UNITED STATES SUPREME COURT DECISIONS ON-LINE

In December, 1971, the Nation's railroads, citing sharply increasing costs and decreasing or negative profits, collectively proposed to file tariffs increasing their freight rates by a temporary surcharge across the board. The Interstate Commerce Commission (ICC), in the ensuing general revenue proceeding, finding that the railroads had a critical and immediate need for revenue, declined to exercise its power to suspend proposed rate increases, and the surcharge became effective in February, 1972. The railroads shortly filed for larger, selective rate increases, but, in April, 1972, the ICC suspended the effectiveness of these increases pending its investigation of their lawfulness, the ICC the previous month having served a brief draft environmental impact statement on all parties to the investigation, discussing the environmental consequences of rate increases with respect to recyclables in general terms and concluding that there was no basis yet to believe that the environment would be substantially affected thereby. Thereafter, appellee SCRAP and other environmental groups filed suit alleging that the ICC had decided not to suspend the surcharge pending its investigation -- which decision would have a substantial effect on the environment -- without preparing an environmental impact statement or considering environmental issues as required by the National Environmental Policy Act (NEPA); that the preexisting rate structure discriminated against recyclables and in favor of virgin materials; and that the surcharge exacerbated this situation with the unfortunate consequence to the environment that use of recyclable materials would be inhibited and use of virgin materials encouraged. A three-judge District Court was convened under 28 U.S.C. § 2325 (now repealed), which required that an injunction restraining the enforcement operation, or clubjuris

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execution of an ICC order would not be granted unless the application therefor was heard and determined by a three-judge court, and relief was granted. On direct appeal, this Court reversed in United States v. SCRAP, 412 U. S. 669, (SCRAP I), holding that § 15(7) of the Interstate Commerce Act lodges in the ICC exclusive power to suspend rate increases pending final determination of their lawfulness. Meanwhile, in October, 1972, after an oral hearing, the ICC issued a final report declining to declare the selective rate increases unlawful, terminating the previously entered suspension order, canceling the surcharge that had been subsumed in the selective increases, and ordering a ceiling on rate increases with respect to some, but not all, recyclables. The report stated that, having given extensive consideration to environmental factors, the ICC would not file a separate, formal impact statement under the NEPA, and pointed out that the ICC had begun a separate investigation into the entire rate structure focusing on whether it interfered with the Government's environmental program. However, in November, 1972, the ICC reopened its investigation into the lawfulness of selective rate increases to reconsider the environmental effects of the new rates on recyclables, such rates being suspended for an additional period with the railroads' consent. In March, 1973, the ICC served an expanded draft impact statement, and in May, 1973, issued a final impact statement, concluding that its order of October, 1972, had been correct, and finally terminating its investigation without declaring any of the proposed rates unlawful except as previously provided in the October, 1972, order. In May, 1973, shortly before the increased rates on recyclables were to become effective, appellees SCRAP and Environmental Defense Fund (EDF) filed a motion for a preliminary injunction to restrain the implementation of increased rates on recyclables, and the three-judge court granted the motion. The railroads and the ICC appealed, and in June, 1973, THE CHIEF JUSTICE stayed the order on the railroads' motion, and the full Court declined to vacate the stay, 413 U.S. 917, with the result that the increased rates on recyclables went into, and remain in, effect. In November, 1973, this Court vacated the preliminary injunction and remanded the cases for reconsideration, 414 U.S. 1035. Meanwhile, appellees had filed motions for summary judgment in the three-judge court. Finding that the ICC had failed to comply with the NEPA in that, inter alia, it failed to hold an oral hearing before adopting the final impact statement, having previously held such a hearing (presumptively clubjuris

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an "existing agency review process") before issuing its October, 1972, order, and should have started over again after it decided to issue a final impact statement, that court set aside the ICC order terminating the general revenue proceeding without declaring the rate increases unlawful, and ordered the ICC to reopen the proceeding, prepare a new impact statement under the NEPA, hold hearings, and reconsider, in light of the new statement, its determination to declare the rate increases on recyclables lawful. The railroads appealed, claiming that the District Court had no jurisdiction over the case, and that the ICC had, in any event, fully complied with the NEPA, and the ICC and the United States appealed, claiming only that the ICC had so complied with the NEPA.

Held:

1. This Court has jurisdiction over the appeals under 28 U.S.C. § 1253, which gives this Court jurisdiction to determine appeals from "an order granting or denying . . . an . . . injunction in any civil action . . . required . . . to be heard and determined" by a three-judge district court, since the District Court's order, which not only declared that the ICC had failed to comply with the NEPA but also directed the ICC to perform certain acts, was an "injunction" within the meaning of § 1253, and since, moreover, such order restrained "the enforcement, operation or execution" of the ICC order within the meaning of 28 U.S.C. § 2325, and hence could have been issued only by a three-judge court. Pp. 422 U. S. 306-309.

2. The District Court had jurisdiction to review the ICC's decision not to declare the increased rates unlawful, notwithstanding such decision was made in a general revenue proceeding. Pp. 422 U. S. 310-319.

(a) There is no merit to the railroads' argument that the ICC's decision is just as much an interim decision as a decision not to suspend a particular rate pending investigation, and hence is unreviewable under SCRAP I, supra. Since the District Court did not enjoin collection of the rates so as to come within the rule barring courts from entering disruptive injunctions against collection of rates not finally declared unlawful by the ICC, the rule of SCRAP I is not applicable even if what the railroads say is true. P. 422 U. S. 317.

(b) Nor is there any merit to the railroads' argument (1) that, treating the District Court's decision as a review of whether the record supported the ICC's decision not to suspend the rates as to recyclables, the District Court reviewed an issue not yet decided finally by the ICC in violation of the principles of finality clubjuris

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and exhaustion of remedies, and (2) that the District Court's conclusion that the rule against review of general revenue proceedings does not apply to NEPA cases is contrary to the decision in SCRAP I that the NEPA does not change preexisting jurisdictional rules. Here, the issue as to whether the ICC had adequately considered under the NEPA environmental factors in the general revenue proceeding had already been finally decided by the ICC, and the relief sought from and granted by the District Court could not have been obtained from the ICC in a subsequent proceeding under § 13 of the Interstate Commerce Act. While the interim nature of a general revenue proceeding may be relevant to the extent of the consideration of environmental factors required, its nature does not prevent review of the question, finally decided by the ICC, whether the environmental impact statement prepared for that proceeding is adequate. When agency consideration of environmental factors in connection with major "federal action" is complete, notions of finality and exhaustion do not bar judicial review of the adequacy of such consideration, even though other aspects of the rate increase are not ripe for review. Pp. 422 U. S. 317-319.

3. The District Court erred in deciding that the oral hearing that the ICC held prior to its October, 1972, order was an "existing agency review process" during which a final environmental impact statement should have been available. The NEPA provides that a formal impact statement "shall accompany the proposal through the existing agency review processes," and hence does not affect the time when the "statement" must be prepared, but simply provides what must be done with the "statement" once it is prepared. Under this provision, the time at which the agency must prepare the final "statement" is the time at which it makes a recommendation or report on a proposal for federal action. Here, until the October, 1972, report, the ICC had made no proposal, and hence the earliest time at which the statute required a statement was the time of the October, 1972, report -- some time after the oral hearing. Pp. 422 U. S. 319-321.

4. The District Court also erred in deciding that the ICC should have "started over again" after it decided to propose a formal impact statement, even assuming that the ICC erred in failing to prepare a separate impact statement to accompany its October, 1972, report or that the consideration given to environmental factors in that report was inadequate. To the extent that such decision is based on the court's belief that the March, 1973, draft clubjuris

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impact statement had to be considered at a hearing, it is incorrect, since it appears that the consultation with environmentally expert agencies required by the NEPA occurred from the outset, that environmental issues pervaded the hearings held, and that all draft impact statements were circulated before the hearings, thus indicating that, procedurally, the NEPA was thoroughly complied with to the time of the October, 1972, report. And to the extent that such decision is based on the court's belief that the ICC did not in good faith reconsider its October, 1972, order in light of the impact statement, it is without support in the record, since the ICC (as it, in fact, proceeded to do) was in as good a position to correct a statutory error by integrating environmental factors into its reopened investigation and into its May, 1973, decision, as it would have been if the October, 1972, report had never been written. Pp. 422 U. S. 321-322.

5. The District Court further erred in concluding that the final environmental impact statement was deficient. Pp. 422 U. S. 322-328.

(a) As in most general revenue proceedings, the "action" taken by the ICC was in response to the railroads' claim of a financial crisis, and the inquiry was primarily into whether such a crisis -- usually entitling the railroads to a general increase -- existed, leaving primarily to more appropriate future proceedings the task of answering challenges to rates on individual commodities or categories thereof, the latter question -- usually involved in a general revenue proceeding only to a limited extent -- raising the most serious environmental issues, and the former question raising few such issues, none of which is claimed here to have been inadequately addressed in the impact statement. Pp. 422 U. S. 322-324.

(b) There is no merit to the appellees' argument that the environmental consequences flowing from a facially neutral rate increase, which, when superimposed on an underlying rate structure, allegedly discriminates against recyclables, must be explored in an impact statement and can be explored only by analyzing the underlying rate structure; and that, moreover, the ICC has been tardy in complying with the NEPA, was required to analyze the underlying rate structure only once with a view toward environmental consequences, had plenty of time and cause to do so before its general revenue proceeding, and therefore should not have been permitted to terminate that proceeding without having done so. Such argument is not only contrary to the holding in United States v. Louisiana, 290 U. S. 70, giving the ICC wide discretion to decide what issues to address in a general revenue clubjuris

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proceeding and to postpone comprehensive consideration of discrimination claims, but it also loses force in view of the fact that the ICC had already begun an investigation of the underlying rate structure before commencing its investigation in the general revenue proceeding, and had started to consider environmental issues in the former investigation before the District Court's decision. Thus, even if the NEPA were read to require the ICC to address comprehensively the underlying rate structure at least once before approving a facially neutral general rate increase, no purpose could have been served by ordering it to explore the discrimination question in the general revenue proceeding when it was already doing so in a more appropriate proceeding. Pp. 422 U. S. 324-325.

(c) The District Court's decision to deem the "federal action" involved in the general revenue proceeding to include an implicit approval of the underlying rate structure was inaccurate, and led it to an entirely unwarranted intrusion into an apparently sensible decision by the ICC to take much more limited "action" in that proceeding and to undertake the larger action in a separate proceeding better suited to the task. P. 422 U. S. 326.

(d) In view of the scope of the "federal action" being taken by the ICC in the general revenue proceeding, the District Court was incorrect in holding that the final impact statement inadequately explored the underlying rate structure and the extent to which the use of recyclables will be affected by the rate structure. Pp. 422 U. S. 326-328.

371 F.Supp. 1291, reversed.

WHITE, J., delivered the opinion of the Court, in which BURGER, C.J.,and BRENNAN, STEWART, MARSHALL, BLACKMUN, and REHNQUIST, JJ., joined, and in Parts I, II, and III of which DOUGLAS, J., joined. DOUGLAS, J., filed an opinion dissenting in part, post, p. 422 U. S. 328. POWELL, J., took no part in the consideration or decision of the cases. clubjuris

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