National Classification Committee v. U.S., 83-2273

• Decision Date: 05 July 1985
• Docket Number: No. 83-2273,83-2273
• Citation: 765 F.2d 1146
• Parties: NATIONAL CLASSIFICATION COMMITTEE and National Motor Freight Traffic Association, Inc., Petitioners, v. UNITED STATES of America and Interstate Commerce Commission, Respondents.
• Court: U.S. Court of Appeals — District of Columbia Circuit

Page 1146

765 F.2d 1146

246 U.S.App.D.C. 393

NATIONAL CLASSIFICATION COMMITTEE and National Motor Freight Traffic Association, Inc., Petitioners, v. UNITED STATES of America and Interstate Commerce Commission Respondents.

No. 83-2273.

United States Court of Appeals District of Columbia Circuit.

Argued Nov. 16, 1984.

Decided July 5, 1985.

As Amended July 5, 1985.

William W. Pugh, Washington, D.C., with whom Bryce Rea, Jr. and John R. Bagileo, Washington, D.C., were on brief, for petitioners.

Dennis J. Starks, Atty., I.C.C., Washington, D.C., with whom J. Paul McGrath, Asst. Atty. Gen., Dept. of Justice, John Broadley, Gen. Counsel, Lawrence H. Richmond, Deputy Associate Gen. Counsel, I.C.C., Robert B. Nicholson and Margaret G. Halpern, Attys., Dept. of Justice, Washington D.C., were on brief, for respondents. John P. Fonte, Atty., Dept. of Justice and Ellen D. Hanson, Atty., I.C.C., Washington, D.C., entered appearances for respondents.

Before WALD, EDWARDS and BORK, Circuit Judges.

Opinion for the Court filed by Circuit Judge BORK.

BORK, Circuit Judge:

This is an action seeking review of the Interstate Commerce Commission's ("ICC" or "Commission") Final Decision in Ex parte No. MC-98 (Sub-No. 1), Investigation Into Motor Carrier Classification, 367 I.C.C. 243 (1983). The informal rulemaking proceeding that led to the decision was instituted in 1978 and concerned revisions in the national motor freight classification system ("NMFC")--a system that classifies commodities according to transportation characteristics in order to facilitate ratemaking. The ICC revised and simplified the NMFC by condensing fifteen traditional transportation characteristics into four new characteristics: density, stowability, handling, and liability. In doing so, the ICC eliminated three economic factors that were traditionally considered in making classification decisions even though they were irrelevant to the transportability of a particular commodity. The National Classification Committee ("NCC") and the National Motor Freight Traffic Association, Inc. ("NMFTA"), organizations that represent various motor common carriers, have petitioned this court seeking review of the ICC's action. We affirm the decision of the ICC.

I.

At the instigation of the ICC, motor common carriers in this country have long maintained a collective ratemaking system to set charges on all articles they move in interstate commerce. This is done in two steps. The first classifies all known commodities into a limited number of classes according to their transportation characteristics. The NMFC contains nineteen such classes, which apply to hundreds of thousands of commodities. These classes are then used in conjunction with a rate schedule to determine the prices of particular shipments between various points of origin and destination.

The National Classification Committee maintains the NMFC pursuant to an agreement approved by the ICC under 49 U.S.C. Sec. 10706(b) (1982). That section confers antitrust immunity on the NCC's collective activities that conform to the agreement. Approximately 3,000 carriers use the NMFC to publish their freight classifications. In Ex parte No. MC-22, Motor Carrier Rates in New England, 47 M.C.C. 657, 660 (1948), the ICC set forth the following fifteen transportation characteristics which have traditionally been used for freight classification:

(1) Shipping weight per cubic foot; (2) Liability to damage; (3) Liability to damage other commodities with which it is transported; (4) Perishability; (5) Liability to spontaneous combustion or explosion; (6) Susceptibility to theft; (7) Value per pound in comparison with other articles; (8) Ease or difficulty in loading or unloading; (9) Stowability; (10) Excessive weight; (11) Excessive length; (12) Care or attention necessary in loading and transporting; (13) Trade conditions; (14) Value of service; (15) Competition with other commodities transported.

In 1978, the ICC received complaints from several shippers, individual carriers, and government agencies concerning the classification system. The United States Department of Justice, for example, urged adoption of a cost-based system that would improve efficiency while providing fairer rates for small shipments. Accordingly, the ICC issued a notice of investigation and proposed rulemaking in Ex parte No. MC-98, New Procedures in Motor Carrier Restructuring Proceedings, 359 I.C.C. 399, 416, 528 (1978). See also 43 Fed.Reg. 14,978 (1978). This rulemaking was to consider, inter alia, revisions in the fifteen traditional classification criteria and analysis of what types of costs are relevant for ratemaking.

On May 13, 1981, the ICC served its Interim Decision which recommended that the NMFC be revised. Ex parte No. MC-98 (Sub-No. 1), Investigation into Motor Carrier Classification, 364 I.C.C. 906 (1981). The stated purpose of undertaking revisions was to confine the classification process to considerations based upon relative physical transportability. Economic or ratemaking considerations were to be removed from the classification process. This was to be done by: (1) eliminating four of the fifteen traditional classification characteristics and consolidating the remaining factors into four broad categories; (2) instructing the NCC to publish information about the relevant transportation characteristics rather than a single rating number; and (3) forbidding the NCC from varying the ratings on an article depending on whether it is shipped truckload ("TL"), less than truckload ("LTL"), or "any quantity" ("AQ"). Id. at 919.

The Commission based its new approach in part on the Motor Carrier Act of 1980 which encourages competition by easing entry and by stressing individual instead of collective ratemaking. 364 I.C.C. at 910. The four transportation characteristics which the ICC determined were essential to cost-based ratemaking were density, stowability, handling, and liability. These characteristics were all found to be relevant to physical transportability. The four characteristics which the ICC proposed to eliminate were trade conditions, value of service, value per pound, and competition with other commodities. These characteristics were all found to be illegitimate because they had nothing to do with transportability but bore instead upon economic or ratemaking considerations. Subsequently, value per pound was retained because it bore upon carrier liability which the Commission regarded as a transportation characteristic.

The ICC's Interim Decision solicited comments on the proposed classification concept from all interested parties, but it did not provide for cross-service of comments by the parties to this proceeding nor did it allow for the filing of reply comments. The NCC filed comments supporting the 1948 system and opposing the ICC's proposal to use only four transportation characteristics. A survey of subscribers to the NMFC was also conducted by the NCC and allegedly revealed strong user support for the traditional classification system. Although the ICC provided no procedure for filing reply comments, the NCC did obtain some of the comments that were favorable to the ICC's proposed scheme and responded to those comments. On March 9, 1983, the ICC served its decision in this proceeding. 367 I.C.C. 243 (1983).

The March 9 Decision revised portions of the Interim Decision to take into account the comments that were received from the NCC and other carriers and shippers. For example, the Final Decision allowed the NMFC to continue to publish commodity ratings as a composite number since carriers and shippers seemed to agree that elimination of the uniform NMFC rating system would disrupt their present operations. The Final Decision reaffirmed the ICC's adoption of a new streamlined system based on only four transportation characteristics. The Decision also confirmed the abolition of the use of economic or ratemaking characteristics as well as the prohibition of differing truckload and less-than-truckload ratings for shipments of a specific commodity. The ICC refused to grant an NCC request for leave to reply to comments filed by the Department of Justice since this would unduly delay a final decision by necessitating the acceptance of other reply comments.

On March 29, 1983, the NCC filed a petition requesting the ICC to reconsider the substance of its decision and requesting that a hearing be held to cover various alleged procedural defects in the Commission's handling of the matter. The defects allegedly arose because the ICC did not provide for cross-service of comments and the filing of replies. In its decision on reconsideration, the ICC denied the NCC's procedural claim, stating that as a rulemaking this proceeding is governed by section 553 of the Administrative Procedure Act ("APA"), 5 U.S.C. Sec. 553 (1982). That section does not require cross-service of comments or the filing of replies and indeed the Commission does not usually allow such a process in its rulemaking proceedings. See 49 C.F.R. Secs. 1104.12(b), 1110 (1984). In any event, the Commission concluded that the NCC was not prejudiced by its decision to omit cross-service of comments and reply comments and thus rejected its claim.

In reconsidering the substance of the Final Decision, the ICC decided partially to grant the NCC's petition by rescinding its previously ordered ranking of the factors within the new composite "liability" characteristic. On the remaining substantive issues, however, the Commission deadlocked on a two versus two tie vote, and accordingly all other aspects of the Final Decision were left in effect. 367 I.C.C. 715, 717 (1983).

On December 9, 1983, the NCC and the NMFTA filed a petition with this court seeking review of the ICC's final decision.

II.

Petitioners' first contention is that the ICC mishandled this case procedurally by failing to provide for cross-service of comments, by refusing to accept petitioner...