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05/19/87 Illinois Commerce v. Interstate Commerce

May 19, 1987

ILLINOIS COMMERCE COMMISSION, ET AL., PETITIONERS

v.

INTERSTATE COMMERCE COMMISSION AND UNITED STATES OF AMERICA, RESPONDENTS; ILLINOIS CENTRAL GULF RAILROAD



UNITED STATES COURT OF APPEALS FOR THE DISTRICT OF COLUMBIA CIRCUIT

Company, Intervenor 1987.CDC.201

Petition for Review of an Order of the Interstate Commerce Commission.

APPELLATE PANEL:

Wald, Chief Judge, Silberman, Circuit Judge, and Revercomb,* District Judge.

DECISION OF THE COURT DELIVERED BY THE HONORABLE JUDGE WALD

Petitioners challenge the Interstate Commerce Commission's decision to exempt from regulation all written trackage rights agreements not made in the context of rail consolidation proceedings. See 1 I.C.C.2d 270 (1985). Because we conclude that the ICC did not act improperly by granting this broadscale exemption, we deny the petition for review. I. BACKGROUND

Trackage rights agreements are arrangements by which one railroad company allows another to use its railroad tracks. These agreements can take one of two different forms. The owner railroad may allow the tenant railroad to serve freight customers along the leased track or may limit the tenant railroad to use of the track from one point to another, withholding permission to serve customers along the route. The ICC refers to the first kind of agreement as "extension trackage rights transactions" and the latter kind as "bridge trackage rights transactions," See, e.g., 1 I.C.C.2d at 278.

Despite the restriction against serving local shippers along the track, "bridge agreements" are often attractive to railroads because they allow a carrier to create new routes for long-distance customers. For example, if a railroad already has trackage rights from New Orleans to Memphis and from St. Louis to Chicago, the railroad might seek an agreement with a railroad owning tracks from Memphis to St. Louis. Even if the tenant railroad acquired only bridge rights, it now could offer its New Orleans customers carriage to Chicago. The ICC refers to such long-distance freight that passes over the tracks from Memphis to St. Louis as "overhead traffic." Trackage rights agreements can also provide railroads with more efficient routes. If, for example, the railroad has been traveling from New Orleans to Memphis by way of Birmingham, Alabama, trackage rights agreements that allow the railroad to go from New Orleans to Jackson, Mississippi, and from Jackson to Memphis provide the railroad with a more direct route from New Orleans to Memphis.

The Interstate Commerce Act provides for ICC regulation of all trackage rights agreements. See 49 U.S.C. § 11343(a)(6). Under the Staggers Act of 1980, however, the ICC "shall exempt a person, class of persons, or a transaction or service" from regulation when the ICC finds that regulation "(1) is not necessary to carry out the transportation policy of

The ICC granted the exemption for trackage rights agreement pursuant to § 10505. It concluded that neither extension nor bridge agreements needed regulation to carry out the rail transportation policy enumerated in 49 U.S. § 10101a or to protect shippers from abuse of market power, and that bridge agreements were limited in scope. The main thrust of the Commission's reasoning in support of these conclusions was that trackage rights agreements did not cause anticompetitive effects but indeed tended to enhance competition, when they affected it at all. See 1 I.C.C.2d at 276 (discussing rail transportation policy); id. at 278

Various parties petitioned the ICC to reconsider its decision. The Commission denied their petitions, relying on the reasoning contained in its original decision. See Joint Appendix at 166. The petitioners argue before this court that the decision to exempt trackage rights agreements from regulation was improper under the standards of 10505(a) and that the ICC exceeded its statutory authority by relying on the availability of subsequent revocation proceedings under § 10505(d), when making its initial exemption decision under § 10505(a). II. ANALYSIS

The petitioners attack the ICC's determination that bridge agreements are "of limited scope" and that neither extension nor bridge agreements need regulation to protect shippers from abuse of market power. The petitioners do not bring an independent challenge under the rail transportation policy clause of § 10505(a). Rather, the petitioners contend only that "if the Court should set aside the I.C.C.'s findings concerning 'market abuse,' the I.C.C.'s findings under the rail transportation policy should be set aside as well." See Brief of Petitioners at 30. Since we conclude that the ICC acted properly under the "abuse of market power" clause of the statute, by the terms of petitioners' own argument we have no occasion to question further the validity of the exemption under the rail transportation policy of clause § 10505(a).

Because we conclude that the ICC acted properly under the "abuse of market power" clause, we also need not address petitioners' "limited scope" challenge. The "limited scope" and "abuse of market power" requirements for an exemption are disjunctive: as long as the ICC properly concludes that regulation is unnecessary to protect shippers from abuse of market power, it need not find that the exempt transaction or service is "of limited scope." In this case, the Commission made clear that it would have granted the exemption even if it had not made ...


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