United States v. Chesapeake & Ohio Ry. Co., 426 U.S. 500 (1976)

United States v. Chesapeake & Ohio Railway Co.

No. 75-420

Argued April 26-27, 1976
Decided June 17, 1976
426 U.S. 500

APPEAL FROM THE UNITED STATES DISTRICT COURT

FOR THE EASTERN DISTRICT OF VIRGINIA

Syllabus

In April 1974, virtually all the Nation’s railroads, including appellees, the Chessie System, filed with the Interstate Commerce Commission (ICC) a joint petition for a general revenue increase, stating as a reason therefor that "billions of dollars are needed immediately and in the coming decade for maintenance and improvement of the Nation’s rail transportation plant." Though the ICC on June 3, 1974, suspended the operation of the new schedules, it authorized the railroads to file new tariffs subject to conditions that would assure that the additional revenue would be expended for "delayed capital improvements" and "deferred maintenance" of plant and equipment, defining those terms in a subsequent order, which also permitted up to 3% of the revenue derived from the increase to be applied to higher nonfuel material and supply costs. Thereafter, appellees, alleging that they had no "deferred maintenance" or "delayed capital improvements" that would qualify under the ICC’s definitions; that they were precluded from applying the additional revenues to earlier commitments; and that they were placed at a competitive disadvantage with railroads that could meet the ICC’s conditions, sought reconsideration from the ICC. Dissatisfied with the ICC’s response, appellees brought this suit attacking the lawfulness of the conditions imposed and seeking to have the ICC’s orders set aside. The District Court issued an injunction prohibiting the ICC from enforcing against appellees those portions of the challenged orders that required revenues to be spent for specified purposes, concluding that "Congress has not authorized the [ICC] to control a carrier’s expenditure of funds as a condition to withholding the suspension of rates."

Held: The ICC may, as a condition for not suspending and subsequently investigating the lawfulness of a proposed tariff, require the railroads to devote the additional revenues for the purposes the carriers invoked in support of the increase. Pp. 509-515.

(a) Imposition of the condition precedent to the immediate implementation of the rate increase was directly related to the ICC’s statutory mandate to assess the reasonableness of the rates and to suspend them if there was a question as to their legality. Instead of suspending the proposed rates for the seven-month statutory period, as it could have done, the ICC offered an alternative more precisely tailored to the particular circumstances presented. P. 514.

(b) Since the District Court held that the ICC did not have the power to impose conditions on the refiling of the tariff, it did not consider appellees’ contention that their inability to use the new revenues makes the ICC’s action arbitrary and capricious as to them, and that question may, if appellees choose, be raised on remand. P. 515.

392 F.Supp. 358, reversed and remanded.

BURGER, C.J., delivered the opinion of the Court, in which BRENNAN, WHITE, MARSHALL, BLACKMUN, and REHNQUIST, JJ., joined. STEVENS, J., filed a dissenting opinion, in which STEWART, J., joined, post, p. 521. POWELL, J., took no part in the consideration or decision of the case.