Opinion ID: 390017
Heading Depth: 2
Heading Rank: 5

Heading: Violation of the Administrative Procedure Act

Text: 69 Burlington Northern's final contention is that the Commission violated the Administrative Procedure Act (APA), 5 U.S.C. §§ 553, 706(2)(A), in promulgating and enforcing its 1980 policy statement, Ex Parte No. 358-F, Change in Policy Railroad Contract Rates (decided February 21, 1980). In this statement, the ICC indicated that it would consider enforcement of contracts executed before 1978 on a case-by-case basis. See n.18, supra. 70 Burlington Northern argues that the 1980 policy statement was a rulemaking requiring notice and comment procedures pursuant to 5 U.S.C. § 553(b), rather than a policy statement exempt from such procedures under 5 U.S.C. § 553(b) (A). The railroad also contends that the ICC acted arbitrarily and capriciously in applying the 1980 policy to prior conduct, in violation of 5 U.S.C. § 706(2) (A). 71 A policy statement is not defined in the APA but has been characterized through case-by-case development. 26 Such a statement does not establish a binding norm, but instead announces the agency's tentative intentions for the future. Brown Express, Inc. v. United States, 607 F.2d 695, 701 (5th Cir. 1979); Pacific Gas & Electric Co. v. FPC, 506 F.2d 33, 38-39 (D.C.Cir. 1974), and is marked by the absence of substantial impact on existing rights and obligations. Lewis-Mota v. Secretary of Labor, 469 F.2d 478, 482 (2d Cir. 1972). The Attorney General's Manual further defines statements of policy as those issued to advise the public prospectively of the manner in which the agency proposed to exercise a discretionary power. Attorney General's Manual on the Administrative Procedure Act 30 n.43 (1947). The courts have similarly required that a policy statement leave the administrator free to exercise his informed discretion. Guardian Federal Savings & Loan Association v. Federal Savings & Loan Insurance Corp., 589 F.2d 658, 666 (D.C.Cir.1978). See also 3 B. Mezines, J. Stein & J. Gruff, Administrative Law § 15.05(4) at 15-81 (1981). 72 We conclude that the ICC's 1980 policy statement satisfies these requirements. The statement advised the public prospectively how the Commission would view pre-1978 contracts in assessing the reasonableness of a rate. The statement in no way established a binding norm for future rate cases, but instead left the Commission free to exercise considerable discretion in considering whether, and to what extent, to enforce contracts executed prior to 1978. Ex Parte No. 358-F, supra, Change of Policy Railroad Contract Rates (decided February 21, 1980), 45 Fed.Reg. at 21720. 73 We also conclude that the ICC did not act arbitrarily or capriciously in applying its new policy on contract rates to past conduct. Retroactive application of policy is disfavored when the ill effects of such application will outweigh the need of immediate application, NLRB v. Majestic Weaving Co., 355 F.2d 854, 861 (2d Cir. 1966), or when the hardship on affected parties will outweigh the public ends to be accomplished. SEC v. Chenery Corp., 332 U.S. 194, 203, 67 S.Ct. 1575, 1580, 91 L.Ed. 1995 (1947). 74 In this case, the Commission closely scrutinized the potential harm to BN that might result from enforcement of the agreed rate, finding not only that the rate would exceed BN's fully allocated costs of service, but also that public interest considerations strongly warrant holding these parties to their agreement. Applying the February, 1980 policy in this case will give BN the benefit of an agreement into which it freely entered. This is a burden only in comparison with the higher rate it seeks to obtain. Accordingly, it was reasonable for the Commission to conclude that the benefits from application of the February, 1980 policy clearly outweighed any adverse effects. 27 75