Florida East Coast Railway Company v. United States

Decision Date08 June 1966
Docket NumberNo. 64-64-Civ. J.,64-64-Civ. J.
Citation259 F. Supp. 993
PartiesFLORIDA EAST COAST RAILWAY COMPANY, a corporation, et al., Plaintiffs, v. UNITED STATES of America and Interstate Commerce Commission, et al., Defendants.
CourtU.S. District Court — Middle District of Florida


Robert W. Ginnane, Gen. Counsel, Interstate Commerce Commission, Washington, D. C., Edward F. Boardman, U. S. Atty., Jacksonville, Fla., Lionel Kestenbaum, Antitrust Division, Dept. of Justice, Washington, D. C., for defendants.

Prime F. Osborn, Phil C. Beverly, Jacksonville, Fla., Dennis G. Lyons, Arnold & Porter, Washington, D. C., William H. Maness, Jacksonville, Fla., Richard A. Hollander, Richmond, Va., John S. Cox, Jacksonville, Fla., Walter H. Brown, Jr., New York City, for Atlantic Coast Line R. Co. and Seaboard Air Line R. Co.

Edwin H. Burgess, Baltimore, Md., for Mercantile-Safe Deposit and Trust Co.

Fred H. Kent, Jacksonville, Fla., A. Alvis Layne, Washington, D. C., for Florida East Coast R. Co.

Wm. Graham Claytor, William D. McLean, John K. Mallory, Jr., Washington, D. C., H. P. Osborne, Jr., Jacksonville, Fla., for Southern Railway System.

William G. Mahoney, Washington, D. C., William H. Adams, III, Jacksonville, Fla., for Railway Labor Executives' Assn.

William Reece Smith, Jr., City Atty., Carlton, Fields, Ward, Emmanuel, Smith & Cutler, Tampa, Fla., for City of Tampa.

MacFarlane, Ferguson, Allison & Kelly, Tampa, Fla., for petitioner Port Sutton Inc.

Before RIVES, Circuit Judge, and SIMPSON and McRAE, District Judges.

RIVES, Circuit Judge:

Our first opinion1 in this case was vacated and remanded by the Supreme Court and we have now considered the Interstate Commerce Commission's action anew. The Interstate Commerce Commission,2 by an order entered in December 1963, authorized the merger of the Atlantic Coast Line Railroad Company3 with the Seaboard Air Line Railroad Company,4 subject to certain routing and gateway conditions and employee protective conditions. Related acquisition of control by Seaboard of carriers subsidiary to or affiliated with Atlantic, most prominently including the Louisville and Nashville Railroad Company, was also authorized. 320 I.C.C. 122 (1963). Florida East Coast Railway Company5 brought suit in this Court asking that the ICC's order be enjoined, annulled and set aside.

A three-judge district court was convened pursuant to 28 U.S.C.A. § 2325. The Attorney General, representing the United States, opposed the merger and therefore the United States was realigned as a party-plaintiff. The Railway Labor Executives' Association, the Southern Railway Company,6 and its affiliated companies in the Southern Railway System intervened as parties-plaintiff. At the hearing on remand the City of Tampa also intervened as a party-plaintiff. In addition to defendant ICC, the Mercantile-Safe Deposit and Trust Company, the Seaboard and the Atlantic, all intervened as parties-defendant. In this posture issue was joined.

After submission of briefs and full argument, in our first opinion we set aside the ICC's order and remanded the case to the Commission for further proceedings. Our reasoning was two-fold. First, we determined that the ICC's analysis of the merger was defective because it failed to apply proper product and geographic market criteria as explicated in Brown Shoe Co. v. United States, 370 U.S. 294, 82 S.Ct. 1502, 8 L.Ed.2d 510 (1962). Second, we held that the Commission erred in not specifically determining whether the merger violated section 7 of the Clayton Act, 15 U.S.C.A. § 18 (1964 ed.). The Supreme Court vacated our judgment and remanded "for a full review of the administrative order and findings pursuant to the standards" they had previously "enunciated." 382 U.S. 154, 86 S.Ct. 277 (1965).7

This case presents a head-on-collision between the antitrust laws and the Interstate Commerce Act. It is incumbent upon us to seek to rationalize the statutes involved here and make of them, to the extent that what Congress has written will permit, a harmonious functional body of law. Section 5(2) directs the Commission to approve voluntary rail mergers which it finds to be "consistent with the public interest," but reserves to the Commission power to approve the merger subject to such "terms and conditions" as it may find to be "just and reasonable." Section 5(2) (c) of the Interstate Commerce Act, which sets forth certain factors which must be considered by the ICC in passing upon any proposed railroad merger or affiliation, does not expressly require that the Commission consider the antitrust laws as a factor in the public interest. However, since section 5(11) exempts carriers and individuals participating in an approved merger from the antitrust laws, the ICC has long been required to give weight to the antitrust policy of the Nation in approving mergers.8 It is the accommodation of the national transportation policy with the national antitrust policy with which this litigation is chiefly concerned.

The records and briefs in this case read far more like an antitrust case or FTC review proceeding than like an action to set aside an order of the ICC. This aspect can only be indicative of one fact—at some point the orderly administrative process envisioned by Congress has been derailed. All too much time has been consumed in showing a violation of the antitrust laws and too little time devoted to assessing the "public interest" as expressed in the Interstate Commerce Act. Review of ICC proceedings, while in many respects quite similar in appearance to FTC review, is substantially different.

It is not without significance that Congress placed review of proceedings of the FTC in the Courts of Appeals and those of the ICC in a three-judge district court. Each has three judges, but there the comparison ends. The FTC is to administer a group of statutes whose meaning and content are primarily entrusted to the judiciary for rational extrapolation. There was no intention on the part of Congress that the FTC should become a plenary body, reshaping American industry to a model which the Commission in its own wisdom decided best served the Nation. On the contrary, the FTC was to prevent "unfair competition" in widely divergent industries, preserving the existing price system so fundamental to the American way of life.

Review of such proceedings could easily be fitted into the normal appellate process. A one-hour argument coupled with briefs sufficient to phrase out the issues with which courts of appeals routinely deal, allow a circuit court to give a carefully studied review.

The ICC stands in a uniquely different posture. Congress has vested the Commission with "exclusive and plenary" powers in the regulation of rail mergers. No one who reviews the history and language of the Interstate Commerce Acts can doubt that Congress has entrusted the ICC with plenary power to regulate almost every aspect of the rail industry and, for that matter, almost every aspect of the transportation industry save the airlines.9 The ICC is in many ways a super-management, often making managerial-type decisions affecting the transportation industry, with but one overriding duty—to protect the public interest.10 A rail carrier cannot change rates without ICC approval, and the ICC can on its own initiative investigate and alter rates after proper findings.11

New services cannot be provided nor old ones discontinued without Commission approval.12 No new railroad may enter the field without ICC permission; the Commission may compel an existing railroad to extend its line and provide new service.13 We have, in effect, a government-protected monopoly for those already providing service. In the area of rail mergers and consolidations, Congress' intention to let the ICC plan the structure of the national transportation industry has long been apparent.14 World War I with the government takeover of the rail system had left this Nation's primary transportation system in a state of dilapidation. War needs had diverted critical materials to other areas of the economy and needed rail repairs had been neglected.

Congress, therefore, determined that the health and vitality of the Nation's railroads could best be restored by merging them into fewer, more efficient systems than then existed. Congress realized that it was functionally not the appropriate body to study and determine which railroads should be combined. It had neither the time nor the facilities. The Transportation Act of 1920 thus for the first time conferred upon the ICC "exclusive and plenary" power over rail mergers. The Commission was directed to "prepare and adopt a master plan for the consolidation of the railway properties of the continental United States into a limited number of systems".15 However, the Commission was not given power to force consolidation. It had to come voluntarily. Only mergers which were in harmony with the master plan could be approved. Approved mergers were exempt from the antitrust laws.

It was apparent almost from the outset that the master plan approach had set an impossible pattern. The Transportation Act of 1940 took a more realistic view.16 It abandoned the idea of a master plan, as such, and adopted a more flexible approach which authorized the ICC to approve carrier-initiated voluntary plans for mergers if those plans conformed to a public interest test prescribed by the Act. A requirement relating to the preservation of competition contained in the 1920 Act was deleted by the 1940 Act. The initiative to formulate plans for consolidation or merger thus passed from the Commission to the rail carriers; but exclusive and plenary power to grant permission for such mergers subject to such conditions as might be prescribed was left with the ICC.17

Unlike review of FTC proceedings, review of ICC approved mergers involves the review of intricate, expert plenary judgments in a highly specialized area of our...

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