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UNION MECHLING CORP. v. UNITED STATES

November 26, 1974

UNION MECHLING CORPORATION et al., Plaintiffs, and Igert, Inc., et al., Intervening Plaintiffs,
v.
The UNITED STATES of America and the Interstate Commerce Commission, Defendants, and Sioux City and New Orleans Barge Lines, Inc., Intervening Defendant



The opinion of the court was delivered by: SCALERA

This is an action to enjoin, set aside and annul the order of the Interstate Commerce Commission (I.C.C.) *fn1" granting a certificate of public convenience and necessity to Sioux City and New Orleans Barge Lines, Inc. (SCNO), intervening defendant herein, to operate as a common carrier by water generally throughout the Mississippi River System and the Gulf Intracoastal Waterway. *fn2"

I

 HISTORY OF THE CASE

 On August 11, 1970, SCNO filed an application with the I.C.C. for a certificate of public convenience and necessity under § 309(c) of the Interstate Commerce Act, 49 U.S.C. § 909(c), seeking authority as a common carrier by water on ports and points throughout the entire Mississippi River System and Gulf Intracoastal Waterway. *fn3" SCNO was a certificated common carrier by water authorized to operate between points on the Missouri and Arkansas Rivers as well as between points on the above-named rivers, on the one hand, and, on the other hand, to or from points along the Illinois Waterway, the Ohio River, and a portion of the lower Mississippi River. *fn4"

 Noted in evidence is that 96% Of SCNO's traffic volume consisted of bulk, unregulated commodities (mostly grain). Unregulated or bulk traffic are goods loaded or carried without wrappers or containers and received without transportation mark or count. Bulk commodities are usually fungible goods such as grains, coal, or ore. Any water carrier can engage in the transportation of bulk commodities throughout the entire inland waterways without requesting any grant of authority from the I.C.C. This type of bulk or unregulated traffic accounts for approximately 96% Of the totality of tonnage shipped by water carrier on this nation's inland waterways.

 During the pendency of this proceeding before the I.C.C., there was in effect a law, commonly referred to as 'the Three-Commodity Rule,' § 303(b) of the Interstate Commerce Act (Act), 49 U.S.C. § 903(b), which essentially acted as an exception to the general rule that bulk commodities move in an unregulated status. The Three-Commodity Rule provided that when more than three distinct bulk commodities were carried in a single tow, the commodities traveled in a regulated status. Thus, if several barges filled with wheat were in a tow with barges containing iron ore, soybeans, and coal, the rule converted the entire tow from an unregulated status to a regulated one.

 The Three-Commodity Rule was repealed on December 28, 1973 by P.L. 93-201, after the I.C.C. rendered its decision on SCNO's application. Under the present state of the law, therefore, more than three different bulk commodities can be carried in a single tow in an unregulated status.

 The named plaintiffs and intervening plaintiffs *fn5" along with many western and midwestern railroads *fn6" protested SCNO's application for the extended authority. The protestants offer service on or near the waterways which SCNO's application sought to serve. (343 I.C.C. at 416.)

 Public hearings on SCNO's application, which consumed over two weeks of testimony, were held in Washington, D.C., and St. Louis, Missouri, in March, April, and May of 1971. SCNO presented over twenty supporting witnesses. The supporting witnesses included shippers from points along waterways which SCNO already served as a regulated carrier as well as shippers of regulated commodities from the waterways which SCNO proposed to serve by the application. The supporting witnesses may be classified into three general groups: (1) shippers of unregulated, bulk commodities (principally grain); (2) shippers of regulated commodities; and (3) spokesmen for the various ports, port authorities, and the various civil organizations of the cities which SCNO served and sought to serve. (Id. at 415.)

 On April 20, 1972, the I.C.C.'s hearing examiner (now an Administrative Law Judge) handed down his report which recommended the denial of SCNO's application because SCNO had not established that the present and future public convenience and necessity required the proposed grant of authority. The Administrative Law Judge based his ultimate conclusion on several subsidiary findings. At page 9 of this report he concluded:

 '. . . it is not possible to find any real need for the service proposed by the applicant for the shippers of bulk commodities. The . . . evidence presented . . . is clearly insufficient to demonstrate that any meaningful advantage would accrue to bulk shippers or the applicant on any type of consistent basis by enabling it to move exempt bulk commodities in a regulated status. In fact, it appears that this would be somewhat of a rarity with most bulk shippers.

 'The evidence presented by shippers of inherently regulated commodities fails to show any material inadequacy in the present service.'

 Thereafter, SCNO, together with several of the supporting witnesses, filed exceptions to the Administrative Law Judge's report and recommended order. The competing barge lines and railroads filed replies.

 On September 22, 1972, Division One of the I.C.C. voted to entertain oral argument on the matter, which was held in Washington, D.C., on October 25, 1972.

 The I.C.C. on April 20, 1973, concluded that contrary to the Administrative Law Judge's report and recommended order, SCNO's application should be granted. The Commission found that:

 'The evidence demonstrates that applicant will be able to render a more prompt, efficient, and economical service to shippers on the Missouri River if it is permitted to handle regulated and exempt traffic moving to and from intermediate points on the Mississippi River System and the Gulf Intracoastal Waterway. It also appears that, contrary to the arguments of protestants, shippers of exempt bulk commodities would be willing to have their commodities move in a regulated status, . . .. The ability of communities situated on the Missouri River to develop and promote water borne commerce and to locate industry is closely related to the quality of water carrier service available. We believe that Missouri River shippers are entitled to the benefits and the improvements in water transportation service which would flow from a grant of this application.' 343 I.C.C. at 419.

 The I.C.C. also rejected the contention by protestants (plaintiffs herein) that the grant of authority to SCNO would have an 'appreciable effect' on their existing operations. The I.C.C. noted the projected growth of regulated traffic on the Mississippi River System and Gulf Intracoastal Waterway and concluded that the protestants authorized to conduct operations on the Missouri River (Federal and Union Mechling) *fn7" had neglected their common carrier obligations to the general public. ( Id. at 420.) The I.C.C. granted SCNO's application on the condition that SCNO maintain at least the level of service it presently provides shippers on the Missouri River. (343 I.C.C. at 420.) And, the I.C.C. found that the grant of SCNO's application was 'not a major federal action significantly affecting the quality of the human environment' and therefore no environmental statement was required by § 102(2)(C) of the National Environmental Policy Act (NEPA), 42 U.S.C. § 4332(2)(C). ( Id. at 420.)

 Plaintiffs Union Mechling, Federal, and American Commercial filed petitions requesting a finding that the extension of authority to SCNO involved an issue of general transportation importance under Rule 101(a)(4) of the I.C.C.'s Rules of Practice and that the proceeding be set for oral argument before the entire I.C.C. Intervening plaintiffs Arrow, Igert, and Dixie filed petitions requesting a finding of general transportation importance insofar as the grant of authority concerns the inland waterways upon which they possess general authority. On October 19, 1973, the I.C.C., at its general session, denied the above petitions and concluded that the grant to SCNO did not involve a matter of general transportation importance.

 The plaintiffs sought a temporary restraining order of the I.C.C.'s grant of authority to SCNO pending the hearing and determination of this action by the required three-judge court. After hearing, plaintiff's motion for a temporary restraining order was denied by this court because the plaintiffs failed to show that the granting of SCNO's certificate would irreparably injure them as 28 U.S.C. 2284(3) requires. As a result of the denial of the temporary restraining order, the certificate issued to SCNO became effective.

 A motion by the plaintiffs to consolidate this proceeding with Civil Action No. 73-1063 (Union Mechling, et al. v. United States of America and the Interstate Commerce Commission and Hennepin Towing Company) was denied by this court on February 14, 1974.

 Briefs were filed and oral argument was held before the statutory court.

 II

 SCOPE OF REVIEW

 In a suit of this nature to set aside an I.C.C. order, the scope of review of this three-judge court is governed by the Administrative Procedure Act, 5 U.S.C. § 706. *fn8" Minneapolis & St. Louis Railway v. United States, 361 U.S. 173, 192, 80 S. Ct. 229, 4 L. Ed. 2d 223 (1959). The exact scope of this judicial review has been expressed in various ways. Judge Aldisert in Leonard Express, Inc. v. United States, 298 F.Supp. 556, 559 (W.D.Pa.1969) stated:

 'There have been various judicial expressions of the precise scope of this review. We are impressed by the standard set forth in Illinois Central R. Co. v. United States, 263 F.Supp. 421, 430 (D.C.Ill.1966), aff'd 385 U.S. 457, 87 S. Ct. 612, 17 L. Ed. 2d 509:

 'The function of this court is reviewing this determination of the Commission is sharply restricted. 'It is limited to ascertaining whether there is warrant in the law and the facts for what the Commission has done.' United States v. Pierce Auto Freight Lines, Inc., 327 U.S. 515, 536, 66 S. Ct. 687, 698, 90 L. Ed. 821 (1946); 5 U.S.C. § 1009(e). 'The judicial function is exhausted when there is found to be a rational basis for the conclusions approved by the administrative body.' Mississippi Valley Barge Line Co. v. United States, 292 U.S. 282, 286-287, 54 S. Ct. 692, 694, 78 L. Ed. 1260 (1934). Once this court finds substantial evidence in support of the Commission's findings, it cannot go further and inquire into the soundness of the Commission's reasoning or the wisdom of the result. Virginian Ry. v. United States, 272 U.S. 658, 663, 47 S. Ct. 222, 71 L. Ed. 463 (1926); United States v. New River Co., 265 U.S. 533, 542, 44 S. Ct. 610, 68 L. Ed. 1165 (1924)."

 'Substantial evidence' in the sense it is used in the Administrative Procedure Act, 5 U.S.C. § 706(2)(E), has been defined as 'such relevant evidence as a reasonable mind might accept as adequate to support a conclusion.' Consolidated Edison Co. v. National Labor Relations Board, 305 U.S. 197, 229, 59 S. Ct. 206, 217, 83 L. Ed. 126. 'It must be enough to justify, if the trial went to a jury, a refusal to direct a verdict when the conclusion sought to be drawn from it is one of fact for the jury.' National Labor Relations Board v. Columbian Enameling & Stamping Co., 306 U.S. 292, 300, 59 S. Ct. 501, 505, 83 L. Ed. 660. This is something less than the weight of the evidence, and the possibility of drawing two inconsistent conclusions from the evidence does not prevent an administrative agency's finding from being supported by substantial evidence. Consolo v. Federal Maritime Commission, 383 U.S. 607, 619-620, 86 S. Ct. 1018, 16 L. Ed. 2d 131 (1966).

 III

 Effect of Administrative Law Judge's Proposed Conclusions and Findings

 Division One of the I.C.C. in its decision reached ultimate conclusions and findings contrary to those proposed by the Administrative Law Judge. Yet, Division One essentially adopted the Administrative Law Judge's statement of the facts and summary of the evidence. The I.C.C. is not bound in any way by the 'proposed' conclusions of the Administrative Law Judge. In the final analysis, it is the obligation of the Commission to make its own decisions and in so doing it is free to accept or reject the recommendations of the Administrative Law Judge. Administrative Procedure Act (APA), § 8(a), 5 U.S.C. § 557(b); Braswell Motor Freight Lines, Inc. v. United States, 275 F.Supp. 98 (W.D.Tex.1967) aff'd 389 U.S. 569, 88 S. Ct. 692, 19 L. Ed. 2d 779, rehearing denied 390 U.S. 975, 88 S. Ct. 1025, 19 L. Ed. 2d 1194 (1968).

 To put it another way, the mere fact that the Commission adopts the Administrative Law Judge's findings of fact does not impose upon the Commission the added burden of explaining how it arrived at contrary conclusions because the APA does not relegate the Commission to the role of a reviewing court; rather, the APA confers on the Commission the right to make its own conclusions from the evidence. Morgan Drive-Away, Inc. v. United States, 268 F.Supp. 886 (N.D.Ind.1967).

 There is no requirement that the Commission furnish an analysis of each and every item of evidence brought before the Administrative Law Judge, nor is the Division (Commission) required to disclose the mental process through which its ultimate conclusion was reached. As long as the Commission's findings are expressed with sufficient particularity to inform the court and the parties of the basis of its decision, the I.C.C. has fulfilled its statutory purpose. Caravelle Express, Inc. v. United States, 287 F.Supp. 585, 588 (D.Neb.1968).

 IV

 Need for Improvement of Water Carrier Service on the Missouri River

 The decision of the I.C.C. is bottomed on the objective of providing improved service to Missouri River shippers and receivers. In reaching its ultimate decision that the requested authority should be granted, the Commission concluded that:

 (a) '. . . the desirability of a more efficient and economical service to shippers and receivers on the Missouri justifies a grant of the proposed authority.' 343 I.C.C. at 418.

 (b) 'The ability of communities situated on the Missouri River to develop and promote waterborne commerce and to locate industry is closely related to the quality of water carrier service available. We believe that Missouri River shippers are entitled to the benefits and the improvements in water transportation service which would flow from a grant of this application.' Id. at 419.

 The need for improvement of service on the Missouri River is in part due to the River's physical and geographic characteristics. The Missouri is navigable from its mouth (on the Mississippi River north of St. Louis, Missouri) to Sioux City, Iowa, only because of the extensive and costly work of the United States Corps of Engineers. By the utilization of locks, dikes, and dredging, the Missouri, inherently non-navigable, has become a useful inland waterway. However, the Missouri River has a swift current; it is narrow and shallow. Apparently only a maximum of six to eight barges may be carried in a single tow on the Missouri from its mouth to the Kansas City area. On the Mississippi River, twenty to forty barges may be placed in a single tow.

 At least three companies on the Missouri testified that time in transit for their products shipped by SCNO has been excessive. Stormor, Inc., Behlen Manufacturing Company, and Valmont Industries, steel fabricators and processors, have been put to a competitive and economic disadvantage by delays in SCNO's barge service. *fn9" For example, Stormer, Inc., a steel fabricator, receives galvanized steel. As time in transit increases, the steel becomes subject to a white rust, making the steel unsuitable for the uses to which it might otherwise be put the accordingly increases inventory and other costs connected with handling.

 Behlen Manufacturing Company, which depends on SCNO for the transportation of its raw steel from Chicago and New Orleans to its Nebraska plant, also testified to delays. These delays disrupt its production schedule, sometimes putting this steel processor to the added expense of substituting higher grade steel for the delayed steel. SCNO has informed Behlen that the delays have been the result of holding barges at New Orleans until sufficiently large and economic tows can be assembled for the northbound journey.

 Valmont Industries, operator of a steel processing plant in Nebraska, relies on SCNO for the transportation of steel from New Orleans to Omaha. This company, which schedules its production according to expected arrival time of its import steel via SCNO, has experienced added costs and customer dissatisfaction from the delayed arrival of SCNO's inbound shipments. Again, SCNO has ...


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