Seaboard Coast Line R.R. v. U.S.
| Decision Date | 13 February 1984 |
| Docket Number | No. 82-8172,82-8172 |
| Citation | 724 F.2d 1482 |
| Parties | SEABOARD COAST LINE RAILROAD, et al., Petitioners, v. UNITED STATES of America and Interstate Commerce Commission, Respondents, Consolidated Rail Corporation, Intervenor. |
| Court | U.S. Court of Appeals — Eleventh Circuit |
P. Brantley Davis, Atlanta, Ga., R. Eden Martin, Joseph B. Tompkins, Jr., Lawrence A. Miller, Washington, D.C., for petitioners.
Lawrence H. Richmond, Timm L. Abendroth, ICC, Kenneth P. Kolson, John J. Powers, III, Dept. of Justice, Washington, D.C., for respondents.
Charles N. Marshall, Bruce B. Wilson, Timothy T. Toole, Philadelphia, Pa., for intervenor Consol. Rail Corp.
Carl E. Sanders, Atlanta, Ga., for intervenor Southeastern Assoc. of Reg. Utility Com'n and Southern Governor's.
Petition for Review of an Order of the Interstate Commerce Commission.
Before HATCHETT and CLARK, Circuit Judges, and SCOTT, * District Judge.
This controversy between Seaboard Coast Line Railroad Company and Consolidated Rail Corporation is based on a dispute over the division of the tariff charged for shipments of cereal from points in the northeastern section of the United States to points in the southeastern area. At stake is a much larger issue; the fixing of freight rail rates when the participating carriers cannot agree on the division of a rate and rail service is refused by a receiving carrier.
The determination of freight tariffs and their division between two or more carriers is a complex subject, and has a vocabulary all its own. To generate business, tariffs must be competitive with truck and barge carriers; to support the business, tariffs must be sufficient to pay the costs of the several railroad companies; and then the tariff must be divided amongst the participating carriers. The vast majority of tariffs are divided by agreement of the carriers. Very few are fixed by the Commission. A third method of division results when each carrier charges its individual tariff for its portion of the carriage.
The subject is complicated by passage in 1980 of significant changes in the law which deregulated the railroad transportation business. 1 The new legislation spawned two decisions by the Interstate Commerce Commission in 1980 and 1981 which arguably undermine the recent historical basis for the division of rates between northern and southern carriers serving the eastern half of the United States. As a result, Consolidated Rail Corporation (Conrail) unilaterally changed its tariff rate for the carriage of cereal products from points in the Northeast to Cincinnati, the freight gateway to the Southeast. This increased the amount of the tariff collected by Conrail on shipments going into the Southeast, thus altering the prior division of tariffs. In retaliation, Seaboard Coast Line Railroad Company (hereafter called Family Lines, the trade name of the group of railroad companies to which Seaboard belongs) entered into certain tariff agreements with other freight carriers in the Northeast for the carriage of cereal into the Southeast resulting in a competitive disadvantage to Conrail. The ICC directed Family Lines to cease certain of its anti-competitive practices and this appeal resulted.
Some definition of rates is necessary, the most common rates being "local," "proportional," "joint," and "combination." Freight may move on the lines of only one railroad carrier or it may move over the lines of two or more interconnected railroads. The latter are interline shipments. Freight hauled solely on the lines of one carrier is known as "local" traffic and moves under so-called "local rates."
Traffic which moves via two or more interconnected railroads necessitates two or more companies sharing in the "through rate" tariff charged to the shipper. One way to establish and divide such tariffs is for the carriers to combine, or add up, the separate local or proportional rates of all of the carriers participating in such movements. These are called combination rates. They result generally from shipments over long distances and normally are too costly to compete with motor carriers and other rail carriers. This is a little used method of determining a tariff rate.
In order to be competitive, railroads generally do not make through rates by combining the applicable local rates of participating carriers; instead, through rates are made as joint rates--a single amount charged to shippers for the joint transportation services of all of the railroads participating in a through movement. It is the normal rule that joint rates are fixed by agreement of the participating carriers in the transportation chain and all carriers must agree. Pursuant to 49 U.S.C. Sec. 10705, the Interstate Commerce Commission may prescribe joint rates and the division of the tariff amongst the carriers.
As a safety valve for fixing a tariff when the carriers cannot agree, they may establish a combination rate through the use of proportional rates. A proportional rate has the characteristic of a local rate in that it is unilaterally established by each carrier for the passage of the freight over its lines. However, proportional rates are limited to carriage of through freight and are lower than local rates. Used only in combination with a proportional or local rate of other carriers, this method permits railroads to arrive at a lower combination rate for through shipments and avoid the higher rate which would result from the combination of local rates.
When a proportional rate of one carrier is combined with the local or proportional rate of other carriers, they may become joint rates by virtue of a joint rate tariff provision known as an "aggregate of intermediates" rule which is mandated by 49 U.S.C. Sec. 10726(a)(1)(B). This rule provides that if the combination of local and/or proportional rates applicable to a movement of freight between a particular origin and a particular destination over any route produces a lower through rate than the single-factor joint rate set forth in the tariff, shippers may only be charged the lower combination of rates, which becomes the joint rate over all routes between those two particular points.
In those instances where joint rates have not been fixed by agreement of the carriers or by the Commission, revenue arising from shipments are divided between carriers on the basis of "as made" or on the basis of "through percents." The division is a simple one when "as made" and results in each carrier being paid a share of the revenue collected depending upon its own local or proportional rate for the distance the freight is hauled. However, when a rate is lower than the total of the local or proportional rates as a result of the operation of the statutorily required "aggregate of intermediates" rule, the rate must be charged "through percents." Each carrier gets a percentage of the tariff either as agreed upon by them or as prescribed by the Interstate Commerce Commission. As previously stated, the "aggregate of intermediates" clause (49 U.S.C. Sec. 10726(a)(1)(B)) makes it unlawful for carriers to charge a shipper a through rate that exceeds the aggregate of intermediate rates (i.e., local or proportional rates) applying between the same points over the same routes. See 49 C.F.R. Sec. 1300.56 and Sec. 1300.200. 2
In order to understand the present litigation, it is necessary to review the history pertaining to the division of tariffs between carriers in the official territory (an area east of the Mississippi, north of a line extended along the northern line of the state of Virginia to the Ohio River and north of that river) and rail carriers in the southern territory (an area south of the official line and east of the Mississippi River). As a result of Class Rate Investigation starting in 1939 and first reported in 262 I.C.C. 447, the Commission found an inequitable rate structure between carriers in the official territory and the southern territory as a result of which the Commission established a "uniform divisional scale" which prorated divisions of tariffs primarily in accordance with the mileage hauled in each territory. See New York v. United States, 331 U.S. 284, 67 S.Ct. 1207, 91 L.Ed. 1492 (1947), and Official-Southern Divisions, 287 I.C.C. 497 (1953). The Commission had this authority pursuant to former 49 U.S.C. Sec. 15(1)(6), now 49 U.S.C. Sec. 10705(a)(1) (West U.S.C.A. 1983).
The commodity involved in this case, cereal, is the only one that has moved in significant quantities between official and southern territories on combination rates. As previously stated, combination rates, unlike joint rates, are determined by combining separate local or proportional rates of all the carriers participating in a through movement. Normally, combination rates divide as made; that is, each carrier independently prices the service on its portion of the movement (the local or proportional rate) and receives that amount as its "division" of the total through combination rate. However, the 1953 Commission order, 287 I.C.C. 497, 547, included not only joint rates but combination rates. 3 The Commission order apportioned all rates on the basis of the mileage the freight was carried over each line. Thus, a carrier could receive as its share of the tariff more or less than its local or proportionate rate would otherwise entitle it to absent the Commission order.
Conrail was dissatisfied with this division of revenue because, under the division schedule, it did not receive all its rate that was used to make the combination rate. The amount Conrail received on a through movement was not determined by Conrail's pricing its own services over its own lines, but by the divisions formula rule in 287 I.C.C. 497, supra. As appellants have correctly noted, Conrail has long been dissatisfied with the division of revenue on much of its through service. Before the events of the...
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