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

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oupreme Court, U, $3

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IN THE | DEC 28 1978

SUPREME COURT OF THE UNITED!STATES®: ©. cx

OCTOBER TERM, 1978

No. 78-872

ATCHISON, TOPEKA & SANTA FE

RAILWAY CO., et al,

Petitioners,

Vv.

NATIONAL ASSOCIATION OF

RECYCLING INDUSTRIES, INC., et al.,

Respondents.

BRIEF OF RESPONDENT INSTITUTE OF SCRAP

IRON AND STEEL, INC., IN OPPOSITION TO

PETITION FOR WRIT OF CERTIORARI TO THE

UNITED STATES COURT OF APPEALS FOR THE

DISTRICT OF COLUMBIA CIRCUIT

HOWARD GOULD

DAVID REICHERT

STEPHEN D. STRAUSS

2613 Carew Tower

Cincinnati, Ohio 45202

(513) 621-4607

Attorneys for Respondent,

Institute of Scrap Iron and

Steel, Inc.

December 29, 1978

TEE

COURT INDEX PRESS, INC. — 2!5 E. Ninth Street, Cincinnati, Ohio 45202 — (513) 241-1450

TABLE OF CONTENTS

STATEMENT

ARGUMENT Oe Sane yo ela a 52k

I. Events Prior to Ex Parte No. 319.

II. The Ex Parte No. 319 Order Contains Num-

erous Reversible Errors.

III. The Commission Did Not Apply Traditional

IV.

Rate Making Criteria.

Certiorari is Not Warranted at This Time.

12

TABLE OF AUTHORITIES

Cases and Administrative Proceedings:

Aberdeen & R.R.R. v. SCRAP, 414 U.S. 1035 (1978) .

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

American Construction Co. v. Jacksonville, T. & K.

R. Co., 148 U.S. 372

Arrow Transportation v. Southern R. Co., 372 US.

658 , 106 cp ta Ca a RO

Asphalt Roofing Mfg. Assoc. v. 1.C.C., 356 F.2d 994

Baltimore & Ohio R. Co. v. United States, 319 F.

Supp. 249 (1975)

Brotherhood of Locomotive Firemen v. Bangor &

Arroostook R.R., 389 U.S. 327

Chicago Board of Trade v. Illinois R. Co., 344 L.C.C,

818 (1973) ice |

Chicago & Eastern Illinois R. Co. v. United States,

384 F.Supp. 298, affd. 421 U.S. 956 (1975)

Citizens to Preserve Overton Park v. Volpe, 401

U.S. 402 (1971)

Cobbledick v. United States, 309 U.S. 323

Ex Parte No. 256, Increased Freight Rates, 1967,

332 1.C.C, 280

Ex Parte No. 259, Increased Freight Rates, 1968,

332 1.C.C. 714

Ex Parte No. 262, Increased Freight Rates, 1969,

337 1.C.C. 436

Page

8

8

12

10

Ex Parte No. 265 and Ex Parte No. 267, Increased

Freight Rates, 1970 and 1971, 339 1.C.C.125.... 5

Ex Parte No. 270 (Sub. No. 5), 345 L.C.C. 548 | 12

Ex Parte No. 270 (Sub. No. 6), 345 1.C.C. 867 | 10

Ex Parte No. 281, Increased Freight Rates and

Charges, 1972, 341 1.C.C. 290 | 5, 13

Ex Parte No. 295 (Sub. No. 1), Increased Freight

Rates and Charges, 1973, 349 I.C.C. 250 . 5, 13

Ex Parte No. 299, Increased Freight Rates and

Charges, 350 1.C.C. 673 ) 13

kx Parte No. 303, Increased Freight Rates and

Charges, 1974, Nationwide, 349 I.C.C. 862... 5

Ex Parte No. 305RE, Increased Freight Rates and

Charges, 1975 — Recyclable Materials, (unreported) 5

Ex Parte No. 306, 346 I.C.C. 408 |. 6

kx Parte No. 310, Increased Freight Rates and

Charges, 1975, 349 1.0.C.555 .......... ) 5

Ex Parte No. 313, Increased Freight Rates and

Charges — Labor Costs — 1975 (unreported) 5

Ex Parte No. 319, 356 I1.C.C. 114 _... Passim

Ex Parte No. 320 (unreported) .... 8

Hamilton-Brown Shoe Co. v. United States, 240

Us. i ...... Ce aoe 3

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

SS Oa 8

IV.

Statutes: Page

Clear Air Act and the Clean Air Act Amendments

of 1970, Pub.L. 89-675, 80 Stat. 954 and Pub.L.

91-604, 84 Stat., 1676, Title 42, U.S.C. §§ 1857-

So eh en mepiits etn ek ice ted, ele 3

Energy Policy and Conservation Act, Pub.L. 94-163,

TE SR eters MEG. yee ge a eo) eee 3

Energy Supply & Environmental Coordination Act

of 1974, Pub.L. 93-319, 88 Stat. 246... ssssd 3

Federal Water Pollution Cotnrol Act, Pub.L. 92-

500, 86 Stat., 816, Title 33 U.S.C. § 1151 et seq. | 3

National Environmental Policy Act of 1969, Pub.L.

Siem Ge ae eee... fo ee ai 3

National Material Policy Act of 1970, Pub.L. 91-

en ee Ms ME oy gest es cl ee eee 3

Railroad Revitalization and Regulatory Reform Act

of 1976, Pub.L. 94-120, 90 Stat. 40 ........... Passim

Regional Rail Reorganization Act of 1973, Pub.L.

Spaee, es. eee Fee a ee 8. Aas. 3, 4, 5

Resource Conservation and k.ecovery Act of 1976,

Pub.L. 94-580, 90 Stat. 2795 sss... Aa adnee 3

Resource Recovery Act of 1970, Pub.L. 91-512, 84

Stat. 1227 NGL Sanh Se Kare ep we a sy 1 a 3

Solid Waste Disposal Act, Pub.L. 89-272, 79 Stat.

ea AoA Se eA Pe Pa £.J

Miscellaneous:

Federal Energy Administration, Office of Conserva-

tion and Environment, Report to Congress: Ener-

gy Conservation Study, December, 1974 |.

Final Report of the National Commission on Ma-

terials Policy, June 1973... s——sis‘ts

119 Congressional Record 40724

Page

IN THE

SUPREME COURT OF THE UNITED STATES

OCTOBER TERM, 1978

No. 78-872

ATCHISON, TOPEKA & SANTA FE

RAILWAY CO., et al,

Petitioners,

Vv.

NATIONAL ASSOCIATION OF

RECYCLING INDUSTRIES, INC., et al.,

Respondents.

BRIEF OF RESPONDENT INSTITUTE OF SCRAP

IRON AND STEEL, INC., IN OPPOSITION TO

PETITION FOR WRIT OF CERTIORARI TO THE

UNITED STATES COURT OF APPEALS FOR THE

DISTRICT OF COLUMBIA CIRCUIT

STATEMENT

Respondent, Institute of Scrap Iron and Steel, Inc. is

a non-profit trade association incorporated in the state of

New York with its principal offices in Washington, D. C.

Institute members process, ship and otherwise handle ap-

proximately 90% to 95% of the iron and steel scrap pur-

chased in the United States.

2

Petitioners seek a writ of certiorari to review a unanimous

decision of the United States Court of Appeals for the

District of Columbia, vacating and remanding for further

proceedings the February 1, 1977 report and order of the

Interstate Commerce Commission in Ex Parte No. 319.'

In that order three commissioners, including the current

chairman and the past vice chairman, registered strong

dissents? to the five-member majority opinion. Thus, six

of the eleven judicial officers who have reviewed the case

have found error in the majority's order.

Significantly, the United States Department of Justice,

which traditionally represents the administrative agency and

had never previously supported scrap shippers, abandoned

the Commission and filed with the Court of Appeals a brief

in favor of Respondent, requesting that the Commission's

order be vacated and remanded. Additionally, the En-

vironmental Protection Agency and the Federal Energy

Administration opposed the Commission's order.

If the substantial opposition (other than that of Re-

spondent) to the Commission's order is not enough to

deny the petition for writ, two additional cogent reasons

exist:

1. The Interstate Commerce Commission itself does

not seek a writ of certiorari’, and

1 356 I.C.C, 114 (Pet.App. D.).

2356 1.C.C. 432 (Pet.App. 322d).

3 Petitioners’ claim that the requirement that the remand be com-

pleted within six months constitutes grounds for granting a writ of

certiorari. However, the Commission's decision not to seek a writ can

be interpreted as a lack of concern by the Commission regarding the

six month deadline. In any event, the order to complete the remand

in six months is not a matter of such great public interest as would

warrant review by this Court.

3

2. The assailed opinion of the Court of Appeals is not

ripe for review since the case has been remanded for fur-

ther proceedings.*

ARGUMENT

I. Events Prior to Ex Parte No. 319.

On February 5, 1976 Congress enacted the Railroad

Revitalization and Regulatory Reform Act of 1976.5 Sec-

tion 204 of the Act reflected Congress's continuing and

accelerating concern for conservation of rapidly dwindling

natural resources, reduction of pollution and conservation

of energy, in that it directed the Interstate Commerce

Commission to investigate the rate structures for recyclable

materials and competing virgin materials in order to de-

termine if they were unjustly discriminatory or unreason-

able. Section 204 was one of the many bricks in the

complex Congressional structure involving numerous gov-

ernmental agencies in the critical areas of conservation,

environment and energy.®

4 American Construction Co. v. Jacksonville, T. & K. R. Co., 148 U.S.

372, 384; Cobbledick v. United States, 309 U.S, 323, 324-325; Hamilton-

Brown Shoe Co., v. United States, 240 U.S, 251, 258 and Brotherhood

of Locomotive Firemen v. Bangor & Arroostook R.R., 389 U.S. 327.

5 Pub.L. 94-210, 90 Stat. 40 (Pet. App. F).

6 E.g., National Environmental Policy Act of 1969, Pub. L. 91-190,

83 Stat. 852; the Solid Waste Disposal Act, Pub. L. 89-272, 79 Stat.

997; the Resource Recovery Act of 1970, Pub. L. 91-512, 84 Stat. 1227;

the Clean Air Act and the Clean Air Act Amendments of 1970, Pub.

L. 89-675, 80 Stat. 954, and Pub. L. 91-604, 84 Stat. 1676, Title 42,

U.S.C. §§ 1857-1871; the Federal Water Pollution Control Act, Pub.

L. 92-500, 86 Stat. 816, Title 33 U.S.C. § 1151 et seq.; the Energy

Policy and Conservation Act, Pub. L. 94-163, 89 Stat. 871; the Na-

tional Materials Policy Act of 1970, Pub. L. 91-512, 84 Stat. 1234, the

Resource Conservation and Recovery Act of 1976, Pub. L. 94-580, 90

Stat. 2795; and the Energy Supply and Environmental Coordination

Act of 1974, Pub. L. 93-319, 88 Stat. 246.

4

For many years a number of Federal agencies had com-

plained that freight rates discriminated against the trans-

portation of recyclable materials in favor of virgin com-

modities, thereby creating a significant barrier to increased

recycling.”

Indeed on several occasions, the Commission had recog-

7 E.g., “Recycling offers a significant potential for energy and resource

conservation in a number of important industries. However, shipping

rates that discriminate against transport of recycled materials in favor

of virgin materials are a significant barrier to increased recycling . . .”.

Federal Energy Administration, Office of Conservation and Environ-

ment, Report to Congress: Energy Conservation Study, December,

1974, p. 157.

“Certain railroad freight rates appear to discriminate against sec-

ondary materials in favor of virgin materials.” Final Report of the

National Commission on Materials Policy, June, 1973, p. 4D-17.

During the Congressional deliberations prior to the enactment of

the Regional Rail Reorganization Act of 1973, Pub. L. 93-236, 87 Stat.

1023, Senator Moss stated:

“. . .(T)he record before the Commerce Committee shows that

since 1968, agency after agency of the executive branch has urged

the Interstate Commerce Commission and the Federal Maritime

Commission to correct the unreasonable, discriminatory trans-

portation rates for recyclable commodities such as scrap metals,

waste paper and textile wastes.

“The Secretary of the Interior, the Department of Commerce,

the Director of the Office of Emergency Planning, the General

Services Administration, the Council on Environmental Quality,

tne Environmental Protection Agency, the Citizens Advisory Com-

mittee on the Environment, the National Materials Policy Commis-

sion, and the National Science Foundation have all called for the

elimination of the unreasonable and discriminatory freight rates

which have impeded effective recycling and have drained our

scarce stock of critical natural resources.

“At the local level the National League of Cities, the U.S.

Conference of Mayors, the Council of State Governments, and the

League of Women Voters have sought the same relief from the

Federal Government contending that unreasonable, discriminatory

freight rates for the transportation of recyclables are discouraging

recycling and making it more and more difficult and costly for

local governments to manage and dispose of their expanding

volumes of solid waste materials.” 119 Cong.Rec. 40724.

5

nized the competition between the recyclable scrap iron

and the virgin material iron ore by granting rate relief

during general freight rate increase cases.8 But, inconsis-

tently, the Commission denied rate relief for recyclables

in numerous other general freight rate increase cases.?

Congressional disenchantment with the Commission's

failure to take more positive action to eliminate the dis-

parity in freight rates between virgin and _ recyclable

commodities was first manifested on January 2, 1974 when

the Regional Rail Reorganization Act of 1973 was en-

acted.'® Section 603 of the Act admonishes the Commis-

sion to ‘‘by expedited proceedings, adopt appropriate rules

8 See Ex Parte No. 256, Increased Freight Rates, 1967, 332 LC.C.

280, 331, where the Commission ordered the increase on scrap iron

freight rates to be “held to those permitted on iron ore in view of the

competition, shown on the record, between these commodities”; Ex

Parte No. 259, Increased Freight Rates, 1968, 332 1.C.C. 714, 743, where

the increase on scrap iron freight rates was held to the increase granted

iron ore; Ex Parte No. 265 and Ex Parte No. 267, Increased Freight

Rates, 1970 and 1971, 339 1.C.C. 125, 207, where scrap iron rates in the

east were increased by 11% while iron ore rates were increased 14%

because of “environmental considerations”; Ex Parte No. 295 (Sub-No.

1), Increased Freight Rates and Charges, 1973, 349 I.C.C. 250, 279,

where scrap iron freight rates were granted a holddown equal to the hold-

down on iron ore rates to “remove any possible risk that the increase may

retard movements of ferrous scrap”; and Ex Parte No. 310, Increased

Freight Rates and Charges, 1975, 349 1.C.C. 555, where scrap iron

rates were again granted a holddown in cents per ton equal to the

average increase on iron ore rates to “generate a degree of positive

environmental benefits.” The Commission added that “as virgin counter-

parts are allowed to increase incrementally, recyclables will be placed

in a more favorable economic posture.” 349 I.C.C. 555 at 578.

9 Ex Parte No. 262, Increased Freight Rates, 1969, 337 1.C.C. 436;

Ex Parte No. 281, Increased Freight Rates and Charges, 1972, 341 1.C.C.

290; Ex Parte No. 303, Increased Freight Rates and Charges, 1974,

Nationwide, 349 I.C.C. 862; Ex Parte No. 305 RE, Increased Freight

Rates and Charges, 1975 — Recyclable Materials, (unreported); Ex

Parte No. 313, Increased Freight Rates and Charges — Labor Costs —

1975 (unreported).

10 Pub.L. 93-236, 87 Stat. § 1023, 45 U.S.C. § 793.

6

. which will eliminate discrimination against the ship-

ment of recyclable materials in rate structures and in other

Commission practices where such discrimination exists.”

The Commission’s response to § 603 was to enact re-

dundant rules, adding little to those already incorporated

‘a the Interstate Commerce Act, prompting a strong

dissent from Commissioner O’Neal."'

The enactment by Congress of § 204 of the Regulatory

Reform Act some eighteen months following Ex Parte No.

306 was a second, more strongly worded directive to the

Commission to act promptly to eliminate the discriminatory

freight rate structure on recyclables.

Il. The Ex Parte No. 319 Order Contains Numerous

Reversible Errors.

The three dissenting Commissioners, the Court of Ap-

peals and the Department of Justice all detected errors in

the order of the majority in Ex Parte No. 319.

Section 204 (a) (2) of the Regulatory Reform Act im-

posed upon the rail carriers the burden of proof that the

rate structure on competing recyclables and virgin ma-

terials was just, reasonable and nondiscriminatory. Peti-

tioners state that the Interstate Commerce Commission

clearly and repeatedly recognized that the railroads had

'! Commissioner O’Neal complained: “The lack of specific require-

ments in the statute is read by the majority (according to the report)

to indicate that the Commission seed not undertake a broad investi-

gation. But the Congress had indicated that this is an area of sufficient

Congressional concern to warrant a statutory message to the Com-

mission. This suggests to me that Congress wanted the Commission

to do something more than merely reaffirm that upon the filing of a

formal complaint a remedy for discrimination exists at the I.C.C.”

Ex Parte No. 306, 346 L.C.C. 408 at 414. Commissioner Murphy

joined in the dissent.

7

the burden of proof and that the Court of Appeals dis-

agreed with the factual evaluation of the rates.'?

The Commission's order indicates otherwise. On num-

erous occasions it criticized the carriers for improper evi-

dence and failure to furnish adequate evidence.'* More

importantly the Commission improperly chastised the ship-

pers for failing to fill the void created by the railroads’ lack

of evidence, prompting Commissioner Christian to com-

plain that “In practical effect, the report has lifted the statu-

tory burden of proof from the carriers and placed it on

the shippers.” 356 I.C.C. 433 (Pet.App. 323d).

Petitioner’s assertion that the Court of Appeals con-

ceded that the Interstate Commerce Commission had acted

properly in applying traditional standards of reasonable-

ness and discrimination but improperly disagreed with the

Commission's factual evaluation of the rates, is incorrect.

What the Court of Appeals found was that by reversing

the rules governing the burden of proof, § 204 precluded

the Commission from following the rules applicable during

general revenue proceedings requiring that the railroads

establish their revenue needs following which the burden

shifts to the shippers to show the increases are not justified.

Repeatedly the Commission erroneously stated it would

consider the revenue needs of the carriers before making

12 Pet. pgs. 9-10.

13 See e.g., 356 1.C.C. 134, (Pet.App. 24d) where the Commission

stated “All respondents failed to show comparisons of results for re-

cyclable commodities with their competing or potentially competitive

virgin commodities.” See also 356 1.C.C. 133 (Pet.App. 23d) where

additional specific “failure” or “improper” determinations were found

by the Commission. Of the 3,000 movements referred to by Petitioners

on page 6 of their petition, over 875 had to be discarded because they

were improper. 356 I.C.C. 127 (Pet.App. 17d).

8

any rate adjvsiments.'* The Court of Appeals properly

found it was not for the Commission to disagree with

Congress by giving greater weight to railroad profitability

than to environmental and energy goals. Slip Op. 24-25.'5

Nor does the action by the Court of Appeals parallel

that of the SCRAP litigation'® as Petitioners contend.'”

SCRAP IT was an appeal from a three-judge Federal court

setting aside a Commission order terminating a general

revenue proceeding without declaring unlawful certain in-

creases on the basis the Commission failed to hold hearings

after preparing a draft environmental impact statement,

thereby violating a NEPA requirement that the statement

accompeny the proposal through the agency review process.

This Court held under Arrow Transportation v. Southern

R. Co., 372 U.S. 658, that §15(7) of the Interstate Com-

14E.g., 356 L.C.C. 160 (Pet.App. 50d). See also 356 LC.C 118,

151, 152, 158 and 429 (Pet.App. 8d, 41d, 42d, 48d and 319d). Even

in the few instances where rates were found unreasonable, the Com-

mission evidenced its primary concern for the railroads’ profitability by

stating that reductions would not adversely affect their financial status.

356 1.C.C. 416 (Pet.App. 306d).

'S Petitioners’ appeal to the benevolence of this Court by asserting

that the Court of Appeal’s opinion “threatens vitally needed railroad

revenues” is misplaced. Pet. p. 11. First, scrap iron shippers sought

no rate reductions; only that in future general freight rate increases,

the increases on scrap iron be held, until such time as discrimination in

the basic rate structures is removed, to the average level granted iron

ore in cents per ton. 356 I.C.C. 153, 163 (Pet.App 43d, 53d). Second,

the rail carriers can improve their financial condition by raising the

rates on marginal and non-compensatory traffic. Third, the Commission

in other proceedings involving interpretation of the Regulatory Reform

Act has stated “Congress intended that the railroads’ need for rate

flexibility be balanced against the public's need for protection against

excessive rates.” Ex Parte No. 320, Slip Sht. pp. 18, 26, App. D, p. 7.

'6 United States v. SCRAP, 412 U.S. 669 (1973) (“SCRAP I”);

Aberdeen & R.R.R. v. SCRAP, 414 U.S. 1035 (1973); Aberdeen &

R.R.R. v. SCRAP, 422 US. 289 (1975 (“SCRAP II”).

'7 Pet. pp. 11, 21-22.

9

merce Act gives the Commission exclusive power to suspend

rate increases pending final determination of their law-

fulness.

IxXI. The Commission Did Not Apply Traditienal Rate

Making Criteria.

Petitioners erroneously urge that the Court of Appeals,

having admitted the Commission was authorized by § 204

to apply traditional rate making criteria, improperly re-

weighed the evidence and substituted its evaluation of the

evidence for that of the Commission.'® While the criteria

for determining discrimination pursuant to §3(1) were

correctly articulated by the Commission’? a demonstration

of how the Commission proceeded to investigate discrimi-

nation in Ex Parte No. 319 discloses the Court of Ap-

peals and the three dissenting Commissioners were correct

in holding the articulated procedure was not followed.

First, although it was undisputed that there was a gross

disparity on freight rates on scrap iron and iron ore such

fact was never acknowledged by the Commission. It neat-

18 Pet. p. 12-13.

19 The Commission stated “In typical section 3(1) cases we have

stated that in order to support a finding of a violation of section 3(1),

it must be shown (1) that there is a disparity in rates, (2) that the

complaining party is competitively injured, actually or potentially, (3)

that the defendant carriers are the common source of both the allegedly

prejudicial and preferential treatment, and (4) the disparity in rates

is not justified by transportation conditions. The complainant has the

burden of proving the presence of the first three factors, and the

defendants have the burden of justifying the disparity, if possible, in

connection with the fourth. Chicago Board of Trade v. Illinois Central

R. Co., 344 1LC.C, 818, 831 (1973).” 356 LC.C. 159 (Pet.App. 49d).

See also Chicago & Eastern Illinois R. Co. v. United States, 384 F.Supp.

298, affd. 421 U.S. 956 (1975).

10

ly finessed this damaging fact by reviewing instead the ratios

of revenue to variable costs of the two commodities.?¢

More importantly, as noted by the Court of Appeals and

the dissenting Commissioners, the order failed to address

the issue of whether the substantial rate disparities were

justified by transportation characteristics. —The Commis-

sion sidestepped this issue by finding that scrap iron ship-

pers had not been injured by the higher ratios since the

movement of scrap had not decreased.?'

The finding that the movements of scrap iron had not

decreased provided the basis for another Commission error.

As stated earlier, one of the traditional §3(1) criteria

is whether the shipper is competitively injured, actually or

potentially.22, Having properly enumerated this criterion,

the Commission ignored it and, as the Court of Appeals

found, introduced “a novel element, competition in fact,”

as opposed to potential competitive injury.?%

By ruling scrap shippers did not establish discrimination

by failing to show actual rather than potential injury, the

20 Even the discussion of ratios was biased. Without explanation,

the Commission abandoned the findings of the Coordinator in Ex

Parte No. 270 showing the ratios on scrap iron to be superior to those

on iron ore in all territories: 124.9 to 109.4 in Official (Eastern),

163.9 to 108.2 in Southern, 127.9 to 92.8 in Western and 129.9 to

101.4 in all. Ex Parte No. 270 (Sub-No. 6) 345 LC.C, 1119, 1121.

21 Specifically the Commission stated: “There is really no need to

consider if the transportation characteristics of iron ore, which differ

from those of scrap iron and steel, justify the higher ratios on scrap.”

356 L.C.C. 206 (Pet.App. 96d).

22 The Commission has repeatedly held that the potential for dis-

criminatory treatment violates §§ 2 and 3(1). Baltimore & Ohio R. Co.

v. United States, 391 F.Supp. 249, 259 (1975). See also footnote 19,

supra.

23 Slip Op. 35 (Pet.App. 39b).

1]

Commission vitiated its self-proclaimed § 3(1) criteria, as

well as those denominated by Congress in § 204.74

For § 204 does not require a positive finding of actual

injury: if potential injury exists, there is discrimination

and the Commission was mandated to eliminate it. The

Commission’s acquiescence in higher rates for recyclables

so long as shipments were not reduced, frustrates the desire

of Congress to increase the movement of recyclables in or-

der to achieve conservation, environmental and energy

goals.25 Failure to adhere to statutory and procedural re-

quirements constitutes grounds for setting aside an agency

decision. Citizens to Preserve Overton Park v. Volpe, 401

U.S. 402, 410-416 (1971).

Petitioners argue that an indication of potential injury

was the utilization by the Commission of an econometric

analysis of transportation demand elasticity indicating the

rate structure had no significant impact on the movement

of recyclables.26 However, the Commission itself admitted

24 The Commission admitted “that statistics on the movement of

scrap iron and steel by rail does not tell the story, i.e., how much could

have moved by rail.” 356 1.C.C. 183 (Pet.App. 73d). The Commis-

sion noted further that “the absence of extensive evidence and discussion

of the shifting of recyclable traffic from rail to motor carriage, both

common and private, is a great void in this record.” 356 I.C.C, 183

(Pet.App. 73d).

25 The Commission was aware of the environmental benefits of using

serap iron as opposed to iron ore. It found “Accordingly, conversion of

BOF to EAF steelmaking, which scrap utilization incentives would do,

would create significant environmental benefits.

“Increasing scrap utilization thus impacts the environment, primarily

by reducing the iron ore mining and processing activities in the short

run rather than by changes in environmental profiles of the furnaces

themselves. In the long run, substitution of the blast furnace -- BOF

system with the scrap intensive EAF system would result in a more

environmental efficient industry.” Ex Parte No, 319, FEIS, p. 4-32.

26 Pet. pgs. 15-16.

12

the inherent limitation of such studies when used to de-

termine the lawfulness of the rate structures. (See Slip

Op. 30, Pet. App. 34b) .?7

IV. Certiorari is Not Warranted at This Time.

As stated earlier, the interlocutory nature of the remand

precludes further review at this time. To state that this

case is in substance a continuation of the prior SCRAP

litigation (Pet. p. 22) is absurd. The SCRAP cases in-

volved an interpretation of NEPA requirements in a gen-

eral revenue increase proceeding. This case is a Con-

gressionally mandated investigation in which judicial re-

view is specifically provided in § 204 (d) .?8

All of the so-called repeated examinations of illegal

rates of recyclables enumerated by Petitioners (Pet. p. 26)

occurred prior to the enactment of the Regulatory Reform

Act on February 5, 1976.2® Petitioners infer that such re-

27 The theoretical conclusions of the econometric analysis of demand

elasticity were contrary to the Commission’s own findings. In Ex

Parte No. 270 (Sub. No. 5) the Commission stated “should freight

rates become too high . . . capital expenditures for steel mill con-

struction could be shifted toward investment in mills that utilize scrap

as opposed to ore.” 345 I.C.C. 667. In its final environmental impact

statement in Ex Parte No. 319 the Commission found “Holddowns will

generally benefit recyclable materials because rates on those commodities

are typically higher than the corresponding virgin material.” Ex Parte No.

270, FEIS, January 4, 1977, p. 5-5.

28 Pet.App. 2(f). This Court held in SCRAP II that the Com-

mission’s conclusions at the close of a general revenue proceeding that

it give no further consideration to environmental factors under NEPA

was a final decision subject to judicial review. Asphalt Roofing Mfg.

Assoc, v. 1.C.C., 567 F.2d 994, 1001 (1977).

29 Ex Parte No. 270 (Sub-Nos. 5 and 6) was instituted December

27, 1973, and although the Coordinator’s report was decided February

4, 1976, it was not served until March 19, 1976. However, Ex Parte

No. 270 was a non-adversary proceeding in which “the Coordinator did

not go through a structured, step-by-step analysis in determining

13

peated examinations should close the book on further in-

vestigation of discriminatory rate treatment of recyclables.

To the contrary, it can be assumed that Congress was well

aware of the Commission’s repeated failures to eliminate

the grossly disparate rates on recyclables and it was because

of such failure that § 204 was enacted.

Petitioners remind this Court again on page 26 of its

petition of ‘‘the railroad industry's dire financial position.”

This theme, which repeatedly appears throughout the

Commission's order (see footnote 14) and the petition

(Pet. pgs. 3-4), is seen as justification for maintaining a

highly discriminatory freight rate structure. Yet, the very

fact that § 204 was enacted in the thick of legislation en-

titled the ‘Railroad Revitalization and Regulatory Reform

Act’, indicated that to Congress, railroad revenue needs

are not to be a factor in the elimination of unreason-

able or discriminatory rate structures on recyclables.

The petition for writ of certiorari should be overruled.

Respectfully submitted,

HOWARD GOULD

DAVID REICHERT

STEPHEN D. STRAUSS

2613 Carew Tower

Cincinnati, Ohio 45202

(513) 621-4607

Attorneys for Respondent, Institute

of Scrap Iron and Steel, Inc.

December 29, 1978

whether the rate structures on scrap iron and steel are being discrim-

inated against in favor of the rate structure on iron ore.” 356 I.C.C,

184 (Pet.App. 74d). The Ex Parte No. 281 order was issued September

27, 1972, the Ex Parte No. 295 (Sub-No. 1) order was issued October

29, 1974, 349 L.C.C, 250, and the Ex Parte No. 299 order was issued

August 15, 1975, 350 LC.C, 673.