Bangor & A. R. Co. v. I. C. C.

• Decision Date: 30 March 1978
• Docket Number: 77-1105 and 77-1108,Nos. 77-1082,s. 77-1082
• Citation: 574 F.2d 1096
• Parties: BANGOR AND AROOSTOOK RAILROAD COMPANY, Petitioner, v. INTERSTATE COMMERCE COMMISSION, Respondent, Maine Central Railroad Company et al., Intervenors. MAINE CENTRAL RAILROAD COMPANY, Petitioner, v. UNITED STATES of America, and Interstate Commerce Commission, Respondents, Bangor and Aroostook Railroad Company, Intervenor. Robert W. MESERVE and Benjamin H. Lacy, Trustees of the Property of Boston and Maine Corporation, Debtor, Petitioners, v. UNITED STATES of America, and Interstate Commerce Commission, Respondents.
• Court: U.S. Court of Appeals — First Circuit

Page 1096

574 F.2d 1096

BANGOR AND AROOSTOOK RAILROAD COMPANY, Petitioner, v. INTERSTATE COMMERCE COMMISSION, Respondent, Maine Central Railroad Company et al., Intervenors.

MAINE CENTRAL RAILROAD COMPANY, Petitioner, v. UNITED STATES of America, and Interstate Commerce

Commission, Respondents,

Bangor and Aroostook Railroad Company, Intervenor.

Robert W. MESERVE and Benjamin H. Lacy, Trustees of the

Property of Boston and Maine Corporation, Debtor, Petitioners, v. UNITED STATES of America, and Interstate Commerce

Commission, Respondents.

Nos. 77-1082, 77-1105 and 77-1108.

United States Court of Appeals, First Circuit.

Argued Sept. 12, 1977.

Decided March 30, 1978.

Rehearing Denied No. 77-1082 May 12, 1978.

See 578 F.2d 444.

Laurence S. Fordham, Boston, Mass., with whom Verne W. Vance, Jr., Scott C. Moriearty, Boston, Mass., Todd D. Rakoff, Foley, Hoag & Eliot, Boston, Mass., William M. Houston, Edward T. Robinson, and Gaston, Snow & Ely Bartlett, Boston, Mass., were on briefs, for Bangor and Aroostook Railroad Co.

Peter J. Nickles and Eugene D. Gulland, Washington, D. C., with whom Covington & Burling, Washington, D. C., and Scott W. Scully, Portland, Me., were on briefs, for Maine Central Railroad Co.

Sidney Weinberg, Boston, Mass., for Robert W. Meserve and Benjamin H. Lacy, Trustees of the Property of Boston and Maine Corp., Debtor.

Lee A. Monroe and Sidley & Austin, Washington, D. C., on brief for intervenor Canadian Pacific Limited.

Charles H. White, Jr., Associate Gen. Counsel, Washington, D. C., with whom Mark L. Evans, Gen. Counsel, John H. Shenefield, Acting Asst. Atty. Gen., Carl D. Lawson, Daniel J. Conway, Attys., Dept. of Justice, and Raymond Michael Ripple, Atty., Washington, D. C., were on briefs, for I. C. C. and the United States.

Before CAMPBELL, Circuit Judge, TUTTLE, Circuit Judge, ^* and WOLLENBERG, District Judge. ^**

LEVIN H. CAMPBELL, Circuit Judge.

These are consolidated petitions to review cease and desist orders and damage awards entered by the Interstate Commerce Commission in a report and order of February 4, 1977. 28 U.S.C. §§ 2321, 2342, 2344. The Commission's actions followed administrative proceedings concerning the legality of interchange arrangements between the Bangor and Aroostook Railroad Co. (BAR) and Canadian Pacific Ltd. (CP). Initiated in 1973 by the Commission itself, the proceedings focused upon complaints which Maine Central Railroad (MEC) and the Boston and Maine Corporation (B&M) filed in 1974 seeking damages on account of BAR's purportedly unlawful preference of CP.

In agreement with an administrative law judge, the Commission concluded that BAR, "aided" by CP, had "unduly prejudiced Maine Central Railroad Co. and Boston and Maine Corporation . . . in the distribution of traffic in violation of section 3(4) of the Interstate Commerce Act (the Act)," 49 U.S.C. § 3(4). ¹

Acting under authority of § 16(1) of the Act, 49 U.S.C. § 16(1), the Commission held BAR liable in damages to the two complaining carriers. But the Commission's assessment of the amount of damages was considerably lower than the ALJ's. It ordered BAR to pay damages of $176,323 to MEC and $86,917 to B& M, with 4% Interest. ²

BAR here challenges the Commission's ruling that it was guilty of conduct violative of § 3(4). It also challenges the Commission's awarding damages to MEC and B&M and the amounts assessed. In separate petitions, MEC and B&M also contest the amount of damages, claiming that the ALJ's higher assessments should have been adopted.

We conclude that the Commission had ample basis to find that BAR violated § 3(4) and that its conduct damaged MEC and B&M. We also sustain the Commission's determination of damages. However, since we find the cease and desist orders to be overly broad, we vacate those orders and remand that aspect of the case for clarification.

I

At the heart of BAR's allegedly improper conduct is a formal agreement that BAR and CP concluded in July, 1970, initiating a shipper solicitation program in an attempt to divert "as much traffic as possible" from MEC and B&M ³ onto BAR's alternative connecting line, CP. The facts we state are drawn from the opinions of the ALJ and the Commission. Except as noted, they are substantially undisputed.

BAR's track network spans 541 miles in Maine. It connects with CP at Brownville Junction, located 45.3 miles north of Northern Maine Junction, where BAR interchanges with MEC. MEC connects further on with B&M. ⁴ These four railroads skirt and cross the Canadian border in the northeastern reaches of Maine, offering alternative through routes for shippers with goods to be transported across the region. Paper, frozen vegetables, starch, clay, and wood pulp, primarily, are shipped over these lines. Depending on a shipper's origination and destination points, he may have the option of routing his traffic via BAR and CP, or via BAR with MEC and B&M. ⁵ BAR is primarily an originating carrier, receiving goods directly from shippers rather than from other railroads, and shipping them out toward destinations not reached by its lines.

In October of 1969, the Amoskeag Co., a company controlled by a "voluntary association" known as Dumaines, purchased 99 percent of BAR stock. Frederic C. Dumaine, who controls Dumaines, became a director and chief executive officer of BAR after the purchase. When this purchase was made, Amoskeag owned 26 percent of MEC stock as well; the Commission found that "word of an impending merger between MEC and BAR became widespread" after the acquisition. In early November, 1969, the president of BAR (who had stayed on at the request of Dumaine) asked that BAR's general freight manager prepare a traffic study showing which of the cars presently traveling via Northern Maine Junction could instead be interchanged at Brownville Junction, without modifying their destinations. A series of memos on this subject followed; most were passed on to Dumaine by the president of BAR, in late November and early December of 1969. The memos detailed the commodities and numbers of carloads that were subject to such a diversion; one set forth the estimated loss, about $2.8 million per year, that was predicted to accrue to MEC and B&M should all 24,000 such carloads successfully be rerouted. Another memo, circulated in mid-December, compared transit times for goods traveling the alternative routes, and showed little over-all difference between the two routes.

Negotiations between CP and BAR to arrange a cooperative effort in support of a freight diversion plan were initiated late in 1969, and continued through the first half of 1970. Salient features of the negotiations were BAR's undertaking to furnish CP origin and destination statistics of all traffic subject to diversion, CP's duty aggressively to solicit new traffic, and CP's agreement to expand and improve its interchange facilities at Brownville Junction in order to handle the expected additional traffic. CP also indicated by letter its understanding that any agreement regarding concerted solicitation efforts that was ultimately concluded would be "long-term and not subject to any reversal of policy" by BAR.

In mid-January, BAR investigated the potential financial impact on BAR of the proposed re-routing efforts: it compared the divisions that it would receive from additional traffic of different commodities when shipped over CP instead of over MEC. The investigation showed that diversion would decrease BAR's revenues in some cases and induced CP to offer to pay BAR a "car allowance" for every additional car moving over its lines that would otherwise give BAR a diminished division.

After further discussion and correspondence, the terms of an agreement were reached in early June of 1970, and activity pursuant to that agreement intensified. ⁶ Under the heading "PRIVATE " a written confirmation of the agreement set forth inter alia that BAR had,

"agree(d) to interline with CP Rail via Brownville Junction as many cars of paper products and potatoes as it is possible for it so to interline and anticipates that by reason of this agreement such interline traffic will be increased by approximately 24,000 cars annually as follows:

The agreement described the allowances that CP agreed to pay BAR on additional carloads of potatoes and paper products that would be interlined at Brownville Junction; those payments were to be made "quarterly by check through the Claims Section of the Auditor of Freight Claims". CP also formally undertook to improve its interchange facilities. Not specifically spelled out in the memorandum, but apparent from the correspondence and testimony regarding the negotiations of early 1970, was the commitment of both parties vigorously to solicit traffic on behalf of CP. The pact was to bind the parties over a fifteen year period; there was provision, however, for reopening and renegotiation every five years, on 180-day notice. The agreement was not formally executed until July 31, 1970, but it was by its terms to take effect retroactively, as of January 1, 1970.

The Commission received evidence that pursuant to this agreement, both carriers approached shippers, urging them to route their traffic over CP instead of via MEC. Though service differences such as transit time, reliability, and car supply were sometimes cited to the shippers in support of the solicitations, those comparisons do not appear to have been grounded in either fact or prior study. ⁷ BAR also "distributed suggested routes to the principal shippers on its lines. . . . All suggested routes were via Brownville Junction." CP and BAR personnel made some solicitation visits jointly, in search of more traffic for CP.

The sales efforts of BAR and CP coincided with a drop in traffic shipment over MEC that was marked enough to prompt MEC's inquiry of shippers and carriers about the possible reasons behind the decrease. As MEC became generally aware of the intensified promotion campaign on...