Missouri-Kansas-Texas R. Co. v. U.S.
| Decision Date | 24 November 1980 |
| Docket Number | Nos. 80-1523,MISSOURI-KANSAS-TEXAS,80-1563 and 80-1692,s. 80-1523 |
| Citation | 632 F.2d 392 |
| Parties | RAILROAD COMPANY, Petitioner, v. UNITED STATES of America and Interstate Commerce Commission, Respondent. RAILWAY LABOR EXECUTIVES' ASSOCIATION, Petitioner, v. UNITED STATES of America and Interstate Commerce Commission, Respondents. PEOPLE OF the STATE OF ILLINOIS, Illinois Commerce Commission, Patrick W. Simmons and M. S. Stuckey, Petitioners, v. INTERSTATE COMMERCE COMMISSION and United States of America, Respondents. |
| Court | U.S. Court of Appeals — Fifth Circuit |
William A. Thie, Dallas, Tex., Harry G. Silleck, Jr., New York City, Gerard M. Dillon, New Orleans, La., for Missouri-Kansas-Texas R. Co.
C. H. Peterson, Minneapolis, Minn., for Soo Line R.R. Co.
William J. Scott, Atty. Gen., Hercules F. Bolos, James E. Weging, Chicago, Ill., Gordon P. MacDougall, Washington, D.C., for People of the State of Illinois, et al.
Robert L. Redfearn, Brian, Simon, Peragine, Smith & Redfearn, New Orleans, La., Arthur J. Cerra, Stinson, Mag & Fizzell, Kansas City, Mo., for Board of Trade of Kansas City, Mo., Inc.
Benjamin Civiletti, Atty. Gen., Barry Grossman, James H. Laskey, Dept. of Justice, Washington, D.C., for United States of America.
Henri F. Rush, Richard A. Allen, Denise O'Brien, Louis E. Gitomer, Lawrence H. Richmond, I.C.C., Washington, D.C., for Interstate Commerce Commission.
Martin M. Lucente, Christian L. Campbell, Sidley & Austin, Chicago, Ill., John F. Whitney, Paul M. Haygood, New Orleans, La., G. Paul Moates, Washington, D.C., for Burlington Northern & St. Louis-San Francisco.
Highsaw, Mahoney & Friedman, P. C., John O'Brien Clarke, Jr., Washington, D.C., Barker, Boudreaux, Lang, Gardner & Foley, New Orleans, La., for RLEA.
Petitions for Review of an Order of the Interstate Commerce Commission.
Before THORNBERRY, GEE and REAVLEY, Circuit Judges.
In late 1977 Burlington Northern, Inc. (BN) and the St. Louis-San Francisco Railway Company (Frisco) applied to the Interstate Commerce Commission (ICC or the Commission) for authorization to merge pursuant to 49 U.S.C. §§ 11343 and 11344. 1 The Commission authorized the merger in a decision rendered in March 1980. No party to the proceeding sought administrative review. Instead, several of the protesting parties filed petitions in this court for judicial review of the Commission's decision, 2 and BN and Frisco intervened as respondents. The appellants challenge the Commission's standard of the "public interest," the existence of substantial evidence supporting certain projections, two new policy announcements, and a statutory interpretation regarding the scope of required employee protection. We have stayed the merger pending appeal, but we now affirm the Commission's decision.
The Interstate Commerce Act (ICA or the Act) requires that the merger of railroads subject to the jurisdiction of the ICC may be accomplished only with the approval and authorization of the Commission. 49 U.S.C. § 11343. The Act's single and essential standard of approval is that the Commission find the merger to be "consistent with the public interest." 49 U.S.C. § 11344(c). The Commission is required to consider at least the following factors in a merger approval proceeding:
(1) the effect of the proposed transaction on the adequacy of transportation to the public.
(2) the effect on the public interest of including, or failing to include, other rail carriers in the area involved in the proposed transaction.
(3) the total fixed charges that result from the proposed transaction.
(4) the interest of carrier employees affected by the proposed transaction.
The Commission must also consider as an element of "the public interest" the anticompetitive effects of a proposed merger, because § 11343 3 of the Act exempts transactions approved by the Commission from the antitrust laws. United States v. ICC, 396 U.S. 491, 504, 90 S.Ct. 708, 714, 24 L.Ed.2d 700 (1970). When the Commission finds that a merger meets the "public interest" standard, it must approve the transaction. The Commission may, however, impose any conditions upon the merger that it wishes. 49 U.S.C. § 11344(c). These conditions may effectively re-distribute the merger's benefits to bring it within the public interest or enhance the degree to which the public interest is served, consistent with the relevant requirements of the Act.
The flexible procedure and standard that Congress provided in §§ 11343 and 11344 of the Act allow the Commission to adapt its policies and practices to the ever-changing transportation needs of the public. But Congress has also enacted broad policy guidelines for the Commission, which it is required to consider in its task of identifying the public interest. McLean Trucking Co. v. United States, 321 U.S. 67, 82, 64 S.Ct. 370, 378, 88 L.Ed. 544 (1944). One is the national transportation policy, which says, in part:
(I)t is the policy of the United States Government to provide for the impartial regulation of the modes of transportation subject to this subtitle, and in regulating those modes-
(1) to recognize and preserve the inherent advantage of each mode of transportation;
(2) to promote safe, adequate, economical, and efficient transportation;
(3) to encourage sound economic conditions in transportation, including sound economic conditions among carriers;
(4) to encourage the establishment and maintenance of reasonable rates for transportation without unreasonable discrimination or unfair or destructive competitive practices;
(5) to cooperate with each State and the officials of each State on transportation matters; and
(6) to encourage fair wages and working conditions in the transportation industry.
49 U.S.C. § 10101. Congress provided another policy guideline in the Railroad Revitalization and Regulatory Reform Act of 1976 (4R Act), in which Congress declared its purpose to encourage "efforts to restructure the (railway system of the United States) on a more economically justified basis " 45 U.S.C. § 801. The legislative history of the 4R Act specifically states that it is "intended to encourage mergers, consolidations, and joint use of facilities that tend to rationalize and improve the Nation's rail system." S.Rep. No. 94-499, 94th Cong., 1st Sess. 20 (1975), Section 101(a)(2) and 101(b)(2), reprinted in [1976] U.S. Code Cong. & Admin. News pp. 14, 34. Within these statutory standards and policies set forth by Congress, it is the unique task of the Commission to identify the specific factors, and their proper balance, that best serve the public interest as it changes through the years. 4
Because the parties before the Commission and before us are numerous, we will briefly identify them and the roles they play.
Burlington Northern is a diversified transportation and natural resources company that is the largest railroad system in the United States in terms of miles, and the second largest in terms of transportation revenues. The principal lines of BN's 25,000 mile system extend east from Seattle and Portland to Montana, where two branches continue to Chicago. Through two subsidiaries, BN also serves Denver, Dallas-Fort Worth, and Galveston. Since 1970 BN has compiled a good traffic and revenue growth record. Net railway revenues in 1976 5 were about $72.6 million.
Frisco, the railroad to be absorbed into BN, has about one-fifth the track mileage of BN. Operating mainly as a link between other carriers, Frisco provides service from St. Louis and Kansas City to Wichita, Memphis Birmingham, and Pensacola. It also runs from Springfield, Missouri through Kansas and Oklahoma to Dallas-Fort Worth. Frisco connects with BN subsidiaries at four points in Texas: Dallas, Fort Worth, Irving, and Quanah. Frisco's net income in 1976 was $12 million.
Because BN and Frisco are not competitors on parallel routes, their proposed merger is of an "end-to-end" form, greatly extending for both railroads the markets they can reach, for which they may then offer more efficient service and lower "single-line" rates. Other operating efficiencies and innovations made possible by the merger would enable the merged railroad to achieve net revenue gains of about $33 million a year, including traffic diversions from competitors of about $16.8 million.
The railroad that will probably face the greatest challenge in dealing with increased competition from the merged BN-Frisco is the Missouri-Kansas-Texas Railroad Company (Katy). Katy serves Missouri, Kansas, Oklahoma, and Texas, with its main lines running south from Kansas City and St. Louis through Dallas-Fort Worth to San Antonio and Houston. Katy's traffic volume and operations have changed little since the 1950's, and its net income of $2.4 million in 1978 was only the second significant income for the railroad in nearly 75 years. Katy acknowledges, however, that it has begun to "turn the corner" as a result of improving business in its territory and a substantial rehabilitation of its facilities aided by $38 million in federal funds.
The Soo Line Railroad Company (Soo) operates 4,600 miles of railroad in Montana, North and South Dakota, Minnesota, Michigan, Wisconsin, and Illinois. These routes place Soo in direct competition with BN. Soo is an economically strong carrier, and had a net income of almost $19 million in 1976.
The non-carrier appellants are as follows: (1) the Railway Labor Executives' Association (RLEA), a voluntary, unincorporated association of the chief executive officers of most of the nation's rail labor organizations; (2) the Kansas City Board of Trade (KCBOT); and (3) a group of joint intervenors representing Illinois interests (Illinois parties). 6
BN and Frisco filed their...
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