Cleveland Elec. Illuminating Co. v. I. C. C.

• Decision Date: 12 August 1982
• Docket Number: Nos. 80-3727,80-3792 and 80-3793,s. 80-3727
• Citation: 685 F.2d 170
• Parties: The CLEVELAND ELECTRIC ILLUMINATING COMPANY, Petitioner, v. INTERSTATE COMMERCE COMMISSION and United States of America, Respondents, Consolidated Rail Corporation (80-3727), Norfolk and Western Railway Company(80-3792), Baltimore and Ohio Railroad Company (80-3793), Intervenors.
• Court: U.S. Court of Appeals — Sixth Circuit

Page 170

685 F.2d 170

The CLEVELAND ELECTRIC ILLUMINATING COMPANY, Petitioner, v. INTERSTATE COMMERCE COMMISSION and United States of America Respondents Consolidated Rail Corporation (80-3727), Norfolk and Western Railway Company(80-3792), Baltimore and Ohio Railroad Company (80-3793), Intervenors.

Nos. 80-3727, 80-3792 and 80-3793.

United States Court of Appeals Sixth Circuit.

Argued May 5, 1982.

Decided Aug. 12, 1982.

Charles J. McCarthy, John M. Cutler, Jr., Belnap, McCarthy, Spencer, Sweeney & Harkaway, Washington, D. C., for petitioner.

Sidney L. Strickland, Jr., Richard A. Allen, Kathleen V. Gunning, Gen. Counsels, I. C. C., Benjamin R. Civiletti, Atty. Gen. of the U. S., John J. Powers, III, Kenneth P. Kolson, U. S. Dept. of Justice, Washington, D. C., for respondents.

Anne E. Treadway, Consol. Rail Corp., Philadelphia, Pa., for intervenor Consol. Rail Corp.

Before KEITH, MERRITT and JONES, Circuit Judges.

PER CURIAM.

The sole issue for review is whether the Interstate Commerce Commission erred in refusing to exercise its discretionary power to abate penalty demurrage charges assessed when severe weather conditions prevented Cleveland Electric Illuminating Company from releasing rail cars promptly.

BACKGROUND

Demurrage is an expense shippers incur for retaining rail cars beyond the "free time" period. ¹ Demurrage charges are an integral part of the established rules and regulations relating to the use and movement of rail cars. The charges are neither rates nor penalties, rather, they have a unique status as car service rules. Demurrage charges serve two purposes. First, they compensate railroads for the lost opportunity to profit from the use of their cars. Iversen v. United States, 63 F.Supp. 1001, 1005 (D. D.C.), aff'd., 327 U.S. 767, 66 S.Ct. 825, 90 L.Ed. 998 (1946). Second, they promote the overall efficiency of the rail system by creating an incentive to return the cars promptly. Id.

The national tariff, Freight Tariff 4K, ICC H-74 General Car Demurrage Rules and Charges ("Tariff"), offers shippers two alternative methods for computing demurrage: straight demurrage or an average demurrage agreement. Shippers have the option of selecting the demurrage agreement which best meets their needs. A shipper may, upon providing one month's notice, select a different demurrage agreement at any time.

Straight demurrage is applied in the absence of any other arrangement between shipper and carrier. Straight demurrage does not provide an affirmative "reward" for releasing cars early. Cars detained beyond free time incur "debits". The amount of these debits increases with the length of time the car is detained. The Tariff provides relief from demurrage charges assessed where unloading is impeded by frozen lading, bad weather, strikes, or bunching. ² For example, where the lading is frozen, a shipper may obtain two additional days of free time.

In addition to the relief available under the Tariff for straight demurrage agreements, the Interstate Commerce Commission ("Commission") may, in its discretion, excuse penalty demurrage. ³ This relief is contingent upon the shipper demonstrating that it was not the proximate cause of the detention and that it took all reasonable steps to minimize the accumulation of demurrage. See Prince Manufacturing Co. v. Norfolk & Western Ry. Co., 356 I.C.C. 702, 706 (1978).

An average agreement is the alternative to straight demurrage. Average agreements spread demurrage liabilities over all shipments, rather than calculating them solely on an individualized per car basis. The key feature of the agreement is its provision for offsetting debits incurred on cars held beyond free time with credits earned on cars released before the expiration of free time. The Tariff does not provide relief such as additional free days where the detention is caused by bunching or weather interference. In fact, in most circumstances, the shipper must pay the charges unless it can offset the debits with credits. Item 1420(4) of the Tariff, however, grants shippers two extra days of free time where the lading is frozen.

FACTS

During the first three months of 1978, the Baltimore and Ohio Railway Company, Consolidated Rail Corporation, and Norfolk and Western Railway Company ("Railroads") delivered coal to several Cleveland Electric Illuminating Company ("CEI") plants. Cold weather and snow froze the coal inside the rail cars. Consequently, CEI had difficulty unloading the coal and did not release many rail cars within the free time period. The Railroads, therefore, assessed several thousand dollars in demurrage against CEI pursuant to average agreements which had been in effect for over 50 years. On December 28, 1979, CEI filed three complaints with the Commission which alleged that the penalty demurrage assessed under the average agreements were unreasonable and violated the Interstate Commerce Act. The Commission held that it would not excuse penalty demurrage where an average agreement provided for an alternative form of relief, a credit-debit system of minimizing demurrage. CEI appeals.

I.

The Commission has both expertise and discretion in developing regulations in matters relating to interstate commerce. See United States v. Pierce Auto Freight Lines, 327 U.S. 515, 535-36, 66 S.Ct. 687, 697-98, 90 L.Ed. 821 (1946). Courts cannot, as CEI implicitly suggests, determine the content of national transportation policy. "The court may not substitute its judgment for that of the agency." Bowman Transportation, Inc. v. Arkansas-Best Freight System, Inc., 419 U.S. 281, 285, 95 S.Ct. 438, 441, 42 L.Ed.2d 447. See Pierce Auto Freight Lines, 327 U.S. at 536, 66 S.Ct. at 698. This action does not involve the construction of a tariff. Had CEI alleged that the demurrage charges were inapplicable, an issue of law would have been presented. The Court could then freely review the Commission's construction of the tariff. See, e.g., Coca-Cola v. Atchison, T. & S.F. Ry. Co., 608 F.2d 213, 218-219 (5th Cir. 1979).

In the present case, however, all parties admit the charges are applicable. Therefore, the only issue presented is a question of fact, whether the charges are reasonable and consistent with Commission policy. See Illinois Central Railroad v. Interstate Commerce Commission, 206 U.S. 441, 459, 27 S.Ct. 700, 706, 51 L.Ed. 112 (1907). This Court's scope of review is limited to determining whether the Commission's policy has been consistently and fairly applied in a manner which is not arbitrary and capricious. See Bowman Transportation, Inc., 419 U.S. at 285, 95 S.Ct. at 442; Pierce Auto Freight Lines, 327 U.S. at 536, 66 S.Ct. at 698. ("Unless in some specific respect there has been a prejudicial departure from requirements of the law or an abuse of the Commission's discretion, the reviewing court is without authority to intervene.") See also Atchinson, T. & S. F. Ry. Co. v. Wichita Board of Trade, 412 U.S. 800, 806, 93 S.Ct. 2367, 2374, 37 L.Ed.2d 350 (1973). The Commission need only articulate a "rational connection between the facts found and the choice made." Bowman Transportation, Inc., 419 U.S. at 285, 95 S.Ct. at 442.

II.

CEI argues that: 1) there exists no rational basis for supporting the Commission's policy; and 2) the Commission has not been consistent in denial of relief from penalty demurrage where an average agreement provides for an alternative form of relief. CEI attacks the Commission's policy of not excusing penalty demurrage where an average agreement is in effect on several grounds. First, penalty demurrage represents an arbitrary windfall to the Railroads since it cannot create a further incentive to promote the efficient use of rail cars. Allegedly, all reasonable steps had been taken to prevent delays occasioned by the severe weather conditions. Second, an average agreement's credit-debit arrangement is inadequate relief where, as here, the penalties a shipper may incur greatly exceed the maximum credits which can be obtained through diligence. Finally, there is nothing in the language of the average agreement or the tariff which precludes the Commission from granting relief from penalty demurrage. We find these arguments unpersuasive.

Over the long-run, the credit-debit system of an average agreement provides adequate relief from demurrage incurred by a diligent shipper. CEI has been a party to an average agreement with the Railroads for over 50 years. During this period, the Commission has, with the possible exception of a 10 year period over 20 years ago, held that relief from penalty demurrage was only available to shippers under straight demurrage agreements. Now that severe weather has reduced the advantage of average agreements in the short-run, CEI contends that all demurrage agreements should be treated alike. CEI was aware of the benefits and the drawbacks of the respective agreements. CEI made a business decision to retain its average agreements. Moreover, CEI failed to exercise its option of canceling the average agreement at any time. We hold that the Commission's policy of maintaining a distinction between straight demurrage and average agreements is a fair and rational policy decision. See Monongahela Power Co. v. Interstate Commerce Commission, 640 F.2d 504, 507 (4th Cir. 1981), cert. denied, --- U.S. ----, 102 S.Ct. 111, 70 L.Ed.2d 97 (1981); Empire-Detroit Steel Division of Cyclops Corp. v. Interstate Commerce Commission, 659 F.2d 396 (3d Cir. 1981).

The Commission maintains that it has consistently applied its policy of not excusing penalty demurrage where an average agreement is in effect. See Marshall-Putnam Oil Co. v. Chicago, R. I & P. R. Co., 316 ICC 581, 583 (1962) (weather interference); Interstate Power Co. v. Chicago, Milwaukee, St. Paul and Pacific Ry., ICC Decision No. 36743 (Decided November 21, 1978) (weather interference); Indiana University Trustees-Petition Seeking Reparation of Demurrage Charges Caused by Severe Winter...