General American Transp. Corp. v. I.C.C., Nos. 87-1125

CourtUnited States Courts of Appeals. United States Court of Appeals (District of Columbia)
Writing for the CourtBefore SILBERMAN, WILLIAMS and SENTELLE; SILBERMAN
Citation872 F.2d 1048
PartiesGENERAL AMERICAN TRANSPORTATION CORPORATION, et al., Petitioners, v. INTERSTATE COMMERCE COMMISSION and United States of America, Respondents, Lo Shippers Action Committee, Baltimore and Ohio Chicago Terminal Railroad Co., U.S. Clay Producers Traffic Association, Inc., Association of American Railroads, Chemical Manufacturers Association, Intervenors. RAILWAY PROGRESS INSTITUTE COMMITTEE ON TANK CARS, Petitioners v. INTERSTATE COMMERCE COMMISSION and United States of America, Respondents, Association of American Railroads, Baltimore and Ohio Chicago Terminal Railroad Co., et al., Chemical Manufacturers Association, MBF Industries, Inc., Intervenors. RAILWAY PROGRESS INSTITUTE COMMITTEE ON TANK CARS, et al., Petitioners, v. INTERSTATE COMMERCE COMMISSION and United States of America, Respondents, Association of American Railroads, Baltimore and Ohio Chicago Terminal Railroad Co., et al., Intervenors.
Decision Date30 June 1989
Docket Number87-1171 and 88-1284,Nos. 87-1125

Page 1048

872 F.2d 1048
277 U.S.App.D.C. 78
GENERAL AMERICAN TRANSPORTATION CORPORATION, et al., Petitioners,
v.
INTERSTATE COMMERCE COMMISSION and United States of America,
Respondents,
Lo Shippers Action Committee, Baltimore and Ohio Chicago
Terminal Railroad Co., U.S. Clay Producers Traffic
Association, Inc., Association of American Railroads,
Chemical Manufacturers Association, Intervenors.
RAILWAY PROGRESS INSTITUTE COMMITTEE ON TANK CARS, Petitioners
v.
INTERSTATE COMMERCE COMMISSION and United States of America,
Respondents,
Association of American Railroads, Baltimore and Ohio
Chicago Terminal Railroad Co., et al., Chemical
Manufacturers Association, MBF
Industries, Inc., Intervenors.
RAILWAY PROGRESS INSTITUTE COMMITTEE ON TANK CARS, et al., Petitioners,
v.
INTERSTATE COMMERCE COMMISSION and United States of America,
Respondents,
Association of American Railroads, Baltimore and Ohio
Chicago Terminal Railroad Co., et al., Intervenors.
Nos. 87-1125, 87-1171 and 88-1284.
United States Court of Appeals,
District of Columbia Circuit.
Argued Jan. 9, 1989.
Decided April 14, 1989.
Rehearing Denied June 30, 1989.

Patrick M. Raher, with whom Elizabeth B. Heffernan, Washington, D.C., Thomas F. McFarland, Jr., Chicago, Ill., David F. Zoll, John L. Oberdorfer, Scott N. Stone, Peter A. Greene, R. Hale Foote, Washington, D.C., and Henry M. Wick, Jr., Pittsburgh, Pa., were on the joint brief, for petitioners and intervenors Chemical Mfrs. Ass'n, MBF Industries, Inc., and U.S. Clay Producers Traffic Ass'n, Inc. in 87-1125, 87-1171 and 88-1284.

Peter F. Rousselot, Washington, D.C., also entered an appearance for petitioners in 87-1171.

Dennis J. Starks, Attorney, I.C.C., with whom Henri F. Rush, Deputy General Counsel, Robert S. Burk, General Counsel, John J. Powers, III and John P. Fonte, Attorneys, Dept. of Justice, Washington, D.C., were on the brief, for respondents in 87-1125, 87-1171 and 88-1284.

Stephen C. Herman, with whom Harold E. Spencer, Chicago, Ill., was on the brief, for intervenor LO Shippers Action Committee in 87-1125, 87-1171 and 88-1284.

Robert M. Jenkins, III, with whom Paul A. Cunningham, Marc D. Machlin, W. Susanne Addy, Washington, D.C., Joseph D. Anthofer, James L. Howe, III, Roanoke, Va., John B. Norton, William R. Power,

Page 1050

Chicago, Ill., Charles C. Rettberg, Cleveland, Ohio, Alice C. Saylor, Pittsburgh, Pa., James C. Schultz, Hauppauge, N.Y., John MacDonald Smith, San Francisco, Cal., J. Thomas Tidd and Dennis W. Wilson, Washington, D.C., were on the brief, for intervenor Ass'n of American Railroads in 87-1125, 87-1171 and 88-1284.

Anna M. Kelly, Chicago, Ill., Emried D. Cole, Jr., and Paul R. Hitchcock, Chicago, Ill., filed a joint brief for intervenors The Indiana Harbor Belt R. Co. and the Baltimore and Ohio Chicago Terminal R. Co. in 87-1125, 87-1171 and 88-1284.

Lawrence M. Cohen and Shayle P. Fox, Chicago, Ill., filed a brief for amicus curiae Rescar, Inc. urging that the petitions be granted.

William Henry Barrett, Chicago, Ill., also entered an appearance for amicus curiae Rescar, Inc.

Before SILBERMAN, WILLIAMS and SENTELLE, Circuit Judges.

Opinion for the Court filed by Circuit Judge SILBERMAN.

SILBERMAN, Circuit Judge:

In these consolidated cases, petitioners 1 request review of the Interstate Commerce Commission's reversal of a forty-year old policy that substantially prevented railroads from charging the owners of private railcars for the costs of transporting their cars (when empty) to repair depots for ordinary maintenance. We hold that the Commission's reinterpretation of the statute is permissible and rationally explained, and further conclude that it was within the Commission's discretion to apply its new policy retroactively to the parties before it in this adjudication. Accordingly, we deny the petitions in all respects.

I.

Railroads, pursuant to their common-carrier obligations under the Interstate Commerce Act, must provide railcars suitable for the transportation of a broad range of property, including agricultural products, flammable liquids, as well as crated freight. In part because of these diverse requirements, it has proved impracticable for rail common-carriers to invest the capital necessary for the acquisition of general-use and specialty rolling stock. Carriers, therefore, commonly lease railcars both from firms in the business of supplying railcars and, occasionally, from shippers themselves. Under these leasing arrangements, railroads fulfill their common-carrier obligation to make available suitable railcars by paying car providers their costs of owning the rolling stock through a variety of means, including direct "mileage allowances" and offsets on line-haul freight tariffs.

Railcars "provided" to railroads in this manner accrue a substantial amount of "empty mileage"--mileage traveled without carrying any freight--in part because railcars commonly make a so-called "empty return." Railroads are not permitted to charge the railcar owners or car providers separately to return an empty car to the point of origination; instead, carriers may recover the cost of an empty return only by incorporating it in their rates for the line-haul movement of freight. In addition, railcars are periodically moved empty to repair depots selected by car providers. Up until the challenged order was filed, the Commission treated such empty-repair mileage identically to empty-return mileage by prohibiting carriers (in most circumstances) from charging car providers separately for empty-repair moves. In a 1977 adjudication involving many of the parties before us today, see General Am. Transp. Corp. v. Indiana Harbor Belt R.R. Co., 357 I.C.C. 102 (1977) ("Indiana Harbor I "), aff'd sub nom. Indiana Harbor Belt R.R. Co. v. General Am. Transp. Corp., 577 F.2d 394 (7th Cir.1978), the Commission reaffirmed its then longstanding prohibition on empty-repair-move charges. It held

Page 1051

that private railcars moving empty for repair continued to serve as "instrumentalities of transportation" during such movements since repairs enabled railroads to maintain their use of such cars for revenue-generating purposes. Accordingly, the Commission concluded that empty-repair moves were not "distinct rail services" for which railroads could impose a separate tariff; rather, such moves were deemed a collective responsibility of those carriers who derive more than de minimus economic benefit (through line-haul freight charges) from the use of privately-owned railcars. 357 I.C.C. at 126-27.

Whatever its merits, Indiana Harbor I 's regime of collective railroad responsibility for empty-repair moves left certain carriers (predominantly switching or terminating railroads) 2 with an empty-repair mileage burden considerably out of proportion to the economic benefit those carriers derived from the line-haul movement of freight. And cross-subsidization among railroads was not the only perceived evil of Indiana Harbor I: the rule was believed to encourage inefficient depot selections because the costs of empty-repair transportation were imposed on parties other than those selecting the repair depot locations. In 1983, the Indiana Harbor Belt Railroad ("IHB") and the Baltimore & Ohio Chicago Terminal Railroad Company ("BOCT"), two carriers that found themselves disadvantaged by Indiana Harbor I, filed proposed tariffs for empty-repair moves in an effort to prompt the Commission to change course. The IHB and the BOCT contended that the statutory basis for the theory of collective responsibility had been undermined by recent congressional enactments designed to give railroads greater flexibility in imposing tariffs for rail services. The proposed tariffs elicited virtually immediate complaints from car providers, 3 and the instant proceeding began.

After an initial dismissal of the complaints by an administrative law judge and a subsequent reversal by the ICC Review Board (holding that Indiana Harbor I controlled the case), the complaints were appealed to the full Commission in July 1984. The ICC stayed the Review Board's order and published a notice in the Federal Register indicating that it was considering modifying or reversing Indiana Harbor I. See 49 Fed.Reg. 39,740 (1984); see also 50 Fed.Reg. 10,867 (1985) (soliciting additional comments). The Commission thereafter reopened the record underlying the complaints before it (and in Indiana Harbor I ) and invited industry comments concerning, among other issues, whether or not the prohibition against empty-repair-move charges was efficient and equitable.

Three years later, after compiling an extensive record, the Commission reversed Indiana Harbor I and ruled that carriers may impose tariffs on car providers for empty-repair moves. See General Am. Transp. Corp. v. Indiana Harbor Belt R.R. Co., 3 I.C.C.2d 599 (1987) ("Indiana Harbor II "). The Commission revisited the statutory questions analyzed in Indiana Harbor I and concluded that the Interstate Commerce Act, at least after its amendment by the Railroad Revitalization and Regulatory Reform Act ("the 4R Act") 4 and the Staggers Act 5 does not prohibit carriers from imposing an initial charge on car providers for empty-repair moves. See Indiana Harbor II at 606-11. The ICC further explained that permitting carriers to impose initial repair-move charges would redress the problem of intercarrier misallocation of empty-repair-mileage burdens and improve efficiency in the selection of repair depots by placing empty-repair-transportation costs, in the first instance, on car providers. See id. at 613-16. The ultimate responsibility for the costs of owning railcars, including the costs of empty-repair moves, would continue to

Page 1052

be transferred to railroads through customary channels--such as mileage allowances. See id. at 614. Since the ICC concluded that Indiana Harbor I 's prohibition on empty-repair-move charges no longer was viable under the Act, it upheld the...

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