Oklahoma Corporation Commission v. United States

• Citation: 388 F. Supp. 4
• Decision Date: 20 December 1974
• Docket Number: No. 73-C-163.,73-C-163.
• Parties: OKLAHOMA CORPORATION COMMISSION et al., Plaintiffs, v. UNITED STATES of America et al., Defendants.
• Court: U.S. District Court — Northern District of Oklahoma

388 F. Supp. 4

OKLAHOMA CORPORATION COMMISSION et al., Plaintiffs, v. UNITED STATES of America et al., Defendants.¹

No. 73-C-163.

United States District Court, N. D. Oklahoma.

December 20, 1974.

COPYRIGHT MATERIAL OMITTED

Stephen A. Collinson, Oklahoma City, Okl., Okl. Corp. Com'n, for plaintiff Oklahoma Corp. Com'n.

R. L. Davidson, Jr., and John E. Robertson, Tulsa, Okl. (Houston, Davidson, Jacoby, Main & Nelson, Tulsa, Okl., on the brief), for plaintiffs Liberty Glass Co., Kerr Glass Mfg. Corp., Bartlett-Collins Co., ASG Industries; Ball Corp. and Brockway Glass Co.

Richard H. Streeter, Atty., I. C. C. (Thomas E. Kauper, Asst. Atty. Gen., Fritz R. Kahn, Gen. Counsel, I. C. C., Nathan G. Graham, U. S. Atty., and John H. D. Wigger, Atty., Dept. of Justice, on the brief), for defendants United States and I. C. C.

Grey W. Satterfield, Oklahoma City, Okl., and Dickson M. Saunders, Tulsa Okl. (Donal L. Turkal, St. Louis, Mo., and William C. Anderson, of Doerner, Stuart, Saunders, Daniel & Langenkamp, Tulsa, Okl., and Franklin, Harmon & Satterfield, Oklahoma City, Okl., on the brief), for intervenors defendant Railroads.

Before HOLLOWAY, Circuit Judge, BARROW, Chief Judge of the Northern District of Oklahoma, and BOHANON, District Judge.

HOLLOWAY, Circuit Judge.

This action seeking review of an order of the Interstate Commerce Commission (the ICC) invokes the jurisdiction of this three-judge court in accord with 49 U.S.C.A. § 17(9); 28 U.S.C.A. §§ 1336, 1398, 2284 and 2321-2325. The order sought to be reviewed is one of the ICC finding existing intrastate rates and charges in the State of Oklahoma to constitute an undue discrimination and undue burden on interstate commerce, and increasing the intrastate rates and charges to the level of interstate rates and charges pursuant to 49 U.S.C.A. § 13(4).

The suit was brought by the Oklahoma Corporation Commission and several companies which will be collectively referred to as the Oklahoma Glass Industry or the Glass Industry. The later group of plaintiffs are all shippers of silica sand, sometimes referred to as "industrial" sand, and were all parties to the proceedings before the ICC.

The ICC proceedings were initiated by the principal railroads serving Oklahoma, which are also intervening defendants in this suit. The proceedings were held before an Administrative Law Judge and subsequently an Examiner's Recommended Report and Order was issued by him. Exceptions to the report and order were taken by the plaintiffs as protestants and were denied by Review Board Number 4 of the ICC. Having denied petitions for reconsideration and a request for oral argument by the protestants, the ICC, by Division 2 acting as an Appellate Division, entered an order in April, 1973, which essentially adopted the report of the Examiner.

In May, 1973, this suit was filed and a temporary restraining order was granted. On June 13 a hearing was held before the three-judge court on the application for an interlocutory injunction and the defendants' motion to vacate the restraining order. After the intervening railroads filed undertakings to keep separate accounts of the funds derived from the higher rates and charges and to make refund if the increased rates were determined to be unlawful, the court vacated the temporary restraining order and denied the application for an interlocutory injunction.

The plaintiffs allege in their amended complaint that the ICC order is invalid in sum because it is not supported by substantial evidence, is contrary to the evidence, and ignores competent, uncontradicted and unrebutted evidence; because there was no need for increased revenue shown by the defendant railroads; and because the increased rates will diminish rather than strengthen the viability of rail transportation by causing a loss of revenue through diversion to other modes of transportation. It is also alleged that the order will create an undue and unreasonable advantage, preference or prejudice between persons or locations in intrastate commerce and those in interstate commerce, and that the order is an invasion of the sovereign powers of the State of Oklahoma.

Additional grounds for relief are set forth in a supplemental amendment. It is based on a motion by the St. Louis-San Francisco Railway Co. (Frisco) to the ICC for authority to vary its rates to avoid diversion of traffic to motor carriers and the August 1, 1973, modification of the previous order by the ICC. It is alleged that granting of authority to the railroads to reduce rates is repugnant to the Interstate Commerce Act; is not founded on any evidence before the hearing officer or the ICC and is unsupported by substantial evidence; is an acknowledgment of the erroneousness of the findings by the administrative law judge; is an acknowledgment that the level of rates for the transportation of silica sand is not necessary to achieve compliance with the finding that, "The unlawfulness . . . found to exist should be removed by applying to the Oklahoma intrastate rates and charges the increases which are maintained by the railroads on like interstate traffic between points in Oklahoma and points in adjoining states, as authorized by previous proceedings . . .."; converts the general revenue order to a specific commodity order; is an unlawful invasion, interference with, and preemption of the inherent powers of the Oklahoma Corporation Commission; and is an unlawful delegation of authority to the carriers.

In their joint answer to the amended complaint, the United States and the ICC assert that the orders of the ICC are not reviewable because they are permissive in nature and do not approve the justness or reasonableness of any particular rate, and that the plaintiffs have failed to "exhaust administrative remedies under 49 U.S.C.A. §§ 13 and 15" by attacking the justness and reasonableness of the rates on the particular commodities named in the amended complaint, along with general denials. The same defenses are raised in the intervening railroads' answer.

On these issues the case was heard by this three-judge court in February, 1974, and we have considered a supplemental brief filed and the briefs, arguments and the administrative record offered. This opinion will constitute our findings and conclusions concerning the record before us.² The court concludes that the following issues merit discussion:

1) Whether the proceeding before the ICC was a general revenue proceeding and, if so, what effect that determination has upon consideration of other issues;

2) Whether the findings and order of the ICC are supported by substantial evidence; and

3) Whether the ICC's modification, on August 1, 1973, of the previous order was valid and whether the modification converted the original order from a general revenue order to a specific commodity order.

We will treat some related contentions in discussing these issues to which we now turn.

1. Was the ICC proceeding a general revenue proceeding?

As we have noted, the United States and the ICC and intervening railroads contend that plaintiffs have failed to exhaust their administrative remedies and that relief from individual rates, such as for silica sand and limestone, must first be sought by a proceeding for reparations before the ICC, pursuant to 49 U. S.C.A. §§ 13(1) and 15(1). The plaintiffs respond to this by saying that they have exhausted administrative remedies since they filed a petition and an amended petition with the ICC for modification of the order, and these petitions have now been rejected by the ICC. They further contend that because the order required the establishment of particular rates, rather than merely setting ones which were permissive, the rates are now final, in full force and effect and subject to review in this proceeding. They contend that they would be unable to obtain reparations in a separate proceeding because of the holding in Arizona Grocery Co. v. Atchison, T. & S. F. Ry Co., 284 U.S. 370, 52 S.Ct. 183, 76 L. Ed. 348, due to the fact that these rates have been approved as reasonable by the ICC.

The cases cited by plaintiffs do distinguish general revenue proceedings by stating that the rates set in such proceedings are permissive rather than prescribed.³ And it is true that in our case the effect of the order was to require the carriers to bring intrastate rates up to interstate rate levels in effect. See Finding 5, Examiner's Report and Order.⁴ However, the use of mandatory language in such an order does not alter the fundamental nature of a general revenue proceeding pursuant to 49 U.S.C.A. § 13(4). See, e. g., King v. United States, 344 U.S. 254, 259, 275-276, 73 S.Ct. 259, 97 L.Ed. 301. Nor does it open to attack through court review the reasonableness of individual rates increased pursuant to the general revenue order. See United States v. Louisiana, 290 U.S. 70, 78-79, 54 S.Ct. 28, 78 L.Ed. 181; State of North Carolina v. ICC, 347 F.Supp. 103, 111-112 (E. D.N.C.), aff'd, 410 U.S. 919, 93 S.Ct. 1362, 35 L.Ed.2d 582; State Corporation Commission of Kansas v. United States, 216 F.Supp. 376, 384 (D.Kan.), aff'd, 375 U.S. 15, 84 S.Ct. 60, 11 L.Ed.2d 39.

In other findings adopted by the ICC, the Administrative Law Judge did address the reasonableness of rates. See Examiner's report pp. 15, 16. Also the order's provision preserving to parties the right to seek modification of individual rates is couched in somewhat more restrictive language than is often the case in such orders. See Examiner's report, 16; and see, e. g., Atlantic City Electric Co. v. United States, 306 F. Supp. 338, 340 (S.D.N.Y.), aff'd by an equally divided Court, 400 U.S. 73, 91 S.Ct. 259, 27 L.Ed.2d 212; but see Florida Citrus Commission v. United States, 144 F.Supp. 517, 524 (N.D.Fla.), aff'd 352 U.S. 1021, 77 S.Ct. 589, 1 L.Ed.2d 595. We do not feel, however, that the intent or effect of the order was to prescribe or fix reasonable rates within the meaning of Arizona...