Assoc. of Am. R.R. v. Surface Transportation Bd.

• Decision Date: 30 January 2001
• Docket Number: No. 99-1354,No. 99-1355,99-1354,99-1355
• Citation: 237 F.3d 676
• Parties: (D.C. Cir. 2001) Association of American Railroads, Petitioner v. Surface Transportation Board and United States of America, Respondents National Industrial Transportation League, et al., Intervenors Union Pacific Railroad Company, Petitioner v. Surface Transportation Board and United States of America, Respondents
• Court: U.S. Court of Appeals — District of Columbia Circuit

Page 676

237 F.3d 676 (D.C. Cir. 2001)

Association of American Railroads, Petitioner v. Surface Transportation Board and United States of America, Respondents National Industrial Transportation League, et al., Intervenors Union Pacific Railroad Company, Petitioner v. Surface Transportation Board and United States of America, Respondents

No. 99-1354 No. 99-1355

United States Court of Appeals FOR THE DISTRICT OF COLUMBIA CIRCUIT

Argued November 29, 2000

Decided January 30, 2001

On Petitions for Review of Orders of the Surface Transportation Board

Samuel M. Sipe, Jr. argued the cause for the petitioners. Cynthia L. Taub, Louis P. Warchot, James V. Dolan, Louise A. Rinn, S. William Livingston, Jr. and Michael L. Rosenthal were on brief.

Thomas J. Stilling, Attorney, Surface Transportation Board, argued the cause for the respondents. Joel I. Klein, Assistant Attorney General, United States Department of Justice, Robert B. Nicholson and John P. Fonte, Attorneys, United States Department of Justice, Ellen D. Hanson, General Counsel, Surface Transportation Board, and Craig M. Keats, Associate General Counsel, Surface Transportation Board were on brief. Henri F. Rush, Counsel, Surface Transportation Board, entered an appearance.

William L. Slover, John H. LeSeur, Christopher A. Mills, Peter A. Pfohl, Nicholas J. DiMichael, John K. Maser, III., Frederic L. Wood, Karyn A. Booth, John M. Cutler, Jr., Edward D. Greenberg, David K. Monroe, Andrew P. Goldstein, Martin W. Bercovici, Arthur S. Garrett, II., Michael F. McBride, Bruce W. Neely, Henry M. Wick, Jr., Vincent P. Szeligo and William W. Binek were on brief for intervenors American Chemistry Council, et al. Michael M. Briley entered an appearance.

Before: Henderson, Rogers and Tatel, Circuit Judges.

Opinion for the court filed by Circuit Judge Henderson.

Karen LeCraft Henderson:

The Association of American Railroads (AAR) and Union Pacific Railroad Company (Union Pacific) challenge a Surface Transportation Board (STB) rulemaking which altered the Board's guidelines for finding that a particular rail carrier enjoys "market dominance," a statutory prerequisite to hearing a railroad rate challenge. Before the rulemaking the guidelines required that the Board, in making the market dominance determination, consider both "direct" competition to the challenged carrier, by shippers that would carry the same products (whether by rail or otherwise) from the same location to the same destination, and "indirect" competition using alternate routes (geographic competition) or different products (product competition). The challenged STB decision eliminated consideration of indirect competition. Petitioner AAR and Union Pacific¹ contend that the statutory definition of "market dominance" in 49 U.S.C. § 10709(a) requires that the Board consider both direct and indirect competition.² Although we reject the petitioners' construction of section 10709(a), we nonetheless remand for the Board to reconsider its decision in light of the strong language favoring rail deregulation set out in 49 U.S.C. § 10101(1).

I.

Before 1976 the Interstate Commerce Commission (ICC or Commission) was charged with examining every railroad shipping rate to ensure that it was "just and reasonable." See 49 U.S.C. S 1(5) (1976). In 1976, however, the Congress enacted the Railroad Revitalization and Regulatory Reform Act, Pub. L. No. 94-210, 90 Stat. 31 (4R Act), which largely deregulated railroad rates so that thenceforth the ICC was authorized to examine a rail carrier's service rate only if it first affirmatively found that the carrier had "market dominance over such service." Pub. L. No. 94-210, S 202(b), 90 Stat. at 35. The 4R Act expressly directed the ICC to "establish, by rule, standards and procedures for determining ... whether and when a carrier possesses market dominance over a service rendered or to be rendered at a particular rate or rates," such rules to be "designed to provide for a practical determination without administrative delay." Id. S 202(d), 90 Stat. at 35. Pursuant to the Congress's directive, the ICC promulgated "Special Procedures for Making Findings of Market Dominance," which required that in making the market dominance determination the ICC consider only "direct" competition using the same point of departure and the same destination by other rail carriers ("intramodal competition") or by nonrail transport ("intermodal competition"). See 353 I.C.C. 874, modified, 355 I.C.C. 12 (1976). During the rulemaking, the ICC expressly declined to require consideration of "indirect" product competition (using a different product subject to a different rate) or geographic competition (using a different departure-point or destination). 353 I.C.C. at 904-07. In Atchison, Topeka & Santa Fe Ry. v. ICC, 580 F.2d 623, 62334 (D.C. Cir. 1978), this court upheld the Board's decision to exclude geographic and product competition.

In early 1980 the ICC proposed a rulemaking to, inter alia, add indirect competition to its market dominance calculus. See Ex Parte No. 320 (Sub-No. 1), Rail Market Dominance and Related Considerations, 45 Fed. Reg. 3353, 3357 (§ 1109.1(g)(4)(iv) (Jan. 17, 1980)). While the rulemaking was pending, the Congress enacted the Staggers Act to further deregulate rail transport. Pub. L. No. 96-448, 94 Stat. 1895 (1980).³ The Staggers Act retained the requirement of a market dominance finding as a prerequisite to regulation as well as the existing statutory definition of the term and directed that the ICC "commence a proceeding for purposes of determining whether, and to what extent, product competition should be considered ... to determine the reasonableness of rail carrier rates." Id. S 205(a)(1), 94 Stat. at 1905. The Congress explained, however, that this directive was not to "be construed as altering the meaning, use, or interpretation by the Commission, the courts, or any party of the term 'market dominance,' as defined in section 10709(a) of title 49, United States Code." Id. S 205(a)(3)(B), 94 Stat. at 1906. Following the Congress's directive, the ICC instituted a new rulemaking and concluded that both product competition and geographic competition should be considered in making the market dominance determination.⁴ Ex Parte No. 320 (SubNo. 2), Market Dominance Determinations and Consideration of Product Competition, 365 I.C.C. 118 (June 24, 1981). The Fifth Circuit Court of Appeals upheld the Board's determination. See Western Coal Traffic League v. United States, 719 F.2d 772 (5th Cir. 1983) (en banc), cert. denied, 466 U.S. 953 (1984).

In 1995 the Congress enacted the Interstate Commerce Commission Termination Act, Pub. L. No. 104-88, 109 Stat. 803 (1995), which abolished the ICC and vested in the newly fashioned STB, inter alia, the ICC's authority to regulate rail transportation rates. The ICC Termination Act left the statutory market dominance provisions intact.

On May 5, 1998 the Board published its "Proposal to Eliminate Product and Geographic Competition From Consideration in Market Dominance Determinations." 63 Fed. Reg. 24,588 (1998). After receiving comments the Board issued a decision dated July 1, 1999, announcing that geographic and product competition would no longer be considered in deter mining market dominance. Ex Parte No. 627, Market Dominance Determinations--Product and Geographic Competition (Dec. 21, 1998) (STB Dec.). The Board reasoned that the statute does not itself require their consideration and that the Board "can more expeditiously, efficiently and effectively carry out [its] mandated functions by limiting the market dominance inquiry to the scope expressly required by the statute." STB Dec. at 10, 12. The Board noted that "the time and resources" spent on indirect competition evidence and analysis, by both the parties and the Board, "can be inordinate." Id. at 12. The Board also determined the change would benefit shippers, which would not be so reluctant to challenge rates if they did not have to litigate product and geographic competition, and that it would not substantially injure rail carriers, which, once a rate was challenged, could still rely on indirect competition to establish the rate's reasonableness. Id. at 12-14. AAR and Union Pacific petitioned for reconsideration which the Board denied on July 19, 1999. Ex Parte No. 627, Market Dominance Determinations--Product and Geographic Competition (1999) (Reconsideration Denial).

II.

The petitioners first contend that the statutory definition of "market dominance" in section 10709(a) requires the Board to consider indirect product and geographic competition in determining market dominance. We disagree.

The result of the statutory evolution outlined above is that now "a rail carrier providing transportation subject to the jurisdiction of the Board ... may establish any rate for transportation or other service provided by the rail carrier" "[e]xcept as provided in subsection (d) of [49 U.S.C. S 10701] and unless a rate is prohibited by a provision of [part A of Subtitle iv of title 49]". 49 U.S.C. § 10701(c). The subsection (d) exception provides: "If the Board determines, under section 10707 of this title, that a rail carrier has market dominance over the transportation to which a particular rate applies, the rate established by such carrier for such transportation must be reasonable." Id. S 10701(d)(1). Section 10707, in turn, provides that if a rate is challenged, "the Board shall determine whether the rail carrier proposing the rate has market dominance over the transportation to which the rate applies," 49 U.S.C. S 10707(b), and "[w]hen the Board finds in any proceeding that a rail carrier proposing or defending a rate for transportation has market dominance over the transportation to which the rate applies, it may then determine that rate to be unreasonable if it exceeds a reasonable maximum for that transportation," id. S 10707(c). Finally, and most significantly...