Midtec Paper Corp. v. U.S., 87-1032
| Decision Date | 16 September 1988 |
| Docket Number | No. 87-1032,87-1032 |
| Citation | 857 F.2d 1487 |
| Parties | , 273 U.S.App.D.C. 49, 57 USLW 2212 MIDTEC PAPER CORPORATION, Petitioner, v. UNITED STATES of America and Interstate Commerce Commission, Respondents, Chicago and North Western Transportation Company, American Paper Institute, Inc., Chemical Manufacturers Association, National Industrial Transportation League, Allied Corporation, et al., and Florida Phosphate Council and Growmark, Inc., Intervenors. |
| Court | U.S. Court of Appeals — District of Columbia Circuit |
Edward D. Greenberg, with whom David P. Street and Mark S. Kahan, Washington, D.C., were on the brief, for petitioner. Mark T. Priesing, Washington, D.C., also entered an appearance for petitioner.
Louis Mackall, Attorney, Interstate Commerce Com'n, with whom Robert S. Burk, General Counsel, Interstate Commerce Com'n, Ellen D. Hanson, Associate General Counsel, Interstate Commerce Commission, Catherine G. O'Sullivan and John P. Fonte, Attorneys, Dept. of Justice, Washington, D.C., were on the brief, for respondents.
Christopher A. Mills, Chicago, Ill., for intervenor Chicago and North Western Transp. Co.
R. Eden Martin, Chicago, Ill., David M. Levy, Washington, D.C., Donald H. Smith, Paul A. Cunningham, Robert M. Jenkins, III, David A. Hirsh, J. Thomas Tidd, Washington, D.C., Kenneth P. Kolson, Vienna, Va., and Constance L. Abrams, Philadelphia, Pa., were on the joint brief for amici curiae, The Ass'n of American Railroads and Consolidated Rail Corp., urging affirmance.
Frederic L. Wood, Nicholas J. DiMichael, John L. Oberdorfer, Scott N. Stone, David F. Zoll, Washington, D.C., Richard S.M. Emrich, Chicago, Ill., William L. Slover, Washington, D.C., John A. Vuono, Pittsburgh, Pa., C. Michael Loftus and Donald G. Avery, Washington, D.C., were on the joint brief for intervenors and amicus The National Industrial Transp. League, et al. John F. Donelan and John M. Cleary, Washington, D.C., also entered appearances for intervenors American Paper Institute, Inc. and National Industrial Transp. League.
Before BUCKLEY and D.H. GINSBURG, Circuit Judges, and GARTH, * Senior Circuit Judge.
Opinion for the Court filed by Circuit Judge D.H. GINSBURG.
In this case we review a decision and order of the Interstate Commerce Commission in which the agency applied its newly- adopted rules governing "competitive access" in the railroad industry. Midtec Paper Corporation and the Soo Line Railroad filed a joint complaint alleging that the only railroad with rail trackage directly serving Midtec's facilities, the Chicago and North Western Transportation Company (C & NW), enjoyed a monopoly in the market for Midtec's rail transportation needs and exploited its market power at Midtec's expense. As a "captive shipper," Midtec, supported by the Soo, requested that the Commission order the C & NW to give the Soo direct access to Midtec's facilities by providing it with "reciprocal switching" service and with "terminal trackage" rights over the C & NW's tracks. These remedies were necessary, they argued, to promote the public interest and the competition policies adopted by Congress in the Staggers Rail Act, Pub.L. No. 96-448, 94 Stat. 1895 (1980). The Commission was of a different view, and dismissed the complaint. We conclude that the agency's decision is consistent with its statutory mandate and supported by substantial evidence. We therefore deny Midtec's petition for review.
Kimberly, Wisconsin, is in the Fox River Valley, a major papermaking area. Midtec acquired a paper mill there and invested nearly $130 million in it over a period of years. Like the other paper mills in the valley, Midtec relies substantially on rail service to receive raw materials and to ship paper products.
Two major carriers, the C & NW and the Soo, serve the paper manufacturers in the Fox River Valley. The main lines of these two railroads intersect at Appleton, Wisconsin; they exchange traffic there at "interchange" facilities located approximately eight miles from Midtec's mill. The mill itself is on the C & NW's Kaukauna branch line, which connects it to the Appleton interchange. Thus, in order to share in Midtec's traffic, any rail carrier other than the C & NW must enter into some cooperative arrangement with the C & NW.
There are three general types of arrangement by which a railroad might be able to participate with the C & NW in the carriage of Midtec's rail shipments. We describe the arrangements and the legal standards governing their imposition by the ICC before going on with the facts of this case. First, the C & NW and another railroad (or railroads) could agree to establish "through routes," whereby Midtec's traffic would be carried between its mill and the traffic's origin or destination in part by each of the participating carriers. Under this arrangement, railcars carrying Midtec's traffic would be transferred from one carrier to another at an interchange facility like that maintained by the Soo and the C & NW at Appleton. The railroads would quote a "joint rate" to Midtec, the revenues from which would be apportioned between them pursuant to an agreed "divisions" formula. If the carriers could not agree between themselves, the Commission could, if "it considers it desirable in the public interest," 49 U.S.C. Sec. 10705(a)(1) (1982), 1 prescribe through routes, joint rates, and division formulae.
Second, another railroad could operate its railcars over the C & NW's Kaukauna branch line, and thus provide "single line" rail service to Midtec's mill at Kimberly, i.e., by publishing rates to or from the point it does not serve over its own tracks. The Commission is authorized by section 223 of the Staggers Act to require a carrier to provide such joint use of terminal area facilities, 2 "including main-line tracks for a reasonable distance outside of a terminal [to] another rail carrier if the Commission finds that use to be practicable and in the public interest without substantially impairing the ability of the rail carrier owning the facilities or entitled to use the facilities to handle its own business." 49 U.S.C. Sec. 11103(a) (1982). Again, if the carriers cannot agree on terms for so-called terminal trackage rights, the Commission may prescribe them. Historically, the Commission has required a party requesting terminal trackage rights to satisfy the "practicable and in the public interest" criteria of this section by demonstrating "some actual necessity or compelling reason" why such an arrangement should be ordered; this requires a showing of "more than a mere desire on the part of shippers or other interested parties for something that would be convenient or desirable to them." Jamestown Chamber of Commerce v. Jamestown, W. & N.R. Co., 195 I.C.C. 289, 291 (1933).
Finally, a carrier could obtain "reciprocal switching" service, under which the C & NW would, for a fee, transport that carrier's railcars between Midtec's mill and an interchange facility, and the carrier would publish single line rates to and from the mill. Pursuant to section 223 of the Staggers Act, the Commission may require rail carriers to enter into such agreements, where it finds them to be "practicable and in the public interest, or where such agreements are necessary to provide competitive rail service." 49 U.S.C. Sec. 11103(c)(1) (1982). Again, if the carriers cannot agree on terms, the Commission may prescribe them.
Initially, the Commission interpreted the "practicable and in the public interest" criteria of sections 11103(a) and 11103(c)(1), governing terminal trackage rights and reciprocal switching respectively, to be substantially identical. See Delaware & H. Ry. Co. v. Consolidated R. Co., 367 I.C.C. 718, 720-21 (1983) (Delaware & Hudson ). 3 With respect to reciprocal switching, the Commission initially interpreted the alternative criterion, that such an arrangement be "necessary to provide competitive rail service," to require "a narrow[ ] (intramodal) focus ... [on] providing 'competitive rail service'...." Id. at 728. It discounted evidence concerning the reasonableness of the rates charged by the carrier over which reciprocal switching was requested because, in the Commission's view, such evidence "cannot determine the need for additional rail competition" to hold down rail rates. It explained that
rail carriers have been given a great deal of flexibility to adjust their rates under the Staggers Act. We are convinced that Congress's aim in creating section 11103(c) was to provide a competitive counterbalance to this broadened rate freedom.
We return now to the facts of the case before us. In 1981, when the market for paper products was in a slump, Midtec approached the C & NW, described its transportation needs and the market, and "asked for help" from the railroad. When it did not receive a satisfactory response from the C & NW, Midtec approached the Soo, and together they urged the C & NW to negotiate with the Soo and to provide it with "operating rights" over the C & NW's Kaukauna branch line. The Soo warned the C & NW "that if the requests ... are rejected the Soo and Midtec will jointly petition the Interstate Commerce Commission for direct authority to serve Midtec pursuant to the provisions of Sec. 11103(a) [] and, alternatively, [of] Sec. 11103(c) [governing reciprocal switching]...." The C & NW, which found the proposal "most unusual" and "unacceptable," refused to enter into negotiations. Midtec and the Soo then made good on their threat by filing a joint complaint with the ICC.
Before the Commission, Midtec and the Soo argued that because it has access to rail service only via the C & NW's Kaukauna branch line, Midtec is a "captive shipper," i.e., that it is deprived of the benefits of competitive rail service, and therefore disadvantaged relative to competing...
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