# Petition — Wichita Board of Trade v. United States > Briefs, arguments, decisions, and more. URL: https://www.frixlaw.com/law-library/documents/brief%3Amicro_IA40385011_0433%3A1 ## Record - **Collection:** Supreme Court brief - **Document type:** Petition - **Published:** January 1, 1984 - **Citation:** 464 U.S. 1069 ## Text ALEXANDER L STEVA IN THE Supreme Court of the United States October Term. !983 S | THE WICHITA BOARD OF TRADE, ET AL., Petitioners, v. THE UNITED STATES OF AMERICA AND THE INTERSTATE COMMERCE COMMISSION, ET. AL., Respondents. ON WRIT OF CERTIORARI TO THE UNITED STATES COURT OF APPEALS FOR THE TENTH CIRCUIT PETITION FOR WRIT OF CERTIORARI CHARLES J. McCARTHY Counsel of Record DANIEL J. SWEENEY 1750 Pennsylvania Avenue, NW Washington, D.C. 20006 (202) 393-5710 McCARTHY, SWEENEY & HARKAWAY, P.C. Of Counsel September, 1983 SS I |S a DiCesare and Associates Printing @ Washington, D.C. @ (202) 331-8101 QUESTIONS PRESENTED 1. Where this Court directed a district court to resolve the disposition of a fund, consisting of payments by shippers of unlawful grain inspection charges collected by railroads during the period covered by a stay order issued by this Court, and the district court remanded the issue of reasonableness of those charges to the Interstate Commerce Commission, did that court lose the power to comply with this Court’s directive by failing to state in its remand that it reserved jurisdiction over the ultimate disposition of the fund? 2. Where, pursuant to a stay order issued by this Court, a fund, consisting of payments by shippers for unlawful grain insvection charges, was accumulated under the jurisdiction of a district court, did the district court act properiy in ordering the fund returned to those who bore the unlawful charges? 3. (a) When this Court has referred to a district court for decision an issue that was not briefed or argued before this Court, it is the district court’s duty to decide that issue by appiying established legal and equitable principles or to try, by parsing the opinion of the Court, to decide how this Court would have decided the issue if it had decided it? (b) Where the district court has decided the issue applying established legal and equitable principles, may a court of appeals ignore the merits of the district court’s decision and reverse, based on its interpretation of this court’s opinion? 4. Where: (1) the charges collected by the railroads while an appeal was pending in this court are in a fund under the supervision of a district court; (2) the Interstate Commerce Commission subsequently found that the charges collected by the railroads were unlawful; and (3) the statute confers on shippers an unqualified right to recover the damages sustained by unlawful action of the railroads, must the district court nevertheless relegate the shippers who paid the unlawful charges to complaint proceedings before the Commission? 5. After a three-judge court has completed its review of a Commission decision, is the disposition of a fund accumulated as an incident to such review a matter that can be determined by a single judge? Cre P| iil LIST OF PARTIES This Petition is being filed on behalf of the following: The Wichita Board of Trade, the Board of Trade of Kansas City, Mo., Board of Trade of the City of Chicago, Omaha Grain Exchange, Enid Board of Trade, the Hutchison Board of i rade, Sioux City Grain Exhange, Merchants’ Exchange of St. Louis, the Denver Grain Exchange Association, Los Angeles Grain Exchange, Fort Worth Grain Exchange, Peoria Board of Trade,Utah-ldaho Grain Exchange, State Corporation Commission of the State of Kansas, Missouri Department of Agriculture, Kansas Grain & Feed Dealers Association, National Grain Trade Council, National Grain and Feed Association, Missouri Farmers Association, Inc., Cash Grain Association of the Chicago Board of Trade, Pacific Northwest Grain Dealers Association, Inc., National Association of Wheat Growers, Kansas City Grain Commission Men’s Association, California Grainand Feed Association, Far-Mar-Co., Inc. FS Services, Inc., Producers Grain Corporation, Bunge Corporation, C-G-F- Grain Company, Inc. Garvey Elevators, Inc. Garvey Grain, Inc., Lincoln Grain, Inc., Midwestern Grain Company - Division of Garnac Grain Co, Inc., Masters Grain Company, Hollander & Feuerhaken, Mohr-Holstein Commission Co., and Stotler & Company. ! The following list identifies parties to the proceeding in the Court of appeals for the Tenth Circuit: The Wichita Board of Trade The Board of Trade of Kansas City, MO Board of Trade of the City of Chicago Omaha Grain Exchange Enid Board of Trade 'Lauhoff Grain Company is a subsidiary of the Bunge Corporation, which is a subsidiary of Los Andes N V. C-G-F Grain Company, Inc. isa subsidiary of Mid-West Industries. Lincoln Grain, Inc. is subsidiary of Lincoln Industries, Inc. The Hutchison Board of Trade Sioux City Grain Exchange Merchants’ Exchange of St. Louis The Denver Grain Exchange Association Los Angeles Grain Exchange Fort Worth Grain Exchange Peoria Board of Trade Utah-Idaho Grain Exchange State Corporation Commission of the State of Kansas Missouri Department of Agriculture Kansas Grain & Feed Dealers Association National Grain Trade Council Nationa! Grain and Feed Association Missouri Farmers Association, Inc. Cash Grain Association of the Chicago Board of Trade Pacific Northwest Grain Dealers Association, Inc. National Association of Wheat Growers Kansas City Grain Commission Men's Association California Grain and Feed Association Far-Mar-Co., Inc. FS Services, Inc. Producers Grain Corporation Bunge Corporation CGF Grain Company, Inc. Garvey Elevators, Inc. Garvey Grain, Inc. Lincoln Grain, Inc. Midwestern Grain Company - Division of Garnac Grain Co., Inc. Masters Grain Company Hollander & Feuerhaken Mohr-Holstein Commission Co. Stotler & Company United States of America Interstate Commerce Commission The Atchison, Topeka and Santa Fe Railway Company The Baltimore and Ohio Railroad Company The Baltimore and Ohio Chicago Terminal Railroad Company Burlington Northern Inc. The Chesapeake and Ohio Railway Company Chicago and Eastern Illinois Railroad Company Chicago and North Western Railway Company Chicago, Rock Island, and Pacific Railroad Company Colorado and Southern Railway Company The Denver and Rio Grande Western Railroad Company Elgin, Joliet and Eastern Railway Company Erie Lackawanna Railway Company Fort Dodge, Des Moines & Southern Railway Company Fort Worth and Denver Railway Company Grand Trunk Western Railroad Company Gulf, Mobile and Ohio Railroad Company Illinois Central Railroad Company Illinois Central Gulf Railroad Company Illinois Terminal Railroad Company Kansas City Southern Railway Company Louisville and Nashville Railroad Company Missouri-Kansas- Texas Railroad Company Missouri Pacific Railroad Company Monon Railroad Company _Norfolk and Western Railway Company Penn Central Transportation Company St. Louis-San Francisco Railway Company St. Louis Southwestern Railway Company Soo Line Railroad Company Southern Pacific Transportation Company Texas and Pacific Railway Company Toledo, Peoria & Western Railroad Company Union Pacific Railroad Company Western Pacific Railroad Company TABLE OF CONTENTS ME coo cdbheetcessacescevedscévsnentacawaunee i DCE vcabeendcdcconceoedveceeestacedeveasceubuseees iii cv. ccadecescccebeddscesédvcotseccbeseee eed vi ED ck. dp peewnancadcéeccanecdebs thepeseuaniren x ENED Ca cdpebcbeccecccvccccovevessetsevcenbaceeeees | torch veces kbeedrCbdend oeccscndeencuceveusestdeewe 2 DOMSRREY POGUIIIONS TRVOIVEE 0.0.00 cccccccccsrecsaccdsccceceness 2 tite ee iwetee howe Whee e¥ehéopanseedeqkenehgen 3 POR HO COMIN WUE gc cc vcccccccncccces coecccecscocesucse 8 |. THE HOLDING BY THE COURT OF APPEALS THAT THE DISTRICT COURT HAD LOST JURISDICTION OVER THIS CASE FRUSTRATES THE MANDATE OP THIS COURT nn ccscsscvcccccssccccccsccccccccsses 9 tl. THE DECISION OF THE COURT OF APPEALS CONFLICTS WITH THE DECISION OF THIS COURT IN MORGAN U0 wccccrcccccvccccccccccccsceccccceces 1 ill, THE CONSTRUCTION BY THE COURT OF APPEALS OF THIS COURTS MANDATE CON- FLICTS WITH ESTABLISHED PRINCIPLES GOVERNING THE CONSTRUCTION OF MEANDATES occccccccccccccccccccccceccccescsecesics 13 IV. THE HOLDING BY THE COURT OF APPEALS THAT REPARATIONS ARE WITHIN THE PRIMARY JURISDICTION OF THE COMMISSION CONFLICTS WITH A.J. PHILLIPS CO. v. GRAND TRUNK WESTERN RAILROAD .wuccccccccscccccccccccccccecs 15 V. THE HOLDING BY THECOURT OF APPEALS THAT A SINGLE JUDGE HAD NO JURISDICTION TO ISSUE AN ORDER DISPOSING OF THE FUND CONFLICTS WITH THE DECISION OF THIS COURT IN PUBLIC SERVICE COMMISSION vy. BRASHEAR FREIGHT LINES 0.0.00 ccc ceeeeeennnes 17 CONCLUSION ...ccccccccccccccccccvvccvccsccseccecccceces 18 viii Appendix (i) Wichita Board of Trade vy. United States, 706 F. 2d 1067 (10th Cir. 1983) Appendix (ii) (a) Wichita Board of Trade v. United States, No. 4730 (D. Kan. May 6, 1982) (Order directing railroads to file a written accounting and tender the amounts collected into the court, reserving decision on the amount of interest which might be due on such funds.) (ii) (b) Wichita Board of Trade v. United States, 352 F. Supp. 365 (D. Kan. 1972) (ii) (c) Atchison, Topekaand Santa Fe Railway v. Wichita Board of Trade, 412 U.S. 800 (1973) (ii) (d) Atchison, Topeka and Santa Fe Railway v. Wichita Board of Trade, 409 U.S. 801 (1972) (ii) (¢) Inspection in Transit, Grain and Grain Products, 339 1.C.C. 364 (1971) (ii) (f) Inspection in Transit, Grain and Grain Products, 349 1.C.C. 89 (1975) (ii) (g) /nspection in Transit, Grain and Grain Products, 359 1.C.C. 624 (1979) (ii) (h) Atchison, Topeka and Santa Fe Railway v. Wichita Board of Trade, 433 U.S. 902 (1977) (ii) (i) Wichita Board of Trade v. United States, No. 4730 (D. Kan. July 31, 1973) (Order of the court remanding to the Commission.) ix (ii) (j) Wichita Board of Trade v. United States, No. 4730 (D. Kan. Feb. 23, 1977) (Opinion of the court granting Peiti- ioners’ motion for refund.) (ii) (k) Wichita Board of Trade v. United States, No. 4730 (D. Kan. Aug. 22, 1977) (Order remanding to the Commission.) Appendix (iii) Wichita Board of Trade v. United States, No. 82-1808 (10th Cir. June 16, 1983) (Petition for rehearing denied.) Appendix (iv) (a) No. 8548 /nspection in Transit, Grain and Grain Products, (served Nov. 20, 1975) (Order denying protestant’s mo- tion for refund.) (iv) (b) Secretary of Agriculture v. 1.C.C., 551 F. 2d 1329 (D.C. Cir. 1977) Appendix (iv)(c) INTERSTATE COMMERCE ACT Former Section | (5) Former Section 8 49 U.S.C. §11705(b) (2) Former Section 9 49 U.S.C. §11705(c) (1) Former Section 13(1) Former Section 15(7) Former Section 16(1) 7 TABLE OF AUTHORITIES Cases Page Atchison, Topeka & Sante Fe Railway v. Wichita Board of Trade,409 U.S. 801 (1972) ....... 2 Atchison, Topeka & Santa Fe Railway v. Wichita Board of Trade, 412 U.S. 800 (1973) ..2, 4, 13 Atchison, Topeka and Santa Fe Railway v. Wichita Board of Trade, 433 U.S. 902 (1977)....2, 10 Bates v. United States, 323 U.S. 15 (1944) .......... 15 Burlington Northern, Inc. v. United States, U.S. , 103 S.Ct. 514 (1982); reh’g denied, 103 S.Ct. 1238 (1983) ........... 16, 17 Byrd v. Blue Ridge Rural Electric Cooperative, Re EES oo’ bina beled SWaw twee eee bene a 15 In re Sanford Fork & Tool Co. 160 ET UMEE ob kv cedddewes sc ccbdawns vupweene 13 Inspection in Transit, Grain and Grain Products, 339 1.C.C. 364 (1971) wc. ccc cece eeeees y Inspection in Transit, Grain and Grain Products, 349 1.C.C. 89 (1975) .....cesccccccees 2,4 Inspection in Transit, Grain and Grain Products, eT Rn TUTE 6 6 6 oe sib adecveens 2, 6, 7, 10, 11 Insulating Materials, Between Points in Official Territory, 364 1.C.C. 599 (1981)... ccc cece e eens 15 Manufacturers’ Finance Co. v. Mc Key, 294 U.S. PN 6 0G4d ia Wed 00 si0.bs dock cehbapekeinkena 15 Morgan v. United States, 298 U.S. 468 (1936) ..... 5, 14 Morgan v. United States, 304 U.S. | (1938) ....... 5, 12 Morgan v. United States, 24 F. Supp. 214 Core WOO: IFIED acne cwcies'scs) ideemeeener ensue 12 Perkins v. Standard Oil of Calif., 399 U.S. TE AEOUED oi0 sa cbvesecewseneeee » san abate ala enh 13 xi A.J. Phillips Co. v. Grand Trunk Western Reiroad, 236.U.S. 662 (1G1D) oo. os vicvvcvs rer 15, 16 Public Service Commission v. Brashear Freight Lines, 312 U.S. 621; reh'g denied, 313 Ti SOE cdiedcpeed-ued Ccdhesbikewds ube 17, 18 Quern v. Jordan, 440 U.S. 332 (1979) oc. ccc cceceues 13 Rosado v. Wyman, 397 U.S. 397 (1970) .......eeeees 10 Secretary of Agriculture v. 1.C.C., 551 Pee Paee tees GO, LOTT in cscvice beees ane 2, 5,6 Southwestern Sugar and Molasses Co. v. River Terminals Corp., 360 U.S. 411 (1959) .... eee eee 10 Special Equipment Co. v. Coe, 324 U.S. IN tnd G binkie bake eblens heme Aba neh adanece 15 United States v. 1.C.C., 337 U.S. 426 (1949) .......45. 16 United States v. Malphurs, 316 U.S. 1 (1942) ....... 15 United States v. Morgan, 307 U.S. 183 POA Tas oab tne kee ued vambceas nee ee a 08,44 Om United States v. Morgan, 313 U.S. 409 (1941) ........ 5 U.S. Department of Energy v. Baltimore and Ohio Railroad, 364 1.C.C. 951 (1981)... eee cece ees 16 Wichita Board of Trade v. United States, eee eee. 6a eee BOR. ISTE cc cdessccasseas 1,4 Wichita Board of Trade v. United States, 706 F. 2d 1067 (10th Cir. 1983)..........045. Passim Unreported Cases: Inspection in Transit, Grain and Grain Products, ICC Docket No. 8548 (served Nov. 12, 1975)....... 2 Wichita Board of Trade v. United States, No. 4730 (D. Kan. May 6, 1982) .......ccceeeeeeees 7,8 Wichita Board of Trade v. Uniied States, 4730 RS NS Sg Fe eer 6,9 xii STATUTORY PROVISIONS PE EEE) ccc cen rccdocdecvevsecesectuecen 2 PEE, hb adcntcedrccecscvecpceevedaencsae A EP ss cevas ductcereties ctnesdpeeCtinw wn 3 OP eters See OO BD CIDTSD ccc ccccccenceectecenstwes 2 TEED Gswein 6 ds odes s cause ceaccebehnens 3 INET Us soc 4 viene'cs 64 ¢eoeed uuawedaea 3, 15 a Cutt chives cacuveacadveskveoneunee a MECN 6 C0 ces Goecesssesbeeeeeueebaeuun 3 DY vie's o 6 we bo oecsevees veces eenaden 3, 5 EE + vacsetsdeeetonthus ob karaneeuel 3 49 U.S.C. §10101 ef seg, Pub. L. No. 96-473, 92 Stat. 1337 (1978) ........ 2 a, en Tee Cs oc ccccccccccsveswesuns 3, 15 PE UAETER BEER a5. 0 ae A42 theirs. Cf. Part I, infra." The Commission did not suggest that its approval of the proposed rates on the grounds it gave would alter the usual practice in actions for reparations. Nor did it say why the need for an increased supply of freight cars justified a significant change in the burden of proof, In this sense, the Commission's action was, as the District Court noted, “discriminatory per se.” It is even harder to understand from the Commission's opinion why it departed from the rule in prior cases protecting shippers who decide not to have in-transit inspections, If the separate charges are to be effective in alleviating the car-shortage problem, there must be a substantial number of shippers who do not seck in-transit "The argument urged in support of the Commission's order is, in essence, that the separate charge approved by it was just like a general rate increase because of the breadth of its application. However, the Commission did not use the language characteristic of general increase proceedings. See, ¢.g., Lx parte 259, Increased Freight Rates, 1968, 432 1 C. C, 714, 715, 792 (1969). And. if this were just like a general rate increase, serious questions would arise about the jurisdiction of the District Court to review the Commission's order. See Atlantic City Llectric Co. v. United States, W6F, Supp. 3B(SDNY 1969), Alabama Power Co. v, United States, 6b, Supp. 337 (DC 1969), both affd by an equally divided court, 400 U.S. 73(1970). Yet. although the parties have cited those cases to us, see Brief for the Interstate Commerce Commission 35; Brief for the Secretary of Agriculture 18; Brief for Wichita Board of Trade 32, they have not contended at any length that the District Court lacked jurisdiction over this litigation, This suggests that the parties, including the Commission, do not interpret the Commission's opinion as resting on the similarity between these cases and general rate increase cases, A-43 inspections, Yet according to the Commission, the railroads need not show that the present line-haul rates are reasonable charges for the services provided to shippers who do not seek in-transit inspections, | would appear, thus, that the Commission has approved a policy that dis- criminates against what it hopes will be a very large number of shippers; it seems to have tried to justify its policy by citing reasons that affect only a much smaller class. Some of the shippers who previously sought in-transit inspections will no longer do so, Others had the opportunity for such inspections, Yow the railroads propose to eliminate some of the service previously provided, yet charge the same rates. The Commission in its prior cases has required rail- roads proposing a similar reduction in service either to show that the rates then in effect did not compensate them for the service, and thus that the service was being provided at no charge, or to reduce the existing rates. See, e. g., Transit Charges, Southern Territory, 332 1.C.C. 664, 683 (1968); Loading of Less-Than-Carload Freight on Lighters in Norfolk, WVa.. Harbor, 91 LC.C. 394 (1924); ICC ¥, Chicago, B. & Q. R. Co., 186 U.S. 320 (1902). A-44 Nothing the Commission said suggests any reason why the railroads should not be required to follow the same rule in this case, At no time have rates ever been established, or found just and reasonable, when the railroads did not include the service of in-transit inspection, Perhaps the imperative need to increase the number of freight cars available to all shippers justifies some alteration of the general rule, Yet the Commission, when dealing with shippers who will continue to have in-transit inspections, invoked the fact that the new charges would not raise rates above those permitted by the general maximum. As to that class, the Commission apparently believed that it could not simply refuse to follow pre-existing practices on the ground of exigency alone. The Commission offered no reason to distinguish the larger class from the smaller one, in that respect. But it might be that rates for services including an in-transit inspection, at the level of the general maximum, would be reasonable while rates for services without such inspections would be unreasonable at that level, or even below it. Thus, the fact that the new charges will not exceed the general maximum seems to have no bearing on the question of the reasonableness of the rates that will continue to be in force for now-reduced services.!! Perhaps the current line-haul rates really do not include a substantial amount attributable to the cost of providing in- transit inspections, But cf, Tr. 231-232, 258-266. Or perhaps the Commission has some reason to reinterpret the prior cases Suggesting that its rule reflects a concern for rates that are “increased” simply because of a reduction in services. As in Secretary of Agriculture v. United States, 347 U.S, at 652, the Commission may have reasons for “following a procedure fairly adapted to the unique circumstances of this ''The Commission may have intended to leave this question for later proceedings, But this course runs into the difficulties noted supra, at S13-S14, A-45 case.”'? But, as in that case, it must make these reasons known to a reviewing court with sufficient clarity to permit it to do its job, Even giving the Commission's opinion the most sympathetic reading that we find possible, we cannot discover in it an expressed reason for permitting the railroads to reduce their services without showing that the rates they propose to maintain are reasonable rates for the service they intend to provide, Hl After holding that the matter must be remanded to the Interstate Commerce Commission for further proceedings, the District Court ordered, “The proposed charges are suspended and shall be ineffective until and unless otherwise ordered by this Court.” No reasons for such an order were given; the District Court did not, for example, specify the nature of the harm o the shippers that would, presumably, injure them irreparably, Nor did it explain the basis for its apparent belief that Arrow Transportation Co. v. Southern R. Co., 372 U.S. 658 (1963). was distinguishable. lt was error to enter such an injunction, The District Court clearly had power to suspend the operation of the Commission's order pending the final determination of the shippers’ suit. That power is given in terms by 28 U.S.C. §2324: “The pendency of an action to enjoin, set aside, annual, or suspend any order of the Interstate Commerce Commission shall not of itself stay or suspend the operation On remand, the Commission might explain more fully the course it followed, or it might adopt a different course, for example, by rey uiring the carriers to demonstrate the reasonableness of the line-haul rates for services provided without an in-transit inspection on @ representative sample of routes. Most of the prior casts in which the Commission invoked the rule involved quite limited problems, often confined to a single route, But ef. Transit Charges, Souther territory, 4921.C. C. 664 (196%). If the Commission then explained why that procedure was responsive to the needs of the particular case, the prerequisites of judicial review would be satisfied. A-46 of the order, but the court may restrain or suspend, in whole or in part, the operation of the order pending the final hearing and determination of the action.” But an injunction forbidding the railroads to implementa proposed change in rates is not, strictly speaking, an injunction suspending the Commission's order. In this case, for example, the Commission's order stated that “the proposed new or increased charges for in-transit inspection of grain at various points in the United States are just and reasonable...” 340 L.C.C., at 74. The only consequence of ‘suspending that order is that the railroads may not rely, in some subsequent proceeding, on a Commission finding that the proposed rates were just and reasonable. In an action for reparations, for example, the railroads could not gain any benefit from the purported Commission approval of the increases.'' See Arizona Grocery v. Atchison. T. & S. F. R. Co., 284 U.S. 370 (1932). See also 49 U.S.C, §§1(5), 10 (1). The Commission's order also provided that the proceeding be discontinued, and suspension of the order requires the Commission to reopen its inquiry. Carriers may put into effect any rate that the Commission has not declared unreasonable. 49 U.S.C. §§ 6 (3), 15 (1) Suspension of the Commission's order thus does not in itself preclude the carriers from implementing a new rate. The power conferred on the District Court by § 2324 does not in itself include a power to enjoin the railroads from implementing a proposed new charge. Rather, that power must be considered as at best ancillary to the general equitable powers of the reviewing court, and protective of its jurisdiction. See Arrow Transportation Co. v. Southern R. Co., supra, at 671 n. 22; Order of Conductors v. Pitney, ''The Commission may, of course, approve the rates on a theory similar to that discussed in Part Hof the opinion, justifying its ref usalto require a showing of reasonableness by the fact that questions would be open it, subsequent proceedings. A suspension of the Commission order would then have almost no practical meaning, A-47 326 U.S. 561, 567 (1946). Cf. Pittsburgh & W. Va. R. Co. v. United States, 281 U.S. 479, 488 (1930); 28 U.S.C. § 1651 (a). As this Court noted in Seripps- Howard Radio, Inc. v. FCC, 316 U.S. 4 (1942), such a power must be inferred from Congress’ decision to permit judicial review of the agency action, “If the administrative agency has committed errors of law for the correction of which the legislature has provided appropriate resort to the courts, such judicial review would be an idle ceremony if the situation were irreparably changed before the correction could be made.” Id, at 10. Yet it would be surprising if that power could be exercised to the extent that it might substantially interfere with the function of the administrative agency. “The existence of power in a reviewing court to stay the enforcement of an administrative order does not mean, of course, that its exercise should be without regard to the division of function which the legislature has made between the administrative body and the court of review.” /bid. Proper regard for that division of function requires that we hold erroneous the District Court's decision to enjoin not only the Commission's order finding the proposed rates just and reasonable but also the implementation of those rates. In Arrow Transportation Co. v. Southern R. Co., supra, this Court considered a similar problem. The Interstate Commerce Commission has the power to suspend proposed rate changes for seven months, while it proceeds to consider the reasonableness of the proposal. “If the proceeding has not been concluded and an order made within the period of suspension, the proposed change of rate. ..shall go into effect at the end of such period.” 49 U.S.C. § 15 (7). In Arrow, parties affected by proposed reductions sought an injunctions against the implementation of the proposed reductions when, at the end of the suspension period, the railroads announced that they intended to put the new rates into effect. The Commission had not determined that those A-48 rates were reasonable. The Court concluded that Congress, by giving the Commission the power to suspend rates, had intended to preclude the courts from doing the same. Here, of course, the Commission's proceeding has been concluded, or at least so the Commission thought when it entered its order. The terms of § 15(7) do not specifically govern this situation. Nor is there any other provision in the relevant statutes depriving federal courts of their general equitable power to preserve the status quo to avoid irreparable harm pending review. Yet many of the considerations, relied on in Arrow and influencing this Court's definition of the proper relation between the courts and the Interstate Commerce Commission, must be drawn on to delineate guidelines for the exercise of the ancillary power, in a proceeding to review a Commission order, to enjoin a rate increase pending final determination of the suit, The most important of these considerations is the group of policies that are encompassed by the term “primary jurisdiction.” National transportation policy reflects many often-competing interests. Congress has established an administrative agency that has developed a close understanding of the various interests and that may draw upon its experience to illuminate, for the courts, the play of those interests in a particular case. Cf. Great Northern R. Co. v. Merchants Elevator Co., 259 U.S. 285 (1922); United States v. Western Pacific R. Co., 352 U.S. 59 (1956). Ordinarily, then a court should refrain from expressing a preliminary view on what national transportation policy permits, before the ICC expressees its view. But when a court issues an injunction pending final determination, one important element of its judgment is its estimate of the probability of ultimate success of the merits by the party challenging the agency action. Virginia Petroleum Jobbers Assn. v. FPC, 104 U.S. App. D.C. 106, 110, 259 F. 2d 921, 925 (1958). Depending on the type of error the reviewing A-49 court finds in the administrative proceedings, the issuance of an injunction pending further administrative action may indicate what the court believes is permitted by national transportation policy, prior to an expression by the Commission of its view. This is precisely what the doctrine of primary jurisdiction is designed to avoid. Cf.Order of Conductors v. Pitney, supra; Locomotive Engineers v. M.- K.-T. R. Co., 363 U.S. 528, 533 (1960). The fact that issuing an injunction may undercut the policies served by the doctrine of primary jurisdiction is therefore an important element to be considered when a federal court contemplates such action.'4 As we have indicated in Part II of this opinion, we require the agency to justify its departure from its prior decisions so that we may understand what policies it is pursuing. If a reviewing court cannot discern those policies, it may remand the case to the agency for clarification and further justification of the departure from precedent. But an injunction pending the completion of those proceedings would be warranted only if the reviewing court entertained substantial doubt about the consistency of the Commission's action with its mancate from Congress. Cf. Virginian R. Co. v. United States, 272 U.S. 658, 673 (1926).'S When a case is remanded on the ground that the 47 ocomotive Engineers v. M.-K.-T. R. Co., 363 U. S. 528 (1960), shows that not all judicial injunctions infringe on an agency's primary jurisdiction. There the Court noted that the District Court's “examination of the nature of the dispute is so unlike that which the [agency] will make of the merits of the same dispute, and is for sucha dissimilar purpose, that it could not interfere with the later consideration of the grievance by the [agency] will make ofthe merits of the same dispute, and is for such a dissimilar purpose, that it could not interfere with the later consideration of the grievance by the [agency}.” /d., at 534. Here, in contrast, the District Court must consider whether the Commission is likely to find reasons for its action that are consistent with congressional policy. Not only is such a question exceedingly complex, it is also just what the Commission itself must decide before approving the proposed new charges. 'SIn some cases, the reviewing court might explicity refrain from considering the likelihood of success on the merits in deciding whether A-SO agency's policies are unclear, an injunction ordinarily interferes with the primary jurisdiction of the Commission. '° Cf. Arrow Transportation Co. v. Southern R. Co., U.S. at 669-670. In addition, the reviewing court must consider whether or not to issue an injunction. The, if the possibility of irreparable damage to the party seeking review or to other interests is great enough, an injunction may perhaps be justified. See. e.g.. Semmes Motors. Inc. v. Ford Motor Co., 429 F. 2d 1197, 1205-1206(CA2 1970); Checker Motors Corp. v. Chrysler Corp. 405 F 2d 319, 323 (CA2 1969). Here. however, the District Court did not clearly refuse to access the likelihood of ultimate success and, as indicated infra. the possibility of irreparable harm to the shippers ts quite small. 'eThis analysis turns on the fact that the type of error in these cases involves precisely a failure by the Commission to do the job committed to it, the proper performance of which is a predicate of the doctrine of primary jurisdiction. Where the error might be considered purely procedural, for example where the Commission failed to consider relevant evidence on grounds the reviewing court finds inadequate, the issuance of an injunction might not interfere with the agency's primary jurisdiction quite so severly. Yet even there. before issuing an injunction the reviewing court must consider whether the Commission would have come to a different conclusion had it considered the evidence. And that may sometimes impinge on the sphere committed to the Commission for initial decision. This Court has distinguished between blatantly lawless action and mere procedural error in cases raising similar questions of the power of courts to intervence in administrative action. See Oestereich v. Selective Service Bd., 393 U.S. 233 (1968); Fein v. Selective Service Svstem, 405 U. S. 365 (1972). Different considerations would come into play, too. when the reviewing court finds some failure by the carriers in the suspension proceeding, rather that a failure by the Commission to do its task. A reviewing court might find. for example. that the Commission's conclusion that the carriers had carried the burden of proofto justify the increase was not supported by substantial evidence. Although phrased as a finding of administrative error, that in fact relates to the presentation of evidence by the carriers. Finally, this litigation involves only claims under the Interstate Commerce Act. Subsequent legislation might affect the relation between court and agency and so the propriety of injunctive relief. Whether it does so must be determined by cxamining that legislation. A-SI irreparable harm will result if the injunction is not issued and the party seeking it prevails on the merits. Order of Conductors v. Pitney, supra. That too may interfere with the agency's primary jurisdiction. We deal here with a dispute between shippers and carriers. In giving the Interstate Commerce Commission power to suspend proposed rate increases, Congress allocated the benefit and harm of a suspension. For a period of up to seven months, the carriers may not collect the increases if the Commission suspends them. The income that they might have gained is lost to them forever. Congress did provide protection to shippers for the period after the rates go into effect. The Commission may require the carriers to keep detailed accounts of the income received asa result of the increase. If the increase is ultimately found unjustified, the Commission may order a refund. 49 U.S.C. § 15(7). Evenif the Commission does not do so in a suspension proceeding, the shippers may recover reparations under some circumstances. 49 U.S.C. §§8, 9. Thus, it is often quite unlikely that shippers will be irreparably damaged by the implementation of a rate increase.'’ There are, however, public interests at stake in this litigation, as well as the private interests of the shippers and carriers. The Commission found that inspection of grain is required for the orderly marketing of grain. 339 1.C.C., at 385. Inspections will thus continue to be made. But now if the Commission ultimately approves the new charges, there will be a separate charge for them, either by the railroads under the new charges, or by someone else engaged in marketing grain. This extra cost must be absorbed by someone, perhaps by farmers, perhaps by the ultimate '" The interests of other carriers who might object to a proposed rate change are somewhat different. They are not damaged, as the shippers are, by out-of-pocket expenditures, and refunds or reparations do not remedy the loss of business that they might suffer. This factor would thus have less weight in suits by such carriers, att houghthe problem of interfering with primary jurisdiction must still be considered. A-52 consumers of grain. See Tr. 1299. The impact of rates on various groups in this country is surely relevant to deciding that the rates are consistent with national transportation policy. But the public interest is not a simple fact, easily dete-mined by courts. Here, for example, the interests of fa; » s and consumers of grain must be balanced against the interests of producers and consumers of all sorts of other goods shipped by rail. For the premise of the Commission's action in this case was that separate charges for in-transit inspections would alleviate the freight-car shortage. The shortage itself increases the cost of transporting a wide range of products by rail. Thus, the decision that must be made is whether the car shortage hasa more significant impact on the national economy that does increased cost for grain products. Congress has committed that decision to the Interstate Commerce Commission in the first instance, and the extent of harm to farmers and consumers of grain cannot be estimated without interfering with the primary jurisdiction of the Commission.'* '*Although they are far less substantial than the problems of primary jurisdiction and irrepable injury. procedural problems might also arise when a district court consideres a request for an injunction like that issued here. Review of Commission orders is by a three-judge district court. The United States is the difendant. 28 U. S. C. §§2321, 2322. Railroads which appeared before the Commission have a right to intervene, 28 U.S. C. §2323, but they need not do so. If arailraod chose not to intervene, the district court could not enjoin it from implementing the new charge. The plaintiffs could, of course. compel an unwilling railroad to appear. Fed. Rule Civ. Proc. 19(a). But. even though services of process is nationwide, 2% U.S. C. §2321. some plaintiffs might findit difficult to serve every railraod that did not appear willingly. The presence before the reviewing court of all interested parties. or only some of them, is therefore relevant to the exercise of the court's discretion to enjoin a proposed rate increase. Like the other factors discussed in the opimon. this does not establish that the district court lacks power to enjoin the implementation of proposed rate increases after a final Commission order. but it is a factor to be considered in determining whether to exercise eyuitabie discretion to issue such an injunction. A-53 As this discussion shows, it is very likely thata decision to enjoin rates pending reconsideration by the Commission in order to clarify its policies will imply some view by the District Court about decisions committed to the Commission by the doctrine of primary jurisdiction. The District Court’s power to enjoin rates, in order to protect its jurisdiction to review Commission orders, must therefore be exercised with great care and after full and detailed consideration of the problems set out above. It will not do to enter such an injunction in the off-hand manner of the District Court. Cf. Virginian R. Co. v. United States, 272 U.S. 658 (1962). Here the District Court could not consider the likelihood of success on the merits or where the public interest lies without infringing on decisions committed by Congress to the primary jurisdiction of the Interstate Commerce Commission and the possibility of harm to the shippers was small. It was therefore improper to enter an injunction against the implementation of the proposed new charges. Here the Commission ordered the railroads to maintain records of the amounts collected as a result of the new charge. It may be that this adequately protects the shippers from irreparable damage, in light of the availability of actions for reparations. The Commission may determine on remand that some further steps must be taken to protect the shippers. But in any event, it is clear that the District Court should not have entered the injunction it did. The action of the District Court is affirmed as to the remand to the Commission and is reversed as to the injunction suspending the proposed charges. So ordered. Mr. Justice Powell took no part in the consideration or decision of these cases. Mr. Justice Douglas, concurring in the affirmance of the remand to the Commission and dissenting from the reversal of the decree authorizing the injunction. A-54 Though I concur in the affirmance of the remand to the Interstate Commerce Commission, | dissent from the reversal of the decree authorizing the injunction, since in my view the District Court was quite correct in issuing its injunction. Arrow Transportation Co. v. Southern R. Co., 372 U.S. 658, is not relevant here, for the reason that 49 U.S.C. § 15(7) only purports to control the suspension of rates up until the time the Commission has rendered a decision. After that decision has been made, the reviewing court has, | believe, the power to enjoin the affected rates. The new charges which the Commission would impose would have an immediate impact upon the grain-marketing system. It would affect the volume of business of the grain merchants, it would affect the employment of grain inspectors, and it would result in lower prices being paid to the farmers. None of these incidences can be remedied under the existing statutory scheme, because none of these interests is enabled to bring suit for a later rate refund. Hence, in my view, the grain trade and the farmers need this interim protection lest in inspection the marketing system suffer severe attrition during the period of remand. The deciding principle is that the District Court sits as a court of equity, United States v. Morgan 307 U.S. 183, 191, and asa court of equity has, | believe. ample power to protect the grain market nationally which would otherwise be without remedy under the existing statutory regime. Jurisdiction is granted the District Court “to enforce, enjoin, set aside, annul or suspend” any order of the Interstate Commerce Commission. 28 U.S.C. § 1336 (a). For years, the type or order here involved* was not reviewable. See Procter & Gamble Co. v. United States, 225 U.S. 282. But that “negative” order concept was abandoned in Rochester Tel. Corp. v. United States, 307 U.S. 125, 145. The provisions of 28 U.S.C. § 1336 (a), are an explicit grant *The order of Division 2 of the Commission provided that the proceeding “be, and it is hereby, discontinued.” 339 1. C. C. 364, 401. The order of the Commission en banc affirming is in 340 1. C. C. 69, 74, A-55 of power to provide injunctive relief. Under that Act the “governing principle” is “that it is the duty of a court of equily granting injunctive relief to do so upon conditions that will protectall including the public —- whose interests the injunction may affect.” Inland Steel Co. v. United States, 306 U.S. 153, 157. That power exists whether the Commission's authority over rates is challenged under 49 U.S.C. § 15 (1) as being unjust or unreasonable or under 49 U.S.C. § 15(7) relating, as here, to “a new individual or joint rate, fare, or charge.” In all cases the District Court by reason of 28 U.S.C. § 1336 (a) sits as a court of equity. Mr Justice White, with whom Mr. Justice Brennan and Mr. Justice Rehnquist join, concurring in the reversal of the injunction and dissenting from the affirmance of the remand to the Commission. i dissent because the District Court erred both in holding that the Commission had inadequately explained the basis for its judgment and in suspending the new in-transit inspection tariff beyond the time the statute permits new rates to be suspended without a finding that they are unjust and unreasonable. As to the latter, 49 U.S.C. § 15 (7) forbids the suspension of new freight rates for more than seven months without the requisite finding of unreasonableness by the Commission. Only the Commission may suspend in the first instance; and if the agency refuses to do so, the court is powerless itself to suspend. The Commission may postpone effectiveness of new rates for seven months, but if it does, the statute commands that, absent the appropriate order of the Commission within that period, “the proposed change of rate. . .shall go into effect. ...”To permit the District Court nevertheless to extend this period seems to me to be flatly contary to the will of Congress. | therefore cannot agree that, although the District Court has no statutory power to do so, it nevertheless retains sufficient power to enjoin the rates as “ancillary to the general equitable powers of the reviewing A-56 court, and protective of its jurisdiction.” Anve, at 819. As I see it, the District Court contravened the precepts of Arrow Transportation Co. v. Southern’ R. Co., 372 U.S. 658 (1963). As for the remand to the Commission, there is somewhat more to be said. The Commission found, and it is not questioned by the District Court or by the majority here, that in-transit inspection of grain is not an essential part of transportation service but only ancillary to it; that the premarketing inspection of grain, in transit or otherwise, is no longer required by federal law; that in-transit inspection of grain has been the regular practice in Western territory, to some extent the practice in Southern territory, but not in Eastern territory; that the line-haul rates for grain in Western and Southern territories established by the railroads or prescribed by the Commission have provided one free in-transit inspection stop, but a separate charge for’ that service is the practice in Eastern territory; ' and that, because of recent developments in-transit inspection is no longer an essential service for the orderly marketing of grain in Western and Southern territories. Furthermore, the unquestioned finding of the Commission was that the principal motivation for imposing a separate charge for in- transit grain inspection was not to increase railroad revenues through collection of the charge itself but to 'The Commission noted: “It is again emphasized that the major impact of the proposal under consideration will be on the movement of grain in the western district. Most inspections occur in this territory. There is presently effective a spearate charge for this service in the East. A sunstantial increase in those charges will result, however, it the proposed charges are permitted to become effective. The number of in-transit inspections in the South is limited and take place chiefly at the ports on export grain tonnage. There is little, if any, opposition to establishment of the charges in southern territory. Practically all of the controversy is concerned with establishment of the separate charge for the first inspection of grain within the western district.” 339 1. C. C. 364, 385, 2 ie a ee A-57 promote efficient utilization of freight cars by discouraging the practice of in-transit inspection which had proved extremely wasteful in terms of car utilization, The Commission finding, also undisturbed, was that the separately stated inspection fee would discourage the practice of in-transit inspection, would contribute toa more efficient utilization of freight cars, and hence help relieve the unquestioned grain-car shortage. With, these important preliminary findings and conclusions behind it, the Commission examined in detail the reasonableness of the separate charge being imposed for in-transit inspection of grain. Its conclusion was that the charge was reasonable, a judgment not overturned either here or in the District Court. Finally, the Commission noted that by the terms of the new tariff itself, separate in- transit inspection charges could not be collected where the combination of the new, separate charge and the existing line-haul rate exceeded the maximum reasonable level of grain rates established in Docket 17,000, pt. 7, Grain and Grain Products, 205 1.C.C. 301 (1934); 215 L.C.C. 83 (1936), as raised by subsequent general revenue increases. Docket 17,000, pt. 7. Rate Structure Investigation, was a major national effort, a comprehensive investigation of rates on agricultural products, and resulted, among other things, in the Commission's prescribing maximum reasonable freight rate levels for movements of grain. Since that time, there have been general rate increases for revenue purposes, in the course of which the rates on grain and their structure as required by the 1934 and 1936 determinations have been given special attention. See, for example, /nceased Freight Rates, 1967, 332 1.C.C. 280, 300 (1968). Under the new tariffs now filed, as | have said, if the applicable line-haul rate on the particular grain movement involved is at the maximum reasonable level theretofore prescribed by the Commission in previous proceedings, no separate in-transit inspection charge is imposed or A-58 allowable, nor may the combination of the new charge and the existing line-haul rate collected by the railroad exceed the maximum allowable rate as previously determined. This is the key to understanding that, in approving the separate inspection charge, the Commission did not ignore its longstanding rule that railroads may not impose separate charges for an ancillary service previously furnished under a line-haul rate unless both the reasonableness of the separate charge and the line-haul rate are scrutinized. Transit Charges, Southern Territory, 332 UC.C. 664, 683-684 (1968), is. for example a relatively recent restatement of the rule. The Commission thought this rule not controlling here because, in the first place, the magnitude of the task of justifying each one of a countless number of line-haul grain rates would, as a practical matter, prohibit the imposition of a separate in-transit inspection charge and so frustrate the important nonrevenue goal of discouraging in-transit inspection and so improving car utilization. But, more fundamentally, the Commission in any event deemed the rule satisfied; for here the reasonableness of the line-haul rate was sufficiently examined and ensured by proof that the new charge was itself reasonable and by prohibiting its collection if thé total cost of the grain movement--its line-haul charge plus the separate inspection charge exceeded the maximum reasonable rate theretofore prescribed by the Commission, that is, the maximum reasonable rate the Commission had theretofore prescribed for both the transportation service and the privilege of in-transit inspection. "The Commission's order was sustained, on other grounds, in Cincinnati, N. O. & T. PR. Co.. United States, Cwil Action No, 6692 (SD Ohio, Jan. 12 1970), aff'd, 400 U.S, 932 (1970). The District Court sustained the Commission on the basis that the proposed increase in charges might well result in a substanital diversion of the considered traffic, with a diminution, rather than an increase, in revenues. In the present case, the Commission noted: “Similar conclusions are not warranted here” A-59 This approach seems straighforward and adequate. Keeping in mind that Docket 17,000. Part 7, as was customary in Western territory, prescribed rates for grain movements permitting one in-transit inspection without extra charge, let us assume, for example, that the maximum rate prescribed by the Commission for a particular grain movement with in-transit inspection privileges was 120. Assume further what is the recurring situation in the case before us— that the railroad is charging less than it may, say 100, for the grain movement with that privilege. The railroad then publishes a tariff under which the line-haul rate of 100 no longer entitles the shipper to in-transit inspection, and a separate charge of 20 is imposed on those who want that service. The line-haul charge plus the separate in-transit inspection charge does not exceed what the Commission has heretofore ruled the railroad may collect for both the transportation and the inspection service. This calculus seems to me an adequate basis for concluding that the line-haul rate of 100 is itself within the zone of reasonableness. If a railroad may charge 120 for a grain movement with in-transit inspection provided, and the inspection stop is proved reasonably worth 20, why should there also be occasion for considering the reasonableness of 100 as a line-haul rate and so proving again what the Commission previously found —that 120isa reasonable charge for both services? The District Court thought the Commission ignored Secretary of Agriculture v. United States, 347 U.S. 645 (1954), but I read that case far differently. There the Court, although being of the opinion that the Commission had not adequately explained why it was approving a separate charge without examining the legality of the line-haul rate, was careful to point out that the Commission was not precluded “from following a procedure fairly adapted to the unique circumstances of this case”; nor did the Court question “the Commission's power, under appropriate A-60 findings, to approve such unloading charges without pursuing one of these courses. In dealing with technical and complex matters like these, the Commission must necessarily have wide discretion in formulating appropriate solutions.” /d., at 652. That case does not stand for the rule that a separate charge for an ancillary service may in no circumstances be permitted without new proof in thar proceeding of the reasonableness of the line-haul rate. The prior decisions of the Commission relied upon by the District Court establish clearly enough that the Commission must be satisfied with the reasonableness of the line-haul rate as an exaction for the remaining services before approving a separate charge for a service previously covered by the line-haul rate. Transit Charges, Southern Territory, supra; Terminal Charges at Pacific Coast Ports, 255 1.C.C. 637 (1943); Reconsignment Case No. 3, 531.C.C. 455 (1919); Loading of Less-Than-Carload Freight on Lighters in Norfolk, Va., Harbor, 91 1.C.C. 394 (1924). In these cases, the carriers simply failed to carry their burden of proof. The District Court also cited for this proposition Grand Forks Chamber of Commerce v. Great Northern R. Co., 321 1.C.C. 356 (1963), but the Commission in that case, see i¢., at 360-362, did precisely what it has done in this one: it approved a separate in-transit inspection charge in the case of so-called Group 3 rates where the line-haul rate and the new charge together were less than so-called Group | rates prescribed in Grain and Grain Products, 205 1.C.C. 301 (1934); 215 LC.C. &3 (1936). See also Public Service Comm'n of North Dakota v. Great Northern R. Co., 340 1L.C.C. 739 (1972); Alabama State Docks Dept. v. Alabama, T. & N. R. Co., 321 LC.C. 347 (1963), Agsco Chemicals, Inc. v. Alabama G. 8. R. Co., 314 1.C.C. 725 (1961). Neither do | understand why the majority is comforted by the opinion in Cincinnati N. O. & T. P. R. Co. v. United States, Civil Action No, 6992 (SD Ohio, Jan. 12, 1970), in A-61 which the District Court affirmed, but on very limited grounds (grounds that would save the cases before us now), the Commission's disallowance of a separate transit charge for cotton movements but disapproved the stringent standard by which the Commission required the railroads to prove the reasonableness of the resulting line-haul rate. The District Court restated the prevailing rubric: “The question here is what should the carrier be paid for a service which it has been rendering, and has been charging for, and has been paid for (one knoweth not what) which it proposes to separate and charge separately for. Both the courts and the Commission have consistently held that what is a just and reasonable rate for the service to be separated and charged for separately cannot be determined by examining only the typical questions of cost, etc., with respect to the separate service. On the contrary, the typical questions must be directed to the overall or combined picture so that one may conclude (a) that the rate for the separated service, looked at by itself in the light of the applicable questions, is just and reasonable; and (b) that the remaining rate for the services, sans the separated service, is not rendered unjust or unreasonable.” The District Court continued: “Whether the examination is in terms of ‘what portion of the line-haul rate represented the rate for the service to be separated,’ or whether the search in terminology is for the answer to this question: Does the new aggregate rate, composed of line-haul plus transit rates represent a just and reasonable rate for all of the services (the aggregate of the severed and the nonsevered)—the principle is the same.” (Emphasis added.) A few paragraphs later, the court repeated the same alternate approach. This Court affirmed the District Court A-62 summarily. 400 U.S. 932(1970). In the litigation now before us the total of the line-haul rate and the separate in-transit charge will in no case exceed what the Commission has heretofore found to be a reasonable charge for the aggregate service. The maximum permissible rates for grain movements with in-transit inspection privileges were established some years ago, it is true, but they have been subject to repeated examination upon the occasions of general rate increases and, as this litigation itself shows, they are far from dead letters from the standpoint of either the railroads or the Commission. They remain the foundation of the Commission's opinion as to what just and reasonable grain rates are with in-transit privileges furnished by the railroad. I see no reason for now disagreeing with the Commission's judgment that the reasonableness of a line-haul rate lower than the maximum allowable has been sufficiently re- examined to permit imposition of a separate in-transit inspection charge, in itself found reasonable, when it is also determined that the existing line-haul rate and the new inspection charge together total less than the maximum Commission-prescribed rate for the two services combined. Surely this presents an inadequate occasion or context in which to frustrate what the Commission found to be a promising effort to solve a critical problem—the freight car shortage—-by seeking to deter a wasteful practice not indispensable or even, in the Commission’s view, unusually important to the orderly marketing of grain under modern conditions. For these reasons, | respectfully dissent. APPENDIX (ii)(d) A-63 ORDERS FROM END OF OCTOBER TERMS, 1971 THROUGH JANUARY 15, 1973 July 7, 1972 Miscellaneous Order No. A— 1320. Atchison, Topeka & Santa Fe Railway Co. Et Al. v. Wichita Board of Trade Et al., D.C. Kan. On consideration of the appellants’ application for stay, the appellees’ reply to the application, and the affidavits and memoranda filed in support of the application and reply, IT IS ORDERED: (1) That, subject to the condition set forth in paragraph 2 herein, the judgment of the Unites States District Court for the District of Kansas entered in this matter on June 8, 1972, be and hereby is stayed pending a final determination of the appeal by this Court. (2) That, as a condition of the foregoing stay, each railroad collecting in-transit grain inspection charges under the challenged tariffs shall immediately take steps, including publication of appropriate provisions in applicable tariffs, to do the following: (a) keep accurate accounts in detail of all amounts hereafter received during the existence of the stay by “@rcason of in-transit grain inspection charges, specifying by whom and in whose behalf such amounts are paid; and (b) in the event the order suspending the charges is affirmed by this Court, refund (with interest) of such amounts to persons in whose behalf such amounts were paid, without the necessity for such persons to make applications for refunds. In the event this Court's action should be other than in affirmance of the results reached by the District Court, this Court may make such further order concerning the disposition of the aforesaid amounts as the Court may deem appropriate. APPENDIX (ii)(e) A-64 Investigation and Suspension Docket No. 8548 INSPECTION IN TRANSIT, GRAIN AND GRAIN PRODUCTS Decided April 16, 1971 REPORT AND ORDER DIVISION 2, COMMISSIONERS WALRATH, JACKSON, AND BREWER WALRATH, Commissioner Due and timely execution of our functions under section 15(7) of the Interstate Commerce Act imperatively requires the omission of a hearing examiner’s report and recommended order. Requested findings not specifically discussed in this report nor reflected in our findings and conclusions have been considered and found not justified. By schedules filed to become effective March 28, 1970. and later, the Traffic Executive Association of Eastern Railroads, together with other rail publishing agents and individuals rail carriers, proposed to establish new or increased charges for the first in-transit inspection of grain and grain products at points in the United States. Upon the protest of interested shippers and other parties, the proposed schedules were suspended by the Commission, Board of Suspension, to and including October 27, 1970, for reconsideration and vacation of the order of suspension was denied by the Commission, division 2, on May 21, 1970. Respondents have voluntarily post poned the effective date of the schedules to April 24, 1971. © By order dated April 7, 1970, the Commission prescribed special rules of procedure and assigned the proceeding for A-65 hearing before a hearing examiner. Hearings were held July 13 to July 22 and August 13 and 14, 1970. Briefs were filed October 12, 1970. The Long Island Rail Road Company intervened in support of respondents. Numerous protests were filed against the proposed schedules and many of the protestants are active participants in this proceeding. They include the Secretary of Agriculture of the United States, State Corporation Commission of the State of Kansas, Missouri Department of Agriculture, North Dakota Public Service Commission, the Boards of Trade at Kansas City, Mo., and Chicago, IIl., and grain exchanges at Omaha, Nebr., Minneapolis, Minn., Sioux City, lowa, St. Louis, Mo., and Fort Worth, Tex. Appearances were also made by the National Grain Trade Council and the National Grain and Feed Dealers Association on behalf of their members and by representatives of a number of individual grain concerns such as the Continental Grain Company and Garvey, Inc. The latter has extensive grain interests in Knasas, Texas, Illinois, and North Dakota. In-transit inspection has reference to the practice of stopping railroad cars loaded with grain and grain products, including soybeans, and placing them on railroad track facilities for the purpose of permitting inspection of the contents of the car, awaiting disposition orders from shippers after inspection, and the subsequent movement of the railroad car. The indicated inspection is the taking of a representative sample or samples to determine the official grade of the contents of the car for the purpose of establishing value of the commodity at the market. It does not include any inspection on tracks of the shipper at either origin or destination. The charges' per car for in-transit inspection, under currently effective tariffs, are as follows: ‘Charges stated herein are subject to Increased Freight Rates, 1970 and 1971. 339 LC.C. 125, and subsequently authorized general increases. A-66 Second and First stop subsequent Stops Within eastern territory $7.42 $13.29 Within Illinois territory None 14.33 Within southern territory None 12.51 Within western territory: Border markets along the Mississippi River None 14.33 and northern Illinois. Within western territory: On and east of the Missouri River markets, None 13.78 also Minneapolis-St. Paul, Duluth-Superior and points east thereof. Within western territory: West of the Missouri River including south- None 13.36 western territory, and west of Minneapolis- St. Paul and Duluth-Superior. The proposed per-car charges for each stop, including the first stop, on the rail carriers’ tracks for inspection are (1) within Eastern, Illinois, and Southern Freight Association territories—$14.33; (2) on and east of the Missouri River markets, also Minneapolis-St. Paul, and Duluth-Superior and points east thereof—$13.78; and (3) west of the Missouri River, including southwestern territory, and west of Minneapolis-St. Paul and Duluth-Superior—$13. 36. It should be stressed that the in-transit inspection is primarily an operation inthe West. Respondents’ st udies indicate that there were 464,000 inspections on 16 western railroads in 1968 and 488,000 on 15 western railroads in 1969. There was a much smaller number of inspections in the East and the South. In the South, inspection on carriers’ tracks is regularly performed at only four locations, all of which are export ports. Background.—A brief description of production and marketing of the considered commodities, their importance to the Nation’s economy and to the railroads, and the significance of the transportation charges is helpful to an understanding of the issues presented in the instant A-67 proceeding.? For the most part, the various grains? are grown in the farming or agricultural States that form a rough crescent from Ohio in the east through to Montana, Idaho, Oregon, and Washington, in the west and around to Oklahoma and Texas in the Southwest. The greatest production of wheat is found in Colorado. Kansas, Nebraska North Dakota, Montana, Oklahoma, Oregon, and Washington. Corn and oats are produced in large quantities in lowa, Nebraska, Minnesota, Missouri, Illinois, Indiana, and Ohio. The sorghum production is heaviest in Texas, Knasas, and Oklahoma, and soybeans are grown principally in Illinois, Indiana, Ohio, and Arkansas. The total amount of grain grown in these States is substantial. The 1969 estimates show that total grain production in lowa is in excess of 1.2. billion bushels and Kansas and Nebraska are each shown to have produced more than 600 million bushels. Some 300 million bushels were produced in Missouri and the yield of both Montana and Washington during the same year was in excess of 100 million bushels. Oklahoma and Texas are also producers of large quantities of grain. The former’s wheat production in 1969 exceeded 100 million bushels and Texas produced nearly 70 million bushels of wheat and more than 300 2A more detailed description is available in two general investigations instituted by the Commission pursuant toa resolution of the Congress. The first was directed to the railroad movement of grain and grain products within the western district and for export and is reported in Grain and Grain Products, 205 1.C.C. 301, and 215 1.C.C. 83. This proceeding is sometimes referred to in this report as docket No. 17000, Part 7. The second concerned the movement of the same commodities in the South and is set forth in Grain To, From, and Within Southern Territory, in 259 1.C.C. 629. There is also a more recent summary in Grain and Grain Products (Rate Structure Investigation, Part 7), 329 1.C.C. 824 (1967). ‘Grain, unless otherwise indicated, includes corn, wheat, oats, barley, rye, sorghums, and soybeans. A-68 million bushels of sorghum grains. There is also a substantial production of grain, particularly corn and soybeans, in Illinois and Indiana. The Chicago, Milwaukee, St. Paul and Pacific Railroad Company (Milwaukee) transported more than 3,700 carloads of Illinois corn and nearly 700 carloads of Illinois soybeans in 1969. The Chicago and North Western Railway Company (C&NW) originated approximately 5,000 carloads of corn and 1,000 carloads of soybeans in Illinois during the same year. Enormous quantities of grain move from the country origin points to the nearest price-fixing or first markets. The Missouri River markets of Sioux City, Omaha, Atchison and Leavenworth, Kans., and St. Joseph and Kansas City, Mo., serve the producing areas west thereof, and, with the gulf ports, grain from the southwestern States. Duluth, St. Paul, and Minneapolis, Minn., and Superior, Wis., act in the same capacity on the easterly flow of grain grown in the producing areas east of the Missouri River. Receipts at Chicago are indicative of the importance of the grain markets. In 1969, slightly more than 194 million bushels of grain were received there, of which approximately 98 million were delivered by railroad. Some 81 million bushels were delivered by truck and about 15 million bushels were delivered via water carriers. The grain receipts and the other markets are also substantial. The grain traffic is extremely significant tonnage for the railroads, particularly those in the West. In 1969, the Chicago and North Western Railway originated 118,348 carloads of grain. This reflected 8.6 percent of their carload traffic and 11.83 percent of total carload gross freight revenues. The railroads that merged to form the Burlington Northern (BN) carried some 20.5 million tons of grain in the same year, which represented 13.2 percent of the gross tons of all their carload freight traffic. The revenue earned for handling this tonnage was $117.7 million and constituted 14.9 percent of gross revenues. The Atchison, Topeka and A-69 Santa Fe Railway Company (Santa Fe) for 1968 showed that the movement of wheat and sorghum grains accounted for 6.63 percent of its total revenue and 12.1 percent of total tonnage carried. Similar figures are submitted by the other western railroad respondents and, while tonnages and revenues varied, grain traffic is shown to be particularly significant in every instance. The rate structure applicable to the railroad movement of grain and grain products from the West to the East and Southeast differs from the applied in connection with other commodities. For the purpose of this report, it is sufficient to state that the freight charges are generally determined from the application of combination rates composed of gathering rates to the price-fixing or first markets and proportional rates beyond. This rate structure is described in the Commission proceedings* mentioned earlier. Under the structure, certain services are historically provided by the railroads. One such service is transit, which is the privilege of stopping a grain shipment prior to final destination for storage or processing with later reshipment to destination at freight charges for the entire movement no higher than the charges assessed for uninterrupted movement from origin to destination. Another such service is inspection and sampling. Until recently, official inspection was required by Federal statute. Both transit and inspection were authorized originally without any additional charge. Separate or additional charges for transit and inspection services, however, have been assessed in recent years in connection with particular movements of grain and grain products under specific rates, and, in the East, a separate charge for the first inspection of a carload of grain was established in 1963. However, the practice in the western district has been to permit the first inspection without any charge. The proposed schedules, if they become effective, will change this practice. +Grain and Grain Products, 205 1.C.C. 301, 215 L.C.C. 83, and Rate Structure Investigation, Part 7, supra. A-70 For many years, the railroads that originated substantia! quantities of grain have made provision for sampling and inspection while the loaded cars weie in transit. The provisions of the Federal statute requiring an inspection to establish the official grade could have been satisfied by inspection at point of origin prior to loading of the railroad cars Or ai point of destination after the cars had been unloaded. However, as a practical matter, it was easier for the grain trade if the samples on which inspection is made were drawn from the loaded railroad car and the inspection completed before the grain was unloaded. This was established as the practice and the Commission approved and provided for the continuance of the in-transit inspection at the line-haul rates in Grain and Grain Products, supra. There has been some erosion of the rail carrier practice of providing for the inspection in transit. This has been true where the railroads have established special reduced rates for particular movements of grain. However, the Docket No. 17000, Part 7, maximum rates which have limited application in the West, and the currently effective rates for general application which are on a lower level than the prescribed basis, continue to authorize the transit and inspection services that have long been available to the grain shippers. Where Docket No. 1700, Part 7, maximum rates are applicable, the charges proposed here do not apply. Nor will the charges apply where the line-haul rates plus the inspection charge equals or exceeds the maximum prescribed level. Thus the prescribed level will not be exceeded under this proposal. The issue before the Commission in this proceeding is whether or not the proposed departure from the established practice of providing the inspection service is just and reasonable. The grain shippers continue to make extensive use of the prevailing in-transit inspection service, and if the proposed charges become effective it will result in either increased cost to the shippers or in modification of current practices. a fe Fs argentine ¢ of A-71 Prior to 1967, the United States Grain Standards Act provided that all interstate movements of whole grains, sold by grade and shipped to or from designated markets, be inspected for the purpose of determining their official grade. This provision was originally designed to protect the purchasers of grain. However, beginning sometime in the early 1960's it became apparent that the requirement of mandatory inspection of interstate grain movements had ceased to serve its original purpose. The increasing diversion of bulk grain movements from railroad to other transportation modes, particularly to motor trucks, rendered uniform enforcement of the mandatory inspection requirement difficult. In-transit services are not available by other modes of transportation. In addition, a part of the grain trade found it expedient to market grain without benefit of official grade determination by the US. Department of Agriculture. For these reasons the U.S. Secretary of Agriculture proposed the 1968 revision of the Grain Standards Act which eliminated the mandatory inspection. The primary objective of the revision was to expedite and simplify the movement of whole grains. The railroad industry supported the elimination of the inspection requirement because they believe such action would improve car utilization. They were supported in this position by some Federal and State agencies. Several of the protestants objected to the receipt of evidence submitted by the respondent railroads purporting to show that improve car utilization was a major objective of the 1968 revision. They have renewed their objection in briefs contending that the hearing examiner improperly received evidence of the legislative history of the revised act including testimony of witnesses before congressional committees. The evidence was properly received by the examiner and his ruling is affirmed. Neither the provisions of the revised Grain Standards Act nor the legislative history indicates that improved car utilization was the primary factor in the enactment of the 1968 statute. A-72 However, it is equally clear that improved car utilization in the movement of whole grain by railroad was a consideration in the revision. Need for in-transit inspection. - Before lookin to the level of the proposed charges in relation to the services performed in connection therewith, and the corollary question directed to the inclusion of the cost for such services in the line-haul rates, it is helpful to examine into the present need for in- transit inspection. An important segment of the opposition is based on the proposition that such inspection ts essential to the orderly marketing of whole grains and that the substitute or alternative inspections at origin or destination, advocated by the respondents, is unacceptable to the grain trade for a number of reasons. The respondent carriers, while urging that the overriding justification for the proposed schedules is the critical need for improvement of car utilization, submit that there is no longer any real necessity for the in-transit inspection service. We have noted that there is a substantial use of the considered inspection service, especially in the West. Some grain shipments even received two in-transit inspections without the imposition of any additional charge. Generally, the tariffs applicable to the movement of grain in the West provide for only one inspection without charge and there isa published charge for the second and subsequent inspections. However, in addition to the one free inspection allowed under the currently effective tariffs, an additional free inspection is permitted at destination where the car is unloaded in lieu of reconsignment.S Under the suspended tariffs, a charge would be made in the West for both an intermediate inspection and a destination inspection while on the carriers’ tracks. Both inspections are in transit since SA study by the western railroad respondents in 1967 established that there was an average of 1.6 inspections per shipment. Consequently, a large number of inspections for 1968 and 1969 are duplications or repeat inspections. A-73 the car is stopped and held out of its other wise normal course of movement. There is a need for a sampling and inspection of the grain at some time during the marketing process. The grade of the particular shipment must be determined before the majority of sales can be consummated. For a number of reasons it has been convenient for grain shippers and receivers to have the grain inspected while in transit. If a variance of the grade from what was offered is shown by the inspection, the shipment can be reconsigned to more appropriate markets. Also, there is less chance of deterioration of the grain following the in-transit inspection than is the case if the inspection is made earlier at the point of origin. Finally, the possibility of bias is lessened if the inspection occurs after the shipment leaves the origin elevator. These factors, along with the madatory requirement for inspection, were the basis for providing the in-transit inspection originally, and for the Commission's approval of the practice in its reports in the Docket No. 17000, Part 7, proceedings. These are also the factors stressed by protestants in urging that origin and destination inspections are not acceptableto the grain trade. However, it is not essential that the grade of the grain be determined while the particular shipment is in transit on the railroad. As noted, the inspection is now permissive and it can take place elsewhere. The record in this proceeding shows that there is a substantial growth in the use of origin mechanical sampling for inspection. These relatively low-cost samplers® are installed in the existing elevator grain spout and are electronically timed and operated. A representative sample of the grain being loaded in the rail car is obtained and taken to an inspection laboratory for analysis and grading. The origin sampling devices are approved under existing regulations of the U.S. Department of Agriculture. The authorized samplers in lowa increased from 33 to 75 *The record shows installation cost to range from $1,000 to $2,000. A-74 between August of 1969 and the same month in 1970. During the same period, in Illinois, the number increased from 7 to 15; in Nebraska from 27 to 53; and in Kansas from 11 to 25. This growth is not sufficient as yet to result ina decline in the number of in-transit inspections on the railroads, but the increase in the number of automatic samplers at the origin elevators does show that this method of inspection does not adversely affect the grain marketing process. The basic responsibility of the railroads does not require them to provide the service for in-transit inspection. The fact that the carriers have provided such service, and have included the cost thereof in their line-haul rates, does not preclude a change or modification of the practice if circumstances justify some revision. Therefore, we conclude that the service made available by the railroads in connection with in-transit inspection is not shown on this record to be essential to the grain marketing process. The in- transit inspection is now permissive under the Federal statutes and can be either omitted entirely or made through samples taken prior to tender at origin or subsequent to delivery at destination. There are numerous shipments of the grain where in-transit inspections are not performed. Grain inspection is an accessoria! service for whicha charge separate from the line-haul charges may properly be assessed. See Grand Forks Chamber of Com. v. Great Northern Ry. Co., 321 1.C.C. 356. Whether the separate charges proposed herein are just and reasonable requires a more extended review of the evidence submitted. Respondents.—The railroads offer a two-pronged justification for the proposed charges. The asserted primary objective to be attained under the proposed charges is a substantial increase in car utilization through elimination of the delay time required for inspection with a resultant improvement in the critical car shortage. In fact, in brief, the respondents state that “the railroads do not want to A-75 collect one penny of the charges proposed.” The considered charge is proposed as an incentive to shippers to forego in- transit inspections. Secondly, the respondents, having in mind the burdens that must be met in a proceeding directed to increased charges, attempt also to show that the cost directly related to the performance of the inspection exceeds the charges proposed to be assessed for such service. Respondent carriers submitted evidence of the decrease in the ratio of revenues to out-of-pocket costs for the movement of whole grains from 218 percent in 1950 to 149 percent in 1966. This data compiled from waybill statistics cost scales, and related publications of the Commission's Bureau of Economics and Bureau of Accounts, are reflected in the following table: Ratio of revenue Out-of-pocket to out-of-pocket Year Revenues cost cost (1) (2) (3) (4) Percent NEE cnercnieasieciainien $3,566,568 $1,637,840 218 a 4,119,817 2,039,467 202 eS 4,946,158 2,877,519 172 a 5,205,729 3,490,094 149 The figures in the table represent a |-percent sample of rail terminations on all grain traffic.’ Figures later than 1966 are not available. The purpose of the table is to illustrate that during the last 20 years the rates on grain moving by railroad have been reduced and, consequently, the contribution of this traffic to the overhead burden has been lessened due to the reduced rates and increasing cost of operations. Most of the reductions were made by the railroads to meet the increased competition of the motor trucks and barges. The respondents followed procedures 7The figures shown in the table should be multiplied by 100 to obtain total figures. A-76 used by the Commission’s cost finding section to determine the out-of-pocket costs for 1966. Those for the prior years were taken from so-called contribution studies of the same section® A number of studies were presented by the respondents which purport to show their costs for performing the in- transit inspection. The following cost items are listed by respondents as those created and possibly avoidable by the elimination of grain inspection at in-transit stops on the railroads: (1) car detention and associated car costs, (2) cost of switching the cars to inspection tracks on the railroads, (3) clerical costs associated with inspection, (4) loss and damage costs, (5) excess per diem costs, (6) costs that result from delays in handling other traffic because of cars held for inspection, and (7) costs associated with backhaul movements to provide for inspection. The firststep was to determine the amount of car detention that resulted from stopping the grain cars for inspection. Five studies were made and they are summarized in the following table: Summary of all car detention studies Weight-of-the-evidence considerations Annual Average Method of Time inspection delay due selecting period volume to grain study of the (number of Line Study carriers inspection stations study inspections) (1) (2) (3) (4) (5) (6) Hours 1 Western ---------------------- 78.01 Random ---- 1 year 476,000 2 Eastem ----------------------- 44.91 Judgment --- 3108 24,500 months (Penn Central only) 3 Northern Pacific ------------ 68.00 = judment ----- 10 months 8,035 (nearly a (10 months census) only) 4 — Great Northern - Great Falls ------------------ 92.30 Judgment--- | week Unknown 5 Great Northern - Spokane-Hill yard ---------- 92.90 Judgment--- | week Unknown *Distribution of Rail Revenue Contribution by Commodity Groups, A-77 Because the Western study was based on a random sample, covered the period of | full year (1968), and had application to the greatest number of inspections, the respondents contend that it should be accorded the greatest weight. In the Western study, 18 study stations’? were selected at random from the complete list of 217 stations where grain inspection occurred in 1968 on the 16 western railroads'® that participated in the study. At each of the 18 study stations, a simple random sample of inspected cars and a simple random sample of uninspected cars was chosen.!'! The difference in average handling times between inspected cars and uninspected cars at each station is the delay time due to grain inspection at that station. Eighteen delay times were obtained for grain inspection, one delay time for each study station. These 18 delay times were then combined using a weighted average formula to obtain the result shown in the table. From the beginning the two groups of cars ateach station were made comparable in four respects: year, commodity, station, and method of arrival. A group of inspected cars was compared with a group of uninspected cars that moved *They are listed in appendix B. "Atchison, Topeka and Santa Fe Railway Company (Santa Fe), Chicago, Burlington & Quincy Railroad Company, The Colorado and Southern Railway Company, Fort Worth and Denver Railway Company (these three are now a part of Burlington Northern), Chicago and North Western Railway Company (C&N W); Chicago Rock Island and Pacific Railroad Company (Rock Island), The Denver and Rio Grande Western Railroad Company (Rio Grande), Illinois Central Roadroad Company; Kansas City Southern Railway Company; Louisiana & Arkansas Railway Company; Chicago, Milwaukee, St. Paul and Pacific Railraod Company (Milwaukee); Missouri Pacific Railroad Company); Texas and Pacific Railway Company; St. Louis- ' San Francisco Railway Company; Southern Pacific Company, and’ Union Pacific Railroad Company. ‘In two cases (inspected cars at Belmond and Stockton), there were less than 100 cars and for these, every car was studied. In the other 34 cases, samples of approximately 100 cars were used. A-78 in the same year, carried a grain subject to the proposed charge, were handled at the same station, and arrived ona road train of the reporting carrier. Subsequent to the start of the study, an adjustment was made based on segregating all study cars into one of three movement types — delivered at the study station, moving through the study station but taking an intertrain switch to do so, and moving through the study station on the same train. Respondents assert that the figure of 78.01 hours is based on groups that are comparable in five respects: year, commodity, station, method of arrival, and type of movement. The results are shown in appendix B. Respondents used this adjusted delay time (78.01 hours) to determine the cost of the delay for an inspection of a grain car in the western district. This cost was computed on several bases as outlined in the following table: Using adjusted delay time of 78.01] hours or 3.25 days Days Cost per Total cost Cost groupings’ detention day per inspection (1) (2) (3) (4) oe 3.25 $3.12 $10.14 I] ----------------+--------22--2++- 3.25 2.56 8.32 | ao 3.23 2.79 9.07 IV -------------- 20-22-22 ene ene e ee 3.25 2.24 7.28 at |. Standard error I high ----------------------------- 3.59 3.12 11.20 low - 2.91 3.12 9.08 Il high --- 3.59 2.56 9.19 low --- 2.91 2.56 7.45 Ill high --------------------------- 3.59 2.79 10.02 low 2.91 2.79 8.12 IV high 3.59 2.24 8.04 low 2.91 2.24 6.52 ‘Explanation: 1. Car costs based on per diem procedure including 6percent return on freight train cars. Il. Car costs based on per diem procedure including a 4-percent return on ireight train cars. A-79 Ill. Car costs were determined by the application of Rail Form A including a 6-percent return on freight train cars. IV. Car costs were determined by the application of Rail Form A including a 4-percent return on freight train cars. As indicated earlier, there were other studies of the detention time for the in-transit inspections which the respondents urge corroborate the costs shown in the above table. The results of such studies are shown below: Days Cost per Total cost Study carriers detention day per inspection (1) (2) (3) (4) 1. Eastern carriers ------------- 1.87 $2.76 $5.16 2. Northern Pacific ------------ 2.833 2.63 7.45 3. Great Northern -— Great Falls ---------------- 3.84 3.$2 13.52 4. Great Northern — Spokane-Hill yard -------- 3.87 3.52 13.62 The other item of cost determined by the respondents was switching. Respondents determined that the inspected grain cars require on the average an additional 8.39 minutes of switching. This covers removal of the car from the inbound train to the inspection hold tracks, any additional switching on the hold tracks and finally the removal of the car to either the outbound train or to an industry switch. This study embraced I1 stations in the western district and is reflected in the following table: A-80 Final results of the western carriers’ switching studies Station Switch engine minutes per Railroad City State cartoad (Il) (2) (3) (4) MILW ----- Aberdeen -------------------++- S. Dak ------------ 3.52 ATSF ------ Atchison ---------------------- Kans --------------- 4.20 CRIP ------- Belmond _ -------------------- lowa --------------- 9.89 SP ---------- Colton ------------------------- Calif --------------- 23.17 CNW ------ Huron -------------------------- S. Dak ------------ 3.29 IC ---------- lowa Falls -------------------- lowa --------------- 6.28 BN --------- Lincoln ------------------------ Nebr --------------- 2.04 UP --------- Omaha-Council Bluffs ----- Nebr-lowa 5.50 MP --------- St. Joseph -------------------- Mo ----------------- 3.20 UP --------- Spokane ----------------------- Wash _ -------------- 14.99 BN --------- Superior ----------------------- Nebr --------------- 11.67 Weighted average ----------- --------+---+-------+=- 8.39 The stations in the table were considered to be representative with respect to, (a) the number of railroads considered, (b) geographic dispersion, (c) dispersion among statistical strata, and (d) range in volume of traffic. The period of study was 7 consecutive days at each of the I] stations. The engine minutes produced by the study for the actual movement of the inspected cars were increased to include nonproductive time charged to switch ng operations. The out-of-pocket costs per engine minute were developed for all of the 16 western railroad respondents combined through the application of a Rail Form A for the year 1969. The results are shown in the following table which also includes computations presented by the eastern railroads respondents and those made by studies submitted on behalf of individual respondents. A-81 Cost of additional switching required for grain inspection Added switch Cost per Total cost Carriers engine minutes engine minutes of switching (1) (2) (3) (4) 1. Western railroads ---------- 8.39 $0.76070 $6.38 2. Eastern railroads ----------- 10.30 0.76206 7.85 3. Northern Pacific ------------ 4.906 0.803 3.94 4. Great Northern — Great Falls ---------------- 12.65 0.6559 8.30 5. Great Northern — Spokane-Hill yard -------- 9.60 0.6683 6.42 No attempt was made to determine the remaining items of cost associated with in-transit inspection on behalf of the western railroads as a group.'? Essentially, the respondents rely on their general study embracing the 16 western railroads and on the two cost items only-car delay and added switching. They do contend that the other costs are sustained and, to that extent, the costs shown are understated. The primary figure relied upon by the respondents to show the cost of providing in-transit inspection is $16.52 and this figure is based, as stated, only on the expense categories of car detention and switching for the western railroads. This is composed of $10.14 as cost of car detention and $6.38 for cost of switching. The proposed charges range from $13.36 to $14.33. None of the respondents’ showing as to detention time, switching minutes, or other costs makes reference to in-transit inspections in southern territory. The number of inspections in that territory are small and it "One of the respondents (Union Pacific Railroad )after an analysis of 956 inspected grain cars at three of its stations, Denver, Colo.. Omaha and Lincoln, Nebr. concluded that its clerical costs amounted to 84 per car and that there were additional costs of 18.4 cents per car- mile for the backhaul required to move some cars to the inspection point. The total cost per car including a cost of $3.51 per day for each day the car was detained and $8.58 per switch ranged from $34. 36to $75.89. The study was based on data accummulated in 1968. One of the eastern railroad respondents also submitted a study which showed added clerical costs of A-82 is respondents’ position that where they occur the same elements of car delay, car expense, and switching expense are involved. The eastern railroad respondents have a currently effective charge for in-transit inspection of grain. It will be increased under the proposed schedules. These respondents undertook to develop the minimum costs incurred for holding cars for inspection, and their studies are discussed later in detail. Essentially, these costs include detention of cars, additional switching, and clerical expenses. The detention study in the East was confined to the three railroads on which the great majority of grain inspections are performed, Penn Central, C&O-B&O, and Norfolk and Western. The results indicate that the weighted average delay time due to grain inspection amounted to 44.91 hours per inspected car, which produces per car expense of $5. 16. The switching studies encompassed [41 cars with an average switching time for inspection of 10.3 minutes per car more than is required on noninspected cars. At a unit-cost of $0.76206 per switch engine minute, this produced a cost of $7.85 percar. The clerical cost based on test observations at three inspection points (East St. Louis, III. Indianapolis, Ind., and Toledo, Ohio) show a cost of $0.92 per bill. The total of the three elements of expense amounts to $13.93 per car on the basis of a 4-percent return on investment after Federal income taxes. On the basis of a 6-percent return on car value, the total expense is shown to be $15.96 per car. The proposed charge is $14.33. Other studies were made by individual respondents in connection with the car detention and additional switching and these differ from those shown in the study for the 16 western railroads. Respondents submit the individual studies for corroboration of their primary study. The results of such studies are shown in A-83 the tables set forth earlier, and the studies are described later in this report. The respondents urge that the proposed charges, if they become effective, will not contravene the Commission's orders in the Docket No. 17000, Part 7, proceedings. The latter proceeding fixed the maximum rates for the movement of grain and grain products to, from, and within the West and there has been no vacation of that aspect of our outstanding orders. Respondents direct attention to the fact that the proposed charges will not apply to in-transit inspections where the underlying line-haul rates are at the Docket No. 17000, Part 7, level as increased by subsequently authorized general increases. It is their view that the currently effective rates on the vast majority of grain movements even when combined with the inspection charge proposed in the suspended tariffs do not exceed the Docket No. 17000,Part 7, level. Where they do, the proposed charge will not apply. Consequently, they submit that no violation of the outstanding orders can occur. Anticipating that the protestants will make reference to a recent decision of the Commission, division 2, wherein proposed new transit charges (no separate charges were in effect for transit service), were found not shown to be just and reasonable, 7ransit Charges, Southern Territory, 332 1.C.C. 664 (1968), the respondents urge that that decision is not applicable to the facts herein. There it was concluded, inter alia, that the railroads failed to show that their existing line-haul rates were not already sufficient to cover the service. Respondents urge that here they have demonstrated that the proposed charges are just and reasonable compared to the cost of providing the inspection service, and that in the western district, the proposed charges. when combined with the existing line-haul A-84 rates, are less than the maximum prescribed rates on the same commodity. In the cited proceeding, it was also concluded that the proposed transit charges would likely divert traffic away from the railroads and thereby impair the railroads’ net revenues. Such a determination is not possible on the evidence here, according to respondents. It is their view that competition with other modes for grain traffic will not be affected by the proposed charges. Finally, the railroads refer to two issues raised during the hearing. The first is directed to a showing by the protestants that the proposed charges will result in violations of section 4 of the act. The respondents submit that any such violations are unintentional and will be corrected by appropriate tariff amendments when they become known. The second also relates to allegedly inadvertent changes in rates which one protestant submits results in unlawful preference. Respondents urge that there is no showing of any undue preference or prejudice of any location or shipper as to any traffic. The supporting intervener, The Long Island Rail Road Company, advocates the same propositions advanced by the respondents. This party is particularly concerned with the practice of in-transit inspection in its relation to freight car supply. It suggests that the elimination of the car days for this inspection service would contribute more to the alleviation of the freight car shortage than the imposition of higher per diem charges on the terminating carrier. The intervener urges that the proposed charges are justified principally because of the benefits that will result in freight car supply and utilization. Protestants. Some 15 separate briefs were submitted by the protestants. Each of these parties request that the considered charges for in-transit A-85 inspection be found not shown to be just and reasonable. Their arguments and evidence in support, is grouped into the following categories: (1) grain must be inspected and the only practical way for it to take place is while the shipment is in transit on the railroad, (2) the cost of the considered service is included in the line-haul rates and the proposed charge represents a surcharge not shown to be reasonable or justified, (3) car detention on grain inspected cars, where it occurs, is due to inefficient operating practices of railroads, (4) elimination of the in-transit inspection will not materially contribute to car supply, (5) the detention and car studies offered by respondents are basically deficient, and (6) the proposed charges, if they become effective, will result in violations of section 4 of the act. Extensive evidence is presented by the protestants, particularly from the grain exchanges and the boards of trade, purporting to show that despite the change in the Federal statute an official inspection is required for the orderly marketing of grain. They also presented evidence showing the substantial movement of the grain loaded cars to inspection points for sampling and grading before the grain can be placed in trade channels for sale and distribution. The purpose of such evidence is to show that there is no other way for the preponderance of country grain elevators to secure official grades on the grain since they do not have automatic grain samplers. The grain market representatives also stress the necessity for an official inspection while the grain is still on the lines of the railroad in order to permit reconsignment of the shipments. Destination and origin sampling and inspection are impractical, according to the protestants. The former because the consignee would have difficulty in disposing of a shipment that failed to meet the grain required by his needs, and the latter because the cost of an original sampler precludes its A-86 installation at the majority of the country elevators. The Secretary of Agriculture and most of the other protestants argue that the respondents have failed to sustain their burden of establishing that the proposed “additional charge” they seek to impose is reasonable and lawful in relation to the cost of performing the through service. Since the railroads, particularly those in the West and South, are presently not assessing a charge in their line-haul rates for the first stop for inspection, the protestants allege that the carriers may not now segregate the inspection service and assign to it a separate charge without first considering the entire through service of which the inspection is part and the compensation now being received for such service. The Secretary indicates on brief that he does not oppose the concept of a separately states charge for the first stop for inspection but insists that the Commission must consider the revenue derived from the line-haul rates before it can determine the level of such a separate charge. A similar position is advocated by protestant National Grain and Feed Association. The latter submits that respondents have not sustained their burden of showing that proposed charges, applied in conjunction with the line-haul rates that permit the inspection, are justand re’ ~nable. In support thereof, reliance is placed on Transit Charges, Southern Territory supra, hereinafter more particularly considered. There is also considerable evidence by protestants directed to the proposition that the car detention resulting from the in-transit inspection is due to respondents’ inefficient operations. The presentation of the Fort Worth Grain Exchange, Fort Worth, Tex., and Far-Mar-Co., Inc., a company engaged in the handling, storage, and merchandising of grain with facilities in Colorado, Kansas, Nebraska, and Missouri, is representative of the showing in this area. The Fort Worth Exchange maintains that the Fort A-87 Worth yard of the Rock Island, one of the railroad yards in respondents’ study, has antiquated facilities and an analysis of the service rendered shows that too many cars designated for inspection are held in this yard. The delays for inspection are allegedly attributable to the inability of this respondent to perform the service. Similarly, Far-Mar-Co., Inc., contends that one of the respondents serving the inspection point of Hutchison, Kans., regularly delays the movement of its cars following inspection until the second day after receipt of billing instructions. Almost without exception, the protestants urge that since the grain trade will continue to require the in-transit inspection there is little hope for enlarging the car supply under the proposed charges. If these charges become effective, the result will be an increase in respondents’ revenue and the inspection delays that hinder a more efficient use of railroad cars will continue according to the protestants. These parties also assail the various studies submitted by the railroads. Led by the Board of Trade of the city of Chicago and beginning with the profitability analyses, they uniformly challenge the reliability of all the studies presented. The use of the waybill statistics to measure the decrease in profitability for the grain movement is attacked because of the changes in the transportation of grain by railroad since 1966. The increased use of the heavier loading covered hopper cars, multiplecar movements, and unit trains in the past 4 years assertedly makes respondents’ comparisons invalid. However, the principal opposition is directed to the car detention and switching studies. Protestants contend that the basic premise of the detention study, namely, that any significant differences between the detention time for inspected cars and the control group of uninspected cars at any given station could be properly attributed to the service of inspection, in not established. Initially, as indicted, the respondents treated the inspection group of cars and the control group as if they A-88 were directly comparable and equal inall respects except for differences that may be attributable to inspection. There was criticism during the hearing by protestants as to whether the inspected cars and uninspected cars differ importantly in the proportions in which they fall into different types of movement such as terminating, through, and transfer cars. Any differences could seriously bias the study. As indicated earlier, an adjustment was made to take care of this problem (the so-called like-vs.-like correction). Protestants do not accept the adjust ment. They urge that for each of the 18 study stations there are five types of movements where inspected and uninspected cars would potentially be compared on a like-with-like basis or a total of 90 potential comparisons. Appendix B to the report shows protestants’ computation of numbers of cars, inspected and uninspected, in the five types of movement for the 18 study stations. Of these 90 situations in which comparison could be made, there are assertedly only 27 instances in which both inspected and uninspected cars occur and, even there, protestants submit that there are numerous instances where the number of inspected or uninspected cars is so small that no meaningful conclusion could be drawn from the happenstance of the detention time on such a small number of cars. On a total of 3,387 cars in the study, protestants contend that only 1,000 have a like- with-like comparison. The second asserted basic error in the carriers’ detention study to which protestants refer is that is was designed to include a large portion of time which they submit is not attributable to in-transit inspection. It is their view that the preponderance of the inspected cars in the study were at the particular study stations because they were to be delivered to industries at that point. The study, by definition, include the time the car spent at the study stations until it departed ina switch run to the industry which included all thetimethe cars spent on constructive placement because the industries were unable to receive additional cars. Protestants submit A-89 that the constructive placement time should not be included in the time charged to inspection since the industry could not receive the cars regardless of whether they have been inspected or not. Other deficiencies in the detention study are charged by protestant. These include the use of estimates at certain of the stations for delivery of uninspected cars; the elimination from the study of certain uninspected cars which were not representative and produced unduly long detention times; the failure to offset the detention time with the time the car would be held for sampling at origin; and the method of expanding the sample after the data was developed. Protestants did not attempt to restate the results because it is there view that the described defects cannot be cured by a restatement and they ask us to conclude that the extensive study has failed to produce a reliable and accurate estimate of the detention time. Much criticism is also offered of the switching study subinitted by the 16 western railroad respondents. There are allegedly three principal deficiencies in the | l-station study which make it unacceptable: (1) the |-week period used is not a representative period, (2) the study assigned switching time to gain cars for inspection that should not be attributed to such cars, and (3) the assignment of too much nonproduction time to the inspected cars. Here, as in the detention study, protestants assert that the switching data submitted was so basically deficient it was impossible to make corrective adjustments and restate the switching costs. The other studies offered by the individual western railroads and by the eastern railroads were considered similarly deficient by protestants. Finally, protestants argue that the assessment of the proposed charges will result in violations of the act. Primarily, reliance is placed on violations with respect to the provisions of section 4 but there are also allegations that the additional charges, if they become effective, will produce A-90 unlawful preference and prejudice. As_ stated, the respondents do not propose to make the charges applicable where the line-haul rates for the movement of the grain when coupled with the said charges result in transportation charges that exceed the Docket No. 17000, Part 7, maximum rates as increased. This method of publication has resulted in departure from the long-and short-haul provisions of the section. While the respondents have indicated a willingness to correct all the violations brought to their attention, the protestants submit that there are numerous instances of section 4 violations and it is the obligation of the railroads to propose rates and charges which do not result in violations of the act. Some of the protestants urge that the rate differences resluting from the elimination of the assessment of the charge whre the applicable line-haul rates are at the Docket No. 17000, Part 7, level also cause unlawful preference and prejudice. The Public Service Commission, State of North Dakota, contends that the assessment of the charge for inspection on shipments of grain originating in North Dakota, which was approved in Grand Forks Cham. of Com. v. Great Northern Ry. Co., 321 1.C.C. 356, results in undue prejudice to the North Dakota grain shippers and undue preference of other shippers of grain not paying the charge. This party asks the Commission to make the charge uniform throughout the western district. If the proposed charges are found not to be just and reasonable, we are asked to conclude herein that the charges applied in North Dakota are unduly prejudicial. DISCUSSION AND CONCLUSIONS This proceeding presents complex factual and legal issues and there is intense controversy. The issue of the lawfulness of any part of the unique pricing system applicable to the railroad movement of grain is always a preplexing task. Here the problem is further complicated by the inclusion of A-9] the equally difficult question relating to the national shortage of railroad freight cars. It is again emphasized that the major impact of the proposal under consideration will be on the movement of grain in the western district. Most inspections occur in this territory. There is presently effective a separate charge for this service in the East. A substantial increase in those charges will result, however, if the proposed charges are permitted to become effective. The number of in-transit inspections in the South is limited and take place chiefly at the ports on export grain tonnage. There is little, if any, opposition to establishment of the charges in southern territory. Practically all of the controversy is concerned with establishment of the separate charge for the first inspection of grain within the western district. Except where indicated otherwise, the discussion relates to the proposed charges in connection with the railroad movement of grain in the West. We consider, initially, the record in relation to the justness and reasonableness of the proposed charges, without regard to the impact of such charges on the availability of railroad freight cars. We have resolved two preliminary questions. First, the orderly marketing of grain under present practices requires that a substantial portion of the commodity moving in commercial channels must be subjected to some form of sampling and inspection to determine grade or quality. Second, it is not essential to the marketing process that this sampling and grading take place while the grain is in transit on the railroad. While it is conceded by protestants that in-transit inspection is not mandatory, they submit that it is the only logical and practical way for the sampling and grading to take place. Even if we accept that proposition, it does not constitute a sound basis for requiring the railroads to continue making the service available. The in-transit inspection is an accessorial service. There is no mandate either in the act or in the Commission's decisions that \ . A-92 compel the railroads to continue to provide the inspection service without separate charge merely because such a service is a convenience to shippers or, stated otherwise, provides a logical and practical way for buyers and sellers to be assured of the grade or quality of grain in a particular shipment. The significant aspect is, of course, whether the establishment of an additional charge for a service that has been provided at the line-haul rates is just and reasonable under the circumstances shown on this record. Protestants submit that it is not since respondents have failed to establish that the combination of the line-haul rate and the pro; osed charge does not exceed a just and reasonable level for the total services provided. Such an omission is assertedly critical in view of our decision in Transit Charges, Southern Territory, supra. Particular reference is made to the following excerpt from that decision (332 1.C.C. at 638 and 684): ***The reasonableness of the proposal cannot be properly determined here without reference to, and consideration of, the line-haul rates, the services furnished thereunder, and the cost thereof. Clearly, in the circumstances presented, the proposed charge may not be divorced from the line-haul rate, for both, insofar as transit is concerned, are inextricably interdependent. Cf. Terminal Charges at Pacific Coast Ports, 255 1.C.C. 673 (1943); Unloading Lumber at New York Harbor, 2561.C.C. 463 (1943); and see Secretary of Agriculture v. United States, 347 U.S. 645, 652 (1954). While it would seem preferable to have the various elements entering into, and constituting, the whole analyzed, if indeed they could be separated, the entire transportation service rendered, including transit, must be examined in relation to the total rates and charges assessed. Respondents have not endeavored to base their action here on any facts bearing upon the revenue-cost relationship of the complete operation. Nor have they indicated the effect A-93 of the proposal either overall or with respect to the movement of the specific commodities involved. The instant proceeding is distinguishable from the cited proceeding in two important respects. As_ indicated, approximately 480,000 in-transit inspections took place in 1969 at various points throughout the western district. The line-haul rates applicable on the grain to, from, and through those inspection points number in the thousands and, because of the complexities of the grain rate structure, vary to a large degree. A requirement that the reasonableness of the proposed charges cannot be determined without “reference to the line-haul rates, the services furnished thereunder, and the cost thereof,” effectively precludes respondents from ever establishing a separate charge for the accessorial first stop for inspection regardless of the need for such a charge. This inability was not present in the cited proceeding and even there, on appeal, the District Court of the United States, for the Southern District of Ohio, western division, Cincinnati, New Orleans & Texas Pacific Rv, Co. v. United States, 224 F. Supp. 563 (decided April 12, 1970), while sustaining the Commission on other grounds, indicated that the burden of proof required of the respondent railroads was erroneous. However, there is a more significant distinguishing feature that persuades us that the prior decision is not controlling here. That difference is that the line-haul rate applicable to any movement of grain within the West when coupled with the proposed charge is less than the maximum reasonable level determined by this Commission. In no instance will the combined rate and charge exceed the maximum level prescribed in Grain and Grain Products, supra. Nor are we influenced to reach a contrary conclusion by protestants reference to the fact that the rate level was fixed more than 36 years ago and conditions and circumstances relating to the railroad transportation of grain have changed in the interim. There is possibly no A-94 segment of this country’s railroad freight rate structure that has been reviewed more frequently than the one that has application to the movement of grain and grain products. In Grain and Grain Products, 298 1.C.C. 261 (1956), the Commission, while vacating prior orders in Docket No. 17000, Part 7, relating to the rates and charges on coarse grains, specifically left standing the requirement for the establishment and maintenance of the maximum reasonable rates. In a report decided in 1964, in Southeastern Assn. of R. & Util. Commrs. v. A., T. & S. F. Ry., 321 1.0C.C. 519, the Commission relied on the rate factors applicable to the movement of grain within the West in concluding that the rates and method of making rates on grain from, to, and within the South were not shown to be unjust, unreasonable, or otherwise unlawful. In Grain and Grain Products (Rate Structure Investigation, Part 7), 329 1.C.C. 824 (1967), the rate structure was again reviewed by the Commission. Furthermore, in practically every general freight rate increase proposal made by the railroads in the past 10 years particular attention has been given to the level of the grain rates and, in several instances, the increases in rates on grain and grain products were less than those authorized for the movement of other commodities. The Docket No. 17000, Part 7, prescribed rates, as increased through the subsequently authorized general increases, are a currently effective maximum rate levei for the movement of these commodities. One of the grounds relied upon by the division in Transit Charges, Southern Territory, supra, was that the proposed increase in charges might well result in substantial diversion of the considered traffic with a diminution, rather than an increase, in revenues. Similar conclusions are not warranted here. Comparative costs to the shipper of the movement of grain by railroad versus the movement by truck or barge is essential before a decision can be reached on diversion, and there is no showing here which relates the cost of truck or A-95 barge transportation to the cost of rail transportation with the inspection charge added. Grain will continue to be moved by railroad even if it becomes necessary to pay the proposed charge because of the advantages, such as transit and reconsignment, that are available. Even though the combined line-haul rate and proposd charge does not exceed the prescribed maximum level, it is still encumbent on the Commission to determine if the separate charge is reasonable when related to the specific service for which it is to be assessed. As indicated, extensive studies are offered to supprt the claim that it is. The detention studies.-- The key evidence with respect to an ascertainment of the cost factor associated with in-transit inspection and, as later considered,‘in connection with efficient car utilization, is the analyses of the time required to perform the indicated service. The principal study is the joint one presented by the 16 western railroads. The purpose of this study is to determine how much delay time is caused by the in-transit inspection on the [Text truncated at 120,000 characters. The full text is on the page linked above.] --- Source: Frix Law Library, https://www.frixlaw.com/law-library/documents/brief%3Amicro_IA40385011_0433%3A1. Public record. Not legal advice.