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United States District Court, Northern District of Illinois, E.D

June 27, 1969


Before Kerner, Circuit Judge, and Hoffman and Napoli, District Judges.

The opinion of the court was delivered by: Napoli, District Judge.

This is an action brought by thirteen railroads to enjoin reports (dated April 5, 1966 and September 17, 1968) and an order (dated September 17, 1968) of the Interstate Commerce Commission. The order ended joint rail-truck rates on oil country iron and steel pipe transportation which discriminated against connecting barge traffic. An earlier action between these parties, 66 C 2371, arising out of the report of April 5, 1966, had been filed in this Court on December 27, 1966, but was dismissed without prejudice when the Commission reopened the proceedings. Thereafter, the Commission issued its report and order of September 17, 1968, 332 ICC 540, ending the discriminatory rates and dismissing the motor carriers. On November 8, 1968, the instant complaint was filed and the Commission voluntarily postponed the effective date of its order pending the outcome of this case. Three highway motor carriers have intervened as additional plaintiffs and the Waterways Freight Bureau and seven of its members have intervened as additional defendants.

The pipe used in Texas and Oklahoma oilfields is manufactured in the steel centers of the Northern States. From there it is moved either by water carriers or Eastern railroads to transfer points in Missouri and then by Western railroads to storage points in Oklahoma and finally by truck to the oilfields. Some pipe is switched to Western railroads while still in the north, but all pipe is eventually trucked to the oilfields. The Commission found that, under the joint rates agreed to by the railroads and the motor carriers, the railroads were charging more to carry the pipe to Oklahoma when it was transported the first leg of the trip by barge than when it was transported by train and that this additional cost was not entirely justified by the added costs of transferring the shipment from barge to train.

The complaint and the arguments of plaintiffs' counsel were grounded upon only two contentions: that the Commission had no jurisdiction over these joint rates and that in measuring the discrimination involved the Commission failed to give proper weight to the added costs of handling barge traffic.

In deciding the case our first reference must be to the Interstate Commerce Act, 49 U.S.C. § 1 et seq. The original Act, passed in 1887, governs rail transportation by common carrier and forms Part I of the present Act. Part II of the Act, added in 1935, governs transportation by motor vehicle. Part III, added in 1940, governs transportation by water. In the past these three parts of the Act have been construed as separate and independent systems. It is on this theory that plaintiffs base their case. The plaintiffs contend that the Commission's concern with this case should be limited to Part II of the Act, and that the limitation is part of the statutory scheme. It is Section 216(c) of Part II, 49 U.S.C. § 316(c) that enables railroads and trucking concerns to enter into joint rates. Prior to its enactment in 1935, joint rates were not permitted because trucking was not regulated. We see nothing in the argument that because joint rates are allowed under Part II of the Act, the sections in Part I dealing with discriminatory rates, namely Sections 3(4) and 4(1), are inapplicable to joint rates. We could not agree with such a limited construction of the Act.

We do not ground our decision on the contention that the movement of pipe was one over which the Interstate Commerce Commission had statutory authority because it was simply a railroad shipment from the steel centers to the Oklahoma storage points. While there is impressive authority by which we could base our decision on this narrower ground, it is not illogical to hold that, if the Commission can regulate rates of rail traffic from A to B which discriminate against barge traffic, then it can regulate joint rail-truck rates of rail traffic from A to B, the proportionate share of which discriminates against barge traffic, and truck traffic from B to C. There is, of course, a long line of cases prohibiting discrimination in railroad rates and joint water-rail rates against ex-barge traffic.

Interstate Commerce Commission v. Mechling, 330 U.S. 567, 67 S.Ct. 894, 91 L.Ed. 1102 (1947), held invalid a Commission order approving higher rates for grain moving out of Chicago if it had come in by barge rather than by rail. The Court pointed out that in the debate over the enactment of Part III of the Act, bringing water carriers under Interstate Commerce Commission jurisdiction, "opponents were repeatedly assured by sponsors of the 1940 Act * * * that the questioned legislation unequivocally required the Commission to fix rates which would preserve for shippers the inherent advantages of barge transportation: lower cost of equipment, operation, and therefore service." Id. at 575, 67 S.Ct. at 898. It is true that Section 3(4) of Part I had been specifically amended by the 1940 Act to include water carriers within the definition of connecting carriers. However, much of the underlying rationale of Mechling is applicable to the instant case.

  The basic error of the Commission here is that it
  seemed to act on the assumption that the
  congressional prohibitions of railroad rate
  discriminations against water carriers were not
  applicable to such discriminations if
  accomplished by through rates. But this
  assumption would permit the destruction or
  curtailment of the advantages to shippers of
  cheap barge transportation whenever the
  transported goods were carried beyond the end of
  the barge line. Id. at 577, 67 S.Ct. at 899.

In Dixie Carriers, Inc. v. United States, 351 U.S. 56, 76 S.Ct. 578, 100 L.Ed. 934 (1956), the Court reviewed the Commission's dismissal of a complaint requesting the establishment of joint rail-barge rates on a par with joint all-rail rates for carrying sulphur. The Court commented at page 59, 76 S.Ct. at page 580:

  The Mechling case involved an attempt to deprive
  water transportation of one of its "inherent
  advantages," as that phrase is used in the preamble
  of the 1940 Act, (49 U.S.C.A. note preceding
  section 1,) by increasing the cost of barge
  service. The Commission's present decision achieves
  the same result through the device of a joint rate
  allowed carriers by rail but denied carriers by
  water. * * * Barge transportation frequently covers
  only one segment of the journey to market. The
  failure of the railroads to establish
  nondiscriminatory joint rates with barges might,
  therefore, seriously impair the development of
  barge service as a vital component of our national
  transportation system. Section 3 outlaws
  discrimination in all its forms.

  In Arrow Transportation Co. v. United States, 176 F. Supp. 411
 (N.D. Ala. 1959), aff'd, per curiam, State Corp.
Commission of Kansas v. Arrow Transportation Co. 361 U.S. 353,
80 S.Ct. 406, 4 L.Ed.2d 362, the District Court held that the
Commission had no authority to approve ex-barge rates which
deprived shippers of their savings accrued through the use of
barge service. The Court termed the case "another chapter in
the conflict between the requirement of the National
Transportation Policy that the provisions of the Interstate
Commerce Act be administered in such a way as to preserve the
inherent advantages of water transportation and the desire of
the railroads to offset those advantages by refusing to accord
to traffic received from a connecting barge line the same
treatment accorded to traffic received from connecting
railroads." Id. at 415-416. The Court concluded its discussion
of discriminatory rates at page 418 as follows:

  The differences upon which the Commission finally
  rests its holding is [sic] one of the form in
  which the rates are published, but the decisions
  of the Supreme Court in Mechling and Dixie
  Carriers make it abundantly clear that carriers
  cannot hide their discrimination against ex-barge
  traffic behind the veil of a through rate any
  more than they can charge a higher proportional
  rate on ex-barge than on ex-rail traffic. The
  thrust of the Mechling-Dixie rationale goes much
  deeper than form — it makes clear that Congress
  imposed a duty upon the Commission to eliminate
  discrimination in whatever guise or form it exists.

While the order before us could be sustained on these cases alone, which condemn the discrimination against ex-barge traffic, we do not base our decision solely on them. We agree with plaintiffs that those cases are not directly controlling of the situation before us, which can be considered a case of first impression. However, there is additional support for defendants' position in an additional line of cases which we must regard not only as controlling but even dispositive of the case before us. They are the cases that hold that because of the National Transportation Policy the various Parts of the Interstate Commerce Act may be, indeed, must be construed as a whole.

The National Transportation Policy of 1940 amended the Interstate Commerce Act by adding at the outset the following provision, 49 U.S.C. preceding § 1:

  It is hereby declared to be the national
  transportation policy of the Congress to provide
  for fair and impartial regulation of all modes of
  transportation subject to the provisions of this
  Act, so administered as to recognize and preserve
  the inherent advantages of each; * * * to
  encourage the establishment and maintenance of
  reasonable charges for transportation services,
  without unjust discriminations, undue preferences
  or advantages, or unfair or destructive

  practices; * * * all to the end of developing,
  coordinating, and preserving a national
  transportation system by water, highway, and
  rail, as well as other means, adequate to meet
  the needs of the commerce of the United States,
  of the Postal Service, and of the national
  defense. All of the provisions of this Act shall
  be administered and enforced with a view to
  carrying out the above declaration of policy.

  In New York Central R.R. Co. v. United States, 267 F. Supp. 619
 (S.D.N.Y. 1967) the National Transportation Policy and one
of the sections of the Act were treated as if they could be at

  [T]he provision in question [is not] a broad
  statement of policy which Congress has assigned
  to the Commission for detailed interpretation.
  [Citation omitted] The provisions of the National
  Transportation Policy are the statutory guide
  furnished by Congress to the Commission [as] the
  policy of Congress * * *. What we are dealing
  with in Section 4(1) is a detailed, specific,
  prophylactic regulation, without technical
  language which would require expertise in the
  field for its interpretation. Id. at 625-626.

Moreover, the court did not follow the National Transportation Policy in holding that motor-rail rates were not subject to § 4 which prohibits higher rates for short hauls than the rates for long hauls over the same route. The majority was not inclined toward a liberal construction of the Act. The Court found at page 626:

  That, under Section 1(1)(a), Part I would not
  apply to motor-rail transportation where the rail
  portion was wholly within one state although the
  motor transportation crossed state lines. Part II
  would cover any motor-rail transportation
  crossing state lines. While this omission in Part
  I may be of minimal practical effect, if Congress
  had intended to regulate any phase of motor-rail
  transportation under Part I it would hardly have
  made such an arbitrary exception intentionally.
  On the other hand, in view of the tight
  draftsmanship on the face of the statute and the
  number of revisions to which the statute as a
  whole has been subjected, the exception is
  probably not an oversight. * * *

  Certainly the provisions of Part II dealing with
  combined motor-rail operations on their face form
  a complete, self-contained system of regulation
  which includes protection against the evil dealt
  with in Section 4(1).

The error in these conclusions is ably pointed out by Judge Friendly in his dissenting opinion.

  The basis for the railroads' claim of
  inapplicability of the fourth section is that the
  lower rates for the longer hauls in which they
  participate are joint rail-motor rates, and thus
  not for transportation "wholly by railroad." But
  the statute does not say they have to be. Section
  4(1) reads on carriers subject to Part I and Part
  III, not on transportation subject to these parts
  * * * however the case might stand if the rate to
  the prejudiced point was a joint rail-motor rate
  and the lower rate to the farther point was all
  rail or, more pertinently, if both were joint
  rail-motor rates, I fail to see why the language
  is not broad enough to cover any arrangement
  whereby a railroad participates in a lower
  interstate rate to a more than to a less distant
  point * * *.

  It squares ill with Congress' devotion to the
  long and short haul principle to suppose that by
  authorizing joint rail-motor rates, it meant to
  give rail carriers a franchise thus to charge a
  lower rate to a more distant point they had not
  effectively possessed before; as said by
  Commissioner Freas, "there is no suggestion" in
  § 216(c), "or in its legislative history, that such
  a provision was intended to afford a railroad a
  device by which, merely by joining with a motor
  carrier for the performance of a short portion of
  its haul under a joint-rate arrangement, the former
  could escape the regulatory provisions of the act
  otherwise applicable

  to rates maintained by railroads," 326 ICC at

The New York Central case was not appealed. However, there are two Supreme Court decisions to the contrary, "Seatrain" and "Piggyback". "Seatrain" is the common name for United States v. Pennsylvania R.R., 323 U.S. 612, 65 S.Ct. 471, 89 L.Ed. 499 (1945), which was not discussed in New York Central. "Piggyback" is the common name for American Trucking Ass'n, Inc. v. Atchison, Topeka & Santa Fe R.R., 387 U.S. 397, 87 S.Ct. 1608, 18 L.Ed.2d 847 (1967), which was decided only a month and a day after New York Central and reversed a decision which had been relied upon in the latter, Atchison, Topeka & Santa Fe R.R. Co. v. United States, 244 F. Supp. 955 (N.D.Ill. 1965).

"Seatrain" held that the Interstate Commerce Commission had the authority to require railroads to interchange their cars with connecting water carriers. The Court outlined the breadth of the Act when construed in light of the National Transportation Policy:

  True, Congress has specified with precise
  language some obligations which railroads must
  assume. But all legislation dealing with this
  problem since the first Act in 1887, 24 Stat.
  379, has contained broad language to indicate the
  scope of the law. The very complexities of the
  subject have necessarily caused Congress to cast
  its regulatory provisions in general terms.
  Congress has, in general, left the contents of
  these terms to be spelled out in particular cases
  by administrative and judicial action, and in the
  light of the Congressional purpose to foster an
  efficient and fair national transportation
  system. [Citations omitted]

    The 1940 Transportation Act is divided into
  three parts, the first relating to railroads, the
  second to motor vehicles, and the third to water
  carriers. That Act, as had each previous
  amendment of the original 1887 Act, expanded the
  scope of regulation in this field and
  correlatively broadened the Commission's powers.
  The interrelationship of the three parts of the Act
  was made manifest by its declaration of a "national
  transportation policy * * *." United States v.
  Pennsylvania R.R., supra at 616 of 323 U.S., at 473
  of 65 S.Ct.

    We cannot agree with the contention that the
  Commission has less power now to protect water
  carriers than it had in 1914. The 1940 Act was
  intended, together with the old law, to provide a
  completely integrated interstate regulatory
  system over motor, railroad, and water carriers.
  Id. at 617-619, 65 S.Ct. at 474.

"Piggyback" held that the Commission had the authority to make rules that railroads shall not discriminate in the offer of bimodal transportation. In 1962 the Commission instituted an investigation of trailer-on-flatcar or piggyback service. The rules that were the outcome of the investigation were the subject of the case. The Commission ordered that when the railroads offered their own TOFC or piggyback service to the public generally they also had to offer their facilities to motor and water carriers. In deciding the case the Court reiterated the "Seatrain" rationale:

    In Seatrain, this Court emphatically rejected the
  analysis upon which the District Court here
  essentially based its position — that since the
  Act regulates rail, motor, and water carriers
  separately, in Titles I, II, and III, the
  Commission may not compel the mutual furnishing of
  services and facilities other than as expressly
  directed. Recognizing that in the case of water
  carriers (as distinguished from motor carriers),
  the Act specifically directs railroads to establish
  through routes with them, the Court held that this
  is not the end of the railroads' obligation or the
  limit of the Commission's power. * * *

    In view of this, we cannot accept arguments
  based upon arguable inference from nonspecific
  statutory language, limiting the Commission's
  power to adopt rules which, essentially, reflect
  its judgment in light of current

  facts as to the proper interrelationship of
  several modes of transportation with respect to
  an important new development. For example, §
  216(c), 49 U.S.C. § 316(c), authorizes the
  railroads to enter into voluntary arrangements for
  through routes and joint rates with motor carriers.
  There is no Commission power to compel the
  railroads to do so, and it is argued from this we
  should derive a congressional intent that the ICC
  may not compel the railroads to furnish services to
  the motor carriers in any circumstances. There is
  no basis for this vast leap from a particular
  authorization to a pervasive prohibition. American
  Trucking Ass'n Inc. v. Atchison, Topeka & Santa Fe
  R.R., supra at 409, 410-411 of 387 U.S., at
  1615-1616 of 87 S.Ct.

Finally, the Court concluded:

  In the absence of congressional direction, there
  is no basis for denying to the ICC the power to
  allocate and regulate transportation that
  partakes of both [rail and truck] elements; and
  there is no basis whatever for denying to the
  Commission the power to carry out its
  responsibilities under the National
  Transportation Policy * * *. Id. at 421, 87 S.Ct.
  at 1621.

While some may argue that the "Piggyback" decision is limited to questions of transportation rather than rates, the language of the decision was drafted in broad and sweeping resolve. The same logic that is found in that case of giving added breadth to an Act which covers three major modes of commercial transportation — water, truck and rail — must be used when a question of analogy arises under that Act which also involves transportation, carriers and rates. To take the whole in one instance implies that we take the whole in a like situation.

A holding that the Commission is powerless to regulate discrimination in joint rail-truck rates simply because parties voluntarily entered into these rates under a provision in Part II of the Act or because trucks are not specifically designated connecting carriers under Part I of the Act would fly in the face of the National Transportation Policy. Such a holding could not be ascribed as the intent of Congress. We are compelled to hold, therefore, that under the language of the National Transportation Policy and of the Interstate Commerce Act that joint rail-truck rates are to be regulated pursuant to Section 3(4) of Part I of the Act.

Moreover, our discussion and the cases cited above are as applicable to the question of regulating joint rail-truck rates under Section 4(1) of Part I of the Act, the high rate-short haul provision. Therefore, we also must hold that the Commission can, within its statutory grant, exercise jurisdiction over these rates under this provision.

Finally we are left with plaintiffs' second argument that the Commission erred in failing to give proper weight to the additional costs which would be incurred in handling barge-rail traffic. This argument seems to border on the oft-made request that courts review and reevaluate the evidence before the Commission. This we will not do. If the argument is, on the other hand, merely that there is no substantial evidence in the record to support the conclusions of the Commission, that argument is without weight. We have carefully examined the record and find substantial and ample evidence to sustain the findings of the Commission.

A decree will be entered for the defendants in accordance with the foregoing.


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