National Grain and Feed Association v. United States of America, Interstate Commerce Commission, Burlington Northern Railroad Company, North Dakota Public Service Commission, North Dakota Wheat Commission, North Dakota Barley Council, Intervenors. North Dakota Grain Dealers Association v. United States of America, Interstate Commerce Commission, Burlington Northern Railroad Company, North Dakota Public Service Commission, North Dakota Barley Council, North Dakota Wheat Commission, IntervenorsNational Grain and Feed Association v. United States of America, Interstate Commerce Commission, Burlington Northern Railroad Company, North Dakota Public Service Commission, North Dakota Wheat Commission, North Dakota Barley Council, Intervenors. North Dakota Grain Dealers Association v. United States of America, Interstate Commerce Commission, Burlington Northern Railroad Company, North Dakota Public Service Commission, North Dakota Barley Council, North Dakota Wheat Commission, Intervenors
William W. Binck, Asst. Atty. Gen., Bismarck, ND, argued, for intervenor North Dakota Wheat Com‘n.
Samuel M. Sipe, Jr., Washington, DC, argued, for intervenor Burlington Northern R.R.
Louis Mackall, V, I.C.C., Washington, DC, argued, for appellee.
Before FAGG, Circuit Judge, HEANEY, Senior Circuit Judge, and BEAM, Circuit Judge.
HEANEY, Senior Circuit Judge.
The National Grain and Feed Association and the North Dakota Grain Dealers Association petition for review of a decision by the Interstate Commerce Commission (“the Commission“) approving the Certificate of Transpоrtation program of the Burlington Northern Railroad Company. We affirm in part and reverse in part, and remand to the Commission for further consideration of the relevant common carrier obligations.
I
In June 1988 Burlington Northern Railroad Company began selling guaranteed future rail transportation capacity by public auction. The Burlington Northern auction allows shippers to bid on specified rail transportation up to five months in advance of an approximately two-weеk shipping period. Shippers participating in the auctions bid on negotiable Certificates of Transportation (“COTs“) that are specific to one of fourteen different “corridors.” A corridor, in turn, is specific to the particular commodity to be shipped as well as to the size and direction of shipment.1
Burlington Northern manages all aspects of the COT auctions, periodically announcing the offer of specified COTs and setting the minimum acceptable bid. Shippers trаnsmit bids by telephone or telefacsimile. Under current practice, the successful bidder must make an initial down payment of twenty-five percent of the COT purchase price, the balance to be paid five days before the designated shipment period. The successful COT bid, together with the relevant corridor information, is filed with the Commission on one day‘s notice as a tariff pursuant to
Because COTs are filed as tariffs, rather than contracts, there is no specific statutory limit on the grain car capacity that Burlington Northern could auction through such a program, and there is no limit on the quantity of COTs that a single large shipper might purchase. As currently administered, Burlington Northern voluntarily limits the grain cars available for auction in the COT program to forty percent of its total covered hopper fleet. The percentage of the fleet actually auctioned in the COT program has been less than forty percent, but as conceded at oral аrgument, during periods of peak demand in certain corridors, the number of COT cars actually loaded may exceed seventy percent of all loadings.2 It also is typical that as few as four large shippers control the vast majority of the COT car capacity.
II
On 7 March 1988 the petitioners filed a complaint with the Commission challenging the COT program as unlawful under the Interstate Commerce Act. They alleged four grounds on which the program violated the Act: The program does not qualify as a special tariff under
The Commission heard the complaint pursuant to its modified procedures under
The petitioners seek review of the decision of the Commission, to which they are entitled under
III
Burlington Northern‘s COT program, a new approach to the sale of rail transportation, has never before been scrutinized by the Commission or the courts. Because some of the implicated provisions of the Interstate Commerce Act also have evaded judiсial scrutiny, we are presented with several issues of first impression. In this context, we emphasize that when reviewing a ruling of an administrative agency, we are constrained to grant considerable weight to the agency‘s construction of the statutory scheme it is entrusted to administer. Chevron v. Natural Resources Defense Council, Inc., 467 U.S. 837, 844, 104 S.Ct. 2778, 2782-83, 81 L.Ed.2d 694 (1984). “If the statute is silent or ambiguous with respect to the specific issue, the question for the court is whether the agency‘s answer is based on a permissible construction of the statute.” Id. at 843, 104 S.Ct. at 2782. Thus, we may not substitute our construction of the statutes for a reasonable interpretation made by the Commission. Id. at 844, 104 S.Ct. at 2782-83.
A. Contract versus Tariff
The petitioners allege the Commission abused its discretion and misconstrued the law when ruling that COTs may be filed as special tariffs under section 10734 rather than as contracts under section 10713. We find that the Commission‘s decision is based on a permissible construction of the statutory scheme of the Interstate Commerce Act, and that the Commission did not abuse its discretiоn in so ruling. The Commission‘s further finding that shippers may complain about the reasonableness of COT rates for specific movements provides some assurance that abuses of the classification may be remedied.
Congress conducted a thorough review of the nation‘s rail transportation system before enacting the Staggers Rail Act of 1980,
Thus, with the inclusion of these specifically enumerated restrictions and prophylactic measures, Congress provided that a carrier‘s preferential treatment of shippers pursuant to an approved contract would be insulated against attacks alleging violations of the common carrier obligations. See
B. The Common Carrier Obligation
Congress passed the Staggers Rail Act upon a finding that most transportation in the United States today is competitive, that the nation‘s railroads have deteriorated under the burden of unnecessary and inefficient government regulation, and that rail tariffs should be more responsive to market fоrces. Although Congress specifically set as one goal of the Act “to assist the rail system to remain viable in the private sector of the economy,” Staggers Rail Act, 94 Stat. 1895, 1897, it also preserved the statutory common carrier obligations of rail companies to all shippers. Whether the innovative COT program unduly thwarts Burlington Northern from meeting its common carrier obligations is the heart of this case, and highlights the potential difficulty of combining innovation and reliance on market forces with preservation and enforcement of the common carrier obligations.
More precisely, this case presents the question whether Burlington Northern‘s COT program violates its common carrier obligations during periods of grain car shortages; for when there is a surplus of available grain cars, there are few undue delays in car service. Shortages, however, appear to arise precipitously and with sufficient frequency as to cause problems for shiрpers3; indeed, the COT program would have little appeal to shippers if they did not anticipate delays in shipping their grain under the conventional tariff program. Assuming shortages arise sufficiently often to cause adverse consequences to shippers, what is the common carrier obligation that Burlington Northern must meet with regard to its non-COT clients?
The specific restrictions on the use of rail contracts is instructive as to the understanding of Congress concerning the common carrier obligations. The forty percent restriction on the total equipment a carrier may dedicate to contract service provides assurance that a carriеr will still have sufficient equipment to meet reasonable requests for conventional service. The restriction on rail car capacity for which certain large shippers might contract provides assurance that limited rail equipment can be equitably distributed among all shippers. The explicit power of the Commission to deny approval to any contract provides assurance that unforeseen infringements on the common carrier obligations might be rectified. Thus, with these restrictions, section 11101(a) also provides that “[a] rail carrier shall not be found to have violated this section because it fulfills its commitments under contracts approved under section 10713 ... before responding to reasonable requests for service.” There is no similar admonishment regarding carriers who give preference to special tariff shippers over reasonable requests for service.
Indeed, the statutory authority allowing carriers to establish special tariffs was enacted with the express legislative understanding that it would not adversely affect a carrier‘s ability to fulfill its common carrier obligation. The conference report specifically notes that “the common carrier obligation is not abrogated in any way. This will insure that the shipper is still guaranteed the same level of service that he receives today.” Conference Report, 1980 U.S.C.C.A.N. at 4150.
The petitioners argue that Congress thus intended a carrier‘s convеntional service to remain virtually identical to the service provided before the offering of a special tariff. We disagree. Rail service under a carrier‘s conventional tariff program need not be identical to that service before the introduction of special tariffs, but the conventional service must at all times meet the requirements of the common carrier obligations. When presented with such a case as this, therefore, the Commission must determine whether the opportunity for shippers to use conventional rail transport remains reasonable. In the instant case, the Commission failed to make that determination.
The Commission here concluded that the “general common carrier obligation as currently defined” requires only that a carrier “maintain a fleet sufficient to meet average demand.” 8 I.C.C.2d at 427. The Commission further observed that a “requirement for a fleet sufficient to meet peak demand would result in a wasteful surplus оf equipment detracting from the carrier‘s long term financial health.” Id. We find that the Commission‘s ruling regarding fleet size is a permissible construction of the statute. The common carrier obligations, however, involve much more than maintenance of sufficient fleet size. The Commission must also examine how the common carrier allocates the resources of that fleet: Are the procedures for distribution of the fleet reasonable and fair, and is the distribution equitable? Does the cаrrier provide adequate service on reasonable request?
In this case, the Commission failed to resolve these issues. The Commission did acknowledge the question of equitable distribution, but it failed to respond with appropriate findings of fact and legal analysis. Rather, it improperly rejected the claim on an extraneous basis: “We do not think that [petitioner] has shown that the COT program enables or causes [Burlington Northern] to breach its obligation to distribute cars equitably. There is nothing about the COT program that excludes particular classes of shippers.” Id. at 429. Notwithstanding the questionable finding that the COT program does not exclude particular classes of shippers,4 a finding that non-COT shippers could participate in the COT program still fails to address whether conventional, non-COT shippers receive an equitable distribution of rail cars.
Nor has [petitioner] shown that [Burlington Northern] has violated its common carrier duty to provide cars on reasonable request.... The fact that the COT process reduces the numbers of cars available during shortages for non-COT shippers, again, does not show that the COT program is unlawful. Moreover, shippers dissatisfied with the quality of non-COT service can bid on COTs.
Id. at 430. The Commission errs here in two ways. First, if the COT process so reduces the numbers of cars available during shortages for non-COT shippers that it unduly impairs Burlington Northern‘s ability to meet its common carrier obligations, then it does show that the COT program is unlawful. Second, the Commission again suggests that if the quality and reasonableness of non-COT service is a problem, shippers can resolve the problem simply by bidding on the special COT service.
Evidence in the record suggests that non-COT shippers endure unreasonable delays in receiving car service during shortages. That these shippers might feasibly switch to the premium tariff COT service is nоt the relevant inquiry; rather, the Commission must determine if the COT program so affects the service for conventional shippers as to violate Burlington Northern‘s common carrier obligation to provide equitable and adequate car service on reasonable request.
To be clear, we stress that Congress intended the common carrier obligations to continue to apply to a rail carrier‘s conventional tariff service—that is, to its common carriage. Although а rail carrier also may offer other forms of service through contracts or premium tariffs, no shipper must avail itself of these special offerings simply to receive common carriage. Thus, the special service may not so adversely affect the carrier‘s conventional tariff service as to prevent or frustrate its ability to meet its common carrier obligations through that conventional tariff service.
In concluding that Burlington Northern meets its common carrier obligations because its COT premium tariff program is available to all shippers, the Commission erred. It must rather determine whether Burlington Northern meets its common carrier obligations to shippers who might choose to use only its conventional tariff service. Specifically, the Commission must determine the following: Does the COT program adversely affect Burlington Northern‘s conventional tariff rail service? If so, does Burlington Northern fail as a consequence to provide equitable sеrvice to any of its conventional tariff shippers? Does it fail to provide adequate service to its conventional tariff shippers? Does it fail to provide service on reasonable request to its conventional tariff shippers? Does the COT program render Burlington Northern‘s first-come-first-served allocation scheme unreasonable for conventional tariff shippers? Does Burlington Northern fail in any way to meet its common carrier obligations to its conventional shippers because of its COT program?
IV
We reverse the holding of the Commission that Burlington Northern‘s COT program does not infringe its common carrier obligations and remand for further proceedings consistent with this opinion. We affirm the decision of the Commission in all other respects.
BEAM, Circuit Judge, concurring and dissenting.
Congress discovered that America‘s rail transportation system was being regulated out of business by the Interstate Commerce Act. In response, it enacted the Staggers Rail Act of 1980,