ELGIN, JOLIET AND EASTERN RAILWAY CO. v. Benj. Harris & Co.

• Decision Date: 26 August 1965
• Docket Number: No. 63 C 1009.,63 C 1009.
• Citation: 245 F. Supp. 467
• Court: U.S. District Court — Northern District of Illinois
• Parties: ELGIN, JOLIET AND EASTERN RAILWAY COMPANY, a corporation, Plaintiff, v. BENJ. HARRIS & CO., a corporation, Defendant.

245 F. Supp. 467

ELGIN, JOLIET AND EASTERN RAILWAY COMPANY, a corporation, Plaintiff, v. BENJ. HARRIS & CO., a corporation, Defendant.

No. 63 C 1009.

United States District Court N. D. Illinois, E. D.

August 26, 1965.

COPYRIGHT MATERIAL OMITTED

Jay A. Lipe, W. Gerald Thursby, Stevenson, Conaghan, Hackbert, Rooks & Pitts, Chicago, Ill., for plaintiff.

Ben Liss and Michael M. Lyons, Sonnenschein, Levinson, Cartin, Nath & Rosenthal, Chicago, Ill., for defendant.

WILL, District Judge.

Plaintiff, Elgin, Joliet and Eastern Railway Company (hereinafter EJ&E), instituted this action to recover $2,668.89 in additional freight charges alleged to be due from the defendant. The instant controversy involves a shipment of used gunsights shipped from Pocatello, Idaho to Chicago Heights, Illinois at the scrap metal rate of $1.05 per cwt. EJ&E contends that the general commodity tariff ($4.61 per cwt.) applies to this shipment and, since it is statutorily obligated to charge and collect the applicable rate, Interstate Commerce Act, Part I, § 6(7), 49 U.S.C. § 6(7), the additional freight charges are due from the defendant.

The sole issue in this proceeding is the applicability of one of two alternative rates to the shipment. The reasonableness of the rates is not questioned. Defendant does not assert any set-off, counterclaim or other defense collateral to the applicability question.

I

The question of tariff construction here presented is similar to that involved in United States v. Western Pacific Railroad Co., 352 U.S. 59, 77 S.Ct. 161, 1 L.Ed.2d 126 (1956). It is, therefore, within the exclusive primary jurisdiction of the Interstate Commerce Commission. Accordingly, this court directed EJ&E to institute appropriate proceedings before the Commission, retaining jurisdiction of the action pending the ICC decision.

Pursuant to the court's order, EJ&E filed, in October, 1964, a petition for a declaratory order under § 5(d) of the Administrative Procedure Act, 5 U.S.C. § 1004(d). On February 4, 1965, the ICC Examiner filed his report and recommended order finding that the general commodity tariff applied to the shipment in question; that the shipment was incorrectly billed at the scrap metal rate; and that EJ&E was obligated to collect the additional amount from defendant Harris. No exceptions were filed and, on March 16, 1965, the Commission served notice that the examiner's report and recommended order had automatically been adopted as the order of the ICC.

While characterized as a "declaratory" order, there is no question that the ICC order was itself subject to direct judicial review. See National Van Lines v. United States, 326 F.2d 362 (7 Cir. 1964). Indeed, in view of the 1964 amendments to 28 U.S.C. §§ 1336 and 1398 and the principle stated in Eastern Freight-Ways, Inc. v. United States, 170 F.Supp. 848, 850 (D.N.J.1959), any direct review of the ICC order would have taken place in this court rather than before a three-judge panel. While the scope of review would of course be limited in accordance with § 10(e) of the Administrative Procedure Act, 5 U.S.C. § 1009(e), the underlying issues would have been identical to those presented in the complaint originally filed here by EJ&E, although, pursuant to 28 U.S.C. § 2322, the United States would be denominated as the party defendant. No such proceedings for direct review were instituted within the period specified by statute, 28 U.S.C. § 1336(c). Accordingly, the ICC's order accepting the report and recommendation of its examiner has become final.

Under these circumstances, EJ&E seeks summary judgment on its complaint, asserting that the ICC order is final and binding on all parties and that no issues remain before the court for decision. Responding to the motion, defendant Harris asserts that it is now entitled to a trial de novo in the District Court, the ICC findings and order resulting in no more than a rebuttable presumption. Moreover, defendant contends that the evidence before the ICC is susceptible of only one characterization — that the scrap metal tariff was properly used to determine the charges — and submits that it is entitled to summary judgment dismissing the EJ&E complaint. In short, defendant takes the position that the method for review of an ICC decision is not limited to the specific procedure established by Congress in 28 U.S.C. §§ 2321-2325 and that whenever the doctrine of primary jurisdiction has been applied in a pending District Court case, the litigants are automatically entitled to a retrial of the issues before the District Court.

For the reasons advanced below, the position taken by defendant Harris is erroneous. The function of the judiciary in a situation involving primary jurisdiction is determined by the relation of the subject matter of the controversy to the regulatory responsibilities which have been legislatively placed in the hands of the administrative agency. In the instant case, the only issue before the court is one which is wholly within the discretion and particular competence of the Interstate Commerce Commission. Judicial review of the ICC order was not sought in the manner specified by statute and, under the circumstances of this case, this court's function is to apply the legal principle stated in § 6(7) of the Interstate Commerce Act, supra, in light of the ICC's findings, entering judgment accordingly. While, as noted below, the court has an interest in the sufficiency of the agency's decision and, in an appropriate situation, could re-refer an issue for a second administrative proceeding notwithstanding the parties' failure to seek judicial review, the case before the court does not warrant such extraordinary action.

II

Plaintiff EJ&E asserts that whenever any matter referred to the ICC results in a final order it necessarily determines the outcome of the civil action which has been stayed pending agency decision and is not open to collateral attack. In support of its contention, it relies on Pennsylvania R. Co. v. United States, 363 U.S. 202, 80 S.Ct. 1131, 4 L.Ed.2d 1165 (1960). In that case, the issue of the reasonableness of certain rates had been referred to the ICC under the doctrine of primary jurisdiction by the Court of Claims. Holding the subsequent ICC order subject to direct judicial review, Mr. Justice Black, speaking for the Court, noted that the ICC order finding certain rates unreasonable was not "a mere `advisory opinion' * * * for if valid it forecloses the `right' of the Railroad to recover in its pending Court of Claims suit". 363 U.S. at 205, 80 S.Ct. at 1133.

Defendant points out that, as distinguished from the question of applicable rate here involved, reasonableness of rates is a subject over which the ICC has been given plenary power and asserts that the binding effect of an ICC order is limited to actions involving that question. The legal principle upon which the quoted portion of the Court's opinion is based is not as narrow as defendant would construe it. However, neither is it as broad as the plaintiff contends.

The effect of an agency determination — and hence the function of the court once that determination has become final — depends on the effect which judicial action will have on the statutory scheme of regulation. If an ICC determination as to the reasonableness of rates were subject to collateral attack in each of the district courts of the land, the regulatory function of the Commission would atrophy from impotence. Hence, as Justice Black pointed out, supra, once the steps for direct judicial review of the ICC decision have been taken (or, as here, are not pursued) and the order becomes final, the outcome of pending civil litigation is determined.

This principle applies with equal force to decisions involving the applicability of tariffs to particular commodities. The entire scheme of value-of-service ratemaking rests on a series of fine balances between theories of cost allocation and market conditions. If regulatory decisions — selecting one of many possible approaches to the problem on the basis of agency expertise — are mere "advisory opinions" which the courts may choose to modify or ignore, rational regulation is impossible.

The limits of allowable judicial action in cases such as the one before the court are fully consistent with the general principle that application of the concept of primary jurisdiction is but a preliminary step in the decisional process. Commenting on the roles of the court and administrative agency in such instances, Professor Jaffe, in a detailed examination of the subject recognizes the accuracy of the opinion expressed in dissent in United States v. Kansas City So. Ry., 217 F.2d 763 (8 Cir. 1955): following the ICC's determination of a tariff construction question, the referring court would simply "enter such judgment as the Interstate Commerce Commission dictates, without the exercise of any judicial function". 217 F.2d at 777. Jaffe, Primary Jurisdiction, 77 Harv.L.Rev. 1037, 1055 (1964). He notes, however, that the judicial review specified by statute is available to the parties before proceedings in the stayed civil action are resumed. Id. at 1055 n. 57.

In the instant case, the issue of tariff applicability was referred to the Interstate Commerce Commission. The particular expertise of the Commission is exercised so that the factual circumstances pleaded in the complaint, i. e., the "evidentiary" facts, may be appraised and interpreted, being transformed into "ultimate" facts which "serve as a premise for legal consequences to be judicially defined." Far East Conference v. United States, 342 U.S. 570, 574, 72 S.Ct. 492, 494, 96 L.Ed. 576 (1952). It is this process of applying expertise to characterize underlying facts and circumstances which comes under judicial scrutiny when direct review of an agency decision is sought. Once the agency decision is final, the court in which an action has been stayed is presented with the...