SPRECHER, Circuit Judge.
In this case, we review the decision of the Interstate Commerce Commission ("ICC") to allow the Baltimore and Ohio Railroad ("B&O") to abandon a railroad line. We find that the ICC's decision was arbitrary and capricious. Further, we find that, under the circumstances of this case, the parties should have been allowed the opportunity for cross-examination regarding supplementary evidence received by the ICC.
This is an action to review decisions the ICC issued in Docket No. AB-19 (Sub-No. 27), Baltimore and Ohio Railroad Company Abandonment Between Flora and Sangamon Junction In Clay, Effingham, Fayette,
By application filed March 17, 1975, the B&O sought a certificate of public convenience and necessity permitting abandonment of a 103.29 mile line of railroad between Flora, Illinois and Sangamon Junction, Illinois ("Flora line"), pursuant to § 1(18) of the Interstate Commerce Act ("IC Act"), 49 U.S.C. § 1(18)-(22), now codified at 49 U.S.C. § 10903-07.
The B&O gave notice of its application to abandon the Flora line as required under the IC Act and the ICC's regulations. The abandonment was opposed by various shippers, public officials, and other interested persons, including the petitioners here: the Illinois Department of Transportation, the State of Illinois and the Illinois Commerce Commission, United Transportation Union, and B&O Concerned Citizens Committee (a group composed of 34 shippers, farm interests, and local community organizations). In October, 1976, the ICC referred the abandonment application to an administrative law judge for hearing and an initial decision. Hearings, in which the parties had the right of cross-examination, were held during 1977.
In an initial decision, served in November, 1977, and made after eleven days of hearings, the law judge
On appeal by the B&O, the ICC's Division I reversed. In a seven page decision, Division I accepted the law judge's restated figures but rejected without explanation the law judge's conclusion that those restated figures were insufficient to support the B&O's argument that operating the line caused a financial burden which was more substantial than the impairment of public convenience caused by the abandonment.
Petitioners sought administrative review of the Division I decision. The ICC denied all parties' petitions for administrative review. Petitioners then filed for judicial review of the ICC's decision in this court.
Just prior to the due date for its reply brief, however, the ICC requested a remand of this matter on the grounds that the Division I decision may have contained material error. On January 31, 1979, this court granted the ICC's motion to remand. On remand, the full Commission found that it was unable to decide the matter because the record lacked adequate cost and financial data. The data in the record reflected the financial results of the operation of the line in calendar years 1974, 1975, and the first six months of 1976. The ICC directed the B&O to supplement the information by providing revenue and avoidable cost information for the years 1976, 1977, and 1978. The B&O filed such a supplementary statement. The petitioners appealed the decision to consider this supplemental evidence. The ICC denied those appeals. The petitioners were not afforded the right of cross-examination regarding the supplementary evidence.
On March 3, 1980, the ICC issued its final decision, affirming the June, 1978, decision of Division I granting the abandonment. That ICC decision is the subject of this appeal. The petitioners launch three general arguments against the ICC's final decision. First, petitioners argue that the ICC should not have accepted supplementary evidence for the years 1976-78. Second, petitioners argue that the ICC decision is not supported by substantial evidence in the record and is arbitrary and capricious. Third, petitioners argue that the ICC should have afforded the parties the opportunity for cross-examination regarding the supplementary evidence received. We find that: the ICC properly received the supplementary evidence; the final decision was arbitrary and capricious; and the parties should have been afforded the opportunity for cross-examination.
We begin with the use of supplementary evidence. In an abandonment application, the applicant has the burden of proof to show that abandonment of the rail line is consistent with the present and future public convenience and necessity. 49 U.S.C. § 10904(b) (1978). The petitioners argue that the fact that the ICC was unable to decide the abandonment case on the basis of the 1974-76 data proves, as a matter of law, that the B&O failed to carry its burden of proof.
Petitioners base their argument on two grounds. First, they point out that the ICC's abandonment regulations require the filing of financial results and other evidence for two calendar years prior to the filing of the abandonment application. Second, they argue that financial results of operations after the filing of an abandonment application are inherently nonrepresentative. This second argument is relevant to the weight to be given to the evidence, and is discussed in Part IV of this decision. But even if the evidence is nonrepresentative, we are not persuaded that the ICC cannot, as a matter of law, take additional evidence.
ICC regulations require an applicant for abandonment to submit operating data with regard to the two years prior to the filing of the abandonment application. 49 C.F.R. § 1121.32(c), (d)(2), (4), (5). But nothing in the statute, regulations, or case law prohibits the ICC from requesting and accepting new evidence when, because of the administrative process described above, the evidence before it was three years out of date.
Furthermore, the Supreme Court has held that reopening of a case for further evidentiary hearing is a matter entrusted to an agency's broad discretion and has declined to interfere with an agency's judgment. See Bowman Transp. v. Arkansas-Best Freight System, 419 U.S. 281, 294-95, 95 S.Ct. 438, 446, 42 L.Ed.2d 447 (1974); American Farm Lines v. Black Ball Freight, 397 U.S. 532, 540-41, 90 S.Ct. 1288, 1293, 25 L.Ed.2d 547 (1970); I.C.C. v. Jersey City, 322 U.S. 503, 516-17, 64 S.Ct. 1129, 1135, 88 L.Ed. 1420 (1944). For the above reasons, we are unable to find the ICC's action in requesting and receiving supplementary evidence was improper.
The petitioners' second argument is actually two arguments: that the ICC's final decision was unsupported by substantial evidence in the record and was arbitrary and capricious. To consider whether we can reach these arguments, we must first determine the appropriate standard of review. See Citizens To Preserve Overton Park v. Volpe, 401 U.S. 402, 413-14, 91 S.Ct. 814, 822, 28 L.Ed.2d 136 (1971). The standards of judicial review are set forth in § 706 of the Administrative Procedure Act ("APA"), 5 U.S.C. § 706, which states that a "reviewing court ... shall hold unlawful and set aside agency action, findings, and conclusions found" not to meet six separate standards. Of these six standards, four apply to all cases. Any agency action is to be set aside if it is (1) "arbitrary, capricious, an abuse of discretion, or otherwise not in accordance with law," or if the action fails to meet: (2) constitutional, (3) statutory, or (4) procedural requirements. 5 U.S.C. § 706(2)(A), (B), (C), (D). The remaining two standards only apply to certain narrow situations. Standard (5) provides that action which is "unsupported by substantial evidence" is to be set aside only in "a case subject to sections 556 and 557 of this title or otherwise reviewed on the record of an agency hearing provided by statute". 5 U.S.C. § 706(2)(E). Finally, (6) a court must set aside agency action which is "unwarranted by the facts to the extent that the facts are subject to trial de novo by the reviewing court." 5 U.S.C. § 706(2)(F).
Since the "arbitrary and capricious" standard applies to all cases, it is clear we must review the ICC's final decision by this standard. But it is not clear whether we also are to review that decision by the "substantial evidence" standard. The touchstone of whether the substantial evidence standard applies is whether this case is (1) subject to sections 556 and 557 of the APA or (2)
Section 557 of the APA only applies when a hearing is required by § 556; § 556 sets forth the rules for hearings required by §§ 553 and 554. Section 553 applies to rule making and § 554 applies to adjudication. Since this case involves an adjudication,
We now turn to the railroad abandonment statutes, 49 U.S.C. §§ 10903-04. Section 10903(a) states that the ICC can grant abandonment only if it finds that the "present or future public convenience and necessity" requires or permits the abandonment. 49 U.S.C. § 10903(a). Section 10903(a) then states that, in making this finding, the ICC shall consider whether the abandonment will have a serious, adverse impact on rural and community development. Section 10904(c)(1) provides that the ICC, in considering the public convenience, "shall, on petition, and may, on its own initiative, begin an investigation to assist it." 49 U.S.C. § 10904(c)(1). As to the use of a public hearing in such an investigation, the statute provides: "An investigation may include public hearings.... The hearing may be held on the request of an interested party or on the initiative of the Commission." 49 U.S.C. § 10904(c)(1). Because of the use of the word "may", it appears that the ICC is not required by statute to hold a hearing on an abandonment application. Thus, the requirement for the use of the substantial evidence test is not met.
In this case, the parties did not argue the applicability of the substantial evidence test. The ICC apparently conceded the test was applicable. ICC Br. at 12. Moreover, we have discovered a recent railroad abandonment case where the substantial evidence standard was used by the reviewing court. Concord Township, et al. v. United States, 625 F.2d 1068, 1072-73 (3d Cir. 1980). But the Concord Township court did not discuss its decision to use the substantial evidence test. It may have been that the question there was also not disputed by the parties. Based on our analysis, we have doubts regarding the applicability of the substantial evidence standard. Because this issue was not litigated, we decline to use that standard and we review the ICC's decision solely in terms of the "arbitrary and capricious" standard.
Under the arbitrary and capricious standard, the scope of our review, although relatively narrow, is to be "searching and careful." Bowman Transp. v. Arkansas-Best Freight System, 419 U.S. 281, 285, 95 S.Ct. 438, 441, 42 L.Ed.2d 447 (1974). This court, of course, cannot substitute its judgment for that of the ICC. Id. But we must consider whether the ICC's decision "was based on a consideration of the relevant factors and whether there were any clear errors of judgment. Id., quoting Overton Park, 401 U.S. at 416, 91 S.Ct. at 823. "The agency must articulate a `rational connection between the facts found and the choices made.'" Id., quoting Burlington Truck Lines v. United States, 371 U.S. 156, 168, 83 S.Ct. 239, 245, 9 L.Ed.2d 207 (1962).
Two important considerations in defining the degree of precision required in an agency's statement of reasons are first, whether the decision is "legislative" or "adjudicative" and, second, whether the agency's final decision differs from the decision made by its fact-finder. With regard to the first consideration, to the extent that an agency is dealing with broad "legislative" policy questions, it need not respond in detail to all issues. But when confronted with "adjudicative" questions based on a determination of particular facts, the agency must clearly address the specific legal and factual issues raised. Harborlite Corp. v. I.C.C., 613 F.2d 1088, 1092 (D.C.Cir.1979). In the case at bar, this abandonment application is an adjudicative issue involving specific financial information of the operations of the Flora line.
The second consideration regarding the degree of precision required in an agency decision is whether that decision differs from the decision of the agency's factfinder. See N.L.R.B. v. P.P.G. Industries, Inc., 579 F.2d 1057, 1058 (7th Cir. 1978). In the case before us, the ICC relies on facts determined by the law judge, but then draws a conclusion diametrically opposed to that of the law judge. Although the agency certainly may draw a differing conclusion, it is important for the agency to clearly explain the nature and rationale of its differing conclusion.
The ICC seems to argue that it is not required to explain its departure from the
Although § 557(b) of the APA states that when an agency reviews an initial decision of a presiding officer, it has all the powers that it would have if it were making the decision in the first instance, it does not state that the agency need not clearly and precisely explain the reason for its different conclusion. Indeed, § 557(c) specifically requires a statement of reasons for an agency's findings and conclusions.
The cases cited by the ICC are equally unavailing. In fact, the Interboro decision, selectively quoted by the ICC, directly supports the petitioners. To be sure, the court stated that an agency may reject an examiner's findings, even though not clearly erroneous. 388 F.2d at 499. But the Interboro court emphasized that a reviewing court must look much more critically at such a decision than a decision consistent with an examiner's findings. Id. Accord, N.L.R.B. v. P.P.G. Industries, Inc., 579 F.2d 1057, 1058-59 (1978).
The ICC relies on Colorado Interstate Gas Co. v. Federal Power Commission, 324 U.S. 581, 65 S.Ct. 829, 89 L.Ed. 1206 (1945), but the situation there did not even involve a difference between the Commission and a fact-finder. Indeed, the Court refused to overturn findings which were quite summary because those findings had incorporated by reference the staff's exhibits on allocation of costs. 324 U.S. at 595, 65 S.Ct. at 836. There was no suggestion of disagreement with the staff's findings or the conclusions to be drawn from those findings. The ICC's reliance on other cases cited above is equally misplaced.
Having summarized the appropriate scope of review, we now proceed to consider whether the ICC's decision was arbitrary and capricious. The statutory standard governing the abandonment decision is whether the present or future public convenience and necessity requires or permits the abandonment. 49 U.S.C. § 10903(a). In making this determination, the ICC must balance the present and prospective need for the line against any burden on interstate commerce from continued operation of the line. Colorado v. United States, 271 U.S. 153, 168-69 (1926). The burden of proof as to public convenience and necessity is specifically placed by the IC Act upon the railroad applying for abandonment. 49 U.S.C. § 10904(b). Simply stated, the fundamental contested issue in this proceeding has been whether the Flora line has been and will continue to be operated at a financial loss.
On remand from this court, the ICC issued a three page opinion which concluded that continued operation of the Flora line is a burden on interstate commerce and that this burden outweighs any inconvenience to shippers. 360 I.C.C. at 681. In making its final decision, the ICC had before it the findings and conclusions of the law judge and of its Division I as well as supplemental evidence. The ICC had admitted that its Division I decision might have been erroneous and could not be relied upon. The ICC
The ICC final decision calculating these losses made conclusions regarding four issues: rehabilitation costs, maintenance expenses, system line financial information, and the impact of abandonment on the B&O's net operating income. Petitioners primarily
In its final decision, the ICC found that from 1974 through 1978, the B&O had maintenance-of-way expenses averaging $3,583 per mile. The ICC stated without elaboration that these expenses were "reasonable".
There are two major problems with the ICC's finding of "reasonableness". First, the finding consists solely of a conclusory statement. The ICC did not state why the expenses are reasonable.
Intervenor B&O attempts to rationalize the ICC's decision on a ground relating to track maintenance expense which was not relied on by the ICC. B&O argues that had it spent more for maintenance during 1974-75, i.e., had it performed "normalized maintenance"
First, this court cannot accept appellate counsel's post hoc rationalizations for agency action. If an agency's order is upheld, it must be on the same basis articulated in the order by the agency itself. F.P.C. v. Texaco, Inc., 417 U.S. 380, 397, 94 S.Ct. 2315, 2326, 41 L.Ed.2d 141 (1974); Burlington Truck Lines, Inc. v. United States, 371 U.S. 156, 168-69, 83 S.Ct. 239, 245, 9 L.Ed.2d 207 (1962); S.E.C. v. Chenery Corp., 332 U.S. 194, 196, 67 S.Ct. 1575, 1577, 91 L.Ed. 1995 (1947). Second, as stated in the Division I opinion, the ICC's policy is not to consider "normalized maintenance" expenses in lieu of actual expenses. 354 I.C.C. at 799-800, No. AB-19 (Sub-No. 27) at 2.
Petitioners next challenge the ICC's findings regarding the impact of proposed abandonment. The ICC authorized abandonment because it found that abandonment would reduce the "drain" on B&O's net operating income caused by operation of the Flora line. 360 I.C.C. at 683. It concluded that the B&O was sustaining a loss from operating the line and that the line did not generate and, because future traffic was speculative in nature, would not generate, sufficient traffic to justify further operations. Id. In reaching these conclusions, the ICC relied on the supplementary evidence submitted by the B&O indicating that the Flora line created net operating losses of $32,695, $492,279, and $276,374 in 1976, 1977 and 1978, respectively. Id.
Petitioners raise several challenges to these conclusions by the ICC. First, petitioners argue that results of operating the line subsequent to the filing of the abandonment application are, by their very nature, nonrepresentative of normal operations on the line. In support of this argument, they correctly point out that the ICC's abandonment regulations require the filing of financial results for two calendar years prior to the filing of the abandonment application, 49 C.F.R. § 1121.32(c), (d)(2), (4), (5), and argue that the ICC's requirement recognizes that such "pre-application" operations are usually reasonably representative of normal operations on the line.
The ICC responds that data after the abandonment application is as reliable as pre-application data because, under the ICC's abandonment regulations, it is known in advance of the application that a line is going to be subject to abandonment. In support of that argument, the ICC states
Petitioners also argue that post-application data is inherently nonrepresentative because, in the process of applying for abandonment, a railroad becomes committed to abandonment and provides poorer service than previously. Although we find that financial information for the years subsequent to the abandonment application can be considered in evidence, as discussed in Part II, we also recognize obvious problems with the representativeness of that evidence. In this case, that financial information will reflect data of operations on the line after the B&O told shippers it was abandoning the line; after it filed and vigorously sought approval of the abandonment application; after Division I had approved abandonment; and after that approval was published, but not yet implemented, pending judicial review. Petitioners argue that while an abandonment application is pending, shippers are hesitant to expand facilities and rail shipments for fear that rail service might be lost. Petitioners also argue that a railroad seeking abandonment is unlikely to continue the quality of service provided before the abandonment application and that such poorer quality rail service would further discourage rail traffic. The fact that these arguments are substantial is demonstrated by the fact that, in the initial decision, the law judge found that the B&O had diminished services and had, in effect, caused its own losses on the Flora line. ICC No. AB-19 (Sub-No. 27), slip op. at 1074, 1075.
Second, petitioners argue that the record on reopening confirms the nonrepresentative character of the post-application financial data. As discussed earlier, petitioners argue that maintenance expenses increased after the application because the B&O was forced to undertake a major track rehabilitation project in order to cure the effects of neglected track maintenance during the period 1968-75. Petitioners also argue that the B&O has continued to discourage service while this matter has been under appeal.
These challenges to the post-application financial evidence are vital and serious. In its decision reopening the matter, the ICC stated that it would "give appropriate weight" to the updated financial evidence in its decision on the merits.
In its brief, the ICC responds that any downgrading of service by the railroad after application for abandonment is inconsistent with the B&O's legal obligation to continue to provide service. The ICC states that evidence of such downgrading may be introduced by petitioners as factors weighing against a grant of abandonment. ICC Br. at 19. That is precisely what petitioners have done in this case. But the ICC has ignored the petitioners' protests. As Commissioner Clapp, dissenting from the ICC final decision, pointed out, the ICC disregarded, and Division I dismissed with a single sentence, the law judge's finding that the B&O had downgraded the line. 360 I.C.C. at 684. Thus, although the ICC did have the discretion to receive additional evidence, its refusal to consider the serious challenges to that evidence was arbitrary and capricious.
Petitioners next challenge the ICC's predictions regarding future traffic. First, they challenge the ICC conclusion that the evidence of cars handled post-1975 bore out the Division I finding that future traffic prospects were speculative. The ICC relied for its conclusion on its finding that the B&O did not handle a sufficient number of cars to "break-even".
More importantly, petitioners argue that the ICC's finding that prospects of future traffic are "speculative" is erroneous because the ICC failed to take account of evidence which showed: (a) the number of carloads in 1977-78 was affected by a five month strike in 1977 at the plant of the largest shipper on the line; (b) the B&O continued to fail to supply sufficient freight cars to permit additional shipments; (c) the pendency of the abandonment application caused some shippers to use other means of transportation; and (d) traffic on the line was growing, particularly originating and terminating traffic.
With regard to the issue of alternate transportation for rail shippers, the ICC's final decision and the Division I decision merely recite the same phrase: the ICC has weighed the inconvenience to the shippers from "incurring higher costs of alternative transportation." 360 I.C.C. at 683.
The B&O, of course, disputes the petitioners' arguments. In addition to arguing that there was substantial evidence and a reasoned basis for the ICC's final order, it argues that the ICC could have authorized abandonment on the basis of the "opportunity cost" incurred by B&O in keeping the value of the rail and land in the right-of-way tied up in a deficit operation. But the ICC final decision did not rely on any "opportunity cost" argument. An agency's decision may not be upheld on a basis not articulated by the agency. See F.P.C. v. Texaco, Inc., 417 U.S. 380, 397, 94 S.Ct. 2315, 2326, 41 L.Ed.2d 141 (1974); Burlington Truck Lines, Inc. v. United States, 371 U.S. 156, 168-69, 83 S.Ct. 239, 245, 246, 9 L.Ed.2d 207 (1962); S.E.C. v. Chenery Corp., 332 U.S. 194, 196, 67 S.Ct. 1575, 1577, 91 L.Ed. 1995 (1946).
Petitioners' final challenge in this appeal is that, if the ICC can receive the supplementary evidence submitted by the B&O, the parties should be afforded an opportunity
We begin with a reluctance to interfere with an agency's freedom to fashion its own rules of procedure. See Vermont Yankee Nuclear Power Co. v. Natural Resources Defense Council, 435 U.S. 519, 543, 98 S.Ct. 1197, 1211, 55 L.Ed.2d 460 (1978). But although requests for cross-examination are addressed to the discretion of an agency, that discretion is not unlimited. A court may determine that "extremely compelling circumstances," Vermont Yankee, 435 U.S. at 543, 98 S.Ct. at 1211, exist to indicate that an agency's decision constitutes an abuse of discretion. The question before us, then, is whether the facts here rise to such extremely compelling circumstances that the ICC should have afforded the parties the opportunity for cross-examination.
First, while there is no across-the-board right to oral argument in every administrative proceeding, F.C.C. v. WJR, 337 U.S. 265, 69 S.Ct. 1097, 93 L.Ed. 1353 (1949), the general principle is that the right to be heard in adjudicative proceedings encompasses due process rights in excess of the right to submit written evidence. Londoner v. Denver, 210 U.S. 373, 28 S.Ct. 708, 52 L.Ed. 1103 (1908). As the court stated in I.C.C. v. Louisville & Nashville R.R., 227 U.S. 88, 93, 33 S.Ct. 185, 187, 57 L.Ed. 31 (1913):
Second, the ICC concedes that the tests of whether cross-examination should be required are whether material facts are in dispute and whether the verified statements do not provide an adequate basis for the resolution of those disputed factual questions. ICC Br. at 27.
Third, the prior history of cross-examination in this case is very important for two reasons. First, the fact that the ICC did provide cross-examination regarding the 1974 and 1975 financial information suggests that cross-examination should not lightly be denied regarding the 1976-1978 financial information. Second, the record at the initial hearing demonstrates that the disputed facts were not subject to resolution on the basis of written verified statements. That history shows that the opportunity
In its abandonment application, the B&O initially claimed losses of $1,135,691 in 1974 and $1,108,856 in 1975. But after the law judge heard the evidence, in hearings in which the participants were afforded the opportunity for cross-examination, he found the B&O had earned a profit of $2,454 and had suffered a loss of $18,437 (later adjusted in the ICC final decision to a profit of $71,563) for those years, respectively. A brief review of the law judge's findings indicates over twenty references to admissions made on cross-examination.
We emphasize the narrowness of our conclusion that the parties here should be afforded the opportunity of cross-examination with regard to the supplementary evidence received by the ICC. We do not hold that the ICC must afford cross-examination in all cases where supplemental evidence is taken after proceedings in which cross-examination was allowed. Rather, our conclusion is based on the combination of factors in this case: cross-examination was initially allowed; it played a key role in the determination of facts in the initial hearing; the agency then received supplemental evidence of the same type as that provided, and discredited after cross-examination, in the initial hearing; and the agency's final decision ignored the many serious factual disputes and gave no indication that the agency could have resolved those disputes on the basis of the written supplementary evidence submitted. These unique factors indicate that the opportunity for cross-examination, the "`greatest legal engine ever invented for the discovery of truth,'" California v. Green, 399 U.S. 149, 158, 90 S.Ct. 1930, 1935, 26 L.Ed.2d 489 (1970) quoting 5 Wigmore § 1367, was necessary regarding the 1976-78 financial information. Only by knowing that the parties here had the opportunity for cross-examination, can a reviewing court be assured that the ICC was relying on permissible evidence. Therefore, we find that the parties should have been afforded the right of cross-examination with regard to the supplementary evidence.
For all of the foregoing reasons,
Vacated And Remanded.
FAIRCHILD, Chief Judge, concurring.
I concur in setting aside the ICC decision and remanding for further proceedings.
I agree with Judge Sprecher that when the Commission, on the remand it solicited, decided that its earlier decision (by Division I) could not be sustained, it was appropriate and eminently sensible to call for more current financial data. I also agree that under the circumstances it was an abuse of discretion to deny cross-examination with respect to this evidence. This was a significant denial of procedural rights and is, alone, sufficient for setting aside the decision.
If that ground were not present, I would nevertheless conclude that the decision is an inadequate demonstration that factual material was properly addressed and choices rationally made within the range of administrative discretion. I am mindful of the presumption that agency action is properly based and decided upon, but it seems to me
SWYGERT, Circuit Judge, dissenting.
This case is not as complex as the majority leads one to believe. The Baltimore and Ohio Railroad wishes to abandon a 100-mile section of its track in central Illinois. It proved that the operation of this line has been unprofitable in the past and that its future prospects are no brighter. The Interstate Commerce Commission considered evidence of five years' operations of the line and, after balancing the losses to the railroad with the hardship to the public were the section to be closed, decided that the public interest was best served by allowing the railroad to abandon the line. In view of the substantial evidence before the Commission and the deference to be accorded its decisions, we should uphold the order and permit the abandonment.
The majority finds fault in four concerns — regarding maintenance expenses, the weight attached to the losses in 1976-1978, alternate transportation and future prospects — that led the Commission to approve the abandonment. In each instance, the majority's complaint is essentially that the Commission does not explain its decision as fully as the court would like. Our task, however, is not to require that agencies always write lengthy opinions which explain every finding or rebut every argument made by the losing side. Particularly in a case such as this in which the final determination involves a balancing of interests, our purpose should be to ensure that the findings — and the ultimate conclusion — are justified by a sufficient basis in the record. There can be little doubt that in this case the Commission had before it more than enough evidence to support the result.
The Commission found that the railroad suffered significant losses, ranging from $32,695 to $492,279, from 1976-1978. The contestants and the majority do not dispute this bottom-line figure; nor do they contend that no maintenance costs were properly includable in that figure. Rather, they argue simply that the Commission did not explain fully enough its finding that the maintenance expenses were "reasonable." See majority opinion, supra at pp. 1076-1077. The Commission stated in its opinion:
360 ICC 681, 682 (1980). I cannot understand why that is not a sufficient explanation. The majority declares that it is too conclusory simply because the Commission does not respond to petitioners' argument that the costs were the result of the railroad's failure to perform adequate maintenance in the past. It is not the Commission's responsibility to counter every argument put forward by the parties in each case,
The majority questions the weight that was accorded this supplemental financial evidence that was received upon remand.
The majority also questions the sufficiency of the Commission's findings with respect to alternate transportation and future prospects. Again the record before the Commission contains more than adequate evidence to support its conclusion. Sufficient alternate transportation exists for the shippers on the line. Of the 19 stations located on the line, seven (accounting for 65 percent of the carloads on the line) are
The majority's only argument concerning this evidence is that the contestants raised a number of issues which the Commission did not address specifically in its opinion. This seems to me to place too large a burden on an agency. Where the Commission, as here, explains the reasons for its action, and where there is sufficient evidence in the record to support those reasons, no more should be necessary. The Commission should not have to respond to all the contentions normally raised in a shotgun approach under such circumstances.
I would affirm the order of the Commission.
On the basis of this language, the ICC argues that its decision to obtain additional evidence was consistent with the purpose of its rules: to make decisions on the basis of the most up-to-date revenue and cost information available.
But the issue before the ICC in the cited passage was the use of pre-application base year data as opposed to pre-application calendar year data. No issue was presented concerning the use of post-application data to determine a burden on interstate commerce, or for any other purposes. Thus, the case does not stand for the proposition that the ICC's reliance on post-application data is consistent with the ICC's regulation requiring the filing of pre-application operating results.
Doe v. Hampton, 566 F.2d 265, 271-72 n.15 (D.C.Cir.1977).
United States v. Florida East Coast Ry. Co., 410 U.S. 224, 245, 93 S.Ct. 810, 821, 35 L.Ed.2d 223 (1973). See also Independent Bankers Assn. of Georgia v. Federal Reserve System, 516 F.2d 1206, 1216 & n.26 (D.C.Cir.1975).
The parties did not dispute the question of whether the relevant facts were "adjudicative". The ICC's final decision indicates that the abandonment decision was based on the specific factual issues related to the income of and operations on the Flora line for the years 1974-78. 360 I.C.C. at 682-83. Special emphasis was placed on the years 1976-78. Id. Thus, the outcome of the case seemed to depend on the resolution of specific adjudicative facts. See generally Independent Bankers, 516 F.2d at 1215.
Similarly, the decision in Minneapolis & St. Louis R.R. Co. v. United States, 361 U.S. 173, 80 S.Ct. 229, 4 L.Ed.2d 223 (1959), upon which the ICC relies, is also unavailing. The Minneapolis & St. Louis Court merely held that the Commission need not make findings on every subordinate contention advanced, but must make findings on "those issues of fact, law, or discretion which are `material'." 361 U.S. at 193-94, 80 S.Ct. at 241. Indeed, the Minneapolis & St. Louis Court found that the record showed the Commission did consider the material facts, even where no specific finding was made. Id. at 194, 80 S.Ct. at 241.
The result in the case of Bangor & Aroostook R.R. v. I.C.C., 574 F.2d 1096 (1st Cir. 1978), is also similar. The Bangor & Aroostook case involved interchange agreements in which another railroad sought damages from the Bangor & Aroostook. The ICC accepted the administrative law judge's determination on the question of liability, but the ICC assessed damages at a lower rate than did the law judge. The court properly held that the Commission was free to reject the law judge's conclusion and arrive at its own assessment of damages. But the decision clearly showed that the Commission had specifically explained the basis of its calculations and the reasons why it differed from the law judge. Id. at 1109-12. Thus, the Bangor & Aroostook case did not reject the proposition that, where the Commission differs from the law judge, it must clearly and precisely state the reasons for its difference.
The Bangor & Aroostook court did state that an administrative law judge's decision, except on matters of credibility, "is due little deference when the Commission has made an independent evaluation that is substantially supported by the evidence." Id. at 1110. For several reasons, this statement is not persuasive in suggesting that, in the case at bar, the administrative law judge's decision is due little deference when compared to the ICC's final decision.
First, as has been noted, the Bangor & Aroostook court suggests that deference need not be accorded to the law judge's decision only when the agency has issued an opinion which clearly indicates that an independent evaluation was made and which specifies the details of that evaluation. Second, the Bangor & Aroostook decision does not indicate to what extent there was an inconsistency between accepting the law judge's determination regarding liability and lowering the law judge's determination of damages. It is quite possible that the two issues were independent and that there was no serious inconsistency. But in the case at bar, there appears to be a serious inconsistency between accepting a law judge's decision regarding financial information and then rejecting his conclusion based on that financial information. Finally, to the extent there remains a conflict between our view of the proper deference to be accorded a law judge's decision, expressed in N.L.R.B. v. P.P.G. Industries, Inc., 579 F.2d 1057, 1058 (7th Cir. 1978), and the view of the First Circuit Court of Appeals expressed in Bangor & Aroostook, our view is more in accord with the need for a "searching" judicial review. When, as here, the law judge's decision is thorough and based on specific financial findings, the ICC must carefully and precisely explain any decision which accepts those findings but rejects the conclusion.
Finally, the ICC relies on Bowman Transp., supra, 419 U.S. at 285-86, 95 S.Ct. at 441-42; for the proposition that so long as the agency's path is discernible and the Commission's findings are not so vague as to make judicial review perfunctory, the court should affirm challenged decisions. But the Bowman Court also stated that judicial review must be "searching and careful." Id. The real question, of course, is where the line must be drawn between a perfunctory review and a careful one. Nothing in the Bowman decision suggests that the agency can avoid articulating a "`rational' connection between the facts found and the choice made," id., quoting Burlington Truck Lines v. United States, 371 U.S. 156, 168, 83 S.Ct. 239, 245, 9 L.Ed.2d 207 (1962).
A possible explanation for the confusion is that the ICC was responsive to the petitioners' argument but incorrectly termed the $90,000 item a cost item rather than a system revenue item. The ICC did restate, in its final opinion, the 1975 financial figure by $90,000 to show that the B&O earned a net profit of $71,563. Thus, any technical misidentification does not seem prejudicial because the ICC reached the result requested by petitioners: the financial statement for 1975 was adjusted by $90,000 to show a profit of approximately $72,000.
360 I.C.C. at 682.
Maintenance ofSupp.App. at 52.
Year Way Expenses Tie Expenses1974 181,028 0 (0%) 1975 230,795 13,029 (5.6%) 1976 400,355 141,313 (35.2%) 1977 595,262 248,688 (41.8%) 1978 442,622 246,312 (55.6%)
I.C.C. No. AB-19 (Sub-No. 27), slip op. at 1074, 1075.
I.C.C. No. AB-19 (Sub-No. 27), Supp.App. at 55.
Cars Required360 I.C.C. at 683.
Year to Break Even Cars Handled1976 3,886 3,610 1977 4,670 2,725 1978 3,622 2,504
360 I.C.C. at 684 (Clapp, C., dissenting).
360 I.C.C. at 683.
The Division I final opinion states:
I.C.C.No. AB-19 (Sub-No. 27) at 5, App. 125.
613 F.2d at 1099-1100.
The first finding has not been made. Indeed, the B&O suggested to the ICC that the rail on the Flora line was not valuable and that it was old, light-weight, and had sustained many rail-surface failures. The second finding has been seriously challenged, as discussed above. Also, to accept the opportunity cost argument would ignore the law judge's finding that the B&O had de facto abandoned and discouraged traffic on the Flora line.
Finally, unlike the situation in Missouri-Pacific, this situation does not present a case of "expensive rail and other equipment," slip op. at 1070, 1071, being sacrificed at the expense of more efficient movement of other traffic by the B&O. In Missouri-Pacific, because the rail could be better used on other railroad lines, allowance of the opportunity cost argument was consistent with meeting the public convenience by improving the quality of other rail service. But in this case, the opportunity cost argument merely relates to increased income for the B&O, not improved equipment elsewhere in the rail system. Thus, the B&O's opportunity cost argument must be rejected as argued in this appeal. We do not decide, however, whether an opportunity cost argument, perhaps based on more fully developed facts, might prevail in possible subsequent ICC proceedings or appeals.
360 ICC at 683.
Nearest Alternate Railroad Other RailroadsHighway Station Population Serving Station Railroad MilesRochester 1,667 -- ICG 7 Berry 64 -- ICG 11 Breckenridge 47 -- ICG 13 Edinburg 1,153 -- N&W 9 Sharpsburg 78 -- N&W 5 Taylorville 10,644 N&W, C&IM N&W, C&IM 0 Owaneco 278 -- N&W 8 Millersville 61 -- CR 6 Pana 6,326 CR, ICG, C&EI CR, ICG, C&EI 0 Tower Hill 683 CR CR 0 Lakewood 175 -- N&W 6 Cowden 537 N&W N&W 0 Beecher City 466 -- C&EI 3 Moccasin 75 C&EI C&EI 0 Altamont 1,929 CR, C&EI CR, C&EI 0 Gilmore 25 -- CR 6 Edgewood 495 ICG ICG 0 Iola 163 -- ICG 7 Louis 1,020 -- B&O 8 Abbreviation codeN&W -- Norfolk and Western C&EI -- Chicago & Eastern Illinois Railroad Company C&IM -- Chicago & Illinois Midland Railroad Company ICG -- Illinois Central Gulf Railroad Company CR -- Conrail
360 ICC at 683.