Opinion ID: 292748
Heading Depth: 1
Heading Rank: 3

Heading: construction of the icc order

Text: 20 At the outset we must consider the construction and effect of the ICC order. The carriers contend that the ICC order neither rendered the tariff unlawful nor compelled a reduction in rates. If this contention is sound, then there is no need to consider the question of restitution, for there would be nothing to order restitution for. Unfortunately, because of the procedural posture of this case, we do not have the benefit in this Court of the presence of the Commission itself, since its immediate interest in the case was terminated with the denial of the interlocutory injunction. Therefore, in order to reach a decision on the issue, we must rely on the meager case law available and an analysis of the pertinent parts of the record. Neither party has referred us to any pertinent cases, though our own search has revealed a few indirectly relevant. 21 As a preliminary matter, it is necessary to make clear that in this part of the opinion we are dealing only with the construction and effect of the ICC order as it would operate as a valid administrative order. The lawfulness of the order is no longer at issue, and it must therefore be presumed valid. Interstate Commerce Commission v. Jersey City, 322 U.S. 503, 512, 64 S.Ct. 1129, 88 L.Ed. 1420 (1944). Nor is it material for purposes of this discussion that the carriers were allowed to collect the tariffs which were ordered canceled during the period of the temporary restraining order. The right to make that collection is not denied. Whether they have the right to keep the charges so collected is an entirely different matter, to be discussed below with reference to the availability of restitution. We must here determine whether, if the order went into effect, either because of carrier compliance or judicial enforcement, the result would be a reduction in the tariffs. 22 The proceedings involving this tariff arose under 216(g) of the Interstate Commerce Act, 49 U.S.C. 316(g), which provides in pertinent part as follows: 23 'Whenever there shall be filed with the Commission any schedule stating a new individual or joint rate, fare, charge, or classification for the transportation of passengers or property by a common carrier or carriers by motor vehicle,    the Commission is authorized and empowered upon complaint of any interested party    to enter upon a hearing concerning the lawfulness of such rate, fare, or charge . . ..    At any hearing involving a change in a rate, fare, charge, or classification,    the burden of proof shall be upon the carrier to show that the proposed changed rate, fare, charge, classification, rule, regulation, or practice is just and reasonable.' 24 When the carriers in this case filed their increased rates, the shippers filed a complaint protesting the increases and the ICC commenced a hearing under the above section. The proceeding terminated approximately 18 months later when the ICC issued its final order requiring the tariffs to be canceled. The grounds for this order were that the carriers had not sustained their burden of proof and had thus not shown that the schedules were just and reasonable. 25 At this point, explanation of the differences possible among various ICC orders in rate proceedings of this sort provide some illumination of the problem we face. There are numerous reasons why a tariff may be unlawful under the Interstate Commerce Act. A rate may be unlawful because it is unreasonable-- e.g., it is too high to be just or too to be compensatory. A rate, even though reasonable, may be unlawful because it is discriminatory-- e.g., shippers similarly situated are charged different rates, each of which by itself might be reasonable. A rate, even though reasonable and nondiscriminatory among shippers, may be unlawful because it is prejudicial to other interests the Act protects-- e.g., it threatens the solvency of competing forms of transportation. A rate, even though reasonable, nondiscriminatory, and nonprejudicial, may nevertheless be unlawful because it is not filed in accordance with the terms of 317(a). Further variations on this theme might be orchestrated but are not necessary for our immediate purpose. The variation with which we are concerned is whether a rate that is not shown to be just and reasonable is unlawful. We believe it is. 26 The premise of this conclusion is the requirement of 316(g) that the burden of proof is upon the carrier to justify any change in rates. The concept of burden of proof is a highly varying one depending on the circumstances of the issues involved; often it is merely a procedural rule which determines which party has the duty of producing evidence on a particular question. But often the concept is a far more significant one involving basically problems of substantive law. See 2 Davis, Administrative Law Treatise 14.14 (1958). We think the instant statutory requirement is clearly substantive in nature, for the following reasons. 27 The Commission may order a tariff canceled solely on the grounds that the carriers have failed to meet their burden of proof, provided of course that the requisite findings are made to support the order. Chicago & E.I.R. Co. v. United States, 107 F.Supp. 118 (S.D.Ind.1952), aff'd 344 U.S. 917, 73 S.Ct. 346, 97 L.Ed. 707 (1953). This is true even where the carriers have offered a considerable volume of evidence in support of the tariff. (This appears to have been conceded by the carriers in the proceedings below and is not contested here; their challenge to the validity of the Commission's order was not that they had met their burden of proof under the appropriate standards, but that the Commission had changed these standards without affording them sufficient notice.) Thus the burden of proof requirement under this statute is not merely a procedural one requiring the carriers to produce some evidence justifying their changed tariffs. The proof they offer must be sufficient to positively justify the tariffs. 28 The carriers contend that even though they have failed to meet their burden of proof, the tariff in issue is nevertheless lawful. That conclusion would not follow, even if they had met the burden of proof for purposes of 316(g). For it is well established that when the Commission holds a hearing on the lawfulness of a tariff and refuses to cancel it, even with a specific finding that it is not shown to be unlawful, it is not thereby converted into a lawful tariff. '   They stand only as carrier-made rates which    leaves them open to possible recovery of reparations.' Interstate Commerce Commission v. Inland Waterways Corp., 319 U.S. 671, 687, 63 S.Ct. 1296, 1305, 87 L.Ed. 1655 (1943). If the fact that the carrier sustains its burden of proof sufficiently to convince the Commission to allow the tariffs to stand as carrier-made rates does not thereby convert them to lawful rates, it is self-evident that where the proof fails even to justify them as carrier-made rates and the Commission orders them canceled, they cannot be lawful. 29 To sustain the carriers' contention on this issue would mean that the Commission could order lawful rates canceled. That of course is contrary to the whole scheme of the rate-making process under the Interstate Commerce Act. The rationale of that process is that the carrier has the right to fix its own rates at any level it sees fit, so long as it complies with the terms of the Act and is, upon challenge, able to show that its rates are just and reasonable. The Commission, proceeding under 316(g), investigates the 'lawfulness' of the rates. Hence, if the Commission orders a tariff canceled, it must be because it was unlawful. If a tariff may be canceled because the carrier failed to sustain its burden of proof, then that failure must render the tariff unlawful. 30 It must be emphasized that we are here dealing with the lawfulness of the tariff following the effective date of the Commission's cancellation order. If the cancellation order, based on the finding that the tariffs were not shown to be just and reasonable, did not mean that the tariffs for the future would be unlawful, then the entire proceedings would be meaningless. The Commission did not let the tariffs stand as 'carrier-made rates.' Nor did it, as it has in some cases, order the tariffs canceled without prejudice to their amendment. See Accelerated Transport-Pony Express, Inc. v. United States, 227 F.Supp. 815 (D.Vt.), aff'd, 379 U.S. 4, 85 S.Ct. 43, 13 L.Ed.2d 21 (1964). Nor did it leave open to the carriers the option of producing additional evidence to justify these tariffs. Positive cancellation was required. 31 Cases dealing with orders of the Commission in this form have not addressed themselves specifically to this question of whether the tariffs ordered canceled were thereby rendered unlawful. Nevertheless, they seem to have proceeded upon this assumption, consistently with the above discussion. Language from the following two cases is indicative of this approach: 32 'Upon submission and study the Commission reported that the new classification was unlawful, saying: 'We conclude that the respondents (carriers) have failed to sustain their statutory burden of proof. 33 'We find that the proposed changed rating has not been shown to be just and reasonable. 34 Overnite Transportation Co. v. United States, 266 F.Supp. 88, 90 (E.D.Va.1967) (emphasis added). 35 'But where, as here, the carrier has presented impressive evidence to support the proposed rate, the Commission may not hold the rate unlawful upon the mere statement that the carriers have not sustained their burden of persuasion.' New York Cent. R. Co. v. United States, 99 F.Supp. 394, 401 (D.Mass.), aff'd 342 U.S. 890, 72 S.Ct. 201, 96 L.Ed. 667 (1951) 36 See also Ringsby Truck Lines, Inc. v. United States, 263 F.Supp. 552 (D.Colo.1967), app. dis., 389 U.S. 576, 88 S.Ct. 689, 19 L.Ed.2d 775 (1968); Baltimore & O.C.T.R. Co., v. United States, 279 F.Supp. 270 (N.D.Ill.), aff'd, 389 U.S. 88, 88 S.Ct. 253, 19 L.Ed.2d 255 (1967). 37 Due to the technicality of the concepts involved, as well as the distinct possibility of future misinterpretation of the import of this decision, it seems necessary here to expressly limit the sense in which we are applying the term 'unlawful' to these tariffs. In holding that the tariffs are unlawful, we are not expressing any affirmative judgment that the rates embodied in them are in any substantive way violative of the Act-- e.g., that they are unreasonably high or discriminatory. Such a judgment lies solely within the province of the Interstate Commerce Commission. Nor does this holding imply that the tariffs were unlawful in any sense whatsoever prior to the Commission's final order. This issue is not before us in this case, limited as we are solely to the period of the temporary restraining order following the effective date of the final order (September 13 to 29, 1965). Nor does the term 'unlawful' in this context mean that the carriers could not collect the rates in the tariff during the period of the temporary restraining order; that they may or may not keep them after collection is discussed below in regard to the availability of restitution. The conclusion that the tariffs were unlawful is restricted to the sense that by virtue of the Commission's cancellation order, as it operated prospectively, the carriers no longer had the right to maintain that particular tariff; maintenance of the tariff in violation of the order was unlawful. 38 Having concluded that the cancellation order rendered the particular tariffs here in issue unlawful, we are next faced with the question of what was the actual effect of the order on the rates which the carriers could charge. The carriers contend that the effect of the order did not require them to reduce their rates. We pause to note here that, prior to the carriers' raising this contention on appeal, there appears to have been absolutely no confusion on anybody's been absolutely no confusion on anybody's Commission's order. The carriers, the shippers, the Commission, the Government, and the trial court all operated on the assumption that the effect of the Commission's order was to require the carriers to cancel the increases and to revert, for some period of time at least, to the immediately prior rate levels. The insistence of the carriers now that the order did not require such a reduction is disingenuous, to say the least. Under normal circumstances, we would not feel obliged to deal with such a contention raised for the first time on appeal, especially where it is directly contrary to all the proceedings below. Nevertheless, since the proceedings below were focused primarily on the validity of the Commission's order, rather than the problems of restitution, we feel constrained to examine the issue briefly. There is no case law on the subject to which we have been directed by the parties, nor have we found any. Lack of authoritative decisions indicates an accepted interpretation of the regulatory scheme whereby failure to justify rate increases accompanied by an order of cancellation would result in a reduction in rates. 39 First, account may be taken of the Commission's proceedings in this case. The order of investigation which initiated the proceedings, dated June 28, 1963, was directed at the proposed increased less-truckload rates. In its final report, reported at 325 I.C.C. 106 (1965), the Commission made clear that its findings were directed solely at the carriers' increases. 'The increases became effective on September 7, 1963, and will be referred to herein as the proposed increases.' Id. at 107. In the discussion section, the Commission again emphasized its concern, not with overall high rates, but with carrier increases: 40 'Numerous motor carrier general increase proceedings involving strong shipper opposition have been considered in the past several years. As a consequence the evidence presented to justify a general increase in rates has been subjected to close scrutiny.    The evidence is not convincing that this less-than-truckload traffic, which generally is not susceptible of diversion to other modes of transportation, should be subjected to an additional increase barely 1 year after the last increase became effective.' Id. at 121-122. 41 The Commission's specific finding was that the 'increases are not shown to be just and reasonable.' And the final order, dated August 31, 1965, denying further postponements and rehearings, again said that the 'proposed increases found not shown to be just and reasonable have been ordered cancelled.' 42 It is quite evident from this that the Commission order did not mean that the carriers' entire rate structure was not just and reasonable, but only that the most recent increase was not shown to be just and reasonable. The obvious conclusion to be drawn is that the increases to be canceled would leave the carriers with the rate structure as it existed just prior to the increases. That the carriers understood this exactly is clear both from the letter written to the Commission by carrier's Attorney Feldman on August 30, 1965, and by their subsequent court suit. 43 In their complaint filed instituting a suit against the Commission order and applying for a temporary restraining order, the carriers specifically alleged that the order 'requiring cancellation of increased rates and minimum charges to become effective September 13, 1965, would cause irreparable injury to plaintiffs   .' In the affidavit in support of the motion for the temporary restraining order, the carriers reiterated the charge that the cancellation of the increases would cause irreparable damage, and presented specific figures indicating their financial position if the increases were left in their rates compared to the effect of omitting them from the rates if the order went into effect. Further explication of the extensive evidence in the record to this effect is unnecessary to this opinion. 44 Finally we take specific note of the findings and order entered by the Three-Judge Court denying the interlocutory injunction, Order of September 29, 1965. Throughout this order, the court consistently refers to the rate increases. Of specific interest here is the finding VII(c): 45 'That the balancing of the equities in considering the magnitude of the losses and injury to the public if the interlocutory injunction is granted and if the Commission's order is sustained by the Court, as compared with the losses to the carriers if the injunction is not granted, with the remote possibility of the Commission's order being set aside, adequately justifies this Court, on this showing, in denying the motion for an interlocutory injunction.' 46 This finding is obviously based on the premise that the Commission's order requires a reduction in the carriers' rates. Otherwise there could be no losses to the public. 47 Despite this seemingly unanimous agreement by all parties in the trial litigation that the Commission order required cancellation of the rate increases, resulting in a reversion to the prior rate levels, the carriers now insist on appeal that that was not the effect of the Commission order. Just exactly what was the effect of the order in the carriers' view is left uncertain, but the import of their position as quoted here leaves open several possibilities: 48 'The tariff schedules at issue were not 'rate increase schedules' as repeatedly characterized by the shippers    -- but all schedules-- and there then left no underlying, pre-existing schedules of rates and charges which would automatically have become effective upon cancellation of the schedules which are the subject of the case at bar. In order words, the challenged Commission order did not direct cancellation of merely an increase, or addon, leaving an underlying rate structure, but swept away all basis for any charges for transportation services.' (Carriers' Brief, p. 10). 49 'By the order of cancellation the carriers were left entirely free to publish new rates, and those new rates could conceivably have been higher than, the same as, or lower than, the rates ordered cancelled.' (Carriers' Supplemental Brief, p. 8.) 50 At this point we pause in the argument to note that the ensuing analysis proceeds on the assumption that as of the September 13 effective date, the Commission order would have caused cancellation of the tariffs in question absent the temporary restraining order, either because of its self-executing nature or because of carrier compliance. The possibility that the carriers could have wilfully failed to comply with the order, and thereby blocked its effectiveness without becoming liable for refunds would make impotent the whole congressional scheme for review and consideration of tariffs. 51 The Commission's order of cancellation was served March 16, 1965, to become final April 14, 1965. Subsequently, the compliance date of the order was extended to September 13, 1965. Throughout this period, the carriers were free to publish new tariffs with ample time for the thirty days notice requirement to be met. Whether those new tariffs could have been higher than, the same as, or lower than, the schedules ordered canceled is immaterial, for the fact of the matter is that they did not publish any new tariffs. (The record makes clear that at least one reason for failing to publish new tariffs which would have been higher was the carriers' fear that the Commission would suspend them. This is also a fair indication that the carriers recognized the actual import of the cancellation order.) When the compliance date of September 13 arrived, the carriers had not published any new tariffs and the increased tariffs were to be canceled. If their argument that cancellation would leave them with no rates whatsoever which could be charged is correct, we could only conclude that as of that date they were bound to quit offering services to the public at all because of their dereliction in failing to publish new tariffs. But since even the shippers do not suggest such a harsh result, and since it seems rather contrary to common sense, we conclude only that the pre-existing lower rates should have come into effect at that time, either by operation of law or by the affirmative action of the carriers. 52 In concluding that, in the absence of any carrier action to establish new rates where a tariff is found unlawful, the last lawful pre-existing rates are the effective rates to be applied by a court in considering restitution, we find an analogy in the case of Chicago, M., St. P. & P.R. Co. v. Alouette Peat Products, Ltd., 253 F.2d 449 (9th Cir. 1957). In that case, the carriers published increased rates which the court found to be unlawful because they failed to comply with the statutory 30-day notice requirement. The court acknowledged that the carriers were entitled to collect this rate because it was the only published rate on file, but ordered restitution to the shippers to the extent that this rate exceeded the immediately preceding one, because the higher rate had not been lawfully established. 53 'No change having been legally made in the rate which existed before Ex Parte 162 (the one published on less than statutory notice), that rate was the only existing, legally established rate and the Court was bound to apply it.' 253 F.2d at 456. 54 To summarize our holding on this aspect of the case, we conclude that the Commission order canceling the tariffs in issue rendered those tariffs unlawful as of the effective date of the order, with the consequence that the immediate prior lower rates should have been in effect and would have been in effect had not the temporary restraining order been issued. 55