Providence and Worcester R. Co. v. U.S., 80-1772

• Citation: 666 F.2d 736
• Decision Date: 27 January 1982
• Docket Number: No. 80-1772,80-1772
• Parties: PROVIDENCE AND WORCESTER RAILROAD COMPANY, Petitioner, v. UNITED STATES of America and Interstate Commerce Commission, Respondents. Penn Central Corporation, et al., Intervenors.
• Court: U.S. Court of Appeals — First Circuit

Page 736

666 F.2d 736

PROVIDENCE AND WORCESTER RAILROAD COMPANY, Petitioner, v. UNITED STATES of America and Interstate Commerce Commission,

Respondents.

Penn Central Corporation, et al., Intervenors.

No. 80-1772.

United States Court of Appeals, First Circuit.

Argued Sept. 10, 1981.

Decided Dec. 24, 1981.

As Modified Jan. 27, 1982.

Thomas E. Acey, Jr., Washington, D.C., with whom John L. Richardson, Lloyd John Osborn, and Verner, Liipfert, Bernhard & McPherson, Washington, D.C., were on brief, for petitioner.

Kathleen V. Gunning, Atty., I.C.C., Washington, D.C., with whom William F. Baxter, Asst. Atty. Gen., John J. Powers, III, Kenneth P. Kolson, Attys., Dept. of Justice, Richard A. Allen, Gen. Counsel, and Henri F. Rush, Associate Gen. Counsel, Washington, D.C., were on brief, for I.C.C. and the United States.

Sidney Weinberg, Boston, Mass., for Boston and Maine Corp., debtor.

Laurence Z. Shiekman, Philadelphia, Pa., with whom Pamela L. Perry, Joan A. Yue, and Pepper, Hamilton & Scheetz, Philadelphia, Pa., were on brief, for Consolidated Rail Corporation.

James E. Howard, Philadelphia, Pa., for Penn Central Corporation.

Before ALDRICH, CAMPBELL and BOWNES, Circuit Judges.

LEVIN H. CAMPBELL, Circuit Judge.

Providence and Worcester Railroad ("P&W") petitions for review of a decision by the Interstate Commerce Commission ("ICC") dismissing its complaint against the Boston and Maine Railroad ("B&M"), ¹ Consolidated Rail Corporation ("Conrail"), and the Penn Central Corporation. ² P&W alleged that the defendants, individually and in concert, diverted rail traffic away from a "gateway" ³ in Worcester, Massachusetts, which it owns to various other gateways, in violation of the Interstate Commerce Act, 49 U.S.C. §§ 10101 et seq. ("ICA"). An administrative law judge (ALJ) held hearings and concluded that the defendants' conduct was lawful, a review board of the ICC affirmed the dismissal of P&W's complaint, and further administrative review was subsequently denied. Jurisdiction of this court has been invoked pursuant to 28 U.S.C. §§ 2321, 2342. We uphold the decision of the ICC.

I. FACTUAL BACKGROUND

The focus of this dispute is tracks within and between Worcester rail yards which belong to P&W and comprise the so-called "Worcester gateway." All traffic seeking to interchange at Worcester between B&M lines to the north and east and Conrail lines to the south and west must make use of these tracks. P& W here complains that B&M and Conrail have acted unlawfully in routing traffic to gateways in other areas where their two lines directly interconnect, thus obviating use of the third carrier's tracks.

Prior to 1968, the Worcester gateway was controlled by the New York, New Haven and Hartford Railroad ("New Haven") under a lease from P&W and the Norwich and Worcester Railroad ("N&W"). In 1968, the New Haven became part of the Penn Central Transportation Company ("PCTC"), predecessor to the Penn Central Corporation (see note 2, supra ). After the 1968 merger, PCTC continued to operate track leased from N&W, which permitted a direct interchange between B&M and PCTC; it elected, however, not to continue to operate the lines leased from P&W. In an abandonment proceeding before the ICC in 1972, P&W sought and obtained permission, effective in February 1973, to operate the track formerly operated by the New Haven (which was by then part of PCTC). An arbitration award established P&W's right to participate in "overhead traffic" ⁴ through the gateway. Thus, from 1973 through March 31, 1976, the Worcester gateway was controlled partly by PCTC and partly by P&W.

On April 1, 1976, the northeast rail reorganization became effective, pursuant to the Regional Rail Reorganization Act of 1973, 45 U.S.C. § 701 et seq. ("RRR Act"). The RRR Act established the Conrail system in an attempt to restructure the entire northeast rail system, which had been plagued by financial difficulties. The United States Railway Association ("USRA") administered the formation of Conrail, deciding which lines were to be included in it and which were not. P&W obtained exclusive control of the remaining 300 yards of the Worcester gateway from the USRA, ⁵ effective April 1, 1976, the date Conrail commenced its independent operations, which included the relevant former PCTC track to the south and west of Worcester. As of April 1, 1976, therefore, the direct B&M-PCTC interchange at Worcester was severed, and henceforth B&M traffic seeking to interchange with Conrail at Worcester was required to first interchange with P&W, which would then interchange with Conrail, producing the routing B&M-P&W-Conrail (the same was also true, of course, for Conrail traffic seeking to interchange with the B&M). B&M and Conrail began interchanging their traffic at Rotterdam Junction, New York, and Springfield and Boston, Massachusetts, where they could interchange directly without the necessity of a third carrier. The volume of traffic interchanging at Worcester fell dramatically; P&W claims that it has lost approximately $5,000 per day in overhead traffic that rightfully belonged to it. The basic issue before us is the legality of the new traffic patterns through gateways other than Worcester.

II. THE DISCRIMINATION CLAIM

P&W's primary contention is that the defendants' conduct violated 49 U.S.C. § 10701(c) (formerly part of ICA § 3(4)), ⁶ which provides that a carrier may not "unreasonably discriminate against (a connecting) line in the distribution of traffic that is not routed specifically by the shipper." This statute prohibits both discriminatory routing of unrouted traffic and the inducing of shippers to discriminate in specifying their routings. See Bangor & Aroostock Railroad v. ICC ("BAR "), 574 F.2d 1096, 1103-04 (1st Cir.), cert. denied, 439 U.S. 837, 99 S.Ct. 121, 58 L.Ed.2d 133 (1978); Southern Pacific Railway v. United States, 277 F.Supp. 671, 685 (D.Neb.1967) (three-judge court), aff'd mem., 390 U.S. 744, 88 S.Ct. 1442, 20 L.Ed.2d 275 (1968). P&W alleges that both types of conduct occurred here. But a carrier may prefer one line over another if the preference is justified by differences in conditions; the statute only proscribes discrimination between essentially comparable lines. ⁷ See Western Pacific Railroad v. United States, 382 U.S. 237, 246, 86 S.Ct. 338, 344, 15 L.Ed.2d 294 (1965); State of New York v. United States, 600 F.2d 349, 352 (2d Cir. 1979), cert. denied, 449 U.S. 887, 101 S.Ct. 242, 66 L.Ed.2d 113 (1980). The defendants assert, and the ICC found, that conditions at the Worcester gateway were not sufficiently similar to those at the other gateways to bring the proscriptions of the statute into play. We believe the ICC's determination is supported by substantial evidence, 5 U.S.C. § 706(2)(E), and therefore do not disturb it.

The ICC found that the Rotterdam Junction, Springfield, and Boston interchanges enjoyed numerous operating advantages over Worcester. Rotterdam Junction, in particular, is close to Conrail's classification yard in Selkirk, New York, and permits high-volume, high-speed interchanging. Springfield and Boston were also found to be more efficient than Worcester. Moreover, beginning on April 1, 1976, B&M and Conrail could not interchange directly at Worcester; the ICC supportably found that the three-carrier interchange there was less efficient than the direct two-carrier interchange that could be performed at the other gateways. ⁸

The ICC found also that Conrail and B&M earned greater revenues by routing traffic through Rotterdam Junction rather than Worcester. ⁹ In BAR, where the issue was not necessary to decision, we expressly left open the question whether revenue or other non-service-related justifications could constitute defenses to a discrimination claim. 574 F.2d at 1105 n.10. Now that the question is presented, we agree with the ICC that, for section 10701(c) purposes, a carrier does not "unreasonably discriminate" (emphasis supplied) where legitimate revenue considerations lead it to send traffic to one connecting line rather than another. Such considerations, grounded in the operating economics of the industry, are an essential factor in making rail transportation responsive to the realities of a competitive market. Taking them into account does not contravene section 10701(c), whose purpose, like that of its predecessor statute, is "to deprive railroads of discretion to apportion economic advantage among competitors," Western Pacific Railroad Co. v. United States, 382 U.S. 237, 244, 86 S.Ct. 338, 343, 15 L.Ed.2d 294 (1965). Congress has determined that competition is to be preferred over regulation in the oversight of the rail industry. 49 U.S.C. § 10101a(1), (2). It has also committed to the ICC "the determination, by application of an informed judgment to existing facts, of the existence of forbidden ... discrimination." United States v. Chicago Heights Trucking Co., 310 U.S. 344, 352-53, 60 S.Ct. 931, 935-36, 84 L.Ed. 1243 (1940). The ICC's determination here is one we should not lightly overturn. It is consistent with the statute and with national rail transportation policy. Its application to the facts of this case is supported by substantial evidence. We therefore uphold the ICC on this issue.

In seeking reversal of the ICC, P&W argues various factual issues at length, contending that the ICC misjudged the weight of the evidence or was inaccurate and incorrect on some points. As to many of these matters, we can only say that it is not the function of a reviewing court to substitute for the agency. We are satisfied that the ICC's essential conclusions are substantially supported in the record, and that to the extent there may be some inaccuracies, these are too minor to undermine the soundness of the agency's decision overall. See State of New York v. United States, 600 F.2d 349, 351 (2d Cir. 1979).

P&W insists that even if the gateways are not comparable, the defendants' preferences for...