SOUTHERN R. CO. v. SEABOARD ALLIED MILLING CORP.
Legal provision: Interstate Commerce, as amended
Argument of Mark L. Evans
Chief Justice Warren E. Burger: We'll hear arguments next in 78-575, Southern Railway against Seaboard and the consolidated cases.
Mr. Evans, I think you may proceed whenever you're ready.
Mr. Mark L. Evans: Mr. Chief Justice and may it please the Court.
These consolidated cases are here on certiorari to the Court of Appeals for the Eighth Circuit.
They present a discrete issue of reviewability.
Are the courts empowered to review an ICC decision not to investigate a proposed railroad rate change before the change takes effect?
The Court of Appeals held that such a decision is reviewable and we argued that it is not.
The case started in August 1977 when the Southern Railroads filed tariffs proposing a 20% seasonal increase on the rates for the transportation of grain in the southern territory.
The tariff was to last for three months and it was among the first of the tariffs filed under the 1976 legislation which directed the Commission to allow the filing of such demand sensitive rates.
The purpose of the statute was to give shippers an incentive to reduce peak period transportation and to better use the national car pool of railroad freight cars.
Several groups of shippers including the respondents here filed protest with the Commission arguing that the increase has violated a variety of sections of the Act and they asked the Commission to suspend and investigate the rates under Section 15.
The Commission decided not to suspend or investigate essentially for two reasons.
First, it was not convinced that the shippers had made convincing arguments on the merits of their claims of unlawfulness, and second, because the Commission wanted to carry out the congressional policy of creating a regulatory climate that would be conducive to this kind of experimentation in railroad ratemaking.
The shippers filed a petition for review in the Court of Appeals for the Eighth Circuit.
They sought and we got a stay from the court for approximately eight days which enjoined the railroads from collecting the rates during that period.
The Court of Appeals declined to review the Commission's decision not suspend the rates but it held that it could review the decision not to investigate the rates.
A decision that is characterized as a termination of an investigation into the lawfulness of the rates, court of appeals reasoned that shippers -- the shippers had made substantial allegations that the tariffs were patently unlawful that the Commission had a duty to investigate and that it's what it referred to as a premature termination of the investigation was improper.
The decision was in conflict with the decision of the District of Columbia Circuit which had held unreviewable, a commission decision not to investigate under Section 15 of the Act.
The key to the case, I believe is in the structure of the acts, rate investigation and complaint procedures.
There are two ways that the Commission can investigate a railroad rate.
Under Section 15, it has the power before the effectiveness of the rate to institute an investigation and during that period to suspend the rate for up to seven or ten months depending on whether it seeks an extension of time pending the completion of the investigation.
If it decides against instituting a Section 15 investigation, anyone can complain under Section 13 and the Commission must investigate in response to their complaint.
Justice William H. Rehnquist: Am I right in thinking Mr. Evans that under Section 13 complaint, the Commission doesn't simply set as an adjudicator but it has an affirmative duty to investigate it?
Mr. Mark L. Evans: It must investigate, it must begin a proceeding.
It is an effect an adjudicator of the proceeding, basically, a dispute between the complaining party on the one hand and the carrier on the other.
Justice William H. Rehnquist: Well, can it just seat back and say you two contestants bring your evidence before we will decide or does it have to participate in the investigation?
Mr. Mark L. Evans: No, I think it's more the former.
It does not necessarily actively participate in the investigation by the same token of course has the power to develop the record if the record is not being adequately developed.
But investigation is a term that was used in the original act.
It really, in the recodification, it's been changed to the word proceeding.
It's a proceeding before the agency.
And it can be instituted either on its motion in which case there may not be complaining party in which case it would developed the record or could be instituted in response to a complaint.
Justice William H. Rehnquist: So the investigation is the same under either 13 or 15?
Mr. Mark L. Evans: Essentially the same, there are several procedural differences.
The burden of proof with respect to some issues is on the carrier in a Section 15 case.
That is the one that would be instituted in advance of the rates effectiveness.
On the question of whether the rates are reasonable are these, are they high enough or too high.
The carrier their bears the burden of going forward with evidence.
As to other issues, the burden remains the same.
In either proceeding, the burden of going forward with an initial showing on question such as discrimination or violations of the long and short whole clause which are the issues that we have in this case rest with the shippers.
There are some differences in the result of the proceeding.
In a Section 15 proceeding, the Commission may order refunds if it finds that the rates are unjustified.
In a Section 13 proceeding, the result is damages in favor of the shipper if he can demonstrate that he's been financially injured by the unlawful rate.
And they are slightly different statutory time limits that govern the proceedings under Section 15.
The Commission is under an obligation to complete the proceeding in seven months with a possible three-month extension.
There's not that same statutory limit in a Section 13 proceeding but there are some internal some procedural limits within the proceeding itself.
Justice John Paul Stevens: Mr. Evans, can you help me in one perhaps it's an awfully narrow question but under a Section 15 proceeding, if folks see the word investigate.
Does the word investigate refer to what the Commission should do before it decides whether or not to suspend or does it refer to the examination made after the suspension?
Mr. Mark L. Evans: It refers to the examination made after the suspension or after the decision to investigate.
That's critical to this case because the Court of Appeals as I mentioned characterized what the Commission did here as a premature termination of an investigation.
The term investigation is used in the statute, the statutes that we codify the word is now proceeding.
What it means is the process that can lead to a final judgment on the -- or final order of the Commission adjudicating the lawfulness of the rates.
Justice John Paul Stevens: Well, doesn't it always follow that if the Commission has decided not to suspend, it is also necessarily decided not to investigate?
Mr. Mark L. Evans: No, quite the reversed Mr. Justice is if it in order --
Justice John Paul Stevens: Then -- then your answer was misleading.
Mr. Mark L. Evans: I'm sorry.
Justice Lewis F. Powell: Or is it my brother --
Justice John Paul Stevens: That's got me confused.
Mr. Mark L. Evans: I'm sorry.
Well, in a -- the decision whether to investigate and suspend is simultaneous.
A rate is filed.
It is up to the Commission in response to protest to decide whether first of all to conduct an investigation into the rate.
If it decides that it will investigate at that stage for the rates effectiveness, it may but need not also suspend the effectiveness of the rates for up to seven months.
Justice John Paul Stevens: So that an investigation may be for the purpose of determining whether or not to suspend?
Mr. Mark L. Evans: No, maybe I'm not being clear.
The suspension happens at the outset.
A suspension is basically an injunction, temporary injunction.
Justice John Paul Stevens: Alright.
Mr. Mark L. Evans: Pending a final decision.
The final decision is the result of the investigation.
The suspension carries with the investigation and terminates the end of the investigation.
Justice Potter Stewart: But there must be some ready hallucination leading to a decision of whether or not to investigate?
Mr. Mark L. Evans: Yes.
It's a very rapid necessary so, very rapid decision at the administrative stage.
The rates come in, tariffs cannot, brought along some tariffs just you could see what we're talking about.
Justice Potter Stewart: And then protest come in?
Mr. Mark L. Evans: Protest come in with -- the tariffs have to followed with at least 30 days notice.
Justice Potter Stewart: Right.
Mr. Mark L. Evans: A tariff comes in, it is -- protest must be in under the rules by 12 days before the effective date.
The carrier can reply to the protest by the fourth working day before the effectiveness of the rate.
By the third working day, before the effectiveness of the rate, the Commission's suspension board makes a judgment whether it will investigate and suspend or investigate --
Justice Potter Stewart: Or it has to be some sort of an appraisal.
Mr. Mark L. Evans: There's an appraisal.
It's a very rapid informal assessment (Voice Overlap) absolutely.
It is not an answer to Mr. Justice Stevens' question an investigation is that phrase it's used within the statute.
Justice John Paul Stevens: But then, you still have me confused about one thing.
It's still seems to me that if the investigation under the statute is the post suspension proceeding, necessarily a decision not to suspend would include a decision not to investigate?
Justice Potter Stewart: Yes.
Chief Justice Warren E. Burger: Isn't it?
Mr. Mark L. Evans: I'm not making this clear, I guess but the decision -- let me put it this way.
It is possible for the Commission to investigate --
Justice Potter Stewart: Without suspending?
Mr. Mark L. Evans: -- without suspending.
It cannot suspend without investigating.
In other words, the suspension -- purpose of the suspension is much like a preliminary injunction.
You're holding the rain off while you're investigating.
If you have an investigation, there's no reason to suspend.
Chief Justice Warren E. Burger: As you might --
Mr. Mark L. Evans: There's no foundation for a suspension.
Justice Potter Stewart: But you may investigate without suspending.
Justice John Paul Stevens: There are two different kinds of investigation in other words?
Mr. Mark L. Evans: Yes.
Justice John Paul Stevens: Would that -- the word investigate under the statute can refer two different kinds of investigations.
One, a post-suspension investigation and alternatively, an investigation without a --
Mr. Mark L. Evans: Without suspension, precisely.
It's the same investigation.
It's just that one case, the Commission feels it necessary to hold the rate from being effective and the other case it's will and when it come to effect.
Chief Justice Warren E. Burger: Since you analogize it to an injunction, is it the same, broadly the same kind of discretion to be exercised by the Board as a court would -- of equity would exercise?
Mr. Mark L. Evans: Even broader, I believe Mr. Chief Justice.
There are no statutory standards that govern the exercise of the suspension and investigation authority.
The statute is simply the Commission may investigate and may suspend.
There are very clear statutory standards that come into play in response to a Section 13 complaint.
There the Commission must investigate it.
It has no discretion unless it finds that the complaint is completely without substance.
Chief Justice Warren E. Burger: Do you say that the discretion is broader in part because they have absolutely feel a safe way of protecting everybody?
Mr. Mark L. Evans: In effect, that's right.
A --a shipper who seeks unsuccessfully to have her rate investigated at the outset can just turn around the next day and file a complaint and secured investigation, they compel it, they can compel it.
What the respondents in this case did was go to court.
They could have simply filed the complaint with the Commission the next day and the investigation probably would be over by now.
The Commission's discretion at that stage is even broader than a court.
This is not limited to questions of likely harm and so forth.
That is clearly part of the suspension board's consideration.
It considers questions like, is it likely that this rate is going to be found unlawful?
Is it likely that the public is going to be significantly harmed?
But it also takes into account things like the availability of Commission resources for the investigation.
And it takes it to account things like the overriding congressional policy that the Commission found decisive here.
Justice John Paul Stevens: May I ask one other question.
In the, if there is an investigation pursuant to Section 15 not the Section 13, the burden, I take it is on the carriers to demonstrate the lawfulness of the rates.
Mr. Mark L. Evans: It's a little bit narrower than that Mr. Justice, its -- the burden is on the carrier to demonstrate the reasonableness of the rates.
Justice John Paul Stevens: Right.
Mr. Mark L. Evans: Now, there are other issues embraced within the phrase lawfulness.
Justice John Paul Stevens: But my other question was, in such a proceeding is, are reparations a possible form of relief?
Mr. Mark L. Evans: Well, it --
Justice John Paul Stevens: It still the rate was -- at the end of the proceeding, it was determined that the rate have been unreasonable.
Mr. Mark L. Evans: In the Section 15, --
Justice John Paul Stevens: In the Section 15 case.
Mr. Mark L. Evans: -- the remedy normally is refunds.
In fact, the statute requires refunds.
Justice John Paul Stevens: Yes, I see.
Mr. Mark L. Evans: If the Commission finds that the rates were unjustified, now that doesn't always happen.
Sometimes the Commission can find that the rates were not lawfully, were not shown to be just reasonable or not shown to be lawful.
In which case, the remedy might not be refunds.
But refunds are unavailable remedy.
The Court of Appeals in this case went wrong I believe for basically three reasons.
First, we discussed that it characterized the Commission's decision in this case as a termination of investigation.
In fact, the investigation was never begun.
That's critical because in this Court's decision in the City of Chicago case, that distinction was of the size of significance.
The Court held there that a Commission decision terminating an investigation of a -- the lawfulness of train discontinuance was reviewable because it was a decision on the merits just like any other decision on the merits.
The same time it stated in that case the corollary principle that the Commission need not institute the investigation.
That matter according to court was a matter committed to the agency's discretion and not reviewable.
The second error, the court made was that it seemed to think that Section 13 complaint procedures under Section 13 would not be available for certain categories of claims.
That's just not the case.
Any issue of the lawfulness of the rates can be raised in the Section 13 complaint just as it could in the Section 15 proceeding.
And finally, it believed that the decision of the Commission not to investigate was tantamount to a finding that the rates were lawful and that's not the case.
This Court held as much in the first SCRAP decision, a refusal to investigate leaves the rates fully subject to complaint investigation.
It forecloses no argument as to the lawfulness.
I began to point to these tariffs I brought along here that illustrate the kind of thing the Commission deals with.
I asked the tariff people to give me a sampling, a big one, a medium one, and a little one.
That is a one tariff, that's about average I'm told, the middle one, that's a small one.
The Commission receives 52,000 of this a year roughly and it considers for suspension and investigation in response to protest for a smaller number.
But even so, there are a within each tariff maybe one or two but as many as thousands of individuals rate changes, this is a mammoth undertaking.
The Commission examines all the tariffs that it receives and when it receives protest, it considers the issues of lawfulness of the raise.
But these are the kinds of judgments that are being made rapidly in the face of the day after getting the railroads reply.
They're the kind of judgments that are made basically from gut because it's just impossible to deal with more effectively in that stage than from the gut.
And in our view, that's not the kind of decision the courts are very well-equipped to undertake review of.
There are a number of --
Justice John Paul Stevens: Mr. Evans, I assume that your position in the Court of Appeals that is the ICC's provision was different and not taken by the Department of Justice there?
Mr. Mark L. Evans: Yes, the Department of Justice argued there that the decision of the Commission was reviewable then.
Right there in that court.
In fact, the -- much of the Court of Appeals opinion is a reflection of the brief that was submitted by the Department of Justice in that case.
We have been consistent.
Justice William H. Rehnquist: The Government just developed its esoteric theory in this Court?
Mr. Mark L. Evans: Yes.
Justice Byron R. White: Quite different from its position below?
Mr. Mark L. Evans: Quite different, yes.
Justice Byron R. White: I take it from your answer to Justice Rehnquist do you think its esoteric?
Mr. Mark L. Evans: Right.
Justice Byron R. White: That's arcane, yes.
Mr. Mark L. Evans: I hesitate to embrace the adjective but it certainly has appeal.
I just want to make --
Justice Byron R. White: With yourself?
Mr. Mark L. Evans: Pardon me?
Justice Byron R. White: You wish you thought of it yourself?
Mr. Mark L. Evans: Yes, I have a few others.
The one I used was curiously cumbersome.
I just want to make one other point, that is if the respondent's arguments here really hinged on a notion that these rates are patently obviously ridiculously unlawful and their whole argument hinges on the Court's willingness to make that finding.
It's really trying to drag -- they're really trying to drag this Court into the merits of this case even before they've given the Commission an opportunity to address those merits finally.
There is doubt about the lawfulness notwithstanding what they will tell you and I respectfully suggest that the Court need not enter the matter until the Commission has spoken.
Argument of Wandaleen Poynter
Chief Justice Warren E. Burger: Ms. Poynter.
Ms Wandaleen Poynter: Mr. Chief Justice and may it please the Court.
As representative of the railroads, I would like to approach essentially and very emphatically the overriding public policy problems as well as the congressional mandate avoidance problems, if you will that we will face if and I do without completely the position that the Commission has taken in this regard that the court below has simply intruded, it is a classic example of an intrusion into an administrative proceeding.
They absolutely took this case, they entered a suspension as only the Commission has the authority to do under 15 (8) and as this Court has held emphatically, a completely a part from court interference.
They then proceeded to take every step available under Section 15 (8) to the Commission.
They made a determination in light of the evidence.
They issued a refund order and they then proceeded to set an investigation.
They literally remanded to the Commission and said to the Commission you will investigate and you will make findings on two specific areas.
In 1976, Congress passed the Railroad revitalization and regulatory reformat and within that as the Commission has indicated were provisions which drastically changed the rate making regulation allowed to the Commission and in most instances definitely decrease the authority that the Commission had to step in especially at pre-effective stage to literally interfere with railroad made rates.
Carrier initiation of rates isn't absolute.
There is only the suspension stage which interferes with carrier initiation of rights.
One of the provisions was the provision allowing the publication of demand sensitive rates.
The allegations which have been made of patent illegalities by the protestants were desperate attempts literally, 11th hour attempts on part of one of the protestants simply to get before a court to avoid the restrictions that have been placed by Congress within 15 (a) including and I address the question which was initially requested of Mr. Evans.
The suspension state is more like a petition for a stay to a court.
At this particular time and it was prior to February of 1976 because indeed now a complainant to the Commission requesting that a rate be suspended or investigated or both must show that there is a possibility of substantial harm and that there is a likelihood that the complainant will prevail on the merits.
Neither the complainants represented before this Court today did that.
In seeking appeal to the Eighth Circuit, the complainants in essence avoided their recourse through the Commission and mislead the Court in a sense by requesting suspension on patent illegalities when it had not been proved to the Commission.
The court below misconstrued what the complainants were saying to the Court and that is where we find ourselves today before this Court.
If the lower court decision is not reversed, it literally will open floodgates to allow shippers to avoid the restrictions that have not been placed against them by Congress by allowing is equivalent to a pre-1910 situation where the courts will be telling the Commission when they will and when then they will not investigate and at what time.
The most compelling example of this is the position represented to this Court today by the Chicago Board of Trade and its co-respondent parties.
They have simply alleged simple violations of two sections of the Interstate Commerce Act which deal with discriminatory or prejudicial practices, most definitely, areas with which only the Commission is qualified to act.
If the lower court decision is upheld, it will only be necessary for a complainant to go before the Commission and to make any allegation of patent illegality and then put that before in appeals court for the court to decide whether they have raised a substantial question or not, not to allow the Commission to make that determination.
Argument of Richard A. Allen
Chief Justice Warren E. Burger: Very well, Ms. Poynter.
Mr. Richard A. Allen: Mr. Chief Justice and may it please the Court.
The United States in this case is urging the position that agrees in some respects and disagrees in other respects with both sides in this controversy.
First, we agree with the Commission that the Court of Appeals do not have jurisdiction to review the Commission's decision in this case essentially because in our view the Commission's decision was not a final decision that is reviewable under the Administrative Procedure Act and because the complaining shippers had not exhausted their administrative remedies.
In that respect, we disagreed with the Court of Appeals and with the complaining shippers.
Second, however, we disagree with the Commission's position that its decision not to conduct an investigation under Section 15 is never judicially reviewable.
We submit that decision may be judicially reviewed after the Commission has made a final decision on the lawfulness of rates under a Section 13 proceeding that any aggrieved shipper can compel the Commission to undertake the statute.
Chief Justice Warren E. Burger: Do we need to decide that in this case?
Is it inevitable that we must decided it?
Mr. Richard A. Allen: I think, Mr. Chief Justice, it is inevitable that you decide it or I think it is --
Chief Justice Warren E. Burger: In this case?
Mr. Richard A. Allen: In this case.
Perhaps not absolutely necessary but in order to determine and to conclude as we submit you should that the Court of Appeals had no jurisdiction in this case.
There are two alternative theories for accepting that.
The first theory is the Commission's theory that this is simply one of those kind of agency actions that is committed to agency discretion by law and therefore under the administrative Procedure Act, wholly immune from judicial review at anytime.
The other position is our position which is quite different which is that it is not one of those kind of actions but rather the Court of Appeals lack jurisdiction on finality principles and failure to exhaust administrative remedies.
Our position is based on our view that under the particular scheme by the Interstate Commerce Act, the principle consequence that a Commission's decision not to conduct an investigation under Section 15 is to shift the burden of proof on the question of the lawfulness of rates from carriers wold be under Section 15 to shippers where it would be under Section 13.
That consequence is expressly provided for by in the Act and it's an important aspect of the scheme of the Act.
As this Court has recognized in a number of decisions.
If the Commission conducts and decides to conduct an investigation under Section 15, that Section expressly provides that the burden of proof is on the carrier to show that the proposed change in rates is just and reasonable.
If the Commission does not investigate under Section 15, any aggrieved shipper can file a complaint under Section 13 and compel a Commission to adjudicate the lawfulness of the rates but in that case, the burden is on the complaining shipper to show that the rates are unlawful.
I'd like to take briefly our reasons for agreeing with the Commission that the Court of Appeals was wrong in reviewing this case and devote the preponderance of my time to the point in which we disagree with the Commission.
The Commission's decision not to investigate under Section 15 was not reviewable by the Court of Appeals in our view because it was not a final decision within the meaning of the Administrative Procedure Act and within the meaning of 28 United States Code Section 23425 which gives the Courts of Appeals jurisdiction to review final orders of the Commission.
Contrary to the Court of Appeals, the Commission's decision not to investigate under Section 15 did not constitute or expressly or in effect a determination on the lawfulness of the proposed rate changed.
The statute gives shippers an adequate remedy in Section 13 to compel the Commission to decide the lawfulness of the rates and the Administrative Procedure Act and principles of exhaustion administrative remedies require shippers to use and employ that procedure before they can invoke judicial review.
Justice William H. Rehnquist: You don't think that Arrow and SCRAP then are the cases that control this particular aspect of the case?
Mr. Richard A. Allen: No, Mr. Justice Rehnquist, we do not because we do perceive a distinction between the review of a decision not to investigate and a review of a decision not to suspend the rate.
In Arrow and SCRAP, the Court explained that decision of the Commission not to suspend a rate were not reviewable but for very particular and persuasive reasons that were evident in the statutory scheme.
Justice William H. Rehnquist: But Congress just hadn't intended them to be?
Mr. Richard A. Allen: Congress had not intended to be reviewable because the suspension power itself was enacted to prevent the practice that it previously occurred of district courts in joining rates and therefore creating a great disparity in rates contrary to the national transportation policy.
Justice William H. Rehnquist: Well, wouldn't it follow if Congress had not intended review of the suspension power?
It would likewise had not have intended review of the authority to investigate preliminary to a suspension?
Mr. Richard A. Allen: We believe not Mr. Justice Rehnquist as Mr. Evans explained.
The this -- they -- the power to investigate is not necessarily a power preliminary to a decision to investigate.
It is a power that is exercised at the same time or even independently.
The Commission can refuse to suspend the rate and nevertheless, investigate its lawfulness under Section 15 in which the carriers have the burden of proof.
It can suspend the rate and still investigate under Section 15.
It doesn't conduct the investigation before it decides whether to suspend or not to suspend.
Chief Justice Warren E. Burger: I suppose there is something in nature of at least to analogous to probable cause and the -- that enters into their thinking at that stage?
Mr. Richard A. Allen: Perha -- perhaps analogous.
There are circumstances as I will explain in a minute in which they can be easily imagine and not extremely farfetched in which the Commission's decision not to conduct an investigation would be, we think plainly contrary to the statute or plainly arbitrary and capricious.
We've given some examples in our brief but for the present, let me outline the precise reasons that we disagree with the Commission's position.
As I said, we agree that the Court of Appeals did not have jurisdiction to review in this case now.
But the Commission goes further and contends that its decision not to investigate is never subject to judicial review even after a final decision by the Commission on the merits of the lawfulness of rates because in the Commission's view, the decision not to investigate is one of those actions which under the Administrative Procedure Act is committed to agency discretion by law and therefore wholly unreviewable.
According to the logic of the Commission's position, therefore it believes that its discretion not to investigate is analogous to the discretion of the public prosecutor not to investigate or prosecute someone for violations of criminal law.
With that proposition, we strongly disagree.
And I'd like to emphasize two points in connection with our disagreement.
The first is that we believe that the Commission's position is contrary to general and important principles that this Court has established determining the availability of judicial review of administrative action.
The second point I want to make is that while it may be that there is not, that there will not be a practical difference or that there will be little practical difference between our position and the Commission's position in most cases.
There may be some cases in which it is of significant practical consequence.
And we believe that an example of the kind of case where it may make a difference has already been before this Court in the Atchison, Topeka, and Santa Fe Railway case versus Wichita Board of Trade case in 412 U.S. discussed in our brief at pages 35 to 37?
With respect to the first point, this Court has established and stated in many cases that the Administrative Procedure Act establishes a strong presumption in favor of judicial review of administrative action and there are only two circumstances in which review can be precluded.
First, where a statute expressly precludes review or second, where the statutory scheme provides some particular and persuasive reason why review would not be appropriate.
In this case, so long as review is deferred until after a Commission decision under merits of rates under Section 13 which is reviewable in a Court in any event.
There is nothing in the scheme of the Interstate Commerce Act that would indicate that review of the no investigation decision was -- is inappropriate.
And the Commission is cited nothing in the purposes or procedures of the Act that would be undermined by review of a no investigation decision in the context of the normal judicial review of final commission decisions.
Accordingly, we think that rejection of the Commission's position is important as a matter of general principles.
In respect to my second point, there may be as I've said little practical difference between our position and the Commission's in most cases.
We believe that we think that the Commission's discretion in this matter is quite broad although not unlimited.
And it may be -- there may be and probably are very few cases in which a court could ultimately find that the Commission had abused its discretion in not investigating a rate.
And yet in which at the same time the Commission in a Section 13 proceeding found that the complaining shippers had not met their burden of selling that the rates were unlawful.
Chief Justice Warren E. Burger: You have to equate action and non-action to sustain your position, don't you?
Mr. Richard A. Allen: Yes, you do Mr. Chief Justice.
I think this Court has equated action and non-action in the past.
I think the Chicago Board of Trade case can be viewed as an example of that.
But in any event, there's no principle which I can perceive for saying that action and non-action are different in terms of judicial reviewability.
Justice John Paul Stevens: Mr. Allen, is there a time within which a Section 13 (1) proceeding must be commenced?
Mr. Richard A. Allen: No, not in this text.
Justice John Paul Stevens: So your under analysis, a decision not to investigate never become final unless such a proceeding was some time of two or three years, some time rather commits because there will always be a potentiality that such a proceeding can be commenced and terminated then that would have the effect of making final.
The earlier decision by the Commission not to investigate, that's your theory, is it?
Mr. Richard A. Allen: In a sense, I suppose that is true although it is very farfetched and unrealistic.
A case in which it might be that a Section 13 proceeding was initiated years after the Commission that decline to investigate the tariff over the protest of complaining shippers.
Justice John Paul Stevens: I suppose that's about equally probable as you say there's really little practical difference between your position and --
Mr. Richard A. Allen: In -- in probably in most cases but it is by no means farfetched to imagine cases in which it might be a practical significance.
We have given examples in our brief, hypotheticals where the Commission fails to investigate for solely and for manifestly erroneous legal reasons.
So because for example --
Justice John Paul Stevens: Why is it that they voilated the dispose of this case assuming either you are the ICC is correct.
Is it the long the line suggested by the Chief Justice to say that even assuming that the matter is not entirely committed to the discretion of the Commission.
Nevertheless the order is plainly not final.
We don't have to reach the question.
Mr. Richard A. Allen: Yes, I think the Court could do that.
Justice John Paul Stevens: So it is necessary to decide.
It really is not necessary to decide the difficult question you argue?
Mr. Richard A. Allen: It is not necessary to decide that question.
We would be perfectly happy with the decision that says whatever the ultimate reviewability it is not final at this time.
Chief Justice Warren E. Burger: You just have to put you foot in the door for future's development.
Mr. Richard A. Allen: Whether or not that would be appropriate is a matter of sound judicial administration is more of your question than mine.
Chief Justice Warren E. Burger: Or even if your foot isn't in the door, you'd like to have the door left open.
Mr. Richard A. Allen: Well, certainly that's true Mr. Chief Justice.
My last point though is that it is not farfetched to imagine such cases and in our view, a good example is that situation that it has already confronted this Court in the Wichita Board of Trade case.
And although the posture of that case was somewhat different, we think that it does stand in principle for the proposition that we support namely that no investigation decisions are subject to judicial review for an abuse of discretion.
We have discussed that case in our brief and I rely on the discussion unless there are any questions from the Court.
Thank you very much.
Argument of John H. Caldwell
Chief Justice Warren E. Burger: Very well.
Mr. John H. Caldwell: Mr. Chief Justice and may it please the Court.
Respondents feel as if there are two separate cases that are being presented to this case -- to this Court.
The case being argued -- or maybe three cases, the case being argued by the United States, the case being argued by the Railroads and the Commission, and the case which we presented to the court below which we argue before this Court.
The ICC, the Railroads before this Court in an abrupt change of its position, the United States all have repeatedly mischaracterize this case as only involving a routine normal determination not to suspend or investigate under Section 15 (8).
What happened however was a far different situation, what happened was an unprecedented abuse of statutory authority in the form of Commission action taken in opposition to the clearly stated requirement of Section 4 (1) in contrary to the absolute prohibition of that Section and that rates were approved to become binding and effective and harmful on all segments of the public without compliance with a clearly stated requirement to Section 4.
Now, what this case is -- is an abuse of statutory authority of an unprecedented nature under Section 4 (1), an example of statutory misinterpretation by the Commission and approval of rates as effective and binding on the final basis and an issuance of orders notably lacking any rational basis or findings.
What the case is not --
Justice William H. Rehnquist: Is this something that this loud point that you just made not the one that it's just about me, something that will be apparent on the face of the proceedings?
Mr. John H. Caldwell: Yes, it is Your Honor.
It's apparent from the face of the orders that were issued by the Commission as reviewed by the court and that the Commission failed to resolve the allegations that the rates on their face were patently illegal and could not be permitted to take effect.
Justice William H. Rehnquist: Is that allegation one capable of being resolved simply on the face of your protest without some sort of investigation?
Mr. John H. Caldwell: It can be easily and could have been easily resolved by mere examination of the face of the tariffs that had been filed by the carriers with the railroads and should have been resolved when the allegation was made by our side that the rates on their face could not be allowed to take effect because they were substantively annullity and that they contain long and short haul departures.
Now, there is a distinction between the kind of appraisal, I just referred to and a subsequent 15 (8) type of investigation.
Our position in this case is that the automatic prohibition of Section 401 was triggered when we made our allegation and provided substantial examples that the tariffs on their face were invalid.
Justice William H. Rehnquist: But, okay, you use the word substantial examples that the tariffs on their face were invalid, is it your position that the ICC could simply by having looked at the tariffs and looked at the Section of the statute you rely on concluded without any further factual investigation, the tariffs were invalid?
Mr. John H. Caldwell: That's absolutely correct, Your Honor.
The statute, Section 4 (1) prohibits the establishment of tariffs that contain on their face this mathematical relationship but longer charge -- but greater charges for shorter distance and a longer distance over the same route of haul.
In effect, the Commission ignored the statutory prohibition.
It was a very simple and very easy task for it to have its tariff people to simply look at the tariffs, even in the absence of any demonstrated violations documented as such as we document it.
And quickly have determined that these tariffs contain long and short haul departures.
Instead, the Commission merely turned its head and said that it would not reject and said it would make no findings and leave unresolved the question of whether on their face, these tariffs were substantively invalid in violation of the clearly state prohibition.
Justice William H. Rehnquist: How many --
Chief Justice Warren E. Burger: Pardon, go ahead.
Justice William H. Rehnquist: How many pages did the tariffs consist of?
Mr. John H. Caldwell: I don't know, Your Honor, the exact number of pages but it was not a substantially difficult job for the Commission to evaluate the tariffs as a matter of fact the pleadings which were evaluated by the Commission in this case were about half the size of the yellow pages of the Washington phonebook.
If the Commission was capable of analyzing digesting that material, it certainly could have its tariff people look at the tariffs.
Justice William H. Rehnquist: You mean the pleadings were half the size of the yellow pages of the Washington?
Mr. John H. Caldwell: This is the approximate size of the pleadings that were filed and resolved and digested by the Commission prior to its action authorizing the tariff to take effect.
This is the appendix.
Justice William H. Rehnquist: They're supposed to do that in four days?
Mr. John H. Caldwell: They do it in -- in this case, Your Honor, they did it and I think a little more than four days but this is not an unusual Section 15 (8) kind of record.
Some of them are even greater than that.
But our point, Your Honor, is that the Commission is entrusted with the enforcement of the Section 401 prohibition.
We provided specifically uncontroverted examples that on the face of these tariffs, they contain violations of the cause.
Justice Byron R. White: Mr. Caldwell, do I understand the Commission still doesn't agree with you on that?
Mr. John H. Caldwell: Your Honor, neither the Commission --
Justice Byron R. White: Well, do they or not?
Mr. John H. Caldwell: I don't know what the Commission specifically --
Justice Byron R. White: Well, they have -- they haven't --
Mr. John H. Caldwell: They haven't agreed that there were violations --
Justice Byron R. White: They agreed with you even after all this time.
After bidding everything you ever said about, they still haven't agreed with you?
Mr. John H. Caldwell: Because apparently, they never had their tariff people look at the face of the tariffs.
They haven't denied our position.
They Commission in the Railroads have not denied that these rates contain violations on their face.
Justice John Paul Stevens: But Mr. Caldwell, if all that's clear, could you not file a 13 (1) proceeding and you get prompt relief?
Mr. John H. Caldwell: No, sir.
We could not Your Honor for a number of reasons.
First of all, the Commission does not grant refunds in Section 13 proceedings for violation by itself of its own statutory mandate.
It is simply does not do that.
Justice John Paul Stevens: There's no --
Mr. John H. Caldwell: We could not have obtained the sort of review we sought in the Court here by submitting the Section 13 complaint.
The Commission would not agree in that proceeding that it had allowed illegally established tariffs become effective.
That would have been a futile exercise on our part.
Secondly, the Commission historically does not grant refunds in Section 13 complaint cases or Section 4 violations --
Justice John Paul Stevens: You say that it's perfectly obvious there's a violation but you're saying because the Commission exercises discretion not to suspend and not to investigate even though the patent violation were disclosed of the Commission, as a matter of pride, they wouldn't rule that way?
Why wouldn't they rule that way if you could see?
Mr. John H. Caldwell: As a matter of case history, the Commission takes a position that overcharges and refunds cannot be established in s Section 4 proceeding.
In their reply brief, Your Honor, they even state that overcharges are alien.
And that's the word they used, alien to the concept of a Section 13 complaint proceeding.
Historically, the Commission takes a position if you file a Section 13 complaint you must established that the rates are unreasonable and violate some other section of the Act beyond Section 4.
So even under their own case precedent and long established history, a process in the Section 13 complaint case, we could have obtained more no relief, but importantly --
Justice John Paul Stevens: But the United States and the Commission of represented to us that the issue you want raise would be open in the Section 13 proceeding.
You're telling us they are misrepresenting the law.
Mr. John H. Caldwell: That's correct, they are.
They are misrepresenting in the sense that we could obtain refunds or overcharges in the Section 13 complaint case and we so cited cases to that effect.
Justice Byron R. White: Well, if this is your objection, the United States position would take care of you?
Mr. John H. Caldwell: No, sir.
The United States --
Justice Byron R. White: Because they would go back and say that they should have investigated.
Mr. John H. Caldwell: The United States position is that we would now have to file Section 13 complaints and then if we were unsuccessful, we would have to go back to Court and at that time obtain a review or the failure to investigate.
Justice Byron R. White: They would say that the decision did not -- to investigate was wrong and they'll put you back in a position that as if the Commission had been investigating.
If the Commission has investigated here and found the rates, shouldn't be filed but haven't suspended them, there would be a refund
Mr. John H. Caldwell: If they had investigated and had not suspended, they would have been refunds available.
Justice Byron R. White: Exactly.
Mr. John H. Caldwell: Assuming that the allegations have ultimately been established.
But our point, Your Honor is that this is not a Section 15 (8) case involving Commission discretion to suspend or to investigate.
This is a Section 4 case of the type decided in the McLean decisions of this Court and the type decided by the Seaboard Allied case before the Western District of Missouri where the Commission is violating on the face of the statute a prohibition by refusing to reject or suspend of for that matter investigate tariffs that were invalid on their face.
Now, I think the important thing the Court must understand is that very coy, in a very coy way, the Railroads have never denied that these departures exist.
They're either in the tariffs or they aren't in the tariffs.
The railroads have the obligation to clear them out of the tariffs before the file them or file special application for pre-effectiveness, permission to make those tariffs effective.
The carriers have never denied that these departures exist on the face of the Commission -- of the tariffs nor for that matter has a Commission made such a denial.
Now this case had other unusual aspects about it beyond that fact it involved the Section 401 prohibition.
It involved a special increase under a specially delegated power from the Congress in Section 15, 17.
It involved rates that were proposed at the time of the year when effective shippers had no alternative but to pay the rates in ship and suffer the injury that was caused by the unlawful rates.
There was a unique method of processing the case by the Commission contrary to the normal 15 (7) or 15 (8) type procedure.
The Commission established a formal docket number and assigned it to the case.
It assigned the case to processing by the full commission and by division two of the Commission.
And finally and most importantly it issued to formal written orders in which it purported to make findings on various issues but in effect brushed aside the Section 4 (1) issues.
It's our position that the Commission in effect has abrogated its responsibility in enforcing Section 4 (1) and that this was found by the lower court and was the reason why the lower court ordered the case back to the Commission for completion of the investigation.
I want to emphasize that the investigation of the Commission should have made was one prior to allowing these rates to take effect.
They were not self-executing, they could not be allowed to take effect until these departures were either cleared out of the tariffs or the carriers obtained permission for those violations.
Justice William H. Rehnquist: Do you say this Court serve court intervention is permissible only when a violation of 4 (1) is claimed?
Mr. John H. Caldwell: I'd say that it's permissible whenever there's a statutory violation and I'd say that the Court should have the power to intervene whenever the Commission is violating either its own regulations or an organic statute which occurred in this case.
Justice William H. Rehnquist: Well, and you can alleged that anytime?
Mr. John H. Caldwell: You could allege it and I'm not suggesting that the Court would intervene and it -- that but --
Justice William H. Rehnquist: Or it has the power to intervene if it thinks --
Mr. John H. Caldwell: Only in the event of valid showing as they may.
Justice William H. Rehnquist: Well, valid, substantial, you know --
Mr. John H. Caldwell: We're not -- no, Your Honor, we're not talking in terms of the semantics involved.
The mere fact we made these allegations and called them patent is not to determining fact -- determinative fact.
The determinative fact is what the Commission did in response to the allegations.
It in effect, refused to make any finding.
It left the allegations undetermined.
Justice William H. Rehnquist: But why?
Mr. John H. Caldwell: The Commission had two alternatives.
The first --
Justice William H. Rehnquist: Mr. Caldwell, let me ask this, what if the Commission thought the allegation were simply frivolous?
It said nothing about them?
Mr. John H. Caldwell: It could have said so.
It could have said that --
Justice William H. Rehnquist: But what if it said nothing but they thought they were frivolous.
Mr. John H. Caldwell: I could not do that under Section 4 without violating the congressional intent that rates of this type not be allowed to take effect.
Justice Byron R. White: But what if --
Mr. John H. Caldwell: The Commission was dealing with a different section then it normally deals within a Section 15 (8) case and that Section makes clear, the Commission has not discretion to leave unresolved allegations that there are facially invalid rates that have been filed.
This is not a Section 15 (8) case in its normal context.
Justice Byron R. White: But what is its standard under your view?
Mr. John H. Caldwell: The standard is a standard that Congress established in Section 4 (1).
Justice Byron R. White: Well, I know but would you say the Commission, when these allegations are made, should it say --
Mr. John H. Caldwell: The Commission has a couple of alternatives, Your Honor.
The first is to say that we find the allegations, let's say frivolous or incorrect because no four section of the court has been established.
Justice Byron R. White: But what if they say well, it's about evenly balance so they're arguable?
Mr. John H. Caldwell: It's not.
It's like a little bit of pregnancy.
It's not evenly balance.
There's no way that you could evenly balanced it.
Justice Byron R. White: Well, I know, I know but (Voice Overlap) sometimes things are not that clear about what the statute means.
Mr. John H. Caldwell: Well, with all due respect in this case --
Justice Byron R. White: And sometimes, the Commission and other agencies have changed their mind and have been upheld on both occasions.
Mr. John H. Caldwell: Well, Your Honor, those cases, I'm unaware of would -- if they're under Section 4 (1).
Section 4 (1) is absolutely crystal clear.
It doesn't leave any room for discretion or application of transportation judgment by the Commission.
And unless it acts on an application submitted prior to making the rates effective and determines that a special case has been made.
Chief Justice Warren E. Burger: What about reparations?
Don't the reparations take care of curing the unwanted condition?
Mr. John H. Caldwell: They do not, Your Honor, because as I earlier indicated in response to Mr. Justice Stevens, the Commission will not grant refunds that would grant reparations only in the event a shipper could establish unlawfulness under other sections of the Act other than Section 4 and the Commission's cases clearly show that it does not grant refunds or overcharges where illegally established rates in violation of Section 4 (1) have been filed.
Our position here is that this is a commission violation.
In other words, we can't be required to go to the Commission fairly and have adjudicated the Commission's violation of its own statute.
This is a leading be kind sort of situation and not a normal 15 (8).
Justice John Paul Stevens: Excuse me.
You described from patent violations on the long haul short haul relationship rates and your opponent, the ICC points out this tariff are quite large and may contain thousands of changes in rates.
Roughly, how many changes are there in this tariff and how many violations do you think they're patent, is it like 1% of it or 50% of it?
Mr. John H. Caldwell: Our -- the gentleman who did the checking of these tariffs for us called me at home last night and said that he stopped counting at 500.
Justice John Paul Stevens: Out of how many?
Mr. John H. Caldwell: Out of the all the various points involved and --
Justice John Paul Stevens: Thousands?
Mr. John H. Caldwell: How many?
Justice John Paul Stevens: Hundreds of thousands?
Mr. John H. Caldwell: There may be but not hundred of thousands, possibly thousands, there's a good chance that were thousands of violations in the tariff.
Justice John Paul Stevens: How many did you identify in your pleadings?
Mr. John H. Caldwell: We'd -- we identified in our pleadings before the Commission five specific documented examples showing the tariff rate showing the points involved.
Justice John Paul Stevens: You identified five specific examples out of several thousands.
Mr. John H. Caldwell: And we said they were illustrative of hundreds.
We made that allegation.
Our point is Your Honor, had we not even made that allegation documented it.
The Commission had an obligation to at least look at the allegation and tell us where right or wrong.
It was very simple, the Commission, Mr. Justice White, all it had to do was issue an order saying we find the allegations frivolous or incorrect.
For the following reasons --
Justice Byron R. White: So that you say that anytime you alleged a statute, so-called statutory violation whether it's four or some other statutory violation that the Commission must adjudicated in its suspension proceeding.
Mr. John H. Caldwell: Not our position, Your Honor, our position is that where --
Justice Byron R. White: You must investigate and then adjudicate it.
Mr. John H. Caldwell: No, our position is not if any allegation whatsoever is made that the rate might have some unlawfulness and that the Commission must --
Chief Justice Warren E. Burger: We'll resume at 1 o'clock.
You may continue Mr. Caldwell.
Mr. John H. Caldwell: Thank you Mr. Chief Justice.
I'd like to take the remaining amount of time to answer the question that was raised by Mr. Justice White before the recess and also deal on a few other remaining points.
Mr. Justice White inquired whether under our interpretation statute it would be necessary for the ICC issue or render findings on any violations alleged in the Interstate Commerce Act, that is not our position.
Justice Byron R. White: However, have rulings on legal points?
Mr. John H. Caldwell: No, the point here Your Honor is that this is not just an allegation of unlawfulness that can be rendered or determined in a post effectiveness investigation.
This was an allegation that the tariffs were not -- could not be allowed to take effect because of the clear language of Section 4 which proscribes any of these tariffs in becoming effective.
Justice Byron R. White: Any allegation that would have that effect, you say the ICC would have to rule on?
Mr. John H. Caldwell: Our case is based on the Section 4 prohibition --
Justice Byron R. White: Yes.
Mr. John H. Caldwell: -- which is organic to the Interstate Commerce Act and to that extent, the Commission cannot let rates take effect which contain those violations on their face.
Now as far as other violations of the Act are concerned --
Justice Byron R. White: Well, are you saying that they could not -- are you saying they just have to investigate or they could not – that they could not refuse to suspend?
Mr. John H. Caldwell: Or sh -- where they should not have committed the rates to take effect.
Justice Byron R. White: So you're saying --
Mr. John H. Caldwell: So it should have either rejected or suspended but at a minimum they should have ordered a Section 15 (8) investigation to determine if the allegations without.
Justice Byron R. White: Their refusal to suspend then is reviewable for the same reason as well as --
Mr. John H. Caldwell: That's -- that's correct.
Justice Byron R. White: Well, I --
Mr. John H. Caldwell: As far as but that issue need not be reached in this case because the lower court was not reviewing the no suspend decision but the no investigate decision.
So the question of whether the future court could intervene --
Justice Byron R. White: What if you were wrong on your argument with respect to the refusal to suspend?
What if the Commission could refuse to suspend despite your allegation of the Section 4 violation?
Would you say that Commission nevertheless erred in refusing to investigate?
Mr. John H. Caldwell: Yes, we would say that Your Honor.
They had to, they should have suspended or rejected because of the obvious proscription in Section 4 (1) and the Court should be allowed to intervene to correct that unlawfulness but short of that the Commission should have investigated if it had any doubt in its mind that these violations existed in the face of the tariffs.
Justice William H. Rehnquist: Isn't judicial review of refusal to suspend covered by Arrow and SCRAP?
Mr. John H. Caldwell: Refusal to suspend in the sense that the agency is acting within its discretionary judgment, Your Honor or applying transportation judgmental factors to the record.
It was not obliged to do that here.
This was an abuse of statutory authority that comes within the exception to the Arrow rule as recently announced by this Court in the TAPS case in the opinion written by Mr. Justice Brennan.
Justice Potter Stewart: Right.
Mr. John H. Caldwell: So what we're asking here is that the Court examine this case in light of the exception to Arrow and SCRAP recently announced in the TAPS case as well as left for remaining determination in footnote 22 in SCRAP one.
In which the court held at that time that it would leave for future determination whether or not exercise of failure to exercise the suspension power was an abused to statutory authority.
Now with respect to the patents --
Justice Potter Stewart: Now that would lead them against Congress in the way --
Mr. John H. Caldwell: Yes, sir.
And Oestereich and other such cases in allowing judicial intervention where there's a clear abuse of statutory authority.
Now with respect to the question of whether or not the tariffs contained departures, I call your attention to the reply by the Railroads at page 272 of the joint appendix as opposed to their later reply at page 292 of the appendix.
In the first reply, they provided a tariff citation in the specific demonstration that there was not a departure.
In the second reply, with all due respect on page 292, there was various mumbo jumbo and legal language to the effect that there might be departures.
But if they were, they should be excused.
With respect to the Commission's ability to verify the departures, the Commission's rules provide that that an application should be filed in advance or with the filing of a tariff that contains departures and provides it under normal circumstances, that application should be filed 30 days in advance of the filing of the rate and only after investigation under the statute and finding the special case can such rates such as this be to take effect.
The Railroads could have filed an application under Section 4.
They have months ahead of the time they filed these rates and that application could have subject to disposition by the Commission pursuant to the clearly required standards of Section 4.
Now, with respect to the availability of the Section 13 relief provision, in SCRAP two, it was held that whatever else remains for consideration of Section 13 proceeding, the adequacy of the Commission's determination of an environmental consideration did not remain.
It's our position in this case that whatever else remain for determination in the Section 13 case, the Commission's earlier failure to resolve the issue of illegality on the face of the tariffs and its failure to proscribe the tariff from becoming effective could not be determined in the subsection Section 13 case on the same rational it was employed in SCRAP 2, I --
Chief Justice Warren E. Burger: Your time has expired now.
Mr. John H. Caldwell: I appreciate that sir.
And that Mr. Spencer will take the remaining time.
Argument of Harold E. Spencer
Chief Justice Warren E. Burger: Mr. Spencer.
Mr. Harold E. Spencer: Mr. Chief Justice and may it please the Court.
From the standpoint of my clients the crucial issue in this case simply comes down to whether or not the case is -- the Court is going to decide our case on the basis of the facts and the merits of our case whether it's going to extend the Arrow principle to cover every situation where the Commission allows a rate to become effective regardless of circumstances and regardless of how arbitrary the Commission's action is.
I think it's quite obvious that this case is not like Arrow and that the Arrow rational does not apply to this case.
The tariffs here are unlawfully discriminatory per se.
There is no primary jurisdiction question involved.
No question of reasonableness.
There's no question of injunction pending in investigation.
We did not ask for the investigation that was the theory of the Department of Justice.
There are no disputed issues of fact.
The tariff in the case was about four or five pages long in an answer to a question raised earlier by Mr. Justice Rehnquist.
I think it is obvious that the issue could have been decided on the basis of the tariff, the protest and the reply.
A straight question of law is involved.
And on the straight question of law, no ruling by the Commission is necessary and if they had made a ruling it would not be binding on the courts.
In other words, this is a question of law which has right for a review at this time.
We say that it is wrong to extend the Arrow principle to cover this type of situation for reasons which I state it is wrong for the shippers who are involved in this case and it would be wrong for shippers in other cases where the situation represented by the amicus in this case whose case in the Court of Appeals for the District of Columbia is being delayed pending a decision in this case.
The petitions here argue that a decision for the shippers would create an undue burden on the courts.
I submit that this is a diversionary argument.
This case is not a typical 15 (8) case.
It is a very limited type of situation and it would occur very infrequently.
It would not occur any more often than the Alaska Pipeline type of situation would occur.
But more importantly, I submit that it is not the function of the courts to disregard the merits of individual cases in order to make life easier for the Commission of Railroads or even for the courts.
The law clearly imposes on the Commission certain obligations and clearly grants two shippers the right of access to the courts to correct arbitrary action, abuse of discretion and other unlawful action.
Justice William H. Rehnquist: But isn't the question, is when that access is granted?
Mr. Harold E. Spencer: Yes, and I believe it's very clear that in this type of situation, that access should be granted when the Commissioner refuses to suspend and investigate.
And I shall like to make it clear that I draw no distinction between suspension and investigation.
The Commission in this case should have taken whatever action is necessary to prevent these tariffs from becoming effective.
Now, normally that would be rejection of the tariffs but suspension accomplishes the same thing.
So I say that either of those actions is reviewable and I believe for the very reasons that you heard here today, that the shippers need the protection of the courts more now than on any time of commission's history when the Commission is now engaged in a program of defect of deregulation without regard of the statutory standards.
Before our act which you've heard a good deal about today did not repeal Section 2 of the Interstate Commerce Act.
Section 2 prohibits personal discrimination in freight rates and I submit that if the railroads would attempt to raise rates for an individual and not for a corporation, or for women and not for men, no one could suggest that that could not be judicially reviewed at the time those rates became effective.
This case is no different because the whole history of the Commission says that when the shipper furnishes the car, he should be compensated by the payment of allowance which is what was done in this case.
The petitioners here have studiously avoided any discussions of the merits of the case.
And I suggest that if they could refute to merits, they would have attempted to do so.
Their principle argument is that we can make this same argument in the complaint case to the Commission and that is true.
And that is true, we can.
But I think that that is meaningless and irrelevant in this situation because why should be -- we be required to do that?
What do we need to know that we don't know already?
There aren't any disputed issues of fact.
We know that the railroads made a 20% increase in railroad cars but not in private cars.
We knew that the rates before the increase were the same and we know that the shippers whose furnished private cars are compensated by a published allowance as required by Section 15 paragraph (15) of the Act as it formally existed.
Justice Lewis F. Powell: Counsel, it's that clear, I think?
But why would you not promptly start a Section 13 complaint proceeding?
Mr. Harold E. Spencer: Because I don't -- because we want to settle this principle and I think in this case, what we had here was the seasonal rate.
We had a rate was in effect for three months and I believe that we were entitled to raise the issue in this case as to the right of the railroads to put this in discriminating between the two different types of cars.
Now by the time the Court would reach the decision on the merits, the suspension problem had become moot because the rates were already in and were out.
So, I think the issue could be settled but it is an extremely important question of principle.
Now, they also say in the reply brief, they cite some cases which they say refutes our argument.
This is not correct.
They say that in the you are rendered to arraign case that the Commission found lawful, rates of a million dollars a year and railroad furnished cars and $700,000.00 and shipper furnished cars.
That's an incorrect statement.
The Commission found the rates in a railroad equipment to be unlawful.
As a matter of fact, they found the whole rent a train scheme to be unlawful in so far as the railroads cars are concerned.
The other cases they cite, the other two cases arose during the period of federal control and more one and none of the cases was an allowance involved.
In the allowance, we don't deny that the railroads can publish rates in private cars, and that those rates would be different or could be different from the rates in railroad cars so long as they don't pay an allowance.
There are rates to that effect today but what we say is that they can't do both.
That they can't pay an allowance and then make a discriminatory rate on top of it and there is no case in the history of the Commission that says that they can up to this time.
So all we really want to do is to have the opportunity to show the reviewing court that the tariffs were in fact discriminatory as a matter of law.
And if we can't show that, we're out of court.
But if we can show it, then I think we're entitled of the relief that we ask for.
And I would just like in closing to make one remark that I believe that the question of reviewability and the question of remedy selected by the Court below are really two different questions.
The court below correctly held that the Commission's action was reviewable.
Now, as I say when the case was first presented to the court below, they denied the TRO but they denied it on the merits.
They didn't deny it because of failure to have jurisdiction to hear that kind of an argument or to hear that kind of a case.
They denied it on the balance of the equities.
But I think that on the question of reviewability that it is very clear that that is reviewable.
Now, I suggested that since a straight question of law is involved that this Court can decide that question and simply tell the Eighth Circuit to order refunds in the case.
I think also it would be quite appropriate for this Court simply to tell the Eighth Circuit to go ahead and decide the question of law.
But I don't think an investigation is necessary as I say, we didn't ask for it.
Justice John Paul Stevens: Do you contend they should decide the question of law just on the pleadings?
Mr. Harold E. Spencer: Yes.
Justice John Paul Stevens: No evidence?
Mr. Harold E. Spencer: Yes.
Justice John Paul Stevens: Just on the basis of the tariff itself?
Mr. Harold E. Spencer: On the basis of the facts that we put up and request on the law that we submitted to the Eighth Circuit.
We submitted the brief on the legal issue.
Thank you Your Honor.
Rebuttal of Mark L. Evans
Chief Justice Warren E. Burger: Very well.
You have about seven minutes remaining.
Mr. Mark L. Evans: Thank you.
Both Mr. Caldwell and Mr. Spencer have argued that the Commission is required to suspend these rates to stop them from taking effect.
The argument that before the Court of Appeals made did not prevail.
The Court of Appeals ordered only that the Commission must investigate it.
Did not hold, did not order, the Commission take the steps that the respondents here asked for.
The only issue before the Court is the question of the reviewability the suspension order they failed across petition in our view the issue, the argument that they make are simply impermissible at this stage.
Beyond that it's simply not the case that the issues that were raised by the shippers in this case could be intuited on the face of the papers before the Commission.
What was filed were supplements to very large tariffs, I'm told not quite large as the big one but almost as large as the big one with thousands of individual rates dealing with thousands of points in the southern territory.
The supplements themselves were relatively small but they converted all the rates in the broader tariffs into 20% larger numbers.
The allegations of Fourth Section violations that is long and short haul violations were presented by the shippers in their protest filed three weeks after the tariffs themselves were filed an allegation was made that the tariffs these thousands of rates reflected hundreds of violations.
They cited one example, that one example respondents have now admitted on briefs was an error.
Two days before the effective date, they submitted the supplementary petition attaching five more examples again saying that these are just exemplary pervasive violations.
Well, the Commission has limited resources itself.
The shippers who were most effective were able to dig up a total of six one of which was wrong in a period up to the second day before the effective date.
Justice Byron R. White: And suppose the allegations have been they said there are hundreds and they are as follows and they listed 500 of them and they were as clear as the bells.
What about the -- which should the Commission do then could they refuse to suspend and refuse to investigate?
Mr. Mark L. Evans: Yes, the Commission could.
I don't think the Commission would.
In our view, there's no requirement that a rate of the Commission.
But even the rate of the Commission believes is clearly likely to be unclear to be unlawful.
Justice Byron R. White: Is the United States and Commission's position the same in the Trans Alaska case?
Mr. Mark L. Evans: Yes.
Justice Byron R. White: And you remember the footnote?
Mr. Mark L. Evans: Yes, I do.
Justice Byron R. White: You gain and the Trans Alaska case?
Mr. Mark L. Evans: Yes, indeed.
Justice Byron R. White: Is that still your position?
Mr. Mark L. Evans: Sure.
Justice Byron R. White: If they say -- this footnote says in this Court the United States is modified that position and now apparently concedes that courts have jurisdiction in view of the suspension orders to the limit and extent necessary to ensure that such orders do not overstep the Commission's authority.
Mr. Mark L. Evans: Where the Commission has suspended a rate that it has no authority to suspend or at least the allegations that it has not authority to suspend.
Justice Byron R. White: Do you say it's different if you say it's alleged that you have no authority to refuse to suspend?
Mr. Mark L. Evans: Well, I say it's different if the allegation goes to the Commission's exercise of the suspension discretion and acknowledge discretion.
Justice Byron R. White: These allegations say they have absolutely no authority to suspend in the circuit --- to refuse to suspend in these circumstances?
Mr. Mark L. Evans: That's right.
Justice Byron R. White: That's the allegation?
Mr. Mark L. Evans: Yes, I think that arguably is a reviewable issue.
So long as the remedy sought is not a direction to suspend or direction to investigate, or direction to exercise discretion.
Justice Byron R. White: Is this -- you say you've been absolutely consistent and are you remaining consistent?
Mr. Mark L. Evans: I believe so.
The point I'm making is that --
Justice Byron R. White: I thought you said that it didn't make any difference what you said how illegal it was alleged the rates were claimed to be under Section 4, the Commission could refuse to suspend them.
Mr. Mark L. Evans: Yes.
The Commission --
Justice Byron R. White: Without having any -- without their being reviewability?
Mr. Mark L. Evans: Yes, sir.
The Commission in my judgment does not have an obligation to suspend even in the face of tariffs that it finds are apparently unlawful.
It ordinarily will take action of that sort but is not required to do so.
Justice Byron R. White: Well, --
Mr. Mark L. Evans: And the argument that the analogous argument --
Justice Byron R. White: Do you think if they refuse to suspend it's reviewable or not?
Mr. Mark L. Evans: I think if the argument --
Justice Byron R. White: Then -- then reviewable?
Mr. Mark L. Evans: -- that the Commission refused has declined to consider whether to suspend.
If it has refused to exercise a discretion it lawfully has I think that the Court may review the refusal to exercise the discretion and an order of the Commission to exercise its discretion.
That is the analogy to the TAPS case.
Justice Byron R. White: I know but it's alleged here that the Commission has absolutely no discretion to refuse to suspend in this case when it so clearly claimed that there's a violation of Section 4 on the face of the tariffs.
That's the allegation.
Mr. Mark L. Evans: That's the allegation.
It did not fails --
Justice Byron R. White: And you don't think that is within the reviewability concession in TAPS?
Mr. Mark L. Evans: I expected, it could be argued that it's not but the point is it is not even before the court.
The that -- the argument was made in the Eighth Circuit and was not accepted by the Eighth Circuit.
The Eighth Circuit held only that the Commission was required to investigate and order the investigation.
Justice Byron R. White: Well, I would think you would make the same argument between investigation and suspension.
Mr. Mark L. Evans: Well, the argument that the petitioners of the respondents have been making is that these tariffs were facially unlawful.
The Commission had no alternative but to stop them from taking effect.
Chief Justice Warren E. Burger: I take your argument to be -- to have an emphasis on the limited order of the Eighth Circuit related only to investigation.
Mr. Mark L. Evans: That's correct.
What the Commission was faced with here were tariffs that were -- it was not even clear to the Commission on the face of it that this were not plainly paper rates.
It's not clear to these shippers; in fact they've never really alleged that they're going to be hurt by these rates.
It's an ideal occasion for remitting shippers to their Section 13 remedies which are available for someone who's actually injured.
I want to correct one other point and that is that the Section 13 remedy is available and the Commission's precedent so hold to raise and adjudicate Section 4 issues.
And if a violation of Section 4 is found in a Section 13 complaint proceeding, damages are available.
The measure of damages may draw upon concepts of reasonableness and discrimination but damages are available even if the only violation is alleged in the Section 4 violation.
Our reply brief points that out.
Justice John Paul Stevens: Mr. Evans, do you understand the Court of Appeals to have ordered a complete investigation of the entire tariff or just to the five instances that they say were finally unlawful?
Mr. Mark L. Evans: It's -- it's ambiguous, quite frankly.
I've read it a number of different ways, a number of different times.
I think it can be read either way.
The Court's emphasis throughout its opinion is on the alleged violations of Section 4 but it also speculates towards the end of its opinion that there may also be a problem with Sections 2 and 3 involving private cars and railroad cars that Mr. Spencer alluded to.
Justice John Paul Stevens: And do you take the position of these five examples are or are not unlawful.
Mr. Mark L. Evans: The Commission has not determined it.
I don't have a position on it.
It's simply not been resolved.
Justice Byron R. White: So your submission then that even if they are patently violative of Section 4, the Commission they reach is suspended?
Mr. Mark L. Evans: The Commission can -- yes, the Commission can make a judgment whether it agrees that they are patently unlawful and even so whether it needs to take the action that the respondents have asked for.
Justice Byron R. White: I know but they never -- there's not a murmur as to whether they think they are patently unlawful or not?
Mr. Mark L. Evans: What in the --
Justice Byron R. White: Do you think they are patently unlawful?
I just thought (Voice Overlap) --
Mr. Mark L. Evans: The Commission did not ignore these violations, these alleged violations.
Justice Byron R. White: I thought you just answered my Brother Stevens that the Commission has not passed on it?
Mr. Mark L. Evans: It has not resolved it but it alluded to the fact that there were alleged Section 4 violations.
Justice Byron R. White: But not patently?
Mr. Mark L. Evans: Well, the allegations were that they were patent.
So Commission obviously didn't see it that way.
Justice Byron R. White: Suppose the Commission thought they were patent, could they still refuse to suspend?
Mr. Mark L. Evans: Yes.
Justice Byron R. White: Yes, that's what --
Mr. Mark L. Evans: I dont think the language --
Justice William H. Rehnquist: Now, the language itself says “may” doesn't it?
Mr. Mark L. Evans: That's right.
Chief Justice Warren E. Burger: Thank you gentlemen.
The case is submitted.