ASG Industries, Inc. v. U.S.
| Decision Date | 05 January 1977 |
| Docket Number | No. 75-1962,75-1962 |
| Citation | 548 F.2d 147 |
| Parties | ASG INDUSTRIES, INC., Petitioner, v. UNITED STATES of America and Interstate Commerce Commission, Respondents, and The Atchison, Topeka & Santa Fe Ry. Co., et al., Intervening Respondents. |
| Court | U.S. Court of Appeals — Sixth Circuit |
Frederick W. Read, III, Gen. Counsel, I. C. C., Washington D. C., for respondents.
Before EDWARDS and McCREE, Circuit Judges, and RUBIN, * District Judge.
This is an appeal wherein ASG Industries seeks to vacate an order of the Interstate Commerce Commission, Division II, dated June 2, 1975. The action is brought pursuant to 28 U.S.C. §§ 2341-2349 1 and 49 U.S.C. § 17(9). The appellee railroads have intervened in this proceeding as of right under 28 U.S.C. § 2348. The record before this court consists of the pleadings, statements of witnesses, exhibits and briefs of the parties. For the reasons hereafter stated we vacate and remand.
The uncontroverted facts are as follows: ASG Industries, Inc. (hereafter referred to The Mountain Pacific Territory, encompassing some eight western states, is a major market for flat glass products, and ASG is an active competitor in that market.
as "ASG") is a major domestic producer of flat glass with its principal manufacturing sites in Kingsport and Greenland, Tennessee.
The Transcontinental Freight Bureau, (hereafter referred to as "TFB"), is the carriers' rate making body for freight moving from the east to the Mountain Pacific Territory.
Until recently, the term "flat glass" encompassed two basic categories of glass: polished and unpolished. Window glass and rolled glass are varieties of unpolished glass. Plate glass and polished wire glass are varieties of polished glass. Polished glass is a superior, more expensive product and is used where a distortion-free finish is desired. This difference in price and quality is reflected in the TFB's freight schedule. For over sixty years, "glass, window, other than plate" has traveled at a lower rate than "glass, plate, polished prism or polished wire".
In 1959 Pilkington Brothers, Ltd. of England developed a new variety of flat glass known as "float glass". It is produced by floating a layer of molten glass over molten tin. Float glass was first manufactured in this country in 1964 and by 1966 was a strong competitor in the flat glass industry. Indeed, by 1970 float glass amounted to 39.1% of the total flat glass produced in the United States. From 1966 to 1973, the production of plate glass declined while float glass production increased 130%.
Since float glass is not ground or polished, the TFB lumped it into the lower rate category of "glass, window, other than plate". Other than the method by which they are manufactured, plate glass and float glass are virtually identical products and are totally interchangeable. They are shipped in the same containers and move under the same transportation conditions. As the following table indicates, the disparity in the transcontinental rates between plate and float glass is striking.
Carload Minimum Trailer on Minimum
Rate* Weight Flatcar Rate* Weight
------- ------- ------------- ----------
Plate Glass 334 100,000 421 70,000
Float Glass 231 100,000 269 80,000
Note FN* Rates are stated in cents per pound.
The disparity between the two comes into clearer focus from the following example: A manufacturer of float glass located in Nashville, Tennessee, ships that product to California at a rate 44%-56% lower than his plate glass competitor, ASG, located in Kingsport, Tennessee, only some 250 miles to the east. Since float and plate sell for the same price and the glass manufacturer absorbs the shipping costs, ASG was required to absorb the difference in the freight rates between float and plate in order to remain competitive in the Mountain Pacific Territory.
By 1970 the TFB's dual rate scale had become an anomaly in the industry. Every other railroad rate bureau in the country had reduced or was in the process of reducing the rate on plate to that of float, and the U.S. Customs Bureau had set the same duty on imported float and plate. On December 2, 1971, ASG filed a proposal with the TFB seeking an equalization of rates (Appendix II, page 521). The proposal was approved by the Standing Rate Committee in a special notice dated December 20, 1971. (Appendix II, page 529). On January 19, 1972, the approval was cancelled without explanation. (Appendix II, page 536)
Viewing the evidence as a whole, the administrative law judge found that the rates complained of are and will be unjust and unreasonable under 49 U.S.C. § 1(5), as well as unduly prejudicial to the plaintiff and unduly preferential to its competitors under 49 U.S.C. § 3(1). He ordered that plate glass rates be adjusted down to the level of float glass rates. He awarded ASG reparations with interest on all shipments moved at the unlawful rate since December 2, 1971, in the amount of the difference between plate and float rates.
In his discussion and conclusion the administrative law judge emphasized the In its order of January 14, 1975, the Commission's three member Review Board No. 4 () adopted the findings of fact of the administrative law judge in toto, and affirmed his finding of prejudice and preference under § 3(1). However, in a brief disposition of little more than a paragraph, they reversed his finding that the rates were unjust and unreasonable under § 1(5). The Review Board further held that ASG had failed to show entitlement to damages under § 3(1) and reversed the award of reparation.
TFB's unjustified refusal to change the rate schedule in the face of the competitive realities of complainant's situation and the action of all other rate bureaus.
On March 3, 1975, complainant petitioned the Review Board to reconsider its January 14, 1975 order. In accordance with 49 U.S.C. § 17(8) the Commission stayed its January 14, 1975 order pending disposition of ASG's petition. On June 12, 1975, the petition for reconsideration was denied. The question of equalization of the rates was resolved by the railroads on April 7, 1975, when they voluntarily reduced plate glass rates to the level of float glass. Only those portions of the Review Board's order involving § 1(5) and the denial of reparations under § 3(1) are before this Court for review.
The judicial scope of review over the orders of the Commission is well settled: decisions of the ICC should not be disturbed unless they are unsupported by substantial evidence on the record as a whole, or were arrived at in an arbitrary or capricious manner. Atchison, T. and S. F. Ry. v. Wichita Board of Trade, 412 U.S. 800, 93 S.Ct. 2367, 37 L.Ed.2d 350 (1973); O-J Transport Co. v. U. S., 536 F.2d 126 (6th Cir. 1976); A. Lindberg & Sons, Inc. v. U. S., 408 F.Supp. 1032 (S.D.Ohio 1976). If we find such evidence as to "justify, if the trial were to a jury, a refusal to direct a verdict" and we also find a "rational connection between the facts found and the choice made", we must sustain the agency's decision. Labor Board v. Columbian Enameling & Stamping Co., 306 U.S. 292, 300, 59 S.Ct. 501, 505, 83 L.Ed. 660 (1939); Burlington Truck Lines v. U. S., 371 U.S. 156, 168, 83 S.Ct. 239, 9 L.Ed.2d 207 (1962); See also Bowman Transportation Co., Inc. v. Arkansas-Best Freight Systems, Inc., 419 U.S. 281, 95 S.Ct. 438, 42 L.Ed.2d 447 (1974).
The Supreme Court has held repeatedly that a court may not substitute its own view of the evidence for that of the Commission. Due deference must be accorded the Commission's expertise as to matters within its special competence, particularly in rate cases. Mississippi Valley Barge Line Co. v. U. S., 292 U.S. 282, 54 S.Ct. 692, 78 L.Ed. 1260 (1934); Interstate Commerce Commission v. City of Jersey City, 322 U.S. 503, 64 S.Ct. 1129, 88 L.Ed. 1420 (1944). As was noted in Atchison, T. & S. F. Ry. v. Wichita Board of Trade, supra, this deference is not without limits. 2 Mindful of these principles, we address the substantive issues at hand.
As the Review Board correctly notes, the validity of rates challenged under § 1(5) is determined by examining the rate on its own merit. Although a manufacturer may enjoy a lower freight rate than his competitor, neither rate may be unreasonable under § 1(5):
A charge may be perfectly reasonable under section 1, and yet may create an unjust discrimination or an unreasonable preference under sections 2 and 3. Interstate Commerce Commission v. Baltimore The burden is upon a complainant to show that an existing freight rate is unreasonable in fact. Louisville & R. R. v. U. S., 238 U.S. 1, 35 S.Ct. 696, 59 L.Ed. 1177 (1915). If a rate is found to be unreasonable under § 1(5), amounts charged in excess of the reasonable rates are awarded automatically to the shipper as overcharges. Interstate Commerce Commission v. U. S., ex rel. Campbell, 289 U.S. 385, 391, 53 S.Ct. 607, 77 L.Ed. 1273 (1933).
& O. R. R., 145 U.S. 263, 277, 12 S.Ct. 844, 848, 36 L.Ed.2d 699 (1892).
No mathematical formulae exist for determining the reasonableness of rates, but one of the best tests for reasonableness was first set forth in Louisville & N. R. R. v. U. S., supra 238 U.S. at 15-16, 35 S.Ct. at 700.
Giving the widest possible effect to the fact that mere comparison between rates does not necessarily tend to establish the...
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