PORT OF PORTLAND ET AL. v. UNITED STATES ET AL.
APPEAL FROM THE UNITED STATES DISTRICT COURT FOR THE DISTRICT OF OREGON.
Argued October 20, 1971.
Decided June 29, 1972.
The Spokane, Portland & Seattle Railway Co. (SP&S), a subsidiary of Burlington Northern, and the Union Pacific (UP), sought Interstate Commerce Commission (ICC) approval under 5 (2) of the Interstate Commerce Act of a joint acquisition of control of the Peninsula Terminal Co. (Peninsula), whose tracks provide an access route to Rivergate, an industrial complex being developed by the Port of Portland, Oregon. Peninsula would continue to operate as a separate carrier. The Milwaukee and the Southern Pacific (SP), the two other line-haul carriers serving Portland, sought inclusion as joint purchasers of Peninsula, and trackage rights linking their lines with Peninsula, under 5 (2) (b), (c), and (d) of the Act. SP, by a separate proceeding, also sought trackage linking its lines with Peninsula, under 3 (5). The ICC (subject to conditions to protect the traffic of the other railroads) approved the purchase of Peninsula by Burlington Northern and UP, but denied the Milwaukee and SP petitions. It concluded that the adverse effects on SP&S and UP of the proposed four-railroad ownership of Peninsula and accompanying trackage rights would outweigh the advantages to SP, Milwaukee, and the Rivergate industries. Milwaukee contends that Condition 24 (a) to the Northern Lines merger, which gave Milwaukee access to the Portland area over the Burlington Northern-SP&S tracks, required that Milwaukee be included in the purchase of Peninsula. Held:
BLACKMUN, J., delivered the opinion of the Court, in which all Members joined except POWELL and REHNQUIST, JJ., who took no part in the consideration or decision of the case.
Lofton L. Tatum argued the cause for appellants. With him on the briefs were Raymond K. Merrill, Warren H. Ploeger, Oglesby H. Young, W. Harney Wilson, James H. Pipkin, Jr., Lee Johnson, Attorney General of Oregon, Dale T. Crabtree, Assistant Attorney General, Samuel P. Delisi, and Brenda P. Murray. Messrs. Merrill and Ploeger filed a brief for appellant Chicago, Milwaukee, St. Paul & Pacific Railroad Co. Solicitor General Griswold, Acting Assistant Attorney General Comegys, and Howard E. Shapiro filed a brief for the United States in support of appellants. [408 U.S. 811, 813]
Fritz R. Kahn argued the cause for appellee the Interstate Commerce Commission. With him on the brief were Betty Jo Christian and Emmanuel H. Smith. Hugh L. Biggs, Roger J. Crosby, James Warren Cook, Richard Devers, Randall B. Kester, James H. Anderson, and John F. Weisser, Jr., filed a brief for appellees Spokane, Portland & Seattle Railway Co. et al.
MR. JUSTICE BLACKMUN delivered the opinion of the Court.
This case involves an order of the Interstate Commerce Commission, issued under 5 (2) of the Interstate Commerce Act, as amended, 54 Stat. 905, 49 U.S.C. 5 (2), authorizing the joint acquisition of a heretofore independent switching railroad at Portland, Oregon, by two of the four line-haul railroads serving that city. Spokane, P. & S. R. Co. and Union Pacific R. Co., 334 I. C. C. 419 (1969). The switching railroad, Peninsula Terminal Co., is of current interest to the carriers because it provides an entrance route to the Rivergate Industrial District, a modern industrial and port complex being developed by the appellant, Port of Portland.
The two railroads authorized to acquire Peninsula are the Union Pacific Railway Co. (UP) and the Great Northern Pacific & Burlington Lines, Inc. (Burlington Northern), through its subsidiary, the Spokane, Portland & Seattle Railway Co. (SP&S). 1 The two other line-haul [408 U.S. 811, 814] carriers now serving Portland - the Chicago, Milwaukee, St. Paul & Pacific Railroad Co. (Milwaukee) and the Southern Pacific Transportation Co. (SP) - sought to be included as joint purchasers of Peninsula under 5 (2) (b), (c), and (d) of the Act, 49 U.S.C. 5 (2) (b), (c), and (d), and sought trackage rights linking their lines with Peninsula. This appeal arises out of the Commission's denial - in disagreement with its hearing examiner's recommendations - of the petitions of Milwaukee and SP. Together with these two railroads, the Port of Portland and the Public Utility Commissioner of Oregon appeal from the decision of the three-judge District Court affirming, without opinion, the Commission's order. The United States joins the appellants in urging that the judgment below be reversed, while the Commission joins Burlington Northern and UP in urging affirmance. Probable jurisdiction was noted. 401 U.S. 906 (1971).
The question whether the Commission applied the correct legal standards is presented against the background of a complex factual situation - though this is not unusual in the case of railway mergers and acquisitions - and we find it necessary to go into detail concerning the facts and the proceedings prior to the submission of the case here.
A. The Rivergate Area and Peninsula's Relation to It
The developing Rivergate Industrial District occupies nearly 3,000 acres at the tip of the peninsula formed by the confluence of the Columbia and Willamette Rivers. Rivergate's six miles of waterfront will provide docksites for direct deepwater access to the Pacific Ocean. The Port of Portland has expended more than five million dollars of public funds for planning, construction, and development, and it is estimated that ultimate public [408 U.S. 811, 815] and private investment in industrial and port facilities at Rivergate will exceed 500 million dollars.
As conceived by its public developers, the Rivergate complex will be served by a domestic transportation network capable of providing efficient and economical service to and from points throughout the Nation. To achieve this goal, the Port's consultants recommended construction by the Port of an internal rail loop that would connect with existing carriers at the southwestern and eastern corners of Rivergate, thus providing Rivergate industries with direct access to all line-haul carriers serving Portland. At full development - estimated to be 15 years in the future - rail traffic generated by these industries is expected to reach between 500 and 600 cars per day, with a projected annual volume of five million tons of freight.
At present, eight industries 2 occupy about one-tenth of the Rivergate area. Seven of these are located on the west, or Willamette River, side of Rivergate, and are served by tracks owned by the Port of Portland. Outside rail access to this part of Rivergate is provided by tracks extending from UP's Barnes Yard (point 9 on the schematic map appended to this opinion) and connecting with the Port of Portland tracks. Over these external tracks, jointly owned by UP and Burlington Northern, UP provides switching service to the line-haul carriers serving Portland. It is expected that this Barnes Yard route will remain the southwest entrance to Rivergate. [408 U.S. 811, 816]
The one other Rivergate industry - the poleyard of the Crown Zellerbach Corporation (Point E on the map) - is located at the easternmost edge of Rivergate, on the Columbia River. Outside rail access is presently provided by Peninsula, which serves, in addition, 13 industries located just southeast of the Rivergate boundary. Peninsula, organized in 1918 to serve a packinghouse facility long since closed, has a main track extending for only 8,000 feet along the Columbia River. At its easternmost end is the North Portland interchange (point 7 on the map), where Peninsula connects with lines owned by Burlington Northern and UP. Since the lines of these two line-haul carriers do not connect directly with Rivergate in this area, access to the eastern end of the Rivergate District is, at present, solely over Peninsula tracks.
Whether Peninsula tracks will remain the sole access to the eastern end of Rivergate is by no means certain. Peninsula suffers from certain physical limitations - its tracks are laid upon sand, its clearances are limited, and the main line is impeded by heavy curvature. Furthermore, the North Portland interchange tracks may have insufficient capacity for the expected Rivergate traffic. Accordingly, an alternate access route to the eastern end of Rivergate is under consideration, that is, a new spur leading directly to Rivergate from the Burlington Northern main north-south tracks. 3
B. The Proposed Purchase of Peninsula
All outstanding capital stock of Peninsula is owned by the United Stockyards Corporation. Stockyards R. Co. Control, 254 I. C. C. 207 (1943). United is not [408 U.S. 811, 817] itself a carrier and has no interest in continuing to operate a railroad independent of its stockyard operation. It has been willing to sell Peninsula at the appraised value of its capital stock, and it has no preference as to the purchaser. On February 28, 1967, United entered into an agreement to sell Peninsula to SP&S and UP. 4
By joint application filed with the Interstate Commerce Commission on July 25, 1967, SP&S and UP sought approval, under 5 (2) of the Interstate Commerce Act, 5 of their contracted purchase of Peninsula [408 U.S. 811, 818] from United Stockyards. The application pointed out that the acquisition would enable the applicants to provide rail service to the adjacent Rivergate area over the Peninsula tracks. Peninsula, however, would continue to operate as a separate carrier. No major changes in traffic or revenues were anticipated in the immediate future, though it was anticipated that "within the foreseeable future substantial new traffic and revenues" would be derived from the developing Rivergate area.
In response to the above application, Milwaukee and SP filed petitions seeking inclusion in the acquisition of Peninsula as joint and equal owners, pursuant to 5 (2) (b), (c), and (d) of the Act; in addition, they sought the right to use tracks necessary to connect their own lines with Peninsula. The Commission's action on these petitions is the subject of the present appeal. The competing contentions are closely related to the facts of the interconnections between the four line-haul carriers near Rivergate, and to these we now turn. [408 U.S. 811, 819]
C. Carrier Interconnections and Switching Arrangements
(1) The North Portland Interchange
At the North Portland interchange (point 7 on the map), where Peninsula connects with Burlington Northern and UP, are four interchange tracks. Two of these are jointly owned by Burlington Northern and UP; the remaining two are owned half by Peninsula, and the other half jointly by Burlington Northern and UP. Only one of these four tracks - one of the two jointly owned by Burlington Northern and UP - connects directly to the Burlington Northern double main-line tracks, running to the north across the Columbia River. In addition, the interchange tracks connect to a single UP track, which extends south through a mile-long tunnel to the UP's Albina Yard (point 6 on the map), a distance of 5.2 miles. 6
At the time of the hearing in this case, about 30 cars were handled daily at the North Portland interchange. About 61% of this traffic involved switching between the predecessors of Burlington Northern on the one hand and UP and its subsidiaries on the other. Only the remaining 39% involved switching cars designated to or from industries served by Peninsula. 7 As the only two line-haul carriers connecting [408 U.S. 811, 820] directly with Peninsula at North Portland, Burlington Northern and UP provide reciprocal switching to any other line-haul carrier whose cars are designated to or from industries served by Peninsula. 8
(2) The Southern Pacific Connection
Although SP is a line-haul carrier serving Portland, its tracks terminate in East Portland (point 5) and at the Hoyt Street Yard on the other side of the Willamette River (point 3). SP cars designated for industries served by Peninsula are generally switched to UP trains at the latter's Albina Yard (point 6) and moved [408 U.S. 811, 821] thence to the North Portland interchange, where they are switched by Peninsula itself to their ultimate destination. Alternatively, the cars may be switched to SP&S trains at the Hoyt Street Yard and moved to North Portland over the SP&S mainline. In either case, SP must pay a switching charge to Burlington Northern or to UP (whichever is the switching carrier), and then pay a "rate division" to Peninsula for its switching service. 9 The Peninsula rate division is absorbed by any line-haul carrier subject to it and is thus not passed on to the shipper. The SP&S and UP switching charges may be absorbed by a line-haul carrier if a minimum line-haul revenue per car is exceeded, and SP has done so, except on certain low-rated noncompetitive traffic. SP shared in about 20% of Peninsula's traffic in 1966, and in about 17% in 1967.
(3) Milwaukee's Presence in Portland
Throughout the proceedings below, Milwaukee was not a line-haul carrier serving Portland. Its own tracks terminate at Longview, Washington, 46 miles north of Portland, and through arrangements with SP&S it shared in only one percent of Peninsula's traffic in 1966 and 1967. However, a basic condition of the Commission's approval of the merger of the Great Northern Railway Co., the Northern Pacific Railway Company, and their affiliates, including SP&S, was that Milwaukee be made an effectively competitive transcontinental carrier by being permitted to enter Portland over the lines of the new company, Burlington Northern. 10 Condition [408 U.S. 811, 822]
24 (a) of the merger required that Burlington Northern
D. Milwaukee and Southern Pacific Pleadings Before the Commission
By petition filed August 23, 1967, Milwaukee sought inclusion in the proposed purchase of Peninsula by Burlington Northern (then SP&S) and UP. Section 5 (2) (d) of the Interstate Commerce Act authorizes the Commission to require such inclusion as a prerequisite to its approval of the purchase "upon a finding that such inclusion is consistent with the public interest." After first setting out its impending access to Portland over SP&S lines because of the Northern Lines merger, Milwaukee alleged:
Milwaukee thereupon filed a supplement to its petition for inclusion, stating that
In the meantime, by an amended petition filed November 29, 1967, SP joined with the Milwaukee in seeking inclusion under 5 (2) (d) as an equal owner of Peninsula. It further requested that UP
E. Proceedings Before the Hearing Examiner
The applications, petitions, and replies of the four line-haul carriers were referred to an examiner for hearing upon a consolidated record. The Port of Portland, the Portland Commission of Public Docks, the Public Utility Commissioner of Oregon, and Crown Zellerbach Corporation intervened in favor of Milwaukee and the [408 U.S. 811, 828] SP. 18 At the hearings in February and March of 1968, evidence was taken from five shippers in addition to Crown Zellerbach, as well as officers and consultants of the parties and intervenors.
On September 9, 1968, nearly a year after the Commission had approved the Northern Lines merger, the hearing examiner issued his report. In the 5 (2) proceeding, he recommended approval of the purchase of Peninsula by Burlington Northern and UP, on condition (1) that SP be included as an equal owner and (2) that Milwaukee be included as an equal owner upon consummation of the Northern Lines merger and upon Milwaukee's commencing operations into Portland. 19 The examiner further recommended that if the purchase were consummated on the above conditions, SP and Milwaukee be granted
In the separate 3 (5) proceedings initiated by SP, the examiner ordered common use by SP of the tracks and facilities of UP for operation between the connection at East Portland and the tracks of Peninsula at North Portland, conditioned, again, upon compensation to be agreed upon by the parties or "just and reasonable" as fixed by the Commission.
In his discussion of the issues, the hearing examiner first announced that he would treat the entire area involved [408 U.S. 811, 830] as "one transportation terminal entity." On the subject of inclusion in the purchase of Peninsula, he announced:
Burlington Northern and UP filed exceptions to the hearing examiner's recommendations. They contended, inter alia, (1) that undue emphasis was placed on the future development of Rivergate, (2) that the hearing examiner erroneously held the Portland terminal area to constitute one terminal entity, (3) that the evidence does not support a four-way ownership of Peninsula, either from a general public or a shipper standpoint, (4) that Condition 24 (a) did not grant Milwaukee access to Peninsula, and (5) that neither use of the North Portland interchange tracks by Milwaukee and SP, nor common use by the SP of UP trackage between North Portland and East Portland, was in the public interest. 22
On June 6, 1969, Division 3 of the Interstate Commerce Commission issued its opinion. 334 I. C. C. 419. [408 U.S. 811, 833] Though it approved the acquisition of Peninsula by SP&S and UP, it otherwise rejected the hearing examiner's recommendations and denied the petitions and applications filed by Milwaukee and SP. The following conditions were imposed upon the acquisition, "to protect the present routings and interchanges" of Peninsula:
A. "Direct Access"
As a reading of Part I reveals, there seems to have been a certain amount of confusion below as to whether or not actual operation over the main tracks of Peninsula by any of the four line-haul carriers was at issue in this case. Early in the Commission's discussion of the merits, for example, it said:
This matter was not resolved before this Court. The briefs filed by the appellants and by the United States contain many references to "direct access" by the line-haul carriers to Peninsula and Rivergate, again strongly suggesting physical operation over Peninsula tracks. The Commission argues that physical operation on the part of Burlington Northern and UP is not at issue, because ownership alone - all that these two railroads seek - gives no right to operate over the tracks of the purchased railroad. Brief for Interstate Commerce Commission 23 n. 15; Tr. of Oral Arg. 30. Milwaukee denies that it ever sought "to switch cars to Peninsula industries with its own engines and crews," Supplemental Brief for Appellant Milwaukee 34, but no similarly direct statement has been forthcoming from SP.
We have set forth but one of the confusions - factual and procedural - that plague this case. Such confusions might have been resolved before the case reached us had the three-judge court that initially reviewed these orders written an opinion. [408 U.S. 811, 836]
B. The Petitions for Inclusion
(1) Condition 24 (a)
Milwaukee and the United States argued at length before this Court that Condition 24 (a) of the Northern Lines merger by itself requires that Milwaukee be included in the purchase of Peninsula. The Commission considered this point at the very start of its discussion of the merits and stated that Milwaukee's petition for inclusion could not be viewed
(2) Evaluating the Public Interest
As an initial matter, the Commission limited its attention to Peninsula alone, rather than considering the "entire Portland area" as "one transportation terminal entity," as the hearing examiner had. Appellants contend that this very first step was error, but we think it wiser to evaluate the Commission's approach as a whole.
A fair summary of the Commission's analysis appears in the last paragraph of its discussion of the petitions for inclusion. There it concludes:
First, the Commission said:
The next difficulty with the Commission's approach relates to the potential growth of Peninsula traffic. The raison d'etre of this litigation has been the possibility that Peninsula would become the northern access to Rivergate. As we have already noted, this possibility may be remote, given the physical limitations of Peninsula's present facilities. But the Commission nowhere states that the possibility is too speculative to be considered in this litigation. The paragraph we have just quoted, then, reads strangely indeed; for if Peninsula becomes the northern route into Rivergate, the estimates we have been given indicate that daily traffic over its line would increase from the 1967 rate of 30 cars per day to over 300 cars per day, assuming that a roughly equal number [408 U.S. 811, 841] of cars go out over each of the northern and southern routes from Rivergate. Yet according to the principle announced by the Commission, the public interest requires that Burlington Northern's and UP's 80% share of this potentially enormous traffic be protected.
Such an approach seems to us to fly in the face of the well-settled principle that the Commission is obligated to consider the anticompetitive effects of any 5 (2) transaction. McLean Trucking Co. v. United States, 321 U.S. 67, 83 -87 (1944); Northern Lines Merger Cases, 396 U.S. 491, 511 -516 (1970). It is not necessary to invoke the precise terms of Condition 24 (a) and decide their applicability to this case, to take cognizance of the fact that prior to the Northern Lines merger, Milwaukee was a weak carrier in the Northern Tier of States. Northern Lines Merger Cases, 396 U.S., at 504 , 514-516. Condition 24 (a) was not intended to foreclose consideration of Milwaukee's competitive position vis-a-vis Burlington Northern in any other proceeding. Both Milwaukee and SP were entitled to explicit consideration of their economic positions as compared with that of Burlington Northern and UP or, at least, a clear statement why such an inquiry was not appropriate.
Even the one case cited by the Commission in support of its general principle, Minneapolis, St. P. & S. S. M. R. Co. Acquisition, 295 I. C. C. 787, 802 (1958), undercuts the Commission's reasoning. There, the Commission denied applications of other lines for permission to acquire tracks and to undertake new construction in territory traditionally served by the Chicago & North Western Railway Co.; the latter's economic vulnerability made preservation of its exclusive territory important to the public interest.
There is no indication in the present case that Burlington Northern and UP are economically vulnerable, or that they in any way need their present share of Peninsula [408 U.S. 811, 842] traffic to serve the public interest. We are confronted with two railroads that already control one actual route into Rivergate (via Barnes Yard) and one potential route (any spur leading off the Burlington Northern-SP&S main-line tracks), and that now seek to acquire, for themselves alone, the one remaining route. The Commission's entire discussion of the anticompetitive aspects of this acquisition can be summed up as follows: to the extent that SP and Milwaukee may gain by four-railroad ownership of Peninsula, Burlington Northern and UP will lose; therefore the petitions for inclusion are denied. We do not approve this approach to the case.
Despite what we have said about the Commission's apparent reasoning, it does not necessarily follow that the result it reached was incorrect. Given the uncertainty about the northern access to Rivergate, and given the apparent fact that physical operation over Peninsula and into Rivergate was not at issue, approval of the purchase by Burlington Northern and UP alone, with the eight attached conditions, may be the result most in the public interest at the present time. We note that the Commission retained jurisdiction over the proceedings.
But it is not the role of this Court to arrive at its own determination of the public interest on the facts of this case. Our appellate function in administrative cases is limited to considering whether the announced grounds for the agency decision comport with the applicable legal principles. SEC v. Chenery Corp., 318 U.S. 80, 87 -88 (1943). In this proceeding - where the record is already confused by ambiguities over what was thought to be at issue - we cannot say that the grounds for the agency decision are consistent with the "public interest" standard found in the Interstate Commerce Act. We must reverse and remand for further proceedings. [408 U.S. 811, 843]
C. Southern Pacific's 3 (5) Applications
We turn to SP's applications for trackage rights which would permit it to run trains directly to Peninsula from East Portland. According to the Commission:
First, we note that the two cases cited by the Commission in support of its announced rule, Use of Northern Pacific Tracks at Seattle by Great Northern, 161 I. C. C. 699 (1930), and Seaboard Air Line R. Co. - Use of Terminal Facilities of Florida East Coast R. Co., 327 I. C. C. 1 (1965), do not directly present the question at issue, since in each case the Commission decided that the applying railroad was entitled to serve the area and went on to grant the requested trackage rights. [408 U.S. 811, 844]
Second, we note that the Commission's brief now defends the ruling below on broader grounds than those that were announced. This leads us to doubt the extent to which the Commission's announced rule is settled ICC law.
Third, the question of 3 (5) relief may become moot if the Commission, on remand of the 5 (2) petitions for inclusion, reverses itself and requires trackage rights for SP as a condition for approval of the purchase of Peninsula, and if the purchase is then consummated.
Fourth, the 3 (5) applications were considered in close connection with the 5 (2) petitions for inclusion by both the Commission and the hearing examiner. We cannot say with assurance that the Commission would approach the 3 (5) applications in the same way after reconsidering the petitions for inclusion in light of Parts II (A) and (B) of this opinion.
The judgment of the District Court is reversed. The case is remanded to the District Court with instructions that it remand to the Interstate Commerce Commission for further proceedings consistent with this opinion.
MR. JUSTICE POWELL and MR. JUSTICE REHNQUIST took no part in the consideration or decision of this case.
[Schematic map follows this page.]
[ Footnote 2 ] When the record closed below, the number of industries in Rivergate was five, four of which were located on the Willamette River side of Rivergate. App. 81. By the time the case had reached the Commission, another industry had located on the Willamette River side. According to the Brief for the Interstate Commerce Commission, p. 38, which no one has contradicted, two additional industries have now located on the Willamette River side.
[ Footnote 3 ] SP&S and UP had already provided for joint ownership of such a spur in their May 26, 1967, contract for the joint ownership of the line between Barnes Yard and the southwestern part of Rivergate. See Art. XI of this agreement, App. 313.
[ Footnote 4 ] The agreed purchase price is $299,405 for all outstanding shares of common stock of Peninsula plus the sum of $70,000 to reimburse United for two switch engines sold by United to Peninsula, and representing an unsecured account payable to United. Peninsula's properties consist of 13.17 acres of land, none suitable for industrial development, and a total of 3.79 miles of main line and secondary and spur track laid on treated ties in sand with no rock ballast. Besides the two above-noted locomotives, including tools and parts for their operation and maintenance, Peninsula owns tools for track maintenance, a conveyance for workmen, a heated engine house for both locomotives, a yard office, and a sand house.
[ Footnote 5 ] Section 5 (2) of the Act, 49 U.S.C. 5 (2), provides in pertinent part:
[ Footnote 6 ] Although the map reproduced in the Appendix does not make this clear, trains coming north on the UP track from Albina Yard may enter directly upon the Burlington Northern double main-line tracks just south of North Portland, without passing through the North Portland interchange.
[ Footnote 7 ] These percentages are based on the figures for loaded or partly loaded cars interchanged at Peninsula during 1967: 2,748 cars designated to or from Peninsula industries; 4,300 interchanged between UP and the predecessors of Burlington Northern. It is not clear from the record how the total figure of 7,048 cars is translated into 30 cars per day - perhaps empty cars are included - but none of the parties disputed the daily or annual figures.
[ Footnote 8 ] In Switching Charges and Absorption Thereof at Shreveport, La., 339 I. C. C. 65, 70 (1971), the Commission has explained "reciprocal switching" as follows:
[ Footnote 9 ] In other words, Peninsula is compensated for its switching service in these cases by a flat division of the line-haul rates. At the time of hearing below, the charge generally amounted to $29.25 per car when the car revenue exceeded $60. App. 79.
[ Footnote 10 ] The Commission approved the merger on November 30, 1967. Great Northern Pacific & Burlington Line, Inc. - Merger, etc. - Great Northern R. Co. et al., 331 I. C. C. 228, modified Apr. 11, [408 U.S. 811, 822] 1968, 331 I. C. C. 869. This Court ultimately affirmed. Northern Lines Merger Cases, 396 U.S. 491 (1970).
Why direct access to Portland was critical to the Milwaukee is made clear by the following quotation from the three-judge District Court opinion in what became the Northern Lines Merger Cases:
[ Footnote 11 ] Since the instant case was litigated below on the express assumption that the Northern Lines merger, and the accompanying condition, [408 U.S. 811, 823] would ultimately be affirmed, the Milwaukee's current operation does not constitute a "change in circumstances" so much as a realization of the assumption.
[ Footnote 12 ] The briefs do not clearly reflect under what arrangements Milwaukee cars have been reaching Peninsula since March 22, 1971, though it is plain that Milwaukee trains have not been moving directly to the North Portland interchange.
[ Footnote 13 ] The contract here referred to is a 1966 agreement between Milwaukee and the Northern Lines, the terms of which were incorporated in large part into the Commission's conditions accompanying the approval of the Northern Lines merger. In particular, the agreement provided that Milwaukee could operate over SP&S lines as far south as the Hoyt St. Yard, and that SP&S would provide switching of Milwaukee cars at Vancouver and Portland "to or from industries and connecting carriers to the extent such service is performed by [Burlington Northern] or SP&S for itself or any other carrier." These provisions were the direct predecessors of the vaguer Condition 24 (a), quoted above.
[ Footnote 14 ] A source of confusion in this case has been the extent to which various carriers either would possess or sought to possess trackage rights over Peninsula's main track (as opposed to the interchange tracks at North Portland), so the reader is alerted to tread carefully through the descriptions of the pleadings and the opinions below.
[ Footnote 15 ] Section 3 (5) of the Act, 49 U.S.C. 3 (5), provides in pertinent part:
[ Footnote 16 ] We are told that "bridge trackage rights," permitting SP only to haul cars from one end of the line to the other, are to be contrasted with "full user rights" or "common use," which would permit SP to serve any industries located along the UP track. See Brief for Appellees SP&S and UP 27.
[ Footnote 17 ] Like Milwaukee, SP had mentioned 3 (5) in connection with its 5 (2) petition for inclusion, asking for
[ Footnote 18 ] Eight railway employee organizations opposed the petitions and applications of Milwaukee and SP. None of their contentions are before us now.
[ Footnote 19 ] In return for inclusion in the purchase of Peninsula, SP and Milwaukee were to be required to make equal contribution to the cost of the shares of capital stock and the locomotive equipment of Peninsula.
Milwaukee's inclusion in the purchase was made contingent, not only on ultimate approval of the Northern Lines merger, but also upon Milwaukee's filing a 1 (18) request for a "certificate of convenience and necessity authorizing railroad operation between Longview Junction, Wash., and Portland, Oreg." Given Condition 24 (a), the Commission rejected the proposition that a 1 (18) certificate would be necessary before Milwaukee could begin operating in Portland, and the question is not before us on appeal.
[ Footnote 20 ] Did this 5 (2) order grant SP the trackage rights it sought from the Albina Yard? SP contended below that it did, arguing that the only individually owned track in the area that was relevant to the issue was the UP track from North Portland to the Albina Yard, and that the examiner did seem to have in mind all intervening tracks. To protect itself on this point, however, SP filed an exception to the hearing examiner's recommendations, arguing that he should have granted the requested trackage rights under 5 (2).
As for Milwaukee's apparent effort to claim a 3 (5) right to trackage over the North Portland interchange tracks, see Milwaukee's Supplement to Petition for Inclusion, quoted supra, we can only say that it was handled very ambiguously by the hearing examiner. The best explanation of his action is that he deemed it unnecessary to grant trackage rights to Milwaukee under 3 (5), since he was granting them under 5 (2). Alternatively, he may have thought that Condition 24 (a) gave Milwaukee trackage rights over the North Portland interchange. Milwaukee did not file an exception on this issue and has not pressed it on this appeal. Cf. Brief for Appellants 34.
[ Footnote 21 ] Whether or not SP had in fact sought, under 3 (5), the right to operate over Peninsula's main track was the subject of strenuous dispute before the hearing examiner. Counsel were unable to agree on the meaning of "common use," so the result of the interchange is not perfectly clear, but SP's counsel appeared to concede that his client sought no more than the right to operate to the North Portland interchange and to connect there with Peninsula (in addition, of course, to equal ownership in the stock of Peninsula). In any event, it is clear that the hearing examiner did not recommend granting any right to operate over the Peninsula main track, and we note that SP did not file an exception on this matter.
[ Footnote 22 ] SP&S and UP contended, in addition, that SP and Milwaukee are not "railroads in the territory involved" within the meaning of 5 (2) (d), and that the Commission, accordingly, did not have jurisdiction to include these two lines in the purchase of Peninsula. The Commission squarely rejected this contention, and since SP&S and UP do not raise it in their briefs here, we assume that the Commission decided the question correctly and discuss it no further. [408 U.S. 811, 845]