146 F.3d 942
331 U.S.App.D.C. 1
ASSOCIATION OF AMERICAN RAILROADS, =
Petitioner
v.
SURFACE=20
TRANSPORTATION BOARD and United States of America, =
Respondents
Western Coal=20
Traffic League, et al., Intervenors
No. 97-1020.
United States Court of Appeals,
District of Columbia =
Circuit.
Argued May 8, 1998.
Decided June 30, 1998.
On Petition for Review of an Order of the Surface = Transportation=20 Board.
Arvid E. Roach, II argued the cause for petitioner. = With him on=20 the briefs were Louis P. Warchot and Kenneth P. Kolson.
Thomas J. Stilling, Attorney, Surface Transportation = Board,=20 argued the cause for respondents. With him on the brief were Joel I. = Klein,=20 Assistant Attorney General, U.S. Department of Justice, Robert B. = Nicholson and=20 John P. Fonte, Attorneys, Henri F. Rush, General Counsel, Surface = Transportation=20 Board, and Ellen D. Hanson, Deputy General Counsel.
William A. Slover, C. Michael Loftus, Robert D. = Rosenberg,=20 Andrew P. Goldstein, Nicolas J. DiMichael and Fredric L. Wood were on = the joint=20 brief for intervenors Western Coal Traffic League, et al.
Before: WALD, WILLIAMS and TATEL, Circuit Judges.
TATEL, Circuit Judge:
Petitioner challenges Surface Transportation Board = guidelines=20 for determining the reasonableness of railroad rates in small cases. = Finding the=20 challenge unripe, we dismiss the petition.
* For much of the nineteenth century, railroads = possessed=20 sufficient market power to set rates that were often unjust and = unreasonable.=20 See Western Coal Traffic League v. United States, 719 F.2d 772, 775 (5th = Cir.1983)[331 U.S.App.D.C. 2] (en banc). Partially in response to this = problem,=20 in 1887 Congress created the Interstate Commerce Commission, which = tightly=20 controlled rates for almost ninety years and prohibited railroads from=20 responding freely to market forces. See id. As a result of this = regulation and=20 the rise of shipping alternatives such as trucks in the mid-twentieth = century,=20 railroads increasingly experienced inadequate earnings, struggled to = stay=20 solvent, and often went bankrupt. See Western Coal Traffic League v. = United=20 States, 694 F.2d 378, 384 (5th Cir.1982), rev'd en banc in part on other = grounds, 719 F.2d 772.
Responding to the continuing decline of railroads, = Congress=20 again acted, this time significantly deregulating the railroad industry = through=20 the Railroad Revitalization and Regulatory Reform Act of 1976, Pub.L. = No.=20 94-210, 90 Stat. 31 (codified as amended in scattered sections of 45 and = 49=20 U.S.C.), and the Staggers Rail Act of 1980, Pub.L. No. 96-448, 94 Stat. = 1895=20 (codified as amended in scattered sections of 45 and 49 U.S.C.). = Recognizing=20 that railroads must often charge rates well above their variable costs = to=20 compensate for their very high fixed costs, these two acts prohibited = the ICC,=20 now the Surface Transportation Board, from regulating rates unless the = railroad=20 has "market dominance," Pub.L. No. 94-210, =C2=A7 202(b), 90 Stat. at 35 = (codified as=20 amended at 49 U.S.C.A. =C2=A7 10707(d)(1)(A) (1997)), meaning that = railroads must=20 have at least charged a rate with a revenue-to-variable-cost (R/VC) = ratio higher=20 than a specified figure--starting in 1980 at 160% and resting currently = at 180%.=20 Pub.L. No. 96-448, =C2=A7 202, 94 Stat. at 1900 (codified as amended and = reordered at=20 49 U.S.C.A. =C2=A7 10707(d)(1)(A)); see also Burlington Northern R.R. = Co. v. ICC, 985=20 F.2d 589, 595 (D.C.Cir.1993) (discussing Congress' deregulation = efforts).=20 Congress further directed that, "[i]n determining whether a rate = established by=20 a rail carrier is reasonable," the agency must "recognize the policy ... = that=20 rail carriers shall earn adequate revenues." Pub.L. No.96-448, =C2=A7 = 201(a), 94=20 Stat. at 1899 (codified as amended and reordered at 49 U.S.C.A. =C2=A7 = 10701(d)(2)).=20 Although Congress wanted to ensure revenue adequacy for railroads, it = was also=20 concerned about shippers, urging the agency "to maintain reasonable = rates where=20 there is an absence of effective competition." Id. =C2=A7 101(a), 94 = Stat. at 1897=20 (codified and reordered at 49 U.S.C.A. =C2=A7 10101(6)).
The ICC struggled for many years to develop guidelines = for=20 assuring the reasonableness of rates charged by railroads with market = dominance.=20 After some experimentation, see, e.g., Iowa Pub. Serv. Co. v. ICC, 643 = F.2d 542,=20 548 (8th Cir.1981) (rejecting ICC rule allowing railroads to charge=20 low-elasticity shippers 7% above full cost), the agency adopted a = standard known=20 as "Ramsey pricing," which allows railroads to charge markups in inverse = proportion to shippers' demand elasticities, i.e., to charge "captive=20 shippers"--those customers unable to use alternative forms of=20 transportation--rates far above variable cost in order to compensate for = their=20 inability to charge high rates to shippers who can easily choose trucks = or other=20 forms of transportation. See Burlington Northern v. ICC, 985 F.2d at = 595-96.=20 Because accurately measuring elasticities is difficult, however, the = agency also=20 adopted a system called Constrained Market Pricing ("CMP") to set limits = on how=20 high above variable cost railroads can charge their captive shippers. = See id. at=20 596. For purposes of this case, the most important of these limits--the=20 "stand-alone cost constraint" ("SAC")--prohibits a carrier's rates from=20 exceeding "the rates a hypothetical 'stand-alone railroad' would have to = charge=20 in order to recover the costs of building a rail system to carry the = complaining=20 shipper's traffic and earn a reasonable return." Burlington Northern = R.R. Co. v.=20 STB, 114 F.3d 206, 212 (D.C.Cir.1997).
[331 U.S.App.D.C. 3] Although the agency has = consistently=20 described the CMP/SAC constraint as the " 'preferred and most accurate = procedure=20 available for determining the reasonableness' of rates," Burlington = Northern v.=20 ICC, 985 F.2d at 596 (quoting McCarty Farms, Inc. v. Burlington = Northern, Inc.,=20 3 I.C.C.2d 822, 840 (1987)), it has also recognized that developing a = full SAC=20 study is expensive and therefore inappropriate for cases involving = relatively=20 small amounts of money. For this reason, the agency has spent over a = decade=20 searching for an alternative to SAC for use in small cases. It = originally tried=20 using a standard called R/VC subcomp , which compares the R/VC of the = challenged=20 traffic to the average R/VC charged by other railroads for similar = traffic. But=20 this court rejected R/VC subcomp , holding that the agency had failed to = justify=20 using it to strike a particular rate, especially since "employed = regularly and=20 repeatedly, it will reduce rates to the lowest R/VC used in the = comparison=20 group." 985 F.2d at 597. The agency therefore abandoned the formula as a = bright-line test of reasonableness and resumed its search for another = method.=20 Apparently becoming impatient with this search, Congress directed the = Board to=20 establish by January 1997 "a simplified and expedited method for = determining the=20 reasonableness of challenged rail rates in those cases in which a full=20 stand-alone cost presentation is too costly, given the value of the = case." ICC=20 Termination Act of 1995, Pub.L. No. 104-88, Title I, =C2=A7 102(a), 109 = Stat. 803,=20 810 (codified at 49 U.S.C.A. =C2=A7 10701(d)(3)).
Responding to Congress' directive, the STB issued the = guidelines=20 challenged in this case. Rate Guidelines--Non-Coal Proceedings, Ex Parte = No. 347=20 (Sub-No. 2), 1996 WL 741358 (STB served Dec. 31, 1996) ("December = Decision").=20 Because the Board concluded that no one benchmark standing alone would = suffice,=20 the guidelines measure the reasonableness of rates in small cases by = comparing=20 the challenged rate to three ratios: R/VC subcomp ; R/VC sub 180 , which = measures the average markup charged by the challenged railroad on all = captive=20 traffic; and RSAM, which represents the average markup over variable = cost that=20 the railroad would have to charge captive traffic to recover total costs = and a=20 reasonable profit. The Board found that this approach adequately = balances the=20 needs of shippers and railroads and explained how it would employ the = three=20 ratios:While none of the benchmarks is perfect, we are satisfied that = each is=20 instructive for a simplified rate reasonableness analysis. Taken = together, they=20 allow us to consider each of the relevant statutory factors. At the same = time,=20 each measure serves as a check on the other two. Moreover, ... the three = benchmarks are only the starting point for our analysis. They can and = should be=20 supplemented, as appropriate, with any particularized evidence that = would=20 qualify or modify what one or more benchmarks might otherwise indicate. = We are=20 confident that a careful analysis of these three benchmarks, together = with=20 whatever supplementary evidence is provided in a case, should enable us = to meet=20 our modest objective--to make at least a rough call as to rate = reasonableness in=20 those cases where a more precise determination is not = possible.
Id. at * 21.
In issuing these guidelines, the Board rejected = petitioner's=20 argument that whenever complaining shippers use the three-ratio = approach,=20 railroads should be able to defend by presenting a simplified SAC = analysis.=20 Noting that it had already rejected petitioner's computer model for = producing a=20 simplified SAC figure--in a test the model had approved a rate with an = R/VC=20 exceeding 5,000%, see id. at * 5--the Board concluded that since = shippers may=20 only use the three-ratio approach when a SAC analysis would be = economically=20 infeasible, see id. at * 25-26 (describing when shippers may use the = three=20 ratios), railroads should not then be able to "transform the case into a = SAC=20 case," id. at * 28. "In any event," the Board said, "a SAC [331 = U.S.App.D.C. 4]=20 presentation by the defendant railroad(s) would not be persuasive, = because the=20 defendant railroad lacks the incentive to seek out the least-cost = most-efficient=20 standalone service--the objective of the SAC test." Id.
After the Board rejected its petition for rehearing, = Rate=20 Guidelines--Non-Coal Proceedings, Ex Parte No. 347 (Sub-No. 2), 1997 WL = 586968=20 (STB served Sept. 24, 1997), petitioner sought review in this court, = arguing=20 that by promulgating what it refers to as "vague and unilluminating" = guidelines,=20 the Board failed to satisfy Congress' command to establish a "simplified = and=20 expedited method for determining the reasonableness of challenged rail = rates" in=20 small cases. Petitioner also contends that to the extent the guidelines = will=20 have any effect on rates they will undermine revenue adequacy and that = the Board=20 erred by prohibiting railroads from ever introducing SAC = evidence.
II
Before we can consider the merits of the petition, we = must=20 determine whether it is justiciable--i.e., whether petitioner has = standing and=20 whether its claims are ripe for review. Contrary to the situation we = face in=20 most cases, here it is petitioner arguing that the petition may not be=20 reviewable, suggesting not only that it is "unclear" whether it has been = "aggrieved" by the guidelines, Brief for Petitioner at 31 (citing 28 = U.S.C. =C2=A7=20 2344 (1994) (only a "party aggrieved" may obtain review of a Board = order)), but=20 also that its claims are "arguably" not ripe for review, see id. at 32. = Also=20 unlike the typical case, the Board contends that petitioner has standing = and=20 that the petition is ripe, arguing that petitioner has raised a "purely = legal=20 question." Brief for Respondents at 22.
The counterintuitive positions of the parties actually = make=20 sense. Because parties must petition for review of Board orders within = sixty=20 days, see 28 U.S.C. =C2=A7 2344, and because we generally refuse to = allow late=20 petitions even when petitioners argue that their claims were unripe = during the=20 original sixty-day period, see Eagle-Picher Indus., Inc. v. U.S. EPA, = 759 F.2d=20 905, 914 (D.C.Cir.1985) ("[I]f there is any doubt about the ripeness of = a claim,=20 petitioners must bring their challenge in a timely fashion or risk being = barred."), petitioner seeks to protect itself by obtaining either = immediate=20 review of the guidelines or a statement by this court that, though its = claims=20 are not currently justiciable, it may file another petition within sixty = days of=20 the date when the claims ripen, see Baltimore Gas & Elec., Co. v. = ICC, 672=20 F.2d 146, 149 (D.C.Cir.1982) ("A time limitation on petitions for = judicial=20 review, it should be apparent, can run only against challenges ripe for=20 review."). The Board, apparently believing that its guidelines have a = better=20 chance of surviving a judicial challenge in the absence of a specific=20 application, and concerned about the burden that deferral would impose = upon=20 small shippers forced to defend the guidelines in future cases, argues = that we=20 should review petitioner's claims now.
Setting aside the question of whether a party = acknowledging it=20 may not be aggrieved and introducing no evidence demonstrating actual = injury can=20 ever have standing, we limit our analysis to the petitioner's alternate = argument=20 that the case is unripe for review. See Ohio Forestry Ass'n, Inc. v. = Sierra=20 Club, --- U.S. ----, ----, 118 S.Ct. 1665, 1670, 140 L.Ed.2d 921 (1998)=20 (deciding case on ripeness grounds even though petitioner argued the = case was=20 nonjusticiable on both standing and ripeness grounds); Louisiana Envtl. = Action=20 Network v. Browner, 87 F.3d 1379, 1385 (D.C.Cir.1996) ("Because issues = of=20 standing, ripeness, and other such 'elements' of justiciability are each = predicate to any review on the merits, a court need not identify all = such=20 elements that a complainant may have failed to show in a particular = case."). The=20 ripeness requirement "prevent[s] the courts, through avoidance of = premature=20 adjudication, from entangling [331 U.S.App.D.C. 5] themselves in = abstract=20 disagreements over administrative policies, and also [ ] protect[s] the = agencies=20 from judicial interference until an administrative decision has been = formalized=20 and its effects felt in a concrete way by the challenging parties." = Abbott Labs.=20 v. Gardner, 387 U.S. 136, 148, 87 S.Ct. 1507, 18 L.Ed.2d 681 (1967). To=20 determine whether claims are ripe, we apply a two-part test, evaluating = "the=20 fitness of the issues for judicial decision" as well as "the hardship to = the=20 parties of withholding court consideration." Id. at 149, 87 S.Ct.=20 1507.
Beginning with the first question, we ask whether the = court=20 would benefit from an actual application of the challenged agency = action. See=20 Ohio Forestry Ass'n, --- U.S. at ----, 118 S.Ct. at 1670 (court must = consider=20 "whether the courts would benefit from further factual development of = the issues=20 presented"); Louisiana Envtl. Action Network, 87 F.3d at 1385 (noting = that the=20 "classic institutional reason" for postponing review is the "need to = wait for 'a=20 rule to be applied [to see] what its effect will be' ") (quoting Diamond = Shamrock Corp. v. Costle, 580 F.2d 670, 674 (D.C.Cir.1978)). We have = little=20 doubt that judicial resolution of all of petitioner's challenges would = benefit=20 from a concrete case.
Petitioner first argues that by failing to indicate = how the=20 three ratios would be employed in any particular case to review a = challenged=20 rate, the Board violated Congress' command to establish a method for = determining=20 the reasonableness of rates in small cases. Noting that ratemaking is = "not a=20 precise science," the Board responds that the guidelines "establish a = general=20 framework" which the Board will use to balance the interests of carriers = and=20 shippers. Since the Board has not yet applied the guidelines to = invalidate any=20 specific rate--it applied the guidelines only once, finding that the = challenged=20 rate was reasonable, see South-West R.R. Car Parts Co. v. Missouri = Pacific R.R.=20 Co., 1996 WL 741365 (STB served Dec. 31, 1996)--we have no way of = knowing=20 whether the guidelines will provide concrete guidance to railroads or, = as=20 petitioners argue, are simply "mush," Paralyzed Veterans of Am. v. D.C. = Arena,=20 L.P., 117 F.3d 579, 584 (D.C.Cir.1997), (noting in dicta that "[i]t is = certainly=20 not open to an agency to promulgate mush and then give it concrete form = only=20 through subsequent less formal 'interpretations' "), cert. denied, --- = U.S.=20 ----, 118 S.Ct. 1184, 140 L.Ed.2d 315 (1998). We think that reviewing = this claim=20 now would amount to judicial interference before "an administrative = decision has=20 been formalized and its effects felt in a concrete way by the = challenging=20 parties." Abbott Labs., 387 U.S. at 148-49, 87 S.Ct. 1507.
Judicial resolution of petitioner's second claim, that = the=20 guidelines may undermine revenue adequacy, would likewise benefit from a = concrete case. Relying on Burlington Northern v. ICC, 985 F.2d at = 597-99,=20 petitioner argues that because the three ratios are expressed as = averages, they=20 will tend to set low limits on rates and ratchet these limits downward. = Saying=20 that it recognizes these problems, the Board asserts it will avoid them = by using=20 all three ratios and other relevant evidence to test the reasonableness = of=20 challenged rates. See December Decision, 1996 WL 741358, at * 11 ("We = recognize=20 the dangers inherent in relying on average numbers.... That is why ... = the r/vc=20 benchmarks can only provide the starting point for a rate reasonableness = analysis, not the end result."); id. ("[T]he analysis that we envision = would not=20 presume that, simply because a rate produces an r/vc ratio above the = average=20 level, it is thereby unreasonable.... Rather, what we must consider is = whether=20 the resulting markup is within a reasonable range or zone."); id. at * = 18=20 (discussing the ratcheting problem). Without the benefit of a specific=20 application of the guidelines to facts in a concrete case, we cannot = know=20 whether the Board will heed its own advice, or instead fall prey to the = pitfalls=20 that petitioner warns of. See Florida Power [331 U.S.App.D.C. 6] & = Light Co.=20 v. EPA, 145 F.3d 1414, 1420 (D.C.Cir.1998). At this time, we thus have = no way of=20 evaluating petitioner's claim that the Board will employ the guidelines = to=20 undermine revenue adequacy.
Petitioner's challenge to the Board's exclusion of SAC = evidence=20 is equally unfit for judicial review. Although we are unconvinced by the = Board's=20 explanation that a railroad's SAC presentation would be unpersuasive = because the=20 railroad "lacks the incentive to seek out the least-cost most-efficient = stand=20 alone service," id. at * 28--we rejected just this line of reasoning in=20 Burlington Northern v. ICC, 985 F.2d at 599 ("Of course no adjudicator = would=20 expect to be able to rely entirely on one side's analysis.")--the = Board's=20 explanation that railroads may not convert small rate cases into SAC = cases when=20 the shipper has demonstrated the infeasibility of SAC persuades us the = issue is=20 not yet fit for review. According to petitioner, because it is possible = to=20 develop a low-cost (although not computer model-based) SAC analysis, the = Board=20 erred by excluding all SAC evidence. But since shippers cannot use the=20 three-ratio approach unless they first demonstrate the infeasibility of = a SAC=20 presentation, the appropriate time for us to review the Board's decision = to=20 exclude all SAC evidence will come in a case where the Board allows a = shipper to=20 use the three-ratio approach even though the shipper arguably could have = used a=20 low-cost SAC presentation instead. Until this happens, we have no way of = knowing=20 whether (and if so, on what grounds) the Board will ever exclude = low-cost SAC=20 evidence in a case where a presentation based on such evidence would = have been=20 feasible.
Finding all three of petitioner's challenges unfit for = review,=20 we next consider whether deferring review would cause undue hardship to = the=20 parties. See Truckers United for Safety v. FHA, 139 F.3d 934, 938 = (D.C.Cir.1998)=20 (considering hardship issue after finding challenges not fit for = review). We=20 think it would not. To begin with, nothing in either the record or the = briefs=20 even suggests that the guidelines have any "current impact" on either = petitioner=20 or its members. See Baltimore Gas & Elec., 672 F.2d at 149. Unlike = Abbott=20 Laboratories, where the challenged FDA regulations forced drug = manufacturers to=20 either spend money to comply or risk criminal penalties, 387 U.S. at = 152, 87=20 S.Ct. 1507, here the guidelines "do not command anyone to do anything or = to=20 refrain from doing anything; they do not grant, withhold, or modify any = formal=20 legal license, power or authority; they do not subject anyone to any = civil or=20 criminal liability; they create no legal rights or obligations," Ohio = Forestry=20 Ass'n, --- U.S. at ----, 118 S.Ct. at 1670.
According to the Board, deferring review will impose a = hardship=20 upon the small shippers who will have to defend the Board's guidelines = when=20 petitioner or its members challenge them in some concrete future case. = The=20 Supreme Court has already foreclosed this argument, noting that "[t]he = ripeness=20 doctrine reflects a judgment that the disadvantages of a premature = review that=20 may prove too abstract or unnecessary ordinarily outweigh the additional = costs=20 of--even repetitive--post-implementation litigation." Id. 118 S.Ct. at = 1671; see=20 also Florida Power & Light, No. 95-1093, 145 F.3d 1414, 1421 (noting = that=20 the "burden of participating in further administrative and judicial = proceedings=20 ... do[es] not constitute sufficient hardship for the purposes of = ripeness"). In=20 any event, we see no reason why the same coalition of shipper trade = associations=20 that came together to intervene in this case could not join again when = the=20 guidelines are applied in a particular case. And in a final illustration = of the=20 parties' odd alignment, the Board contends that the case is ripe because = petitioner "[c]learly ... believes that application of guidelines could = be=20 harmful to the rail industry." But since petitioner--the party charged = with=20 demonstrating injury--has not alleged any harm, we think it best to = defer=20 review.
[331 U.S.App.D.C. 7] Finding petitioner's challenges = unfit for=20 review and that deferring review until the Board applies the guidelines = in a=20 concrete case would impose no legally significant hardship upon the = parties, we=20 dismiss the petition for lack of ripeness. In the event that the Board = applies=20 the guidelines to invalidate a specific rate, petitioner may file a = petition for=20 review within sixty days of final agency action. See 28 U.S.C. =C2=A7 = 2344; Baltimore=20 Gas & Elec., 672 F.2d at 149-50.
So ordered.