Long Island Railroad v. United States, 73-C-1434.

• Decision Date: 18 October 1974
• Docket Number: No. 73-C-1434.,73-C-1434.
• Citation: 388 F. Supp. 943
• Parties: LONG ISLAND RAILROAD, Plaintiff, v. UNITED STATES of America, and Interstate Commerce Commission et al., Defendants.
• Court: U.S. District Court — Eastern District of New York

388 F. Supp. 943

LONG ISLAND RAILROAD, Plaintiff, v. UNITED STATES of America, and Interstate Commerce Commission et al., Defendants.

No. 73-C-1434.

United States District Court, E. D. New York.

October 18, 1974.

Walter J. Myskowski, Washington D. C. (George M. Onken and Richard H. Stokes, Jamaica, N. Y., on the brief), for plaintiff.

Robert B. Nicholson, Dept. of Justice, Washington, D. C. (Thomas E. Kauper, Asst. Atty. Gen., and Howard E. Shapiro, Dept. of Justice, Washington, D. C., on the brief), for defendant United States of America.

Hanford O'Hara, Interstate Commerce Commission, Washington, D. C. (Fritz R. Kahn, Gen. Counsel, on the brief), for defendant Interstate Commerce Commission.

Richard A. Mehler, Washington, D. C. (Edward A. Kaier, Philadelphia, Pa., and Henry W. Herbert, New York City, on the brief), for intervening defendants Eastern District Railroads.

John J. Burchell, Omaha, Neb. (C. H. Berg, St. Paul, Minn., C. W. Burkett, San Francisco, Cal., H. L. DeLung, Jr., Chicago, Ill., J. D. Feeney, Chicago, Ill., on the brief), for intervening defendants Western District Railroads.

William H. Teasley, Washington, D. C. (James L. Tapley, Washington, D. C., and Davis, Polk & Wardwell, New York City, on the brief), for intervening defendant Southern Railway Co.

Before MOORE, Circuit Judge, and NEAHER and BARTELS, District Judges.

MOORE, Circuit Judge:

This is an action brought by the plaintiff Long Island Railroad ("LIRR") to review, set aside and enjoin the enforcement of orders of the Interstate Commerce Commission (the "Commission"), dated September 13, 1973, and September 21, 1973, entitled Ex Parte No. 299 (Sub-No. 1), Increases in Freight Rates and Charges of the Long Island Rail Road Company to Offset Retirement Tax Increases-1973. The jurisdiction of the district court is founded on 28 U.S.C. § 1336, and a three-judge panel was convened in accordance with 28 U.S.C. § 2325.

In the Railroad Retirement Amendments of 1973, P.L. 93-69, 87 Stat. 162, the Congress, inter alia, provided for increased taxes on railroads to be contributed toward additional retirement benefits for railroad employees. Title II of P.L. 93-69, the Railroad Rate Adjustment Act of 1973, amended section 15a of the Interstate Commerce Act (49 U. S.C. § 15a) to ensure that each railroad would be able to offset the increased retirement taxes by means of higher rates. Congress established a three-step procedure by which the rate adjustments would be implemented.¹ Section 15a(4) (a) directed the Commission to establish rules stating the requirements for railroads' petitions for adjustment of interstate rates based on increases in the railroad retirement taxes. Section 15a(4)(b) then directed the Commission to permit interim increases "in the general level of the interstate rates" within thirty days of the filing of a proper petition. Finally, section 15a(4)(c) provided for hearings to commence within 60 additional days for the purpose of making final rate determinations. In the event that the interim rates exceeded the rates finally approved, section 15a(4)(c) authorized the Commission to order refunds of the excess, plus a reasonable rate of interest.

On July 30, 1973, after a rule-making proceeding, the Commission issued rules setting forth procedures to be followed in the filing of petitions for increased rates. Ex Parte No. 298, Requirements and Procedures Relating to Railroad Rate Adjustment Act of 1973, 49 C.F.R. Part 1107. On August 15, 1973, the nation's railroads other than the LIRR filed a joint petition seeking an interim rate increase in their interstate freight rates of 2.0 percent, effective October 1, 1973, and a further increase to 2.7 percent on January 1, 1974. The LIRR filed an individual petition on August 24, 1973, requesting an interim terminal surcharge of 3.5 percent, effective October 1, 1973, to be increased to 5.5 percent on January 1, 1974.

The decision to proceed individually for a terminal surcharge rather than join the petition of the other railroads was prompted by circumstances peculiar to the LIRR. The LIRR estimated that its additional costs in 1974, resulting from the retirement tax increases would be in excess of $5,400,000.² But it projected freight revenues in the same period to be less than $10,000,000.³ Thus, the LIRR felt that it could not join the petition of the other railroads for a rate increase that would be only 2.7 percent in 1974, since this would have yielded additional revenues in the neighborhood of $270,000, or only about 5 percent of increased retirement tax costs. In contrast, the terminal surcharge⁴ would generate over $3,600,000 in 1974,⁵ with the remaining differential to be recovered through better productivity and increased traffic.⁶

On September 13, 1973, the Commission issued a report and order permitting the establishment of the interim freight rate increases of the railroads other than the LIRR⁷ and rejecting without prejudice the filing of the LIRR's terminal surcharge tariff. On September 18, the LIRR filed a petition for reconsideration, which was denied by the Commission in an order dated September 21, 1973. Three days later the LIRR commenced this action, and on September 27, 1973, Judge Bartels issued a Temporary Restraining Order (TRO) restraining the Commission

from enforcing or otherwise making effective its orders of September 13, 1973 and September 21, 1973, in Ex Parte 299 (Sub-No. 1) and from refusing to accept for filing the aforementioned proposed tariff of plaintiff to become effective October 8, 1973.

In addition, Judge Bartels ordered that sums collected pursuant to the terminal surcharge be held in a separate trust account, subject to refund at six percent interest, until further order of the court.

Pursuant to the TRO, the LIRR's terminal surcharge was filed with the Commission and became effective October 8, 1973. Ten days thereafter, on October 18, this three-judge court heard arguments by attorneys for all parties, including the intervenors, namely, the Eastern District Railroads, the Western District Railroads, and the Southern Railway. With the exception of the LIRR, the parties urged this court to defer decision until after the Commission's order with respect to a final rate determination. However, the Commission's decision has not been forthcoming.

Section 15a(4)(b), pertaining to interim rate increases to offset retirement tax expenses, provides:

(b) Notwithstanding any other provision of law, the Commission shall, within thirty days of the filing of a verified petition in accordance with rules promulgated under subparagraph (a) of this paragraph, by any carrier or group of carriers subject to this chapter, permit the establishment of increases in the general level of the interstate rates of said carrier or carriers in an amount approximating that needed to offset increases in expenses theretofore experienced or demonstrably certain to occur commencing on or before the effective date of the increased rates, as a result of any increases in taxes under the Railroad Retirement Tax Act, as amended, occurring on or before January 1, 1975, or as a result of the enactment of the Railroad Retirement Amendments of 1973. Such increases in rates may be made effective on not more than thirty nor less than ten days' notice to the public, notwithstanding any outstanding orders of the Commission. To the extent necessary to effectuate their establishment, rates so increased shall be relieved from the provisions of section 4 of this title and may be published in tariff supplements of the kind ordinarily authorized in general increase proceedings.

The rejection of the Long Island's terminal surcharge was based upon the Commission's conclusion that section 15a(4)(b) does not permit such a tariff.⁸ The Commission reasoned as follows:

Notwithstanding the petitioner's position and arguments, paragraph (4)(b) of the amendment to section 15a of the act requires that the Commission shall "permit the establishment of increases in the general level of the interstate rates" of a carrier or carriers to offset increases in costs resulting from increases in retirement taxes. Petitioner's proposal of a terminal surcharge, which is not concurred in by other carriers participating in joint rates with the petitioner, is not a tariff supplement of the kind "ordinarily authorized in general increase proceedings," and therefore is not permitted by the statute empowering us to permit "increases in the general level" of rates to effect increased retirement taxes.

Ex Parte 299 (Sub-No. 1) at 8.

We are of the opinion that the Commission has misconstrued section 15a(4)(b) and that this provision does not prohibit a terminal surcharge of the type filed by the LIRR. In this conclusion we are apparently joined by Commissioner Hardin, who wrote a...