Dresser Industries, Inc. v. I.C.C.

• Decision Date: 16 September 1983
• Docket Number: 82-4304,Nos. 82-4066,s. 82-4066
• Citation: 714 F.2d 588
• Parties: DRESSER INDUSTRIES, INC., Petitioner, v. INTERSTATE COMMERCE COMMISSION and United States of America, Respondents. WYO BEN, INC., Petitioner, v. INTERSTATE COMMERCE COMMISSION and United States of America, Respondents.
• Court: U.S. Court of Appeals — Fifth Circuit

Page 588

714 F.2d 588

DRESSER INDUSTRIES, INC., Petitioner, v. INTERSTATE COMMERCE COMMISSION and United States of America,

Respondents.

WYO BEN, INC., Petitioner, v. INTERSTATE COMMERCE COMMISSION and United States of America,

Respondents.

Nos. 82-4066, 82-4304.

United States Court of Appeals Fifth Circuit.

Sept. 16, 1983.

Donald A. Sutherlund, Washington, D.C., for petitioner, Dresser Industries, Inc.

Russell S. Sage, Alexandria, Va., for petitioner, Wyo Ben, Inc.

John Broadley, Gen. Counsel, Kathleen V. Gunnine, Atty., ICC, John J. Powers, III, Kenneth P. Kolson, Dept. of Justice, Washington, D.C., for respondents.

Donal L. Turkal, Curtis H. Berg, Alan R. Post, St. Paul, Minn., John F. Whitney, New Orleans, La., for intervenors, Burlington Northern R. Co., et al.

Petitions for Review of Orders of the Interstate Commerce Commission.

Before THORNBERRY, GEE and WILLIAMS, Circuit Judges.

THORNBERRY, Circuit Judge:

INTRODUCTION:

In these consolidated cases, petitioners Dresser Industries, Inc. [Dresser] and Wyo-Ben, Inc. [Wyo-Ben] seek review of decisions by the Interstate Commerce Commission [the Commission] and Review Board Number 3 of the Interstate Commerce Commission [the Board]. In their separate decisions, both the Commission and the Board determined that, in charging petitioners more to ship iron ore pelletizing [IOP] bentonite clay from Thermopolis, Greybull, and Lovell, Wyoming [prejudiced points] to Minnesota, Wisconsin, and Michigan [destination territories], than it charged a competing shipper to transport IOP bentonite a longer distance over the same line from Casper, Wyoming [preferred point] to the destination territories, Burlington Northern Railroad Company [BN] did not violate either 49 U.S.C.A. § 10726(a)(1)(A), 49 U.S.C.A. § 10741(a), or 49 U.S.C.A. § 10741(b). We conclude that since the decisions rendered by the Commission and the Board were supported by substantial evidence, and were neither arbitrary nor capricious, they must be allowed to stand. Accordingly, we AFFIRM.

FACTS:

Dresser and Wyo-Ben are IOP bentonite shippers served exclusively by BN and its connecting carriers. IOP bentonite is a soft, porous clay formed by the weathering of volcanic ash that is used in the production of taconite, a concentrated form of iron manufactured from relatively low grade iron ore. The taconite industry in this country is centered primarily in Minnesota, Wisconsin and the upper peninsula of Michigan.

Because of its great bulk and low value, IOP bentonite must be shipped by rail. Because of IOP bentonite's generally uniform quality regardless of producer, delivered price is the single most important factor in the sale of this commodity to the taconite industry.

Dresser's plant at Greybull, and Wyo-Ben's plants at Thermopolis, Greybull and Lovell are all located in the same general area of Wyoming, west of the Big Horn Mountains. BN moves much of the traffic from these plants north through Laurel and Billings, Montana, then east through southern Montana and North Dakota to the destination territories [BN's northern route] (see appended map). BN also moves some of this traffic south over a longer route through Casper, Wyoming and then east through Nebraska to the destination territories [BN's southern route]. BN also uses these routes to ship IOP bentonite produced by Black Hills Bentonite Company, a competitor of Dresser and Wyo-Ben's located at Casper, Wyoming. Casper is located 142 miles south of Thermopolis, 210 miles south of Greybull, and 243 miles south of Lovell on BN's northern route.

The Chicago and North Western Transportation Company [CNW] also ships IOP bentonite produced by Black Hills Bentonite out of Casper. CNW's short tariff route is the shortest of all the routes from Casper to the destination territories. However, because of self-imposed internal weight restrictions, CNW does not ship IOP bentonite via this route. ¹ Instead, it uses its longer, alternate route through Dakota Junction, Nebraska, Missouri Valley and Sioux City, Iowa to ship IOP bentonite from Casper to the destination territories. However, CNW is authorized to and does offer its short tariff rate on shipments out of Casper that are moved over its alternate route.

In the 1950s, the CNW and BN's predecessors--the Northern Pacific Railway Company, the Great Northern Railway, and the Chicago, Burlington and Quincy Railroad Company [CBQ]--established two groups of rates from the Big Horn Basin of Wyoming to the destination territories. Greybull, Lovell, Thermopolis and all other points west of the Big Horn Mountains formed the west side rate group. Those shipping points located east of the Big Horn Mountains formed the east side rate group. East side rates were lower because different rail carriers competed for freight from east side points, and because these points were located closer to the destination territories than were west side points. When in 1965 one of CBQ's customers moved east of the Big Horn Mountains to Casper, Wyoming, the CBQ filed an east side rate for all movements from Casper. The CNW also established an east side rate from Casper at that time.

As of July 5, 1981, BN's rail rate on IOP bentonite shipments from the prejudiced points of Thermopolis, Greybull and Lovell to Minnesota destinations was $38.30 per net ton, while the rate from the preferred point at Casper to the same destinations was only $37.00 per net ton, for a difference of $1.30 per net ton. At the same time, BN's rail rate on IOP bentonite from the prejudiced west side points to Michigan destinations was $40.56 per net ton, while the rate from Casper to the same destinations was again $37.00, for a difference of $3.56 per net ton. BN's rates from Casper to the destination territories are identical to CNW's rates from that city to the destination territories. Since BN charges either $1.30 or $3.56 per net ton more to ship IOP bentonite from points which are 142 (Thermopolis), 210 (Greybull) and 243 (Lovell) miles closer to the destination territories than Casper, BN indisputably charges Dresser and Wyo-Ben more to ship their IOP bentonite a shorter distance than it charges Black Hills Bentonite at Casper to ship IOP bentonite a longer distance to the same destinations.

Because of this rate disparity, Wyo-Ben and Dresser filed separate complaints with the Commission, charging that BN had violated 49 U.S.C.A. § 10726(a)(1)(A) [hereinafter section 26(a)(1)(A) ] and 49 U.S.C.A. § 10741(a), (b) [hereinafter sections 41(a) and 41(b) ]. The substance of these complaints is dealt with in our analysis infra. In separate decisions, the Commission and the Board found that BN had violated none of the cited provisions.

ANALYSIS:

Standard of Review

A decision by the Commission is presumptively valid. ² The Administrative Procedure Act in 5 U.S.C.A. § 706 provides that:

The reviewing court shall ...

(2) hold unlawful and set aside agency action, findings, and conclusions found to be--

(A) arbitrary, capricious, an abuse of discretion, or otherwise not in accordance with law [or] ...

* * *

(E) unsupported by substantial evidence....

5 U.S.C.A. § 706(2)(A), (E) (West 1977). This Court applies the arbitrary and capricious-substantial evidence standard in reviewing decisions by the Commission. See Bowman Transportation, Inc. v. Arkansas-Best Freight System, Inc., 419 U.S. 281, 95 S.Ct. 438, 441, 42 L.Ed.2d 447 (1974). ³ To the extent that the Commission's interpretation of section 26(a)(2), or sections 41(a), (b) might represent the adoption of some new standard, we are still bound by the arbitrary and capricious-substantial evidence standard in our review of its action. Nueces County Navigation District No. 1 v ICC, 674 F.2d 1055, 1062 (5th Cir.), cert. denied, --- U.S. ----, 103 S.Ct. 446, 74 L.Ed.2d 601 (1982). ⁴

The Supreme Court in Bowman set out the limits of appellate review under the arbitrary and capricious standard.

Under the "arbitrary and capricious" standard the scope of review is a narrow one. A reviewing court must "consider whether the decision was based on a consideration of the relevant factors and whether there has been a clear error of judgment.... Although this inquiry into the facts is to be searching and careful, the ultimate standard of review is a narrow one. The court is not empowered to substitute its judgment for that of the agency." Citizens to Preserve Overton Park v. Volpe, supra, 401 U.S. at 416, 91 S.Ct. at 824 . The agency must articulate a "rational connection between the facts found and the choice made." Burlington Truck Lines v. United States, 371 U.S. 156, 168, 83 S.Ct. 239, 246, 9 L.Ed.2d 207 (1962). While we may not supply a reasoned basis for the agency's action that the agency itself has not given, SEC v. Chenery Corp., 332 U.S. 194, 196, 67 S.Ct. 1575, 1577, 91 L.Ed. 1995 (1947), we will uphold a decision of less than ideal clarity if the agency's path may reasonably be discerned. Colorado Interstate Gas Co. v. FPC, 324 U.S. 581, 595, 65 S.Ct. 829, 836, 89 L.Ed. 1206 (1945).

Bowman, 95 S.Ct. at 442. This Court has in numerous cases applied the Supreme Court's guidelines under that standard in ICC cases. ⁵

Substantial evidence, while less than the weight of the evidence, ⁶ is such evidence as a reasonable mind might accept as adequate to support a conclusion. Richardson v. Perales, 402 U.S. 389, 91 S.Ct. 1420, 1427, 28 L.Ed.2d 842 (1971). ⁷ The fact that two different conclusions could be drawn from the evidence does not preclude the Commission's finding from being supported by substantial evidence. ⁸

49 U.S.C.A. § 10726

The administrative law judge [ALJ] in Dresser found that BN charged a higher rate for transporting IOP bentonite from Greybull to destination, than for transporting the same commodity a longer distance from Casper to destination. The ALJ concluded that this rate disparity constituted a prima facie violation of the long haul/short haul clause of the Interstate...