GENERAL AMERICAN TRANSPORTATION CORPORATION, ET AL., PETITIONERS V.
INTERSTATE COMMERCE COMMISSION AND UNITED STATES OF AMERICA

   No. 89-688

   In The Supreme Court Of The United States

   October Term, 1989

   On Petition For A Writ Of Certiorari To The United States Court Of
Appeals For The District Of Columbia Circuit

   Brief For The Federal Respondents In Opposition

            TABLE OF CONTENTS
   Questions Presented
   Opinion below
   Jurisdiction
   Statement
   Argument
   Conclusion

                            OPINIONS BELOW

   The opinion of the court of appeals (Pet. App. 1a-28a) is reported
at 872 F.2d 1048.  The opinion of the court of appeals denying
rehearing (Pet. App. 30a-34a) is reported at 883 F.2d 1029.  The
decision of the Interstate Commerce Commission dismissing petitioners'
complaint (Pet. App. 37a-68a) is reported at 3 I.C.C.2d 599.  The
other decisions of the Interstate Commerce Commission (Pet. App.
69a-100a) are not reported.

                             JURISDICTION

   The judgment of the court of appeals (Pet. App. 28a-29a) was
entered on April 14, 1989, and a petition for rehearing was denied on
June 30, 1989 (Pet. App. 35a-36a).  On September 13, 1989, the Chief
Justice extended the time within which to petition for certiorari to
and including October 28, 1989.  The petition for certiorari was filed
on October 27, 1989.  The jurisdiction of this Court is invoked under
28 U.S.C. 1254(1).

                          QUESTIONS PRESENTED

   1. Whether the Interstate Commerce Commission's change of policy
regarding the propriety of railroad charges for hauling empty,
privately owned cars to and from repair facilities was permissible.

   2. Whether the Interstate Commerce Commission's decision to apply
its change of policy in the proceeding in which it announced the
change was permissible.

                               STATEMENT

   1. As common carriers, railroads are obligated to furnish
sufficient numbers of suitable cars to satisfy their customers'
reasonable transportation requirements.  Pet. App. 4a, 38a.  The
Interstate Commerce Commission (the Commission) is responsible for
regulating and enforcing railroads' car service obligations.  49
U.S.C. 11121.  Railroads may satisfy their obligations to furnish cars
in several ways.  They may own their own cars, they may borrow cars
from another railroad, or they may lease privately owned cars, which
are often furnished by shippers.  If railroads lease privately owned
cars, they frequently must haul the empty cars to and from repair
facilities.  The issue in this litigation is whether the railroads may
charge private car owners for hauling the empty cars to and from
repair facilities.  Pet. App. 4a-5, 38a-339a.

   2. In 1976 and 1980, Congress enacted significant changes in
national rail transportation policy.  In 1976, Congress passed the
Railroad Revitalization and Reform Act (the 4R Act), Pub. L. No.
94-210, 90 Stat. 31, and, in 1980, Congress passed the Staggers Rail
Act, Pub. L. No. 96-448, 94 Stat. 1895.  Both statutes were intended
to increase the role of competition and market forces in railroad
operations.  The 4R Act, for instance, was intended, in part, "to
eliminate needless or harmful regulatory constraints and to allow
railroads to compete with other modes of transportation." S. Rep. No.
499, 94th Cong., 1st Sess. 1 (1975).  The Staggers Act, for its part,
explicitly states that "(i)n regulating the railroad industry, it is
the policy of the United States Government * * * to allow, to the
maximum extent possible, competition and the demand for services to
establish reasonable rates for transportation by rail, * * * to
promote a safe and efficient rail transportation system by allowing
rail carriers to earn adequate revenues, as determined by the
Interstate Commerce Commission * * * (and) to encourage honest and
efficient management of railroads and, in particular, the elimination
of noncompensatory rates for rail transportation." 49 U.S.C. 10101a.

   3. In 1983, two railroads -- respondents Indiana Harbor Belt
Railway Company and the Baltimore and Ohio Chicago Terminal Railroad
Company -- filed tariffs for hauling empty, privately owned cars to
and from repair facilities.  Petitioners, which are private car
owners, filed complaints challenging the action.  Under then-existing
Commission policy, a railroad could not levy a direct charge for
transporting privately owned cars to and from repair facilities if it
derived more than de minimis revenues from the loaded movements of the
cars.  That policy had been announced in Union Tank Car Co., Terminal
Service, 268 I.C.C. 338 (1947), and was most recently reaffirmed in
General American Transportation Corp. v. Indiana Harbor Belt R.R., 357
I.C.C. 102 (1977) (Indiana Harbor I), aff'd, 577 F.2d 394 (7th Cir.
1978), a proceeding involving many of the same parties as the current
litigation.  Pet. App. 38a-42a.  Under Indiana Harbor I, the cost of
empty car repair moves was generally viewed as a collective
responsibility of the railroad industry, subject to an "equalization"
formula employed in an effort to distribute the costs equitably with
respect to tank cars.  Pet. App. 40a & n.5;  357 I.C.C. at 127.

   Petitioners' complaints were referred to an Administrative Law
Judge, who concluded that the Indiana Harbor I policy should no longer
be applied because of subsequent legislative changes.  Pet. App.
79a-91a.  The Commission Review Board reversed the ALJ's decision.
Id. at 92a-100a.

   The full Commission then considered the matter.  In October 1984,
the Commission published a notice informing the public that the
Commission might modify or reverse Indiana Harbor I in light of
statutory changes and requesting comment on whether such a decision
would be appropriate.  49 Fed. Reg. 39,740 (1984).  In March 1985, the
Commission published an additional notice, describing comments that
had been filed, posing certain questions, and soliciting additional
comments.  50 Fed. Reg. 10,867 (1985).

   On February 17, 1987, the Commission issued its decision in Indiana
Harbor II.  Pet. App. 37a-68a.  The Commission concluded that "the
existing policy prohibiting tariff charges misallocates economic
burdens among carriers and conflicts with the Congressional mandate
for demand-based rail pricing, rate flexibility, and revenue
adequacy." Id. at 38a.  Accordingly, the Commission overruled Indiana
Harbor I.  The Commission first found that Indiana Harbor I "does not
produce an efficient or equitable system for compensating rail
carriers for repair moves" (Pet. App. 44a-45a) and that it results in
"misallocation and cross-subsidization" (id. at 48a).  The Commission
then determined that the prohibition of charges for empty car repair
moves was not compelled by statute.  Id. at 48a-55a.  To the contrary,
the Commission reasoned that reconsideration of Indiana Harbor I "in
light of the significant changes in the Commission's regulation of
railroads resulting from the 4R Act and Staggers Act" was "necessary."
Pet. App. 55a.  /1/ The Commission concluded that the Indiana Harbor I
"method of compensation for cars moving empty in repair moves is
directly contrary to current statutory provisions that require the
Commission to encourage efficient pricing and provide all carriers
with a realistic opportunity to earn adequate revenues." Pet. App.
55a-56a.  Finally, the Commission determined that it was appropriate
to apply the decision to the tariffs at issue.  Id. at 65a-66a.

   On February 22, 1988, the Commission denied petitions to reopen
(Pet. App. 69a-78a);  it reiterated that the overruled ban on tariffs
for empty repair moves was "outmoded, impractical, and irrational."
Id. at 71a.

   4. The court of appeals denied petitioners' petitions for review.
Pet. App. 21a-27a.  The court first rejected petitioners' contention
that Congress specifically intended to bar carriers from charging for
the empty movement of privately owned rail cars.  Pet. App. 7a-10a.
Although the Seventh Circuit had twice affirmed the Indiana Harbor I
policy, the court concluded that the Seventh Circuit's opinions did
not rest "on a construction of the Interstate Commerce Act, much less
a finding of specific congressional intent" and that the Seventh
Circuit had "simply held that the Indiana Harbor I policy was not
arbitrary and capricious." Pet. App. 9a.  The court also rejected the
claim that congressional actions in recodifying the Interstate
Commerce Act and in enacting the Staggers Act were evidence of
congressional ratification of the changed rule.  Id. at 9a-10a.  The
court then found that the Commission's decision was reasonable, that
the evidence in the record supported the Commission's conclusions,
that the policies underlying the 4R Act and the Staggers Act also
supported the Commission's decision, and that the Commission had
addressed all pertinent considerations.  Id. at 10a-24a.  Finally, the
court concluded that the request for comments did not convert the
adjudication into a rulemaking, and that application of the new policy
to the tariffs under review was appropriate.  Id. at 25a-27a.

   Accompanying the denial of a petition for rehearing, Judge
Silberman, joined by the other two members of the panel which had
decided the case, issued a supplemental opinion addressing the
principal contention in the rehearing petition that the proceeding was
a rulemaking and thus could not be applied to the tariffs under
review.  Pet. App. 30a-34a.  The opinion reiterated that a change in
policy was permissible in an adjudication and that "(w)hat this case
really reduces to is the fairness of retroactive application of the
new principle developed in Indiana Harbor II to the adjudicatory
parties, a question * * * adequately addressed in the original panel
opinion." Id. at 34a.

                               ARGUMENT

   Petitioners contend that the Commission's change in policy was
impermissible and that, if it was permissible, it should not have been
applied to the tariffs in the proceeding in which it was announced.
Neither contention is well founded;  the Commission's determinations,
both about the change in policy and its application to the parties,
were sound and do not warrant further review.

   1. Petitioners first contend (Pet. 11-16) that Congress ratified
the Commission's prior policy, and that a reversal of the policy
"could be justified only by persuasive evidence that Congress had
changed its mind." Pet. 12.  As evidence of congressional
ratification, however, petitioners point only to the fact that
"Congress extensively amended the Interstate Commerce Act in 1980 with
passage of the Staggers Act" and "Congress did not make any pertinent
changes to the provisions" on which the Commission had relied in
Indiana Harbor I and on which the Seventh Circuit had relied in
upholding the Commission's policy.  Pet. 11-12.  But as this Court has
consistently warned, such reliance on congressional silence must be
hedged with considerable caution.  /2/ An inquiry into congressional
purpose and intent is necessarily contextual, and congressional
silence is but one factor to be considered in such an inquiry.  /3/

   Petitioners' extensive reliance on congressional silence is
especially unsound in this context.  As the court of appeals
explained, such reliance "is particularly weak in this case given the
abundant evidence * * * that Congress, in passing the Staggers Act,
wanted to put an end to ratemaking practices involving railroad
cross-subsidization and other inefficiencies." Pet. App. 10a n.10.
Congressional passage of the Staggers Act without either explicitly
disapproving Indiana Harbor I or authorizing a change in Indiana
Harbor I thus cannot be construed as reflecting a congressional intent
to bar the Commission from reexamining its policy regarding railroad
charges for empty car repair moves.  /4/

   2. Petitioners also contend (Pet. 16-18) that the court of appeals'
decision conflicts with three decisions of the Seventh Circuit -- the
decision affirming Indiana Harbor I (Indiana Harbor Belt R.R. v.
General American Transportation Corp., 577 F.2d 394 (1978)) and two
subsequent decisions applying Indiana Harbor I (Atchison, T.&S.F. Ry.
v. Union Tank Car Co., 611 F.2d 1184 (1979);  Evans Products Co. v.
ICC, 729 F.2d 1107 (1984)).  As the court below concluded, however,
there is no conflict.

   The court of appeals correctly noted that the Seventh Circuit
decisions did not rest "on a construction of the Interstate Commerce
Act," but rather on a determination that "the Indiana Harbor I policy
was not arbitrary and capricious." Pet. App. 9a.  Petitioners'
argument to the contrary rests on the claim that the Seventh Circuit's
opinions must be read as definitive statutory constructions, rather
than as approvals of a permissible exercise of agency discretion.
Pet. 16.  In announcing its standard of review to guide consideration
of Indiana Harbor I, however, the Seventh Circuit left no doubt that
its decision rested on a finding of permissible administrative action:

         The responsibility of the court in reviewing a decision and
      order of the Commission properly before it consists in deciding
      1. whether the Commission has acted within the power delegated
      to it by law;  2. whether the Commission's decision is supported
      by facts or substantial evidence;  3. whether the order is based
      on specific findings of fact from the record;  4. whether the
      Commission's conclusions have a rational basis.

   577 F.2d at 397.  Although, as petitioners point out, the Seventh
Circuit referred to statutory provisions in its analysis (577 F.2d at
400), it is clear that those references are in the overall context of
an inquiry into the reasonableness of the Commission's decision.  See,
e.g., 577 F.2d at 396-397 (defining issue before the court as "Is the
Commission's determination (in Indiana Harbor I) * * * rational and
within the Interstate Commerce Commission's statutory powers?");  id.
at 404 ("Therefore, in light of the standard of review enunciated in
Universal Camera Corp. (v. NLRB, 340 U.S. 474, 488 (1951)), this Court
now affirms the ruling of the Interstate Commerce Commission in all
respects.").  The Seventh Circuit's subsequent two decisions,
moreover, are merely applications of Indiana Harbor I.  /5/ As the
court of appeals concluded, then, its affirmance of Indiana Harbor II
as a reasoned exercise of agency discretion poses no conflict with the
Seventh Circuit's similar affirmance of Indiana Harbor I (and
subsequent cases) as a reasoned exercise of agency discretion.

   3. Petitioners further contend (Pet. 18-20) that the Commission's
decision is arbitrary and capricious.  According to petitioners, the
Commission's decision "addresses purported concerns about
cross-subsidization and misallocation of empty repair move costs among
railroads by shifting those costs away from the railroads altogether
and onto private car providers" (Pet. 19).  Petitioners maintain that,
under the common carrier doctrine reflected in 49 U.S.C. 11121(a)(1),
railroads must bear the cost of maintaining and owning the cars.  And
petitioners object that, under the Commission's decision, private car
owners will not be able to recover their full costs.

   The court of appeals correctly rejected these objections.  As the
court pointed out, petitioners' contention that no empty car repair
move costs should be borne by noncarriers would require the Commission
to treat empty car repair move costs differently from other ownership
costs.  Pet. App. 18a.  Moreover, private car providers are not
entitled to a guarantee of full recovery of ownership costs.  See LO
Shippers Action Comm. v. Aberdeen & Rockfish R.R., 4 I.C.C.2d 1, aff'd
sub nom. LO Shippers Action Comm. v. ICC, 857 F.2d 802 (D.C. Cir.
1988), cert. denied, 109 S. Ct. 2429 (1989).  As the court of appeals
explained, "(p)rivate car providers have no statutory right to
insulate themselves from market forces generally in fixing allowances
to be paid by carriers for the use of railcars" (Pet. App. 18a);  as a
result, "providers have no right to sequester the empty-repair-move
component of ownership costs from market forces." Ibid.  The
Commission's decision that empty repair moves should be treated like
other ownership costs thus was entirely reasonable.

   4. Finally, petitioners contend (Pet. 21-25) that, even if the
change in policy was permissible, the Commission should not have
applied it to the parties in the proceeding in which it was announced.
 Petitioners apparently do not dispute that an agency is "not
precluded from announcing new principles in an adjudicative proceeding
and that the choice between rulemaking and adjudication lies in the
first instance in the (agency's) discretion." NLRB v. Bell Aerospace
Co., 416 U.S. 267, 294 (1974).  See also SEC v. Chenery Corp., 332
U.S. 194, 203 (1947) ("the choice made between proceeding by general
rule or by individual, ad hoc litigation is one that lies primarily in
the informed discretion of the administrative agency").  Rather,
petitioners' contention is that the proceeding was converted into a
rulemaking when the agency solicited outside comments on its proposed
change in policy, and that, as Bowen v. Georgetown University
Hospital, 109 S. Ct. 468 (1988) makes clear, a rulemaking ordinarily
may not be applied retroactively.

   As the court of appeals pointed out, however, an adjudication is
not transformed into a rulemaking simply because an agency solicits
general comments.  Pet. App. 25a.  Just as an agency "has discretion
to decide that the adjudicative procedures in (a) case may * * *
produce the relevant information necessary to mature and fair
consideration of the issues" (Bell Aerospace, 416 U.S. at 295), so too
an agency may decide that allowing affected parties to comment may aid
that "mature and fair consideration of the issues," and its decision
to do so does not convert an adjudication into a rulemaking.
Petitioners' claim that the adjudication became a rulemaking through
the solicitation and receipt of comments is thus unavailing.

   Petitioners also maintain that the court of appeals' decision
conflicts with Justice Scalia's concurrence in Georgetown University
Hospital.  Pet. 23-24.  Once petitioners' erroneous premise that the
solicitation of comments converted the adjudication into a rulemaking
is rejected, however, it is clear that the court of appeals' decision
-- and the Commission decision which it affirms -- actually reflect
the distinction between rulemaking and adjudication emphasized in the
concurrence.  The concurrence noted that, under the Administrative
Procedure Act, "rules have legal consequences only for the future" and
that adjudications have "future as well as past legal consequences."
109 S. Ct. at 476.  Consistent with this distinction, the Commission
applied the principle it announced to the parties in this
adjudication.  See Georgetown University Hospital, 109 S. Ct. at 478
(concurring opinion) (in an adjudication, "retroactivity is not only
permissible but standard").  As the court of appeals concluded,
moreover, application of the newly announced principle in this
proceeding was fair and equitable.  Pet. App. 26a-27a.  /6/

                              CONCLUSION

   The petition for a writ of certiorari should be denied.

   Respectfully submitted

   WILLIAM C. BRYSON

      Acting Solicitor General /7/

   ROBERT S. BURK

      General Counsel

   HENRI F. RUSH

      Deputy General Counsel

   DENNIS J. STARKS

      Attorney Interstate Commerce Commission

   JANUARY 1990

   /1/ The Commission noted that, although the 4R Act had been passed
shortly before Indiana Harbor I, the decision in Indiana Harbor I
failed to give it adequate consideration and the Staggers Act had been
passed since Indiana Harbor I.  Pet. App. 41a-42a.

   /2/ See, e.g., Alaska Airlines, Inc. v. Brock, 480 U.S. 678, 686
(1987) ("Congress' silence is just that -- silence");  Zuber v. Allen,
396 U.S. 168, 185-186 n.21 (1969) ("Congressional inaction frequently
betokens unawareness, preoccupation, or paralysis.  * * * Where, as in
the case before us, there is no indication that a subsequent Congress
has addressed itself to the particular problem, we are unpersuaded
that silence is tantamount to acquiescence.");  Commissioner v.
Glenshaw Glass Co., 348 U.S. 426, 431 (1955) ("Re-enactment * * * is
an unreliable indicium at best.");  Girouard v. United States, 328
U.S. 61, 69 (1946) ("It is at best treacherous to find in
congressional silence alone the adoption of a controlling rule of
law.");  Helvering v. Reynolds, 313 U.S. 428, 432 (1941)
(congressional reenactment "is no more than an aid in statutory
construction.  While it is useful at times in resolving statutory
ambiguities, it does not mean that the prior construction has become
so embedded in the law that only Congress can effect a change.").

   /3/ Rather than "disarray" (Pet. 14), the decisions cited by
petitioners (Pet. 14-15) reflect this necessarily contextual inquiry
into congressional purpose and intent.

   /4/ As the Commission noted (Pet. App. 64a), this Court has long
stressed the importance of the Commission's ability to revise its
policies in light of changed conditions.  See American Trucking Ass'ns
v. Atchison, T.&S.F.R.R., 387 U.S. 397, 416 (1967) ("(T)he Commission,
faced with new developments or in light of reconsideration of the
relevant facts and its mandate, may alter its past interpretation and
overturn past administrative rulings and practice.  * * * (T)his kind
of flexibility and adaptablity to changing needs and patterns of
transportation is an essential part of the office of a regulatory
agency.  Regulatory agencies do not establish rules of conduct to last
forever;  they are supposed, within the limits of the law and of fair
and prudent administration, to adapt their rules and practices to the
Nation's needs in a volatile, changing economy.").

   /5/ Indeed, the two subsequent decisions affirm Commission
decisions permitting charges for transportation of empty cars to and
from repair facilities because, in the Commission's view, particular
characteristics of the charges took them outside the scope of the
Indiana Harbor I prohibition of such charges.  See Pet. App. 41a
(Commission explanation that several cases after Indiana Harbor I
permitted charges for empty car repair moves).  Like the Seventh
Circuit's decision affirming Indiana Harbor I, moreover, the two
subsequent decisions rest on a conclusion that the Commission's action
was a permissible administrative decision.  See Evans, 729 F.2d at
1111;  Atchison, T.&S.F. Ry., 611 F.2d at 1189-1190.

   /6/ Petitioners suggest (Pet. 24) that the court of appeals'
opinion accompanying the denial of the petition for rehearing
recognized a conflict between its opinion and the Georgetown
University Hospital concurrence.  Like the concurrence (109 S. Ct. at
478, 480), however, the court of appeals recognized that adjudications
must ordinarily be applied retroactively and that new principles may
be announced in adjudications and applied retroactively.  Pet. App.
26a.  As petitioners note (Pet. 21), the rehearing opinion states that
"(w)hile arguments no doubt can be advanced in support of limiting
agencies' policymaking use of the adjudicatory form to circumstances
where 'legal consequences hinge upon the interpretation of statutory
requirements, and where no pre-existing interpretive rule construing
those requirements is in effect,' Georgetown Univ. Hosp., 109 S. Ct.
at 480 (Scalia, J., concurring) * * * the law of this circuit is
emphatically to the contrary." Pet. App. 34a.  This statement in the
rehearing opinion does not, however, suggest any conflict on the
general applicable principles.  In any event, the Commission's change
here did not involve a change in a "pre-existing interpretive rule";
the Indiana Harbor I policy itself was developed through adjudication.
 Petitioners' related suggestion that the court of appeals' decision
conflicts with decisions of the Ninth Circuit and the Fifth Circuit
(Pet. 24-25) regarding the use of adjudications to change policy is
also insubstantial.  The Ninth Circuit clearly recognizes that
"(a)dministrative agencies are free to announce new principles during
adjudication" (Cities of Anaheim v. FERC, 723 F.2d 656, 659 (1984)),
provided the adjudication does not impose undue hardship and neither
amends a recently adopted rule nor supplants a pending rule-making
proceeding;  neither condition is present here.  Similarly, the Fifth
Circuit decision relied on by petitioners simply applied the settled
Chenery principle that the choice between rulemaking and adjudication
is primarily the agency's, and upheld the agency's decision to proceed
by rulemaking.  Nueces County Navigation District No. 1 v. ICC, 674
F.2d 1055, 1065-1066, cert. denied, 459 U.S. 1035 (1982).

   /7/ The Solicitor General is disqualified in this case.