Burlington Northern Inc v. United States

• Decision Date: 13 December 1982
• Docket Number: No. 81-1008,81-1008
• Citation: 459 U.S. 131,74 L.Ed.2d 311,103 S.Ct. 514
• Parties: BURLINGTON NORTHERN INC. et al., Petitioners, v. UNITED STATES et al
• Court: U.S. Supreme Court

459 U.S. 131

103 S.Ct. 514

74 L.Ed.2d 311

BURLINGTON NORTHERN INC. et al., Petitioners,

v UNITED STATES et al.

No. 81-1008.

Argued Nov. 3, 1982.

Decided Dec. 13, 1982.

Rehearing Denied Feb. 22, 1983. See U.S., 103 S.Ct. 1238.

Syllabus

In 1974, San Antonio, Tex., negotiated with petitioner railroads to transport to San Antonio coal purchased under long-term contracts in Wyoming for use in the city's coal-fired electricity generating plants. Because it was not satisfied with the railroads' quoted rate for moving the coal, San Antonio filed a complaint with the Interstate Commerce Commission (ICC). In 1976, the ICC issued a temporary order, subject to modification, establishing a rate of $10.93 per ton. In 1978, on petition of the railroads, the ICC ordered the rate raised to $16.12 per ton. But both San Antonio and the railroads were dissatisfied, and in 1979 the ICC issued a third order resulting in a rate of $17.23 per ton. The railroads then filed tariffs at this rate. Petitions for review of the 1978 and 1979 orders were filed by all parties in the Court of Appeals for the District of Columbia Circuit, which in 1980 decided that both orders were arbitrary and capricious, and accordingly vacated them and remanded to the ICC. The parties disagreed about the effect of this decision on the filed tariffs pending the ICC's decision on remand, the railroads continuing to treat the $17.23 rate as the one San Antonio was required to pay, and San Antonio claiming that the $10.93 rate was revived. The railroads then asked the Court of Appeals for clarification of its decision. Ultimately, after the parties, pending review, had carried on their controversy in other forums, including the ICC, which in 1981 vacated the 1976 order, the Court of Appeals later in 1981 held that since it was without authority to determine interim policy pending remand proceedings in the ICC, the effect of the court's 1980 decision was necessarily to reinstate the 1976 order, which was "revived" by the vacation of the 1978 and 1979 orders, and that therefore tariffs set in excess of the 1976 rate were "unlawful" for the period after the court vacated the 1978 and 1979 orders but before the ICC formally vacated the 1976 order.

Held: The Court of Appeals should have deferred to the ICC on questions concerning the applicable rates. Pp. 138-144.

(a) Under the Interstate Commerce Act, primary jurisdiction to determine the reasonableness of rates lies with the ICC. Federal court authority to reject ICC rate orders extends to the orders alone and not to the rates. Where there is a dispute about the appropriate rate, the equities favor allowing the carriers' rate to control pending a decision by the ICC, since under the Act the shipper may receive reparation for overpayment while the carrier can never be made whole after underpayment. Pp. 138-142.

(b) By declaring that the 1976 rate order was "revived" for the period indicated, the Court of Appeals did what a federal court may not do, i.e., freeze the rate the railroads charge shippers prior to a decision by the ICC as to what a reasonable rate should be. This undermines the ICC's ability to exercise its primary jurisdiction to insure equitable and uniform rates. Moreover, the Court of Appeals' determination requires the railroads to accept a return that was considered temporary when it was approved in 1976, and "below a maximum reasonable rate" when it was modified in 1978. If the court was unsure about the continued vitality of the 1976 order, the more appropriate course would have been to remand to the ICC for explanation rather than to undertake itself to construe the order, and in so doing interfere with the ICC's primary jurisdiction. In striking the 1978 and 1979 orders, the Court's action operated to leave in effect the rates filed under the ICC's authority pending the ICC's redetermination of a reasonable rate and subject to reparations to protect the shipper should the ICC find that these rates were too high. Pp. 142-144.

211 U.S.App.D.C. 111, 655 F.2d 1341, reversed.

Robert Eden Martin, Washington, D.C., for petitioners.

Elliott Schulder, Washington, D.C., for federal respondent in support of the petitioners.

William L. Slover, Washington, D.C., for non-federal respondents.

Chief Justice BURGER delivered the opinion of the Court.

We granted certiorari to clarify the allocation of authority, as between the federal courts and the Interstate Commerce Commission, to set and review rates for movements of coal by rail.

I

This case arose as a result of a 1972 decision of San Antonio, Texas, acting through its City Public Service Board, to substitute coal-generated electricity for natural gas. Toward that end, in 1974, San Antonio entered into long-term contracts to purchase coal from two suppliers in Campbell County, Wyoming; began to construct two coal-fired generating units; and initiated negotiations with Burlington Northern, Inc. and Southern Pacific Transportation Company for contracts to transport coal from Wyoming to the new plants. Although the Railroads originally quoted San Antonio a rate of $7.90 per ton for moving coal from Campbell County to San Antonio, economic conditions, which were characterized by rapid inflation, required the Railroads to raise the rate to $11.90 per ton. In May 1975, San Antonio filed a complaint with the Interstate Commerce Commission seeking prescription of a just and reasonable tariff.

In October 1976, the Commission rendered a decision, San Antonio, Texas v. Burlington Northern, Inc., 355 ICC 405 (1976) (San Antonio I), establishing a rate of $10.93 per ton for the San Antonio movement. The Commission emphasized that the prescription was temporary by noting that "[t]he public interest requires that, in view of the parties' inability to reach an agreement, a rate be prescribed at this time so that the movement may commence. As actual experience is gained, the parties may petition for modification of the prescription if circumstances warrant." Id., at 417-418. The order was to "continue in full force and effect until the further order of the Commission." Ibid.

The Railroads sought review in the United States Court of Appeals for the Eighth Circuit, claiming, inter alia, that the Commission had erred in not considering the Railroad Revitalization and Regulatory Reform Act of 1976, Pub.L. 94-210, 90 Stat. 31 (4-R Act),¹ which became effective before San Antonio was announced. The Court of Appeals affirmed the Commission, reasoning that since the rate was temporary and expressly subject to modification, the parties could return to the Commission when guidelines for implementing the 4-R Act were promulgated, Burlington Northern, Inc. v. United States, 555 F.2d 637, 648 (CA8 1977).

In June 1977, after six months of operation at the San Antonio I rates, the Railroads petitioned the Commission for a modification of the rate. In October 1977, the Commission reopened the San Antonio proceeding, and one year later, issued a new order, San Antonio, Texas v. Burlington Northern Inc., 359 ICC 1 (1978) (San Antonio II ), finding that when compared to other similar movements, the San Antonio I $10.93 rate was "below a maximum reasonable rate and that modification of that rate [was] warranted." Id., at 7. After making extensive new cost findings and applying the ratemaking guidelines of the 4-R Act, the Commission set the maximum rate level at $16.12 per ton.

Both San Antonio and the Railroads were dissatisfied with this rate and petitioned for reconsideration. In June 1979, a third order was issued, San Antonio, Texas v. Burlington Northern Inc., 361 ICC 482 (1979) (San Antonio III ), which made certain modifications in the San Antonio II analysis that resulted in a new maximum rate of $17.23 per ton for the San Antonio movement. The Railroads then filed tariffs at the $17.23 rate.

Petitions for review of the San Antonio II and San Antonio III prescriptions were filed in the United States Court of Appeals for the District of Columbia Circuit by all the parties. Without expressing an opinion as to whether the rate was too high, as San Antonio claimed, or too low, as the Railroads urged, in June 1980, the Court of Appeals decided that aspects of both the San Antonio II and the San Antonio III rate orders were "arbitrary and capricious" and "without defensible rationale." San Antonio v. United States, 203 U.S.App.Div. 249, 269, 631 F.2d 831, 851 (1980). The Commission's orders were vacated and the case remanded to the Commission.

It is at this point that the present controversy arose, for the parties sharply disagreed about the effect of the Court of Appeals decision on the filed tariffs pending the Commission's decision on remand. Construing the decision as vacating only the Commission's orders in San Antonio II and III but not the rates that were filed, the Railroads continued to treat the $17.23 rate as the one which San Antonio was required to pay pursuant to 49 U.S.C. (Supp.III) § 10761. San Antonio, on the other hand, interpreted the Court of Appeals decision as vacating the $17.23 rate and reviving the rate set by San Antonio I. Accordingly, the shipper unilaterally reduced its payments to the $10.93 per ton rate set in 1976.²

Although we might have thought otherwise, it was not clear to the Railroads what legal action should be taken to force San Antonio to pay the filed $17.23 tariff. Several maneuvers were attempted: in its first effort to reestablish San Antonio III as the rate applicable to this period, the carriers filed a new tariff in early November 1980. That tariff, which would have required San Antonio to prepay at the $17.23 rate before coal service would be provided, was suspended by a division of the Commission which agreed with San Antonio that the Court of Appeals' decision precluded any rate except $10.93.

The Railroads asked the Court of Appeals for clarification of its decision.³ Pending review, however, the parties...