McCarty Farms, Inc. v. Surface Transp. Bd.
| Decision Date | 20 October 1998 |
| Docket Number | 98-1304,Nos. 97-1632,s. 97-1632 |
| Citation | 158 F.3d 1294 |
| Parties | McCARTY FARMS, INC., et al., Petitioners, v. SURFACE TRANSPORTATION BOARD and United States of America, Respondents. Burlington Northern and Santa Fe Railway Company, Intervenor. |
| Court | U.S. Court of Appeals — District of Columbia Circuit |
On Petitions for Review of an Order of the Surface Transportation Board.
Tim L. O'Neill argued the cause for petitioners, with whom Timothy R. Engler was on the briefs.
Thomas J. Stilling, Attorney, Surface Transportation Board, argued the cause for respondents, with whom Joel I. Klein, Assistant Attorney General, United States Department of Justice, Robert B. Nicholson, and John P. Fonte, Attorneys, Henri F. Rush, General Counsel, Surface Transportation Board, and Ellen D. Hanson, Deputy General Counsel, were on the brief.
Samuel M. Sipe, Jr. argued the cause for intervenor Burlington Northern and Santa Fe Railway Company, with whom Carolyn Doozan Clayton, Richard E. Weicher and Michael E. Roper were on the brief.
Before: SENTELLE, HENDERSON, and GARLAND, Circuit Judges.
Petitioners McCarty Farms, Inc., et al. (collectively "McCarty Farms") and the State of Montana Department of Commerce, et al. (collectively "State of Montana") challenge a decision of the Surface Transportation Board ("STB" or "Board") in which the STB ruled that petitioners had failed to demonstrate that the rates charged by Burlington Northern Railroad ("BN") to transport wheat and barley from Montana to the Pacific Northwest were unreasonable. The STB's decision covered three sets of claims: (1) single-car wheat shipments moving before September 12, 1980 (Docket No. 37809), (2) multiple-car and trainload shipments of wheat and barley (Docket No. 37815S), and (3) single-car shipments of barley and single-car wheat shipments moving after September 12, 1980 (Docket No. 37809 (Sub-No. 1)). We conclude that we have jurisdiction over the second and third categories of claims, but not the first. We further conclude that, in rendering its decision, the Board did nothing that was arbitrary, capricious, or contrary to law. As a result, we affirm the Board's ruling with respect to those claims over which we have jurisdiction.
This case has a long and complex history. Indeed, these proceedings have been winding their way through the courts in one form or another for approximately 18 years. As Judge Williams noted five years ago when this case was last before this court: "McCarty Farms started this dispute's crawl through the legal system in 1980 by filing a class action on behalf of Montana farmers under 49 U.S.C. § 11705(c)(1) and 28 U.S.C. § 1337 in the U.S. district court for the District of Montana." Burlington Northern R.R. v. ICC, 985 F.2d 589, 592 (D.C.Cir.1993). In their Montana suit, McCarty Farms and the other class representatives alleged that BN was charging unreasonable rates for transporting single cars of wheat for the two-year period ending September 12, 1980, in violation of 49 U.S.C. § 10701(a) of the Interstate Commerce Act. See McCarty Farms, Inc. v. Burlington Northern, Inc., 787 F.Supp. 937 (D.Mont.1992).
Under the doctrine of primary jurisdiction, the district court referred the action to the Interstate Commerce Commission ("ICC" or "Commission") to determine the rate reasonableness issues. On March 27, 1981, McCarty Farms filed the referred complaint with the ICC (Docket No. 37809), in which it challenged not only BN's single-car wheat rates, but also its single-car rates for barley. McCarty Farms sought a prescription on future rates and did not limit its request for reparations to the two-year period specified in its complaint filed with the district court. McCarty Farms' Petition for Declaratory Order and Complaint at 6 (March 27, 1981). In an unpublished decision served on December 14, 1981, an Administrative Law Judge found that (1) BN had market dominance over wheat and barley traffic, (2) BN's present and past rates were unreasonable insofar as they exceeded 200% of the variable cost of service, and (3) a revenue-to-variable cost ratio of 200% was to be the maximum reasonable rate for the transportation of wheat and barley.
McCarty Farms was not alone, however, in challenging the reasonableness of BN's rates. In a separate proceeding filed with the ICC (Docket No. 37815S), the State of Montana challenged BN's rates for multiple-car and trainload shipments of wheat and barley and sought prescription for reasonable rates for the future. In an unpublished decision served on July 30, 1982, the ICC reopened the case filed by McCarty Farms (Docket No. 37809). The ICC instituted a separate proceeding regarding the reasonableness of barley rates (Docket No. 37809 (Sub-No. 1)) because it did not believe they were part of the district court's referral. The ICC consolidated the proceedings filed by McCarty Farms and those filed by the State of Montana.
The three consolidated cases before the ICC were held in abeyance indefinitely. In May 1984, McCarty Farms and the other class representatives filed a complaint in the district court, seeking a writ of mandamus. In response, the ICC reopened the proceedings on September 11, 1984. In a decision served on December 28, 1984, the ICC ruled that, to the extent market dominance issues had not been developed, additional evidence concerning market dominance would be accepted. After extensive discovery, on May 22, 1987, the ICC ruled that BN was market dominant over the subject wheat and barley shipments moving from Montana to the Pacific Northwest. McCarty Farms v. Burlington Northern, Inc., 3 I.C.C.2d 822 (1987).
Having determined that BN was market dominant for the movements at issue, the ICC turned to the rate reasonableness analysis. On February 5, 1988, the ICC decided that the Revenue-to-Variable Cost ("R/VC") standard was an appropriate means for testing the challenged rates and found that the rates charged by BN were unreasonable. The ICC directed BN to (1) compute the reparations due, (2) modify its existing rate structure, and (3) present a proposal of compliance to the ICC. On February 21, 1989, the ICC issued an unpublished decision that corrected several costing problems in the R/VC test and recomputed the ratios by which reparations were to be calculated. The ICC directed BN to submit a quantification of reparations due the class based on the corrected procedure and a proposal for modifying its existing rate structure so that BN would comply with the maximum reasonableness standard in the future.
On March 20, 1991, the ICC affirmed its earlier decisions in which it concluded that BN was market dominant over the movement of wheat and barley and that BN's rates for this traffic were unreasonable. The ICC calculated the amount of reparations owed by BN through 1986 to be $9,685,918 plus interest, and imposed on BN a future rate prescription procedure. McCarty Farms v. Burlington Northern, Inc., 7 I.C.C.2d 1026 (1991). On July 5, 1991, BN filed a petition for clarification of the March 20, 1991 decision, asking the ICC to modify the calculations. In an unpublished decision served on November 26, 1991, the ICC entered an order which affirmed the amount of reparations and interest due through July 1, 1991. However, the ICC sua sponte vacated the rate prescription order contained in its March 20, 1991 decision.
McCarty Farms, the State of Montana, and BN then sought review of the ICC decisions by this court. In an opinion issued in 1993, we questioned the theoretical basis of the R/VC test and remanded the proceedings to the ICC for the purpose of reconsidering whether it was appropriate to use the R/VC test instead of the Constrained Market Pricing ("CMP") test to evaluate the reasonableness of the challenged rates. Burlington Northern R.R. v. ICC, 985 F.2d 589 (D.C.Cir.1993).
In an unpublished opinion served on March 26, 1993, the ICC directed the class representatives and the State of Montana to advise the Commission whether (1) they wanted to proceed using the CMP test, (2) the proceedings should be held in abeyance pending the development of a suitable reasonableness methodology, or (3) there was some other course of action that was appropriate. On April 23, 1993, McCarty Farms notified the ICC of its election to proceed using the CMP test. On May 10, 1993, BN notified the ICC of its agreement to use the CMP test in the proceedings. Effective January 1, 1996, the ICC Termination Act of 1995, Pub.L. No. 104-88, 109 Stat. 803, abolished the ICC and transferred certain functions, including the disposition of these proceedings, to the STB. After the transfer, the STB ruled that McCarty Farms had failed to show (under the CMP test) that the challenged rates were unreasonably high, and discontinued the proceedings. McCarty Farms, Inc. v. Burlington Northern, Inc., Nos. 37815S, 37809 & 37809 (Sub-No. 1) (Aug. 20, 1997) (the "1997 Decision").
Instead of petitioning the STB to correct alleged computational errors and to reconsider issues they contended were incorrectly decided, McCarty Farms and the State of Montana filed their petition for review with this court on October 14, 1997. McCarty Farms also filed an appeal with the U.S. District Court for the District of Montana, which was stayed pending the outcome of this appeal. After examining McCarty Farms' brief to this court, the STB agreed that there were certain errors in its 1997 Decision and issued a supplemental decision to correct those determinations it agreed were erroneous. McCarty Farms, Inc. v. Burlington Northern, Inc., Nos. 37815S, 37809 & 37809 (Sub-No. 1) (May 11, 1998) (the "1998 Decision"). However, even after it made these corrections, the STB still concluded that BN's rates were reasonable.
McCarty Farms challenges this court's jurisdiction to review several claims...
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