Burlington Northern, Inc. v. ICC

• Decision Date: 31 January 1972
• Docket Number: No. 71-1087,71-1199.,71-1087
• Citation: 462 F.2d 280
• Parties: BURLINGTON NORTHERN, INC., et al., Appellees, v. INTERSTATE COMMERCE COMMISSION, et al., Appellants. BURLINGTON NORTHERN, INC., Appellant, v. INTERSTATE COMMERCE COMMISSION, et al.
• Court: U.S. Court of Appeals — District of Columbia Circuit

462 F.2d 280 (1972)

BURLINGTON NORTHERN, INC., et al., Appellees, v. INTERSTATE COMMERCE COMMISSION, et al., Appellants.

BURLINGTON NORTHERN, INC., Appellant, v. INTERSTATE COMMERCE COMMISSION, et al.

Nos. 71-1087, 71-1199.

United States Court of Appeals, District of Columbia Circuit.

Argued June 16, 1971.

Decided January 31, 1972.

Rehearing Denied May 17, 1972.

Mr. Raymond D. Battocchi, Atty., Department of Justice, with whom Mr. L. Patrick Gray, III, Asst. Atty. Gen., Messrs. Thomas A. Flannery, U. S. Atty., at the time the brief was filed, Morton Hollander, Atty., Department of Justice, Fritz R. Kahn, General Counsel, Interstate Commerce Commission, and Leonard S. Goodman, Associate Gen. Counsel, Interstate Commerce Commission, were on the brief for appellants in No. 71-1087 and appellees in No. 71-1199.

Mr. Richard J. Flynn, Washington, D.C., with whom Mr. Richard G. Clemons, Washington, D.C., was on the brief, for appellees in No. 71-1087 and appellants in No. 71-1199.

Mr. Peter S. Craig, Washington, D.C., filed a brief on behalf of Southern Railway Company, et al., as amici curiae, urging affirmance.

Before WILBUR K. MILLER, Senior Circuit Judge, and TAMM and ROBB, Circuit Judges.

Rehearing En Banc Denied in No. 71-1087 May 17, 1972.

ROBB, Circuit Judge:

Burlington Northern, Inc., a common carrier by railroad subject to the jurisdiction of the Interstate Commerce Commission, filed this action in the district court against the Commission and Matthew Paolo, Director of the Commission's Bureau of Accounts.¹ The complaint sought a declaration of Burlington Northern's rights and injunctive relief against a formal demand for examination of records served upon the railroad by the Commission. The demand, upon the purported authority of section 20(5) of the Interstate Commerce Act, 49 U.S.C. § 20(5) (1970), called for the production for inspection and examination of Burlington Northern's 1970 and current budget forecasts, including cash flow and income forecasts, together with all related working papers and interpretative material. The Commission filed an answer admitting the allegations of fact contained in the complaint and praying that the action be dismissed. The United States intervened, adopted the answer of the Commission, and counterclaimed. The counterclaim asked the court to order Burlington Northern to comply with the Commission's demand, and to assess against the railroad the statutory forfeiture of $500.00 for each day it continued its refusal to comply with the demand. Thereafter cross-motions for summary judgment were filed, supported by affidavits. Holding that the demand was not authorized by section 20(5) of the Interstate Commerce Act, the district court granted Burlington Northern's motion, dismissed the counterclaim, and denied the government's motion for summary judgment. Burlington Northern, Inc. v. Interstate Commerce Commission, 323 F.Supp. 273 (D.D.C.1971). We affirm the judgment of the district court.

The facts appear in the pleadings and affidavits filed in the district court, and so far as material here, are not in dispute. The controversy had its origin in a hearing before the Subcommittee on Surface Transportation of the Committee on Commerce of the United States Senate. Prompted by the bankruptcy of the Penn Central Railroad the Subcommittee was considering legislation to provide financial assistance to certain railroads. During the hearing on June 23, 1970 Senator Hartke told Commissioner Tuggle of the ICC that the Subcommittee needed a list of the railroads which were prospective applicants for loan guarantees. (A. 115) The following exchange then took place:

Senator Hartke. Let me ask you this: Do you or do you not now have a list of railroads which will in your opinion be asking for assistance under a loan guarantee bill of the type which is presently proposed for the Congress to consider?

Mr. Tuggle. Not in our opinion. But we can examine our records and see the railroads that are marginal or losing money. We formed no opinion about it yet, but we can easily evaluate the railroads that appear to be needing help.

Senator Hartke. In other words, you can provide for us relevant financial information about these railroads, showing their current financial condition, together with the financial forecasts made by the railroad.

Can you do that?

Mr. Tuggle. We can show their financial condition according to our records. We can\'t give you the railroads\' forecast.

* * * * * *

Mr. Tuggle. We don\'t know what their financial forecasts are. They don\'t file them with us.

Senator Hartke. Can you ask them for it?

Mr. Tuggle. We can do that.

Senator Hartke. And will you give us their reply?

Mr. Tuggle. Yes.

Senator Hartke. If they give you a financial forecast, give us that. If they refuse to give it to you, will you report that to us?

Mr. Tuggle. Yes, we would be glad to do that.

* * * * * *

Senator Hartke. * * * So I am going to ask you to do that and also give us, as soon as possible, an estimate of the time in which you can give us the financial forecasts of the railroads.

Mr. Tuggle. Senator, let\'s get this straight. We write them and request it. They may write back and want to know more specifically what we want, things of that kind. That is completely beyond our control.

Senator Hartke. I am not saying it is within your control. But if they plan to come in and ask for money under this Act, I would think they would be in a position now to inform (?) the ones that are coming. (A. 115-119)

The government does not contend that Burlington Northern was a "marginal" railroad, likely to apply for a loan guarantee. Nevertheless, on July 17, 1970, Mr. Paolo wrote to Burlington Northern and other major railroads, referring to the request for financial forecasts, and stating:

You are, therefore, requested to furnish information which we will pass on to the Senate Committee, concerning a financial forecast for your railroad including an income statement and a cash flow statement projected forward to December 31, 1970. (A. 134)

By letter of August 4, 1970 Burlington Northern responded to Mr. Paolo's request. The railroad's letter recited various contingencies and imponderable factors which precluded reliable predictions of the company's income and cash flow.² The letter concluded with the statement that Burlington Northern expected that its net income for 1970 "will be somewhat less than the pro forma earnings of the constituent companies, before special charges, for the year 1969" and that "by the end of 1970 cash will be down somewhat from the amounts on hand at the beginning of the year but still at a level adequate for working purposes." (A. 135)

On September 4, 1970 Mr. Paolo again wrote to Burlington Northern requesting information about the company's current dividend policies. He referred in particular to the railroad's 1970 dividend declarations, and asked for copies of the minutes of the meetings of the Board of Directors at which the dividends were declared, together with copies of all documents furnished members of the Board in their deliberation. He asked further for copies of Burlington Northern's cash flow and income forecasts for 1970 and 1971.

At a meeting with Mr. Paolo on September 25, 1970, representatives of the railroad explained the declarations of dividends and agreed to furnish all the material he had requested, except forecasts. Thereafter the company did furnish the requested material, except forecasts, and in addition offered to provide current financial data on a monthly basis.

On September 25, 1970 Mr. Paolo by letter repeated his request that Burlington Northern submit "actual pro formatype statements detailing the items generally found in income and cash flow statements. . . ." (A. 136-37). He requested such statements for the last quarter of 1970 and projected income and cash flow statements for the full year 1970. When Burlington Northern declined to comply with this request the Commission served upon the railroad the "Formal Demand for Examination of Records" which is challenged by Burlington Northern in this action. The demand, purporting to be under the authority of section 20(5) of the Interstate Commerce Act, called for inspection and examination of:

(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 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. (A. 40)

In conclusion, the demand directed the railroad's attention to section 20(7) (a) of the Interstate Commerce Act, 49 U.S.C. § 20(7) (a) (1970), providing that failure or refusal to comply subjects the railroad to a forfeiture of not to exceed $500.00 for each day of default. Burlington Northern declined to comply, and this action followed.

The Commission contends that its demand is authorized by section 20(5) of the Interstate Commerce Act, 49 U.S.C. § 20(5) (1970).³ That section authorizes the Commission to "prescribe the forms of any and all accounts, records, and memoranda to be kept by carriers and their lessors, including the accounts, records, and memoranda of the movement of traffic, as...