Opinion ID: 390017
Heading Depth: 2
Heading Rank: 1

Heading: Jurisdiction under the Staggers Rail Act of 19807

Text: 16 BN raises a jurisdictional issue of first impression: whether the Staggers Rail Act of 1980, Pub.L.No. 96-448, 94 Stat. 1895 (1980) (the Staggers Rail Act or the Act) deprived the Commission of jurisdiction to compel a rate reduction in its decision of October 1, 1980. 8 17 Burlington Northern argues that the ICC lacked jurisdiction to enter its October 1, 1980 order, 9 relying on the following provision of Section 202 of the Staggers Rail Act: 18 (T)he Commission shall find that the rail carrier establishing the challenged rate does not have market dominance over the transportation to which the rate applies if such rail carrier proves that the rate charged results in a revenue-variable cost percentage for such transportation that is less than 19 (A) 160 percent during the period beginning on the effective date of the Staggers Rail Act of 1980 and ending September 30, 1981. 20 Pub.L.No. 96-448, 94 Stat. 1900 (1980), to be codified at 49 U.S.C. § 10709(d). 21 This provision relating to market dominance is best comprehended against the background of the Railroad Revitalization and Regulatory Reform Act of 1976, Pub.L.No. 94-210, 90 Stat. 31 (1976) (the 4-R Act). In the 4-R Act, Congress set forth market dominance as a novel test for the Commission's jurisdiction over a challenged rate. Section 202 of the 4-R Act, recodified as part of the Revised Interstate Commerce Act, Pub.L.No. 95-473, 92 Stat. 1382 (1978), 49 U.S.C. § 10709(b), provides that the Commission has no jurisdiction over a rate in circumstances where the rail carrier lacks market dominance. Regulation of rates in such competitive circumstances is left to market forces. 22 The Staggers Rail Act continues the deregulation of rail traffic begun by the 4-R Act, providing in Section 202 a presumption against market dominance where the rail carrier's revenues from the transportation at issue do not exceed variable costs by at least 160 percent. 23 Burlington Northern contends that the agreement rate ordered by the Commission in its October 1, 1980 decision will provide revenues that are 123 percent of variable costs plus additives. 10 This 123 percent figure is far below the 160 percent ratio needed to trigger the ICC's jurisdiction under the Staggers Rail Act. Accordingly, Burlington Northern argues, the Commission had no jurisdiction to issue its October 1 decision or to order the agreement rate of $5.62 as a reasonable maximum. 24 While Burlington Northern argues that Section 202 controls, the ICC contends that another section of the Staggers Rail Act, Section 208, governs the jurisdictional issue. Section 208 addresses negotiated ratemaking and authorizes rail carriers to enter into privately negotiated contracts for rail services. In subsection (j), which is directly relevant here, Congress addressed the status of contracts already in effect as of the effective date of the Staggers Rail Act, as follows: 25 The provisions of this section shall not affect the status of any lawful contract between a rail carrier and one or more purchasers of rail service that is in effect on the effective date of the Staggers Rail Act of 1980. Any such contract shall hereafter have the same force and effect as if it had been entered into in accordance with the provisions of this section. Nothing in this section shall affect the rights of the parties to challenge the existence of such a contract. 26 Pub.L.No. 96-448, 94 Stat. 1909-10 (1980) to be codified at 49 U.S.C. § 10713(j). 27 The Commission contends that this subsection preserves the contract rights of parties, such as Iowa Power, who negotiated rate agreements prior to enactment of the Staggers Rail Act. The Commission argues, in other words, that Section 208 takes precedence over Section 202. Allegedly, Section 208 creates a limited category of pre-Staggers Rail Act rate agreements over which the Commission has continuing jurisdiction regardless of the jurisdictional threshold set forth in Section 202. 28 We believe that the parties' respective reliance on Sections 202 and 208 is misplaced. Both BN and the ICC assume that the Staggers Rail Act applies here, although with disagreement as to which section of the Act determines the ICC's jurisdiction. We conclude to the contrary that the Staggers Rail Act is not applicable. 11 29 We base our conclusion on three grounds: (i) the Staggers Rail Act does not alter the provision of 49 U.S.C. § 10709(b) requiring a ninety day determination of market dominance; (ii) the legislative history of the Staggers Rail Act directs that case law should determine the effect of the Act on pending cases; and (iii) case law teaches that new legislation should not be applied to pending cases where manifest injustice would result. 30 (i) The Ninety Day Provision of 49 U.S.C. § 10709(b) 31 We begin our analysis from the premise that the new provisions of the Staggers Rail Act pertaining to market dominance must be integrated with existing statutory provisions, particularly those of the 4-R Act. We view as crucial the relationship between 49 U.S.C. § 10709(b ) and the new provisions of Section 202 of the Staggers Rail Act, 49 U.S.C. § 10709(d ). 32 The 4-R Act directed the Commission to render a determination on market dominance within 90 days after the start of a proceeding under section 10707. 49 U.S.C. § 10709(b). The new presumption against market dominance provided by the Staggers Rail Act in 49 U.S.C. § 10709(d) is presumably intended to operate within the established ninety day period. Cf. Burlington Northern, Inc. v. United States, 555 F.2d 637, 640 (8th Cir. 1977) (ninety day language of 49 U.S.C. § 10709(b) was determinative of the time at which new market dominance standards promulgated by the Commission would apply). In effect, therefore, the Act's 160 percent jurisdictional threshold will apply (1) in proceedings begun on or after effective date of the Act, in which the ninety day period for a market dominance determination has not begun to run, and (2) in those few proceedings begun before the effective date of the Act in which the ninety day period for a jurisdictional determination still pends. This is not such a case. 33 Here, a finding of market dominance was entered by the Commission's Suspension and Fourth Section Board in 1978 and was affirmed by the full Commission in its July 13, 1979 decision, well before the effective date of the Staggers Rail Act. I & S 9199, supra, 361 ICC at 671, 687. The Commission reaffirmed its finding of market dominance in its October 1, 1980 decision. I & S 9199, supra, 364 ICC at 201, App. A. To require a reassessment of market dominance at this late date would contravene the express statutory dictate that market dominance be determined within 90 days of the start of a proceeding. We find no indication that Congress, by setting a jurisdictional threshold in the Staggers Rail Act, intended to alter the ninety day rule. 34 (ii) Legislative History 35 The legislative history of the Staggers Rail Act further supports a prospective application of the legislation. The House Conference Report indicates that case law should control the effect of the Act on existing cases. House Conf.Rep.No.96-1430, 96th Cong., 2d Sess. at 142 (1980), reprinted in (1980) U.S.Code Cong. & Ad.News, 7378, 7510, 7574. 12 Although decision law is not free from ambiguity, we conclude that prospective application is suggested by case precedent. 36 (iii) Case Law 37 We acknowledge that case law looks both ways. In favor of retroactive application of the Staggers Rail Act is the principle that a court must apply the law in effect at the time of its decision. 13 Bradley v. School Board of Richmond, 416 U.S. 696, 94 S.Ct. 2006, 40 L.Ed.2d 476 (1974); Thorpe v. Housing Authority of Durham, 393 U.S. 268, 89 S.Ct. 518, 21 L.Ed.2d 474 (1969); Bruner v. United States, 343 U.S. 112, 72 S.Ct. 581, 96 L.Ed. 786 (1952); Insurance Co. v. Ritchie, 5 Wall. 541, 18 L.Ed. 540 (1866); United States v. Schooner Peggy, 1 Cranch 103, 2 L.Ed. 49 (1801). On the other hand, exception to this principle has been recognized where application of the intervening law would result in manifest injustice. Bradley v. School Board of Richmond, supra, 416 U.S. at 716, 94 S.Ct. at 2018; Thorpe v. Housing Authority of Durham, supra, at 282, 89 S.Ct. at 526; Greene v. United States, 376 U.S. 149, 160, 84 S.Ct. 615, 621, 11 L.Ed.2d 576 (1964); Arkoosh v. Dean Witter & Co., 571 F.2d 437 (8th Cir. 1978) (per curiam). We conclude that the manifest injustice exception as explicated by the Supreme Court in Bradley v. School Board of Richmond, supra, 416 U.S. 696, 94 S.Ct. 2006, 40 L.Ed.2d 476, pertains here. 38 The Bradley opinion identifies three factors which are pertinent to the exception: (a) the nature and identity of the parties, (b) the nature of their rights, and (c) the nature of the impact of the change in law upon those rights. 416 U.S. at 717, 94 S.Ct. at 2019. 39 In discussing the first factor, the Supreme Court has distinguished litigation involving great national concerns, and parties who are public entities, from private cases between individuals. Id. at 718-19, 94 S.Ct. at 2019-20, citing Schooner Peggy, supra, 1 Cranch at 110. Where only private entities are involved, as here, the courts are admonished to struggle hard against a construction which will, by a retrospective operation, affect the rights of parties. Id. at 717, 94 S.Ct. at 2019, citing Schooner Peggy, supra, 1 Cranch at 110. 40 Admittedly, Congress in the Staggers Rail Act addressed matters of national concern, namely the deterioration of the nation's rail system and the need to preserve a financially stable system in the private sector of the economy. House Conf.Rep. 96-1430, 96th Cong., 2d Sess. at 79-80 (1980), reprinted in (1980) U.S.Code Cong. & Ad.News at 7510-11. These national concerns encourage, to some extent, retroactive application of the legislation. 41 However, the national objective of revenue adequacy for the nation's railroads can be achieved in the present instance without impairment of the parties' rights through retroactive application of the new law. The agreed rate will fully compensate BN at the revenue need level. See Section D, infra. Under Bradley, the rights of the parties should not be disturbed by retroactive application of the Staggers Rail Act where the national concerns of the legislation will be met without such retroactivity. 42 The second factor cited in Bradley provides further argument against retroactive application of the Staggers Rail Act. Concerning the nature of the rights affected, the Bradley court noted that it would refuse to apply an intervening change in law to a pending action where to do so would infringe upon a right that had matured or become unconditional. Id. at 720, 94 S.Ct. at 2020, citing Greene v. United States, supra, 376 U.S. 149, 84 S.Ct. 615, 11 L.Ed.2d 576; Claridge Apartments Co. v. Commissioner, 323 U.S. 141, 65 S.Ct. 172, 89 L.Ed. 139 (1944); Union Pacific R.R. v. Laramie Stock Yards Co., 231 U.S. 190, 34 S.Ct. 101, 58 L.Ed. 179 (1913). 43 Here, Iowa Power's right to contest the Council Bluffs rate in ICC proceedings matured with the Commission's finding of market dominance. The utility's right to ship coal at the agreed rate matured under the Commission's October 1, 1980 decision, on the effective date of the Staggers Rail Act. 14 Cf. Ames v. Merrill Lynch, Pierce, Fenner & Smith, Inc., 567 F.2d 1174, 1180 n.6 (2d Cir. 1977) (injustice resulting from retroactive application of new law depends upon the stage to which litigation has progressed). 44 Finally, the Bradley court indicated that manifest injustice would be measured by the nature of the impact of the new law on existing rights. Stated another way, the Court thought that manifest injustice would stem from the imposition of new and unanticipated obligations on a party without notice or an opportunity to be heard. Id. at 720, 94 S.Ct. at 2020. Here, insofar as application of the Staggers Rail Act might operate 15 to deprive the Commission of jurisdiction, Iowa Power could be forced to begin litigating its contract anew before the courts. 16 Such an exercise would vastly increase the burden on Iowa Power in the context of a case that began more than two and one-half years ago and that has already seen one judicial remand to the Commission. Litigation before the ICC, which had progressed to a final decision on the effective date of the Staggers Rail Act, would be rendered futile. 45 Given these considerations, this is clearly an instance in which the manifest injustice exception precludes application of the Act. Ames v. Merrill Lynch, Pierce, Fenner & Smith, Inc., supra, 567 F.2d 1174; Monell v. Department of Social Services, 532 F.2d 259 (2d Cir. 1976), rev'd on other grounds, 436 U.S. 658, 98 S.Ct. 2018, 56 L.Ed.2d 611 (1978); Coe v. Secretary of Health, Education & Welfare, 502 F.2d 1337 (4th Cir. 1974); cf. Flanigan v. Burlington Northern, Inc., 632 F.2d 880 (8th Cir. 1980), cert. denied, -- U.S. --, 101 S.Ct. 1370, 67 L.Ed.2d 349 (1981). 46