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The standard of judicial review for actions of the Interstate Commerce Commission in general, and for actions taken by the Commission under the authority of the Esch Act in particular, is well established by prior decisions of the United States Supreme Court The Court does not weigh the evidence introduced before the Commission; it does not inquire into the wisdom of the regulations that the Commission promulgates, and it inquires into the soundness of the reasoning by which the Commission reaches its conclusions only to ascertain that the latter are rationally supported. In judicially reviewing these particular rules promulgated by the Commission, the Court must be alert to the differing standard governing review of the Commission's exercise of its rulemaking authority, on the one hand, and that governing its adjudicatory function, on the other: The Commission's authority to legislate is limited to establishing a reasonable rule. But in establishing a rule of general application, it is not a condition of its validity that there be adduced evidence of its appropriateness in respect to every railroad to which it will be applicable. In this connection, the Commission, like other legislators, may reason from the particular to the general.
Pursuant to the Esch Car Service Act, which empowers the Interstate Commerce Commission to establish "reasonable" rules with respect to railroad car service, the Commission, after investigations and hearings, promulgated rules requiring that railroad freight cars, after being unloaded, be returned in the direction of the lines of the road owning the car, and imposing sanctions for violations thereof. The Commission found that there was a nationwide shortage of freight cars, a principal cause thereof being the operation of the railroads' national carpool system under which cars remained on lines other than those of the owning road for long periods of time, and the Commission concluded that its rules would, in the long run, correct the shortage of freight cars by giving owning roads greater use of their cars and by providing an incentive for the purchase of new equipment. Several shippers and railroads instituted an action in the United States District Court for the Western District of Pennsylvania to enjoin enforcement of the Commission's rules. The three-judge District Court held that the rules were invalid as not meeting the statutory requirement of "reasonableness".
Was the Commission's action in promulgating the car-service rules substantively authorized by the Esch Act and procedurally acceptable under the Administrative Procedure Act, 5 U.S.C.S. § 551 et seq.?
Upholding the Commission's authority to issue the car-service rules, the Court stated that the Commission's finding of an inadequate freight car supply to service shippers was supported by substantial evidence. The Court held that there was sufficient relationship between the Commission's conclusions and the factual bases in the record upon which it relied to substantively support this exercise of its authority under the Esch Act. The Court concluded that the Commission's action in promulgating these rules was substantively authorized by the Esch Act and procedurally acceptable under the Administrative Procedure Act, 5 U.S.C.S. § 551 et seq.