Iowa Power and Light Co. v. Burlington Northern, Inc., Nos. 79-1676

CourtUnited States Courts of Appeals. United States Court of Appeals (8th Circuit)
Writing for the CourtBefore LAY, Chief Judge, and ROSS and HENLEY; HENLEY
Citation647 F.2d 796
PartiesIOWA POWER AND LIGHT COMPANY, a Corporation, Appellant, v. BURLINGTON NORTHERN, INC., a Corporation, Appellee. IOWA POWER AND LIGHT COMPANY, Petitioner, v. INTERSTATE COMMERCE COMMISSION and United States of America, Respondents, and Burlington Northern, Inc., Intervenor-Respondent (two cases). IOWA POWER AND LIGHT COMPANY, Petitioner, v. INTERSTATE COMMERCE COMMISSION and United States of America, Respondents, Burlington Northern, Inc., Intervenor-Respondent. BURLINGTON NORTHERN, INC., Petitioner, v. UNITED STATES of America and Interstate Commerce Commission, Respondents, Iowa Power and Light Company, Intervenor-Respondent.
Decision Date27 April 1981
Docket NumberNos. 79-1676,80-1915 and 80-1959,80-1914

Page 796

647 F.2d 796
IOWA POWER AND LIGHT COMPANY, a Corporation, Appellant,
v.
BURLINGTON NORTHERN, INC., a Corporation, Appellee.
IOWA POWER AND LIGHT COMPANY, Petitioner,
v.
INTERSTATE COMMERCE COMMISSION and United States of America,
Respondents,
and
Burlington Northern, Inc., Intervenor-Respondent (two cases).
IOWA POWER AND LIGHT COMPANY, Petitioner,
v.
INTERSTATE COMMERCE COMMISSION and United States of America,
Respondents,
Burlington Northern, Inc., Intervenor-Respondent.
BURLINGTON NORTHERN, INC., Petitioner,
v.
UNITED STATES of America and Interstate Commerce Commission,
Respondents,
Iowa Power and Light Company, Intervenor-Respondent.
Nos. 79-1676, 80-1914, 80-1915 and 80-1959.
United States Court of Appeals,
Eighth Circuit.
Submitted Dec. 9, 1980.
Decided April 27, 1981.

Page 800

Curtis H. Berg, Alan R. Post, St. Paul, Minn., Howard J. Trienens, Richard J. Metzger, Chicago, Ill., Albert E. Schoenbeck, St. Louis, Mo., R. Eden Martin, Richard E. Young, Washington, D. C., for Railroad petitioner.

Lynn K. Vorbrich, Curtis L. Ritland, Iowa Power and Light Co., Des Moines, Iowa, John M. Cleary, Frederic L. Wood, Nicholas J. DiMichael, Donelan, Cleary, Wood & Maser, P. C., Washington, D. C., William E. Franke, Clayton, Mo., for Iowa Power and Light.

Sanford M. Litvack, Asst. Atty. Gen., John J. Powers, III, Kenneth P. Kolson, Attys., Dept. of Justice, Washington, D. C., Richard A. Allen, Kathleen M. Dollar, Deputy Associate General Counsel, Evelyn G. Kitay, Atty., Interstate Commerce Commission, Washington, D. C., for ICC and United States.

Thomas L. Croft, St. Louis, Mo., W. Don Brittin, Jr., Randall G. Horstmann, Des Moines, Iowa, Louis A. Harris, St. Paul, Minn., for Burlington Northern; Coburn, Croft & Putzell, St. Louis, Mo., Nyemaster, Goode, McLaughlin, Emery & O'Brien, Des Moines, Iowa, of counsel.

John M. Cleary, Frederic L. Wood, Nicholas J. DiMichael, Donelan, Cleary, Wood & Maser, Washington, D. C., William E. Franke, Clayton, Mo., Lynn K. Vorbrich, Curtis L. Ritland, Iowa Power & Light Co., Des Moines, Iowa, John A. McClintock, David L. Brown, Hansen, McClintock & Riley, Des Moines, Iowa, for Iowa Power & Light Co.

Before LAY, Chief Judge, and ROSS and HENLEY, Circuit Judges.

HENLEY, Circuit Judge.

Burlington Northern, Inc. (Burlington Northern or BN) brings this petition to review orders 1 of the Interstate Commerce Commission (ICC or Commission) which prescribe a maximum reasonable rate for the transportation of coal from Belle Ayr, Wyoming to Council Bluffs, Iowa. In the decision which is the focus of this appeal, I & S 9199, Unit Train Rates on Coal Burlington Northern, Inc., 364 ICC 186 (1980), the Commission prescribed a transportation rate which holds Burlington Northern to a rate negotiated in 1973 with the Iowa Power and Light Company (Iowa Power or IPL). In this decision, served on October 1, 1980 (the "October 1 decision"), the Commission reversed an earlier ruling which refused to give weight to the parties' agreement. I & S 9199, Unit Train Rates on Coal Burlington Northern, Inc., 361 ICC 655 (1979).

For the reasons stated below, we deny the petition for review.

I. BACKGROUND

The Iowa Power and Light Company is engaged in the sale and generation of electricity in the State of Iowa. The utility maintains a coal-fired generating plant at Council Bluffs, Iowa, which is supplied under a twenty-year supply contract with coal from Belle Ayr, Wyoming.

IPL announced its plans to construct the generating plant at Council Bluffs in 1972, and began at that time to negotiate for coal supply and transportation. In 1973 the utility and the Amax Coal Company joined in a statement of intent under which Iowa Power would purchase thirty-five million tons of coal from Amax over the term of the arrangement. IPL then commenced negotiating with Burlington Northern, the only rail line serving the Amax mine at Belle Ayr, Wyoming.

On July 10, 1973 BN quoted a unit train rate of $3.21 per net ton in shipper-owned cars, which was accepted by Iowa Power on July 25, 1973. From this date until early 1976 the railroad and the utility had several meetings concerning the contemplated movement, but neither side questioned the level of the $3.21 rate. Negotiations continued,

Page 801

however, because no agreement had been reached on how the rate would be adjusted in the future as costs increased. Meanwhile, IPL in November, 1973 entered into a contract with Amax Coal Company for the supply of coal. Finally, on January 7, 1976, BN sent to IPL a letter of understanding, incorporating the parties' consensus regarding the base rate for coal transportation and a rate escalation formula. IPL signed the letter on February 16, 1976.

In 1977 IPL gave notice to BN that coal movements would commence on January 1, 1978. As this date approached, however, Burlington Northern in December, 1977 advised IPL that it would not publish the agreed rate 2 of $5.23 because several recent coal rate adjustments approved by the Commission made it appear that this rate was beneath the going pattern of rates. Burlington Northern offered to publish a rate of $6.32 and to hold this rate until July 1, 1979. Iowa Power in turn insisted that BN honor the agreed rate.

This impasse was followed by Burlington Northern's unsuccessful attempt, not directly relevant here, to publish a capital incentive rate of $7.38. The Commission found that the proposed rate did not qualify for capital incentive treatment, Incentive Rate on Coal Belle Ayr, Wyoming to Council Bluffs, Iowa, 359 ICC 201 (1978), and the parties were once again left to negotiate their differences. 3

Ultimately BN elected to file the same $7.38 rate under normal statutory notice provisions. This increase is the subject of the present petition for review.

The proposed $7.38 rate was kept from becoming effective pending investigation by Iowa Power's filing of a petition for suspension and investigation (I & S Docket No. 9199) and a complaint (Docket No. 36944) under the provisions of 49 U.S.C. § 10707. 4 Pending investigation Burlington Northern was allowed to establish a rate no higher than $5.62, that is, the contract rate as increased by the parties' agreed cost escalation formula.

In decisions dated July 6 and July 13, 1979 the ICC concluded that BN's $7.38 rate was unlawfully high. Docket No. I & S 9199, Unit Train Rates on Coal Burlington Northern, Inc., 361 ICC 655 (1979). Significantly, the Commission declined to hold BN to the parties' agreed rate, prescribing instead as a reasonable maximum rate the above-contract rate of $7.25 per net ton.

Petitions for judicial review followed, 5 with eventual consolidation of the appeals in this court. While these petitions were pending, however, the Commission sought and the court on May 7, 1980 granted a remand to the Commission, giving the ICC an opportunity to reexamine its findings in light of its policy on negotiated ratemaking.

The order which is the focus of the present review is the product of this remand. The Commission by order served on October 1, 1980 found that it had erred in July, 1979 in prescribing $7.25 as a maximum reasonable rate without giving weight

Page 802

to the parties' agreement. The Commission found instead that the agreed rate was a just and reasonable maximum. I & S 9199, supra, 364 ICC at 200.

Both parties petitioned for review of the ICC's October 1, 1980 decision. 6 The United States and Interstate Commerce Commission are respondents pursuant to 28 U.S.C. § 2322 and Fed.R.App.P. 15(a). This court has jurisdiction under 28 U.S.C. §§ 2321(a), 2342(5) as amended by Pub.L.No. 93-584, 88 Stat. 1917 (1975), and 2344.

On review, objections are raised to (A) the Commission's jurisdiction under the Staggers Rail Act of 1980; (B) the enforcement of a private agreement as outside of the ICC's authority and contrary to decisional precedent; (C) the Commission's finding that the parties intended to be bound; (D) the violation of statutory ratemaking guidelines; and (E) the Commission's promulgation of a new policy on contract rates without notice and comment.

II. DISCUSSION

A. Jurisdiction under the Staggers Rail Act of 1980 7

BN raises a jurisdictional issue of first impression: whether the Staggers Rail Act of 1980, Pub.L.No. 96-448, 94 Stat. 1895 (1980) (the Staggers Rail Act or the Act) deprived the Commission of jurisdiction to compel a rate reduction in its decision of October 1, 1980. 8

Burlington Northern argues that the ICC lacked jurisdiction to enter its October 1, 1980 order, 9 relying on the following provision of Section 202 of the Staggers Rail Act:

(T)he Commission shall find that the rail carrier establishing the challenged rate does not have market dominance over the transportation to which the rate applies if such rail carrier proves that the rate charged results in a revenue-variable cost percentage for such transportation that is less than

(A) 160 percent during the period beginning on the effective date of the Staggers Rail Act of 1980 and ending September 30, 1981.

Pub.L.No. 96-448, 94 Stat. 1900 (1980), to be codified at 49 U.S.C. § 10709(d).

This provision relating to market dominance is best comprehended against the background of the Railroad Revitalization and Regulatory Reform Act of 1976, Pub.L.No. 94-210, 90 Stat. 31 (1976) (the 4-R Act). In the 4-R Act, Congress set forth market dominance as a novel test for the Commission's jurisdiction over a challenged rate. Section 202 of the 4-R Act, recodified as part of the Revised Interstate Commerce Act, Pub.L.No. 95-473, 92 Stat. 1382 (1978),

Page 803

49 U.S.C. § 10709(b), provides that the Commission has no jurisdiction over a rate in circumstances where the rail carrier lacks market dominance. Regulation of rates in such competitive circumstances is left to market forces.

The Staggers Rail Act continues the deregulation of rail traffic begun by the 4-R Act, providing in Section 202 a presumption...

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36 practice notes
  • Mada-Luna v. Fitzpatrick, MADA-LUN
    • United States
    • United States Courts of Appeals. United States Court of Appeals (9th Circuit)
    • 30 Marzo 1987
    ...First, they must operate only prospectively. Burroughs Wellcome, 649 F.2d at 224; Iowa Power and Light Co. v. Burlington Northern, Inc., 647 F.2d 796, 811 (8th Cir.1981), cert. denied, 455 U.S. 907, 102 S.Ct. 1253, 71 L.Ed.2d 445 (1982); American Business Association v. United States, 627 F......
  • United States ex rel. Shakopee v. Pan American Management, Civ. No. 4-85-231
    • United States
    • United States District Courts. 8th Circuit. United States District Court of Minnesota
    • 9 Agosto 1985
    ...General policy statements must leave the agency free to exercise informed discretion. Iowa Power & Light Co. v. Burlington Northern, Inc., 647 F.2d 796, 811 (8th Cir.1981), cert. denied, 455 U.S. 907, 102 S.Ct. 1253, 71 L.Ed.2d 445 (1982). In contrast, a rule should be considered to be a le......
  • Brother Industries, Ltd. v. US, No. 88-11-00860.
    • United States
    • U.S. Court of International Trade
    • 12 Julio 1991
    ...463 (3d Cir.1981), cert. denied, 455 U.S. 939, 102 S.Ct. 1429, 71 L.Ed.2d 649 (1982); Iowa Power & Light Co. v. Burlington Northern, Inc., 647 F.2d 796 (8th Cir.1981), cert. denied, 455 U.S. 907, 102 S.Ct. 1253, 71 L.Ed.2d 445 (1982). The plaintiffs argue that an exporter's good faith effor......
  • McKenzie v. Heckler, Civ. No. 4-84-182.
    • United States
    • United States District Courts. 8th Circuit. United States District Court of Minnesota
    • 7 Febrero 1985
    ...policy statements must leave the administrator free to exercise informed discretion. Ia. Power & Light Co. v. Burlington Northern, Inc., 647 F.2d 796, 811 (8th Cir.1981), cert. denied, 455 U.S. 907, 102 S.Ct. 1253, 71 L.Ed.2d 445 (1982); Brown Exp., Inc. v. United States, 607 F.2d 695, 701 ......
  • Request a trial to view additional results
36 cases
  • Mada-Luna v. Fitzpatrick, MADA-LUN
    • United States
    • United States Courts of Appeals. United States Court of Appeals (9th Circuit)
    • 30 Marzo 1987
    ...First, they must operate only prospectively. Burroughs Wellcome, 649 F.2d at 224; Iowa Power and Light Co. v. Burlington Northern, Inc., 647 F.2d 796, 811 (8th Cir.1981), cert. denied, 455 U.S. 907, 102 S.Ct. 1253, 71 L.Ed.2d 445 (1982); American Business Association v. United States, 627 F......
  • United States ex rel. Shakopee v. Pan American Management, Civ. No. 4-85-231
    • United States
    • United States District Courts. 8th Circuit. United States District Court of Minnesota
    • 9 Agosto 1985
    ...General policy statements must leave the agency free to exercise informed discretion. Iowa Power & Light Co. v. Burlington Northern, Inc., 647 F.2d 796, 811 (8th Cir.1981), cert. denied, 455 U.S. 907, 102 S.Ct. 1253, 71 L.Ed.2d 445 (1982). In contrast, a rule should be considered to be a le......
  • Brother Industries, Ltd. v. US, No. 88-11-00860.
    • United States
    • U.S. Court of International Trade
    • 12 Julio 1991
    ...463 (3d Cir.1981), cert. denied, 455 U.S. 939, 102 S.Ct. 1429, 71 L.Ed.2d 649 (1982); Iowa Power & Light Co. v. Burlington Northern, Inc., 647 F.2d 796 (8th Cir.1981), cert. denied, 455 U.S. 907, 102 S.Ct. 1253, 71 L.Ed.2d 445 (1982). The plaintiffs argue that an exporter's good faith effor......
  • McKenzie v. Heckler, Civ. No. 4-84-182.
    • United States
    • United States District Courts. 8th Circuit. United States District Court of Minnesota
    • 7 Febrero 1985
    ...policy statements must leave the administrator free to exercise informed discretion. Ia. Power & Light Co. v. Burlington Northern, Inc., 647 F.2d 796, 811 (8th Cir.1981), cert. denied, 455 U.S. 907, 102 S.Ct. 1253, 71 L.Ed.2d 445 (1982); Brown Exp., Inc. v. United States, 607 F.2d 695, 701 ......
  • Request a trial to view additional results

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