Southern Pacific Transportation Co. v. Interstate Commerce Commission

69 F.3d 583, 314 U.S. App. D.C. 419

• Court: Court of Appeals for the D.C. Circuit
• Decided: November 7, 1995
• Docket: Nos. 92-1583, 94-1651
• Status: Published

Opinions

Opinion for the Court filed by Circuit Judge SILBERMAN.

Dissenting opinion filed by Circuit Judge ROGERS.

SILBERMAN, Circuit Judge:

Chicago and North Western Railroad (CNW) petitioned for review of the ICC’s promulgation of rules concerning rates at which railroads exchange railcars. After CNW moved to withdraw as petitioner on March 20, 1995, intervenors Southern Pacific Transportation Company and its affiliated railroads (SP) moved to substitute as petitioner.¹ Since SP is not a “party aggrieved” under the Hobbs Act, 28 U.S.C. § 2344 (1994), we deny SP’s motion to substitute and dismiss the petition.

I.

The petition in this case arises out of the mandatory interchange requirement that has characterized American railroading for nearly a century. Railroads must permit their cars to be used by other carriers to carry freight on other lines, as well as accept the cars of other carriers onto their lines. Mandatory interchange allows freight to travel from point A to point B in one car (obviating the need to move freight between ears) even where no one railroad’s lines connect points A and B. See Baltimore & O.C.T.R.R. Co. v. United States, 583 F.2d 678, 681 (3d Cir.1978), cert. denied, 440 U.S. 968, 99 S.Ct. 1520, 59 L.Ed.2d 784 (1979). The rates at which cars are leased in mandatory interchange have traditionally been set through regulation rather than through the operation of the market.

Since 1976, Congress has required the ICC to give consideration to a variety of factors when it prescribes rates, including “current costs of capital, repairs, materials, parts, and labor” as well as “the transportation use of each type of freight car, the national level of ownership of each type of freight car, and other factors that affect the adequacy of the national freight car supply.” 49 U.S.C. § 11122(b) (1994). In 1977, the ICC adopted a formula that prescribed car hire rates for a variety of ear types. Car Service Compensation — Basic Per Diem Charges — Formula Revision in Accordance with the Railroad Revitalization and Regulatory Reform Act of 1976, 358 I.C.C. 716 (1977).

The ICC’s approach was a flop. The most troubling defect was its failure to adapt to changing market circumstances. Despite rampant car surpluses in the early 1980s, for example, car hire rates increased — -leading to still greater car surpluses. In 1985, the ICC suspended annual updates to the car hire rates, and sought comments on possible solutions to the formula’s difficulties. Car Service Compensation — Basic Per Diem Charges (Postponement of the Annual Car-Hire Charge Update for 1983), 11.C.C.2d 742 (1985). A coalition of railroad industry participants, in October 1990, submitted a proposed solution to the ICC’s car hire woes. The coalition’s proposal called for immediate deprescription — setting rates by bilateral negotiation between car owners and car users rather than by ICC formula — for new cars, and gradual deprescription over 10 years for existing cars.

The Commission issued two notices of proposed rulemaking, received numerous comments, issued final rules, and then granted two petitions for reconsideration. In the course of the rulemaking, the Commission changed — sometimes reversed — its position on a variety of issues, particularly on the effective date of the definition of new ears and on the applicability of the right of independent action under 49 U.S.C. § 10706.² The end result was a program very much like that proposed to the ICC in the first place. Under the program, existing cars remain subject to prescribed rates — fixed at 1990 levels — for 10 years; carriers may depres-cribe 10% of their fleets in each of those 10 years. The rates for new cars, defined as cars built after January 1, 1993, are determined by bilateral negotiation and, if necessary, arbitration under a rule adopted as part of the Code of Car Hire Rules.³ The arbitration is of the final offer selection, or “baseball style,” variety, in which the arbitrator must select one of the parties’ final offers and may not consider other arbitral awards or other offers for similar cars. Finally, the ICC decided that the right of independent action afforded carriers under 49 U.S.C. § 10706 does not apply to the arbitration rule because the rule “plainly is not one that forces participants to be parties to collectively set rates.” Joint Petition for Rulemaking on Railroad Car Hire Compensation, 9 I.C.C.2d 1090, 1102 (1993) (Reconsideration).⁴

Over the course of the rulemaking, SP participated twice. After the Commission issued its first notice, SP submitted a comment on the proposed rulemaking stating that it “generally support[ed] the implementation of the Commission’s proposed rules and exemption in these proceedings, subject to the important qualification that such proposed rules and exemption be expressly written to afford carriers, car users, and car owners a subsequent opportunity to seek Commission review of the deprescription in the event unforeseen problems develop which undercut the public interest benefits that the Commission would be seeking to achieve through deprescription.” Comments of Southern Pacific Transportation Company, et al. at 3 (Mar. 18, 1991) (SP Comments). SP further stated that it “believe[d] that a framework of bilateral agreements is vastly preferable to any system imposed by regulation and [was] generally supportive of the proposed car hire rules and exemption in these proceedings which provide for a phased deprescription of car hire over a 10-year period.” Id. at 4. It proposed that the final rules include a section, entitled “Supplemental Review,” providing for further ICC review of the deprescription regime should unforeseen difficulties arise.⁵ SP acknowledged that “the Commission always retains the right, upon petition or upon its own motion, to reopen or institute a proceeding in appropriate circumstances,” but expressed concern lest the “impression be left of the Commission abrogation of participation in the car hire deprescription process.” Id. at 6.

SP submitted further comments on May 1, 1991. Reiterating its concern that the ICC was venturing into unexplored territory, SP this time conditioned its support for the proposed rules “upon explicit inclusion of a procedure for subsequent Commission review.” Reply Comments of Southern Pacific Transportation Company, et al. at 3 (May 1, 1991) (SP Reply Comments). No such provision was included in the ICC’s rules.

On February 11, 1994, CNW filed a petition for a declaratory order (1) that a carrier could opt out of the Code of Car Hire arbitration rule while remaining a party to the remainder of the Code, and (2) that a carrier not participating in the arbitration rule could set its own rates “subject only to the Commission’s regulatory authority under 49 U.S.C. § 11122(b).” In addition to its comments in the rulemaking, SP filed a “Reply in Support of Institution of Declaratory Order Proceeding.” It only asserted, however, that the issues were of “industry-wide importance” and that “[t]he time and expense involved in litigation over these issues on a case-by-case basis will be obviated by the Commission’s expeditious resolution of the matter in a declaratory order proceeding.” SP expressed no opinion on the merits of CNW’s petition.

The Commission ostensibly denied CNW’s request as to the first issue, but stated that the right of independent action did not apply to the arbitration rule, thus settling the matter. The ICC issued a declaratory order as to the second issue that a non-Code participant may set its own rates until a complaint is filed with the ICC. At that time the ICC would set an “interim rate” that would apply until the dispute was resolved.

CNW filed a petition for review and SP intervened.

II.

SP, before us, seeks to argue essentially the position that CNW took before the Commission throughout the rulemaking. SP contends that the ICC’s adoption of the entire deprescription program was arbitrary and capricious. The Commission is accused of failing to explain adequately its major change in direction; SP claims that the Commission merely yielded to the industry’s position. Moreover, the scheme embodied in the rule, according to SP, is simply not consistent with the ICC’s statutory authority. The car hire rates that will result, either through the compulsory arbitration for new cars or the frozen 1990 rate prescribed for old cars, do not reflect the factors the ICC is obliged to consider under § 11122.⁶ And it is argued that the ICC misread the statute by concluding that the railroads are not entitled to exercise “independent action” by either opting out of the arbitration rule or by rejecting an arbitrator’s award.

The government, of course, responds to these weighty arguments, but, at the outset, the government challenges SP’s standing to raise them. The government opposes SP’s motion to substitute for CNW as petitioner, both because as a general matter an interve-nor should not be permitted to substitute as a petitioner (after the time for petition has passed), and because SP is not an “aggrieved parly” within the meaning of the Hobbs Act and therefore lacks standing as a petitioner.

Although the government claims that this court has never permitted an intervenor to substitute for a withdrawing petitioner, we have frequently adverted to the possibility. See Aeronautical Radio, Inc. v. FCC, 983 F.2d 275, 283 (D.C.Cir.1993); Alabama Power Co. v. ICC, 852 F.2d 1361, 1368 (D.C.Cir.1988); Simmons v. ICC, 716 F.2d 40, 46 (D.C.Cir.1983). Numerous other circuit courts have explicitly permitted the practice. See, e.g., Benavidez v. Fong Eu, 34 F.3d 825, 830 (9th Cir.1994) (citing cases); United States Steel Corp. v. EPA, 614 F.2d 843, 845 (3d Cir.1979). Since an intervenor must show standing and may not raise new issues not brought before the court by the petitioner, National Ass’n of Regulatory Utility Comm’rs v. ICC, 41 F.3d 721, 729-30 (D.C.Cir.1994), we see no analytical difficulty in permitting an intervenor to substitute for a petitioner. There remains the question whether SP has standing.

SP contends that the phrase “party aggrieved” obliges a petitioner merely to show Article III standing (injury-in-fact, causation, and redressability), and that it participated as a party before the agency. Although it is quite unclear exactly how SP is economically injured by the Commission’s actions, since SP, like all other railroads, is on both ends of the car hire transaction, we will assume arguendo that SP satisfies Article III injury. But it must still show that it is “aggrieved” under the statute, Water Transport Ass’n v. ICC, 819 F.2d 1189, 1193-95 (its injury falls within the zone of interests Congress contemplated), and, moreover, under the Hobbs Act it must further show that it is aggrieved as a “party” — not just as a person. Simmons, 716 F.2d at 42; Gage v. AEC, 479 F.2d 1214, 1218 (D.C.Cir.1973). SP acknowledges that, in that regard, its participation before the agency is a necessary condition to satisfying party aggrieved status. Although we have said that de minimis participation is insufficient, Alabama Power, 852 F.2d at 1368; cf. Water Transport Ass’n v. ICC, 819 F.2d 1189, 1192-93 (D.C.Cir.1987), SP’s involvement below clears that hurdle — albeit barely.

SP argues that, having met these two standards, it is a party aggrieved without regard to whether the agency agreed with or rejected its views. Thus, it does not really matter what stance it takes at the court of appeals; it can change its position 180 degrees from that which it took before the Commission, just as the Commission can change its position between a notice of proposed rulemaking and a final rule. Whatever an agency’s latitude in switching its rule-making position after comments, SP’s analogy is misconceived. The appropriate comparison would be to an agency’s latitude on appeal. An agency is barred from advancing in a reviewing court even somewhat differing reasoning from that it expressed at the time it took action. SEC v. Chenery Corp., 318 U.S. 80, 87, 63 S.Ct. 454, 459, 87 L.Ed. 626 (1943).

It makes little sense to interpret the statute requiring a petitioner to present its view to the agency to qualify as a “party” and then permit the petitioner to disavow those views and take a directly contrary position in the court of appeals. That would hardly serve the interest we perceived Congress intended—that petitioner present its position first to the agency. To be sure, we permit a party that is aggrieved to raise arguments it did not present to the agency but were presented by other parties, see, e.g., Cellnet Communication, Inc. v. FCC, 965 F.2d 1106, 1109 (D.C.Cir.1992) (“Consideration of the issue by the agency at the behest of another party is enough to preserve it.”). We have never permitted a petitioner, however, simply to take a position in this court opposite from that which it took below, particularly when its position has prevailed before the agency. Our interpretation of the Hobbs Act is consistent with the “general rule that a party may not appeal from a disposition in its favor.” Showtime Networks Inc. v. FCC, 932 F.2d 1, 4 (D.C.Cir.1991). See also Lindheimer v. Illinois Bell Tel. Co., 292 U.S. 151, 176, 54 S.Ct. 658, 668, 78 L.Ed. 1182 (1934). We have frequently applied this general rule to petitions for review of agency actions under the Hobbs Act. See Shell Oil Co. v. FERC, 47 F.3d 1186, 1201 (D.C.Cir.1995); Showtime Networks, 932 F.2d at 4; see also Southern Natural Gas Co. v. FERC, 877 F.2d 1066, 1071 (D.C.Cir.1989) (holding party that received its first choice but that sought review of agency failure to give party its second choice not to be party “aggrieved” under Natural Gas Act § 19(b), 15 U.S.C. § 717r(b) (1988)); National Ass’n of Cas. & Sur. Agents v. Board of Governors of Federal Reserve Sys., 856 F.2d 282, 284 n. 1 (D.C.Cir.1988) (where party “received what it requested—approval of its application—it is not a party aggrieved” under 12 U.S.C. § 1848 (1982)), cert. denied, 490 U.S. 1090, 109 S.Ct. 2430, 104 L.Ed.2d 987 (1989). Thus, we reject SP’s bold argument that it can qualify as a party aggrieved without regard to the position it took before the Commission.

Alternatively, SP argues that it did not gain satisfaction from the ICC; in important respects—at least important enough to qualify as a party aggrieved—it was rebuffed by the Commission. SP points out that its support of the deprescription program was conditioned on the Commission specifically providing for an ongoing review of the de-prescription program, yet the Commission did not include such a provision in the final rule. We agree in principle that if a party conditionally supports a proposed rule before the Commission and the condition is not satisfied that party would be aggrieved. Moreover, it is up to the party, not us, to determine how important a particular condition is to that party. Nevertheless, if the party cannot even explain to us the significance of the supposed condition, we think it can be disregarded. Surely it could not be contended that SP was aggrieved, for instance, if in its comments it had conditioned its support on the Commission promulgating the proposed rule on a holiday'—to emphasize its festive nature.

In this regard, SP asked that the Commission include in the rule a provision that the ICC “may at any time review whether (a) continuation of the application of prescribed rates to fixed rate cars or (b) prescription of rates for market rate cars may need to be revised, modified, or otherwise changed in the public interest, either upon its own motion or upon the petition of any interested party for good cause shown.” SP Comments at 6 (emphasis added). But in the very comment in which SP proposed this provision, SP conceded that the ICC already had the authority to review the deprescription program on the motion of others or on its own motion. Indeed, it is arguable that the doubly precatory admonition contained in SP’s proposed language (“the ICC ... may review whether [the program] may need to be revised”) would give SP less assurance of continued oversight than would existing law. See 5 U.S.C. § 553(e) (1994) (“Each agency shall give an interested person the right to petition for the issuance, amendment, or repeal of a rule.”); 5 U.S.C. § 555(e) (1994) (“Prompt notice shall be given of the denial in whole or in part of a written application, petition, or other request of an interested person made in connection with any agency proceeding_ [T]he notice shall be accompanied by a brief statement of the grounds for denial.”). And, SP’s claim at oral argument that the “Supplemental Review” provision would somehow allow for swifter changes to the deprescription program runs headlong into the Administrative Procedure Act, which requires notice and comment before rulemaking. 5 U.S.C. § 553(a)-(d) (1994).⁷

We are therefore satisfied that, with the ICC’s repeated assertions that it would keep a close eye on the depreseription program, and that it was ready and willing to respond to complaints about the operation of the program, SP received the assurances that it sought. See Reconsideration at 1096; Final Rules at 87. Indeed, if the ICC’s regulatory journey (described by SP — aptly—as peripatetic) demonstrates anything, it should demonstrate the ICC’s willingness to rethink and alter aspects of the program in response to the entreaties of affected industry participants. An expression of this willingness is what SP sought, see SP Comments at 6 (expressing concern lest the “impression be left of the Commission abrogation of participation in the car hire deprescription process”), and that is what it got.

We similarly do not believe that SP became a “party aggrieved” by virtue of its support for the IGC’s resolution of CNW’s motion for declaratory orders. In its filing, SP took no position on the merits of CNWs motion. SP simply indicated its belief that ICC action would provide desirable clarification and asked that the ICC take that action. The Commission denied one motion for a declaratory order and granted the other in part. The action was taken, and the clarification sought was provided.

Accordingly, SP is not a “party aggrieved.” We therefore deny its motion to substitute as petitioner and dismiss the petition.

1 . CNW moved to withdraw from this case after Union Pacific Corporation, which supports the ICC in this matter, acquired all outstanding shares of CNW stock and merged CNW into Union. Pacific. On May 1, 1995, we granted CNW’s motion to withdraw.

2 . Vice Chairman McDonald, joined by Commissioner Simmons, dissented from the final rules, calling their adoption "one of the most egregious examples of regulatory irresponsibility that I have seen to date.” Joint Petition for Rulemak-ing on Railroad Car Hire Compensation, 9 I.C.C.2d 80, 93 (1992) (Final Rules). Discussing the many changes in course between the second notice and the final rules, the dissent stated: “[The] inexplicable reversals can lead to but one conclusion — that the majority’s sole consideration in this decision is to preserve the petitioners' coalition.” Id. at 94.

3 . The members of the Association of American Railroads had adopted a Code of Car Hire Rules in order to ease the administrative burdens of abiding by the mandatory interchange requirement and the ICC’s prescription formula.

4 . Under 49 U.S.C. § 10706(a)(2)(A) (1995), railroads are required to seek ICC approval of agreements that relate to "rates (including charges between rail carriers and compensation paid or received for the use of facilities and equipment), classifications, divisions, or rules related to them or procedures for joint consideration, initiation, publication, or establishment of them.” The Commission may not approve any agreement that establishes "a procedure for determination of a matter through joint consideration unless the Commission finds that each party to the agreement has the absolute right under it to take independent action before or after a determination is made under that procedure.” 49 U.S.C. § 10706(d)(2)(C) (1995).

5 . SP proposed the following language be inserted in the Final Rule:

The Commission may at any time review whether (a) continuation of the application of prescribed rates to fixed rate cars or (b) prescription of rates for market rate cars may need to be revised, modified, or otherwise changed in the public interest, either upon its own motion or upon the petition of any interested party for good cause shown.

Id. at 6.

6 . SP suggested as well that the form of arbitration employed is arbitrary because the arbitrator must choose wholly one position or the other and may not examine other arbitral awards or other offers for similar types of cars. This device, whether or not suited to the statute, is designed to maximize the likelihood that issues will be resolved through negotiations — that arbitration will not be used. See National Emergency Disputes — The Considerations Behind a Legislative Proposal, 4 Ga.L.Rev. 673, 688-90 (1970).

7 . The dissent mentions SP’s participation in earlier rulemakings. Op. at 592. Of course, participation in separate rulemakings cannot make SP a party aggrieved in this proceeding. Simmons, 716 F.2d at 45.