Burlington Northern R. Co. v. I.C.C., s. 88-1114

• Decision Date: 09 February 1993
• Docket Number: 89-1192,91-1255 and 91-1360,88-1257,89-1149,Nos. 88-1114,s. 88-1114
• Citation: 985 F.2d 589
• Parties: BURLINGTON NORTHERN RAILROAD COMPANY, Petitioner, v. INTERSTATE COMMERCE COMMISSION and the United States of America, Respondents, McCarty Farms, Inc., et al., Intervenors. McCARTY FARMS, INC., et al., Petitioners, v. INTERSTATE COMMERCE COMMISSION and the United States of America, Respondents, Burlington Northern Railroad Company, Intervenor. BURLINGTON NORTHERN RAILROAD COMPANY, Petitioner, v. INTERSTATE COMMERCE COMMISSION and the United States of America, Respondents, McCarty Farms, Inc., et al., Intervenors. McCARTY FARMS, INC., et al., Petitioners, v. INTERSTATE COMMERCE COMMISSION and the United States of America, Respondents, Burlington Northern Railroad Company, Intervenor. BURLINGTON NORTHERN RAILROAD COMPANY, and the United States of America, Petitioners, v. INTERSTATE COMMERCE COMMISSION and the United States of America, Respondents, McCarty Farms, Inc., et al. and the State of Montana, Department of Commerce, Intervenors. McCARTY FARMS, INC., et al. and the State of Montana, Department of Commerce, Petitioners, v. INTERSTATE COMMERCE COMMISSION and the United States of America, Respondents.
• Court: U.S. Court of Appeals — District of Columbia Circuit

Page 589

985 F.2d 589

300 U.S.App.D.C. 1

BURLINGTON NORTHERN RAILROAD COMPANY, Petitioner, v. INTERSTATE COMMERCE COMMISSION and the United States of

America, Respondents,

McCarty Farms, Inc., et al., Intervenors.

McCARTY FARMS, INC., et al., Petitioners, v. INTERSTATE COMMERCE COMMISSION and the United States of

America, Respondents,

Burlington Northern Railroad Company, Intervenor.

BURLINGTON NORTHERN RAILROAD COMPANY, Petitioner, v. INTERSTATE COMMERCE COMMISSION and the United States of

America, Respondents,

McCarty Farms, Inc., et al., Intervenors.

McCARTY FARMS, INC., et al., Petitioners, v. INTERSTATE COMMERCE COMMISSION and the United States of

America, Respondents,

Burlington Northern Railroad Company, Intervenor.

BURLINGTON NORTHERN RAILROAD COMPANY, and the United States

of America, Petitioners, v. INTERSTATE COMMERCE COMMISSION and the United States of

America, Respondents,

McCarty Farms, Inc., et al. and the State of Montana,

Department of Commerce, Intervenors.

McCARTY FARMS, INC., et al. and the State of Montana, Department of Commerce, Petitioners, v. INTERSTATE COMMERCE COMMISSION and the United States of

America, Respondents.

Nos. 88-1114, 88-1257, 89-1149, 89-1192, 91-1255 and 91-1360.

United States Court of Appeals District of Columbia Circuit.

Argued Oct. 22, 1992.

Decided Feb. 9, 1993.

Petitions for Review of Orders of the Interstate Commerce Commission.

Samuel M. Sipe, Jr., with whom Betty Jo Christian, Washington, DC, Edmund W. Burke, Douglas J. Babb, Fort Worth, TX, Janice G. Barber, Washington, DC, and Michael E. Roper, Fort Worth, TX, were on the brief, for petitioners in Nos. 88-1114, 89-1149, and 91-1255. William R. Power, Fort Worth, TX, also entered an appearance for petitioners.

Timothy R. Engler, with whom Michael J. Ogborn and Tim L. O'Neill, Lincoln, NB, were on the brief, for petitioners in Nos. 88-1257, 89-1192, and 91-1360.

Edmund W. Burke, Douglas J. Babb, Fort Worth, TX, Janice G. Barber, Washington, DC, Michael E. Roper, Fort Worth, TX, Betty Jo Christian, and Samuel M. Sipe, Jr., Washington, DC, were on the brief for intervenor Burlington Northern R. Co. William R. Power, Fort Worth, TX, also entered an appearance for intervenor.

Thomas J. Stilling, Atty., I.C.C., with whom Robert S. Burk, General Counsel, and Ellen D. Hanson, Sr. Associate General Counsel, I.C.C., John J. Powers, III and John P. Fonte, Attys., Dept. of Justice, were on the brief, for respondent. Louis Mackall, Washington, DC, also entered an appearance for respondent.

Before: RUTH BADER GINSBURG, WILLIAMS and HENDERSON, Circuit Judges.

Opinion for the Court filed by Circuit Judge, STEPHEN F. WILLIAMS.

STEPHEN F. WILLIAMS, Circuit Judge:

Montana wheat and barley farmers ship their grain via Burlington Northern to ports in the Pacific Northwest for transportation to markets in the Pacific Rim. The Interstate Commerce Commission, in a decision not contested here, has found Burlington to have "market dominance" over these shipments; as a result, the Commission has jurisdiction over the rates. See 49 U.S.C. §§ 10701a(b)(1) and 10709(b) (1988). In the set of decisions under review the Commission awarded the shippers over $16 million for excess charges. Both the railroad and the shippers (including the Montana Department of Agriculture as one of their representatives) petition for review. The principal issue revolves around the Commission's decision not to employ its "constrained market pricing" methodology ("CMP"), which implements the principle of Ramsey pricing and which the ICC has apotheosized as the "preferred and most accurate procedure available for determining the reasonableness" of rates in markets where a carrier has market dominance. See, e.g., McCarty Farms, Inc. v. Burlington Northern, Inc., 3 I.C.C.2d 822, 840 (1987). Instead, the Commission used the "revenue over variable cost" ("R/VC") method, which holds the railroad's charges on the disputed traffic to the same ratio of revenue to variable cost as on certain "benchmark" traffic that the Commission has deemed comparable. Burlington claims that the Commission failed to justify this substitution, and we agree. Before we reach that issue, however, we must address claims as to the scope of our jurisdiction and the scope of the complaints filed with the Commission. After dealing with these and with the fight over CMP and R/VC, we address attacks advanced by the shippers that concern the way the Commission applied the R/VC methodology in this case. We address these R/VC issues so that, if the Commission on remand should lawfully adhere to that methodology, the entire litigation may be brought to an end.

Under review are three ICC decisions challenged by both sides and one challenged by McCarty Farms only, all four decisions being styled "McCarty Farms, Inc. v. Burlington Northern, Inc.". For simplicity of citation we label them McCarty Farms I through McCarty Farms IV: (1) McCarty Farms I, 4 I.C.C.2d 262 (1988); (2) McCarty Farms II, Docket Nos. 37809, 37809 (Sub-No. 1) and 37815S (unpublished decision served Feb. 21, 1989); (3) McCarty Farms III, Docket Nos. 37809, 37809 (Sub-No. 1) and 37815S (unpublished decision served Mar. 27, 1991); (4) McCarty Farms IV, Docket Nos. 37809, 37809 (Sub-No. 1) and 37815S (unpublished decision served Nov. 26, 1991).

These decisions found Burlington's rates excessive only on trainload (52-car) shipments of export wheat and barley sent from Montana origins to ports on the Pacific Northwest Coast, and awarded reparations for the years 1981-86, plus interest to July 1, 1991. See McCarty Farms IV, slip op. at 3. The Commission found no overcharges on either single-car or multiple-car (26-car) shipments of wheat or barley. See McCarty Farms III, slip op. at 8.

I. Jurisdiction

McCarty Farms (and the shippers it represents) challenge this court's jurisdiction to review many of the claims raised in this suit. To assess the argument, we must divide the total dispute into three segments--the first over which we clearly do not have jurisdiction, a disputed middle ground, and the last over which we clearly do have jurisdiction.

1. Single-car shipments of wheat for the two-year period ending September 12, 1980. McCarty Farms started this dispute's crawl through the legal system in 1980 by filing a class action on behalf of Montana farmers under 49 U.S.C. § 11705(c)(1) and 28 U.S.C. § 1337 in the U.S. district court for the District of Montana. The suit disputed only wheat shipments sent in single cars over a two-year period ending September 12, 1980. Under the doctrine of primary jurisdiction, the district court referred the rate reasonableness question to the ICC, but retained jurisdiction over the lawsuit. McCarty then filed a complaint with the Commission encompassing this claim (plus others, as discussed below). See ICC No. 37809 (filed Mar. 27, 1981).

Because 28 U.S.C. § 1336(b) gives a referring district court exclusive jurisdiction over appeals from Commission orders "arising out of such referral," ¹ all agree that any appeal as to the single-car wheat shipments moving before September 12, 1980 lies in the district court for the District of Montana.

2. Single-car shipments of barley, and wheat shipments after September 12, 1980. McCarty's complaint to the ICC following up the district court referral, ICC No. 37809, challenged not only Burlington's rates for single-car shipments of wheat in the original two-year period but also those rates for barley. McCarty also broadened its request for relief to include prospective rate prescriptions in addition to its previous demand for reparations. The ICC assigned the barley rate challenges to a separate proceeding, ICC No. 37809 (Sub-No. 1), because it concluded that barley rates were not a part of the district court's referral order.

3. Rates on multi-car (26-car) and trainload (52-car) shipments of wheat and barley. The Montana Department of Agriculture also filed a complaint, ICC No. 37815S, attacking Burlington's rates on larger--multi-car or trainload--shipments of wheat and barley. See id. at 1. McCarty concedes that § 1336(b) has no application to these rates (because they arise out of the Montana Department of Agriculture complaint, not the district court referral), so that this court has jurisdiction to review the ICC decisions under the Hobbs Act, 28 U.S.C. §§ 2321(a) and 2342(5). ²

Given the agreement over jurisdiction for rates in categories 1 and 3, the dispute thus relates only to rates in category 2. McCarty argues that the district court for the District of Montana has exclusive jurisdiction not only over the ICC disposition of the claims actually referred to the ICC by that court, but also over the claims that McCarty added when it filed its complaint with the Commission. Although no one here addresses the point explicitly, McCarty also implicitly makes the narrower claim that the district court has exclusive jurisdiction to review the ICC decisions as they relate to reparations for single-car wheat shipments moving between September 12, 1980 and the Commission's ruling on the reasonableness of those rates.

McCarty's argument has two steps. First, as we have seen, 28 U.S.C. § 1336(b) gives a district court that refers an issue to the ICC exclusive appellate jurisdiction over any ICC order "arising out of such referral." McCarty argues--or, more precisely, implicitly asks us to assume--that all the determinations generated by its complaint to the Commission can be said to have "aris[en] out of" the referral, even though that complaint was broader than the district court referral from McCarty's original complaint. Second, McCarty argues that § 214 of the Staggers Rail Act of 1980, 49 U.S.C. § 10501(d), does not (contrary to the view of the Commission and Burlington) cut off district court jurisdiction with respect to shipments after the effective date of Staggers, October 1, 1980. ³

We need not resolve the jurisdictional dispute,...