568 F.

2d 887

STATE OF NEW YORK, Petitioner,

and
S & E Shipping Corporation, Intervenor,
v.
UNITED STATES of America and Interstate Commerce
Commission,
Respondents,
and
Commonwealth of Pennsylvania et al., Intervenors.
No. 212, Docket 76-4085.

United States Court of Appeals,

Second Circuit.
Argued Nov. 8, 1976.
Decided March 2, 1977.
Rehearing Denied June 6, 1977.
Rehearing En Banc Denied June 6, 1977.

Patrick McEligot, Washington, D. C. (Louis A. Lefkowitz, Atty. Gen.,

Ruth Kessler Toch, Solicitor Gen., State of New York, Albany, N. Y.,
Bryce Rea, Jr., Leo C. Franey, and Rea, Cross & Knebel, Washington, D.
C., on the brief), for petitioner State of New York.
Robert J. Ables, Washington, D. C. (Arthur N. Chagaris, Washington, D.
C., on the brief), for intervenor S & E Shipping Corp.
Hanford O'Hara, Assoc. Gen. Counsel, I.C.C., Washington, D. C.
(Thomas E. Kauper, Asst. Atty. Gen., Lloyd John Osborn, Atty., Dept. of
Justice; Robert S. Burk, Acting Gen. Counsel, I.C.C., Washington, D. C.,
on the brief), for respondents United States and Interstate Commerce
Commission.
C. Harold Peterson, Minneapolis, Minn., and Peter A. Greene,
Washington, D. C. (Louis A. H. Pepper, New York City, on the brief), for
intervenors Soo Line Railroad Co. and ConAgra, Inc.

Robert P. Kane, Atty. Gen., Commonwealth of Pennsylvania; Edward J.

Morris, Counsel, John B. Wilson, Asst. Counsel, Pennsylvania Public
Utility Commission, Harrisburg, Pa.; Gordon P. MacDougall, Spec. Asst.
Counsel, Washington, D. C., filed a brief for intervenors Commonwealth
of Pennsylvania and Pennsylvania Public Utility Commission.
Before HAYS, ANDERSON and TIMBERS, Circuit Judges. *
TIMBERS, Circuit Judge:

On this petition to review, petitioner State of New York (New York) challenges
an order of the Interstate Commerce Commission (the Commission), 351 I.C.C.
470 (1976),1 which approved certain "unit train rates" of two railroads for the
transportation of wheat from points in the midwest to Martins Creek,
Pennsylvania.

The essential questions presented by the petition to review are (1) whether the
Commission's order failed to protect certain lake carriers against allegedly
discriminatory and prejudicial rail rates in violation of 3(4) of the Interstate
Commerce Act (the Act);2 and (2) whether the Commission's order failed to
protect the lake carriers, the Port of Buffalo and other Buffalo interests against
such rail rates which allegedly would divert wheat traffic away from Buffalo in
violation of 3(1) of the Act.3 A further question with respect to this Court's
jurisdiction is raised by respondents' motion partially to dismiss the petition to
review for lack of timeliness.

For the reasons below, we hold that we have jurisdiction to review the order of
the Commission; we affirm the Commission's order that the proposed rates do
not violate 3(1) of the Act; but, with respect to the 3(4) claim, we set aside
the order and remand the case to the Commission for the limited purpose of
determining whether the proposed rates discriminate against the lake carriers as
connecting lines.

I. FACTS AND PRIOR PROCEEDINGS

4

After the Commission's initial report and order of June 18, 1974, 346 I.C.C.
814 (1974), the State of New York was granted leave to intervene to
consolidate and represent various New York interests which had opposed the
proposed rates in question. New York's position on the instant petition to
review is supported by intervenor S&E Shipping Corporation.

Respondents are the United States and the Commission. Their position is
supported by intervenors Commonwealth of Pennsylvania, Pennsylvania Public
Utility Commission, Soo Line Railroad Company (Soo) and ConAgra,
Incorporated (ConAgra). Soo and Erie Lackawanna Railway Company (Erie),
supported by ConAgra, were the original proponents of the proposed rates.4

The proceedings before the Commission involved proposed unit train rates 5 on
wheat transported in bulk over an all rail route from Minneapolis and St. Paul,
Minnesota (Twin Cities) and Duluth, Minnesota, and Superior, Wisconsin
(Twin Ports), to Martins Creek, Pennsylvania. The shipper, ConAgra, has its
mill at Martins Creek.6

The following straight line diagram shows the rail routes as well as the lake
route referred to below:

NOTE: OPINION CONTAINS TABLE OR OTHER DATA THAT IS NOT

VIEWABLE

The proposed rates are summer and winter rates from Twin Ports and Twin
Cities to Martins Creek. Soo carries the wheat from the points of origin to
Chicago. Erie carries the wheat from Chicago to Martins Creek.

10

The summer rate from each point of origin (72.25 cents per hundredweight) is
the lower rate. It applies during the season when the Great Lakes are open to
navigation by lake carriers. It is designed to compete with rates on the lake-rail
route from Twin Ports to Buffalo by lake carrier and thence by rail to Martins
Creek.

11

The winter rate is higher (88 cents per hundredweight). It applies only during
the season when the Great Lakes are closed to navigation. It is designed to
compete with rates on an all rail route, used by shippers when the Great Lakes
are closed, from Twin Ports and Twin Cities via Buffalo to Martins Creek.

12

The proposed rates were protested by various shipper, port, carrier, and
community interests.7 By an order dated October 31, 1973, the Commission
instituted an investigation of the lawfulness of the rates and suspended their
operation through May 31, 1974. The Commission's initial order of June 18,
1974, 346 I.C.C. 814, found the summer and winter rates from Twin Ports and
the winter rate from Twin Cities to be lawful; but it found the summer rate from
Twin Cities to be unduly preferential to Twin Cities and unduly prejudicial to

Twin Ports in violation of 3(1) of the Act.8

13

Following the Commission's initial order, New York was granted leave to
intervene as stated above. Both sides thereupon filed petitions for
reconsideration. On June 27, 1975, the Commission denied reconsideration of
its order with respect to the three rates it had approved; but it granted
reconsideration of its order with respect to the unlawfulness of the Twin Cities
summer rate and "reopened (the proceeding) on the present record."
Meanwhile, all four rates remained in effect. Upon reconsideration, the
Commission issued its final order of January 27, 1976, 351 I.C.C. 470,
affirming the lawfulness of the three approved rates and reversing its prior
finding that the Twin Cities summer rate was unlawful. In short, all rates were
approved and the investigation was discontinued.

14

It is the Commission's final order of January 27, 1976 to which the instant
petition to review is addressed, invoking the jurisdiction of this Court under 28
U.S.C. 2342(5) (Supp. V., 1975), amending 28 U.S.C. 2343 (1970). New
York seeks to have the summer and winter rates from both Twin Ports and
Twin Cities declared unlawful on the ground that they violate 3(1) and 3(4)
of the Act.

II. JURISDICTION
15

Before turning to the merits of the petition to review, we are presented with a
threshold question with respect to this Court's jurisdiction. The Commission
and intervenors Soo and ConAgra (referred to as "respondents" in this section
of our opinion) claim that, because of the asserted lack of timeliness of the
petition to review, we have jurisdiction to review only the Twin Cities summer
rate, not the other three rates. We disagree.

16

It is common ground that a petition to review a final order of the Commission

must be filed within sixty days of the entry of the order, 28 U.S.C. 2344
(1970), and the timeliness requirement is jurisdictional. See, e. g., Microwave
Communications, Inc. v. FCC, 515 F.2d 385, 389 & n. 24 (D.C. Cir. 1974).

17

Respondents argue that the sixty day period began to run on August 5, 1975,
the date of service of the Commission's June 27, 1975 order. That order denied
petitioners' request for reconsideration of the Commission's initial decision of
June 18, 1974 which approved three of the four rates here in question.
Respondents contend that the denial of reconsideration was a final order with
respect to the three rates which earlier had been approved, in that the denial of

reconsideration "impose(d) an obligation, den(ied) a right, or fix(ed) some legal

relationship as a consummation of the administrative process." C & S Air Lines
v. Waterman Corp., 333 U.S. 104, 113 (1948); see Isbrandtsen Co. v. United
States, 211 F.2d 51, 55 (D.C. Cir.), cert. denied sub nom. Federal Maritime
Board v. United States, 347 U.S. 990 (1954). Respondents stress particularly
that "a final order need not necessarily be the very last order." Isbrandtsen Co.
v. United States, supra,211 F.2d at 55.
18

Respondents' argument would be persuasive if all the petitions for

reconsideration had been denied in all respects. Respondents contend that the
order of June 27, 1975 terminated the proceedings as to all but the Twin Cities
summer rate as completely as if the Commission had not agreed to reconsider
that rate. Whatever might be said as to this theoretical contention, it wholly
ignores the essential nature of the proceedings. The rates were proposed as an
interrelated set of rates, not as independent tariffs. Although the Commission
denied reconsideration of the three rates previously approved and granted
reconsideration of the one previously disapproved, all four rates continued in
effect pending reconsideration. The rate initially found to be unlawful was not
cancelled, and new schedules were not filed.

19

Moreover, the Commission itself seems to have viewed the proceeding as still
pending as a whole, notwithstanding its denial of reconsideration. In its final
report and order of January 27, 1976, it discussed all the rates and affirmed and
adopted the conclusions previously made with respect to the three rates as to
which reconsideration technically had been denied. This was necessary because
the Twin Cities summer rate was tied to the Twin Ports summer rate.9

20

As a practical matter, it would have been judicially imprudent for us as a

reviewing court to consider piecemeal the initial order while the proceeding as
a whole remained pending before the Commission. Indeed the Commission
acknowledges in its brief before us that "(s)hould a court action be commenced
under these circumstances, the Court could, in its discretion, decide to stay
proceedings pending completion of the ancillary administrative proceedings."
That hardly comports with our view of finality.

21

Even assuming that petitioners could have filed a petition to review the order
approving three of the four rates immediately after denial of their petition for
reconsideration, a point upon which we express no view, we are satisfied that
they were justified in awaiting the outcome of the proceeding as a whole.
Respondents have not shown that they were prejudiced by the passage of time.
Especially in view of the deeply rooted policies of the federal courts against
piecemeal appeals and in favor of allowing administrative proceedings to run

their course without interference from the courts, we hold that the instant
petition to review was timely with respect to the four rates in question.10III.
SECTION 3(4) CLAIM
22

Turning to the merits of the petition to review, we shall consider first the claim
that the Commission's order failed to protect certain lake carriers against
allegedly discriminatory and prejudicial rail rates in violation of 3(4) of the
Act.11

23

Section 3(4) prohibits carriers from "discriminat(ing) in their rates, fares, and
charges between connecting lines. . . ." The term "connecting line" as used here
means "the connecting line of any carrier subject to the provisions of (part I) or
any common carrier by water subject to (part III)."

24

The Commission did not reach the question whether the proposed unit train
rates discriminate against the lake carriers because it found that the lake
carriers are not entitled to the protection of 3(4). 346 I.C.C. at 852. The
Commission ruled that the lake carriers are outside the scope of the protection
of 3(4) because "(s)o far as the record shows, protestant's members are not
regulated carriers and, therefore, not entitled to protection under section 3(4)."
The Commission also ruled that the lake carriers are not "connecting lines"
within the meaning of the statute.

25

We hold that the Commission erred with respect to both branches of its 3(4)
ruling.12

(A) Exempt Water Carriers Are Entitled to Section 3(4) Protection

26
27

The basis of the Commission's ruling on this issue is unclear. Its ruling and
supporting reasoning is confined to the following two sentences:

28
"Insofar
as is pertinent to the issues in this proceeding, a connecting line is defined
as a common carrier by water subject to part III of the act. So far as the record
shows, protestant's members are not regulated carriers and, therefore, not entitled to
protection under section 3(4)." 346 I.C.C. at 852.
29

Intervenor Soo, in its brief before us, argues that the Commission meant that
there was no evidence in the record that the protesting lake carriers are subject
to part III of the Act. The Commission, however, was fully aware that some
water carriers on the Great Lakes are subject to Part III.13

30

We interpret the Commission's ruling on this issue to mean that carriers

exempted from regulation when they carry commodities in bulk 14 are not
"subject to part III" for purposes of protection under 3(4). We disagree. Just
because a water carrier is exempt from regulation when it transports
commodities in bulk does not mean that it is not subject to part III.15

31

We hold that the water carriers here involved on the Great Lakes are entitled to
the protection of 3(4) although their carriage of wheat in bulk exempts them
from regulation under 303(b) of the Act. See ICC v. Mechling,330 U.S. 567,
576 (1947) (Black, J.); ICC v. Inland Waterways Corp., 319 U.S. 671, 697
(1943) (Black, J., dissenting) (an earlier proceeding which eventually led to the
Mechling decision); Valley Line Co. v. United States,390 F.Supp. 435, 438-39
(W.D.Pa.1975) (three-judge court); Seatrain Lines, Inc. v. United States, 233
F.Supp. 199, 210 (D.N.J.1964) (three-judge court); Atchison, Topeka & Santa
Fe Ry. v. United States, 194 F.Supp. 438 (D.Kan.1961) (three-judge court);
Arrow Transportation Co. v. United States,176 F.Supp. 411, 419
(N.D.Ala.1959) (three-judge court), aff'd sub nom. State Corporation
Commission v. Arrow Transportation Co., 361 U.S. 353 (1960) (per
curiam).16(B) Meaning of "Connecting Line"

32

The Commission ruled that, even if protestants were entitled to the protection
of 3(4), there would be no merit to their argument. The Commission went on
to state, "Section 3(4) is designed to discourage unequal treatment of
connecting carriers at a given point. The proposed all-rail route passes well
south of Buffalo and Erie does not extend unequal treatment at Buffalo as
between carriers." 346 I.C.C. at 852. In its brief before us, the Commission
supplemented this with the following explanation: "The all-rail route here
involved does not reach Buffalo, the point at which New York says its
connection within the meaning of section 3(4) takes place. The fact that Erie
serves Buffalo on other routes does not change this conclusion." We disagree.

33

Respondents concede that a common point of interchange is not a prerequisite

to the applicability of 3(4).17 Rather, they argue that somewhere along the all
rail route there must be a point of interchange with the water carrier. In other
words, so the argument goes, the point need not be the same as the point of
interchange with a connecting rail line, but the respective rail and water
interchanges at least must be located on the same route. We decline the
invitation to adopt this construction of the statute. Respondents have not cited
any authority for their interpretation. Petitioner's interpretation, on the other
hand, finds persuasive support in Seatrain Lines, Inc. v. United States, supra,18
and in the Commission's own decision in Ingot Molds, Ohio & Pa. to Cypress,

Texas, 349 I.C.C. 102 (1975). 19

34

We hold, on the facts of this case, that the lake carriers are connecting lines,
because they serve a point also served by the railroad so that interchange at that
point can be, and in fact is, effected. See note 19 supra.

(C) Discriminatory Rates

35
36

The Commission, having decided that the lake carriers are not "connecting
lines" within the meaning of 3(4), and that they would not be protected by
that section even if they were, did not reach the question whether the rates were
discriminatory.20 We therefore remand the case to the Commission for the
limited purpose of determining whether the proposed rates discriminate against
the lake carriers as connecting lines.

IV. SECTION 3(1) CLAIM

37

Petitioner claims that the Commission erred in failing to protect the lake
carriers, the Port of Buffalo and other Buffalo interests from prejudicial and
discriminatory rail rates and practices allegedly designed to divert wheat traffic
away from Buffalo in violation of 3(1) of the Act. Petitioner's argument in
support of this claim is in two branches, one of which we decline to rule upon
because it was not presented to the Commission, and the other we reject on the
merits.

(A) Prejudice to Water Carriers

38
39

This branch of petitioner's 3(1) argument (upon which we decline to rule) is

based on the same facts which it urged in support of its claim of discrimination
against the lake carriers under 3(4). See note 20, supra. Here New York
argues, on behalf of the lake carriers, that Erie's failure to provide a unit train
rate from Buffalo to Martins Creek is prejudicial to the lake carriers in violation
of 3(1). Primary reliance is placed on Lake Carriers' Association v. United
States, 399 F.Supp. 386 (N.D.Ohio 1975) (three-judge court).

40

This branch of petitioner's argument was not presented to the Commission for
consideration in connection with its initial order or its order on any of the
petitions for reconsideration. It appears to have been raised before us as an
afterthought. In contrast to what we have said above regarding the 3(4) claim
and in contrast to what was said in the Lake Carriers' case, 399 F.Supp. at 39596, we decline to rule upon that issue here. The Supreme Court has admonished
that "(a) reviewing court usurps the agency's functions when it sets aside the

administrative determination upon a ground not theretofore presented and

deprives the Commission of an opportunity to consider the matter, make its
ruling, and state the reasons for its action." Unemployment Compensation
Commission v. Aragan, 329 U.S. 143, 155 (1946). We find no exceptional
circumstances which would impel us to consider the issue here despite the
failure to present it to the Commission.
(B) Prejudice to Buffalo Shippers
41
42

As the other branch of its 3(1) argument, New York argues, as did the
Buffalo flour milling interests in the proceedings before the Commission, that
they are unduly prejudiced while ConAgra is unduly preferred by Erie's failure
to publish a unit train rate from Twin Ports and Twin Cities to Buffalo that is
competitive with the open season lake rates. The rate Erie makes available to
ConAgra during the open season is water-competitive. Petitioner argues that
the Buffalo shippers are prejudiced because the open season unit train rate
available to them is higher than, and therefore not competitive with, the lake
vessel rate (43cents as opposed to 26.67cents). Petitioner contends that equal
treatment requires that open season water-competitive rates be available to
Buffalo as well as to Martins Creek.21

43

The requisite elements of a 3(1) violation have been stated succinctly as

follows:

44 must be shown (1) that there is a disparity in rates, (2) that the complaining
"(I)t
party is competitively injured, actually or potentially, (3) that the carriers are the
common source of both the allegedly prejudicial and preferential treatment, and (4)
that the disparity in rates is not justified by transportation conditions. The
complaining party has the burden of proving the presence of the first three factors
and the carriers have the burden of justifying the disparity, if possible, in connection
with the fourth factor." Chicago & Eastern Ill. R.R. v. United States, 384 F.Supp.
298, 300-01 (N.D.Ill.1974) (three-judge court) (per curiam), aff'd mem., 421 U.S.
956 (1975).
45

See Louis Dreyfus Corp. v. United States, 401 F.Supp. 919, 926-27 & n.4
(S.D.N.Y.1975) (three-judge court).

46

On the facts of this case we find petitioner's claim to be particularly weak. The
72.25cents open season unit train rate to Martins Creek is about 68% Higher
than the 43cents unit train rate which is available to Buffalo shippers. The rail
distances from the origins to Martins Creek exceed the rail distances to Buffalo
by slightly over 200 miles or about 20%. The unit train rate to Buffalo therefore

is less expensive per mile than the unit train rate to Martins Creek.
Furthermore, Buffalo has available to it the original water rate with which the
all rail rate from Twin Ports and Twin Cities to Martins Creek is intended to
compete. Petitioner nevertheless contends that the availability of a watercompetitive all rail rate to Martins Creek gives ConAgra an undue advantage
over the Buffalo mills because Martins Creek will have two alternative means
of transportation from which to choose.22 The Commission rejected petitioner's
claims as speculative. We agree.
47

We hold that petitioner has not shown a disparity in rates; nor has it shown that
it will be injured by the unavailability of an open season water-competitive unit
train rate to Buffalo.
To summarize:

48

We grant the petition to review; we affirm the Commission's order that the
proposed rates do not violate 3(1) of the Act; but, with respect to the 3(4)
claim, we set aside the order and remand the case to the Commission for the
limited purpose of determining whether the proposed rates discriminate against
the lake carriers as connecting lines.

Pursuant to 0.14 of the Rules of this Court, this appeal is being determined by
Judges Anderson and Timbers who are in agreement on this opinion. Judge
Hays heard argument on November 8, 1976, but has not had an opportunity to
participate further in the case because of temporary illness

The Commission's final order of January 27, 1976, 351 I.C.C. 470, which is the
subject of the instant petition to review, as well as the Commission's initial
order of June 18, 1974, 346 I.C.C. 814, were both entered in the Commission's
Investigation and Suspension Docket No. 8899, Unit Train Rates on Wheat,
Minn. & Wis. To Martins Creek, Pa
Both orders were entered by Division 2 of the Commission. The final order was
entered by Division 2 acting as an Appellate Division. In the interest of brevity
we refer throughout this opinion to "the Commission", unless otherwise
specified.

Section 3(4) of the Interstate Commerce Act, 49 U.S.C. 3(4) (1970),

provides:
"All carriers subject to the provisions of this chapter shall, according to their

respective powers, afford all reasonable, proper, and equal facilities for the
interchange of traffic between their respective lines and connecting lines, and
for the receiving, forwarding, and delivering of passengers or property to and
from connecting lines; and shall not discriminate in their rates, fares, and
charges between connecting lines, or unduly prejudice any connecting line in
the distribution of traffic that is not specifically routed by the shipper. As used
in this paragraph the term 'connecting line' means the connecting line of any
carrier subject to the provisions of this chapter or any common carrier by water
subject to chapter 12 of this title."
3

Section 3(1) of the Interstate Commerce Act, 49 U.S.C. 3(1) (1970),

provides:
"It shall be unlawful for any common carrier subject to the provisions of this
chapter to make, give, or cause any undue or unreasonable preference or
advantage to any particular person, company, firm, corporation, association,
locality, port, port district, gateway, transit point, region, district, territory, or
any particular description of traffic, in any respect whatsoever; or to subject any
particular person, company, firm, corporation, association, locality, port, port
district, gateway, transit point, region, district, territory, or any particular
description of traffic to any undue or unreasonable prejudice or disadvantage in
any respect whatsoever: Provided, however, That this paragraph shall not be
construed to apply to discrimination, prejudice, or disadvantage to the traffic of
any other carrier of whatever description."

The rates went into effect on June 1, 1974. By the time of the Commission's
initial decision, the rates had increased. For convenience the Commission
continued to refer to the rates as "proposed" even though they were in effect and
it used the figures applicable to the rates as originally proposed. 346 I.C.C. at
815-16. We shall do the same in this opinion

Unit train rates generally "provide for the movement of a train comprised of
shipper or consignee owned cars from one specified loading point to one
consignee at one specified destination, and the return of the empty cars to the
same origin at a specified rate per ton." Lake Carriers' Association v. United
States, 399 F.Supp. 386, 388-89 (N.D. Ohio 1975). Unit train rates are to be
distinguished from trainload and carload rates. The unit train system is a form
of shuttle, here between the midwest loading points and the shipper's plant at
Martins Creek. The cars in this case are not owned by the shipper, ConAgra,
but by Soo

ConAgra seems to be regarded as something of an upstart by the milling

industry for locating its operation at Martins Creek rather than at Buffalo,

which is considered the milling capital of the East. ConAgra chose to locate at
Martins Creek in order to be closer to the bakeries in the East Coast markets in
New York, New Jersey and Pennsylvania. It is to these markets that ConAgra
ships its flour by motor carrier and the Buffalo millers ship their flour by rail
7

The protestants included, among others, lake carriers, milling companies,

groups representing various Buffalo interests, and the Penn Central
Transportation Company

The Commission found the Twin Cities summer rate unlawful because it was
the same as the Twin Ports summer rate (72.25 cents) and did not include the
cost of transporting wheat from Twin Cities to Twin Ports. The latter cost
would make transportation from Twin Cities more expensive if the wheat were
being transported by lake carrier to Buffalo. The Commission held that the
parity of rates between Twin Ports and Twin Cities, during the season when the
rail rates were supposed to be competitive with lake rates, was unduly
preferential to Twin Cities and unduly prejudicial to Twin Ports in violation of
3(1). "A lawful rate from the preferred origins would be 88 cents which is
substantially the product (sic) of the local 15-cent rate from Twin Cities to
Twin Ports and the proposed 72.25 cent rate beyond." 346 I.C.C. at 855

Under 17(7) of the Interstate Commerce Act, 49 U.S.C. 17(7) (1970), an

appellate division of the Commission is empowered to reverse, change, or
modify the original decision "in any respect". The appellate division apparently
is not limited to the issues on which reconsideration was granted. The
Commission can exercise "continuing jurisdiction to suspend, reconsider or
modify its orders . . . even in the absence of a petition for reconsideration . . . ."
Resort Bus Lines, Inc. v. ICC, 264 F.Supp. 742, 745 (S.D.N.Y.1967) (threejudge court) (Kaufman, J.)
This power to reconsider the entire record is exemplified by the proceedings
below. In its final report and order, the Commission discussed the Twin Ports
rates as well as the Twin Cities summer rate. It identified the rates in issue as
those from Twin Ports and Twin Cities at both the summer and winter levels,
recited the arguments against all the rates, and specifically adopted the prior
findings and conclusions as to the Twin Ports rates in order to extend them to
the Twin Cities summer rate. 351 I.C.C. at 471, 473, 478-79. In conclusion it
stated: "Upon reconsideration, we find the proposed unit-train rates from Twin
Ports and Twin Cities to Martins Creek to be just and reasonable and not
otherwise unlawful." Id. at 479. Despite its earlier denial of reconsideration, the
Commission appears to have reconsidered all four rates.

10

By analogy, a grant of summary judgment as to fewer than all claims or parties

is not a final, appealable judgment unless the district judge determines that
there is "no just reason for delay" pursuant to Fed.R.Civ.P. 54(b). See, e. g.,
Melancon v. Insurance Co. of North America, 476 F.2d 594 (5 Cir. 1973) (per
curiam); 9 Moore's Federal Practice P 110.07, at 108 n. 6 (Supp.1975)
We see no reason to encourage the filing of "protective" petitions for judicial
review at various points preceding completion of administrative proceedings.
See generally Outland v. CAB, 284 F.2d 224, 228 (D.C. Cir. 1960).
11

We reject respondents' contention that this issue is not properly before us.
Although neither New York nor the Lake Carriers' Association (one of the
original protestants) included this claim in their petitions for reconsideration,
that does not preclude our review of the issue under United States v. L. A.
Tucker Truck Lines, 344 U.S. 33, 36-37 (1952). In Tucker the point urged on
review had never been presented to the administrative agency. Here the
question whether the proposed rates are unlawful under 3(4) was presented to
the Commission and was expressly ruled upon in the initial decision of June 18,
1974. 346 I.C.C. at 852. We have the benefit of the Commission's views on the
issue. See Great Falls Community TV Cable Co. v. FCC, 416 F.2d 238, 239 (9
Cir. 1969); Lake Carriers' Association v. United States, supra, 399 F.Supp. at
395-96. Under the circumstances, and especially since a petition for
reconsideration by the agency is not a prerequisite to judicial review, 704 of
the Administrative Procedure Act, 5 U.S.C. 704 (1970), we shall consider the
issue

12

Respondents now suggest a third ground for denying the lake carriers the
protection of 3(4), namely, that the proposed rates are not covered by that
section because the traffic is "specifically routed" to the all rail route by the
shipper, ConAgra, and therefore comes within the statute's exception for
specifically routed traffic. Aside from being a post hoc rationalization for
agency action, Burlington Truck Lines, Inc. v. United States, 371 U.S. 156, 168
(1962), the argument misinterprets the statutory language. The shipper routing
exception to 3(4) is designed to protect a railroad against charges of undue
prejudice when its reason for not giving certain traffic to a particular connecting
line is that it is following a shipper's instructions to route the traffic to another
connecting line. The exception does not provide a defense to a charge of rate
discrimination. Were this not so, 3(4) would be a dead letter, for shippers
obviously would be willing to route traffic in order to avail themselves of lower
rail rates

13

Included in the Certified Index to the Record is the protest originally filed on
behalf of the Great Lakes Ship Owners Association and its individual members.
Its opening sentence identifies the protestants as "common carriers by water

holding certificates of public convenience and necessity issued under Part III of
the Interstate Commerce Act . . . ." The Commission's own public records show
that certificates were issued to the non-exempt carriers. Also included in the
Certified Index to the Record is the protest of the Lake Carriers' Association,
one of whose members is shown by the Commission's records to hold a
certificate. Under these circumstances and in view of the importance of
navigation on the Great Lakes, we cannot assume that the Commission was
unaware that there are water carriers on the Great Lakes subject to Part III
14

Section 303(b) of the Interstate Commerce Act, 49 U.S.C. 903(b) (1970), in

relevant part provides:
"Nothing in this chapter (Part III of the Interstate Commerce Act, 49 U.S.C.
901-23) shall apply to the transportation by a water carrier of commodities in
bulk . . . ."

15

The Commission asserts in its brief that "(t)he only connecting carriers are
Great Lakes water carriers which are not subject to Part III" and that "(t)his
point is vigorously confirmed by S&E Shipping in its brief to this Court." What
we find confirmed in S&E Shipping's brief is that the Commission cannot
regulate water carriers carrying commodities in bulk; and that the Commission
repeatedly has sought repeal of the 303(b) exemption, but not that this
removes such water carriers from the protection of 3(4)

16

Of these cases, only Valley Line explicitly discusses the issue. The question
there was whether exemption from the terms of part III under 303(e) of the
Act, 49 U.S.C. 903(e)(1), makes a carrier not "subject to part III" within the
meaning of 5(2) of the Act, 49 U.S.C. 5(2), which, like 3(4), is in part I of
the Act. Valley Line held that a water carrier exempt from part III nevertheless
is entitled to the protection of 5(2), "relating to protection of the public
interest with respect to mergers and concentration of control over carriers . . . ."
390 F.Supp. at 438. The court reasoned that, although the terms of 5(2), as
defined in 5(13), 49 U.S.C. 5(13), protect water carriers "subject to chapter
12 of this title (part III of the Act)", exemption from part III does not mandate
exclusion from the protection of 5(2) because the policies of part I "are of
general importance, and quite distinct from the specific regulatory requirements
with respect to water carriers established by part III. . . ."
While the other cases cited do not discuss the issue expressly, in all of them
except the Inland Waterways/Mechling cases the courts applied 3(4) to
invalidate rail rates that discriminated against water carriers transporting
commodities in bulk. The bulk commodity in all the cases except Seatrain was
grain.

Mechling was decided under 307(d) of the Act, 49 U.S.C. 907(d) (1970).
But in a general discussion of the legislative history of the Transportation Act
of 1940, which added part III to the Act and extended 3(4) to water carriers,
the Court noted by way of dictum that " 3(4) of the pre-existing Act . . . was
amended by the 1940 Act specifically to include water carriers, such as these
barge lines, within the definition of connecting carriers." 330 U.S. at 576. As in
the instant case, the barge lines in Mechling carried grain in bulk and therefore
would have been exempted from part III. Mr. Justice Black, in his dissenting
opinion in the earlier proceeding (Inland Waterways ), stated that 3(4) had
been violated. 319 U.S. at 671.
17

To the extent that language in Western Pacific Rys. v. United States, 382 U.S.
237, 245-46 (1965), is to the contrary, we believe it can be explained by the
particular facts and the concerns of the parties in that case. In Western Pacific,
an intermediate carrier on a through route complained under 3(4) of
discrimination by a railroad with which the complainant did not connect
physically. Another railroad which had not complained linked the complainant
to the allegedly discriminating railroad. The Court rejected the Commission's
narrow construction which would have required a complainant itself to "make a
direct connection with the discriminating carrier, or be part of a through route
that already includes the carrier." 382 U.S. at 242. In order to make plain that
the facts of that case satisfied the requirements of 3(4), the Court held "that to
qualify as a 'connecting line', in the absence of physical connection, a carrier
need only show that it participates in an established through route, making
connection at the point of common interchange, all of whose participants stand
willing to cooperate in the arrangements necessary to eliminate the alleged
discrimination." Id. at 245 (emphasis added). The holding simply described the
facts of the case and declared them to be sufficient to qualify the complainant as
a "connecting line"
In the instant case there is a direct physical connection at Buffalo between the
lake carriers and Erie. The Court's language about a point of common
interchange, referring to the through route of which the non-connecting carrier
in Western Pacific was a part, is inapplicable to this case, as respondents
concede. Indeed, Western Pacific stands for the proposition that the term
"connecting lines" in 3(4) should not be construed restrictively.

18

In Seatrain the all rail route originated at Sandow, Texas. It had connections
with other rail lines at Marjorie, Texas; Longview, Texas; Texarkana,
Arkansas; and one of three alternate gateways to the East (St. Louis, Mo.; East
St. Louis, Ill.; or Flinton, Ill.). It finally arrived at the shipper's aluminum
fabricating plants at Cressona, Pa

The rail-water-rail route also originated at Sandow, Texas, and arrived

ultimately at Cressona, Pa. The first rail link was at Marjorie, Texas, as on the
all rail route. Thereafter the routes diverged. The next connection was at Texas
City, Texas, where the railroad cars were loaded aboard the water carrier for
shipment to a port at Edgewater, New Jersey, whence they were carried by rail
to Cressona.
Thus, in Seatrain, as in the instant case, there was no point of interchange with
the water carrier along the all rail route. It was sufficient that the water carrier
"connected" with the rail carrier, in the common sense meaning of that word.
19

The parties sharply disagree in their interpretations of the Ingot Molds decision.
There three routes were involved, two all rail and one barge-rail. There was an
interchange between barge and rail lines on one of the all rail routes (at
Houston, Texas) but not on the other all rail route. The Commission held that
the complaining water carrier was a connecting line and that the railroads had
violated 3(4). Respondents contend that the decision was based on the fact
that the barge line interchanged with the rail line on one of the all rail routes.
We believe the Commission would have reached the same result had there been
only the two non-intersecting routes. The decision would be pointless if it
meant that the railroads could continue to maintain discriminatory rates as long
as they routed traffic over the non-intersecting all rail route (via Corsicana,
Texas). See diagram at 349 I.C.C. 107. The Commission itself stated that the
relevant "court decisions (make clear) that a water carrier serving a point also
served by a railroad is a connecting carrier within the meaning of section 3(4)
of the (A)ct if interchange of traffic can be effected . . . ." Id. at 111; see also id.
at 112. See generally Oil Country Iron or Steel Pipe, Midwest to Okla. & Tex.,
326 I.C.C. 511 (1966), 332 I.C.C. 540 (1968), aff'd sub nom. Atchison, Topeka
& Santa Fe Ry. v. United States, 300 F.Supp. 1351 (N.D.Ill.1969) (three-judge
court)

20

Petitioner contends that it made out, and that the Commission's own findings
indicate, 346 I.C.C. at 829, 830, a prima facie showing of a 3(4) violation.
Petitioner argues in its brief:
"(C)ost studies accepted by the Commission showed that Erie's yield under the
reduced rate on the all rail route was 18 percent of fully distributed rail costs in
rail-owned cars and 14 percent in shipper-owned cars whereas Erie's yield in
the rail leg of the water route was approximately four to six times higher 73
percent of fully distributed rail costs in rail-owned cars and 90 percent for
shipper-owned cars. The evidence also shows that Erie would receive 40 cents
to transport one hundred pounds of wheat 340 miles from Buffalo to Martins
Creek but that it would receive only 47 cents per hundred pounds during the

open navigation season and 57 cents per hundred pounds during the closed
navigation season to transport wheat 910 miles from Chicago to Martins
Creek."
21

During the closed season the unit train rate to Martins Creek is set at a level to
compete with the unit train rate to Buffalo (43cents); so petitioner does not
challenge the closed season rate

22

Petitioner emphasizes the importance of having an alternative when shipping

on the Great Lakes is interrupted, the closed season is unusually long, or a
shipper is unable to obtain needed vessels. Petitioner also argues that ConAgra
will have the advantage of being able to shop for the lower transportation cost
because any adjustments in rail rates to reflect changes in lake rates necessarily
will not be implemented as quickly as increases in lake rates, especially because
they require notice and are subject to Commission review