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CANADIAN NATL. RY. CO. v. UNITED STATES

November 30, 1976

CANADIAN NATIONAL RAILWAY COMPANY, and CANADIAN PACIFIC LIMITED, Plaintiffs,
v.
THE UNITED STATES OF AMERICA and THE INTERSTATE COMMERCE COMMISSION, Defendants and ALUMINUM COMPANY OF CANADA, LTD., et al., Intervening Defendant



The opinion of the court was delivered by: WADDY

Waddy, District Judge.

 I. The Procedural Background

 This is an action by plaintiffs to set aside an Order of the Interstate Commerce Commission (the Commission) entered in an administrative general revenue proceeding identified as Ex Parte No. 267, Increased Freight Rates, 1970 and 1971.1 The Order here challenged is dated August 6, 1973, and concerns freight rate increases authorized for railroads operating between points in Eastern Territory of the United States and points in Canada, and purports to be an interpretation or clarification of the Commission's Report and Order in Ex Parte No. 267. By Order dated October 5, 1973, the Commission denied petitions by the railroads to vacate the August 6th Order. The original defendants and defendant-intervenor have counterclaimed seeking enforcement of the Orders and have joined additional parties defendant to the counterclaim.

 Jurisdiction of this Court is invoked under 49 U.S.C. § 17(9), 5 U.S.C. § 559, and 28 U.S.C. §§ 1336, 2284, 2321-2325. Pursuant to 28 U.S.C. § 2325 (since repealed) an action having a filing date of this case required determination by a three-judge court. *fn2"

 Plaintiffs are Canadian National Railway and Canadian Pacific Limited (Canadian railroads). Both are common carriers by railroad, engaged in the transportation of property in Canadian commerce and in foreign commerce, including commerce between the United States and Canada. Both operate partially within the United States. Defendants are the United States of America *fn3" and the Interstate Commerce Commission (defendants). Defendant-intervenor Aluminum Company of Canada, Ltd. (Alcan) is a corporation organized under the laws of Canada, engaged in the production, fabrication and sale of aluminum and aluminum products. Alcan ships products from origins in Canada to points in the United States and also receives materials from origins in the United States destined to points in Canada. *fn4"

 Pursuant to 49 U.S.C. § 16(12) *fn5" defendants and defendant-intervenor Alcan each filed counterclaims seeking enforcement of the Commission's August 6th, and October 5th, 1973, Orders and moved to add 32 additional railroads (Eastern railroads) as parties defendant to the counterclaims. Each of the additional defendants was a party to the Ex Parte No. 267 proceeding, each participates in the movement of traffic between points in Eastern Territory and points in Canada, and each is subject to the Commission's Orders. This Court granted the motions to add the Eastern railroads as parties defendant to the counterclaims, and held that the three-judge court had jurisdiction to hear said counterclaims, and that it was a proper exercise of discretion to consider both the claim and the counterclaims jointly. *fn6"

 The case is now before the Court on the motions of all parties for summary judgment. The Canadian railroads' claim requires the Court to determine whether the Commission, in its Orders dated August 6, 1973 and October 5, 1973, interpreted and clarified its Report and Order in Ex Parte No. 267, or whether it improperly entered supplemental orders without notice and hearing. The counterclaims for enforcement of the Orders require the Court to determine whether, through the tariff updating process, the Eastern railroads issued new rate increases independent of Ex Parte No. 267.

 Preliminarily, it is noted that the Court's function in determining the validity of these Commission Orders is not to conduct a trial de novo, but is

 
"limited to ascertaining whether there is warrant in the law and the facts for what the Commission has done. Unless in some specific respect there has been prejudicial departure from requirements of the law or abuse of the Commission's discretion, the reviewing court is without authority to intervene. It cannot substitute its own view concerning what should be done, whether with reference to competitive considerations or others, for the Commission's judgment upon matters committed to its determination, if that has support in the record and the applicable law." United States v. Pierce Auto Freight Lines, Inc., 327 U.S. 515, 536, 90 L. Ed. 821, 66 S. Ct. 687 (1946).

 II. The Facts

 Pursuant to petitions filed in 1970 and 1971 by most of the railroads in the United States, the Commission instituted an investigation concerning the adequacy of all freight rates and charges of all common carriers by railroad in the United States. On March 4, 1971, as a result of the investigation and hearings, the Commission issued its Report and Order, Ex Parte No. 267, Increased Freight Rates, 1970 and 1971 authorizing general freight rate increases as follows:

 
"(1) Intraterritorial traffic within the East -- not more than 14 percent.
 
(2) Intraterritorial traffic within the South -- not more than 6 percent.
 
(3) Intraterritorial traffic within the West -- not more than 12 percent.
 
(5) Import and export traffic not more than 12 percent and subject to the limitations heretofore prescribed in this report . . . ." 339 I.C.C. at 257.

 Ex Parte No. 267 was a general revenue increase proceeding. *fn7" In Aberdeen & Rockfish R. Co. v. SCRAP, 422 U.S. 289, 95 S. Ct. 2336, 45 L. Ed. 2d 191 (1975), the Court observed that in such proceedings,

 
"The ICC's inquiry has tended to focus on whether the railroads are really in need of increased revenues and has tended to leave for individual rate or refund proceedings under 49 U.S.C. §§ 13 and 15 the problem of determining just which commodities on which runs should bear the increased burden and to what extent. The ICC is careful to leave such refund claims open by including in the general revenue order a statement [leaving open the determination of particular rates]." Id., at 313.

 The Court went on to say:

 
"Of course, the ICC has the power in a general revenue proceeding to declare the new rates unlawful and disapprove the increase. It could also, if it chose, declare some of the rates discriminatory, unreasonable or otherwise unlawful; and it could itself affirmatively approve all or some of the rates as just and reasonable. But under the Louisiana case [ United States v. Louisiana, 290 U.S. 70, 78 L. Ed. 181, 54 S. Ct. 28 (1933)], the general rule has been that the ICC may confine its attention in general revenue proceedings almost entirely to the need for revenue and to any other factors that relate to the legality of the general increase as a whole;" Id., at 313-314.

 A general revenue order is permissive in nature, and increases taken pursuant to it provide certain advantages for the railroads, e.g., the use of the short-cut Master Tariff, institution of rate increases on less than statutory publication, a shifting of the burden of proof as to whether the rates are reasonable and just. *fn8"

 When the Commission issues a general revenue order, it customarily refrains from exercising its power to suspend tariffs filed pursuant to that order if such tariffs are within the level authorized.9 The rates are still carrier-made, but such rates must be within the limits authorized by Commission Order if the carriers wish to partake of the advantages offered by a general revenue proceeding. The lawfulness of individual rates may still be challenged by a complaint under Section 13 or by independent Commission action under Section 15.

 Shortly after the issuance of the Ex Parte No. 267 Order, the railroads published short form Master Tariff X-267-B. The Commission relaxed the statutory 30 day notice requirement, *fn10" and allowed the railroads to publish their Master Tariff X-267-B on 15 days notice. This Master Tariff increased both water-rail and direct-rail rates between points in Eastern Territory of the United States and points in Canada by 14 percent. The Commission did not, either upon complaint or upon its own initiative, suspend the operation of this tariff as it is empowered to ...


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