Atchison, T. & S. F. Ry. Co. v. U.S.

• Decision Date: 24 February 1977
• Docket Number: No. 76-1198,76-1198
• Citation: 549 F.2d 1186
• Parties: The ATCHISON, TOPEKA AND SANTA FE RAILWAY COMPANY et al., Petitioners, American Bakers Association et al., Intervenors-Petitioners, v. The UNITED STATES of America, the Interstate Commerce Commission, Repondents, Board of Trade of the City of Chicago, Intervenor-Respondent.
• Court: U.S. Court of Appeals — Eighth Circuit

Page 1186

549 F.2d 1186

The ATCHISON, TOPEKA AND SANTA FE RAILWAY COMPANY et al., Petitioners American Bakers Association et al., Intervenors-Petitioners, v. The UNITED STATES of America, the Interstate Commerce Commission, Repondents Board of Trade of the City of Chicago, Intervenor-Respondent.

No. 76-1198.

United States Court of Appeals, Eighth Circuit.

Submitted Dec. 16, 1976.

Decided Feb. 24, 1977.

R. Eden Martin, Chicago, Ill., for petitioners.

Peter M. Shannon, Jr., Interstate Commerce Commission, Washington, D. C., for respondent, Interstate Commerce Commission.

Harold E. Spencer, Chicago, Ill., for intervenor-respondent, Bd. of Trade of the City of Chicago.

Albert E. Schoenbeck, St. Louis, Mo., John J. Paylor, Cleveland, Ohio, John A. Daily, Philadelphia, Pa., Peter J. Hunter, Jr., Roanoke, Va., Howard J. Trienens, R. Eden Martin and James W. Jandacek, Chicago, Ill., Smith R. Brittingham, Jr., Virginia Beach, Va., Joseph D. Feeney, Chicago, Ill., for railroad petitioners.

Phil M. Cartmell, Jr., Kansas City, Mo., for Bd. of Trade of Kansas City, Mo., Inc., intervenor-petitioner.

Arthur L. Winn, Jr., Samuel H. Moerman and Paul M. Donovan, Washington, D. C., for Anheuser-Busch, Inc., intervenor-petitioner; LaRoe, Winn & Moerman, Washington, D. C., of counsel.

Frederick H. Mayer, St. Louis, Mo., John F. Donelan, and John K. Maser, III, Washington, D. C., for American Bakers Association, intervenor-petitioner.

Donald I. Baker, Asst. Atty. Gen., James Ponsoldt, Atty., I. C. C., Robert S. Burk, Acting Gen. Counsel, Charles H. White, Jr., Associate Gen. Counsel, Peter M. Shannon, Jr., Atty., I. C. C., Washington, D. C., for the United States and Interstate Commerce Commission, respondents.

Before STEPHENSON and HENLEY, Circuit Judges, and MEREDITH,* District Judge.

STEPHENSON, Circuit Judge.

Petitioners seek to review and set aside orders of the Interstate Commerce Commission (ICC) declaring certain railroad rates for the shipment of wheat eastward from Chicago to be unlawfully discriminatory and directing that the discrimination be removed. ¹ The principal issue before us is whether the Commission erred in finding the rates to be discriminatory as a matter of law in violation of section 2 of the Interstate Commerce Act, 49 U.S.C. § 2. ²

This controversy centers around the dual rate structure maintained by the petitioning railroads for the eastward reshipment of wheat originally shipped to Chicago from points west. Wheat arriving in Chicago by rail, lake steamer or barge is treated as having originated west of Chicago and is accorded a through or proportional rate for reshipment to the east. ³ Wheat arriving in Chicago by motor carrier and reshipped to the east is treated as having originated in Chicago and is charged a local rate. In 1973, the proportional rate for wheat shipped from Chicago to New York was 81.5 cents per hundredweight. The local rate for the same movement was 98 cents. It is undisputed that the cost of service to the railroads for the eastward transportation of wheat from Chicago does not vary according to the manner in which the wheat was shipped to Chicago. All wheat arriving in Chicago is deposited in the same elevators and thereafter loses its identity.

In 1973, the Chicago Board of Trade filed a complaint with the ICC, alleging, inter alia, that the dual rate structure as it affected motor-carrier-arrived wheat at Chicago was unreasonable and discriminatory, and thus in violation of sections 1, 2 and 3(1) of the Interstate Commerce Act, 49 U.S.C. §§ 1, 2 and 3(1). The matter was referred to an administrative law judge, who, after hearings, found that the aforesaid rates were unjustly discriminatory in contravention of 49 U.S.C. § 2. ⁴ The hearing examiner stated that his decision was compelled by I C C v. Mechling, 330 U.S. 567, 67 S.Ct. 894, 91 L.Ed. 1102 (1947); and James McWilliams Blue Line, Inc. v. United States, 100 F.Supp. 66 (S.D.N.Y.1951), aff'd per curiam, 342 U.S. 951, 72 S.Ct. 626, 96 L.Ed. 707 (1952); cases which he viewed as indistinguishable from the instant controversy. The railroads were directed to remove the unlawful discrimination.

The hearing examiner's decision was affirmed and adopted by Division 2 of the Commission. Thereafter, petitioners sought and were denied review by the full Commission. The Commission, however, stayed the effective date of the relief ordered pending the completion of judicial review. This petition for review, filed by the affected railroads, followed. ⁵

49 U.S.C. § 2 prohibits carriers from charging different rates for doing "like and contemporaneous service in the transportation of a like kind of traffic under substantially similar circumstances and conditions * * *." ⁶ Petitioners contend that Wheat reshipped by rail after arriving in Chicago by rail, barge or lake steamer is a through movement, ⁷ whereas wheat arriving by truck and reshipped by rail is a local movement. Based on that distinction, and on the fact that the Interstate Commerce Act requires rail and water carriers to establish through routes with each other, 49 U.S.C. §§ 1(4) and 905, but does not require those carriers to establish through routes with motor carriers, ⁸ petitioners argue that the circumstances of truck-rail transportation on the one hand and rail, barge, lake-rail transportation on the other are dissimilar, and that section 2, therefore, does not require that the respective rates be the same. They argue that Mechling and Blue Line are inapposite in that those cases concerned barges and did not involve the through-local distinction presented here, and that the controlling case which mandates a finding of no discrimination is I C C v. Inland Waterways Corp., 319 U.S. 671, 63 S.Ct. 1296, 87 L.Ed. 1655 (1943). Respondents urge that since the physical transportation of wheat eastward from Chicago and the cost thereof is the same regardless of the mode of transportation by which it arrived, the characterization of one movement as through and the other as local is of no consequence, and that the Commission properly declared the rates to be discriminatory in accordance with Mechling and Blue Line.

We turn to an examination of the cases urged by each side as controlling.

Inland Waterways concerned the legality of railroad rates for the reshipping of grain eastward from Chicago. The railroads filed tariffs which applied proportional reshipping rates to grain arriving at Chicago by rail or lake steamer, and local rates to grain arriving by barge. In all cases, the local rates were higher than the proportional rates. After hearings on the proposed tariffs, the Commission sustained the rates, stating in part:

Protestants maintain that the proposed schedules will be unreasonable, unjustly discriminatory, and unduly prejudicial . . . and unduly preferential * * *. This is based primarily on the fact that under the proposed schedules the ex-barge rates will be higher than the ex-rail or ex-lake rates, although in each instance the physical carriage beyond the reshipping point is substantially the same. But the latter is also true of local grain, grain brought in by truck, or by rail under intrastate rates, or grain which has forfeited its transit privileges. To adopt protestants' premise would mean that all proportional rates lower than local rates and differing from each other according to the origin of the commodity would have to be condemned. As pointed out by the division, reshipping or proportional rates are in their essence balances of through rates. Such balances are, of course, determined by the measure of the in-bound and through rates, and properly may vary according to the relative length and nature of the in-bound and through service. It follows that the protestants' allegations cannot be sustained in this proceeding, although in a proper proceeding we might prescribe proportional rates on the ex-barge traffic lower than local rates or joint barge-rail rates lower than the combinations.

319 U.S. at 681, 63 S.Ct. at 1302.

While the aforesaid Commission proceedings were pending, Congress enacted the Transportation Act of 1940, which, inter alia, conferred common carrier status on barge lines and required that they and the railroads enter into reasonable through routes with each other. 49 U.S.C. §§ 1(4) and 905. The barge lines sought reopening of the hearings or reconsideration on that basis, but were denied relief. Suit was then filed seeking to annul the Commission's approval of the new rates on grounds that the rates unlawfully discriminated against barges. The district court granted relief, 44 F.Supp. 368; however, the Supreme Court reversed. Mr. Justice Jackson, writing for the majority, stated in part:

In the proceedings before the Commission the protestants pitched their case upon two propositions: (1) To deny the ex-barge grain the benefit of proportionals sought to be cancelled was necessarily unlawful since the physical carriage beyond Chicago was substantially the same, no matter where the grain originated; * * *.

As the Commission correctly observed with reference to the first contention, "to adopt protestants' premise would mean that all proportional rates lower than local rates and differing from each other according to the origin of the commodity would have to be condemned."

Proportional rates so differing and lower than local rates for like outbound transportation have a long history, antedating the Interstate Commerce Act itself. * * *

To sustain the injunction would require a holding that grain originating 60 miles from Chicago must as matter of law be given the benefit of proportionals fixed with reference to grain from the Northwest Territory, embracing points in Canada and as far west in the United States as Washington and the Dakotas. In addition to the disparity in distances, there is the further fact that the grain from the Northwest is predominately wheat, while that from the territory served by the barge...