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Atchison, Topeka and Santa Fe Railway Co. v. United States and Interstate Commerce Commission

decided: March 20, 1980.

THE ATCHISON, TOPEKA AND SANTA FE RAILWAY COMPANY, ET AL., AND RAILWAY LABOR EXECUTIVES' ASSOCIATION, PETITIONERS,
v.
UNITED STATES OF AMERICA AND INTERSTATE COMMERCE COMMISSION, RESPONDENTS, THE STATE OF NEW MEXICO, ETC., INTERVENING RESPONDENT, SOUTHERN PACIFIC TRANSPORTATION COMPANY AND ST. LOUIS SOUTHWESTERN RAILWAY COMPANY, INTERVENING RESPONDENTS.



Petitions for Review of an Order of the Interstate Commerce Commission.

Before Fairchild, Chief Judge, and Swygert and Bauer, Circuit Judges.

Author: Swygert

The issue in these consolidated petitions for review is whether the Interstate Commerce Commission ("the Commission") properly exercised its emergency powers under section 11123 of the Interstate Commerce Act ("the Act"), 49 U.S.C. § 11123, when it authorized the St. Louis Southwestern Railway Company (SSW) to operate temporarily over 965 miles of track owned by the Chicago, Rock Island & Pacific Railroad Company (Rock Island) which is bankrupt. Petitioner railroads and the Railroad Labor Executives Association ("RLEA") contend that the Commission exceeded its statutory authority under sections 11123(a)(2) and 11123(a)(4), 49 U.S.C. §§ 11123(a)(2) and (4), on which the Commission relied.*fn1 In addition, petitioner railroads argue that the threshold requirement of an "emergency requiring immediate action" in section 11123(a), 49 U.S.C. § 11123(a), was not met and that the Commission's order has no rational basis in the record. Because we conclude that the Commission lacked the statutory authority under both provisions on which it relied, we do not reach petitioner railroads' alternative contentions.

I

The railroad lines which are the subject of the Commission's order constitute a main line segment of the Rock Island's tracks. The "Tucumcari line," as that segment is called, extends from Santa Rosa, New Mexico, to St. Louis, Missouri, via Kansas City, Missouri, for a total distance of 965.2 miles.

In March 1975 the Rock Island filed a petition for reorganization under section 77 of the Bankruptcy Act, 11 U.S.C. § 205. A trustee was appointed by the reorganization court and approved by the Commission. While attempting to formulate a feasible reorganization plan, the trustee has continued to operate the Rock Island. In December 1978 the Rock Island trustee, joined by the Southern Pacific Transportation Company [ "SPT") and its subsidiary, SSW, filed an application with the Commission seeking approval of a purchase agreement whereby the SSW would pay fifty-seven million dollars to buy the Tucumcari line. The Commission has engaged in extensive hearings concerning the application, which is still pending at the present time.*fn2 The petitioners in the case at bar have vigorously opposed the proposed purchase at all stages of the Commission's proceedings.

During the five years since the Rock Island filed its petition for reorganization, it has been unable to substantially improve its financial condition. In August 1979 two railroad unions struck the Rock Island and other union employees honored their picket line. Because of the strike, the Rock Island management was unable to continue essential service, and on September 20, 1979 President Carter invoked section 10 of the Railway Labor Act, 45 U.S.C. § 160, establishing an Emergency Board to intervene in the Rock Island labor dispute and ordering the striking workers to return to work. The President further stated that "because the Rock Island is critically short of cash, it is possible that the railroad will not be able to restore service on its own, even with this action." He thus asked the Commission to "take the steps needed . . . to maintain service . . . during this period of record-breaking grain harvests." Exec.Order No. 12,159, 44 Fed.Reg. 54687 (Sept. 21, 1979).

Four days later, on September 26, 1979, the Commission issued a directed service order under 49 U.S.C. § 11125 on the basis that Rock Island line was "currently suffering from a lack of cash which makes its continuing operations impossible in the face of national transportation requirements."*fn3 The Kansas City Terminal Railway Company ("KCT") was directed by the Commission to provide service over substantially all the Rock Island lines, including the Tucumcari line.*fn4 On November 30, 1979 the Commission extended its directed service order and directed KCT to continue service for an additional ninety days over a slightly reduced portion of the Rock Island tracks, including the entire Tucumcari line.*fn5

On the same day as the Executive Order was issued and before the Commission had ordered directed service, the St. Louis Southwestern Railway Company with the support of the trustee for the Rock Island filed an application seeking authority to operate temporarily over the Tucumcari line pending final Commission action on its purchase application. SSW stated that it would provide the service at its own expense and that the Commission had "implied power" in an emergency to grant its application.

On September 27, 1979 the Commission served a notice inviting comments on SSW's petition for temporary authority. By December 3, 1979, the date of the Commission's decision granting the application, sixteen replies had been received by the Commission. Four parties favored granting the petition, eleven were opposed, and one party was neutral. The protestants challenged the Commission's statutory authority to issue an order, maintained that the order would prejudice their rights as parties adverse to the application for purchase of the Tucumcari line pending before the Commission, pointed out numerous operating problems with joint service by SSW and KCT over the Rock Island's lines and stated that significant irreparable revenue losses would occur to them even under temporary SSW control of the Tucumcari line.

On December 7, 1979, four days after the Commission had extended KCT's directed service authority to operate the Tucumcari line, the Commission entered Service Order No. 1411 ("the order") which is at issue here, granting SSW and its corporate parent, Southern Pacific Transportation Company (SPT), emergency authority to operate temporarily over the Tucumcari line without Government subsidization. The Commission based its decision on section 11123 of the Interstate Commerce Act, 49 U.S.C. § 11123. The Commission stated that the grant of temporary authority to SSW was necessary because while directed service by KCT under section 11125, 49 U.S.C. § 11125, afforded a temporary answer to Rock Island's problems, it was not "a long-range solution or even an ideal short-term one." Directed service, the Commission noted, could not last for longer than 240 days and created a significant drain on the federal treasury. Relying on its expertise in the rail area, the Commission determined that an emergency existed within the meaning of section 11123, 49 U.S.C. § 11123, despite the implementation of directed service. The Commission also found that the grant of temporary authority to SSW to operate the Tucumcari line would reduce the drain on the federal treasury.

In its decision, the Commission stated that it was relying on subsections (2) and (4) of section 11123(a), 49 U.S.C. §§ 11123(a)(2) and (4). The Commission interpreted section 11123(a)(2) of the Interstate Commerce Act, 49 U.S.C. § 11123(a)(2), to provide the necessary authority because it empowered the Commission to "take action during (an) emergency to promote service in the interest of the public and of commerce regardless of the ownership (as between carriers) of a locomotive, car, or other vehicle . . . ." The Commission also interpreted section 11123(a)(4), 49 U.S.C. § 11123(a)(4), as authority for its order because that provision allowed the Commission to "give directions for . . . movement of traffic under permits." The Commission stated that its decision and order would remain in effect until either SSW's purchase application regarding the Tucumcari line was decided upon or the Commission found that the emergency is over.*fn6

From the Commission's order granting SSW the temporary authority to operate over the Tucumcari line, petitioners bring these petitions for review. SSW and SPT, as well as the State of New Mexico, have intervened on behalf of the Commission.

II

The petitioners argue that the Commission's order was beyond the statutory authority of the Commission under section 11123 of the Interstate Commerce Act, 49 U.S.C. § 11123.*fn7 The Commission and intervenors SPT, SSW, and the State of New Mexico contend that the order was expressly authorized by section 11123(a)(2), 49 U.S.C. § 11123(a)(2), permitting Commission action in an emergency "to promote service in the interest of the public," and by section 11123(a)(4), 49 U.S.C. § 11123(a)(4), allowing the Commission to "give directions for . . . movement of traffic under permits." Respondents also point out that this court must uphold the Commission's interpretation of the statute if it is reasonable.

Petitioners respond with a detailed analysis of the statutory language and the legislative history to support their contention that the language on which the Commission relied cannot be construed to allow the grant of temporary authority to one carrier to operate over approximately one thousand miles of another carrier's tracks. Further, the petitioners assert that section 11123 cannot be read to contain any general grant of emergency power.

Section 11123(a)(2), 49 U.S.C. § 11123(a)(2), provides:

When the Interstate Commerce Commission considers that . . . (an) emergency requiring immediate action exists in a section of the United States, the Commission may

(2) take action during the emergency to promote service in the interest of the public and of commerce regardless of the ownership (as between carriers) of a locomotive, car, or other vehicle . . . .

Respondents rely on the phrase "promote service" in this provision which they contend allows the Commission to grant authority to one carrier to operate over another carrier's tracks. Petitioners, on the other hand, argue that the word "service" in section 11123(a)(2) must be interpreted as meaning only car service and does not authorize the Commission's order which involves railroad tracks rather than railroad cars. To support their interpretation, petitioners point to the language of former section 49 U.S.C. § 1(15)(b), the predecessor provision to section 11123(a)(2):

Whenever the Commission is of the opinion that . . . (an) emergency requiring immediate action exists in any section of the country, the Commission ...


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