985 F.2d 589
300 U.S.App.D.C. 1
BURLINGTON NORTHERN RAILROAD COMPANY,=20
Petitioner,
v.
INTERSTATE COMMERCE COMMISSION and the United =
States=20
of
America, Respondents,
McCarty Farms, Inc., et al.,=20
Intervenors.
McCARTY FARMS, INC., et al., =
Petitioners,
v.
INTERSTATE=20
COMMERCE COMMISSION and the United States of
America,=20
Respondents,
Burlington Northern Railroad Company, =
Intervenor.
BURLINGTON=20
NORTHERN RAILROAD COMPANY, Petitioner,
v.
INTERSTATE COMMERCE =
COMMISSION=20
and the United States of
America, Respondents,
McCarty Farms, =
Inc., et=20
al., Intervenors.
McCARTY FARMS, INC., et al.,=20
Petitioners,
v.
INTERSTATE COMMERCE COMMISSION and the United =
States=20
of
America, Respondents,
Burlington Northern Railroad Company,=20
Intervenor.
BURLINGTON NORTHERN RAILROAD COMPANY, and the United =
States
of=20
America, Petitioners,
v.
INTERSTATE COMMERCE COMMISSION and the =
United=20
States of
America, Respondents,
McCarty Farms, Inc., et al. and =
the State=20
of Montana,
Department of Commerce, Intervenors.
McCARTY FARMS, =
INC., et=20
al. and the State of Montana,
Department of Commerce,=20
Petitioners,
v.
INTERSTATE COMMERCE COMMISSION and the United =
States=20
of
America, Respondents.
Nos. 88-1114, 88-1257, 89-1149, 89-1192, 91-1255 and=20 91-1360.
United States Court of Appeals,
District of Columbia =
Circuit.
Argued Oct. 22, 1992.
Decided Feb. 9, 1993.
[300 U.S.App.D.C. 3] Petitions for Review of Orders of = the=20 Interstate Commerce Commission.
Samuel M. Sipe, Jr., with whom Betty Jo Christian, = Washington,=20 DC, Edmund W. Burke, Douglas J. Babb, Fort Worth, TX, Janice G. Barber,=20 Washington, DC, and Michael E. Roper, Fort Worth, TX, were on the brief, = for=20 petitioners in Nos. 88-1114, 89-1149, and 91-1255. William R. Power, = Fort Worth,=20 TX, also entered an appearance for petitioners.
Timothy R. Engler, with whom Michael J. Ogborn and Tim = L.=20 O'Neill, Lincoln, NB, were on the brief, for petitioners in Nos. = 88-1257,=20 89-1192, and 91-1360.
Edmund W. Burke, Douglas J. Babb, Fort Worth, TX, = Janice G.=20 Barber, Washington, DC, Michael E. Roper, Fort Worth, TX, Betty Jo = Christian,=20 and Samuel M. Sipe, Jr., Washington, DC, were on the brief for = intervenor=20 Burlington Northern R. Co. William R. Power, Fort Worth, TX, also = entered an=20 appearance for intervenor.
Thomas J. Stilling, Atty., I.C.C., with whom Robert S. = Burk,=20 General Counsel, and Ellen D. Hanson, Sr. Associate General Counsel, = I.C.C.,=20 John J. Powers, III and John P. Fonte, Attys., Dept. of Justice, were on = the=20 brief, for respondent. Louis Mackall, Washington, DC, also entered an = appearance=20 for respondent.
Before: RUTH BADER GINSBURG, WILLIAMS and HENDERSON, = Circuit=20 Judges.
Opinion for the Court filed by Circuit Judge, STEPHEN = F.=20 WILLIAMS.
STEPHEN F. WILLIAMS, Circuit Judge:
Montana wheat and barley farmers ship their grain via = Burlington=20 Northern to ports in the Pacific Northwest for transportation to markets = in the=20 Pacific Rim. The Interstate Commerce Commission, in a decision not = contested=20 here, has found Burlington to have "market dominance" over these = shipments; as a=20 result, the Commission has jurisdiction over the rates. See 49 U.S.C. = =C2=A7=C2=A7=20 10701a(b)(1) and 10709(b) (1988). In the set of decisions under review = the=20 Commission awarded the shippers over $16 million for excess charges. = Both the=20 railroad and the shippers (including the Montana Department of = Agriculture as=20 one of their representatives) petition for review. The principal issue = revolves=20 around the Commission's decision not to employ its "constrained market = pricing"=20 methodology ("CMP"), which implements the principle of Ramsey pricing = and which=20 the ICC has apotheosized as the "preferred and most accurate procedure = available=20 for determining the reasonableness" of rates in markets where a carrier = has=20 market dominance. See, e.g., McCarty Farms, Inc. v. Burlington Northern, = Inc., 3=20 I.C.C.2d 822, 840 (1987). Instead, the Commission used the "revenue over = variable cost" ("R/VC") method, which holds the railroad's charges on = the=20 disputed traffic to the same ratio of revenue to variable cost as on = certain=20 "benchmark" traffic that the Commission has deemed comparable. = Burlington claims=20 that the Commission failed to justify this substitution, and we agree. = Before we=20 reach that issue, however, we must address claims as to the scope of our = jurisdiction and the scope of the complaints filed with the Commission. = After=20 dealing with these and with the fight over CMP and R/VC, we address = attacks=20 advanced by the shippers that concern the way the Commission applied the = R/VC=20 methodology in this case. We address these R/VC issues so that, if the=20 Commission on remand should lawfully adhere to that methodology, the = entire=20 litigation may be brought to an end.
Under review are three ICC decisions challenged by = both sides=20 and one challenged [300 U.S.App.D.C. 4] by McCarty Farms only, all four=20 decisions being styled "McCarty Farms, Inc. v. Burlington Northern, = Inc.". For=20 simplicity of citation we label them McCarty Farms I through McCarty = Farms IV:=20 (1) McCarty Farms I, 4 I.C.C.2d 262 (1988); (2) McCarty Farms II, Docket = Nos.=20 37809, 37809 (Sub-No. 1) and 37815S (unpublished decision served Feb. = 21, 1989);=20 (3) McCarty Farms III, Docket Nos. 37809, 37809 (Sub-No. 1) and 37815S=20 (unpublished decision served Mar. 27, 1991); (4) McCarty Farms IV, = Docket Nos.=20 37809, 37809 (Sub-No. 1) and 37815S (unpublished decision served Nov. = 26,=20 1991).
These decisions found Burlington's rates excessive = only on=20 trainload (52-car) shipments of export wheat and barley sent from = Montana=20 origins to ports on the Pacific Northwest Coast, and awarded reparations = for the=20 years 1981-86, plus interest to July 1, 1991. See McCarty Farms IV, slip = op. at=20 3. The Commission found no overcharges on either single-car or = multiple-car=20 (26-car) shipments of wheat or barley. See McCarty Farms III, slip op. = at=20 8.
I. Jurisdiction
McCarty Farms (and the shippers it represents) = challenge this=20 court's jurisdiction to review many of the claims raised in this suit. = To assess=20 the argument, we must divide the total dispute into three segments--the = first=20 over which we clearly do not have jurisdiction, a disputed middle = ground, and=20 the last over which we clearly do have jurisdiction.
1. Single-car shipments of wheat for the two-year = period ending=20 September 12, 1980. McCarty Farms started this dispute's crawl through = the legal=20 system in 1980 by filing a class action on behalf of Montana farmers = under 49=20 U.S.C. =C2=A7 11705(c)(1) and 28 U.S.C. =C2=A7 1337 in the U.S. district = court for the=20 District of Montana. The suit disputed only wheat shipments sent in = single cars=20 over a two-year period ending September 12, 1980. Under the doctrine of = primary=20 jurisdiction, the district court referred the rate reasonableness = question to=20 the ICC, but retained jurisdiction over the lawsuit. McCarty then filed = a=20 complaint with the Commission encompassing this claim (plus others, as = discussed=20 below). See ICC No. 37809 (filed Mar. 27, 1981).
Because 28 U.S.C. =C2=A7 1336(b) gives a referring = district court=20 exclusive jurisdiction over appeals from Commission orders "arising out = of such=20 referral,"1=20 all agree that any appeal as to the single-car wheat shipments moving = before=20 September 12, 1980 lies in the district court for the District of=20 Montana.
2. Single-car shipments of barley, and wheat shipments = after=20 September 12, 1980. McCarty's complaint to the ICC following up the = district=20 court referral, ICC No. 37809, challenged not only Burlington's rates = for=20 single-car shipments of wheat in the original two-year period but also = those=20 rates for barley. McCarty also broadened its request for relief to = include=20 prospective rate prescriptions in addition to its previous demand for=20 reparations. The ICC assigned the barley rate challenges to a separate=20 proceeding, ICC No. 37809 (Sub-No. 1), because it concluded that barley = rates=20 were not a part of the district court's referral order.
3. Rates on multi-car (26-car) and trainload (52-car) = shipments=20 of wheat and barley. The Montana Department of Agriculture also filed a=20 complaint, ICC No. 37815S, attacking Burlington's rates on = larger--multi-car or=20 trainload--shipments of wheat and barley. See id. at 1. McCarty concedes = that =C2=A7=20 1336(b) has no application to these rates (because they arise out of the = Montana=20 Department of Agriculture complaint, not the district court referral), = so that=20 this court has jurisdiction to review the ICC decisions under the Hobbs = Act, 28=20 [300 U.S.App.D.C. 5] U.S.C. =C2=A7=C2=A7 2321(a) and 2342(5).2
Given the agreement over jurisdiction for rates in = categories 1=20 and 3, the dispute thus relates only to rates in category 2. McCarty = argues that=20 the district court for the District of Montana has exclusive = jurisdiction not=20 only over the ICC disposition of the claims actually referred to the ICC = by that=20 court, but also over the claims that McCarty added when it filed its = complaint=20 with the Commission. Although no one here addresses the point = explicitly,=20 McCarty also implicitly makes the narrower claim that the district court = has=20 exclusive jurisdiction to review the ICC decisions as they relate to = reparations=20 for single-car wheat shipments moving between September 12, 1980 and the = Commission's ruling on the reasonableness of those rates.
McCarty's argument has two steps. First, as we have = seen, 28=20 U.S.C. =C2=A7 1336(b) gives a district court that refers an issue to the = ICC=20 exclusive appellate jurisdiction over any ICC order "arising out of such = referral." McCarty argues--or, more precisely, implicitly asks us to=20 assume--that all the determinations generated by its complaint to the = Commission=20 can be said to have "aris[en] out of" the referral, even though that = complaint=20 was broader than the district court referral from McCarty's original = complaint.=20 Second, McCarty argues that =C2=A7 214 of the Staggers Rail Act of 1980, = 49 U.S.C. =C2=A7=20 10501(d), does not (contrary to the view of the Commission and = Burlington) cut=20 off district court jurisdiction with respect to shipments after the = effective=20 date of Staggers, October 1, 1980.3
We need not resolve the jurisdictional dispute, = however. We held=20 in Cross-Sound Ferry Services, Inc. v. ICC, 934 F.2d 327 (D.C.Cir.1991), = as we=20 had in prior cases, that when the merits of a case are clearly against a = party=20 seeking to invoke the court's jurisdiction, and the jurisdictional = question is=20 exceptionally difficult, we may rule on the merits without addressing = the=20 jurisdictional issue. Id. at 333. Here, in the section of the case = relating to=20 multi-car and trainload shipments, over which we have undisputed = jurisdiction,=20 we reject all the shippers' attacks on the ICC's application of R/VC, = attacks on=20 which McCarty had to prevail in order to succeed on the single-car = shipments (of=20 both wheat and barley). Thus, the decision on the segment where our = jurisdiction=20 is clear fully determines the outcome on the segment as to which it is=20 disputed.
The context here differs from that of Cross-Sound = Ferry and its=20 predecessors in that McCarty, the party attacking our jurisdiction to = give=20 relief on single-car shipments, [300 U.S.App.D.C. 6] is the same party = that=20 seeks relief against the agency (contingent on McCarty's not winning the = jurisdictional argument). But that does not give any call not to apply=20 Cross-Sound Ferry. The unifying point is that, regardless of the outcome = on the=20 jurisdictional issue, the ultimate disposition is the same. In a key = respect the=20 case is stronger for use of Cross-Sound Ferry than was that case itself; = resolving the merits issues is exceptionally easy (at least in the sense = that it=20 requires no extra expenditure of judicial resources) because we = necessarily must=20 resolve them in the portion of the case over which we plainly have=20 jurisdiction.4
II. The ICC's Exclusion of Domestic Traffic
The ICC determined that the complaints before it = challenged only=20 the rates for shipments sent to certain Northwest Pacific ports for = export. See=20 McCarty Farms I, 4 I.C.C.2d at 264-66 (1988). The shippers assert that = this=20 interpretation was arbitrary and capricious. According to the shippers, = the=20 filings with the district court and the ICC consistently challenged not = only=20 those rates but also ones on traffic moving to interior points in = Washington and=20 Oregon, and traffic moving to ports for domestic consumption rather than = export.=20 We find no error in the Commission's decision.
ICC rules of pleading do not require that origin and = destination=20 points be pled with specificity; the rules do mandate, however, that a = complaint=20 must "advise the Commission and the defendant fully" of alleged = violations and=20 provide "a detailed statement of the relief requested." 49 CFR =C2=A7 = 1111.1=20 (1990).
The Montana Department of Agriculture's complaint as = to=20 Burlington's trainload and multi-car rates was clearly limited to = Portland and=20 Seattle; it did not embrace all Pacific Northwest destinations, as is = now=20 claimed. See Complaint in No. 37815S (filed Mar. 26, 1981) at 6. = However, the=20 complaint did not clearly state whether only export traffic was being=20 challenged. Nonetheless, the complaint included a verified statement of = Eugene=20 Radermacher that indicated that the complaint was limited to export = rates. See=20 McCarty Farms I, 4 I.C.C.2d at 264 n. 6.
The reasonableness of the ICC's interpretation of the = Montana=20 Department of Agriculture's complaint is underscored by the position = taken by=20 the Department and shippers in the proceedings on market dominance. = There the=20 complainants rested heavily on evidence that Montana wheat's high = percentage of=20 protein and gluten made it uniquely attractive to purchasers in the = Pacific Rim,=20 thereby deflecting Burlington's claim that competition from foreign = sources=20 would undermine any market power that Burlington might enjoy because of = its=20 virtual monopoly over carriage of Montana wheat to Pacific Coast export=20 terminals. See McCarty Farms, Inc. v. Burlington Northern, Inc., 3 = I.C.C.2d 822,=20 836-37 (1987). (The finding as to market dominance in barley is obscure. = See id.=20 at 837-39.) Thus the Commission's finding of the reach of the Montana = Department=20 of Agriculture's complaint was completely in accord with a key element = of the=20 complainants' theory.
In interpreting McCarty's complaint No. 37809 (which = also=20 governed in No. 37809 (Sub-No. 1), the challenge to Burlington's = single-car=20 barley rates), the ICC noted that the complaint stated ambiguously that = the=20 destinations of the traffic at issue were "Pacific Coast terminals" in=20 Washington and Oregon--a phrase that did not confine the issue to export = terminals and grains. See McCarty I, 4 I.C.C.2d at 264 n. 6. Again, the=20 Commission resolved the ambiguity by looking at McCarty's accompanying=20 submissions. Those included a verified statement of Robert L. Hines, = Sr., which=20 stated that the rates at issue were export rates, as well as subsequent=20 testimony from McCarty witnesses Cecil Brennan and Robert L. Hines, who=20 specified that the [300 U.S.App.D.C. 7] dispute focused on rates for = Montana's=20 export traffic in wheat and barley. See McCarty I, 4 I.C.C.2d at 264 n. = 6=20 (citing Hines Verified Statement of 3/27/81 at 2). In addition, as with = the=20 Montana Department of Agriculture claims, the shippers' analysis of = market=20 dominance matched the finding that they challenged only rates on export = grain=20 sent to the designated Pacific Coast ports. We do not find the = Commission's=20 reading of the McCarty complaint arbitrary or capricious.
III. Propriety of the R/VC Methodology
Burlington's sole claim is that the Commission, in = determining=20 reasonable rates, erred by dropping the Constrained Market Pricing = ("CMP")=20 methodology that it adopted in the early 1980s in favor of another = methodology=20 ("R/VC") that limits a railroad to charging rates for disputed traffic = that=20 yield no higher a ratio of revenue-to-variable-cost than the R/VC ratio = of=20 certain "benchmark" traffic used for comparison. First we trace the = origin and=20 theory behind the Commission's adoption of CMP in the wake of the rail=20 regulation reform legislation of 1976 and 1980. Then we consider the = character=20 of R/VC and the strength of the Commission's explanation for adopting it = in this=20 case.
With the Railroad Revitalization and Regulatory Reform = Act of=20 1976 (the "4R Act") and the Staggers Rail Act of 1980, Congress moved to = "allow[=20 ] the forces of the marketplace to regulate railroad rates wherever = possible."=20 H.Conf.Rep. No. 1430, 96th Cong., 2d Sess. at 89 (Sept. 29, 1980) = [U.S.Code=20 Cong. & Admin.News pp. 3978, 4120, 4121]. Recognizing that in many = markets=20 the growth of transportation alternatives had reduced the likely need = for=20 regulatory protection against rail monopoly, see S.Rep. No. 499, 94th = Cong., 2d=20 Sess. at 11 (Nov. 26, 1975), [U.S.Code Cong. & Admin.News pp. 14, = 24, 25].=20 Congress in the 4R Act limited the ICC's jurisdiction to situations = where a=20 carrier had "market dominance." See Pub.L. No. 94-210, =C2=A7 202(c)(i), = 90 Stat.=20 35-36 (Feb. 5, 1976) (codified at 49 U.S.C. =C2=A7 10709(c)).
In Staggers, Congress set a quantitative floor for the = Commission's jurisdiction over rates, and established that the = Commission could=20 not find market dominance if the disputed rate yielded an R/VC ratio = lower than=20 a specified figure--which started at 160% in the first year, rose in = increments=20 of 5% a year, and stabilized at 180% in the fifth. See 49 U.S.C. =C2=A7=20 10709(d)(2)(A)-(E). Even where market dominance was shown, the = Commission was to=20 consider the railroads' need to earn adequate revenue:
[i]n determining whether a rate established by a rail carrier is = reasonable=20 ... the Commission shall recognize the policy of this title that rail = carriers=20 shall earn adequate revenues, as established by the Commission under = section=20 10704(a)(2) of this title.5
49 U.S.C. =C2=A7 10701a(b)(3). Congress explained that = the change was=20 in response to the failure of its previous efforts to require the = Commission to=20 give attention to revenue adequacy:
Previous admonitions by the Congress that the Commission assist = carriers in=20 earning adequate revenue levels (49 U.S.C. =C2=A7 10704) have not = achieved their=20 goals. As a result, the Committee is establishing a more straight = forward=20 mandate. This is a clear directive to ensure financially sound = railroads, and=20 the Commission is not to misuse the term "reasonable" to circumvent this = directive.
H.Rep. No. 1035, 96th Cong., 2d Sess. at 54 (May 16, = 1980)=20 [U.S.Code Cong. & Admin.News p. 3999]. See also S.Rep. No. 499, 94th = Cong.,=20 2d Sess. at 11 (Nov. 26, 1975) [U.S.Code Cong. & Admin.News pp. 24, = 25]=20 (similar).
When the Commission began to develop its Coal Rate = Guidelines in=20 1983, it adopted Ramsey pricing as "the appropriate analytical theory." = See Ex=20 Parte No. 347 (Sub-No. 1), Coal Rate GuidelinesNationwide[300 = U.S.App.D.C. 8]=20 (unpublished decision issued Feb. 8, 1983), hereinafter 1983 Interim = Coal Rate=20 Guidelines at 9. It explained that Ramsey pricing was designed for cases = where=20 marginal cost is below average cost. Where that is true, a regulated = firm forced=20 to sell at marginal cost cannot recoup its total costs. Under Ramsey = pricing,=20 the regulator allows firms to charge each user a premium over marginal = cost in=20 inverse proportion to the elasticity of the user's demand. Because the = highest=20 charges fall on the most inelastic demanders, the impact on total usage = is=20 minimized. Thus, the Commission believed, it would reconcile the = railroad's need=20 for revenue to cover total costs with the least possible distortion of = demand=20 (i.e., railroad usage would approximate as nearly as possible the level = that=20 would prevail under perfect competition). See id.; see also Ex Parte No. = 347=20 (Sub-No. 1), Coal Rate Guidelines, Nationwide, 1 I.C.C.2d 520, 526=20 (1985).
Because of the difficulties in getting the data needed = to apply=20 Ramsey pricing in its pure form, the Commission adopted Constrained = Market=20 Pricing. Under CMP, the Commission allows a rail carrier to set prices = freely in=20 response to market forces, but provides some relief for captive = shippers. Under=20 its "revenue adequacy" approach, the Commission will focus on total = system=20 costs, corrected for "demonstrated management inefficiencies", see id. = at 534=20 & n. 35, with the understanding that costs not attributable to = specific=20 service may be recovered by differential pricing, i.e., by charges to = captive=20 shippers. Id. Regardless of what rate might emerge from this analysis, = however,=20 the final rate is subject to a cap based on stand-alone cost = ("SAC")--the full=20 cost of providing the transportation for a shipper (or group of = shippers)=20 through a hypothetical, efficient, stand-alone rail operation that would = serve=20 only that shipper (or group of shippers). See id.; see also 1983 Interim = Coal=20 Rate Guidelines, at 11. With a SAC ceiling, no shipper (or shipper = group)=20 subsidizes others, at least in a strict sense of the term: though some = bear a=20 higher share of fixed costs than others, they still pay no more than = what they=20 would for a facility designed to serve only them. See id. at 11; Coal = Rate=20 Guidelines, Nationwide, 1 I.C.C.2d at 528. Further, in the Commission's = view SAC=20 assures that even the most captive shippers pay no more than a = "simulated=20 competitive price." Id. at 528, 542.
Although originally developed in the context of coal = traffic,=20 the Commission has consistently affirmed that CMP, with its SAC = constraint, is=20 the "preferred and most accurate procedure available for determining the = reasonableness" of rates in markets where the rail carrier enjoys market = dominance. See McCarty Farms, Inc. v. Burlington Northern, Inc., 3 = I.C.C.2d 822,=20 839-40 (1987). Accord Ex Parte No. 347 (Sub-No. 2), Rate = Guidelines--Non-Coal=20 Proceedings, slip op. at 1-2 (served Apr. 8, 1987) ("Constrained Market = Pricing=20 ... is the most sophisticated and accurate method available for = determining the=20 reasonableness of captive rates").
In the McCarty rate challenges, however, the = Commission applied=20 the R/VC method rather than CMP/SAC. Under the R/VC method, a captive = rate is=20 deemed reasonable if its mark-up over variable cost is no greater than = the=20 mark-up on "benchmark" traffic selected as suitable for comparison. = (Here, the=20 Commission chose all western wheat and barley shipments of similar = distance and=20 with mark-ups higher than the ultimate jurisdictional threshold = established by=20 Staggers (180%). See McCarty Farms I, 4 I.C.C.2d at 275.) The Commission = claimed=20 that the R/VC analysis would "act[ ] as an indirect measure of Ramsey = pricing"=20 because "[b]y selecting traffic for the sample [the comparison traffic] = with=20 similar transportation and demand characteristics to the issue traffic, = we are=20 giving effect to the principles of Ramsey pricing and allowing = differential=20 pricing based on demand." See McCarty Farms, 3 I.C.C.2d 822, 842 (1987). = Thus=20 the Commission purported to achieve something close to the economic = rationality=20 of CMP/SAC analysis while reducing the amount of information needed (and = thus=20 the cost of the calculation).
[300 U.S.App.D.C. 9] Obviously the Commission is free = to make=20 reasonable trade-offs between the quality and cost of possible = regulatory=20 approaches. Reasonableness depends on how much quality is sacrificed for = how=20 much saving in cost, and of course we owe the Commission's judgment on = the point=20 great deference. Here, however, the Commission has not intelligibly = explained=20 why the trade-off chosen was reasonable.
No one here attacks the Commission's accolades for = CMP/SAC. We=20 therefore turn to the asserted drawbacks of R/VC, starting with a = fundamental=20 conceptual problem. If the formula is employed regularly and repeatedly, = it will=20 reduce rates to the lowest R/VC used in the comparison group. Suppose, = for=20 example, that the initial group (including the issue traffic) consisted = of equal=20 blocks of traffic with respective R/VCs of 180%, 185%, 190%, 195% and = 200%. The=20 average is clearly 190%, so that if the initial issue traffic comprises = the=20 blocks at 195% and 200%, they will be shaved to 190%. But at that point = the=20 average will have fallen (to 187%), and all the rates at 190% will be = vulnerable=20 to further reductions. These reductions in turn lower the average, and = so on.=20 Equilibrium would ultimately be achieved at 180%. Thus, having chosen = 180%=20 because Congress had identified it as the point at which the Commission = should=20 start to be concerned with possible abuse of market power, the = Commission would=20 find itself imposing 180% as a rate ceiling.
The shippers' economics expert candidly acknowledged = the truth=20 of this difficulty, but answered it in practical terms. Because = pre-Staggers=20 rates that were not challenged within 180 days of its effective date = could not=20 thereafter be challenged, see Staggers =C2=A7 229, 49 U.S.C. =C2=A7 = 10701a note, the=20 scenario of endless iteration was implausible. Verified Statement of = Alfred=20 Kahn, September 30, 1987 at 8-9. The ICC adopted a similar argument. = McCarty=20 Farms I, 4 I.C.C.2d at 279. Further, of course, the process would = require many=20 iterations, and the relatively small gains for shippers from the later = stages=20 would dissuade them from bothering to drive the process forward. This = practical=20 defense, however, does nothing to give R/VC any glimmer of supporting = principle=20 or intellectual coherence.
Second, it is hard to discern any principle behind the = choice of=20 benchmark traffic. The Commission explained that it selected traffic = with=20 similar transportation and demand characteristics. McCarty Farms, 3 = I.C.C.2d at=20 842. But if a profit-maximizing railroad charges more for the issue = traffic than=20 for the benchmark traffic, that would seem to represent a judgment--by = the party=20 with the greatest interest in making it correctly--that the issue = traffic either=20 costs more to transport or has a less elastic demand. If applied = steadfastly,=20 then, the R/VC method puts the Commission in the position of simply = correcting=20 (or purporting to correct) railroad management decisions as to what = prices will=20 most benefit the railroad. As it is hard to believe the Commission = really thinks=20 that would be a good allocation of its resources, it seems most probable = that=20 the transportation and demand characteristics of the two groups are in = fact=20 different. Thus, though the outcome of the method depends critically on = the=20 choice of benchmark, the Commission's statement of its criteria of = choice seems=20 not to fit its purpose in the exercise, leaving the true criteria=20 obscure.
Further, while CMP explicitly builds in the idea of = revenue=20 adequacy (subject to the SAC constraint), Coal Rate Guidelines, = Nationwide, 1=20 I.C.C.2d at 534 & n. 35, the relation of R/VC to revenue adequacy is = most=20 obscure. The Commission observes (without dispute) that the rates it has = set are=20 above average cost and thus contribute to revenue adequacy. McCarty I, 4 = I.C.C.2d at 280-81. But as Burlington's revenues were inadequate--by the = Commission's own calculations--for each of the six years for which = refunds were=20 ordered,6=20 [300 U.S.App.D.C. 10] it is not altogether clear why the rates charged=20 constituted an abuse of market power within the Staggers Act frame of = reference,=20 with its heavy stress on revenue adequacy. This obscurity is underscored = by the=20 haphazard character of the choice of benchmark traffic.
Thus, while the Commission urges that R/VC is really a = variant=20 of Ramsey pricing, this is so only in the vaguest imaginable sense, = namely, that=20 it leaves the railroad's lower rates alone. The principle for limiting = the=20 higher rates has no evident connection to any of the goals that the = Commission=20 said CMP/SAC was designed--indeed, well designed--to achieve.
It is hardly surprising, then, that the shippers' own = economics=20 expert conceded serious drawbacks in R/VC, candidly admitting that it = "provides=20 no economic principle, no theoretically definable test, against which = the=20 'reasonableness' of the markups [over the variable cost of captive = rates] can in=20 principle be objectively" assessed. Verified Statement of Alfred Kahn, = September=20 30, 1987 at 4. "All it [R/VC analysis] ... accomplish[es] ... [is] to = ensure=20 that no single shipper or group of shippers ... is exploited more than = all other=20 captive shippers." Id. at 5. Even the last comment does not quite = capture the=20 problem, for it assumes exploitation, which R/VC principles do not = intelligibly=20 define.
Perhaps there are things to be said in favor of R/VC = methodology=20 that the Commission has left unsaid; of course it may seek to fill the = gap on=20 remand. The present record, however, suggests a profound discrepancy in = the=20 quality of the competing methods. That takes us to the Commission's cost = justification. The Commission claims that when, as here, there are = multiple,=20 scattered points of origin, it is very costly (or perhaps even = impossible) to=20 develop stand-alone figures for rates under review. Thus it argues that = while=20 CMP/SAC pricing may be best for coal pricing, coal carriage is unique = because=20 coal "is typically shipped in frequent, regular, high-volume = (unit-train)=20 movements over high-density rail lines between a very few origin and = destination=20 points." See Commission Brief at 26.
This argument is not supported by the ICC's own = treatment of=20 apparently analogous cases. In Metropolitan Edison Co. v. Conrail, 5 = I.C.C.2d=20 385 (1989), the Commission used CMP/SAC pricing to evaluate the rates of = coal=20 shipments that seem quite similar, in just these respects, to the = disputed wheat=20 and barley shipments here. In Metropolitan Edison, there were 39 = different=20 origination points, several low-density routes, and a total annual = volume of=20 coal at issue--440,000 tons--that was much lower than the = 2,000,000-3,500,000=20 tons/year of grain at issue in these proceedings. See id. at 416, = 419-20, 423;=20 Burlington Comments at 14-15 (filed August 7, 1987). Moreover, the = Metropolitan=20 Edison decision never suggested that it was particularly hard to develop = SAC=20 data for the type of traffic under review.
Similarly, in Coal Trading Corp. v. Baltimore & = Ohio R.R., 6=20 I.C.C.2d 361 (1990), the ICC analyzed rates with the CMP/SAC = methodology,=20 notwithstanding that the case involved 507 origin-destination pairs, = with=20 shipments from five states terminating at three coal piers on the coasts = of=20 Maryland and Virginia. See id. at 362. That situation appears quite = similar to=20 the present one, in which grain moved from 272 origination points in = Montana to=20 a handful of destination points on the Pacific Northwest Coast. See = Verified=20 Statement of Philip H. Burris, August 6, 1987 at 3. For = origin-destination pairs=20 with very few shipments, the Commission also appeared to believe that = some sort=20 of extrapolation could be used. See Coal Trading Corp, 6 I.C.C.2d at 377 = n. 15.=20 Thus the Commission has by no means shown that the number of = origin-destination=20 pairs or the density of the traffic raise the information costs so = drastically=20 as to justify scuttling CMP.
Burlington submitted SAC calculations in this case in = an effort=20 to demonstrate their [300 U.S.App.D.C. 11] feasibility. The Commission = critiqued=20 the data on grounds that the assumptions were unduly self-serving and=20 unreliable, showing Burlington had "little incentive to develop [data = for] a=20 least cost [SAC] system." See McCarty Farms I, 4 I.C.C.2d at 271; see = also=20 Commission Brief at 27-28 (attacking Burlington for its "self-serving=20 assumptions"). This is hardly a smashing riposte. Of course no = adjudicator would=20 expect to be able to rely entirely on one side's analysis. We hope that = the=20 Commission does not think that the CMP/SAC model works for coal because = parties=20 in that type of litigation never make self-serving assumptions. = Burlington's=20 submissions showed that a SAC analysis could be done; as to whether the = shippers=20 and the Commission could not correct the defects at a reasonable cost, = the=20 Commission never spoke.7
In McCarty Farms I the Commission suggested that the = costs of=20 CMP posed a special problem where the claim was brought by small = shippers who=20 would not be able to recover their expenses except in the event of = victory, 4=20 I.C.C.2d at 267-68, but the Commission does not press the point in its = brief=20 here. The concern seems quite weak where, as here, the shippers' claims = are=20 pressed by an entity that in a sense aggregates all shipper = interests--the=20 Montana Department of Agriculture. Even without the state presence, one = can=20 imagine risk-allocating devices, such as allowing a successful = representative=20 shipper to recover double its reasonable costs out of the total = overcharges=20 collected, which would provide adequate incentives for the additional=20 investment--if indeed CMP is materially more costly to apply than=20 R/VC.
Given the Commission's praise for CMP/SAC, it can on = remand=20 support its switch to R/VC only by a careful analysis indicating that = the=20 incremental costs of applying CMP/SAC are large in relation to the = attendant=20 sacrifice of quality (which, of course, it may seek to deprecate). On = the=20 present record, however, the jettisoning of CMP/SAC cannot pass for = reasoned=20 decisionmaking.
IV. Shippers' Attacks on the Application of R/VC
We here address a series of criticisms of the way the = Commission=20 went about applying the R/VC methodology. The shippers' attacks on that=20 application are now ripe and fully briefed, and we cannot completely = discount=20 the possibility that the Commission on remand will lawfully adhere to = the R/VC=20 methodology. Thus the most practical course, in terms of economy of = judicial and=20 litigants' resources, and the interest in speeding the controversy to = its end,=20 is to dispose of the claims.
The lack of any visible intellectual coherence in the = R/VC=20 method, noted above, somewhat colors this process. The shippers are in = the=20 position of one who, having insisted that a dart-thrower throw = blindfolded and=20 with his back to the dartboard, now claims that the dart-thrower would = do better=20 if he added a little twist of the wrist.
A. ICC's Choice of Jurisdictional Thresholds
The first claim stems from the way the Commission used = the=20 jurisdictional thresholds established by the Staggers Act. Recall that = the Act=20 set up a progressive limitation on the Commission's jurisdiction, = barring it=20 from reviewing the reasonableness of rates below certain R/VC ratios. = The=20 threshold ratio was 160% for the first year (October 1, 1980 through = September=20 30, 1981), and rose by 5% a year until stabilizing, effective October 1, = 1984,=20 at the present ratio of 180%. In defining the benchmark rates, the = Commission=20 excluded all traffic with rates yielding R/VC ratios below 180%. The = shippers=20 had argued that the benchmark traffic should reach lower--to all traffic = that=20 more than covered the railroad system's average costs. See Verified [300 = U.S.App.D.C. 12] Statement of Alfred Kahn, September 30, 1987 at = 5.
The shippers invoke a variety of arguments. First, = they argue=20 that the Commission applied the jurisdictional threshold in a mistaken = belief=20 that it had no legal authority to include traffic yielding lower = revenue. This=20 is simply a misreading of the Commission, which clearly understood = itself to be=20 making a policy judgment. See McCarty Farms I, 4 I.C.C.2d at 275-76 = & n. 26;=20 McCarty Farms, Inc. v. Burlington Northern, Inc., Docket Nos. 37809, = 37809=20 (Sub-No. 1), 37815S (unpublished decision served May 11, 1988) ("May = 1988=20 Decision ") at 3.
Second, the shippers argue that by excluding traffic = with=20 revenue below the 180% R/VC ratio but above fully allocated costs, the=20 Commission wrongly "exclude[d] any competitive traffic." McCarty Brief = at 29.=20 But the Commission's explanation seems quite understandable. Its aim in = applying=20 the R/VC test, it said, was to "develop a benchmark of maximum = reasonableness=20 based on the differential pricing experienced by similarly situated = traffic, not=20 on a ratio which represents an average mark-up." McCarty Farms I, 4 = I.C.C.2d at=20 275-76 (emphasis in original). This appears completely in accord with = the=20 undisputed proposition that Staggers contemplated that rates could be = reasonable=20 even though they reflected an exercise of market power. See 49 U.S.C. = =C2=A7 10709(c)=20 ("a finding of market dominance does not establish a presumption that = the=20 proposed [or existing] rate exceeds a reasonable maximum"). We note that = the=20 shippers' own economics expert said the he found "no basis in principle = for=20 choosing between the Commission's and [the shippers'] proposals." = Verified=20 Statement of Alfred Kahn, September 30, 1987 at 9. Further, the = shippers'=20 proposal incorporates a principle which, if it were continuously = applied, would=20 reduce the rates paid by captive shippers to their share of fully = allocated=20 cost. Compare p. above. Since railroads cannot expect to recover the = very=20 elastic shippers' share of fully allocated costs from them, the = shippers'=20 principle would condemn the railroads to revenue inadequacy.
Third, the shippers assert that if the Commission was = going to=20 use the jurisdictional threshold as a floor in defining the benchmark = rates, it=20 should have used, for each year, the threshold applicable to that year, = e.g.,=20 160% for October 1, 1980 through September 30, 1981. The Commission, = however,=20 adequately explained its reasoning in rejecting this idea. It viewed = Congress's=20 incremental lifting of the jurisdictional floor as an effort "primarily = to=20 cushion the potential of rate increases in the wake of loosened federal=20 controls." May 1988 Decision at 3 n. 5. In the ICC's view, the = successive floors=20 spoke not to what was a reasonable rate, but only to what rates might = justify=20 Commission concern. Id. at 2. Because "the question [of benchmark rates] = relates=20 to an approximation of the point of [market] captivity, not the impact = of sudden=20 increases," it made sense to choose "[t]he end point" of the alteration = in=20 jurisdictional threshold. Id. at 3 n. 5. Given the necessarily = unscientific=20 character of the exercise as a whole, the judgment seems by no means=20 arbitrary.
B. The Commission's Failure to Use Movement-Specific Costs
The shippers object to the Commission's decision to = use generic=20 system costs for wheat and barley shipments instead of movement-specific = costs.=20 They argue that the Commission has previously used movement-specific = costs, and=20 note that the Commission has endorsed that approach as "sound in = concept" under=20 "normal circumstances". McCarty Farms I, 4 I.C.C.2d at 282.
The shippers' objection is unpersuasive. First, the = Commission=20 employed system average costs when computing variable costs for the = benchmark=20 traffic, evidently without objection by the shippers. See McCarty Farms = II, at=20 4; McCarty Farms I, 4 I.C.C.2d at 282. Noting that the benchmark and = issue=20 traffic were very similar, the Commission believed that any adjustment = of costs=20 for the issue traffic would in all likelihood be suitable for the = comparison=20 [300 U.S.App.D.C. 13] traffic as well. Thus, if the adjustment were made = on both=20 sides, it might well be pointless; if on only one, it would create phony = discrepancies. Id. Further, the shippers themselves had offered cost = adjustments=20 only for two years, using extrapolation for the rest. Id. The shippers'=20 suggestion would have dragged out the proceedings, with no apparent = improvement=20 in accuracy.
C. Use of the R/VC Standard as a Cap for Average Rather = Than
Individual Shipment Rates
The shippers complain that the Commission acted = arbitrarily and=20 capriciously when it applied the R/VC standards as a cap which the = average of=20 Burlington's rates (as opposed to each single rate) could not exceed. = More=20 specifically, when applying the R/VC standard, the ICC grouped the issue = traffic=20 by year and then additionally by type (trainload, multiple-car, and = single car);=20 it then offset rates producing an R/VC ratio lower than the permissible = maximum=20 against those rates with an above-standard R/VC ratio. See McCarty Farms = I, 4=20 I.C.C.2d at 278. The shippers say that this application of the R/VC = standard=20 conflicts with Commission precedent and fails to ensure that every = individual=20 shipper is protected against excessive rates.
The Commission's answer seems persuasive. If all = Burlington's=20 above-standard rates were lowered to the standard, when Burlington could = not=20 retroactively collect for below-standard charges, the railroad in the = aggregate=20 would receive less than the standard. Id. The Commission's choice here = seems a=20 logical response to the shippers' decision to have advanced their claims = as a=20 class action, seeking relief on an aggregate rather than = shipment-by-shipment=20 basis.8
D. Reliance on Indexing
The Commission calculated the permissible R/VC for = 1979-86 with=20 aggregate data from those years; for later years, it took the maximum = rates for=20 1986 (derived from the aggregate benchmark) and indexed them forward = with a=20 "Rail Cost Adjustment Factor."9=20 The shippers argue that when 1987 data became available, the Commission = should=20 have recalculated the R/VC benchmarks with the 1987 data. We see no need = for=20 such recalculation. If sorting out disputes about the new data took much = time=20 (and there were disputes over the 1987 data, see McCarty Farms III, slip = op. at=20 3), any such requirement could drag proceedings out indefinitely, as the = digestion of one year's data allowed the next year's to emerge, itself = ready for=20 digestion. Cf. Cost Ratio for Recyclables--1983 Determination, Ex Parte = No. 394=20 (Sub-No. 1), 3 I.C.C.2d 407, 410 (1985) (noting impossibility of using=20 completely current information).
There is quite an irony in the shippers' harping upon = the=20 Commission's having taken shortcuts in its application of R/VC, when the = latter=20 methodology can itself be justified (if at all) only as an economy of = effort.=20 But whereas Burlington has shown a serious qualitative disadvantage in = R/VC as=20 opposed to CMP/SAC, the shippers seem to insist on endless increases in = data=20 analysis by the Commission in the application of R/VC, without = suggesting any=20 compelling gains in accuracy or conceptual coherence.[300 U.S.App.D.C. = 14] E.=20 Method of Calculating Interest
The shippers argue that the ICC acted "arbitrarily, = capriciously=20 and unreasonably" by not employing its usual method of calculating = interest. See=20 49 CFR =C2=A7 1141.1.10=20 When an agency regulation is invoked, the first step of analysis, of = course, is=20 to determine whether it is applicable by its terms, a matter on which we = owe the=20 agency great deference. See Sandstone Resources, Inc. v. FERC, 973 F.2d = 956, 959=20 (D.C.Cir.1992).
As the Commission has explained, the ICC's rules have = no=20 provisions for class action complaints. As a consequence, when the = district=20 court referred the McCarty suit, the Commission was confronted with a = novel=20 problem. 49 CFR =C2=A7 1141.1 contemplates selecting an interest rate = based on rates=20 prevailing on the date of the first unlawful shipment. See McCarty Farms = III,=20 slip op. at 4. But here, rather than assessing the reasonableness of = charges for=20 specific shipments, the Commission calculated the reasonableness of = various=20 categories of rates taken on an aggregate and annual basis. See McCarty = I, 4=20 I.C.C.2d at 278-79. The damage awards in this case therefore did not = represent=20 an actual overcharge owed to any specific individual, but instead an = aggregated=20 overcharge for each year owed to multiple unidentified shippers. Literal = application of =C2=A7 1141.1 therefore made little sense. The = Commission's decision=20 to use a single interest rate for each year, and to assume that there = was one=20 overcharge occurring in the middle of each year, see McCarty Farms III, = slip op.=20 at 4-5, was anything but arbitrary.
F. Prospective Rate-Setting
McCarty says that the ICC erred by refusing to = prescribe=20 prospective rate ceilings for all the rates challenged in these = proceedings,=20 thereby depriving "the Montana shippers ... [of] the protection afforded = them by=20 the Staggers Act." McCarty Reply Brief at 18.
Once the Commission finds a rate in violation of the = statute=20 (but only then), it "may prescribe the rate ... to be followed" in the = future.=20 49 U.S.C. =C2=A7 10704(a)(1) (emphasis added). Concerning single-car and = multiple-car=20 (26-car) shipments, therefore, as to which the Commission had found no=20 unreasonable rates, it lacked authority to prescribe future ones. See = McCarty=20 Farms IV, slip op. at 3-4. Accord Central of Ga. R.R. Co. v. United = States, 379=20 F.Supp. 976, 979 (D.D.C.1974), aff'd sub nom. United States Clay = Producers=20 Traffic Ass'n v. Central of Ga. R.R., 421 U.S. 957, 95 S.Ct. 1944, 44 = L.Ed.2d=20 446 (1975).
For trainload rates, the Commission originally = prescribed=20 prospective rate ceilings; it then elected to lift them after concluding = that=20 they were unnecessary. See McCarty Farms IV, slip op. at 4. In so doing, = it=20 relied on data which showed that levels for trainload rates had been = reasonable=20 from 1987-90, noted findings that the export grain market was now = competitive,=20 drew on its experience to conclude that the situation was unlikely to = change in=20 the future, and noted that shippers could bring complaints to the ICC if = they=20 regarded future rates as unreasonable. See id. at 3-4. There was nothing = arbitrary there.
* * * * * *
On the Montana Department of Agriculture component of = the=20 dispute, we remand the case to the ICC to reconsider whether it was = appropriate=20 to use R/VC instead of CMP/SAC pricing to evaluate the reasonableness of = the=20 multi-car and trainload rates; we also reject the shippers' claims [300=20 U.S.App.D.C. 15] as to the application of R/VC. On the basis of these=20 determinations and Cross-Sound Ferry, we reject the McCarty claims as to = alleged=20 error in the Commission's treatment of the subjects of disputed = jurisdiction,=20 namely, all single-car shipments of barley, and all disputed wheat = shipments=20 after September 12, 1980.
So ordered.
28 U.S.C. =C2=A7 1336(b) states that:
[w]hen a district court ... refers a question or issue to the = Interstate=20 Commerce Commission for determination, the court which referred the = question or=20 issue shall have exclusive jurisdiction of a civil action to enforce, = enjoin,=20 set aside, annul, or suspend, in whole or in part, any order of the = Interstate=20 Commerce Commission arising out of such referral.
(Emphasis added.)
28 U.S.C. =C2=A7 2321(a) provides that:
[e]xcept as otherwise provided by an Act of Congress, a proceeding to = enjoin=20 or suspend, in whole or in part, a rule, regulation, or order of the = Interstate=20 Commerce Commission, shall be brought in the court of appeals as = provided by and=20 in the manner prescribed in ... this Title.
28 U.S.C. =C2=A7 2342 further provides:
The court of appeals ... has exclusive jurisdiction to enjoin, set = aside,=20 suspend (in whole or in part), or to determine the validity of ...
(5) all rules, regulations, or final orders of the Interstate = Commerce=20 Commission made reviewable by section 2321 of this title....
Section 214, 49 U.S.C. =C2=A7 10501(d), provides in relevant part = that:
[t]he jurisdiction of the Commission and of State authorities (to the = extent=20 such authorities are authorized to administer the standards and = procedures of=20 this title ...) ... over transportation by rail carriers ... is = exclusive.
The contention of the Commission and Burlington is that, as to rail = rates,=20 this supersedes (i.e., implicitly repeals) the more general provision = for=20 concurrent jurisdiction, 29 U.S.C. =C2=A7 11705(c)(1). The district = court accepted=20 that view. McCarty Farms, Inc. v. Burlington Northern, Inc., 787 F.Supp. = 937,=20 943 (D.Mont.1992), petition for interlocutory appeal denied, No. = 92-80119 (9th=20 Cir. May 29, 1992) (unpublished order).
As to any claims not filed with the district court before the = effective date=20 of Staggers but relating to shipments before that date, Burlington and = the=20 Commission make a similar claim of ousted district court jurisdiction = based on =C2=A7=20 229, 49 U.S.C. =C2=A7 10701a note, which provides that:
any rate that is in effect on the effective date of this Act [likely = October=20 1, 1980] ... which is not challenged in a complaint filed within the = [following]=20 180-day period ... shall be deemed to be lawful and may not thereafter = be=20 challenged in the Commission or in any court (other than on appeal from = a=20 decision of the Commission).
The sole exception to this is the interpretation of McCarty's = complaint=20 before the ICC, see part II below, last paragraph
Section 10704(a)(2) of Title 49 requires the Commission to adopt = standards=20 for "establishing revenue levels for rail carriers ... that are = adequate, under=20 honest, economical, and efficient management, to cover total operating = expenses=20 ... plus a reasonable and economic profit or return (or both) on capital = employed in the business."
See Ex Parte No. 472, Railroad Revenue Adequacy--1986 Determination, = 3=20 I.C.C.2d 966, 970 (1987); Ex Parte No. 465, Railroad Revenue = Adequacy--1985=20 Determination, 3 I.C.C.2d 541, 552 (1987); Ex Parte No. 463, Railroad = Revenue=20 Adequacy--1984 Determination, 1 I.C.C.2d 615, 622-23 (1986); Ex Parte = No. 457,=20 Railroad Revenue Adequacy--1983 Determination, 1 I.C.C.2d 734, 737 = (1984); Ex=20 Parte No. 450, Railroad Revenue Adequacy--1982 Determination, 48 = Fed.Reg.=20 38,697, 38,697 (1983); Ex Parte No. 439, Railroad Revenue Adequacy--1981 = Determination, 47 Fed.Reg. 52,237, 52,237-38 (1982)
In its brief the Commission suggests that at least one of the = assumptions was=20 compelled by deficiencies in data, namely, Burlington's inability to = develop a=20 stand-alone group for the period before 1982. Commission Brief at 28. In = its=20 administrative exploration of the issue the Commission never mentioned = this=20 defect, see McCarty Farms I, 4 I.C.C.2d at 268-71, making one wonder = whether the=20 problem was so insuperable
Although the Commission did not explicitly distinguish prior = precedent, e.g.,=20 Increased Rates on Coal, Midwestern Railroad, August, 1979, 364 I.C.C. = 29=20 (1980); Increased Rates on Coal, L & N RR, October 31, 1978, 362 = I.C.C. 370=20 (1979), the shippers cite no prior case confronting the consequence that = would=20 follow if their view were adopted here
The RCAF is an industry-wide cost index that is updated four times = each year=20 pursuant to 49 U.S.C. =C2=A7 10707a(a)(2)(B), which provides:
the Commission shall ... in no event less often than quarterly[ ] = publish a=20 rail cost adjustment factor which shall be a fraction, the numerator of = which is=20 the latest published Index of Railroad Costs (which index shall be = compiled or=20 verified by the Commission, with appropriate adjustments to reflect the = changing=20 composition of railroad costs ...), and the denominator of which is the = same=20 index for the fourth quarter of 1980, or for the fourth quarter of 1982 = or for=20 the fourth quarter of every fifth year thereafter, as = appropriate.
The Regulation states that "[i]nterest rates ... computed following a = Commission decision shall be the average yield (investment rate) of = marketable=20 securities of the United States Government having a duration of 90 days. = The=20 interest rate level shall be determined by ... [t]he date the first = unlawful=20 charge is paid." 49 CFR =C2=A7=C2=A7 1141.1 and = 1141.1(b)