Carolina, C. and O. Ry. v. I. C. C., 77-1665
| Decision Date | 23 January 1979 |
| Docket Number | No. 77-1665,77-1665 |
| Citation | 593 F.2d 1305,193 U.S.App.D.C. 151 |
| Parties | CAROLINA, CLINCHFIELD AND OHIO RAILWAY, et al., Petitioners, v. INTERSTATE COMMERCE COMMISSION and United States of America, Respondents, National Association of Regulatory Utility Commissioners, Intervenor. |
| Court | U.S. Court of Appeals — District of Columbia Circuit |
Stuart C. Stock, Washington, D. C., with whom Michael Boudin, Washington, D. C., and Peter J. Hunter, Jr., Roanoke, Va., were on the brief, for petitioners.
Kenneth G. Caplan, Deputy Associate Gen. Counsel, I. C. C., Washington, D. C., with whom Mark L. Evans, Gen. Counsel, I. C. C., Robert B. Nicholson and Cathy G. O'Sullivan, Attys., Dept. of Justice, Washington, D. C., were on the brief, for respondents.
Charles A. Schneider, Asst. Gen. Counsel, National Ass'n of Regulatory Utility Commissioners, Washington, D. C., with whom Paul Rodgers, Gen. Counsel and William R. Nusbaum, Deputy Asst. Gen. Counsel, National Ass'n of Regulatory Utility Commissioners, Washington, D. C., were on the brief, for intervenors.
Also Henri F. Rush, Associate Gen. Counsel, I. C. C., Washington, D. C., entered an appearance for respondent.
Before WRIGHT, Chief Judge, and LEVENTHAL and WILKEY, Circuit Judges.
Opinion for the Court filed by WILKEY, Circuit Judge.
This case involves the procedures through which the Interstate Commerce Act protects railroads from intrastate rates which discriminate against interstate commerce. Petitioners, certain interstate railroads operating in the state of North Carolina, seek review of Interstate Commerce Commission orders 1 rejecting a tariff filing which the Commission claims it has no authority to process. The tariff sought to apply to traffic moving wholly within North Carolina a four per cent general rate increase that had previously been filed and placed into effect for interstate traffic nationwide, including North Carolina. We believe the Commission has correctly construed its statutory authority affecting intrastate rates and, accordingly, we affirm.
An understanding of this controversy requires a little background. At least since the Shreveport case 2 it has been settled that there is federal authority under the Commerce Clause to regulate Intrastate rates which affect interstate commerce. Congress exercised this authority in the Transportation Act of 1920 which, by adding new paragraphs (3) and (4) to § 13 3 of the Interstate Commerce Act, in effect codified the Shreveport decision. 4 Section 13(3) authorized the Commission to investigate intrastate rates and § 13(4) expressly empowered the Commission to "prescribe" intrastate rates in order to cure undue discrimination against interstate commerce, but only "after (a) full hearing."
The procedures which have historically governed Interstate ratemaking are quite different. These are set out in § 15 of the Act. 5 Under these provisions the ratemaking initiative lies with the railroads. Rate changes are filed with the ICC 6 and take effect immediately unless suspended by the Commission. Section 15(8) provides that when a tariff schedule is filed, the Commission, on its own initiative or on complaint of an interested party, may conduct a hearing to determine if the proposed rates are lawful. 7 If a hearing is held, the Commission may suspend operation of the new rates for a maximum of seven months, but only if it is shown by a complainant (1) that the proposed rate change will cause him substantial injury and (2) that he is likely to prevail on the merits. 8 Although the complainant has the burden of establishing the conditions for a suspension, 9 the railroads have the ultimate burden of proving that their rates are lawful. 10
Petitioners contend that this long-standing difference in the procedures governing interstate and intrastate ratemaking was changed by the addition in 1976 of a new paragraph (5) to § 13 of the Act. 11 Section 13(5) allows state regulatory authorities 120 days to act upon carrier applications to adjust intrastate rates to correspond to the rates for similar interstate traffic. However, if the state authority has not "acted finally" within the 120-day period, the ICC is given "exclusive authority . . . to prescribe the intrastate rate." Petitioners argue that the grant of "exclusive authority" to the ICC entitles the railroads to file intrastate rate changes pursuant to § 15(8), just as they file interstate rates, thus making intrastate rate changes automatically effective unless a complainant can meet the § 15(8) burden. The Commission disagrees, maintaining that § 13(4), with its "full hearing" requirement, affords the exclusive means of affecting intrastate rates contemplated by the Act.
Finally, the Interstate Commerce Act was newly codified in October 1978, shortly before this case was argued. Although Congress expressly stated that it intended no substantive change in the law, it did alter the structure and wording of numerous provisions, including §§ 13(4) and 13(5). 12 We think the codification largely resolves against petitioners the ambiguities which led to the instant controversy, but it should be recalled that the parties proceeded throughout on the basis of the earlier version.
On 9 November 1976 the nation's railroads petitioned the ICC for permission to file a master tariff and connecting supplements in order to implement a general four percent increase on freight rates nationwide. The petition showed that the railroads had experienced increases in annual operating costs of nearly $1 billion. 13 Even were the rate increase implemented nationwide on both interstate and intrastate traffic, there would have been a revenue shortfall of some $300 million. 14 The Commission permitted 15 the railroads to file master tariff X-336 to effect the four percent increase nationwide for interstate traffic. Finding the railroads' revenue needs unquestionable, the ICC concluded that it was unnecessary to suspend and investigate the X-336 tariff as permitted under section 15(8). 16 The Commission concluded that the increase was "necessary to prevent a further decline in the railroads' overall financial condition"; that the railroads' rate of return continued to be "substandard"; and that, absent the increase, the railroads would not have "sufficient funds . . . to defray the cost escalations" established. 17
As is ordinarily the case, the cost increases justifying the four percent general rate increase in tariff X-336 affected intrastate as well as interstate traffic. Consequently, the southern railroads in January 1977 began to seek, through state proceedings, identical increases in intrastate rates in each of the states within the Southern Freight Association Territory. The increase was eventually accepted and implemented in each of those states, except North Carolina. 18
On 4 January 1977 the railroads filed with the North Carolina Utilities Commission (NCUC) a tariff supplement which would have applied the four percent increase to North Carolina traffic. The NCUC suspended the increase until 6 November 1977 and began an investigation. 19 Because the NCUC did not act finally on the railroads' four percent increase within 120 days after the filing of the tariff supplement, the railroads moved to discontinue the proceedings, arguing that § 13(5) had ousted the North Carolina authorities of jurisdiction. The NCUC terminated its investigation by order of 16 May 1977. 20
On 9 May 1977 the railroads petitioned the Commission to investigate the allegedly discriminatory North Carolina rates pursuant to its § 13(4) authority. An investigation was ordered on 25 May 1977. 21
On 31 May 1977 the railroads sought to invoke what they conceived to be an alternative procedure for implementing the intrastate rate increase under § 13(5). The railroads filed with the ICC tariff supplement S-20 to master tariff X-336 in order to apply the general increase to North Carolina traffic. Contemplating the ordinary course of practice under §§ 6 and 15, the railroads filed the supplements to become effective on 7 July 1977, after more than 30 days notice, unless suspended by the ICC.
The Commission rejected tariff supplement S-20 by letter of 5 July 1977. 22 Noting that an investigation into the North Carolina rates had been docketed pursuant to § 13(4), the letter asserted that there was no "authority" to establish the increase "(i)nasmuch as no order of the Commission has been served authorizing the increase to be placed in effect." 23
The railroads appealed the decision letter within the Commission. On 18 July 1977, Division 2 of the ICC denied the railroads' application for review, 24 finding that the railroads were required to observe the existing rates until the Commission had concluded its § 13(4) investigation of those rates.
Ten days later, the railroads sought review in this court 25 and a stay of the orders Pendente lite. On 13 September 1977, without ruling on the motion for a stay, we remanded the record and directed the Commission to file a supplemental memorandum regarding the railroads' motion. While the record was on remand, Division 2 entered a further order on 6 October 1977. 26 The latest order reaffirmed the 18 July order, although on slightly different grounds, disclaiming authority to process the railroads' tariff supplement pursuant to §§ 13(5) and 15(8).
Finally, during the course of the filing controversy, the ICC had been conducting its investigation of the North Carolina rates pursuant to § 13(4). On 18 November 1977 the Administrative Law Judge (ALJ) found that the North Carolina rates caused an unjust discrimination against interstate commerce and ordered that the rates be raised to the interstate level. 27 After 30 days, no...
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