Missouri Public Service Com'n v. I.C.C.

• Decision Date: 07 June 1985
• Docket Number: No. 84-1036,84-1036
• Citation: 763 F.2d 1014
• Parties: MISSOURI PUBLIC SERVICE COMMISSION, Petitioner, v. INTERSTATE COMMERCE COMMISSION, Respondent. Jefferson Lines, Inc., a Minnesota Corporation, Intervenor for Respondent.
• Court: U.S. Court of Appeals — Eighth Circuit

Page 1014

763 F.2d 1014

MISSOURI PUBLIC SERVICE COMMISSION, Petitioner, v. INTERSTATE COMMERCE COMMISSION, Respondent Jefferson Lines, Inc., a Minnesota Corporation, Intervenor for Respondent.

No. 84-1036.

United States Court of Appeals Eighth Circuit.

Submitted Nov. 12, 1984.

Decided June 7, 1985.

Eric Kendall Banks, St. Louis, Mo., for petitioner.

Evelyn Kitay, I.C.C., Washington, D.C., for respondent.

Before McMILLIAN, ARNOLD and BOWMAN, Circuit Judges.

McMILLIAN, Circuit Judge.

The Missouri Public Service Commission (MPSC) seeks review of an order issued by the Interstate Commerce Commission (ICC) pursuant to Sec. 17 of the Bus Regulatory Reform Act of 1982 (the Bus Act), 49 U.S.C. Sec. 11501(e), granting Jefferson Lines, Inc. (Jefferson), authority to increase its Missouri intrastate regular route passenger fares by 35%. Jefferson intervenes in support of the ICC. For reversal the MPSC argues that the ICC erred in (1) failing to find that the MPSC adequately rebutted a statutory presumption, (2) failing to find that based on substantial evidence on the record as a whole lower intrastate bus fares imposed no unreasonable burden on interstate commerce, and (3) failing to recognize the proper relationship between state and federal regulatory powers. For the reasons discussed below, we affirm the order of the ICC and deny the petition for review.

In December 1982 Jefferson applied to the MPSC for an increase of approximately 35% in its Missouri intrastate regular route passenger rates. ¹ In support of its request Jefferson submitted financial statements that showed its Missouri intrastate passenger fares yielded 6.95cents per passenger mile while its comparable interstate fares yielded 11.46cents per passenger mile. The cost study also indicated that Jefferson experienced a system-wide operating loss of $939,855 with an operating ratio of 106.990%, meaning that for every $1.00 earned, Jefferson incurred almost $1.07 in costs.

The Missouri portion of Jefferson's system-wide intrastate passenger operations loss amounted to $197,082 with an operating ratio of 122.1%. The MPSC audited Jefferson and agreed that Jefferson's intrastate fares were approximately 4.5cents less per passenger mile than its interstate fares and admitted that intrastate regular route passenger costs exceeded revenue by $148,758. Nevertheless, MPSC denied the rate increase in its entirety.

Although it denied the requested rate increase, the MPSC acknowledged that Jefferson's Missouri intrastate regular route passenger fares were less than comparable interstate fares and that Jefferson's Missouri intrastate regular route passenger operations were not profitable. However, the MPSC explained it had a longstanding policy of examining a company's entire intrastate operation--charter, express, and regular route passenger service--which in this instance revealed that Jefferson's entire Missouri operation provided sufficient revenue to offset losses on passenger traffic. In the MPSC's opinion it would have been unreasonable to increase intrastate regular route passenger rates in light of the excess revenue Jefferson earned from its intrastate charter service because it would have resulted in a return in excess of the cost of service.

Following the MPSC's denial of the requested rate increase, Jefferson filed with the ICC a request to review the MPSC's determination. Under the Bus Act, the ICC has authority to preempt state-set bus fares if it determines the state fares constitute an unreasonable burden on interstate commerce. 49 U.S.C. Sec. 11501(e)(1). ² Further, the Bus Act provides that if the ICC finds intrastate fares are lower than comparable interstate fares, the ICC shall presume the lower intrastate fares are an unreasonable burden on interstate commerce. This presumption, however, is rebuttable. Id. Sec. 11501(e)(2)(A)(i); see note 2 supra.

In its petition for review before the ICC, Jefferson argued the denial of the rate increase caused it to subsidize the depressed intrastate fares with interstate revenue. The MPSC responded that it had overcome the rebuttable presumption that intrastate rates should equal interstate rates because (1) interstate rates were excessive and not a proper standard for evaluating intrastate rates and (2) excess earnings in intrastate charter traffic offset the losses in intrastate regular route passenger traffic. The MPSC further contended that Jefferson expected a rate of return on all its Missouri operations of 37.7% and that further fare increases would push that rate of return to an exorbitant level.

After full consideration of the state record and the pleadings, the ICC approved the fare increase. The ICC determined the record "did not reveal any differences in operating conditions, services, or costs between interstate and intrastate operations sufficient to rebut the statutory presumption." Petition of Jefferson Lines, Inc., ICC Decision No. MC-C-10844, slip op. at 5 (Apr. 25, 1983). The ICC then concluded that the fare increase would reduce the disparity between Jefferson's intrastate and interstate fares and consequently reduce the burden of the cross-subsidy on interstate commerce. Id. at 7.

After the ICC denied an MPSC request to reopen the proceeding, this petition for review was filed. First, the MPSC argues that the ICC erroneously failed to find that the MPSC adequately rebutted the statutory presumption that lower intrastate rates create an unreasonable burden on interstate commerce. The MPSC contends the presumption is rebutted by substantial and competent evidence that (1) Jefferson's aggregate intrastate operations are lucrative and, consequently, the lower intrastate regular route passenger fares do not create an unreasonable burden on interstate commerce, and (2) the interstate fares are excessive and not an appropriate measure of reasonable intrastate rates. Like "bats of the law," the MPSC argues, the statutory presumption is overcome by the "sunshine of actual facts." Mockowik v. Kansas City, St. Joe & Council Bluffs R.R., 196 Mo. 550, 94 S.W. 256, 262 (1906). Relying upon Hertz v. Record Publishing Co., 219 F.2d 397 (3d Cir.), cert. denied, 349 U.S. 912, 75 S.Ct. 601, 99 L.Ed. 1247 (1955), the MPSC asserts that a presumption of law disappears when contrary evidence of fact in issue is introduced. We note, however, that the presumption of Pennsylvania common law at issue in Hertz was "very weak at best," id. at 399 n. 4, unlike the express presumption set forth in the Bus Act.

The ICC has narrowly interpreted the type of evidence necessary to rebut the statutory presumption. The ICC maintains that in the present case the evidence offered by the MPSC simply is not relevant because the legislative history and the statute itself suggest that only demonstrated differences in operating conditions, services, or costs between "comparable" intrastate and interstate operations may rebut the presumption.

"The construction of a statute by an agency charged with its administration is entitled to substantial deference." South Dakota v. CAB, 740 F.2d 619, 621 (8th Cir.1984), citing United States v. Rutherford, 442 U.S. 544, 553, 99 S.Ct. 2470, 2475, 61 L.Ed.2d 68 (1979), and Northwest Airlines, Inc. v. Goldschmidt, 645 F.2d 1309, 1315 (8th Cir.1981). "A deferential standard of review is particularly appropriate in a case such as this, in which the statute being interpreted is 'untried and new.' " South Dakota v. CAB, 740 F.2d at 621, citing Power Reactor Development Co. v. International Union of Electrical, Radio & Machine Workers, 367 U.S. 396, 408, 81 S.Ct. 1529, 1535, 6 L.Ed.2d 924 (1961). "[I]f the statute is silent or ambiguous with respect to the specific issue, the question for the court is whether the agency's answer is based on a permissible construction of the statute." Chevron, U.S.A., Inc. v. Natural Resources Defense Council, --- U.S. ----, 104 S.Ct. 2778, 2782, 81 L.Ed.2d 694 (1984). "The court need not conclude that the agency construction was the only one it permissibly could have adopted to uphold the construction, or even the reading the court would have reached if the question initially had arisen in a judicial proceeding." Id., 104 S.Ct. at 2782 n. 11. However, a construction that is tortured and contrary to the legislative intent will not be upheld. SEC v. Sloan, 436 U.S. 103, 118, 98 S.Ct. 1702, 1711, 56 L.Ed.2d 148 (1978). Basically, the question is whether the agency's construction of the statute is " 'sufficiently reasonable' to be accepted by a reviewing court." Federal Election Comm'n v. Democratic Senatorial Campaign Committee, 454 U.S. 27, 39, 102 S.Ct. 38, 46, 70 L.Ed.2d 23 (1981).

We are persuaded that the ICC's construction of the rebuttable presumption in Sec. 11501(e) is reasonable and consistent with the plain language and the legislative history of the Bus Act. In a similar case involving ICC preemption of state-regulated intrastate bus fares, the Second Circuit agreed with the ICC that only differences between intrastate and interstate operating costs and conditions were relevant in determining whether the disparity between intrastate and interstate rates burdened interstate commerce. Commissioner of Transportation v. United States, 750 F.2d 163, 170, 171 (2d Cir.1984), cert. denied, --- U.S. ----, 105 S.Ct. 2019, 85 L.Ed.2d 301 (1985). Indeed, a clearly stated goal of the Bus Act was the elimination of state regulation which kept intrastate fares artificially low and forced bus companies to subsidize intrastate operations by overcharging interstate passengers. Id. at 169. Congress had found that "a large number of [intrastate] routes ... are cross-subsidized by more profitable interstate routes and charter operations," and that "the carrier who is unable to raise rates high enough on its intrastate route is forced to charge its interstate travelers an inequitable price to remain financially viable." S.Rep. No. 411, 97th Cong.2d Sess. 8...