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ATCHISON, TOPEKA AND SANTA FE RY. v. UNITED STATES

June 27, 1969

ATCHISON, TOPEKA AND SANTA FE RAILWAY COMPANY ET AL., PLAINTIFFS, TURNER BROTHERS TRUCKING CO., INC., WALES TRUCKING COMPANY AND B.F. WALKER, INC., INTERVENING PLAINTIFFS,
v.
UNITED STATES OF AMERICA AND INTERSTATE COMMERCE COMMISSION, DEFENDANTS, WATERWAYS FREIGHT BUREAU, AMERICAN COMMERCIAL LINES, INC., FEDERAL BARGE LINES, INC., A.L. MECHLING BARGE LINE, INC., THE VALLEY LINE COMPANY, THE OHIO RIVER COMPANY, SIOUX CITY & NEW ORLEANS BARGE LINES, INC., UNION BARGE LINE CORPORATION, INTERVENING DEFENDANTS.



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.
  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 ...


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