American Waterways Operators, Inc. v. United States

• Decision Date: 18 December 1974
• Docket Number: Civ. A. No. 2322-72 and 2323-72.
• Citation: 386 F. Supp. 799
• Parties: AMERICAN WATERWAYS OPERATORS, INC., et al., Plaintiffs, v. UNITED STATES of America and Interstate Commerce Commission, Defendants, and Southern Railway Company, Intervening Defendant. AMERICAN COMMERCIAL BARGE LINE CO. et al., Plaintiffs, v. UNITED STATES of America and Interstate Commerce Commission, Defendants, and Southern Railway Company, Intervening Defendant.
• Court: U.S. District Court — District of Columbia

386 F. Supp. 799

AMERICAN WATERWAYS OPERATORS, INC., et al., Plaintiffs, v. UNITED STATES of America and Interstate Commerce Commission, Defendants, and Southern Railway Company, Intervening Defendant.

AMERICAN COMMERCIAL BARGE LINE CO. et al., Plaintiffs, v. UNITED STATES of America and Interstate Commerce Commission, Defendants, and Southern Railway Company, Intervening Defendant.

Civ. A. Nos. 2322-72 and 2323-72.

United States District Court, District of Columbia.

December 18, 1974.

A. Alvis Layne, Leo C. Franey, Washington, D.C., for plaintiffs, American Waterways Operators, Inc., and others.

Arthur L. Winn, Jr., Samuel H. Moerman, Paul M. Donovan, Washington, D. C., for plaintiffs, American Commercial Barge Line Co., and others.

Roger B. Andewelt, Dept. of Justice, Washington, D.C., for defendant, United States.

Betty Jo Christian, Interstate Commerce Commission, Washington, D.C., for defendant, Interstate Commerce Commission.

Charles A. Horsky, Washington, D.C., for intervenor defendant, Southern Railway Company.

Before ROBINSON, Circuit Judge, and BRYANT and SMITH, District Judges.

OPINION

JOHN LEWIS SMITH, District Judge:

These related cases present for our review a determination by the Interstate Commerce Commission (Commission) that the Southern Railway Company (Southern) is not precluded by law from owning and operating a barge line subsidiary for the purpose of transporting coal along the Ohio and Tennessee Rivers.¹ The relevant statute is the Panama Canal Act of 1912 § 11, 37 Stat. 566, as amended, 49 U.S.C. §§ 5(14-16). Section 5(14) prohibits a railroad from having any interest in a water carrier with which the railroad "does or may compete for traffic."² Section 5(16) provides for an exception to this ban in cases where the Commission finds that the railroad's interest will (1) "not prevent such common carrier by water or vessel from being operated in the interest of the public and with advantage to the convenience and commerce of the people," and (2) "that it will not exclude, prevent, or reduce competition on the route by water under consideration."³ Section 5(15) confers continuing jurisdiction upon the Commission to determine, after hearing, whether the existing or proposed railroad ownership of a water carrier violates § 5(14) and, if so, whether such ownership should be authorized under § 5(16). Such proceedings may be initiated either by the Commission or upon application of a railroad or other carrier.⁴

The instant case had its genesis in a plan conceived by Southern which involved the organization of a subsidiary barge line known as Southern Region Coal Transport, Inc. (SRCT) for the purpose of transporting coal from Illinois and Kentucky mine fields down the Ohio and Tennessee Rivers to a transloader owned by Southern at Sheffield, Alabama, and thence by Southern's own rail system to landlocked power plants at various points in the Southeast. In August, 1970, Southern filed an application under § 5(15) requesting the Commission to find that its operation of SRCT as a barge subsidiary would not violate § 5(14) and even if it did, that it be authorized under § 5(16). Southern's application was referred to a hearing examiner who found Southern neither did nor would tend to compete with its barge subsidiary under § 5(14) if the application were granted. Although it was unnecessary for the hearing examiner to pursue his inquiry, he found that if the § 5(14) ban were applicable, § 5(16) would not save the arrangement.⁵ The Commission accepted the hearing examiner's findings and conclusions of no competition under § 5(14) but rejected those under § 5(16), finding instead that the arrangement could be sanctioned under the latter provision notwithstanding a finding of competition under the former. For reasons set forth infra, we affirm the determination of the Commission under § 5(14) and accordingly pre-termit consideration of the issues under § 5(16).⁶

The anticipated coal traffic which Southern seeks to haul over the combined water-rail route would come from as yet undeveloped coal fields located at Shawneetown, Illinois and Sturgis, Kentucky. Both coal reserves are owned by the Peabody Coal Co. and lie within ten miles of the Ohio River. Under Southern's proposal, the coal would be purchased by Southern Services, Incorporated, a wholly owned subsidiary of the Southern Company which in turn is a holding company for the southeastern utility destinations.⁷ Southern Services, acting as shipper, would arrange for transportation of the coal by barge down the Ohio and Tennessee Rivers to a transloader owned by Southern Railway at Sheffield, Alabama.⁸ Contracts for the water segment of the trip are to be awarded on the basis of competitive bidding. At Sheffield, the coal would be transferred from the barges to Southern's cars and transported over Southern road to various landlocked power stations. Under this scheme, Southern would be guaranteed the rail portion of the trip while its proposed barge subsidiary would have to bid on the water segment. The undeveloped Shawneetown and Sturgis mine fields lie in close proximity to the lines of the Louisville & Nashville (L & N) and Illinois Central (IC) railroads, respectively, with which Southern interchanges traffic. Transport of coal from these mine areas to the nearby barge docks must cross the paths of these common carrier lines. However, at present, there is no rail connection between the lines and the mine reserves. As a result, all-rail transportation of coal from the mine sites to Sheffield is presently not possible because while an all rail route exists between Southern's track at Sheffield and an area in close proximity to the undeveloped reserves, no way exists at these areas for moving coal onto common carrier track.

In translating the § 5(14) proscription against railroad interest in a water carrier with which it does or may compete for traffic, the Commission applied a two part test. First, the railroad and the railroad-controlled carrier must be found to serve two or more common points and second, they must be found to be actively competing for the same traffic or, except for the common ownership, it must be found that they would actively compete for the same traffic.⁹ The portion of the route subjected to the § 5(14) competition test, was the water segment between the mine areas along the Ohio River and the Sheffield transloader facility on the Tennessee River. The Commission found that, notwithstanding the close proximity of the L & N and IC track over which Southern could route its traffic, no facility existed at the mine areas for placing coal onto cars using these lines. Accordingly, the Commission concluded that since Southern could not extend its rail service between the two points in question, Southern and SRCT did not serve two or more common points and hence the § 5(14) ban was inapplicable.

In their challenge to the Commission's decision, plaintiffs claim the Commission misinterpreted § 5(14) by applying the overly narrow two point test. In the alternative, they contend that the Commission's factual findings under § 5(14) are inconsistent and unsupported by substantial evidence.

Although sixty-two years have elapsed since the Act's inception, no court has ever passed on the interpretation given sections 5(14) and (16) by the Commission.¹⁰ We look for guidance, therefore, not only to the Act's plain language, but also to its legislative history as well as to the construction given it by the Commission.

Historically, water movement by barge has proven economically more attractive than by rail over comparable distances.¹¹ In an effort to overcome this economic disadvantage, railroads bought up water competition and by applying their economic leverage, reduced water tariffs to the point of forcing independent water carriers off the rivers and lakes. The plain tendency of this acquisition scheme was to create a rail monoply over water traffic. That Congress was aware of this disturbing erosion of non-rail controlled water carriers is clearly apparent throughout the Act's legislative history.¹² Also prevalent in the Act's history is evidence of Congressional intent that the Act should be limited to aborting a railroad's interest in water carriers which ran parallel to its lines as opposed to proscribing interests in water carriers that were a mere extension of the rail route.¹³ As the legislative history makes plain, Congress was not concerned with controlling broad concepts of actual and potential competition in relevant markets as these terms are used in contemporary antitrust litigation. Rather, Congress sought to insulate water carriers against a far narrower and more direct form of competition embracing traffic over parallel water and rail routes. While Congress obviously did not intend to give its concept of parallel route competition a narrow geometric meaning, it no doubt contemplated a situation basic to the Commission's position where the railroad and water carrier served two or more common points.

Further support for the Commission's two point test is also found throughout the Commission's consistent interpretation of § 5(14). The construction placed upon an act by the agency charged with its administration is generally accorded great weight and will ordinarily be affirmed if it has a reasonable basis in law. Volkswagenwerk Aktiengesellschaft v. Federal Maritime Commission, 390 U.S. 261, 272, 88 S.Ct. 929, 19 L.Ed.2d 1090 (1968). See also United States v. City of Chicago, 400 U.S. 8, 10, 91 S.Ct. 18, 27 L.Ed.2d 9 (1970); Red Lion Broadcasting Co. v. FCC, 395 U.S. 367, 381, 89 S.Ct. 1794, 23 L.Ed.2d 371 (1962). Of higher significance, however, is the construction placed on an act by those administrators who participated in its drafting and directly made known their views to Congress. Zuber v. Allen, 396 U.S. 168, 192, 90 S.Ct. 314, 24 L.Ed.2d 345 (1969); Udall v. Tallman, 380 U.S. 1, 16, 86 S.Ct....