ATCHISON, TOPEKA & SANTA FE RAILWAY CO. v. United States

• Decision Date: 05 March 1968
• Docket Number: Civ. A. No. KC-2415.
• Citation: 282 F. Supp. 430
• Parties: The ATCHISON, TOPEKA AND SANTA FE RAILWAY COMPANY, Plaintiff, v. The UNITED STATES of America and the Interstate Commerce Commission, Defendants.
• Court: U.S. District Court — District of Kansas

282 F. Supp. 430

The ATCHISON, TOPEKA AND SANTA FE RAILWAY COMPANY, Plaintiff, v. The UNITED STATES of America and the Interstate Commerce Commission, Defendants.

Civ. A. No. KC-2415.

United States District Court D. Kansas.

March 5, 1968.

J. C. Gibson, Starr Thomas, S. R. Brittingham, Jr., Chicago, Ill., C. J. Putt, Topeka, Kan., Leonard O. Thomas, Kansas City, Kan., for plaintiff.

Newell A. George, U. S. Atty., Topeka, Kan., Donald F. Turner and John H. D. Wigger, Department of Justice, Washington, D. C., for United States.

Robert W. Ginnane, Robert S. Burk, Attorneys, Interstate Commerce Commission, Washington, D. C., for I. C. C.

Before SETH, Circuit Judge, ARTHUR J. STANLEY, Jr., and WESLEY E. BROWN, District Judge.

MEMORANDUM OF DECISION

PER CURIAM.

This is an action instituted by the Atchison, Topeka and Santa Fe Railway Company to enjoin, set aside and suspend orders of the Interstate Commerce Commission entered in two combined administrative proceedings, wherein the Commission held that certain shipment detention practices provided by Santa Fe constituted an unpublished service of delay¹ and that certain tariff rules proposed by Santa Fe to authorize those practices were not just and reasonable.²

The action was brought pursuant to 28 U.S.C. §§ 1336, 1398, and 2321-2325. A three-judge court was convened pursuant to 28 U.S.C. § 2284. The United States was made a party as required by 28 U.S. C. § 2322. Plaintiff Santa Fe is a common carrier by railroad subject to the Interstate Commerce Act, 49 U.S.C. § 1 et seq.

Both of the proceedings were heard before the Commission on a common record and decided in one opinion, reported at 325 I.C.C. 228. In the investigation proceeding, the Commission found, specifically, that Santa Fe provided an unpublished service of delay in transit to certain shippers of potatoes from points in California to the Midwest, particularly Kansas City, Missouri, which delays result in free warehousing to shippers and undue detention of refrigerator cars, in violation of Section 6(7) of the Act, and Section 1 of the Elkins Act.³

Without abandoning its position that it offered no service of delay requiring tariff authorization, Santa Fe proposed two tariff rules bringing the practice at issue under its single-factor through rate schedules. In the tariff proceedings, the Commission found the proposed rules were not just and reasonable.

The discernible facts are largely undisputed, and the Commission found the examiner's findings of fact correct in all material respects. From these facts, however, it reached conclusions contrary to those of the examiner.

Santa Fe annually ships a large volume of potatoes from Kern County, California, located in the San Joaquin Valley, where a large harvest of white potatoes is produced, including a variety known as the White Rose. The White Rose is harvested and marketed as a "new" potato, that is, unmatured with a high moisture content, which results in relatively poor keeping qualities. Harvest occurs from the middle of May to early July, when temperatures range from 100 to 115 degrees. Because of its immaturity, thin skin, and susceptibility to sunburn, the White Rose is highly perishable, and the harvesting process, from digging through washing and grading to loading into cars is sought to be accomplished in 2 to 2½ hours. Extended storage is harmful, and they are usually consumed within two to three weeks after harvest.

The peak harvest amounts to about 1,000 to 1,200 carloads daily. Available cold storage facilities in the locality are inadequate for this volume, so the potatoes are loaded in refrigerator cars and started rolling toward market directly. It cannot always absorb such volumes, and prices are depressed accordingly. Shippers seek to minimize adverse market reactions by delaying the arrival at market of potatoes unsold at the time of shipment.

Santa Fe has the most direct route between the growing areas and market points, and its service is too direct for those shippers seeking greater transit time. By 1947, shippers found that increased shipment time could be achieved by routing their unsold cars away from Santa Fe at various short-haul California junctions, and forwarding them eastward over through routes comprising lines of connecting carriers, over which the through rate applies.

The quantity of unsold potatoes, and hence the number of cars subject to such circuitous routing, has varied from year to year. In some years the entire harvest may be sold at the time of shipment, and no circuitous routing is desired. In 1961, of 14,801 carloads handled by Santa Fe from Kern County origins, 1,582 cars, or approximately ten per cent, were subject to indirect routing; in 1962, of 10,932 cars, 1,032 were indirectly routed; in 1963, of 11,741 cars, only 389 were so treated.

Studies in 1947 indicated that Santa Fe was losing traffic at short-haul California junctions to competing connecting carriers with longer, indirect lines which required more travel time. Thereafter, Santa Fe commenced to accept shipments at the single-factor through rate routed internally over its own lines via circuitous routes. One of these internal routes is formed by Santa Fe lines reaching Denver and Houston. Because these two cities each lie at the end of a line segment, direct backhaul movements over those segments are required. It is undisputed that this route has the same general conformation and is no more circuitous than various indirect, multiple-line routes of competing carriers available to shippers seeking increased transit time.

Santa Fe has since, for convenience and reasons of economy, discontinued physical movement of shipments over the specified circuitous routes; instead, it holds these cars at or near icing stations at Belen, New Mexico, and Newton, Kansas. The finding as to the period of detention is ambiguous. The examiner states at one point that they are held "for periods of time equal to that required for accomplishment of the circuitry specified by the shipper," and at another that "many were held for 10 days or more, some for as long as 16 to 18 days." Maximum travel time over circuitous routes including backhauls is eleven days. Although it appears Santa Fe did hold cars for periods longer than travel time for the specified routes, Santa Fe defends the holding practice only insofar as holding periods equal travel time over the specified circuitous routes. It is on that basis the Commission disapproved the practice, and only that ruling which is before us.

When a hold point was filled, the cars first in were forwarded to the next hold point or, if the next point was Kansas City, and arrival was early, they would be backhauled to Newton, for further holding. The accumulation of cars at hold points necessitates at times an additional switch engine, and alternating crews for two engines, 24 hours a day. Hot weather necessitates daily icing of delayed cars, which the carrier provided without additional charge, and hence at carrier's expense.

Santa Fe urged a separate proposition in each of the proceedings combined before the Commission: in the investigation proceeding, it argued that the holding practice was not a service of delay and hence did not require publication; in the tariff proceeding, without abandoning this position, it proposed tariff rules providing for application of the single-factor through rate to internal circuitous routes including backhauls, and authorizing the described holding practices.

The Commission's opinion betrays an unfortunate confusion of the issues, which leads, in turn, to similarly unfortunate circularity of reasoning in resolving them. Having found the holding practice unlawful as an unpublished service, it proceeds to disapprove the proposed tariff rules authorizing the practice in part on the ground that the practice has already been determined unlawful.

We recognize the scope of judicial review of Commission decisions as defined by the Administrative Procedure Act at 5 U.S.C. § 706, that if its findings and conclusions are neither arbitrary, capricious nor an abuse of discretion, and are otherwise in accordance with law, they must be upheld. However, the propriety of Commission action must be judged solely by the ground invoked by it, and if they are inadequate or improper, we are powerless to affirm its decision. See Securities & Exchange Commission v. Chenery Corp., 332 U.S. 194 at 196, 67 S.Ct. 1575, 91 L.Ed. 1995 at 1999 (1947); see also Burlington Truck Lines, Inc. v. United States, 371 U.S. 156, 83 S.Ct. 239, 9 L.Ed.2d 207 (1962).

The determination that the holding practice constitutes a service of delay rests on a reasonable basis and is not legally erroneous; hence, we may not disturb it. For reasons to be stated, the grounds invoked to disapprove the proposed tariff rules are inadequate, in our view, to support any decision, one way or the other, on the justness and reasonableness of those rules.

The first question is the correctness of the Commission's determination that the carrier's holding practice constitutes a service of delay. Santa Fe urges that it is legally erroneous. We disagree.

The Commission found that Santa Fe's direct route from Bakersfield, California, to Kansas City is 1,748 miles, and requires approximately 59 hours or three days under normal conditions. The longest circuitous route formed internally over Santa Fe's lines, including backhauls into and out of Denver and Houston, is 3,431 miles and requires eleven days. The mileage and running time of Santa Fe internal circuitous routes not involving backhauls does not appear.

Santa Fe argues that a holding schedule directly commensurate with physical travel time over a circuitous route specified by the shipper does not provide a service of "delay." This argument does not acquit the practice if the circuitous route itself provides a delay service and is not available under existing open route tariffs....