clarke, Ilene Chase Gregg, Doyle S. Morris, Charles C. Rettberg, Jr., Cleveland, Ohio, George D. Gibson, E. Milton Farley, III, T. S. Ellis, III, Richard D. Gary, Hunton, Williams, Gay & Gibson, Richmond, Va., for plaintiffs.

Thomas E. Kauper, Asst. Atty. Gen., John H. D. Wigger, Atty. Dept. of Justice, David Hopkins, U. S. Atty., E. D. Va., David G. Lowe, Asst. U. S. Atty., for the United States.

Fritz R. Kahn, Gen. Counsel, Hanford O'Hara, Atty., I. C. C., for the I. C. C.

Before BUTZNER, Circuit Judge, and MERHIGE and WARRINER, District Judges.

BUTZNER, Circuit Judge:

In this petition for review of a series of orders of the Interstate Commerce Commission in Ex Parte No. 305, Nationwide Increase of Ten Percent in Freight Rates and Charges, 1974, the Chessie system lines challenge the power of the Commission to condition the refiling of a rate increase, without investigation or suspension, on the expenditure of revenue derived from the increase in the manner directed by the Commission.¹ We conclude that the Commission lacks statutory authority to order a railroad how to spend its revenue, and we hold that this condition should not be enforced against the Chessie system. Chessie also charges that the Commission unlawfully required it to file certain reports. We hold that the orders to furnish the requested information are incidental to the Commission's authority to suspend the proposed rate increases and are therefore not reviewable.

I

In April 1974 Chessie and all other railroads, except the Long Island, petitioned the I. C. C. for a 10 percent increase in freight rates. Among the reasons cited for the increase was the statement that "billions of dollars are needed immediately and in the coming decade for maintenance and improvement of the Nation's rail transportation plant." A number of shippers protested, so the Commission did not allow the carriers to initiate the proposed tariffs on short notice. The railroads again filed for an increase in May. On June 3 the Commission acknowledged the railroads' need for an increase but ruled that "if the schedules were permitted to become effective as filed and without conditions designed to promote service improvements, the increases proposed would be unjust and unreasonable and contrary to the dictates of the national transportation policy." Accordingly, it suspended the proposed tariff and at the same time authorized the railroads to refile, incorporating conditions which would assure that the additional revenue would be expended for capital improvements and deferred maintenance of plant and equipment.²

The railroads, including Chessie, then cancelled the prior increase and on June 5, 1974, refiled in accordance with the conditions of the June 3 order. However, on July 18, the Commission clarified its June 3 order. It allowed up to 3 percent of the revenue derived from the rate increase to be applied to higher material and supply costs, other than fuel. It required the railroads to expend the balance of the new revenue, less the income taxes attributable to it, for deferred maintenance and delayed capital improvement. For the purposes of the order, the Commission narrowly defined the term "deferred maintenance" as accrued deterioration producing a severe adverse effect on railroad operations. It also prohibited expenditure of the funds for any capital improvements that had been scheduled or otherwise committed as of June 1, 1974.³

Protesting that it had neither deferred maintenance nor delayed capital improvements as defined by the Commission, Chessie petitioned for an amendment to the July 18 order that would allow it to expend the additional funds for any valid corporate purpose. On August 9 the Commission denied Chessie's petition but relaxed its order by changing the cut-off date for determining what constituted delayed capital improvements.

Rebuffed by the Commission, Chessie instituted this action on August 15, 1974, and in due course secured an interlocutory injunction restraining the Commission from controlling Chessie's expenditure of its increased revenues.⁴ In the meantime, at the instance of other railroads, the Commission reopened the proceedings. After a hearing, in which Chessie declined to participate, the Commission on October 3 modified its orders of June 3, July 18, and August 9 by allowing a railroad to use the increased revenues for new capital improvements if it could show that it could not use the funds for deferred maintenance and delayed capital improvements, as defined by the Commission.⁵ Chessie then amended its complaint, alleging that the restrictions on expenditure of revenue, even as modified by the October 3 order, exceeded the Commission's statutory authority.

II

At the outset the Commission challenges the jurisdiction of the Court to review the questioned orders. It contends that administrative proceedings involving the suspension of rates are free from judicial review. Consideration of this defense requires examination of the suspension process.

Railroads have always had the right to initiate higher rates, and the Interstate Commerce Act of 1887 did not grant the Commission power to suspend the new charges. Shippers therefore sought injunctive relief while the Commission investigated the lawfulness of the increases. However, the expense of litigation and the courts' lack of uniformity prompted Congress in 1910 to authorize the Commission to suspend a new rate for no more than seven months while it conducted an investigation. The principal cases interpreting the 1910 amendment, codified as 49 U.S.C. § 15(7),⁶ are United States v. SCRAP, 412 U.S. 669, 93 S.Ct. 2405, 37 L.Ed.2d 254 (1973), and Arrow Transportation Co. v. Southern Railway Co., 372 U.S. 658, 83 S.Ct. 984, 10 L.Ed.2d 52 (1963). In Arrow the Court concluded that Congress intended "to vest in the Commission the sole and exclusive power to suspend and to withdraw from the judiciary any pre-existing power to grant injunctive relief." 372 U.S. at 667, 83 S.Ct. at 988. It therefore held that a district court could not restrain a railroad from charging the proposed rates after the seven-month administrative suspension period, even though the Commission had not completed its investigation. In SCRAP the Court held that the exclusive suspension power vested in the Commission by § 15(7) deprived a district court of jurisdiction to forbid the collection of a new rate which the Commission had not suspended.

Arrow and SCRAP establish beyond question our lack of jurisdiction to review the provisions of the June 3 order that suspended the proposed rates. Nor can we enjoin the Commission from permitting the railroads to refile and collect the increased rates. The Commission's discretion in these matters is unbridled, and its decision regarding suspension is unreviewable. See generally K. Davis, Administrative Law Treatise 966 (1970 Supp.).

However, lack of power to review certain parts of the Commission's orders does not deny jurisdiction to examine other parts. Congress gave the courts jurisdiction to review "in whole or in part" any order of the Commission. 28 U.S.C. § 1336(a). A condition is considered a separate part of an order for the purpose of exercising this jurisdiction. United States v. Chicago, M. St. P. & P. R. R. Co., 282 U.S. 311, 328, 51 S.Ct. 159, 75 L.Ed. 359 (1931). We turn, therefore, to the suspension power in § 15(7) to determine whether Congress intended to withdraw from the judiciary claims that the Commission has unlawfully conditioned the suspension of rates on compliance with a requirement which it would otherwise have no statutory authority to impose. Section 15(7) mentions only one condition as concomitant to the Commission's power to suspend. The Commission can require the carrier to keep account of the amounts received from an increased rate and to refund any portion that ultimately is found to be unjustified.⁷ A suspension order imposing this statutory condition is not subject to judicial review. Port of New York Authority v. United States, 451 F.2d 783, 786 (2d Cir. 1971) (by implication).

The statute's silence about other conditions should not be interpreted as a denial of the Commission's authority to appropriately restrict the exercise of its suspension power in a variety of ways. But when the Commission has selected a condition that is not expressly authorized by § 15(7), the courts have jurisdiction to determine whether it should be set aside because it exceeds the Commission's regulatory powers. Judicial relief is available to curb administrative acts that exceed an agency's statutory authority. In Harmon v. Brucker, 355 U.S. 579, 581, 78 S.Ct. 433, 435, 2 L.Ed.2d 503 (1958), the Court rejected the defense that certain administrative action was unreviewable, saying:

"Generally, judicial relief is available to one who has been injured by an act of a government official which is in excess of his express or implied powers. . . . The District Court had not only jurisdiction to determine its jurisdiction but also power to construe the statutes involved to determine whether the official did exceed his powers. If he did so, his actions would not constitute exercises of his administrative discretion, and, in such circumstances as those before us, judicial relief from this illegality would be available."

As Leedom v. Kyne, 358 U.S. 184, 188, 79 S.Ct. 180, 3 L.Ed.2d 210 (1958), explains, in such instances a court does not simply review the agency's action in the same sense that it would review an order falling within the agency's statutory authority. Instead, the court must measure the order by the statute, and if it exceeds the agency's...