International Broth. of Teamsters v. I.C.C.

• Decision Date: 30 September 1986
• Docket Number: 85-1404,Nos. 85-1397,s. 85-1397
• Citation: 801 F.2d 1423
• Parties: INTERNATIONAL BROTHERHOOD OF TEAMSTERS, et al., Petitioners, v. INTERSTATE COMMERCE COMMISSION and United States of America, Respondents, Norfolk Southern Corporation and North American Van Lines, Inc., Intervenors. Patrick W. SIMMONS, Petitioner, v. INTERSTATE COMMERCE COMMISSION and United States of America, Respondents, Norfolk Southern Corporation and North American Van Lines, Inc., Intervenors.
• Court: U.S. Court of Appeals — District of Columbia Circuit

Page 1423

801 F.2d 1423

255 U.S.App.D.C. 384

INTERNATIONAL BROTHERHOOD OF TEAMSTERS, et al., Petitioners, v. INTERSTATE COMMERCE COMMISSION and United States of America,

Respondents,

Norfolk Southern Corporation and North American Van Lines,

Inc., Intervenors.

Patrick W. SIMMONS, Petitioner, v. INTERSTATE COMMERCE COMMISSION and United States of America,

Respondents,

Norfolk Southern Corporation and North American Van Lines,

Inc., Intervenors.

Nos. 85-1397, 85-1404.

United States Court of Appeals District of Columbia Circuit.

Argued May 30, 1986.

Decided Sept. 30, 1986.

James van R. Springer, with whom Robert J. Higgins, Joan M. Darby, Howard N. Feldman and Kevin M. Williams, Washington, D.C., were on the brief for petitioners in No. 85-1397.

Gordon P. MacDougall, Washington, D.C., was on the brief for petitioner in No. 85-1404.

Lawrence H. Schecker, Atty., I.C.C., with whom Robert S. Burk, Gen. Counsel, John J. McCarthy, Jr., Deputy Associate Gen. Counsel, I.C.C., John J. Powers, III and John P. Fonte, Washington, D.C., Attys., Dept. of Justice were on the brief for respondents in Nos. 85-1397 and 85-1404.

L. John Osborn, with whom Eugene T. Liipfert, Fritz R. Kahn, Mark J. Andrews and Thomas E. Acey, Jr., Washington, D.C., were on the brief for intervenors, Norfolk Southern Corp. and North American Van Lines, Inc., in Nos. 85-1397 and 85-1404.

Before STARR, SILBERMAN and BUCKLEY, Circuit Judges.

Opinion for the Court filed by Circuit Judge STARR.

STARR, Circuit Judge:

This case calls upon us to review the Interstate Commerce Commission's decision to approve the acquisition of North American Van Lines, Inc. by Norfolk Southern Corporation. The principal issue raised by the petitions for review is whether the ICC's decision was premised on an impermissible construction of the statutory provision which governs the acquisition, 49 U.S.C. Sec. 11344(c) (1982). For the reasons that follow, we conclude that the Commission's interpretation is violative of clear Congressional intent. We therefore grant the petitions for review.

I

In August 1984, Norfolk Southern Corporation (Norfolk or NS) and North American Van Lines, Inc. (North American or NAVL) filed a joint application with the Commission seeking authority for Norfolk to acquire North American. Norfolk is a leading firm in the railway industry by virtue of its control of two large railroads, the Norfolk and Western Railway Company and the Southern Railway Company, as well as their respective subsidiaries. Norfolk's railroads operate approximately 18,000 miles of track in twenty States and Ontario, Canada.

North American, on the other hand, is one of the largest trucking firms in the United States. Its motor carrier operations are organized into three components: (1) the Household Goods Division, specializing in residential moving services; (2) the Commercial Transport Division, handling principally manufactured goods; and (3) the High Value Products Division, specializing in business relocations and transportation of high-technology apparatus. In 1983, North American's Household Goods and Commercial Transport Divisions each accounted for approximately forty percent of the company's domestic motor carrier revenues, with its High Value Products Division garnering the remaining twenty percent.

In support of their merger proposal, Norfolk and North American maintained that "acquisition of NAVL will enable NS to provide coordinated, single-system intermodal services that will produce significant benefits for shippers." Joint Appendix (J.A.) at 741. The likely benefits were said to include the opportunity for shippers to obtain a comprehensive range of services at reduced costs through a single organization, that is to say less costly "one-stop" shopping. Their application set forth substantial plans for employment of North American's Commercial Transport Division in intermodal service ventures with the Norfolk railroads. A prime example of this intermodal service was the parties' proposed joint trailer-on-flatcar (TOFC) service, ¹ a form of bimodal transportation for which there appears to be increasing demand.

The applicants acknowledged that NAVL would continue to operate as a separate, autonomous entity after the merger. J.A. at 756. They also conceded that the Household Goods and High Value Products Division "in the near term will continue, for the most part, their present focus on all-motor service." J.A. at 812; see also J.A. at 108 ("Norfolk Southern recognizes that much of North American's traffic is peculiarly suited to all-truck handling."). Nevertheless, the applicants contended that "the entirety of NAVL, not just [the Commercial Transport Division]," would prove useful in Norfolk's intermodal operations. J.A. at 813. In particular, the applicants emphasized that the Household Goods and High Value Products Divisions' nationwide networks of agents and the opportunity for joint purchasing would facilitate the operation of intermodal services.

Petitioners Regular Common Carrier Conference and International Brotherhood of Teamsters, Chauffeurs, Warehousemen and Helpers of America jointly opposed the application before the Commission. The only other party to object to the proposed merger was petitioner Patrick W. Simmons, Illinois Legislative Director for the United Transportation Union. Numerous organizations supported the application, including the United States Department of Transportation several state governments and many nationwide shippers of freight.

Before the Commission, petitioners contended that Norfolk and North American had not met their burden under the three-part test for rail carriers acquisitions of motor carriers as set forth in the key provision of the pertinent statute, 49 U.S.C. Sec. 11344(c):

When a rail carrier, or a person controlled by or affiliated with a rail carrier, is an applicant and the transaction involves a motor carrier, the Commission may approve and authorize the transaction only if it finds that the transaction is consistent with the public interest, will enable the rail carrier to use motor carrier transportation to public advantage in its operations, and will not unreasonably restrain competition.

Petitioners argued principally that the proposed merger was precluded by the second of the three statutory requirements, namely that the acquired motor carrier be used by the rail carrier "to public advantage in its operations." (Emphasis added). In petitioners' view, the Commission was bound by its longstanding (and indeed original) understanding that this proviso permitted a railroad to acquire a motor carrier only for operations "auxiliary to or supplemental of" train service in the absence of "special circumstances." This entire doctrine, including both the auxiliary-supplementary rule and its exception, has come to be known over the years as the "special circumstances doctrine." Petitioners contended that the merger application should be denied because of the undisputed fact that North American would not be used as an adjunct to Norfolk's rail operations and because the latter had not demonstrated "special circumstances" warranting its acquisition of North American's motor operations.

Petitioners attacked not only the proposed merger but, in addition, challenged the Commission's recently issued policy statement, Ex Parte No. 438, Acquisition of Motor Carriers by Railroads (July 27, 1984), J.A. at 53-69, reinterpreting the pivotal statutory phrase, "in its operations." Under the Commission's new approach, that provision required only that the motor carrier be used in the acquiring rail carrier's "overall transportation operations" rather than in the latter's "rail operations." Accordingly, the ICC expressly repudiated the well-established "special circumstances" doctrine. In petitioners' view, the ICC lacked authority to adopt this latter-day, less stringent interpretation of the statute inasmuch as the traditional interpretation (that the acquired motor carrier be used in the acquiring firm's rail operations) embodied Congressional intent, not simply agency policy. As petitioners saw it, the combined effect of the legislative history of the provision, Congress' reenactment of that provision with knowledge of the Commission's "special circumstances" doctrine, and the Supreme Court's longstanding, express approval of that doctrine demonstrated Congress' intent to codify a rail operations requirement. Petitioners further argued that the ICC's underlying decision in Acquisition of Motor Carriers was impermissible because it denuded the statutory restriction of any independent significance in relation to the remainder of the three-part test.

Petitioners also maintained that the proposed merger was deficient under the other two prongs of the statutory test. In particular, they submitted evidence to the effect that the acquisition would enable Norfolk to shift costs and revenues between its regulated rail operations and its unregulated motor carrier operations. According to petitioners, Norfolk could thereby evade rail rate regulation and cross-subsidize North American's motor carrier operations to the detriment of competitors in the latter field. Finally, petitioners argued that the merger was unnecessary to realize the efficiencies of intermodal operations because the same efficiencies could be achieved through the two firms' collaboration as separate companies. ²

In the face of this assault, Norfolk and North American offered two alternative responses to the objection that the proposed acquisition contravened the statute's "in its operations" requirement. First, they stoutly defended the Commission's reinterpretation of that requirement in its Acquisition of Motor Carriers decision and contended that "the proposed transaction will be useful to the overall operations of NS in transportation generally," as required under the Commission's new doctrine. J.A. at 813. Second, the applicants argued...