Water Transport Ass'n v. I.C.C., 83-1737
| Decision Date | 04 August 1983 |
| Docket Number | No. 83-1737,83-1737 |
| Citation | 715 F.2d 581 |
| Parties | WATER TRANSPORT ASSOCIATION, Petitioner, v. INTERSTATE COMMERCE COMMISSION and United States of America, Respondents, CSX Corporation and Texas Gas Resources Corporation, Eastern Coal Transportation Conference, Intervenors. |
| Court | U.S. Court of Appeals — District of Columbia Circuit |
Petition for Review of an Order of the Interstate Commerce commission.
Richard A. Zeller, Oneida, N.Y., with whom Neil K. Evans, Cleveland, Ohio, Alan M. Wiseman, James R. Fox, and Robert F. Ruyak, Washington, D.C., were on brief, for petitioners.
Ernest Abbott, Atty., I.C.C., Washington, D.C., with whom John Broadley, Gen. Counsel, and Ellen D. Hanson, Associate Gen. Counsel, I.C.C., Washington, D.C., were on brief, for respondent, I.C.C. Henri F. Rush and Edward J. O'Meara, Attys., I.C.C., Washington, D.C., also entered appearances for respondent, I.C.C.
John J. Powers, III, Atty., Dept. of Justice, Washington, D.C., entered an appearance for respondent, U.S.
Peter J. Nickles, Washington, D.C., with whom Eugene D. Gulland and Ellen Bass, Washington, D.C., were on brief, for intervenors, CSX Corp., et al.
William L. Slover, C. Michael Loftus, and Donald G. Avery, Washington, D.C., were on brief for intervenor, Eastern Coal Transp. Conference. Before WALD and SCALIA, Circuit Judges, and HAROLD H. GREENE, * District Judge for the District of Columbia.
Opinion for the Court filed by Circuit Judge WALD.
CSX Corp. (which operates a railroad) agreed to acquire by tender offer Texas Gas Resources Corp. (Texas Gas), which in turn owns American Commercial Barge Lines, Inc. (which operates a barge line). Water Transport Association (WTA), an organization of barge operators, asked the Interstate Commerce Commission (ICC or Commission) to declare that the tender offer violates the Panama Canal Act, 49 U.S.C. § 11,321. WTA argued that § 11,321(a)(1) makes it unlawful for a railroad to "own, operate, control, or have an interest in" a competing water carrier unless the Commission has approved the transaction after a full hearing, and that no hearing had been held. The ICC held that the tender offer did not violate the Canal Act because CSX and Texas Gas had agreed to put the barge line stock into an independent voting trust until the ICC held a hearing and approved or disapproved the transaction. WTA appeals the ICC's decision.
We affirm the ICC's decision, though not all of the Commission's broad language. We hold that the ICC, as an incident to its authority under § 11,321 to approve the acquisition after hearing, may authorize CSX to proceed with the tender offer if CSX agrees to hold the barge line in a temporary ICC-approved independent voting trust until a hearing can be held.
Two sections of the Interstate Commerce Act restrict a railroad's power to acquire a water carrier. One, 49 U.S.C. § 11,343, deals generally with one carrier acquiring another carrier; the other, id. § 11,321, is specifically concerned with a rail carrier acquiring a water carrier.
49 U.S.C. § 11,343(a) requires advance ICC approval before one carrier can merge with or otherwise acquire control of another carrier:
The following transactions ... may be carried out only with the approval and authorization of the Commission:
(1) consolidation or merger ... of at least 2 carriers into one corporation ....
....
(3) acquisition of control of a carrier by any number of carriers.
(4) acquisition of control of at least 2 carriers by a person that is not a carrier.
(5) acquisition of control of a carrier by a person that is not a carrier but that controls any number of carriers.
The ICC "shall approve" the transaction if it finds the transaction is "consistent with the public interest." Id. § 11,344(c). Before giving its approval, the ICC must conduct a full evidentiary hearing, which can take several years for a merger of two large railroads, see id. § 11,345(b), and 10 months for other transactions of "regional or national transportation significance," see id. § 11,345(c).
Because of this long delay, merging carriers often have an economic incentive to complete the transaction first and seek ICC approval later. The ICC has long permitted carriers to do this by use of an independent voting trust. If the acquiring carriers put the stock of the acquired carriers in an independent voting trust, the ICC holds that the transaction does not violate § 11,343 because the acquiring carrier does not "control" the acquired carrier. See Voting Trust Rules, 49 C.F.R. § 1013 (1982). This construction of § 11,343 has been upheld by the courts 1 and is not disputed here.
The second relevant provision of the Interstate Commerce Act, and the principal focus of this case, is 49 U.S.C. § 11,321, which derives from § 11 of the Panama Canal Act of 1912. 2 Congress specifically designed the Canal Act to protect independent water carriers from unfair competition by rail-owned water carriers. As presently codified, it forbids a rail carrier to "own, operate, control, or have an interest in" a competing water carrier unless the ICC finds that the ownership, control, or interest will not be contrary to the "public interest" and will not reduce water competition:
(a)(1) Notwithstanding [§ 11,343], a [rail] carrier ... may not own, operate, control, or have an interest in a water carrier ... with which it does or may compete for traffic.
....
(b) Notwithstanding subsection (a) of this section, the Commission may authorize a [rail] carrier ... to own, operate, control or have an interest in a water common carrier ... when the Commission finds that ownership, operation, control, or interest will still allow that water common carrier ... to be operated in the public interest ... and that it will still allow competition, without reduction, on the water route in question.
Section 11,321(a)(2) gives the Commission authority to determine whether a rail carrier "does or may compete" with a water carrier:
The Commission may decide ... questions of fact related to competition or the possibility of competition under this subsection on application of a carrier.... The Commission may begin a proceeding under this subsection on its own initiative or on application of a shipper ... if the carrier has not applied to the Commission and had the question of competition or the possibility of competition determined ....
Any Commission action, whether a finding of fact on competition under subsection (a)(2), or approval of ownership, control, or interest despite the existence of competition under subsection (b), may be taken "only after a full hearing." Id. § 11,321(c).
Cases where a rail carrier has sought to acquire a competing water carrier have been few and far between. As a result, the ICC had no occasion before this case to consider whether, as under § 11,343, a railroad can use an independent voting trust to acquire a water carrier before the ICC has had time to conduct a hearing and give or withhold its approval. 3
Texas Gas is a public corporation whose primary business is running a natural gas pipeline system. American Commercial Barge Lines, a wholly-owned subsidiary of Texas Gas, is an ICC-regulated water carrier that operates a barge line east of the Mississippi. Its operations represent about 10% of Texas Gas revenues.
On June 6, 1983, Coastal Corp. made a hostile tender offer for 51% of Texas Gas' stock at $45 per share. Texas Gas looked for a "white knight" to make a friendly tender offer at a higher price and on June 9 found CSX Corp., which agreed to purchase 100% of Texas Gas' stock at $52 per share. CSX's primary business is operating a large railroad east of the Mississippi. The railroad is, of course, regulated by the ICC.
Texas Gas and CSX recognized that the merger of CSX with Texas Gas' barge line subsidiary required ICC approval under 49 U.S.C. § 11,343 () and might require approval under id. § 11,321 (). They therefore agreed to place the barge line stock in an independent voting trust pursuant to ICC voting trust guidelines established under § 11,343. See 49 C.F.R. § 1013 (1982).
The voting trust was irrevocable and instructed the trustee, Midlantic National Bank, not to "create any dependence or intercorporate relationship" between CSX and American Commercial Barge Lines, nor to vote the trust stock "to elect any ... representative of Texas Gas, CSX or their affiliates as an officer or director of the [barge line]." 4 CSX committed to apply to the ICC for authority to control American Commercial Barge Lines "as soon as practicable." 5 CSX hoped that the voting trust would allow the overall CSX-Texas Gas merger to go forward while the ICC was considering whether to approve CSX's application to acquire the barge line subsidiary.
The ICC staff reviewed the voting trust agreement and requested various changes, including an instruction to the trustee to sell the barge line if the ICC disapproves the merger. 6 After CSX and Texas Gas made the changes, the ICC staff issued its "informal nonbinding Commission opinion" that the trust "does effectively insulate ... CSX from violation of the Commission's policy against an unauthorized acquisition of control of a regulated carrier." 7 The ICC staff opinion did not discuss whether the voting trust also insulated CSX from having an unlawful "interest" in American Commercial Barge Lines under § 11,321.
On June 23, 1983, WTA petitioned the ICC for a declaration that the voting trust, even if it satisfied § 11,343's command that one carrier not control...
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