Florida East Coast Railway Company v. United States

• Decision Date: 07 June 1971
• Docket Number: No. 70-182-Civ-J.,70-182-Civ-J.
• Citation: 327 F. Supp. 1076
• Parties: FLORIDA EAST COAST RAILWAY COMPANY, a corporation, Plaintiff, and Southern Pacific Transportation Company, a corporation, Northwestern Pacific Railroad Company, a corporation, and San Diego & Arizona Eastern Railway Company, a corporation, Intervening Plaintiffs, v. UNITED STATES of America and Interstate Commerce Commission, Defendants.
• Court: U.S. District Court — Middle District of Florida

327 F. Supp. 1076

FLORIDA EAST COAST RAILWAY COMPANY, a corporation, Plaintiff, and Southern Pacific Transportation Company, a corporation, Northwestern Pacific Railroad Company, a corporation, and San Diego & Arizona Eastern Railway Company, a corporation, Intervening Plaintiffs, v. UNITED STATES of America and Interstate Commerce Commission, Defendants.

No. 70-182-Civ-J.

United States District Court, M. D. Florida, Jacksonville Division.

June 7, 1971.

Walter G. Arnold, Arnold & Stratford, Jacksonville, Fla., A. Alvin Layne, Kim D. Mann, Washington, D. C., for plaintiff.

Delbridge L. Gibbs, John W. Caven, Jr., Marks, Gray, Yates, Conroy & Gibbs, Jacksonville, Fla., John MacDonald Smith, Albert T. Suter, San Francisco, Cal., for intervening plaintiff.

Walker B. Comegys, Acting Asst. Atty. Gen., John H. D. Wigger, Atty., Dept. of Justice, Washington, D. C., John L. Briggs, U. S. Atty., John Roberts, Asst. U. S. Atty., Jacksonville, Fla., Robert W. Ginnane, Gen. Counsel, Fritz R. Kahn, Trial Atty., Office of the Gen. Counsel, Jerome Nelson, Atty., I. C. C., Washington, D. C., for defendants USA and ICC.

Before SIMPSON, Circuit Judge, and SCOTT and TJOFLAT, District Judges.

MEMORANDUM OPINION AND FINAL JUDGMENT

SIMPSON, Circuit Judge:

This action was brought by Florida East Coast Railway Company (FEC) supported by the intervening lines (Southern Pacific or Southern Pacific Group) under Title 28, U.S.C., Sections 2321-2325 and 2284, to enjoin, annul, and set aside orders of the Interstate Commerce Commission (ICC or Commission) which require the railroads, in accordance with an ICC-imposed formula, to file annual reports concerning their respective ownership of general purpose freight cars and to observe mandatory freight car service rules. The orders are based on investigations by the Commission in Commission docket number Ex Parte No. 241, styled Investigation of Adequacies of Railroad Freight Car Ownership, Car Utilization, Distribution, Rules and Practice. The proceedings before the Commission are reported at 335 I.C.C. 264, modified in 335 I.C.C. 874.

The Florida East Coast Railway Company (FEC) commenced this action by a complaint which attacks both the car ownership formula upon which the affected railroads are required to submit information to the Commission and the imposition of the mandatory car service rules. The Southern Pacific Group of railroads intervened as plaintiffs in the case and also attack both the car ownership formula and the mandatory car service rules as an arbitrary and capricious exercise of Commission power.

For years the Commission has been concerned with recurring complaints by shippers and Congress that there existed a national shortage of railroad freight cars. See, e. g., 268 I.C.C. 687 (1947). Early in the Commission's investigation it concluded that the problem would best be solved by committing it to the sound discretion of the management of the various railroads. In the early 1960's however, as the problem continued to be acute, the Commission issued its order July 29, 1964, in Docket Number 241, supra, to obtain detailed information regarding car ownership, utilization, distribution, rules, and practices which might bear on the alleged railroad car shortage. The railroads were ordered to file the requested information on forms provided by the Commission. The evidence was submitted to the Commission in the form of these reports, verified statements of the railroads and shippers, and in an evidentiary hearing before a hearing examiner, requiring 50 hearing days to receive testimony and 120 Exhibits, and resulting in a transcript running to 5804 pages. On January 23, 1968, the hearing examiner filed his report asserting that the record did not contain competent evidence upon which to base a conclusion as to the adequacy of freight car ownership, and that the adoption of car ownership formula and car service rules had not been shown by the record to be justified.

Exceptions were filed to the hearing examiner's report, and Division 3 of the Commission overruled the hearing examiner, finding from the evidence adduced and official notice taken of congressional hearings, as well as from complaints to the Commission by shippers and studies inside and outside the Commission, that rail car shortages were largely the result of inadequacies in the ownership and utilization of freight cars. 335 I.C. C. 308-309. Division 3 for the Commission adopted a car ownership formula by which the railroads were to help assess the adequacy of the number of cars owned by each railroad. Each railroad was ordered to submit to the Commission reports showing the application of the adopted formula, and to report to the Commission what steps had been taken to cure the deficiencies indicated by the application of the formula, if any, or to provide reasons why such steps were not taken. The Commission also ordered that Car Service Rules 1, 2, 7, 15, 16, 17 and 18, which had earlier been adopted by the American Association of Railroads for voluntary observance, be made mandatory on the railroads.

On review of the action of Division 3 by the entire Commission, the Division decision was affirmed with Rule 19 (which prescribes the procedure for obtaining exceptions to the car service rules) also made mandatory. In other respects the full Commission affirmed the Division action. The Commission made July 1, 1970, the effective date for complying with the orders.

FEC filed its complaint on April 8, 1970. On June 5, 1970, the United States and the Commission filed a motion to dismiss the FEC complaint on grounds of lack of jurisdiction over the subject matter and of failure of the complaint to state a claim upon which relief could be granted. Southern Pacific then on June 22, 1970, moved to intervene and filed a motion for temporary restraining order against the car service rules portion of the Commission's order. On June 24, 1970, a temporary restraining order was issued by a single judge of this court preventing enforcement of Car Service Rules 1 and 2 pending adjudication of the merits by this court.¹ The government's motion to dismiss the action was deferred by the single judge for consideration by the full three-judge panel.²

THE CAR OWNERSHIP FORMULA

The formula approved by the Commission is an interline car-day formula. The formula contemplates that the car ownership requirements of the railroads will be determined by (1) computing the number of serviceable cars required to protect traffic actually carried by dividing serviceable car-days of cars on line by the number of days in October, the computation period; (2) computing the number of serviceable cars required to protect shortages by multiplying the reported shortages in October (reduced by 50%) allocated between local and interline on the basis of car loadings by the computed local turnaround time (serviceable car-days divided by carloads originated in local service) and by the national average turnaround time for interline service; and (3) computing the effect of the credit allowed to railroads loading foreign cars in October for interline movement.

It is the position of FEC that the car ownership formula is arbitrary and capricious as applied to the FEC, and discriminates against the FEC because of its position as a terminating line. As a stub end road running the length of the Florida peninsula along the east coast from Jacksonville to Miami, FEC terminates substantially more carloads of interline freight than it originates. This FEC area originates mainly fruit and vegetable shipments, handled by refrigerated cars and does not produce a substantial volume of traffic involving products capable of loading into ordinary boxcars, the type of cars mainly used for the shipment of commodities into Florida. As a consequence FEC claims that it is habitually burdened with a substantial excess of foreign freight cars over the number required for loadings.

FEC states that while the Commission did not admit into evidence at the hearing any data applying the formula to particular railroads, independent study by the American Association of Railroads indicates that application of the formula to FEC will result in a finding that FEC has a car ownership shortage of some 2,053 freight cars. FEC contends that its purchase of these additional cars would require an expenditure in excess of 28 million dollars.

The crux of FEC's complaint is then that the formula as presently approved is arbitrary because it fails to take into consideration the special operational problems of a terminating railroad. FEC contends that the application of this formula will result in a completely unwarranted but predictable finding that the FEC is deficient in the ownership of railroad freight cars, and that the FEC will then be required to expend millions of dollars for cars which it cannot load and for traffic in which it cannot participate. FEC contends for example that the major freight car shortages occur in October when the West and Midwest grain harvests take place. FEC notes that Florida produces little grain which is loaded into general purpose freight cars, and that little grain from the West and Midwest is shipped over FEC lines for export, consumption or processing. FEC further points out that it does not participate in the shipment of coal, another industry which the Commission cited as suffering from a car shortage. The FEC states moreover that it will be totally unable, as a terminating line (as opposed to an essentially originating line) to load with freight for out shipment the cars which the present formula will require it to purchase. The further argument goes that under the companion mandatory car service rules to be discussed infra, the FEC will not be able to require that the other railroads accept empty FEC cars for loading. Thus FEC argues that the mandatory car service rules further complicate the problem. FEC lastly contends that because of the...