United States Court of Appeals
FOR THE DISTRICT OF COLUMBIA CIRCUIT
Argued September 12, 2002 Decided October 8, 2002
No. 01-1213
Association of American Railroads,
Petitioner
v.
Surface Transportation Board and
United States of America,
Respondents
Edison Electric Institute, et al.,
Intervenor
On Petition for Review of an Order of the
Surface Transportation Board
Samuel M. Sipe, Jr., argued the cause for petitioner. With
him on the briefs were Cynthia L. Taub and Louis P.
Warchot.
Thomas J. Stilling, Attorney, Surface Transportation
Board, argued the cause for respondents. With him on the
brief were Ellen D. Hanson, General Counsel, Craig M.
Keats, Deputy General Counsel, and John P. Fonte and
Robert B. Nicholson, Attorneys, U.S. Department of Justice.
William L. Slover, John H. LeSeur, Christopher A. Mills,
Peter A. Pfohl, John M. Cutler, Jr., Michael F. McBride,
Bruce W. Neely, Nicholas J. DiMichael, Federic L. Wood,
and Andrew P. Goldstein were on the brief for intervenors.
Before: Sentelle and Randolph, Circuit Judges, and
Silberman, Senior Circuit Judge.
Opinion for the Court filed by Senior Circuit Judge
Silberman.
Silberman, Senior Circuit Judge: American Association of
Railroads (AAR) challenges the Surface Transportation
Board's (STB) April 6, 2001 "corrected decision," reaffirming
its determination to exclude consideration of product and
geographic competition from the market dominance analysis
in rail rate cases. In American Association of Railroads v.
Surface Transportation Board, 237 F.3d 676 (D.C. Cir. 2001)
(AAR v. STB I), we held that the Staggers Act definition of
"market dominance" does not require the STB to consider
indirect (product and geographic) competition. However, on
remand we directed the Board to "weigh the effect, if any" of
the statute's preamble, manifesting a preference for market-
based rather than regulatory rate setting, on its decision. We
conclude that the STB's new decision appropriately addresses
this language.
I.
Congress originally gave the Interstate Commerce Com-
mission (ICC) the authority to examine every railroad ship-
ping rate to ensure that it was "just and reasonable." See 49
U.S.C. s 1(5)(1976). But, discovering that such a broad
regulatory scheme was unhealthy for the industry, Congress
passed the Railroad Revitalization and Regulatory Reform
Act, Pub. L. No. 94-210, s 202(b), 90 Stat. 31 (4R Act), to
deregulate rail rates. Under this statute, the ICC could only
review the reasonableness of a carrier's rates if it had first
found that the railway had market dominance over its service.
Market dominance is defined as "an absence of effective
competition from other rail carriers or modes of transporta-
tion to which a rate applies." 49 U.S.C. s 10707(a). The Act
also directed the commission to "establish, by a practical
determination, the rules, standards and procedures of deter-
mining whether and when a carrier possesses such dominance
... without administrative delay." Pub. L. No. 94-210,
s 202(d), 90 Stat. at 35. (emphasis added).
Initially, the ICC's "Special Procedures for Making Find-
ings of Market Dominance" only considered direct competi-
tors who operated along the same points of departure and
destination, including fellow rail carriers (intramodal competi-
tors) and non-rail transporters (intermodal competitors). The
Commission expressly declined to require a consideration of
indirect product competition (using a different product sub-
ject to a different rate), or geographic competition (using a
different departure-point or destination). We held that this
arrangement was consistent with a reasonable reading of the
statute, particularly in light of the Act's clear preference for
efficient and practical proceedings. Atchison, Topeka & San-
ta Fe Ry. v. ICC, 580 F.2d 623, 623-34 (D.C. Cir. 1978).
In 1980, the ICC proposed rulemaking to add indirect
competition to its market dominance analysis. While the
rulemaking was pending, Congress enacted the Staggers Act
to deregulate the rail industry even further. Pub. L. No.
96-448, 94 Stat. 1895 (1980). The new law kept the market
dominance calculus as a prerequisite for Commission regula-
tion, and directed the ICC "to determine whether, and to
what extent, product competition should be considered ... in
determining the reasonableness of the rail carrier rates." Id.
s 205(a)(1), 94 Stat. at 1905. This directive, however, did not
alter the meaning or use of the term "market dominance."
Id. s 205(a)(3)(B), 94 Stat. at 1906. In response, the ICC
decided to issue a new rule requiring both product and
geographic competition to be considered in the market domi-
nance analysis. The Fifth Circuit upheld this decision in
Western Coal Traffic v. United States, 719 F.2d 772 (5th Cir.
1983) (en banc), cert. denied, 466 U.S. 953 (1984).
In 1995 Congress abolished the ICC and vested its authori-
ty to regulate rail rates in the Surface Transportation Board.
The STB issued a decision on July 1, 1999 removing indirect
competition from the market dominance calculus. Ex parte
No. 627, Market Dominance Determinations-Product and
Geographic Competition (Dec. 21, 1998) (STB Dec. 1998).
The Board believed that the change was permissible under
the Staggers Act, since its language does not actually require
that indirect product competition be considered in the market
dominance formula. And it believed that the revision was
warranted because the time and resources spent on indirect
competition evidence in rate litigation was often inordinate,
preventing the Board from providing for the expeditious
handling and resolution of all proceedings, as mandated by
other Staggers Act provisions. The Board thought the
change would benefit shippers, especially the smaller and
more rural ones, because under the new rule, there would be
less disincentive to challenge rates as a result of the reduction
in litigation burdens and costs. Yet it also would be fair to
carriers, who could still point to indirect competition to
defend the reasonableness of their rates in particular cases.
STB Dec. 1998 at 12-14.
The AAR disagreed and sought review of the Board's
decision. In AAR v. STB I we rejected the Petitioner's claim
that the Staggers Act's amendments and additions to the 4R
statute, one of which merely substituted the word "transpor-
tation" for the phrase "traffic or movement" in the statutory
definition of market dominance, see Pub. L. No. 95-473, 92
Stat. 1337, 1382 (1978) [10706], altered the force of our
Atchison holding. AAR v. STB I, 237 F. 3d at 679. We were
of the view that under Chevron1 the Board maintained discre-
tion to interpret the market dominance definition so as to
exclude indirect competition. Therefore, we deferred to its
latest interpretation and accepted the Board's reasoning that
__________
1 Chevron U.S.A. Inc. v. Natural Res. Def. Council, Inc., 467 U.S.
837 (1984).
the decision would reduce administrative delay by limiting the
litigation of the innately complex issues of geographic and
product competition. Id. at 680. Accordingly, the decision
would advance the Staggers Act mandate to "establish proce-
dures to ensure expeditious handling of challenges to the
reasonableness of railroad rates ... which shall include ap-
propriate measures for avoiding delay in the discovery and
evidentiary phases of such proceedings." Id.; 49 U.S.C.
s 10704(d).
Although we thought the Board's decision "reasonable in
isolation"-meaning as an interpretation of the key language-
we decided that it was arbitrary and capricious for the Board
to construe market dominance without considering the
preamble policy. On remand, we directed the STB to "weigh
the effect, if any" of the language calling for "competition and
demand for services ... to establish reasonable rates for rail
transportation ... to the maximum extent possible ...," on
its determination. Id.; 49 U.S.C. s 10101(1). After the
Board denied AAR's request to reopen the administrative
record and solicit comments, on the grounds that it had
already considered its alternative measures, it issued its
official response on April 6, 2001. In this corrected decision,
the Board explained that the first preamble policy (RTP-1) is
"not inconsistent" with its decision to exclude product and
geographic competition from consideration in the market
dominance analysis. It claimed a responsibility to apply, not
one, but all 15 "separate and sometimes conflicting policy
goals that together establish the framework for regulatory
oversight of the rail industry." Ex Parte No. 627, Market
Dominance Determinations--Product and Geographic Com-
petition (April 6, 2001) (Corrected Decision at 6). AAR then
brought this petition for review, contending that the Board
did not properly respond to the Court's remand order.
II.
There is not much left to this case. We have already
decided that the Board's reading of the statute is permissible.
AAR v. STB I, 237 F. 3d at 680. Neither the law of the
circuit nor the law of the case permits us to reconsider that
issue, despite the Petitioner's efforts to have us do so. See
LaShawn A. v. Barry, 87 F.3d 1389, 1395 (D.C. Cir.1996) (en
banc). Therefore the only matter legitimately before us is
whether or not the Board's 2001 decision included an ade-
quate "weighing" of the preamble's first policy directive set
out in the Staggers Act. The provision states:
In regulating the railroad industry, it is the policy of the
United States Government--
(1) to allow, to the maximum extent possible, competi-
tion and the demand for services to establish reason-
able rates for transportation by rail. 49 U.S.C.
s 10101(1) (emphasis added).
The Board reasonably considered the effects of RTP-1. It
does not believe that this preamble provision necessarily
trumps the other (somewhat contradictory) policy goals in the
statute. We have previously held that it is up to the Board to
arrive at a reasonable accommodation of the conflicting poli-
cies set out in the Staggers Act. See Baltimore Gas & Elec.
Co. v. United States, 817 F. 2d 108, 115 (D.C. Cir. 1987).
RTP-1, although indeed a forceful expression of a strong
preference for market-based rather than regulatory rate set-
ting, does not compel the Board to alter its decision in this
case.
The Board believes that eliminating indirect competition
from the market dominance calculus reflects a proper balance
between RTP-1, expressing Congress's desire to have compe-
tition determine rail rates where possible, and RTPs-2, oblig-
ing the Board to "provide for the expeditious handling and
resolution of all proceedings where regulation is required."
49 U.S.C. ss 10101(2)-(15). It has observed that discovery in
individual cases has often included hundreds of questions
directed to the existence or effectiveness of product and
geographic competition. Evidence of indirect competition has
also forced the Board to address matters outside their area of
expertise, adding to the time needed to resolve rate cases.
STB July '99 Dec. at 10-11; STB 2001 Dec. at 2-3. In short,
the Board's construction of the statutory definition furthers
its statutory mandate, added by the ICCTA in 1995, to
establish procedures to ensure expeditious handling of chal-
lenges to the reasonableness of railroad rates, including "ap-
propriate measures for avoiding delay in the discovery and
evidentiary phases of such proceedings." 49 U.S.C.
s 10704(d) (emphasis added). This decision may also allow
shippers that lack competitive alternatives practical access to
the rate complaint process. According to the Board, that
would give real meaning to RTP-6, promoting the mainte-
nance of "reasonable rates where there is an absence of
effective competition." 49 U.S.C. s 10101(6). While we rec-
ognize that the Board's construction was not the only permis-
sible view, its attempt to strike a balance between the various
statutory objectives is reasonable (not arbitrary or capri-
cious).
To be sure, we need not agree with every reason that the
Board advances in support of its decision. Although the
Petitioner has conceded that market forces will compel carri-
ers to offer reasonable rates where there is effective competi-
tion, the Board's argument that shippers will not bring rate
claims where indirect competition genuinely exists may be an
overstatement. It is certainly plausible that some shippers
would consider regulators' hands to be friendlier than invisi-
ble ones.2
Nevertheless, it is reasonable to presume that if Congress
had wanted for indirect competition to be a mandatory con-
sideration in the market dominance inquiry, it would have
stated so directly. Instead, Congress determined to leave
that decision to the agency, while still leaving an impression
that it wanted less regulation, rather than more. See West-
ern Coal Traffic League v. United States, 719 F. 2d 772, 779
(5th Cir. 1983). We have already held that the Board reason-
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2 The expense of litigating rate cases has not prevented all
shippers from filing cases where competition exists. Coal shippers,
in particular, are inclined to bring rate cases even where prices may
be constrained by indirect competition. Comments of the Ass'n of
American Railroads, Ex Parte No. 627 (served Apr. 29, 1998).
ably exercised its option, concluding that its latest decision
can potentially accommodate the various statutory policies
relating to expeditious review and access to relief while
upholding congressional preferences for market-based rates.
AAR v. STB I, 237 F.3d at 680.
It appears then, that the Petitioner is not only asking us to
substitute our policy wisdom for that of the Board, but is also
essentially requesting that we overrule our prior determina-
tion that the Board's decision to exclude evidence of indirect
competition from the market dominance analysis was not
arbitrary or capricious. We are not in either business.
Accordingly, the petition for review is denied.
So ordered.