Association of Am. Railroads v. I. C. C.
| Citation | 600 F.2d 989 |
| Decision Date | 28 June 1979 |
| Docket Number | No. 77-1113,77-1113 |
| Parties | ASSOCIATION OF AMERICAN RAILROADS, Petitioner, v. INTERSTATE COMMERCE COMMISSION and United States of America, Respondents, Institute of Scrap Iron & Steel, Inc. and Louis Padnos Iron and Metal Co., Intervenors. |
| Court | United States Courts of Appeals. United States Court of Appeals (District of Columbia) |
John B. Norton, Washington, D. C., with whom Thomas C. Dorsey, Washington, D. C., was on the brief, for petitioner.
Alan J. Thiemann, Atty., I. C. C., Washington, D. C., with whom Mark L. Evans, Gen. Counsel, Charles H. White, Jr., Associate Gen. Counsel, Henri F. Rush, Atty., I. C. C., and Daniel J. Conway, Atty., Dept. of Justice, Washington, D. C., were on the brief, for respondents.
Also Carl D. Lawson, Atty., Dept. of Justice, Washington, D. C., entered an appearance for respondent.
Abraham A. Diamond, Chicago, Ill., was on the brief, for intervenor, Louis Padnos Iron and Metal Co.
Howard Gould, David Reichert and Stephen D. Strauss, Cincinnati, Ohio, were on the brief, for intervenor, Institute of Scrap Iron & Steel, Inc.
Before ROBINSON, MacKINNON and ROBB, Circuit Judges.
Opinion for the Court filed by MacKINNON, Circuit Judge.
In In re Net Weights for Determining Losses Scrap Iron and Steel, 1 the Interstate Commerce Commission ("Commission"), acting pursuant to the Administrative Procedure Act, 5 U.S.C. § 553(c) (1976), 2 promulgated the following regulation to supplement its existing rules governing loss and damage claims by shippers against railroads:
Where weight is used as a measure of loss in rail transit of scrap iron and steel and actual tare and gross weights are determined at origin and destination, the settlement of claims shall be based upon a comparison of net weights at origin and destination.
The proceedings which resulted in the issuance of the above rule were initiated in response to a petition for investigation filed by Louis Padnos Iron & Metal Company, a shipper of scrap iron and steel and an intervenor in this case. The petition requested the Commission to examine the legality under section 20(11) of the Interstate Commerce Act ("Act") 3 of the practices of certain railroads in regard to settling claims for scrap iron and steel 4 lost in transit. The practice in question involved the railroads determining the amount of scrap lost in transit by ascertaining the difference between the gross weights of the shipment at the points of origin and destination, and then reducing this amount by some percentage, varied in the judgment of the railroad 5 and allegedly designed to account for the inaccuracies of gross weight measurements, in arriving at a settlement figure.
The basis for Padnos' objection to this method of settling shippers' claims was that it did not comply with section 20(11) which mandates that common carriers "shall be liable . . . for the Full actual loss, damage, or injury" 6 to property incurred during the course of transit. The obvious objection to the railroads' practice was that the use of gross weights reduced by some more or less arbitrary percentage was an unjustifiably inaccurate means of determining "full actual loss." As discussed in somewhat greater detail below, where we consider whether the order here challenged was "arbitrary and capricious," the intervenor made a strong case for the illegality of the railroads' gross-weight calculations. Before the Commission, the railroads defended this practice in large part because the ability to vary the reduction factor gave them "greater flexibility" in dealing with claims. 7 This insistence on "flexibility," however, seems tacitly to concede that the settlements thus achieved did vary and were generally inaccurate, thus violating section 1(6) of the Act prohibiting "unjust . . . practice(s)" in rail rates, which by section 12(1)(a) the Commission is "required . . . to enforce . . ."
The undisputed evidence before the Commission established that as scrap iron and steel are generally shipped in open-topped cars 8 ("gondolas" in railroad parlance), the comparison of gross weights at origin and destination inevitably tends to be an imprecise measure of the "full actual loss" due to such sources of inaccuracy as precipitation and other forms of foreign matter potentially affecting the car's weight. 9 We are also mindful of a point apparent from the hearing record, but not pressed, that shippers may be the ones at fault when they load with clamshell loaders that scoop up bricks, concrete, plaster, wood, dirt, etc. along with the iron and steel, and then leave the debris in the car when they unload with crane operated magnets that remove only iron and steel. The operation of the rule, however, is a matter for the future.
Based on the statements presented by Pandos, the Association of American Railroads (AAR), the Institute of Scrap Iron and Steel, and others, the Commission determined that § 20(11) mandated the use of an accurate method for assessing the amount of loss. 10 Obviously that method which eliminates as many extraneous factors as possible from weight comparisons at origin and destination would provide for the most accurate determination of "actual loss." Thus, the net weights comparison set forth, Ante, page --- of 195 U.S.App.D.C., page 991 of 600 F.2d, was adopted since comparing gross weights eliminates none of the possible inaccuracies arising from such factors, and, at least in theory, a comparison of net weights would do so.
In fact, since net weights are determined not by direct weighing of the lading, but by subtracting tare (the weight of the car) from gross weight, a comparison of "net weights" does not eliminate all extraneous factors. For example, if the car containing the shipment is not completely unloaded at destination before the "tare" weight is determined, it will appear that there has been a net weight loss which actually is not the case. The Commission, however, was of the opinion that these potential inaccuracies were less significant than those affecting comparisons of gross weights.
Under the Commission rule, where actual tare and gross weights were taken at origin and destination, net weights must be used as the basis for determining actual loss. However, in response to the protestations of the Association of American Railroads the Commission did permit the railroads to use a reasonable "tolerance factor" to adjust net weight figures because of discrepancies between scales at origin and destination, 11 and also allowed the carrier the option of obtaining a third weighing at the destination to corroborate the accuracy of the initial net loss determination. In the same order in which the challenged regulation was established, the Commission also instructed the railroads to cease and desist from using or applying their current methods for settling damage and loss claims to the extent that these practices were inconsistent with the net-weight regulation. 12
The AAR seeks to invalidate the ICC's regulation on the grounds that its promulgation was not within the Commission's authority, and that even if enacting the regulation was a valid exercise of the ICC's jurisdiction, the content of the rule is unreasonable. We find both these arguments without merit and affirm the Commission's order in its entirety.
The net weights regulation involved here applies only to voluntary settlement of loss and damage claims. It does not apply when such claims are litigated in court. If a railroad does not want to settle a claim in accordance with the net weight regulation, it is free to take the matter to court, where it can offer into evidence all relevant facts. Thus, in this case, the Commission merely seeks court recognition of the rather narrow authority to promulgate regulations governing voluntary settlements of loss and damage claims.
In support of the Commission's position that it had the requisite authority to promulgate the net weight regulation, two different rationales are advanced. First, the Commission relies upon its recent decision in Ex Parte No. 263, Loss and Damage Claims, 340 I.C.C. 515 (1972) (hereinafter Loss and Damage Claims). 13 In that proceeding the Commission asserted, without challenge from the railroads, a jurisdiction to promulgate Regulations implementing the Act provided that such regulations did not interfere with the actual determination of the merits or the measure of damages in particular loss and damage claims, which the ICC conceded were questions cognizable only in the courts. 14 Petitioners acknowledge the validity of the rule-making jurisdiction over settlements claimed in Loss and Damage Claims. 15 They formulate their argument around the issue of whether the net-weight regulation is more properly characterized as "substantive" or "procedural." The Commission acknowledged that substantive regulations are beyond the scope of its jurisdiction as asserted in Loss and Damage Claims, but contends it is authorized to issue procedural regulations governing settlements.
A second approach, elaborated at length by intervenor Padnos, ignores the questions of the substantive or procedural nature of the net-weight rule and relies on a more indeterminately based general rule-making power vested in the Commission to justify its jurisdiction. 16 In Loss and Damage Claims, the ICC, in addition to developing the substantive/procedural dichotomy mentioned above, alluded to this second rationale for maintaining its rule-making authority in this case:
The Congress, recognizing that urgent and complex matters are involved in attempting to regulate the interstate transportation of passengers and property, and realizing also that numerous unforeseen problems could arise in the course of such regulation, has entrusted to us, in section 12(1) of the Act and cognate provisions in parts II, III, and IV thereof,...
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