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Atchison, Topeka and Santa Fe Railway Co. v. Union Tank Car Co.


decided: October 12, 1979.


Appeal from the United States District Court for the Northern District of Illinois, Eastern Division. Nos. 76-C-2372 and 78-C-911 -- Thomas R. McMillen, Judge.

Before Swygert, Tone and Bauer, Circuit Judges.

Author: Tone

Union Tank Car Company leased 148 of its tank cars for use in Mexico. On termination of the leases the cars were transported, pursuant to Union Tank's directions, from points in Mexico to repair and maintenance facilities in the United States. The issue in this case is whether Union Tank must pay freight charges for the movement of the cars from the Mexican border to the repair and maintenance facilities. The answer depends upon the interpretation of two tariff provisions and provisions of the Interstate Commerce Act. The Interstate Commerce Commission held Union Tank liable in Union Tank Car Co. Declaratory Order Empty Tank Cars, No. 36473 (I.C.C. Dec. 13, 1977). The district court sustained the Commission. We affirm.

Union Tank leased the cars to Mexican shippers sometime before August 16, 1973 for periods varying in length from a few months to several years. The cars were used exclusively in Mexico during the lease periods.*fn1 When each lease expired, the Mexican lessee, acting pursuant to Union Tank's instructions, caused the empty cars to be transported to the Mexican-American border at El Paso, Texas, and turned over to the Atchison, Topeka and Santa Fe Railway Company. The Santa Fe then transported the cars to Union Tank's repair and maintenance facilities in Kansas, Louisiana, and Illinois, as directed by Union Tank,*fn2 and billed it at the rate prescribed in the Uniform Freight Classification.*fn3

Union Tank refused to pay, arguing that the following tariff provision, which we shall call simply Paragraph B.3, was applicable and made any charge impermissible:

An empty tank car, after having been loaded in commercial service on which the railroads derived line haul revenue, will be moved without charge to and from facilities for cleaning, lining, relining, maintenance, modification, or repair upon receipt of instructions, confirmed in writing, showing facility, destination and full routing and reason for such movement.*fn4

The Santa Fe rejected Union Tank's excuse for nonpayment, asserting that because the cars had been withdrawn from service in the United States, the provision relied on by Union Tank was inapplicable and the tank cars were "newly acquired" within the meaning of the following tariff provision, which we shall call Paragraph B.5:

A new car or a newly acquired car moving prior to its first loaded move in commercial service . . . will be moved subject to applicable rates named in Consolidated Freight Classification and/or Uniform Freight Classification, . . ., or other applicable tariffs.*fn5

Nevertheless, Union Tank persisted in its refusal to pay.

In June, 1976, the Santa Fe filed suit in the United States District Court for the Northern District of Illinois against Union Tank to recover the unpaid transportation charges.*fn6 Union Tank moved to stay the action on the ground that its defense to the Santa Fe's claim raised issues within the ICC's primary jurisdiction. See generally United States v. Western Pacific Railroad, 352 U.S. 59, 62-70, 77 S. Ct. 161, 1 L. Ed. 2d 126 (1956); 3 K. Davis, Administrative Law Treatise § 19.01 (1958). After the district court granted the motion Union Tank filed a petition with the Commission for a declaration that Paragraph B.5 was either inapplicable or unjust and unreasonable as applied.*fn7 The Administrative Law Judge concluded that Paragraph B.3 applied and no charges could be made. He reasoned that the cars were subject to that provision because, before being leased for use in Mexico, they had been used in the United States by railroads that were parties to the tariff, and because nothing in the language of the tariff prevented the application of Paragraph B.3 following a "temporary" removal of a car from the fleet, however long the removal and whatever its purpose. On appeal, Division Two of the Commission rejected this reasoning. Finding that the maintenance undertaken after the empty mileage in question had resulted from the commercial loaded movements made in Mexico, the Division concluded that Union Tank had removed the cars from the domestic commercial fleet, and that the cars were "newly acquired" by Union Tank under Paragraph B.5 and thus not entitled to free transportation to repair facilities without first making a commercial loaded movement within the United States.*fn8

Dissatisfied with this result, Union Tank filed an action in the district court to set aside the order. The case was assigned to the judge before whom the Santa Fe's earlier filed collection action was pending. The court, recognizing the limited scope of its review, E. g., Indiana Harbor Belt Railroad v. United States., 510 F.2d 644, 649 (7th Cir.), Cert. denied, 422 U.S. 1042, 95 S. Ct. 2656, 45 L. Ed. 2d 694 (1975), noted that the Commission's interpretation of the tariff provisions was not the only one possible, but found it to be a reasonable one. The court also agreed with the Commission that Union Tank had failed to show that the tariffs were unlawful under § 1*fn9 of the Act, and therefore sustained the Commission's decision. This decision effectively disposed of both Mexican lease cases.*fn10 Although Union Tank seeks "reversal . . . not only of the District Court's decision on judicial review, but also of the ICC's report and order which it reviewed," only the former is before us.*fn11


Union Tank asserts that the phrase "newly acquired" is clear and unambiguous and can refer only to changes in ownership and that the ICC's reading of the phrase is "strained and unnatural" and therefore impermissible. See, e. g., Berman and Spector v. Atchison, Topeka & Santa Fe Railway, 308 I.C.C. 254, 256 (1959). We find the tariffs, considered together, sufficiently ambiguous to justify resort to administrative expertise. Union Tank's request for a stay on the ground that the doctrine of primary jurisdiction required submission of the tariff construction issue to the ICC indicates that it initially was of the same view. The district court's grant of the request as well as its final decision in the case show its agreement on this matter.*fn12 We shall examine the relevant tariff provisions in the context of the whole tariff as interpreted by prior Commission decisions.*fn13

The tariff provisions under which Union Tank makes its claim rest in large part on a distinction between "property" and "instrumentality of transportation."*fn14 Although the railroads have traditionally supplemented their own rolling stock by using privately-owned cars supplied by shippers,*fn15 the duty to furnish cars is the railroads', not the shippers'.*fn16 Thus when railroads use cars other than their own to transport property or passengers, the cars are being used for the revenue purposes of the railroads and not for the private benefit of the owner. See Use of Private Passenger Train Cars, 155 I.C.C. 775, 786-87 (1929), Aff'd sub nom. Louisville & Nashville Railroad v. United States, 282 U.S. 740, 51 S. Ct. 297, 75 L. Ed. 672 (1931). The cars, albeit "property" in the ordinary sense of that term, are "instrumentalities of transportation" and therefore not subject to ordinary freight charges.*fn17 See General American Transportation Co. v. Indiana Harbor Belt Railroad, No. 35404, at 29-30 (I.C.C. June 10, 1977), Aff'd, 577 F.2d 394 (7th Cir. 1978) (hereinafter cited as GATCO ).

The issue thus becomes whether Union Tank's cars were moving as private property or as instrumentalities of transportation between El Paso and Union Tank's repair and maintenance facilities. This question is admittedly one of first impression and seems not to have been anticipated by the drafters of the tariff. Two decisions adopted by the Commission, however, give important guidance on this issue. In Union Tank Car Co., 268 I.C.C. 338 (1947), the Commission held that privately-owned tank cars remain instruments of transportation "when they are temporarily withdrawn from transportation service to undergo repairs." Id. at 342. The Commission reasoned that since railroads "have no use for a car that is not in good running order, . . . whether they or . . . (others) own it," the switching of cars to repair tracks was "primarily for their own benefit as common carriers." Id.*fn18 More recently, the decision of the administrative law judges that was upheld in pertinent part in Mileage Allowances, Tank Cars Between Points in the United States, 337 I.C.C. 23 (1970) (hereinafter cited as Mileage Allowances ), which established interim mileage allowances that railroads pay private owners for use of their cars, faced the issue of whether railroads could charge private car owners for empty mileage to and from facilities for relining or modification. The ALJs found the controlling question to be whether that work was "so major a transformation (of the car) as to interrupt the commitment of the car to the national tank car fleet." Id. at 62. Unlike the rebuilding or sale of a car, after which the car must again make a loaded commercial haul to reestablish its membership in the fleet, Id. at 61-62,*fn19 the work under consideration did not interrupt the car's commitment, and thus the railroads could not charge for such transportation.

Given the underlying theory of the tariff evidenced in these two decisions, the Commission's interpretation here was reasonable. Leasing the cars for use in Mexico interrupted the cars' commitment to the national tank car fleet. The movements from El Paso to the repair and maintenance facilities did not arise "directly from the transportation function," GATCO, supra, at 32, since the need for repairs resulted from use of the cars in Mexico, which produced no revenue for railroads who are parties to the tariff. Union Tank effectively removed its cars from a United States tariff system that generally provides free transportation to repair facilities for private car owners but assumes that such repair work resulted from movements producing revenue to railroad parties to the tariff. Union Tank should not be able to avail itself of the benefits of the system after withdrawing its cars from it. The cars in question could not be treated as instrumentalities of transportation until they had in fact been recommitted to domestic service by moving loaded in the United States.*fn20 It is not arbitrary or capricious to distinguish between this leasing arrangement and temporary removals of cars for the repair and maintenance that is necessitated by the American railroads' use of the cars.

Nothing in General American Transportation Co. (GATCO) v. Indiana Harbor Belt Railroad, No. 35404 (I.C.C. June 10, 1977), Aff'd, 577 F.2d 394 (7th Cir. 1978), requires a contrary holding. The Commission did decide in that case that, to be entitled to free transportation to repair facilities, the owner of a private tank car need not prove that the carrier providing the empty mileage has benefitted directly through the use of the owner's cars on revenue-producing hauls, but only that the carrier derives substantial revenue from the use of private cars. That holding might seem to suggest that Union Tank is entitled to free transportation from the Santa Fe even though the latter had not received any revenue from the cars' immediately preceding loaded movements in Mexico, because the Santa Fe makes substantial use of private cars. The Commission's GATCO decision, however, rested on the assumption that the cars in question constituted a part of the national private tank car fleet,*fn21 an assumption that does not hold true in the case at bar.

Thus the Commission's conclusion here that the cars were "property" moved "solely for the benefit of the car owner" and not the railroads, Union Tank Car Co. Declaratory Order Empty Tank Cars, No. 36473, at 6 (I.C.C. Dec. 13, 1977), is consistent with the language of the tariff provisions as well as the purposes they were intended to serve. We therefore agree with the district court that the Commission's interpretation of these provisions should not be disturbed.


Union Tank also contends that even if the district court properly sustained the Commission's decision as to tariff applicability, it erred in accepting that body's determination that collection of the charges had not been shown to be unjust and unreasonable. Union Tank's primary argument is that the Commission's failure to explain its decision requires a remand for findings of fact concerning the reasonableness of the practices complained of.*fn22 The district court found that the Commission's ruling on the reasonableness of the practices followed from its conclusion as to applicability.*fn23 In the context of this case, we agree.

First, as to § 1(6), Union Tank relies on unrebutted testimony by one of its witnesses that the Santa Fe's line-haul rates for goods shipped in privately-owned tank cars actually included compensation for the cost of transporting Union Tank's cars from Mexico, as well as empty cars in the national commercial fleet, to repair and maintenance facilities. The argument is that any additional charge would be an unjust and unreasonable practice affecting rates. Although inclusion of the Santa Fe's costs in moving those cars in the calculation of line-haul rates, if it occurred, would seem to result in excessive overall rates for shippers generally, the legality of those rates is not in issue here. That line-haul rates were too high would not entitle Union Tank to have its property transported without charge; and Union Tank did not argue that the tariff charges were too high generally, See note 23 And 49 U.S.C. § 1(5)(b). The only question before the Commission was whether existing and generally applicable tariff charges, not challenged as such, were "unjust and unreasonable" as applied specifically to these movements of Union Tank's property, and Union Tank cites no evidence in the record before the Commission that would have supported a finding in its favor on that question.*fn24

Union Tank also contends that the charges assessed were unlawful under § 1(11).*fn25 According to one of Union Tank's witnesses, the mileage allowances paid to private car owners for the use of their cars do not compensate the owners for the cost of moving cars to repair facilities after the termination of leases in Mexico. Therefore, Union Tank argues, collection of transportation charges for moving its cars to repair facilities constituted an "unjust and unreasonable car service practice" proscribed by § 1(11). The substance of this argument is persuasive only given a preliminary conclusion that movement of empty cars from Mexico to repair facilities is a cost of providing railroad cars that the mileage allowance is designed to recognize. Our conclusion is to the contrary: such movements are solely for the private benefit of the owner and are not an aspect of providing an instrumentality of transportation to the carrier. In terms of the specific statutory language at issue, we hold that the movements under consideration do not constitute "car service" as defined in 49 U.S.C. § 1(10), I. e., "movement . . . of . . . cars . . . used in the transportation of property . . . by any carrier by railroad subject to (the provisions of the Act),"*fn26 but are instead movements of private property subject to the generally applicable rates. Accordingly, the Commission properly found that the charges had not been shown to be unjust or unreasonable and the district court properly affirmed the decision.

Union Tank had the burden of showing that the existing tariff rates were unjust and unreasonable as applied to its property. The Commission concluded that Union Tank had failed to carry its burden. "While we may not supply a reasoned basis for the agency's action that the agency itself has not given, S.E.C. v. Chenery Corp., 332 U.S. 194, 196, 67 S. Ct. 1575, 91 L. Ed. 1995 (1947), we will uphold a decision of less than ideal clarity if the agency's path may reasonably be discerned." Bowman Transportation, Inc. v. Arkansas-Best Freight System, Inc., 419 U.S. 281, 285-86, 95 S. Ct. 438, 442, 42 L. Ed. 2d 447 (1974). The agency's path here is easily followed.

The judgment of the district court is affirmed.


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