UNITED STATES V. ALLEGHENY-LUDLUM STEEL CORP.
406 U.S. 742 (1972)
NATURE OF THE CASE: This was an appeal by Allegheny (P) for a declaration in favor of ICC
(D) on its failure to establish formal rulemaking for rates under the Esch Car Service Act.
FACTS: The Interstate Commerce Commission (D) regulated railroads. The country's
railroads long ago abandoned the custom of shifting freight between the cars of connecting
roads, and adopted the practice of shipping the same loaded car over connecting lines to its
ultimate destination. The freight cars of the Nation thus became, in essence, a single
common pool, used by all roads. Because of critical freight-car shortages experienced during
World War I, Congress enacted the Esch Car Service Act of 1917, which empowered D to
establish reasonable rules and practices with respect to car service by railroads. D
concluded that one of the principal factors causing an inadequate supply of freight cars was
the operation of the national car-pool system. It resulted in freight cars' being on lines
other than those of the owning road for long periods of time, since the rules providing for
the return of unloaded freight cars in the direction of the lines of the owning road were
observed, more often than not, in the breach. The rules promulgated by the Commission are
intended to make those railroads whose undersupply of freight cars contributes to the
national shortage more directly feel the pinch resulting from the shortage that they have
helped to cause. In 1963, the Commission determined that there was a shortage of freight
cars in general service. D issued rules setting railroad rates without a hearing. Allegheny
(P) sought review contending that the Esch Act required D to hold hearings before issuing
rules. The Esch Act authorized D after hearing on a complaint or its own initiative to
establish reasonable rules, regulations, and practices with respect to car service. The
court below held that the rules were not 'reasonable,' as that term is used in the Esch Act,
for three reasons. First, although there was a general finding of a nationwide freight car
shortage, the court said that a specific shortage on owner lines should have been found in
order to justify the promulgation of these rules. Second, it said there should have been a
finding as to the financial effects upon the railroads and shippers who would be affected by
the rules. Finally, it supported its conclusion that the rules were not 'reasonable' by the
fact that, even though violation of the rules could be enforced by monetary penalties, the
Commission nonetheless conceded that obtaining complete compliance with them would be
impossible.
ISSUE:
RULE OF LAW:
HOLDING AND DECISION:
LEGAL ANALYSIS:
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