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BALTIMORE & OHIO R.R. CO. v. UNITED STATES

April 1, 1975

The BALTIMORE AND OHIO RAILROAD COMPANY et al.
v.
UNITED STATES of America and Interstate Commerce Commission



The opinion of the court was delivered by: LUONGO

This is an action before a three-judge district court pursuant to 28 U.S.C. §§ 1336(a), 1398, 2284, 2321-2325 and 49 U.S.C. § 17(9) to suspend, enjoin, set aside and annul certain orders of the Interstate Commerce Commission.

 These proceedings had their genesis in 1967 when railroads in certain sections of the country filed tariff provisions covering rates and charges for intraplant, intraterminal and interterminal switching service. Certain rates and charges were established for such switching service if the shipments were made on ordinary equipment, but if made on non-ordinary ('special') equipment, there was added to the rates and charges a surcharge of $ 25 per car (since raised by ex parte increases to $ 49.52 per car). For the purposes of this suit, ordinary equipment refers to gondola cars having a marked weight capacity of 180,000 pounds or less, while gondolas with a marked weight capacity greater than 180,000 pounds are referred to as 'special' equipment. *fn1" The purpose of the surcharge was to prevent the use of expensive and specialized equipment in switching movements. *fn2"

 The tariffs were permitted to become effective notwithstanding the opposition of several parties, including the Institute of Scrap Iron & Steel, Inc. (Institute), one of the intervening defendants here. Following the adoption of the tariffs, the number of gondolas with a marked capacity in excess of 180,000 pounds increased, thereby increasing the likelihood of surcharge. In 1970, the Institute and some of its member scrap dealers *fn3" filed a complaint *fn4" with the Commission alleging that the surcharges were in violation of §§ 1(4), 1(5), 1(6), 1(11), 2 and 3(1) of the Interstate Commerce Act, 49 U.S.C. § 1 et seq., and in violation of the Commission's rules governing tariffs and charges as published in Tariff Circular No. 20, rule 66(a), 49 C.F.R. 1300.66(a). Complainants sought a cease and desist order, cancellation of the 'special' car tariff provision, and reparations.

 The gravamen of the complaint was that complainants ordered ordinary gondolas which were quite adequate for their needs for the shipment of scrap within switching districts, but carriers sometimes furnished 'special' gondolas; that carriers did so for their own convenience since the additional weight capacity of the 'special' gondolas was of no use to complainants, consequently the carriers should have charged only for the cars ordered, as required by rule 66(a). The complainants charged further that the practice placed shippers receiving 'special' gondolas at a disadvantage with their competitors and resulted in unequal treatment among shippers equally situated, in violation of the various sections of the Act prohibiting unduly discriminatory and prejudicial treatment.

 The Commission followed its modified procedures, in which the parties submit verified statements. On the record thus made, the Commission's Administrative Law Judge issued his report and recommended order (August 6, 1971), concluding that the carriers' differentiation between ordinary and 'special' gondolas in the switching charges had not been shown to be unjust, unreasonable or otherwise unlawful, and concluding, further that rule 66(a) was inapplicable The Administrative Law Judge's report was adopted and affirmed by Review Board No. 4 (September 18, 1972).

 Upon petition for reconsideration, Division 2 of the Commission, acting as an appellate division, reopened the proceedings, re-evaluated the evidence in the record, and concluded that the switching charges were in violation of the Act. Division 2 refused to award reparations because of the sketchiness of the record, but it held that rule 66(a) *fn5" was applicable; and that there was a violation of § 1(6), *fn6" and that the tariff differential to shippers ordering the same equipment was potentially unjustly discriminatory and unduly prejudicial under §§ 2 *fn7" and 3(1). *fn8" Division 2 issued orders (May 8, 1974) requiring the railroads 'to abstain from violations of sections 1(6), 2, and 3(1) of the Interstate Commerce Act herein found to exist' and to publish and thereafter maintain 'a carrier convenience rule pursuant to rule 66(a) of Tariff Circular No. 20 on intraplant, intraterminal, and interterminal switching of 'nonordinary' gondola cars in interstate commerce carrying ferrous scrap.' *fn9"

 On November 11, 1974, Division 2 denied carriers' petition to reopen and reconsider, and reinstated its May 8, 1974 order, modifying it to require compliance within thirty days from that date.

 The railroads listed in the caption then instituted the present action against the United States and the Interstate Commerce Commission, claiming the Commission erred in its ruling and seeking preliminary and final injunctive relief. Other railroads have intervened as plaintiffs. *fn10" The Institute and the members who participated in the Commission process intervened as defendants.

 In the instant proceedings, plaintiff carriers seek to set aside the Commission order contending that the Commission erred both as a matter of law, and because there was insufficient evidence to support application of rule 66(a) and findings of violations of §§ 1(6), 2 and 3(1).

 Following the filing of this suit, the Commission stayed the compliance date of its order until March 17, 1975, and later extended the compliance date until April 17, 1975, making it unnecessary for this court to consider whether to issue preliminary injunctive relief. By agreement of the parties, the matter was presented to this court on final hearing on March 11, 1975.

 (b) Scope of Review

 Judicial review of orders of the Interstate Commerce Commission is limited. 5 U.S.C. § 706(2) sets forth the pertinent standard:

 'To the extent necessary to decision and when presented, the reviewing court shall decide all relevant questions of law, interpret constitutional and statutory provisions, and determine the meaning or applicability of the terms of an agency action. The reviewing court shall --

 (2) hold unlawful and set aside agency action, findings, and conclusions found to be --

 (A) arbitrary, capricious, an abuse of discretion, or otherwise not in accordance with law;

 (E) unsupported by substantial evidence . . . In making the foregoing determinations, the court shall review the whole record or those parts of it cited by a party, and due account shall be taken of the rule of prejudicial error.'

 Each of the subsections of § 706(2) provides a separate standard for review. Bowman Transportation, Inc. v. Ark.-Best Freight System, Inc., 419 U.S. 281, ...


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