REPORTS No. 35484 ASG INDUSTRIES, INC. v. ABERDEEN AND ROCKFISH RAILROAD COMPANY, ET AL. Decided July 12, 1977 Assailed carload and TOFC rail rates on shipments of plate glass from Greenland and Kingsport, Tenn., to points in mountain Pacific territory, found unjust and unreasonable in violation of section 1(5) and unduly prejudicial and preferential in violation of section 3(1) of the act. Reparations awarded. Appearances as shown in prior report, 350 I.C.C. 856. REPORT OF the CommISSION ON FURTHER BY THE COMMISSION: This proceeding is before us on remand by the United States Court of Appeals for the Sixth Circuit in ASG Industries, Inc. v. United States, et al., Civil Action No. 75-1962.' Therein, the report and order of Review Board Number 4, 350 I.C.C. 856 (1975), was found to be arbitrary and capricious. 2 We find the statement of the case as set forth in the prior report to be essentially accurate, and except where in consistent herewith, affirm and adopt it as our own including the order there in requiring the reduction of the rates herein assailed. Only those facts necessary for an understanding of the issues will be restated. By complaint filed on September 20, 1971 (later amended), ASG Industries, Inc. (complainant or ASG), alleged that the carload and trailer-on-flatcar (TOFC) rail rates on plate glass from Greenland and Kingsport, Tenn., to points and places in mountain Pacific territory are, to the extent they exceed the rates on float glass, unjust and unreasonable in violation of sections 1(5), 15(1) and 15a of the Interstate Commerce Act (the act), and preferential and prejudicial in violation of section 3(1) of the act. Complainant 'Opinion and order filed January 5, 1977. The review board's report became the final decision of the Commission through the denial of a petition for reconsideration by division 2 of the Commission. requested that the Commission (1) prescribe rates for the future, i.e., order the defendant railroads to reduce the rates on plate glass to same level as those on float glass; and (2) award reparations for the 2-year statutory period immediately prior to the filing date of the complaint. In the prior report and order, the review board (or board) found that while the assailed plate glass rates were not shown unjust and unreasonable, they were preferential and prejudicial. It ordered that the rates on plate glass should, in the future, be equal to those on float glass. It did not, however, award reparations for the payment in the past of the higher rates. In finding that the plate glass rates were not shown unjust and unreasonable the board stated: The rates on plate glass are not assailed under section 1(5) of the act for their own sake, but rather because of their relationship to the rates on the float glass recently introduced into the west coast markets. Historically, the carload commodity rates on westbound transcontinental glass traffic have been maintained at a lower level for window than for plate, and the reasonableness of this rate relationship is not seriously questioned in this proceeding. The introduction of float glass, moving at the lower window glass level of rates, into the west coast glass market undoubtedly has had some effect on the sales of plate glass; yet, this rate differential, standing alone, is insufficient to demonstrate that the plate glass rates are unreasonable high. The mere fact that these longstanding rates are higher, even significantly higher, than the rates on a single analogous article, recently introduced into interstate commerce, does not prove that the assailed rates are outside of the zone of reasonableness. It would be as logical to conclude that the float glass rates are too low. Taking complainant's evidence in its most favorable light, there is no warrant to conclude that the level of plate glass rates is inhibiting the traffic's movement. If complainant's ability to compete is in jeopardy, this results from the disparity in rates between float and plate glass, not from the level of rates on the latter. The fact that the revenues derived from shipments of plate glass exceed fully allocated costs by considerable margins shows only that the rates are well above the minimum reasonable level, but this is insufficient to demonstrate that they are above the maximum reasonable level. In concluding that the rail rates prefer the shippers of float glass and prejudice the shippers of plate, the board found that (1) the cost of transporting float and plate glass are identical, (2) there is no justification for the disparity in rates based on transportation circumstances and conditions, (3) ASG's ability to compete is impaired substantially by the lower freight rates on shipments of float glass, i.e., ASG has to absorb rate differences in marketing plate glass at the involved destinations to remain competitive with float glass producers, and (4) there is intense competition between the two commodities. In denying reparations, however, the board found that complainant ASG did not meet the standards for the award of reparations based on a finding of a section 3(1) violation. As described by the board, those standards are (1) the complainant must show with certainty both that he has in fact been damaged and the amount or extent of his damage; (2) the measure of damage is not necessarily the difference between one rate and another, Stauffer Chemical Co. v. Fort Worth & D. Ry. Co., 313 I.C.C. 393, 396 (1961); and (3) the complainant must show that the preferred shipper has diverted business (and, thereby, profits) away from him or has the capacity to fix the market price of the commodity, the commodities involved and, therefore, force the complainant to sell at a lower price. Interstate Commerce Commission v. United States ex rel. Campbell, 289 U.S. 385 (1933); Lake Shore Tire & Rubber Co. v. Central Vt. Transport. Co., 222 I.C.C. 369, 370 (1937); and Black Hills Glass & Mirror Co. v. C., M., St. P. & P. R. Co., 313 I.C.C. 333, 339 (1961). Applying these standards to the facts in this case, the board found the following: There is here no showing that ASG's float glass competitors set the price of float and plate glass on the west coast or that the complainant suffered damage in any specific amount by reason of the assailed rate relationship. Other factors, such as the intense foreign competition, have played a major part in determining the level of sales prices on American glass. While we have evidence of 19 bids which, in the opinion of ASG, were lost due to its inability to meet the prices quoted by float glass competitors, we are offered no basis upon which to conclude that any bids which might have been proferred, had plate and float glass been accorded identical freight rates, would actually have been accepted by the west coast glass distributors. Any damages which might have accrued based upon lost profits due to a lower selling price, or the actual rate differential as a measure of loss, are purely speculative. The Court of Appeals held that the review board's findings that the plate glass rates were not shown unreasonable under section 1(5) and that ASG had failed to show damages under section 3(1) were arbitrary and capricious. With respect to the issue of reasonableness, the court stated that one of the best tests in making this determination was first set forth in Louisville & N.R.R. v. U.S., 238 U.S. 1, 15-16 (1915): Giving the widest possible effect to the fact that mere comparison between rates does not necessarily tend to establish the reasonableness of either, it is still true that, when one of many rates is found to be higher than all others, there may arise a presumption that the single rate is high ***. The capital invested, the traffic hauled, the cost of operation and the earnings might differ, but nevertheless what was shown to be a reasonable rate on one, might, after allowing for the dissimilarity in conditions, earnings and costs, be a factor in determining the reasonableness of the rate on the other. The court then alluded to the findings by the board in its report that (1) float and plate glass are "homogeneous commodities" which move under the same transportation circumstances and conditions" and "sell for the same delivered price," (2) the Transcontinental Freight Bureau's (TCFB) rates on plate glass on movements from the East to mountain Pacific territory are 56 percent higher than the rates on float glass, and (3) as of 1970 the disparity was being or had been eradicated in every other freight bureau in the country. Stating that the board did not pay heed to these findings or principles of law, but summarily found that the rates on plate glass, themselves, were within the zone of reasonableness, the court held that the board's decision must be rejected as arbitrary and capricious. The court stated that, given the board's findings of fact, ASG is at least entitled to a determination of whether its proof was sufficient to trigger the rebuttal presumption set forth in Louisville & N.R.R. v. U.S., supra. If it does, then the burden shifts to the defendant railroads to justify the rates. International Minerals & Chemicals Corp. v. A.T. & S.F. Ry., 303 I.C.C. 603, 607 (1958); and, Lobdell-Emery Mfg. Co. v. Ann Arbor R.R., Co., 156 I.C.C. 569-570 (1929). The court further stated that a determination of what falls within the zone of reasonableness must require more than a mere recitation of the standard itself. Turning to the question of the denial of reparations under section 3(1), the court pointed out that, unlike a finding of unreasonableness under section 1(5), an award of reparations does not automatically flow from a finding of prejudicial and preferential rates. Acknowledging the standards for the award of reparations under section 3(1), as described by the review board, the court questioned the board's application of the facts to these standards and also found that in relation to a number of other Commission cases dealing with reparations under section 3(1), the board had not explained how ASG had failed to meet its burden of proof. DISCUSSION AND CONCLUSIONS The court, essentially, directs us to answer three questions: (1) with regard to section 1(5) of the act, was ASG's proof or evidence sufficient to trigger the presumption that TCFB's rates on plate glass are unjust and unreasonable, (2) if so, have the defendant railroads met their burden of justifying the rates, and (3) with regard to section 3 of the act, had complainant met its burden of proof for the award of reparations under a finding of preference and prejudice. On further consideration, we conclude that complainant's proof was sufficient to trigger the rebuttable presumption, on the issue of reasonableness, that the defendants have not met their burden of justifying the higher rates on plate glass, and that these rates are, therefore, unjust and unreasonable. Having made this finding under section 1(5) reparations are automatically awarded for the amount the plate glass rates exceed the rates on float glass. Since this the relief sought by complainant, there is no need for us to determine whether reparations could also be awarded based on the previous finding of undue preference and prejudice. In the two Commission cases cited by the court for the proposition that a complainant may offer evidence sufficient to establish a rebuttable presumption, the Commission stated: Where a rate has been charged which exceeded by a substantial amount rates contemporaneously maintained for similar or greater service, the burden of justifying the reasonableness of the higher rate devolves upon the defendants. International Minerals & Chemicals Corp. v. A. T. & S.F. Ry., supra; and, Lobdell-Emery Mfg. Co. v. Ann Arbor R.R., Co., supra. The record is very clear that the difference in plate and float glass rates is substantial, and that the "service" provided float glass is not just "similar," but is identical to that provided plate glass. Indeed, the court notes the review board's findings to this effect. The carload rates on plate are 44.6 percent, and the TOFC rates 56.6 percent higher for plate glass than float glass. 350 I.C.C. at 859." And as for The exact rates themselves, as shown by both the board, 350 I.C.C. at 857, and the court (slip opinion sheet 3), are: |