Florida East Coast Railway Company v. United States

• Citation: 368 F. Supp. 1009
• Decision Date: 14 December 1973
• Docket Number: Civ. No. 70-574-J-S,70-577-J-S.
• Parties: FLORIDA EAST COAST RAILWAY COMPANY, Plaintiff, v. UNITED STATES of America and Interstate Commerce Commission, Defendants. SEABOARD COAST LINE RAILROAD COMPANY, Plaintiff, v. UNITED STATES of America and Interstate Commerce Commission, Defendants.
• Court: United States District Courts. 11th Circuit. United States District Court of Middle District of Florida

368 F. Supp. 1009

FLORIDA EAST COAST RAILWAY COMPANY, Plaintiff, v. UNITED STATES of America and Interstate Commerce Commission, Defendants.

SEABOARD COAST LINE RAILROAD COMPANY, Plaintiff, v. UNITED STATES of America and Interstate Commerce Commission, Defendants.

Civ. Nos. 70-574-J-S, 70-577-J-S.

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

December 14, 1973.

COPYRIGHT MATERIAL OMITTED

COPYRIGHT MATERIAL OMITTED

Elliot Richardson, Atty. Gen. of the U. S., John H. D. Wigger, Atty., U. S. Dept. of Justice, Washington, D. C., Theodore C. Knappen, Atty., I. C. C., Washington, D. C., John L. Briggs, U. S. Atty., Jacksonville, Fla., Fritz R. Kahn, Gen. Counsel, I. C. C., Washington, D. C., for defendants.

Louis T. Duerinck, Chicago, Ill., Dan R. Schwartz, Jacksonville, Fla., for Chicago and North Western Railway Co.

A. Alvis Layne, Washington, D. C., Walter G. Arnold, Jacksonville, Fla., Richard A. Hollander, Richmond, Va., Philip A. Webb, III, James E. Cobb, Jacksonville, Fla., for plaintiffs.

Before RONEY, Circuit Judge, and YOUNG and SCOTT, District Judges.

ORDER AND OPINION

CHARLES R. SCOTT, District Judge:

Plaintiffs, two railroad companies, filed these cases seeking injunctive relief restraining the United States of America and the Interstate Commerce Commission (ICC) from enforcing an order of the ICC prescribing a scale of incentive per diem charges for general service, unequipped boxcars.¹Ex Parte 252 (Sub-No. 1), Incentive Per Diem Charges — 1968, 337 I.C.C. 246 (1970). After a three-judge court was constituted pursuant to 28 U.S.C. §§ 2284 and 2325, a hearing was held on the merits of the complaint. Chicago and North Western Railway Company, a party to the ICC proceeding, was granted leave to intervene as of right as a party defendant in this case pursuant to 28 U.S.C. § 2323. The three-judge court, 322 F.Supp. 725, set aside the incentive per diem order of the ICC as it affected these plaintiffs on the ground that the Commission had failed to comply with the applicable provisions of the Administrative Procedure Act. The Court did not reach the merits of plaintiffs' other contentions.

As a condition of the injunction the Court ordered plaintiffs to maintain accounting records of the amounts of incentive per diem charges they would have paid or would have received had the injunction not been in effect. On appeal the Supreme Court of the United States reversed the three-judge panel on the procedural issue and remanded the case for consideration of those contentions of the parties which had not been otherwise disposed of.

Plaintiff Florida East Coast Railway Company (FEC) contends (1) that the challenged Commission order was arbitrary, capricious and an abuse of discretion, (2) that the challenged order was unreasonable and not adequately supported by the evidence before the Commission, (3) that the order as applied to FEC violates substantive due process of law, and (4) that the Commission should have exempted FEC from application of incentive per diem charges because it is a terminating line.

Plaintiff Seaboard Coast Line Railroad Company (SCL) contends (1) that the challenged order was not adequately supported by the evidence before the Commission and was arbitrary and capricious, (2) that the order deprives SCL of due process of law in that it confiscates its property for the benefit of other railroads, and (3) that, if the incentive per diem order is upheld, restitution of the charges that would have been paid by SCL had the injunction not been in effect should not be ordered.

I. GENERAL SCOPE OF JUDICIAL REVIEW

At the outset the Court must determine the proper scope of judicial review available for measuring actions by the Interstate Commerce Commission. Defendants United States of America and the Interstate Commerce Commission argue that the scope of judicial review of actions by the ICC, which has traditionally been limited to determining whether "substantial evidence" supports the ICC action,² has recently been altered by the Supreme Court opinion in United States v. Allegheny-Ludlum Steel Corporation, 406 U.S. 742, 92 S.Ct. 1941, 32 L.Ed.2d 453 (1972). Defendants contend that the scope of judicial review of ICC actions was narrowed by that case, and now the Court is confined to determining whether the actions of the Commission have a rational basis.

In Allegheny-Ludlum a railroad case involving the ICC, the Supreme Court speaks of both "substantial evidence" and of a "rational basis" as standards for measuring the degree of permissible judicial review of ICC actions. This Court does not believe that these two phrases provide for identical measures of judicial review. For example, the scope of review is broader where the Court may inquire into whether there is substantial evidence to support a Commission action than it is where the inquiry is limited to whether the Commission's conclusions are rationally supported.

In Allegheny-Ludlum the Court said that,

The standard of judicial review for actions of the Interstate Commerce Commission in general, . . ., is well established by prior decisions of this Court. We do not weigh the evidence introduced before the Commission; we do not inquire into the wisdom of the regulations which the Commission promulgates, and we inquire into the soundness of the reasoning by which the Commission reaches its conclusions only to ascertain that the latter are rationally supported. (Emphasis supplied)

United States v. Allegheny-Ludlum Steel Corporation, 406 U.S. 742, 748-749, 92 S.Ct. 1941, 1946, 32 L.Ed.2d 453 (1972).

At a later point in the same opinion the Court refers to each standard of judicial review in succeeding paragraphs.

If the Commission were thrusting these regulations upon an admittedly smoothly functioning transportation industry, well supplied with necesseary rolling stock and adequately serving all shippers, the rationality of its action might well be open to question.

But such is not the case. The Commission's finding that there are recurring periods of significant length when there is not an adequate freight car supply to service shippers is supported by substantial evidence. (Emphasis supplied)

United States v. Allegheny-Ludlum Steel Corporation, 406 U.S. 742, 753, 92 S.Ct. 1941, 1948, 32 L.Ed.2d 453 (1972).

It appears that Allegheny-Ludlum outlines a two-tier approach to judicial review of ICC actions. In certain particular instances the Court possesses broader review powers and measures the Commission action against the "substantial evidence" standard, while in other particular instances the review is limited to measuring Commission action against the "rational basis" standard.

In Allegheny-Ludlum the first tier review was exercised when the Court ruled that there was "substantial evidence" to support the Commission finding that there was not an adequate freight car supply to service shippers. Once this initial finding was properly made, the Commission was empowered to promulgate reasonable rules with respect to railroad car service under the Esch Car Service Act. The determination of whether a car shortage exists is jurisdictional in the sense that, if no such shortage is proven, the Commission has no authority to promulgate rules and regulations to alleviate a shortage.³

Similarly in the instant case this Court must determine if there is substantial evidence for believing that there is a national shortage of general service, unequipped boxcars. This is the first tier of review and, because of its jurisdictional aspects, has as its benchmark the broader "substantial evidence" standard.

In the second tier review in Allegheny-Ludlum the Supreme Court examined the challenged rules only to see if the Commission conclusion that the rules would help alleviate the car shortage problem was "rationally supported". Since the jurisdictional question had already been resolved in the tier one review, the Court exercised the more limited review in tier two.

Similarly in the instant case this Court must determine if the conclusion of the ICC that the incentive per diem rule will help alleviate the shortage of general service, unequipped boxcars is "rationally supported". Therefore, the Court's authority to review the initial determination of boxcar shortage is broader under Allegheny-Ludlum than is its authority to review the determination that certain rules will help alleviate that shortage.

Section 706(2) of Title 5, United States Code, provides that only in cases which are subject to §§ 556 and 557 of the Administrative Procedure Act (APA), that is, cases where formal hearings are required, shall the scope of review be so broad as to encompass the substantial evidence standard. This case is subject only to § 553 of the APA, and is not subject to the provisions of §§ 556 and 557 thereof. United States v. Florida East Coast Railway Co., 410 U.S. 224, 93 S.Ct. 810, 35 L.Ed.2d 223 (1973).

The Court notes that, if the challenged order were not the product of a rulemaking proceeding of the ICC, but was the product of a quasi-judicial adjudicatory proceeding of the ICC the previously enunciated standards of review would not be applicable. United States v. Allegheny-Ludlum Steel Corporation, 406 U.S. 742, 749 and 757, 92 S.Ct. 194, 32 L.Ed.2d 453 (1972).

II. SCOPE OF JUDICIAL REVIEW HEREIN

Practically speaking it makes no difference in this case whether the "substantial evidence" test or the more limited "rational basis" test is the proper standard against which to measure the Commission's findings that a national shortage of plain boxcars exists, because there is more than "substantial evidence" of such shortage. On the other hand, the determination that incentive per diem charges will help alleviate the boxcar shortage is not so apparent in this case and might not pass judicial muster if the "substantial evidence" test were used as a standard against which to measure the Commission action.

In its interim...