Petition — Atchison, Topeka & Santa Fe Railway Co. v. National Ass'n of Recycling Industries, Inc.

Supreme Court, U. & -

FILED

NOV $0 1978

MAK, JR., CLERK

IN THE

Supreme Court of the United States

OcTOBER TERM, 1978

ATCHISON, TopEKA & Santa Fre Raitway Co., et a/..

Petitioners,

v3

NATIONAL ASSOCIATION OF REcYcLING INDUSTRIES, INC.,

et al.,

Respondents.

PETITION FOR WRIT OF CERTIORARI TO THE

UNITED STATES COURT OF APPEALS FOR THE

DISTRICT OF COLUMBIA CIRCUIT

Harry N. Bascock MICHAEL BouDIN

2700 Terminal Tower TrmotHy A. HAaRR

P. O. Box 6419 888 Sixteenth Street, N.W.

Cleveland, Ohio 44101 Washington, D.C. 20006

RicHarp W. KIENLE James L. TAPLEY

8 North Jefferson Street James L. Howe, III

Roanoke, Virginia 24042 P. O. Box 1808

Washington, D.C. 20013

WriuiaM C. Lerrer “

P. O. Box 536 JAMES E. SYKES

600 Grant Street 299 S. Riverside Plaza

Pittsburgh, Pa. 15230 Chieago. Tllinois 60606

Jonn A. DarLty

1138 Six Penn Center Plaza

Philadelphia, Pa. 19104

Attorneys for the Ratlroads

November 1978

Press oF Byron S. ADAMS PRINTING, INC., WASHINGTON, D. C.

TABLE OF CONTENTS

Page

i et bl cndig du ou hinwiu ca eekek mab % 1

re elt os hn cumebind meeuk tens 2

veer ebgerebncesaveniones 2

I ee Le a ca maa asm anew seuss 3

ee tabsénauaveeebaces 3

A. The 4R Act and Prior Commission Proceedings 3

ee. Nib nunc ed we bmn aes 5)

C. The Court of Appeals Decision .............. 8

PTL eis lok sts task cembheeweteeee awe 11

I. The Lower Court’s Remand Disregards the

Proper Standard of Judicial Review by Seek-

ing To Reweigh the Evidence and Substitute

the Court’s Judgment for That of the Expert

aint arlas cap ou wecuew e6 ots 40k deep se 12

II. The Lower Court’s Imposition of a Six-Month

Deadline on Remand Is Directly Inconsistent

With Decisions of This Court Preserving the

Agency’s Procedural Authority .............. 17

III. The Importance of This Case and the Nature

of the Lower Court’s Remand Warrant Cer-

tiorari Prior to Any Further Agency Proce :d-

DE Git s cCENceaseee Wa eas bacenen enka ed €2 21

ES eho ee A tells te 27

TABLE OF AUTHORITIES

CasEs AND ADMINISTRATIVE PROCEEDINGS:

Aberdeen € R. R.R. v. SCRAP, 414 U.S. 1035 (1973) .. 11

Aberdeen € R. R.R. v. SCRAP, 422 U.S. 289 (1975) .Passim

arrow Transp. Co. v. Cincinnati, N.O. € T.P. Ry., 379

I a ous ch od wlth aan Sadhu us 22

Atchison T. & S.F. Ry. v. ICC, Nos. 76-2048, 76-2070,

Se oc. Sn pc ccwhawcene then es 25

li Table of Authorities Continued

Atchison, T. € S.F. Ry. v. Wichita Board of Trade,

nS ED Ss ogo de vdu 604 obs aban 00 23

Baltimore & O. R.R. v. United States, 345 U.S. 146

ee ao lan aks cacien s+ GAN owes wes 14

Bowman Transp., Inc. v. Ark.-Best Freight System,

oe RP Per ore rr cere ree 13, 16

Burlington Truck Lines vy. United States, 371 U.S. 156 ‘

I a ne a a a a Re de

Chicago € E.I. R.R. v. United States, 384 F. Supp. 298

(N.D. Ill. 1974) aff’d per curiam, 421 US. 956

Le: Es fol RS RE SERS SEI OE Mee Sh Pa 23

Chromcraft Corp. v. Equal Employment Opportunity

Commission, 465 F.2d 745 (Sth Cir. 1972) ....... 20

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

I Sack elnd's a dduce «6 bad ap.00 00 0b ce 608.8 16

Eastern-Central Motor Carriers Association v. United

rs Oe Fs BO CRON. no oso sv vcawvcctenses 9

Ex Parte No, 270 (Sub Nos. 5 & 6), 345 LC.C. 548

OCT seas aod da his b's cde eb ide's 4, 26

Ex Parte No, 281, 341 1.C.C. 290 (1972), sustained in

Aberdeen @ R. R.R. v. SCRAP, 422 U.S. 289

ES A eee, re ee: 4, 22, 26

Ex Parte No. 295 (Sub No, 1), 344 1.C.C. 589 (1973),

sustained in NARI vy. United States, consolidated

in Asphalt Roofing Mfg. Ass’n. v. ICC, 567 F.2d

Bs eee ere reer Oror 4, 26

Ex Parte No. 299, 350 1.0.C. 673 (1975), sustained in

NARI vy. United States, consolidated in Asphalt

Roofing Mfg. Ass’n. v. ICC, 567 F.2d 994 (D.C.

EE Gas hci nes sak 8 USS par REA 060008 4, 26

FCC vy. Pottsville Broadcasting Co., 309 U.S. 134 (1940) 18

FCC v. Schreiber, 381 U.S. 279 (1965) .............. 18

FPC vy. Idaho Power Co., 344 U.S. 17 (1952) ........ 22

FPC vy. Transcontinental Gas Pipe Line Corp., 423

ofS oy) a ee 11, 21, 23

Kleppe v. Sierra Club, 427 U.S. 390 (1976) .......... 14

Nader v. FCC, 520 F.2d 182 (D.C. Cir. 1975) ....... 19, 21

New England Divisions Case, 261 U.S. 184 (1923) .... 14

SEC vy. Chenery Corp., 332 U.S. 194 (1947) ......... 21, 23

Swayne & Hoyt, Ltd. v. United States, 300 U.S. 297

SEN 6a 20 Wa cls GV isviee te esw bas awn cntenees cee 14

United States vy. Chicago Heights Trucking Co., 310

SE og bo cbs 50.0 o cass de Obbi betas cas 13

United States v. Pierce Auto Lines, 327 U.S. 515 (1946) 13

Table of Authorities Continued iii

Page

United States v. Saskatchewan Minerals, 385 U.S. 94

CUDID vac ode cesstPevaiscepisdimervassd corners 22

United States v. SCRAP, 412 U.S. 669 (1973) ...... 11, 26

Vermont Yankee Nuclear Power Corp. v. Natural Re-

sources Defense Council, 4385 U.S. 519 (1978) .. ra 7

Virginia Ry. v. United States, 272 U.S. 658 (1926) .... 18

STATUTES:

Railroad Revitalization and Regulatory Reform Act

OF TOUTE, BO UE GE oo van scccresdescwessssces Passim

Section 202, 49 U.S.C. §§ 10727, 10728 .......... 4

een GO kv'k dws wks cave ciccsasavecvasvee’s Passim

Section 205, 49 U.S.C. § 10704(a)(2) ........008- 4

Section 907, 40 USO. 9 10GOS 2 ccccccccececccns 4

, ek tome by ee Cry rere reeks Eee e OEE 2

, is fe) er rrerrre ry ore rey rrr ch 8

MISCELLANEOUS:

Association of American Railroads, Yearbook of Rail-

PONE FOG CIGTE) bo acne basi cwaelvestsseennens

Hearings before the Subcommittee on Environment of

the Senate Committee on Commerce on S. 1122, S.

1593, S. 1816, S. 1879, and S. 2753, 98d Cong., 1st

Bec SEF) cc ca cncnscvecds eset beneracees Reiss 5

H.R. 12586, 96d Cong, 2d Bese. wine ccccccccccccctenes 5

H. Rep. 94-725, 94th Cong., Ist Sess. ...........0005: 4

B. 25GB, SEE Dome... 160 BOMB. 6d cicccvcccccccccvecccess 5

B. S7EB, SOE Coma, Let Beas. occ ccccniscccccccncccens 5

S. Rep. No. 94-499, 94th Cong., Ist Sess. ........ 3, 5, 9, 12

—

IN THE

Supreme Court of the United States

OcToBeR TERM, 1978

No.

ATCHISON, TOPEKA & SAnTA Fe Rartway Co., et al.,

Petitioners,

Ve

NATIONAL ASSOCIATION OF RECYCLING INDUSTRIES, INC.,

et al.,

Respondents.

PETITION FOR WRIT OF CERTIORARI TO THE

UNITED STATES COURT OF APPEALS FOR THE

DISTRICT OF COLUMBIA CIRCUIT

Petitioners, the principal Western, Eastern, and

Southern railroads in the United States listed in Ap-

pendix A (‘‘the railroads’’),’ request that a writ of

certiorari issue to review the judgment of the United

States Court of Appeals for the District of Columbia

Circuit in this case.

OPINIONS BELOW

The August 2, 1978, opinion of the Court of Appeals,

which is not yet officially reported, appears as Appen-

‘The appendices are separately bound in a companion volume

cited as ‘‘Pet. App. ——.”’

2

dix B to this petition. The Court of Appeals’ subse-

quent October 16, 1978, order and per curiam opinion

modifying the August 2 opinion, and Judge Leven-

thal’s dissentawhich are not officially reported, appear

in Appendix\C) The February 4, 1977, decision of the

Interstate Commerce Commission, which is reported

at 356 I.C.C, 114, appears as Appendix D.

JURISDICTION

The judgment of the Court of Appeals, which was

entered on August 2, 1978, appears as Appendix E. A

timely petition for rehearing was decided by an order

dated October 16, 1978, which appears as Appendix C.

Mr. Chief Justice Burger extended the time for filing

this petition for certiorari to and including November

30, 1978, by an order entered on October 30, 1978. The

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

§ 1254(1).

QUESTIONS PRESENTED

The Interstate Commerce Commission, after a full

year of investigation including preparation of a de-

tailed environmental impact statement, concluded that

the railroad rate structure for recyclables does not un-

justly discriminate, is generally reasonable, and does

not significantly affect the level of recycling. The ques-

tions presented are:

1, Whether the lower court unlawfully usurped the

substantive authority reserved to the Commission, and

violated the standard of judicial review established in

* Chief Judge Wright, joined by Judges Leventhal and Swygert.

The August 2, 1978, decision (‘‘slip op.’’) appears as Appendix

B together with the orders of August 7, August 25, and Septem-

ber 6, 1978, correcting the opinion.

3

this Court, by overturning the Commission’s decision

which applied proper legal standards and was sup-

ported by detailed evidentiary findings and rational

analysis.

2. Whether the lower court unlawfully usurped pro-

eedural authority reserved to the Commission, and dis-

regarded controlling decisions of this Court, by order-

ing the Commission to complete the remand proceeding

within six months, without any evidence that such a

time limit is warranted or practicable.

STATUTE INVOLVED

Section 204 of the Railroad Revitalization and Regu-

latory Reform Act of 1976, 90 Stat. 31, appears as

Appendix F.

STATEMENT OF FACTS

A. The 4R Act and Prior

Commission Proceedings

In the decade prior to 1975, the financial plight of

many of the nation’s railroads had become desperate: a

number of railroads became bankrupt, including the

giaut Penn Central, and the nation’s railroads as a

whole had not had an annual rate of return higher than

3 percent since 1966. Association of American Rail-

roads, Yearbook of Railroad Facts 20 (1977). In 1975,

both houses of Congress conducted major investiga-

tions into the state of the railroads. The senators found

that ‘‘[e]ight major carriers in the Northeast and Mid-

west are bankrupt; several elsewhere . . . are in pre-

carious financial condition... .’’ S. Rep. No. 94-499,

94th Cong., Ist Sess. 3 (1975). In the House, the mem-

bers similarly found that ‘‘there are 21... railroads

whose financial conditions are at best, marginal’’ and

that ‘‘railroads throughout the nation” showed the

‘‘same signs’’ of decay shown earlier by bankrupt rail-

4

roads. H. Rep. No. 94-725, 94th Cong., lst Sess. 80-81

(1975).

In order to bolster the railroads, Congress on Febru-

ary 5, 1976, passed the Railroad Revitalization and

Regulatory Reform Act (‘‘4R Act’’). The 4R Act con-

tained several measures designed to assist in revitaliz-

ing the nation’s railroads. For example, it directed the

Interstate Commerce Commission to give the railroads

greater rate flexibility (Section 202), to assist the rail-

roads to achieve adequate revenue levels (Section 205),

and to consider authorizing selective exemptions from

the Interstate Commerce Act itself (Section 207).°

The 4R Act also included a section concerning rail-

road rates on recyclables, Section 204. The ICC has

consistently found after careful study that rate adjust-

ments on recyclables were reasonable and were not

discriminating against recyclables. Its determinations

are reflected in general revenue decisions,‘ in special

investigations,’ and in detailed environmental impact

statements approved by this Court and the Court of

Appeals.® In these same proceedings, the ICC has also

> See 49 U.S.C. §§ 10727, 10728 (§ 202) ; 49 U.S.C. § 10704(a) (2)

(§ 205) ; 49 U.S.C. § 10505 (§ 207).

*‘E.g., Ex Parte No. 281, 341 I.C.C. 290 (1972), sustained in

Aberdeen & R.R.R. v. SCRAP, 422 U.S. 289 (1975) (‘‘SCRAP

II’’); Ex Parte No. 295 (Sub No. 1), 344 1.C.C. 589 (1973), and

Ex Parte No. 299, 350 I.C.C. 673 (1975), both sustained in NARI

v. United States, consolidated in Asphalt Roofing Mfg. Ass’n V.

ICC, 567 F.2d 994 (D.C. Cir. 1977).

°E.q., Ex Parte No. 270 (Sub Nos. 5 and 6), 345 L.C.C. 548

(1976).

° £.g., the detailed environmental impact statements in Ex Parte

No. 281, approved by this Court in SCRAP II, and Ex Parte No.

295 (Sub No. 1), approved by the Court of Appeals in Asphalt

Roofing. An impact statement was also prepared in Ex Parte No.

270 (Sub Nos. 5 and 6).

5

found that railroad rate changes do not significantly

affect the movement or utilization of recyclables. See

p. 4, n. 6, above.

Unable to prevail in the ICC under the existing sta-

tutory standards of reasonableness and discrimination,

the recycling interests sought to persuade Congress

to alter existing rate-making standards to benefit

recyclables.’ Rejecting such attempts, Congress in Sec-

tion 204 simply directed the ICC to make a broad in-

vestigation of railroad rates for recyclables to deter-

mine whether the rate structure was reasonable and

non-discriminatory. The legislators refused to require

preferential rates for recyclables or to enact any con-

gressional findings or presumptions impairing the law-

fulness of the recyclable rates. Congress left the evalu-

ation of the rate structure to the expert agency (Sec-

tion 204(a)(2)), on the understanding that the agency

would make its determinations ‘‘consistent with the ex-

isting rules of rate-making... .’’ S. Rep. No. 94-499,

supra, at 51.

B. Ex Parte No. 319

Section 204 provided that the investigation should

be completed within one year. Following enactment of

the 4R Act, the Commission promptly issued an order

* See, e.g., Hearings before the Subcommittee on Environment of

the Senate Committee on Commerce on S. 1122, 8. 1593, S. 1816, S.

1879, and S. 2753, 93d Cong., 1st Sess. (1973). Proposed bills wou!d,

for example, have required recyclables to be transported at the

‘‘lowest possible’’ lawful rates, created Congressional findings of

discrimination against recyclables, or createc statutory presump-

tions of competition between recyclable and non-recyclable com-

modities. See, e.g., S. 2753, 93d Cong., Ist Sess.; S. 1122, 93d

Cong., 1st Sess.; H.R. 12536, 93d Cong., 2d Sess. Congress enacted

none of these proposals.

6

delineating the scope and format of its investigation,

which it styled Ex Parte No. 319. Recognizing that the

railroads bore the burden of proof under the statute

(Section 204(a)), the ICC required that the railroads

submit detailed evidence of sample movements of the

commodities to be investigated. This included identify-

ing, costing and analyzing over 3,000 repetitive move-

ments of recyclable and virgin commodities. Ulti-

mately, the railroads submitted literally thousands of

pages of evidence, testimony and data.

In addition to evidence of costs and revenues for in-

dividual movements, the railroads submitted detailed

evidence on the history of the rate structure for differ-

ent recyclables and for other commodities; on actual

past experience reflecting the lack of impact of rate

changes on recyclable movement and use; on the ratio

of the transportation charges to the value of the com-

modities; on the transportation characteristics of the

commodities; and on the manufacturing and distribu-

tion of the commodities. The railroads also introduced

a detailed analysis of the transportation demand elas-

ticity of recyclables,* prepared by an independent, ex-

pert consulting firm.

A number of important facts emerged from this ex-

tensive evidentiary presentation: First, despite rate

increases, the railroads’ volume of recyclable traffic has

actually increased significantly more than the volume

of all other traffic. Second, the elasticity of transpor-

tation demand for recyclables—the potentia. impact of

* Transportation demand elasticity is the percentage change in

movement of recyclables that would resuit from a percentage

change in railroad rates. In effect, it represents an evaluation of

the potential impact of rate changes on recyclable movements.

7

railroad rate changes on the movement of recyclables

—was extremely low.’ Third, for technological and other

reasons, recyclable commodities cannot generally be

used in place of virgin commodities and there is little

actual competition between recyclables and virgin com-

modities. Fourth, the transportation characteristics of

recyclables are such that it often costs considerably

more to ship recyclables than to ship virgin materials

which move over fixed routes in vast quantities.

The Commission held extensive hearings in which

the shippers of recyclables cross-examined the railroad

witnesses at length. Briefs were filed by the major par-

ties. A draft environmental impact statement was pre-

pared and released by the ICC, concluding that the

railroad rate structure did not significantly affect the

level of recycling. Comments on the draft were sub-

mitted by the parties, and by the Environmental Pro-

tection Agency, which accorded the draft impact state-

ment its highest rating: Adequate and without objec-

tions. The ICC released its final 200-page environ-

mental impact statement on January 4, 1977, reaffirm-

ing its initial conclusion.”

On February 4, 1977, the ICC released its decision.

306 I.C.C. 114 (Pet. App. 4d). This decision, repre-

* Where the impact of railroad rate changes on movement is low

or insignificant, then the impact of such changes on the level of

actual recycling is at least equally low. The impact may be even

lower since some of the recycling may not depend on transportation

at all. See, e.g., 356 I.C.C. at 193 (Pet. App. 83d): ‘‘Home scrap

[utilized in the plant that creates it] represents approximately 61

percent of ali scrap consumed by the steel industry’’ and ‘‘all of

it is reeyeled.’’

The ‘‘exceutive summary’’ of the final impact statement is

reprinted as Appendix G.

8

senting the most extensive analysis of the rate struc-

ture for recyclables ever undertaken, concluded that

the railroads had met their burden of proof in demon—

strating the non-discriminatory character of the rate

structure for recyclables. It further concluded that in

most cases the rate structure for recyclables had been

shown to be just and reasonable; but in a few instances

it found that the railroads had failed to justify the rate

level in a particular region for a particular recyclable

and it ordered an adjustment. The ICC’s decision in

Ex Parte No. 319 includes over 40 pages of discussion

of general issues relating to the evidence, the methods

of analysis and the legal standards (356 I.C.C. at 117-

160 (Pet. App. 7d-50d) ), and 270 pages of detailed dis-

cussion and expert analysis of each of the categories

of recyclable commodities and their virgin counter-

parts."' 356 L.C.C. at 160-430 (Pet. App. 50d-320d).

C. The Court of Appeals Decision

National Association of Recycling Industries

(‘““NARI’’) and Institute of Scrap Iron and Steel

(‘*ISIS’’) sought review of the Commission’s decision

in the Court of Appeals.’ The United States, acknowl-

edging the Commission’s expertise in matters of fact

finding and analysis, challenged its decision on assert-

"The diseussion of individual commodities covers such matters

as the collection, production and marketing methods for recyclables ;

the volume and movement patterns; the rate structure; the his-

torical effeet of rate changes on movements; revenue and cost

figures; the transportation characteristics of the commodity; elas-

ticity of transportation demand; special environmental considera-

tions ; and the comments of both shippers and railroads.

'* Jurisdiction in the lower court was asserted under 28 U.S.C.

§ 2341 et seq., and the NAR/ and /S/S suits were consolidated.

9

edly legal grounds."* Most important, the United States

and ISIS argued that Congress in Section 204 of the

4R Act had enacted new substantive legal standards

for rate discrimination, and NARI argued that Con-

gress intended to create a statutory presumption of

competition between recyclables and non-recyclables., It

was also asserted that the ICC had placed the burden

of proof on the recyclers rather than the railroads.

The ICC and the railroads responded that no sub-

stantive change in the law had been enacted, Congress

10

had in fact required extensive evidentiary submissions

by the railroads.

The Court of Appeals on August 2, 1978, overturned

the Commission’s decision. In an opinion by Chief

Judge Wright (Pet. App. 1b), the court conceded that

the LCC had acted properly in applying traditional

standards of reasonableness and discrimination (slip

op. 21-22 (Pet. App. 25b-26b) ), and it agreed that Con-

gress had not enacted a statutory presumption of com-

petition. Slip op. 37 (Pet. App. 41b). The court’s opin-

ion was thus primarily a series of disagreements with

the Commission’s factual evaluation of the rates under

the traditional legal standards. H.g., slip op. 28, 29, 30,

32 n.78, 36, 39 (Pet. App. 32b, 33b, 36b n.78, 40b, 43b).

The lower court remanded the case to the Commission

to investigate and analyze again the same issues al-

ready studied for a year under the same legal stand-

ards,

On August 15, 1978, NARI filed a petition for rehear-

ing seeking to modify the decision by requiring the

ICC to complete its remand within six months. The

Commission and the railroads opposed this petition, the

railroads pointing out that there was no basis for such

a limit and that an arbitrary six-month deadline threat-

ened to deny the railroads a fair opportunity to meet

their burden of proof. Nevertheless, the Court of Ap-

peals on October 16, 1978, issued a per curiam decision

(Pet. App. 1c), Judge Leventhal dissenting (Pet. App.

2c-3¢), imposing a six-month deadline on the remand,

Pet. App. le. The court made no response to the objec-

tions raised by the ICC and the railroads and cited no

basis for its decision that the investigation could be

carried out within the imposed time limit.

11

ARGUMENT

The lower court’s decision disregards the proper

standard of judicial review repeatedly affirmed by this

Court and is a patent substitution of the lower court’s

policy preferences for the expert appraisal of the agen-

cy. The approach taken and the error committed below

are virtually the same ones which led this Court to re-

verse the lower court in the SCRAP litigation. £.g.,

SCRAP II, 422 U.S. at 322. In addition, paralleling

the lower court’s usurpation of the agency’s substan-

tive authority, the lower court has also erred by dictat-

ing the time frame for accomplishing the remand. This

Court has repeatedly held that internal procedural

matters are properly within the agency’s exclusive au-

thority. FPC v. Transcontinental Gas Pipe Line Corp.,

423 U.S. 326 (1976).

The importance of this case dwarfs the prior SCRAP

litigation, where this Court repeatedly saw fit to review

and reverse the lower court’s actions: ** its scope is lim-

ited not to a single rate adjustment on recyclables but

includes the entire railroad rate structure on recycla-

bles throughout the United States. The lower court’s

decision not only invades agency authority but threat-

ens vitally needed railroad revenues and thus the abil-

ity of the railroads to provide efficient transportation

service, including transportation for recyclables. Be-

cause of the nature of the lower court’s remand, certio-

‘In the prior SCRAP litigation, this Court overturned the

decisions below three times in succession, twice in full opinions

(United States v, SCRAP, 412 U.S, 669 (1973) (‘SCRAP 1’’)

and SCRAP IT, supra), and onee by summarily vacating the

decision below (Aberdeen & R.R.R, v. SCRAP, 414 U.S, 1035

(1973) ).

12

rari now is essential to provide effective review and to

assure respect for Congress’ purpose in enacting the

4R Act.

I. The Lower Court's Remand Disregards the Proper Standard

of Judicial Review by Seeking To Reweigh the Evidence and

Substitute the Court’s Judgment for That of the Expert Agency.

Rejecting the position of the United States,” the

lower court conceded that the Commission correctly de-

termined to apply traditional legal standards in finding

that the rate structure on recyclables is reasonable and

not unjustly discriminatory. The legislative history of

Section 204 clearly stated that the investigation was to

proceed ‘‘consistent with the existing rules of rate-

making”’’ (S. Rep. No. 94-499, supra, at 51) and nothing

in the statute’s language suggested a change in substan-

tive standards. The lower court was therefore com-

pelled to rule that ‘‘the Commission was clearly author-

ized by Section 204 to apply traditional ratemaking

criteria in this investigation.’’ Slip op. 27 (Pet. App.

31b). Thus, the court’s remand cannot be defended on

the ground that the Commission committed legal error

by misapprehending the substantive legal standards to

be applied.

Similarly, although the lower court referred repeat-

edly to the burden of proof, the Commission expressly

acknowledged that the burden lay upon the railroads to

‘© The United States argued that Congress had implicitly altered

the traditional test of discrimination and made cost the only factor

that could justify rate differeutials between recyclables and non-

recyclables. This argument rested importantly on a single scrap of

legislative history constructed by one senator whom even the lower

court in other discussion refused to credit. See slip op, 37 n.83

(Pet. App. 41b n.83),

13

justify their rate structure. 356 I.C.C. at 427 (Pet. App.

317d). The Commission couched its findings in terms

of what the railroads affirmatively proved and, where

the Commission found that the railroads had not car-

ried their burden of proof on an issue, it made this fail-

ure the basis for resolving the issue against the rail-

roads. See p. 9, above. Hence, insofar as the lower

court asserts that the Commission relieved the rail-

roads of their burden of proof, this is not a legal dis-

agreement about the location of the burden of proof

but a determination by the lower court that it did not

agree that the evidence supported the Commission’s

determination on a particular issue.

This Court, however, has repeatedly held that lower

courts are not entitled to reweigh the evidence or sub-

stitute their evaluation of the evidence for that of the

expert agency:

‘‘The very purpose for which the Commission was

created was to bring into existence a body which

from its peculiar character would be most fitted to

primarily decide whether from facts, disputed or

undisputed, in a given case preference or discrimi-

nation existed.’’ "’

For this reason, Justice Brandeis declared many years

ago, ‘‘to consider the weight of the evidence before the

Commission ... is beyond our province... .’’* This

Court has repeatedly applied this principle te prevent

judicial erosion of the authority of the ICC.” Nor is the

7 /nited States v. Chicago Heights Trucking Co., 310 U.S. 344,

352 (1940).

* Virginia Ry. v. United States, 272 U.S. 658, 663 (1926).

'° B.g., Bowman Transp., Inc, v, Ark.-Best Freight System, 419

U.S. 281 (1974); United States v. Pierce Auto Lines, 327 U.S, 515

i4

principle restricting judicial review altered by the na-

ture of the recyclers’ environmental claims, for a court

is not entitled to ‘‘substitute its judgment for that of an

agency as to the environmental consequences of its ac-

tions.’’ *”

What the lower court did in this case was nothing

other than to reweigh the evidence and choose to give

more or less emphasis to one piece of evidence or factor

in the ratemaking equation. For example, the lower

court asserted that the Commission had failed to give

adequate consideration to cost evidence in determining

the reasonableness of the rate structure (slip op. 27, 33

n.78 (Pet. App. 31b, 37b n.78)); but in fact, an im-

mense portion of the record related to the cost of han-

dling recyclables and this evidence clearly was con-

sidered by the Commission.” The question how much

weight should be given to evidence on a particular ele-

ment in the equation, among the many factors that are

pertinent in determining the reasonableness of rates, is

precisely the kind of judgment that is committed to the

agency and not to the court.”

(1946); Swayne & Hoyt, Ltd. v. United States, 300 U.S. 297

(1937); New England Divisions Case, 261 U.S. 184, 203-04 (1923).

2° Kleppe v. Sierra Club, 427 U.S. 390, 410 n.21 (1976).

“One of the railroads’ principal efforts—in addition to com-

piling extensive historical data on rates and movements and

commissioning an independent study of transportation demand

elasticity—-was the determination of costs on almost 3,000 repre-

sentative movements, See the Commission’s discussion of this evi-

dence at 356 I.C.C. at 128-40 (Pet. App. 18d-30d).

22, As this Court stated, the ‘‘mere sample of factors that

have to be considered in rate cases demonstrates the absolute

necessity for considerable flexibility in rate making.’’ Baltimore &

O. R.R. vy. United States, 345 U.S. 146, 150 (1953), The lower

15

Similarly, the lower court asserted that the agency

decision did not give adequate attention to the ‘‘poten-

tial’’ impact of the rate structure on the movement of

recyclables. Slip. op. 38 (Pet. App. 42b). See also slip

op. 28, 39 (Pet. App. 32b, 43b). Yet transportation de-

mand elasticity, which was the subject of extensive evi-

dence and was relied on directly by the Commission, is

nothing other than a measure of the potential impact

of the existing rate structvre on the movement of recy-

clables. The Commission expressly found, based on

econometric analysis, that the rate structure has no

significant impact on the movement of recyclables be-

cause even very substantial increases or decreases in

rates on recyclables do not significantly alter the quan-

tity of recyclable traffic.” Since transportation demand

elasticity is the measure of potential impact, the lower

court’s assertion is simply baffling.

In yet another reweighing of the evidence, the Com-

mission was criticized by the lower court for allegedly

court similarly erred in asserting that the Commission limited its

consideration of factors to the impact of the rates on movement.

The Commission in fact discussed a range of factors including

value of service, competition, and transportation characteristics.

E.q., 356 L.C.C, 297, 232, 164 (Pet. App. 187d, 122d, 54d).

28 These findings are conveniently summarized in the environ-

mental impact statement (Pet. App. 2g-3g¢), and the elasticity

issue is discussed at various points in the Commission’s decision.

E..9., 356 1.C.C. at 205 (Pet. App. 95d). There are various reasons

why the movement and use of recyclables tends to be inelastic, in

relation to freight rate changes, which are reflected in the eviden-

tiary submissions. Merely as examples, the demand for a recyclable

may be fixed by far more important variables, or the transportation

cost may be a minute fraction of the selling price, or limitations

on supply may preclude increased transportation even if the trans-

portation rate falls very significantly.

16

giving too much weight to a report, prepared by an

independent research firm, which was devoted to the

very subject of transportation demand elasticity. Slip

op. 30 (Pet. App. 34b). Ironically, this study, which

the lower court says was overvalued, is directed to the

very subject which the lower court said was given too

little consideration by the Commission, namely, the

potential impact of rate changes on recyclables. What

compounds the lower court’s error is the fact that the

Commission itself said that it was going to give only

limited weight to the report (356 I.C.C. at 144-51 (Pet.

App. 34d-41d)) and in fact the Commission rested its

evaluation of potential impact on its own independent

elasticity analysis. See Pet. App. 2g-3g.

Although the lower court’s catalogue of errors could

be enlarged, the conclusion is clear: The lower court

here engaged in a straightforward reweighing of the

evidence contrary to the principle that the reviewing

court “is not empowered to substitute its judgment for

that of the agency.’’** The very errors committed by

the lower court in this case—including its apparent un-

awareness of evidence in the record and its misunder-

standing of the evidence discussed—furnish reasons

why, under proper standards of judicial review, the

evaluation and weighing of evidence is reserved to the

agency.

The lower court’s disregard of this principle is a

repetition of its error in SCRAP II, There, after the

Commission evaluated the impact of a railroad rate

adjustment on recyclables, Judge Wright found the

** fowman Transp., Inc. V. Ark.-Best Freight System, supra, 419

U.S. at 285, quoting Citizens to Preserve Overton Park vy. Volpe,

401 U.S, 402, 416 (1971).

17

analysis insufficient and remanded for further proceed-

ings. On review in this Court, the railroads argued that

‘the court below simply disagreed with [the Commis-

sion’s] decision not to prevent ... [rate increases] on

recyclables.’’ 422 U.S. at 322. This Court stated that

‘*[ w]e substantially agree with this position”’ (id.) and

reversed the lower court, making clear this Court’s dis-

pleasure with the lower court’s attempt to override

reasoned ICC determinations made within the agency’s

area of authority and expertise. Id. at 326-27. The Com-

mission’s discussion in the present case is even more

elaborate and sophisticated than the environmental im-

pact statement sustained in SCRAP II.

The Commission’s decision in this case is carefully

reasoned, is supported by detailed findings based on

extensive evidence, and is consistent with numerous

prior determinations. Under the standard of judicial

review repeatedly applied by this Court, the agency

decision should have been affirmed by the lower court as

a reasoned exercise of Commission expertise and dis-

cretion, whether or not it is necessarily the same ‘‘de-

cision [that] the judges of the Court of Appeals...

would have reached had they been members of the de-

cisionmaking unit of the ageney.’’ Vermont Yankee

Nuclear Power Corp. v. Natural Resources Defense

Council, 435 U.S. 519, 558 (1978), The disregard of the

established judicial review standard by the lower court

and its substitution of its own policy preferences amply

warrant certiorari.

II. The Lower Court’s Imposition of a Six-Month Deadline on

Remand Is Directly Inconsistent With Decisions of This Court

Preserving the Agency's Procedural Authority.

This Court has insisted not only that lower courts

respect the agencies’ substantive authority but also the

18

agencies’ mandate to structure their own internal pro-

cedures. As this Court recently said in Vermont Yan-

kee Nuclear Power Corp. v. Natural Resources Defense

Council, supra, 435 U.S. at 543-44;

‘“‘TT]his much is absolutely clear. Absent constitu-

tional constraints or extremely compelling circum-

stances the ‘administrative agencies ‘‘should be

free to fashion their own rules of procedure and to

pursue methods of inquiry capable of permitting

them to discharge their multitudinous duties.’’ ’

FCC v. Schreiber, 381 U.S. 279, 290 (1965), quot-

ing from FCC vy. Pottsville Broadcasting Co., 309

U.S. 134, 143 (1940).”

This basic principle was clearly ignored by the lower

court in this case. Over Judge Leventhal’s dissent,

Chief Judge Wright has summarily directed that the

remand ordered by the court be accomplished in six

months. This order was entered, at the behest of a self-

interested party, without any justification for impos-

ing any deadline on the Commission; and certainly no

justification exists or has been offered to support the

selection of a six-month period. The lower court’s error

in both respects is readily demonstrated.

Assuming that a court were ever justified in dictat-

ing the time period for agency proceedings, a clear

precondition would be a showing that the agency would

not otherwise act within a reasonable time.” The Com-

#6 Since this Court held in Vermont Yankee that interference

with ageney procedures could be justified only by ‘‘extremely

compelling cireumstances’’ (435 U.S, at 543), a further precon-

dition must be a threat of serious irreparable injury in the absence

of prompt action. Here, there is no prospect of harm to recyclables

in view of the unimpeached determinations of the Commission,

consistent with numerous prior findings, that railroad rates do not

significantly affect the movement of recyclables.

19

mission in Ex Parte No. 319 has shown no evidence of

unreasonable delay. Congress gave the Commission a

year to complete its proceeding under Section 204 and

the Commission met that deadline, despite the extreme

difficulty of accomplishing all of the necessary steps in

that time frame.”

Similarly, assuming that any time limit was justified

in this case, there is no basis whatever for imposing a

six-month deadline. The lower court did not request a

proposed time schedule from the Commission:” and

the Commission itself explicitly opposed the six-month

period suggested by NARI because it would interfere

with the careful analysis and consideration required in

further proceedings.” The court’s deadline is thus not

** Within one year the Commission had to determine the prod-

ucts, issues, and format of evidence; the railroads and other parties

had to collect the voluminous evidence, which involved a number of

individual studies in addition to the accumulation of existing data ;

the evidence had to be reduced to statement form and submitted ;

an opportunity was provided to file reply and supplemental state-

ments; a draft environmental statement had to be prepared and

circulated for comment; recycling interests were afforded extensive

opportunity to conduct oral cross-examination in order to test the

railroads’ evidence; briefs had to be submitted by the parties to

focus the evidence and place it in a legal framework; a final en-

vironmental impact statement had to be prepared prior to or in

conjunction with the decision on the merits; and the Commission’s

own decision, covering a vast array of commodities and voluminous

evidence, had to be drafted.

77 By contrast, in Nader v. FCC, 520 F.2d 182, 207 (D.C, Cir.

1975), following years of agency delay, a different panel of the

lower court directed merely that the Federal Communications

Commission submit to the court a schedule for resolution of the

procecding.

** Response of the Interstate Commerce Commission, August 25,

1978, pp. 1, 3. The lower court did not even purport to explain

why it thought the Commission could complete the proceedings in

20

only an invasion of agency authority, but a wholly ar-

bitrary and capricious act which, if committed by an

agency, would have been roundly criticized by the lower

court.

It is not the Commission but the railroads which are

the primary victims of this unlawful constraint on the

content of further proceedings. Since under Section

204 the railroads bear the burden of proof, any artifi-

cial deadline impairs the railroads’ ability to meet this

burden and to justify their rate structure. Of course,

the railroads can ultimately seek review from an ad-

verse Commission decision, arguing that they have been

unfairly prejudiced by the deadline; but the railroads’

argument would be made to the very court that has im-

posed the deadline and has prejudged the question

whether the deadline is an appropriate one.

The lower court’s action is in direct defiance of the

general principle articulated by this Court in Vermont

Yunkee. See p. 18, above. It conflicts with the de-

cisions of other courts of appeals that have respected

the ageney’s authority to control questions of timing

for their own proceedings.” Most remarkably, the

six months. As Judge Leventhal noted in his dissent: ‘‘The court's

order presupposes a capacity to judge how long this investigation

should take, and I have no basis for reasoned judgment on that

seore.’’ Pet, App. 3e, Indeed, the six-month period is not even an

exercise of the eourt’s independent judgment; it is simply the

figure suggested by NARI, which is hardly a disinterested com-

mentator.,

* lor example, in Chromcraft Corp. v. Equal Employment

Opportunity Commission, 465 F.2d 745, 748 (5th Cir. 1972), the

court indicated that because of the ‘‘discretion’’ and ‘‘experience-

gained expertise’’ of the agency, the courts should not substitute

their judgment for that of the agency, absent ‘‘proof of a dilatory

21

lower court’s action is in direct conflict with a holding

of another recent decision of this Court, quoted in

Vermont Yankee, treating the very question of time

restrictions in court-ordered remands of agency pro-

ceedings. In F'PC v. Transcontinental Gus Pipe Line

Corp., 423 U.S. 326, 333 (1976), this Court stated:

‘*At least in the absence of substantial justifica-

tion for doing otherwise, a reviewing court may

not, after determining that additional evidence ts

requisite for adequate review, proceed by dictating

to the ayency the methods, procedures and time

dimensions of the needed inquiry and ordering the

results to be reported to the court without oppor-

tunity for further consideration on the basis of

new evidence by the agency. Such a procedure

clearly runs the risk of ‘propel[ling] the court

into the domain which Congress has set aside ex-

clusively for the administrative agency.’ SEC v.

Chenery Corp., 332 U.S. 194, 196 (1947).’”’ (Em-

phasis added. )

In short, as in Vermont Yankee, ‘‘[a]gain the Court

of Appeals has unjustifiably intruded into the adminis-

trative process.’’ 435 U.S. at 556. The lower court’s

error in dictating agency procedure provides an inde-

pendent basis for certiorari.

Ill. The Importance of This Case and the Nature of the Lower

Court’s Remand Warrant Certiorari Prior to Any Further

Agency Proceedings.

This Court has in the SCRAP litigation previously

recognized the importance of the present controversy

-_—_—- -—

attitude on the part of the Commission or its staff... .’’ See

also Nader v. FCC, supra, 520 F.2d at 207.

22

by reviewing—and reversing—three prior attempts of

the lower court to usurp agency authority over recy-

clable rates. See p. 11, above. This case is in substance

a continuation of the prior litigation but it is, if any-

thing, even more important. The earlier actions in-

volved individual rate adjustments (e.g., the 4 percent

adjustment in Hx Parte No, 281), whereas the present

case involves the entire rate structure on recyclable

commodities and not merely a single rate change of

limited scope.

The fact that the lower court has ordered a remand

for further agency proceedings does not diminish, but

rather enhances, the urgency of immediate review.

Although the remand is cast in neutral form, the con-

tent of the lower court’s decision exerts manifest pres-

sure on the Commission to alter its determinations.

Once the true nature of this remand is understood, it

becomes apparent that review now is essential to pro-

tect the railroads’ legitimate interest in judicial re-

view aud in maintenance of their lawful rate structure.

In ordinary judicial review of agency action, the

‘‘function of the reviewing court ends when an error

of law is laid bare’’ and the agency is entitled on re-

mand to reaffirm its original result free of dictation by

the reviewing court.” This Court has been sensitive to,

and repeatedly disapproved of, attempts by lower

courts to warp or to preordain the result in a remand

*” See FPC v. Idaho Power Co,, 344 U.S, 17, 21 (1952), Accord,

Arrow Transp. Co. v. Cincinnati, N.O. & 7.P, Ry., 379 U.S, 642

(1965); United States v. Saskatchewan Minerals, 385 U.S, 94

(1966).

23

proceeding.” In this case, however, the lower court’s

remand decision is freighted with phrasings, observa-

tions, suggestions and instructions which amply reveal

the lower court’s own preferences and intentions, Two

examples will suffice to indicate the true thrust of the

remand,

One of the central findings in the Commission de-

cision in Ka Parte No, 319 was that rate relationships

between recyelables and non-recyclables did not inflict

competitive injury on the recyclables.” In this case,

there was massive evidence that the rate relationships

did not inflict competitive injury on recyclables. This

evidence included technological evidence that recycla-

bles and non-reeyelables are not direct substitutes, his-

torical evidence showing traffic growth for recyclables

and the lack of impact of past rate changes, and studies

previously referred to evidencing inelasticity of trans-

portation demand. Yet the lower court, in ordering a

remand, announced that it was ‘‘fu]nable to discern

from this record any support for the Commission’s

*' See, ¢.9., Atchison, 7. & S.F. Ry. v. Wichita Board of Trade,

412 U.S. 800, 821 (1973). See also FPC vy. Transcontinental Gas

Pipe Line Corp., supra, 423 U.S. at 333-34, quoted at p. 21, above;

SEC vy, Chenery Corp., 332 U.S, 194, 200 (1947),

** Under the anti-diserimination provisions of the Interstate Com-

merce Act which are applicable where two different commodities

are being compared, no unlawful discrimination can be found

unless such a competitive relationship between the commodities is

first established. See, e.g., Chicago & E.J, R.R. v, United States,

384 F. Supp. 298, 300-01 (N.D, Til, 1974), aff'd per curiam, 421

U.S, 956 (1975). The presence of competitive injury does not itself

establish unlawful discrimination but requires that rate disparities

be justified under recognized criteria; on the other hand, a

determination that no competitive injury exists terminates the

inquiry. Id,

24

findings on the discrimination issues,’’ and that ‘‘only

extraordinary circumstances, not disclosed by this rec-

ord, will warrant another effort by the Commission’’ to

reaffirm its original conclusions. Slip op. at 39-40 ( Pet.

App. 43b-44b). Having declared that the overwhelming

evidence already in the record is insufficient to show

a lack of competitive injury, the lower court is plainly

implying that no amount of evidence can ever satisfy

it.

On another issue of general importance, the histori-

cal evidence and the Commission’s elasticity studies

clearly showed that the impact of the rates on recycling

was insignificant. See Pet. App. 95d, 2g. Brushing

aside this determination and ordering further proceed-

ings, the lower court announced that the railroads

‘should at a minimum be required to survey existing

and potential users of recyclables to determine whether

reductions in rates would encourage them to purchase

more or make additional use of recyclable materials.”

Slip op. 40 n.87 (Pet. App. 44b n.87). Yet, such a sur-

vey can only produce biased results favorable to reey-

clers,” quite apart from the fact that the lower court

is not entitled to decide what class of surveys should

or should not be conducted in the remand proceeding.

Repeated comments and directions of this kind in

the opinion below cannot be cloaked or camouflaged by

general statements of the lower court that it is not tell-

ing the Commission how to decide the case. The lower

“Such a survey would virtually amount to asking shippers

whether they would like lower rates, and the answers would be a

patently unreliable guide to whether reeycling would be stimulated

by lower rates, The evidence that is reliable, such as actual evidence

of shipper reaction to past rate changes and econometric studies,

is the evidence that the lower court has ignored. See p, 15, above,

— oe eee

25

court’s decision plainly violates the settled principle of

Idaho Power and Chenery which forbids a reviewing

court to impose, in the course of a remand, limitations

on the way in which the agency shall exercise its judg-

ment in the area committed to its discretion. While

these limitations imposed by the lower court here are

an additional reason for certiorari, they are equally

pertinent in emphasizing why immediate review by

this Court is essential and why a deferral of review is

inadequate to protect the railroads’ legitimate rights.

If the ease is returned to the Commission in its pres-

ent posture, the Commission will be under continuing

pressure not merely to supplement its evidence and re-

examine its conclusions but to reach a different result.

If it yields to that pressure, the railroads will be seri-

ously handicapped in a subsequent appeal to the lower

court which has clearly indicated its own policy pref-

erences. This concern is buttressed by the fact that the

lower court, when it is satisfied with the agency’s result,

is itself extraordinarily quick to invoke the ICQ’s ex-

pertise, the breadth of agency discretion in fact-finding

and analysis, and the limited role of judicial review in

appraising such determination.” If review of the lower

“ Only recently, in sustaining a number of ICC rules under the

4R Act, the lower court emphasized that the Commission's views

‘‘are entitled to deference, even on the issues of law involved in

statutory interpretation.’’ Atchison, 7. & S.F. Ry. v. 1CC, Nos, 76-

2048, 76-2070, D.C, Cir. May 2, 1978, p. 12. The lower court's deci-

sion there repeatedly refers to ‘‘the reasonable discretion of the

Commission in implementing [4R] Act,’’ ‘‘deferral to the Com-

mission's view,’’ and the reasonable exercise of ‘‘the Commission's

diseretion,’’ 7d, at 20, 22. The lower court concluded: ‘‘ Overall,

the Court's role is one of deference and deferral’’ and ‘‘the Com-

mission's effort in fulfilling this task deserves approval, for the

most part, when judged under the deferential standard to which

it is entitled.’’ Id, at 34-35.

26

court’s action in setting aside the Ez Parte No. 319

decision is to be meaningful, it must come now.

Any such coerced about-face by the Commission is

especially threatening because the recycling interests -

are utilizing this proceeding to seek significant altera-

tions in the rate structure, depriving the railroads of

desperately needed revenues.” Yet, a central purpose of

the 4R Act is to improve the railroad industry’s dire

financial position (see pp. 3-4, above) and, as Justice

White previously observed, ‘‘failure to maintain this

country’s railroads even in their present anemic con-

dition will guarantee that recyclable materials will stay

where they are—far beyond the reach of recycling

plants that as a consequence may not be built at all.’’

SCRAP I, 412 U.S. at 724 (White, J., concurring in

part and dissenting in part).

The Commission has repeatedly examined and re-

jected claims of rate illegality and adverse impact on

recycling in one proceeding after another including

Ex Parte No. 270 (Sub Nos. 5-6), Ex Parte No. 281, Ex

Parte No. 295 (Sub No. 1), and Ex Parte No. 299 and

now in Kx Parte No. 319. One of these analyses was

sustained by this Court, another by a different panel of

the lower court, and the present decision and impact

statement is more thorough than either of these prede-

cessors. See p. 4, n. 4, above. The Commission in its

300-page decision in this case and its 200-page environ-

** NARI, representing non-ferrous recyclables, seeks to obtain a

nationwide reduction in railroad rates for those recyclables despite

the clear inadequacy of existing rail earnings; and ISIS, repre-

senting ferrous recyclables, seeks to restrict future increases, de-

spite extraordinary inflation-generated cost increases that the rail-

roads have suffered and continue to suffer in handling these same

commodities.

i lo Ne

27

mental impact statement has given the subject the ad-

ditional ‘‘hard look’”’ required by Congress in Section

204, and it is time for the proceeding to be brought to

a close, without the improper, wasteful and dangerous

remand ordered by the lower court.

CONCLUSION

For the reasons stated, certiorari should be granted.

Respectfully submitted,

MICHAEL BoupDIN

Timotny A. Harr

888 Sixteenth Street, N.W.

Washington, D.C. 20006

James L, TAPLEY

James L. Howe, III

P. O. Box 1808

Washington, D.C. 20013

JAMES E. SYKES

222 S. Riverside Plaza

Chicago, Illinois 60606

Harry N. Bascock

2700 Terminal Tower

P. O. Box 6419

Cleveland, Ohio 44101

Ricuarp W. KIeNLE

8 North Jefferson Street

Roanoke, Virginia 24042

Wiiuiam C. LEIPer

P. O. Box 536

600 Grant Street

Pittsburgh, Pa. 15230

Joun A. DaILy

1138 Six Penn Center Plaza

- Philadelphia, Pa. 19104

Attorneys for the Railroads

November 1978