United States v. Allegheny-Ludlum Steel Corp.

406 U.S. 742 (1972)


The Interstate Commerce Commission (D) regulated railroads. The country's railroads long ago abandoned the custom of shifting freight between the cars of connecting roads and adopted the practice of shipping the same loaded car over connecting lines to its ultimate destination. The freight cars of the Nation thus became, in essence, a single common pool, used by all roads. Because of critical freight-car shortages experienced during World War I, Congress enacted the Esch Car Service Act of 1917, which empowered D to establish reasonable rules and practices with respect to car service by railroads. D concluded that one of the principal factors causing an inadequate supply of freight cars was the operation of the national car-pool system. It resulted in freight cars' being on lines other than those of the owning road for long periods of time, since the rules providing for the return of unloaded freight cars in the direction of the lines of the owning road were observed, more often than not, in the breach. The rules promulgated by the Commission are intended to make those railroads whose undersupply of freight cars contributes to the national shortage more directly feel the pinch resulting from the shortage that they have helped to cause. In 1963, the Commission determined that there was a shortage of freight cars in general service. D issued rules setting railroad rates without a hearing. Allegheny (P) sought review contending that the Esch Act required D to hold hearings before issuing rules. The Esch Act authorized D after hearing on a complaint or its own initiative to establish reasonable rules, regulations, and practices with respect to car service. The court below held that the rules were not 'reasonable,' as that term is used in the Esch Act, for three reasons. First, although there was a general finding of a nationwide freight car shortage, the court said that a specific shortage on owner lines should have been found in order to justify the promulgation of these rules. Second, it said there should have been a finding as to the financial effects upon the railroads and shippers who would be affected by the rules. Finally, it supported its conclusion that the rules were not 'reasonable' by the fact that, even though violation of the rules could be enforced by monetary penalties, the Commission nonetheless conceded that obtaining complete compliance with them would be impossible.