Lamoille Valley R. Co. v. I.C.C., Nos. 82-1498
| Court | United States Courts of Appeals. United States Court of Appeals (District of Columbia) |
| Writing for the Court | Before WILKEY and WALD; WALD |
| Citation | 711 F.2d 295 |
| Parties | , 1983-1 Trade Cases P 65,469 LAMOILLE VALLEY RAILROAD COMPANY, Petitioner, v. INTERSTATE COMMERCE COMMISSION and United States of America, Respondents, Guilford Transportation Industries, Inc., Robert W. Meserve and Benjamin H. Lacy, Trustees of the Property of Boston and Maine Corporation, Debtor, Eastern Magnesia Talc Company, State of Vermont, Intervenors. PROVIDENCE AND WORCESTER RAILROAD COMPANY, Petitioner, v. INTERSTATE COMMERCE COMMISSION and United States of America, Respondents, Guilford Transportation Industries, Inc., Robert W. Meserve and Benjamin H. Lacy, Trustees of the Property of Boston and Maine Corporation, Debtor, State of Vermont, Intervenors. STATE OF VERMONT, Petitioner, v. INTERSTATE COMMERCE COMMISSION and United States of America, Respondents, Guilford Transportation Industries, Inc., Robert W. Meserve, et al., Intervenors. CANADIAN NATIONAL RAILWAY COMPANY, Central Vermont Railway, Inc., Grand Trunk Western Railroad Company and Detroit, Toledo and Ironton Railroad Company, Petitioners, v. INTERSTATE COMMERCE COMMISSION and United States of America, Respondents, Robert W. Meserve and Benjamin H. Lacy, Trustees of the Property of Boston and Maine Corporation, Debtor, Intervenors. |
| Decision Date | 28 June 1983 |
| Docket Number | 82-1578 and 82-1668,Nos. 82-1498,82-1523 |
Page 295
v.
INTERSTATE COMMERCE COMMISSION and United States of America,
Respondents,
Guilford Transportation Industries, Inc., Robert W. Meserve
and Benjamin H. Lacy, Trustees of the Property of Boston and
Maine Corporation, Debtor, Eastern Magnesia Talc Company,
State of Vermont, Intervenors.
PROVIDENCE AND WORCESTER RAILROAD COMPANY, Petitioner,
v.
INTERSTATE COMMERCE COMMISSION and United States of America,
Respondents,
Guilford Transportation Industries, Inc., Robert W. Meserve
and Benjamin H. Lacy, Trustees of the Property of
Boston and Maine Corporation, Debtor,
State of Vermont, Intervenors.
STATE OF VERMONT, Petitioner,
v.
INTERSTATE COMMERCE COMMISSION and United States of America,
Respondents,
Guilford Transportation Industries, Inc., Robert W. Meserve,
et al., Intervenors.
CANADIAN NATIONAL RAILWAY COMPANY, Central Vermont Railway,
Inc., Grand Trunk Western Railroad Company and
Detroit, Toledo and Ironton Railroad
Company, Petitioners,
v.
INTERSTATE COMMERCE COMMISSION and United States of America,
Respondents,
Robert W. Meserve and Benjamin H. Lacy, Trustees of the
Property of Boston and Maine Corporation, Debtor,
Intervenors.
District of Columbia Circuit.
Decided June 28, 1983.
Page 298
[229 U.S.App.D.C. 20] Petitions for Review of Orders of the Interstate Commerce commission.
Robert R. Gensburg, St. Johnsbury, Vt., for Lamoille Valley R. Co., petitioner in No. 82-1498.
Robert P. vom Eigen, Washington, D.C., with whom Charles A. Spitulnik, Washington, D.C., was on the brief, for Canadian National R. Co., et al., petitioners in No. 82-1668.
Page 299
[229 U.S.App.D.C. 21] Joseph L. Manson, III, Washington, D.C., with whom John L. Richardson and Thomas E. Acey, Jr., Washington, D.C., were on the brief, for Providence and Worcester R. Co., petitioner in No. 82-1523. Debra L. Willen, Washington, D.C., also entered an appearance for petitioner.
Robert L. Calhoun, Boston, Mass., was on the brief for the State of Vt., petitioner in No. 82-1578 and intervenor in No. 82-1498 and 82-1523. Paulette S. Kessler, David M. Schwartz, Boston, Mass., and Robert C. Schwartz, Montpelier, Vt., also entered appearances for petitioner and intervenor.
Edward J. O'Meara, Atty., I.C.C., Washington, D.C., with whom John Broadley, Gen. Counsel, and Henri F. Rush, Associate Gen. Counsel, I.C.C., and John J. Powers, III and Kenneth P. Kolson, Attys., Dept. of Justice, Washington, D.C., were on the brief, for respondents. John J. McCarthy, Jr., Atty., I.C.C., Washington, D.C., also entered an appearance for respondents.
James E. Howard, Pittsburgh, Pa., with whom Kathleen D. Hendrickson and Robert M. Owsiany, Pittsburgh, Pa., were on the brief, for intervenor, Guilford Transp. Industries, Inc.
Hugh P. Morrison, Jr., and Rand McQuinn, Washington, D.C., were on the brief, for intervenor, Eastern Magnesia Talc Co. Donald J. Mulvihill and William J. Sweeney, Washington, D.C., also entered appearances for intervenor.
Charles W. Mulcahy, Jr., Boston, Mass., was on the brief, for intervenor, Trustees of the Property of Boston and Maine Corp., debtor.
Before WILKEY and WALD, Circuit Judges, and BONSAL, * Senior District Judge for the Southern District of New York.
Opinion for the Court filed by Circuit Judge WALD.
TABLE OF CONTENTS
Page
I. STATUTORY AND FACTUAL BACKGROUND ............ 300
A. The Statutory Scheme ..................... 300
1. Specific Provisions Governing
Railroad Mergers ...................... 300
2. Congressional Policy on Railroad
Mergers ............................... 301
B. ICC Railroad Merger Policy ............... 302
C. The Railroads Involved in this Case ...... 303
D. Proceedings Below ........................ 303
1. Conditions Requested by the Boston
& Maine's Competitors ................. 303
2. The ICC's Decision .................... 304
E. Issues Presented ......................... 304
II. THE FINANCIAL VIABILITY OF THE BOSTON &
MAINE ....................................... 305
III. LAMOILLE VALLEY'S REQUEST FOR PROTECTIVE
CONDITIONS .................................. 307
A. Standard of Review ....................... 307
B. The ICC's Decision ....................... 308
C. The Essential Services Test .............. 309
1. Current or Past Truck Service ......... 310
2. Business Termination .................. 310
3. Conclusion ............................ 313
D. Anticompetitive Effect ................... 313
IV. CANADIAN NATIONAL'S REQUEST FOR
PROTECTIVE CONDITIONS ....................... 315
A. The ICC's Decision ....................... 315
B. The Limited Relevance of Systemwide
Revenues ................................. 316
C. Guilford's Intent to Maintain Present
Service .................................. 317
D. Guilford's Incentives to Downgrade
Interchange Service ...................... 318
1. Guilford's Incentives in Antitrust
Theory ................................ 318
2. Guilford's Actual Incentives .......... 319
E. Canadian National's Competitive
Leverage ................................. 320
F. Potential Harm from Protective
Conditions ............................... 321
G. Conclusion ............................... 322
V. LABOR PROTECTIVE CONDITIONS ................. 323
VI. PROCEDURAL ISSUES ........................... 324
A. Must Mr. Mellon Join the Merger
Application? ............................. 324
B. The Expedited Procedural Schedule ........ 326
C. ICC Jurisdiction over Holding Company
Securities ............................... 329
D. Failure to Apply for Control of the
Vermont & Massachusetts Co................ 330
E. Premature Control of the Boston &
Maine .................................... 330
VII. CONCLUSION .................................. 331
§ 294(d).
Page 300
[229 U.S.App.D.C. 22] WALD, Circuit Judge:
We review here a decision of the Interstate Commerce Commission (ICC or Commission) approving unconditionally the merger of the Maine Central Railroad with the Boston & Maine Railroad. Guilford Transportation Industries--Control--Boston & Maine Corp., 366 I.C.C. 292 (1982) [hereinafter cited as Boston & Maine Merger ]. 1 Petitioners, competitors of the Boston & Maine, asked the ICC to protect them from competitive harm due to the merger by imposing various conditions on the merged entity (including sale of track, trackage rights, and preservation of swift traffic interchanges). The ICC declined to impose any protective conditions, finding that none of the petitioners had shown that the conditions it requested were needed to prevent the loss of "essential services."
Petitioners appeal to this court, claiming that the ICC's "essential services" test for imposing protective conditions is too strict and does not comply with the statutory directive that the ICC consider the effect of the merger on "adequacy of transportation to the public." 49 U.S.C. § 11,344(b)(1). Petitioners also argue that some of the ICC's findings are not supported by substantial evidence and that the ICC committed a variety of procedural errors. We reject the procedural challenges as either without merit or not constituting prejudicial error. We conclude, however, that the ICC's essential services test, as applied to petitioner Lamoille Valley Railroad, does not comport with the statute. We also find flaws in the agency's reasoning with regard to protective conditions requested by petitioner Canadian National Railway. We therefore affirm in part, reverse in part, and remand to the ICC to determine whether protective conditions are needed to protect the public's right to adequate transportation.
I. STATUTORY AND FACTUAL BACKGROUND
A. The Statutory Scheme
1. Specific Provisions Governing Railroad Mergers
Interstate Commerce Act, 49 U.S.C. § 11,343(a), requires the ICC to review all railroad mergers. 2 The ICC must approve any merger that is "consistent with the public interest," but can impose conditions on the merger when needed to advance the public interest:
The Commission shall approve and authorize a [merger] when it finds the transaction is consistent with the public interest. The Commission may impose conditions governing the transaction.
Page 301
[229 U.S.App.D.C. 23] Id. § 11,344(c). 3 In making the "public interest" determination for a proposed merger of two "class I" railroads, 4 the ICC must consider five specific (but not exclusive) factors:
(A) the effect of the proposed transaction on the adequacy of transportation to the public.
(B) the effect on the public interest of including, or failing to include, other rail carriers in the area involved in the proposed transaction.
(C) the total fixed charges that result from the proposed transaction.
(D) the interest of carrier employees affected by the proposed transaction.
(E) whether the proposed transaction would have an adverse effect on competition among rail carriers in the affected region.
Id. § 11,344(b)(1).
2. Congressional Policy on Railroad Mergers
These statutory provisions must be interpreted in light of the longstanding congressional policy favoring railroad mergers that increase efficiency and quality of service. Since 1920, the ICC has operated under "the congressional policy of encouraging consolidation of the Nation's railroads." Penn-Central Merger & N & W Inclusion Cases, 389 U.S. 486, 492, 88 S.Ct. 602, 605, 19 L.Ed.2d 723 (1968). The Railroad Revitalization and Regulatory Reform Act of 1976 ("4R Act"), Pub.L. No. 94-210, 90 Stat. 31 (current version in scattered sections of 45, 49 U.S.C.), reinforces that policy.
The 4R Act did not alter the substantive "public interest" standard for ICC approval of railroad mergers, but did provide new, expedited procedures for ICC review of merger proposals as an alternative to the existing procedures. 5 It...
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