Petition — FORD MOTOR MOTOR CORP. v. UNITED STATES (Nos. 77-1370, 77-1162, 77-1189)

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“~ Supreme Court, U. &

FILED

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| MAR 27 1978

——— RODAK, JR., CLERK

IN THE

Supreme Court of the United States

October Term, 1977

No.77-13 70

FORD MOTOR COMPANY,

Petitioner,

v.

UNITED STATES OF AMERICA, ET AL.,

Respondents.

PETITION FOR A WRIT OF CERTIORARI

TO THE UNITED STATES COURT OF APPEALS

FOR THE THIRD CIRCUIT

HENRY R. NOLTE, JR.

DAVID R. LARROUY

HARRY GIBSON

Ford Motor Company

The American Road

Dearborn, Michigan 48121

ROBERT N. KHARASCH

OLGA BOIKESS

Galland, Kharasch, Calkins

& Short

1054 Thirty-First Street, N.W.

Washington, D.C. 20007

(202) 333-2200

Attorneys for Petitioner

March 27, 1978 Ford Motor Company

——— ee

THE CASILLAS PRESS, INC.-1717 K Struet, N. W.-Weshington, 0. C.-223-1220

ORDERS AND OPINIONS BELOW

JURISDICTION

QUESTIONS PRESENTED

STATUTORY PROVISIONS

STATEMENT OF THE CASE

1.

2.

3.

4.

S.

REASONS FOR GRANTING THE WRIT

1.

(i)

TABLE OF CONTENTS

PING ENGED 0c ccnccccccecessccceseee

The Agency’s Detention Rules..............+.+:

Holding Yards Serve Important Carrier and

Shipper Needs and Reduce Costs to the Public......

The Agency's Decisions ..........ccccccccccees

The Court of Appeals Decision ...............++-

The Third Circuit Applied an Improperly

Narrow Standard of Review ................:05-

The Interstate Commerce Commission Acted

Arbitrarily and Capriciously by Curtailing

Long-Standing Carrier Obiigations to Perform

Delivery Without Any Rational Basis, or

Examination of Its Departure From Prior Cases,

Or Consideration of the Appropriateness of

OED RNS cc cece cc ccccececcccececces

“ee eeneeeeeeeneeeeeeeeeeneee

(ii)

TABLE OF AUTHORITIES

Court Cases: Page

Alabama Association of Insurance Agents v.

Board of Governors,

S33 F.28 TBO Gi Cie. 19FE) .. oc ccccccccccccccscccccccces 15

Almay, Inc. v. Califano,

No. 76-1718 (D.C. Cir. Dec. 21, 1977) ..... 22. e cece eeees 15, 17

Ann Arbor Railroad Co. v. United States,

358 F. Supp. 933 (E.D. Pa. 1973)... 2.6... e cece eee ee ee eee 14

Atchison, Topeka & Santa Fe Railway Co. v.

Wichita Board of Trade,

I 666 bc db ddvccnccdecrescenencese 3, 13, 19

B. F. Goodrich Co. v. Department of Transportation,

541 F.2d 1178 (6th Cir. 1976), cert.

Gorehad, SID U.D. TIBI ccc ccccccccccccccccccccsses 1S

Bowman Transportation, Inc. v. Arkansas-

Best Freight System, Inc.,

., | & | ST TeTrrrTrerreerrriritire ert 14

Burlington Northern, Inc. v. United States,

Pe GE BOF ED cc vccccccccscenescoscccesvese 14

Burlington Truck Lines, Inc. v. United States,

BPE Wn Dc Ce cc ccescécccdscecscoccesesseceees 17

Camp v. Pitts,

Re Se) eee TROTTITTTOTIL TTT TT 14

Chemical Leaman Tank Lines, Inc. v. United States,

368 F. Supp. 925 (D. Del. 1973)... 2... eee 14,15

Citizens to Preserve Overton Park, Inc. v. Volpe,

Ge Es 6 Cd See dbcecdccoccccsvcescecoues 13, 18

Ethyl Corp. v. Environmental Protection Agency,

S41 F.2d 1 (D.C. Cir. 1976), cert.

EES 6.60 o-4 bc Casi de cnscscdcesensss 15

(iii)

i

Federal Power Commission v. Transcontinental

Gas Pipe Line Corp.,

eng RR a 14

Interstate Commerce Commission v. Atchison,

Topeka & Santa Fe Railway Co.,

ee ule ede base és 19

Loveless Manufacturing Co. v. Roadway Express, Inc.,

104 F. Supp. SO9(N.D. Oksa. 1952)... 2... cece ccc ccccccecs 19

National Association of Food Chains, Inc. v.

Interstate Commerce Commission,

Be ade BEE GOP. BOFED co ccccccccccccccces 15, 16, 18, 20

SEC v. Chenery Corp.,

EE 18

Secretary of Agriculture v. United States,

Cc eh Seu ebbee debe ed eeeescsececnes 19

South Terminal Corp. v. Environmental Protection

Agency, S04 F.2d 646 (Ist Cir. 1974) 2.0... eee eee 1S

United States v. Allegheny-L udlum Steel Corp.,

DMS Ck 6 cecceesatocecdseneeecee 2, 12, 13, 14

United States v. Florida East Coast Railway Co.,

ES decade eebase Fees eu eCeesceuveccess 14

Wabash Railroad Co. v. Pearce.

a cee 18

Administrative Cases:

American Smelting & Refining Co.

Terminal Services,

TT dno ccc ienectansusesecsccesovscess 18

Carrier Switching at Industrial Plants in the East,

DPE cceecccveosecetstsccéeveceesesece 18

(iv)

Charges at New York Harbor, Penn Central

Transportation Co.,

DOS ELAS, TAGE cc ccccvccccccvcvsesesenesuess

Joint Petition for Declaratory Order — Private

Sidetrack — General Motors Corp. and the

Long Island Rail Road Co.,

SEE ECL. GER GIGI co ccccccccvesveccseeteveesesee

Terminal Charges at Philadelphia, Baltimore and

Hampton Roads Ports,

STO LCA, FET GIS) cw ccccccccvencesvccesesusetes

Unloading Restrictions on Meats & Packinghouse Products,

346 I.C.C. 775 (1974), on reconsideration,

349 L.C.C. 189 (1975), vacated and remanded for

further proceedings sub nom. National Association

of Food Chains, Inc. v. Interstate Commerce

Commission, 535 F.2d 1308 (1976), on remand

euGer conved Same BA BST cc ccccctcvcceccctoceceees

Federal Statutes and Regulations:

SUBC.GIU .< <000ccensevescusnsuenneeeee

SUSE, SONNEI... «0s 00seceenasanasnneeeee

WBUSL. GIAO .. . cecccecscccecusndednaneneum

49 C.F.R. §1307.3Se) (2) Section 2(f) (proposed) ..........

Other Authorities:

K.C. Davis, Administrative Law of the Seventies,

a

Pedersen, Formal Records and Informal Rulemaking,

ee

Verkuil, Judicial Review of Informal Rulemaking,

60 VIRGINIA L. REV. 185(1974) ....... 0.0 c ce eeees

Wright, The Courts and the Rulemaking Process;

The Limits of Judicial Review, 59 CORNELL L.Q.

FOOD ccvccccccvcscecsebeeseseuseenneennnn

IN THE

Supreme Court of the United States

October Term, 1977

No. 77-

FORD MOTOR COMPANY,

Petitioner,

v.

UNITED STATES OF AMERICA, ET AL.,

Respondents.

PETITION FOR A WRIT OF CERTIORARI

TO THE UNITED STATES COURT OF APPEALS

FOR THE THIRD CIRCUIT

Petitioner, Ford Motor Company, respectfully requests

that a Writ of Certiorari issue to review the judgment and

opinion of the United States Court of Appeals for the Third

Circuit entered in this proceeding on December 29, 1977.'

‘Respondents to this Petition are United States of America, In-

terstate Commerce Commission, and Middle Atlantic Conference,

Rocky Mountain Motor Traffic Bureau, and Southern Motor Carriers

Rate Conference, Intervenors in support of Respondents below, and

National Industrial Traffic League and Jones Transfer Company,

Petitioners below. National Industrial Traffic League and Jones Trans-

fer Company have each filed petitions for writs of certiorari to review

the Third Circuit decisions (Nos. 77-1189 and 77-1162, respectively).

2

ORDERS AND OPINIONS BELOW

The judgment opinion of the Court of Appeals is not yet

reported and appears in the Appendix hereto (3a).? The ac-

tion in the Court of Appeals sought review of decisions and

orders of the Interstate Commerce Commission (ICC) in Ex

Parte No. MC-88, Detention of Motor Vehicles — Nation-

wide. The initial report and order of the Interstate Com-

merce Commission was decided on May 12, 1976, and is

reported at 124 M.C.C. 680 (15a). The second report and

order of the Commission, on reconsideration, was decided

on June 3, 1977, and is reported at 126 M.C.C. 803 (135a).

The third decision and order of the Commission, on further

reconsideration, was issued on September 14, 1977 and is

unpublished (165a). All of the decisions appear in the Ap-

pendix.

JURISDICTION

The judgment of the Court of Appeals for the Third Cir-

cuit was entered on December 29, 1977 and this petition for

certiorari was filed within ninety days of that date. The

jurisdiction of this Court is invoked under 28 U.S.C.

§1254(1).

QUESTIONS PRESENTED

1. Does this Court’s decision in United States v.

Allegheny-Ludlum Steel Corp., 406 U.S. 742 (1972) impose

so narrow a scope of review that a Court of Appeals must

mechanically approve an Interstate Commerce Commission

rule without a careful scrutiny of the record to determine

that the rule is factually supported and without a careful

*References to the consolidated appendix which has been submitted

by petitioners seeking review of the Court of Appeals’ decision are given

as “ a

review of the agency decision to determine that it has a

rational basis?

2. Does the Interstate Commerce Commission have the

administrative discretion to curtail long standing carrier

obligations to perform delivery services as part of line-haul

service in the absence of any rational explanation of its ac-

tion or of its departure from prior cases, and in derogation

of the principle recently affirmed by this Court in Atchison,

Topekc & Santa Fe Railway Co. v. Wichita Board of

Trade, 412 U.S. 800 (1973), requiring the agency to deter-

mine whether a carrier’s rate should be reduced to reflect a

proposed reduction in carrier service?

STATUTORY PROVISIONS

United States Code, Title 5:

§706. Scope of Review.

To the extent necessary to decision and when presented,

the reviewing court shall decide all relevant questions of

law, interpret constitutional and statutory provisions, and

determine the meaning or applicability of the terms of an

agency action. The reviewing court shall—

(1) compel agency action unlawfully withheld or

unreasonably delayed; and

(2) hold unlawful and set aside agency action, find-

ings, and conclusions found to be—

(A)arbitrary, capricious, an abuse of

discretion, or otherwise not in accordance

with law;

(B) contrary to constitutional right, power,

privilege, or immunity;

(C)in excess of statutory jurisdiction,

authority, or limitations, or short of

statutory right;

4

(D) without observance of procedure required

by law;

(E) unsupported by substantial evidence in a

case subject to sections 556 and 557 of this

title or otherwise reviewed on the record of

an agency hearing provided by statute; or

(F) unwarranted by the facts to the extent that

the facts are subject to trial de novo by the

reviewing court.

In making the foregoing determinations, the court shall

review the whole record or those parts of it cited by a party,

and due account shall be taken of the rule of prejudicial

error.

Code of Federation Regulations, Title 49:

§1307.3S(eX2) (Proposed)

Section 2, Definitions.

(f) ‘Spotting’ means the placing of a trailer at a

specific site designated by consignor, con-

signee, or other party designated by them,

detaching the trailer, and leaving the trailer in

full possession of the consignor, consignee, or

other designated party unattended by carrier’s

employee and unaccompanied by power unit.

Carrier will not move the trailer unti! such

time as it has received notification, pursuant

to section 3, that the trailer is ready for pickup

at any site on premises. Consignor, consignee,

or other designated party may shift the spot-

ted trailer with its own power units at its own

expense and risk for the purpose of loading or

unloading. Empty trailers placed at the

S

premises of consignor without specific request

are not spotted until the carrier reccives a con-

signor’s request and places a trailer for spot-

ting. Movement of the trailer from consignor’s

premises to the specific site for spotting shall

be the obligation of the carrier, and free time

shall accrue as provided in section 3.

STATEMENT OF THE CASE

1. Summary of the Case

This case involves a vital relationship between truckers

ly satisfactory to both, and result in lower transportation

costs — and transportation costs are ultimately borne by the

public. Nevertheless, the Interstate Commerce Commission

(ICC) has undertaken (in a twice-reconsidered decision) to

interfere with these efficient and satisfactory practices, for

vaguely-defined purposes that amount to “regulation” for

regulation’s sake. Ford Motor Company, as a major ship-

per and receiver by truck, is directly affected by

uneconomic practices proposed to be mandated by the ICC.

Under their tariffs, truckers are obliged to deliver goods

and pick up loaded trailers at shippers’ cargo receiving and

loading docks. Many truckers do not — and cannot —

maintain their own terminals near all shippers’ plants.

Therefore, in order to permit deliveries throughout the 24

hours of the day and to permit empty trailers to be con-

veniently ready for outbound loads, piants permit truckers

to drop off loaded trailers and leave empty trailers in

holding yards. By using these yards, truckers need not

bring trailers from terminals many miles away or invest in

multiple unnecessary terminals.

The present system works splendidly, but the ICC, in the

service of a vaguely-defined ideal of “uniformity” has

6

issued rules to abrogate this shipper-carrier cooperation.

The result is unsupported by fact or logic, unsatisfactory to

carriers and shippers, will ultimately be more costly to the

public, and withdraws services now included in tariff rates

without adjusting the rates — in contravention of the plain

language of this Court’s decisions.

2. The Agency’s Detention Rules

Following notice-and-comment rulemaking procedures,

the ICC has issued regulations in ICC Docket Ex Parte

MC-88, Detention of Motor Vehicles — Nationwide, to

provide ‘‘uniform”’ nationwide rules governing charges for

detention of motor vehicles by shippers and receivers (con-

signees) incident to the loading and unloading of freight

shipments. Detention charges are theoretically imposed to

encourage shippers and consignees to release carrier equip-

ment promptly.’ As an adjunct of the rules governing

detention charges, the ICC has included a provision that

declares that a motor carrier trailer is ‘‘spotted’’ (or placed

for delivery) whenever a truck is detached from the power

unit on a consignee’s property. This means that motor

carriers no longer have to meet their tariff obligation to

place trailers at the consignee’s unloading dock to effect

delivery. This obligation is now paid for as part of the line-

haul truck rates.

The long-standing industry practice is to allow carriers to

use a “holding area” established at the consignee’s

premises to drop off trailers, thereby eliminating the need

to tie up the carrier’s expensive over-the-road power unit

while awaiting the time for placement of the trailer at the

unloading dock.‘ The ICC’s rule changing delivery

*Petitioner Ford Motor Company does not challenge [CC deter-

minations respecting the level of detention charges.

“Thus where shipments arrive at night when a plant is closed, or

when carriers deliver trailers to a plant at the same time, a carrier can

leave the trailer in the holding area at its convenience and free the

7

requirements and abrogating carrier delivery obligations

was not accompanied by any corresponding action to deter-

mine if the decrease in carrier responsibilities should result

in an adjustment of the rates charged by the carriers for

their line-haul service.

Detention charges are imposed under the motor carrier

tariffs. The “‘spotting’’ provision just promulgated by the

ICC does not, in fact, change the applicability of detention

charges.* (J.A. 31). Such charges have always been and

remain applicable to any detention of a motor carrier’s

trailer in the holding area. As soon as the carrier informs

the consignee that the shipment has arrived, the tariff

stipulated “free time’’ period allotted for unloading begins

to run and then detention charges (on an hourly or daily

basis) are charged if unloading is not completed and the

trailer released within the unloading period. Free storage in

a trailer is not provided to a consignee as a result of the use

of a consignee-supplied holding yard.

Although the fact is that carrier detention charges are

applicable to trailers in consignee holding yards, the ICC

has continued to justify its mischief-making “spotting”

provision by explaining that without this rule, shippers and

consignees could avoid detention charges by means of

holding yards. The ICC has persisted in this basic miscon-

ception despite repeated efforts of participants in the ICC

proceeding to set the record straight. Thus, the most recent

of the three agency decisions and orders in the docket

dismisses protestants’ arguments by saying:

driver and the over-the-road power unit from needless waiting. These

holding areas are typically fenced parking lots on the consignee’s proper-

ty. They are operated by the carriers, or their agent, who takes

possession of the trailer and later moves the trailer from the lot to the

unloading area.

*References to the administrative record in the Joint Appendix before

the Court of Appeals below are given as “J.A. ”’.

“This argument ignores the fact that the con-

venient holding yard arrangement advocated by

petitioners allows large shippers the advantage of

unlimited spotting with little or no likelihood of

incurring any detention charges."’ (168a). (em-

phasis added)

“*. . . Loaded and empty trailers requested by

consignors should not have to wait hours and

days in limbo before free time can toll."’ (169a).

(emphasis added)

Not only are the spotting provisions based on a wholly

erroneous factual premise, but they have no other eviden-

tiary or legal support on the record. What is more, these

restrictions are totally illogical, for they run directly counter

to the agency’s purported goals in establishing “‘uniform”

detention rules.

3. Holding Yards Serve Important Carrier and

Shipper Needs and Reduce Costs to the Public.

The agency’s declared objective in instituting Ex Parte

No. MC-88 was to establish uniformity in motor carrier

detention rules and charges. A secondary objective was to

determine whether carriers should be required to publish

tariff provisions permitting consignees to establish

prearranged delivery schedules and avoid detention charges

if the carrier’s vehicles arrived ahead of time. Since the ICC

decided that prearranged delivery scheduling should be

mandatory, any consignee, large or small, can require a

carrier to place its trailer at the plant unloading facilities at

a particular time. The spotting provision deals with the use

of holding areas as an alternative to prearranged delivery

schedules — an alternative which has in the past given

carriers and consignees much needed flexibility.

9

Use of holding yards permits a carrier to make the most

efficient use of its drivers and over-the-road power units by

eliminating needless and costly waiting time. A carrier can

deliver trailers to a plant 24 hours a day, whether or not the

plant is open. A single power unit operated by holding yard

personnel frees dozens of drivers and over-the-road trac-

tors, each of which would otherwise queue to deliver the

trailers to the loading dock on a prearranged schedule

basis. Without the use of holding yards, pressure on carrier

terminal facilities, scheduling problems, and concomitant

delays would be severe where deliveries must be made to

plants receiving large numbers of trailers each day.°

Moreover, holding yards expand service opportunities for

carriers and shippers by permitting those carriers who do

not have holding facilities near a particular consignee’s

plant to compete for the traffic.

The spotting provision promulgated by the Commission

relieves the carrier of the responsibility for switching the

trailer between the holding yard and the unloading area. It

requires the shipper or consignee to pay the costs of the

transfer in addition to paying the usual freight charges.

Consequently, if permitted to go into effect, this rule would

largely eliminate the holding yard alternative. Shippers can

be expected to insist on “‘live” pre-scheduled deliveries

which do not involve additional costs for placement at

unloading areas. So, instead of furthering the purported

agency goal of lessening detention of motor carrier equip-

ment, the spotting provisions would result in increased

detention of equipment.

4. The Agency’s Decisions

Over the course of the various decisions and orders

issued, the Commission has never reconciled the spotting

provisions with the proceeding’s presumptive overall ob-

*Some plants receive as many as 150 loaded trailers in a day. As

many as SO different motor carriers may serve a plant.

10

jective of eliminating equipment detention. Indeed it couid

-at do so. The only study of record demonstrated con-

clusively that the use of holding yards eliminated

chargeable detention (detention past free time) of power

vehicles, substantially reduced the use of power vehicles in

the delivery process and reduced chargeable detention of

trailers to a negligible figure (1.5 percent). (J.A. 36-37, 628,

630). Instead of a rational explanation of its proposals, the

ICC has offered a series of shifting and contradictory

reasons for the spotting rule, grounded in the incorrect

prernise that detention charges are inapplicable to equip-

ment in holding yards when in fact charges are applicable

during this period.

A good example of the agency’s inconsistent and illogical

approach is its completely different treatment of holding

yards at origin (loading) points and at destination (delivery)

points. During the course of the proceeding, the ICC

revised its spotting rules to permit continued operation of

holding areas on shipper’s or consignor’s property at origin

points, citing the very same factors which protestants

showed support continued use of destination holding yards,

ie., operating efficiencies, reduced power and driver

waiting time and duplicate mileage, better service to in-

dustries located far from established terminals, etc. (140a-

142a, 167a).’

The ICC never justified its curtailment of carrier delivery

obligations. Initially, the agency took the position that

carrier operated holding yards were a departure from

traditional industry practices. (73a). But in its first decision

on reconsideration, the agency changed to argue only that

the practice was not universal (based upon a reference to

”The agency decisions are also internally inconsistent. Thus, each of

the agency’s reports contains statements that trailers in holding yards

are not spotted (because they remain in the carrier’s possession), as well

as statements that such trailers must be deemed spotted -— leading to real

11

one plant of a consignee, although there were carrier

operated holding yards at other major plants of the con-

signee). (140a). Its only comment on the jong line of cases

holding that placement for delivery at consignee unloading

areas was a carrier obligation was that these cases were

inapposite. (73a).

Throughout the Ex Parte No. MC-88 proceedings, there

have been agency intimations of the possibilities of

discrimination between large and small shippers, but the

record is devoid of any basis for this purported justification.

Initially the Commission suggested that holding yards per-

mitted large shippers greater control over delivery timing

than small shippers. (74a). Yet in this very decision, the ICC

eliminated any such possible advantage by requiring

prearranged deliveries for all shippers. (43a-47a). Thus,

small shippers could precisely control delivery times.’

Later, the agency argued that discrimination would exist

because large shippers could use holding yards to avoid

detention charges. (168a). This is simply not so, since deten-

tion charges are applicable to equipment in holding yards.

There is simply no evidence of record that:

—the use of holding yards contributes to detention;

or that

—the use of holding yards causes a small shipper to

get any less efficient service for his operation than

a large shipper gets; or that

—the use of holding yards causes small shippers to

bear the rate burden of big shippers.

To the contrary, the record shows that permitting the use of

holding yards as an alternative to prearranged deliveries

decreased detention of equipment. Consignees remain free

*There is no evidence to show that use of holding yards is confined to

large shippers. On the contrary, both small and large shippers use such

facilities (J.A. SSS-SS8).

12

to schedule live deliveries on a prearranged basis where that

system gives better operating control.

While the Commission made no independent study of the

comparative costs of carrier deliveries with or without

holding yards and while the only evidence of record showed

that carrier costs were less when holding yards were used

(J.A. 887-890), nevertheless, the agency action requires a

consignee to pay more for a service which would cost the

carriers less. It would be hard to find agency action which

so completely lacks any rational basis.

5. The Court of Appeals Decision

Accordingly, petitioner, joined by other protesting ship-

pers and motor carriers, sought review of the ICC’s adop-

tion of section 2(f) of the detention rules in the Court of Ap-

peals for the Third Circuit. Although the Court denied the

requested relief, per curiam, it is evident from the Third

Circuit’s opinion that it refrained from acting because it

believed itself severely constrained by this Court’s decision

in United States v. Allegheny-Ludlum Steel Corp., 406 U.S.

742 (1972).

The Third Circuit was plainly concerned with the poor

quality of the ICC decisions and orders. It characterized the

ICC’s discussion of the issues raised by petitioners to be “‘at

best, laconic”, (10a) and criticized the fact that the ICC’s

conclusions seemed unrelated to the record. The court

never attempted to show how the agency conclusions were

rationally based and grounded in the record. Instead, after

stating that the Supreme Court in Allegheny-Ludlum “has

formulated a scope and standard that severely limits the ex-

tent of judicial review” (9a), the court explained that its

conclusion might well have been different “wlere we able

to utilize a more expansive notion of what is ‘arbitrary,

capricious, and an abuse of discretion’ ’’. (10a).

13

REASONS FOR GRANTING THE WRIT

This case raises important questions about the exercise

of administrative discretion in rulemaking proceedings and

the role of the courts in reviewing an agency’s action under

section 706 of the Administrative Procedure Act, 5 U.S.C.

§706(2Ka). The Third Circuit’s decision is in conflict with

decisions of courts in other circuits by adopting a ‘‘hands-

off’ approach which permits an agency to exercise its

rulemaking function unbounded by any meaningful

judicial oversight. The agency rulemaking in this case

presents a striking example of the need for a court to per-

form its reviewing function. The ICC’s action lacks any fac-

tual or rational basis, or explanation of its departure from

prior cases, and runs counter to the principle recently reaf-

firmed by this Court in Atchison, Topeka & Santa Fe

Railway Co. v. Wichita Board of Trade, 412 U.S. 800

(1973), requiring the agency to consider whether the

carrier’s rate should be reduced to reflect a curtailment in

carrier service.

1. THE THIRD CIRCUIT APPLIED AN IMPROPERLY

NARROW STANDARD OF REVIEW

Petitioner submits that the Third Circuit’s decision in-

correctly interpreted Allegheny-Ludlum so as to preclude

any meaningful review. Although the Third Circuit correc-

tly recited the formula for judicial review set out in

Allegheny-Ludlum, it did not take the steps needed to ap-

ply this formula. This is not the standard set in Allegheny-

Ludlum, nor is it the teaching of other decisions of this

Court. These cases require that a reviewing court look

closely to see (1) whether the agency has engaged in a

rational decision-making process, (2) whether it has

adequately explained its decision, and finally, (3) whether

the action ‘‘makes sense” in terms of the record, the ap-

plicable legal criteria and the reasons formally given. See

Citizens to Preserve Overton Park, Inc. v. Volpe, 401 U.S.

14

402, 415-416 (1971); Camp v. Pitts, 411 U.S. 138 (1973). See

also, Bowman Transportation, Inc. v. Arkansas-Best

Freight System, Inc., 419 U.S. 281, 285-286 (1974); Federal

Power Commission v. Transcontinental Gas Pipe Line

Corp., 423 U.S. 326, 331 (1976).

In Allegheny-Ludlum, this Court reviewed agency action

taken pursuant to a specific Congressional directive that

the Interstate Commerce Commission establish regulations

and policies to deal with recurring shortages of freight cars

in the nationwide railroad system. Despite the unusual cir-

cumstances of the legislative determination,’ this Court’s

decision analyzed the record to make sure that there was an

adequate factual underpinning (406 U.S. 745-746). It deter-

mined that the agency had articulated the reasons for its

decision (406 U.S. 751) and established that there was a

rational connection between the evidence in the record and

the action taken (406 U.S. 751-752). Although the scope of

review mandated by Allegheny-Ludlum is limited, neither

its example nor its language requires a reviewing court to

affirm agency action in all cases whatsoever, regardless of

the inadequacies of the agency’s decisional process.

The narrow view of a reviewing court’s role taken by the

court below is in sharp contrast to the view of courts in

other circuits. Most courts have read this court’s decisions

in Allegheny-Ludlum and other cases as imposing a duty to

review the record carefully and test the agency’s con-

clusions to determine whether the agency has exercised a

reasoned discretion. Burlington Northern, Inc. v. United

States, 549 F.2d 83 (8th Cir. 1977); Chemical Leaman Tank

Lines, Inc. v. United States, 368 F.Supp. 925 (D. Del.

1973); Ann Arbor Railroad Co. v. United States, 358

F.Supp. 933 (E.D. Pa. 1973). When this standard was not

met, these courts have not hesitated to remand proceedings

*This Congressional factfinding was described in United States v.

Florida East Coast Railway Co., 410 U.S. 224, 230-31 (1973).

15

to the agency for correction. National Association of Food

Chains, Inc. v. Interstate Commerce Commission, 53S F.2d

1308 (D.C. Cir. 1976); B.F. Goodrich Co. v. Department of

Transportation, 541 F.2d 1178 (6th Cir. 1976), cert. den.

430 U.S. 930 (1977); Alabama Association of Insurance

Agents v. Board of Governors, 533 F.2d 224 (Sth Cir.

1976); South Terminal Corp. v. Environmental Protection

Agency, 504 F.2d 646 (1st Cir. 1974); Chemical Leaman

Tank Lines, Inc. v. United States, supra.

A very recent case of the Court of Appeals for the District

of Columbia Circuit, Almay, Inc. v. Califano, No. 76-1718,

(D.C. Cir. Dec. 21, 1977), points out the particular need for

judicial review in informal rulemaking proceedings

precisely because of the absence of a formal evidentiary

record and the concomitant reliance on agency discretion.

The opinion expressly rejected the notion that there was a

‘**super-presumption of correctness’ standard” (/d, Slip

Op. at 13). Almay echoed the warning of the Circuit’s

earlier opinion in Ethyl Corp. v. Environmental Protection

Agency, 541 F.2d 1 (D.C. Cir.), cert. denied 426 U.S. 941

(1976), of the consequences of a reviewing court adopting as

restrictive a role as the court below did:

“This is not to say, however, that we must rubber-

stamp the agency decision as correct. To do so

would render the appellate process a superfluous

(although time-consuming) ritual’’. (Slip Op. at

13).

Legal commentators have also stressed the usefulness of

a vigilant, albeit limited, judicial review of informal rule-

making to curb agency abuses, pointing out that the agen-

cies are not well-equipped to correct errors through their

own proceedings,’® and that this judicial task is “‘straight-

‘Pedersen, Formal Records and Informal Rulemaking, 85 YALE

L.J. 38, 59-60 (1975).

16

forward detective work”’ well suited to “‘generalist judges’’’’

At the same time, there has been a recognition of the

usefulness of further leadership from this Court in defining

the reviewing court’s task, since the agencies are in-

creasingly using the informal rulemaking process.'? The

decision of the court below, virtually abdicating the

reviewing function because of imagined constraints,

illustrates the need for this Court’s guidance.

2. THE INTERSTATE COMMERCE COMMISSION AC-

TED ARBITRARILY AND CAPRICIOUSLY BY CUR-

TAILING LONG-STANDING CARRIER OBLIGATIONS

TO PERFORM DELIVERY WITHOUT ANY

RATIONAL BASIS, OR EXAMINATION OF ITS

DEPARTURE FROM PRIOR CASES, OR CON-

SIDERATION OF THE APPROPRIATENESS OF A

RATE ADJUSTMENT.

Petitioner submits further that the ICC’s adoption of the

spotting provision in Section 2(f) of the detention rules was

an abuse of administrative discretion. This agency action

could serve as a classic example of arbitrary and capricious

conduct. It was based on a wholly incorrect factual premise

— that the use of holding yards permitted consignees to

avoid detention charges — when detention charges are ap-

plicable to trailers in holding yards. The various reports

and orders in the proceeding are riddled with in-

"Wright, The Courts and the Rulemaking Process; The Limits of

Judicial Review, 59 CORNELL L.Q. 375, 393 (1974).

"K.C. Davis, Administrative Law of the Seventies, §29.01-2 (1976);

Verkuil, Judicial Review of Informal Rulemaking, 60 VIRGINIA L.

REV. 185, 210 (1974). The Court of Appeals of the District of Columbia

recently observed: “[T}here is no concensus among the circuits as to the

appropriate standard of review, . . .”’ National Association of Food

Chains, Inc. v. ICC, 535 F.2d at 1313.

17

consistencies.’ The spotting provisions run counter to the

declared agency objective of reducing detention and inef-

ficient use of carrier equipment.

There was no evidence that the use of holding yards con-

tributed to detention, or that the consequence of permitting

the use of holding yards as an alternative to prearranged

live deliveries caused small consignees to get any less ef-

ficient service than large consignees or caused small con-

signees to bear the rate burden of large consignees or of any

other preferential treatment. The only evidence of record

established that holding yards reduced equipment deten-

tion and carrier costs. The Commission’s action in

requiring prearranged deliveries at any consignee’s request

offset any possible advantage to large plants.

The Almay court summarized the requirement that

agency rulemaking action must rest on some factual basis

in the record:

“The fact that an ‘arbitrary and capricious’

standard applies to informal rulemaking, rather

than a ‘substantial evidence’ requirement, cannot

mean that nothing of. an evidentiary nature is

needed in the administrative record to support an

agency decision’”’. (Slip Op. at 15).

Moreover, this Court has repeatedly explained that the

agency must articulate the basis of its action and show that

there is a rational connection between the facts found and

the choice made. Burlington Truck Lines, Inc. v. United

'>Good examples are the conflicting statements regarding spotting.

The ICC formulation of the spotting rule, which states that spotting oc-

curs when a trailer is left in the full possession of a consignee unat-

tended by a carrier’s employee, is inconsistent with the agency's in-

terpretation of the rule that any detachment of a trailer on the con-

signee’s premises is a spotting. (73a, 139a, 168a). Moreover, there are

conflicting statements raising doubts about whether detention with or

without power charges is applicable. (73a, 139a, 166a).

18

States, 371 U.S. 156, 168 (1962). Citizens to Preserve Over-

ton Park, Inc. v. Volpe, 401 U.S. 402 (1971). It is not suf-

ficient that there might have been legally adequate reasons

for the action; the agency itself must have made such find-

ings. SEC v. Chenery Corp., 318 U.S. 80, 94 (1943).

The ICC decision in Ex Parte No. MC-88 fails to state

any evidentiary basis for the spotting provision or to

demonstrate any rational connection between the provision

and the purposes of the proceeding. The ICC’s action here

is reminiscent of another recent ICC rulemaking which also

attempted to abrogate motor carrier delivery obligations.

See National Association of Food Chains, Inc. v. ICC, 535

F.2d 1308 (D.C. Cir. 1976) The reviewing court vacated the

agency’s action, explaining that the Commission’s order

“did no more than recite the problems of abuses. . .”” but

“did not demonstrate that its conclusion . . . was sup-

portable on the record before it.”’ Jd. at 1318.

Another serious deficiency in the ICC’s decision is the

failure to rationally explain its departure from prior cases

holding that deliveries from temporary holding yards are a

part of the carrier’s obligation in providing line-haul ser-

vice. Carrier Switching at Industrial Plants in The East,

294 ICC 159 (1955) was a major ICC proceeding to define

and establish carrier delivery obligations. The agency ex-

pressly stated that the temporary holding of cars on tracks

of the carrier or the industry did not terminate the

obligation of the carrier to place the cars at the consignee’s

unloading platform. In a related ICC decision, American

Smelting & Refining Co. Terminal Services, 294 ICC 745

(1955), the agency examined holding yard practices for

railroad cars similar to the motor carrier holding yard prac-

tices and ruled that subsequent placement at unloading

platforms was the carrier’s responsibility. These and other

similar ICC rulings accord with well-established court

precedents stating that delivery is the common law duty of a

carrier. Wabash Railroad Co. v. Pearce, 192 U.S. 179

a OO ee ct

19

(1904); Interstate Commerce Commission v. Atchison,

Topeka & Santa Fe Railway Co., 234 U.S. 294 (1914);

Loveless Manufacturing Co. v. Roadway Express, Inc., 104

F.Supp. 809, 812 (N.D. Okla. 1952).

Not long ago, when the ICC took action which would

have required shippers to pay an additional charge for ser-

vice covered by the carrier’s line-haul rate, this Court

reminded the agency that its discretion was not unbounded

and that it has a “duty to explain its departure from prior

norms.” Atchison, Topeka & Santa Fe Railway Co. v.

Wichita Board of Trade, 412 U.S. 800, 808 (1973). Ap-

parently this lesson was ignored, for in Ex Parte No. MC-

88, the agency’s only attempt to reconcile its action with

prior precedents was to comment that cases involving

railroad practices were ‘“‘not analogous”. (73a).

Another teaching of Wichita Board of Trade was

disregarded by the ICC. Where an extra charge is to be im-

posed for a service previously covered by the line-haul rates,

this Court has required the agency to determine whether

the carrier should reduce its line-haul rate to reflect the

reduction in service. Atchison, Topeka & Santa Fe Railway

Co. v. Wichita Board of Trade, 412 U.S. at 816-818;

Secretary of Agriculture v. United States, 347 U.S. 645, 652

(1954). The spotting provision would impose a separate

charge for placement of trailers at unloading areas when

the trailers had been temporarily placed in consignee

holding yards, although the motor carrier line-haul rates

presently include complete delivery. Yet the ICC did not

even consider whether it was appropriate to order an ad-

justment in the carriers’ rates (despite the showing that the

use of holding yards decreases carrier costs).'*

‘The ICC recognized its obligation to review the reasonableness of a

rate where a separate charge will be imposed for a service covered by

that rate, but it chose to leave the issue for the “future” despite this

Court’s instruction in Wichita Board of Trade. (146a). The ICC has

adhered to the rule reaffirmed in Wichita Board of Trade in a number

20

The ICC’s adoption of the spotting provision fails to

measure up to any proper application of standards of

judicial review found in 5 U.S.C. §706. Accordingly, a Writ

of Certiorari should issue to review the judgment and

opinion of the United States Court of Appeals for the Third

Circuit.

Respectfully submitted,

HENRY R. NOLTE, JR.

DAVID R. LARROUY

HARRY GIBSON

Ford Motor Company

The American Road

Dearborn, Michigan 48121

ROBERT N. KHARASCH

OLGA BOIKESS

Galland, Kharasch, Calkins

& Short

1054 Thirty-First Street, N.W.

Washington, D.C. 20007

(202) 333-2200

Attorneys for

Ford Motor Company

March 27, 1978

of recent cases. Joint Petition for Declaratory Order — Private

Sidetrack — General Motors Corp. and the Long Island R.R. Co., 351

ICC 691 (1976); Terminal Charges at Philadelphia, Baltimore and

Hampton Roads Ports, 350 ICC 867, 876-77 (1975); Unloading Restric-

tions on Meats and Packinghouse Products, 346 ICC 775 (1974), on

reconsideration, 349 ICC 189 (1975), vacated and remanded for further

proceedings sub. nom. National Ass’n of Food Chains, Inc. v. ICC, 535

F.2d 1308 (1976), on remand order served June 29, 1977; Charges at

New York Harbor, Penn Central Transportation Co., 344 ICC 21

(1972).

a.” ee oe