656 F.2d 251
INTERNATIONAL MINERALS & CHEMICAL CORPORATION, UnitedTransportation Union, Proko Industries, Inc., andLuellin Brothers, Inc., Petitioners,v.INTERSTATE COMMERCE COMMISSION and United States of America,Respondents.Norfolk and Western Railway Company, Intervening-Respondent.
Nos. 80-2096, 80-2097.
United States Court of Appeals,Seventh Circuit.
Argued April 15, 1981.Decided Aug. 3, 1981.Rehearing Denied Oct. 5, 1981.

Thomas F. McFarland, Jr., Belnap, McCarthy, Spencer, Sweeny & Harkaway, Chicago, Ill., Gordon P. MacDougall, Washington, D.C., for petitioners.
Kathleen V. Gunning, Interstate Commerce Commission, Kenneth P. Kolson, Dept. of Justice, Antitrust Div., Washington, D.C., for respondents.
Angelica D. Lloyd, Roanoke, Va., for intervening-respondent.
Before CUMMINGS and WOOD, Circuit Judges, and JAMESON, Senior District Judge.*
HARLINGTON WOOD, Jr., Circuit Judge.

1
This case is another in the process accompanying the contraction of this country's rail service.  Through a petition for review in these consolidated cases, local shippers and a labor union challenge the Interstate Commerce Commission's ("ICC's") decisions to approve the abandonment by Norfolk and Western Railway Company ("N&W") of two separate rail branches in Indiana.  We grant the petitions for review, and remand to the ICC for further consideration of portions of its order.

I. Proceedings Before the ICC

2
In December 1977, N&W filed with the ICC applications to abandon two branches of its rail network.  One application sought approval to abandon a 22.21 mile stretch of track referred to as the Rushville branch.  The other application sought approval to abandon a 23.5 mile rail line on the nearby Connersville branch.  The cases were consolidated for ICC consideration.

3
A hearing on the proposed abandonments was held before an ICC administrative law judge.  Only one shipper who used the Rushville branch, International Minerals & Chemical Corporation ("INC"), appeared at the hearing to protest the proposed abandonment of that branch.1 Several shippers who used the Connersville branch appeared at the hearing, although one, Ford Aerospace & Communications, indicated that its concern over the proceeding extended only so far as necessary to assure continued service to it by ConRail, which used a segment of N&W's Connersville branch pursuant to a trackage agreement.2 Ford is not a party to this appeal.  The United Transportation Union ("UTU") and the Brotherhood of Locomotive Engineers opposed both applications.  UTU is the only union that is a party before this court.

4
N&W produced evidence to show that the branches were presently unprofitable and in need of such extensive repair and future maintenance in order to continue safe operation that the branches would never become profitable.  The administrative law judge concluded that the Rushville branch was profitable and would continue to be so with normal maintenance; that the shippers on the lines would be placed at a competitive disadvantage if N&W abandoned the branches; and that N&W deliberately had downgraded its track in order to make the case for abandonment.  The Connersville branch, the administrative law judge held, was profitable and would be so with normal maintenance; served the public need; and would experience increased traffic.  Hence, the administrative law judge denied N&W's requests for abandonments.  The full ICC reversed the administrative law judge's decision.  Norfolk and Western Railway Company Abandonment, 363 I.C.C. 115 (1980).

5
Since N&W wants to abandon these branches because of their unprofitability, in order to prove the economic necessity for abandonment the railroad had to show that it would actually save its costs of running the lines if they were shut down.  The administrative law judge refused to consider certain labor costs in determining the lines' profitability since in his view those expenses would exist regardless of the lines' operation.  By excluding from his calculations the cost to N&W of labor expenses, the administrative law judge found that both branches generated enough profit to maintain the line at minimum operating standards.  The ICC disagreed, and on review acknowledged employee wages as an expense that could be saved upon abandonment, making the wages an "avoidable cost" in public transportation jargon.  The ICC's calculation reduced the branches' profit margins to a level that failed to produce a reasonable rate of return to N&W.

6
At the initial hearing, the branches' profitability figures were enhanced by the administrative law judge's conclusion that normalized maintenance on the line could be less than that stated by N&W. The ICC agreed, but held that when coupled with even a reduced figure for normalized maintenance, its inclusion of labor expenses as avoidable costs resulted in a narrow profit for the Rushville branch, and a loss for the Connersville branch.

7
The ICC disagreed with the administrative law judge's conclusion that the track and other physical plant on the Rushville branch required no rehabilitation because it presently met minimum safety standards.  The ICC went on to state that the decline in traffic on the branch undercut any justification for substantial rehabilitation expenditures.  And assuming that inflation would raise the true cost of future normalized maintenance, the ICC found that the line would become unprofitable.

8
The ICC agreed with the administrative law judge's finding that the Connersville branch required substantial rehabilitation.  Applying the lower normalized maintenance figure to the year 1977, when N&W deferred most maintenance on that branch, the ICC found that the line would operate at a substantial loss.  The ICC concluded that while the line's traffic had increased due to rising activity at the Ford plant, since ConRail could handle the Ford business even after N&W's abandonment, there was no justification for continuing N&W's operation.  To take into account Ford's interests, the ICC conditioned abandonment upon N&W's good faith offer to sell ConRail the portion of its line that the latter carrier currently operated under trackage rights.

9
The ICC found that alternative motor and rail carrier service was available to shippers on both lines.  This fortified the ICC's conclusion that the shippers would not be unduly harmed by the abandonments.

10
The administrative law judge had concluded that the branches' financial picture did not justify N&W's downgrading the lines by deferring maintenance.  He went on the find that N&W had intentionally and improperly downgraded the branches in order to perfect a case for abandonment.  The ICC's contrary view on the lines' profitability led it to accept N&W's decision to defer maintenance and thus avoid "throw(ing) good money after bad without any prospect of obtaining a profit in return."  The ICC did not, however, discuss an incident described by the administrative law judge in which N&W, prior to filing its abandonment application, told the Rush Grain Company that it planned to abandon the Rushville branch.  This comment induced Rush Grain to shelve its plans to construct at its own expense a rail spur from the Rushville branch to its facilities.  The spur would have added as many as 500 carloads per year to the branch's traffic.

11
Thus the ICC permitted the abandonments requested by N&W, and this appeal followed.

12
In considering these challenges to the ICC's action, we bear in mind that the agency's decision must be upheld if it is not arbitrary, capricious or an abuse of discretion.  See Bowman Transportation, Inc. v. Arkansas Best Freight System, Inc., 419 U.S. 281, 95 S.Ct. 438, 42 L.Ed.2d 447 (1974).3 The ICC's conclusions must exhibit a rational connection between the facts it finds and the decision it makes.  Id. at 285, 95 S.Ct. at 441.  Our review of those conclusions must be "searching and careful," id., particularly here, where the ICC has rejected the administrative law judge's exhaustive and careful findings.  Illinois v. United States, supra, note 3, slip op. at;  NLRB v. Interboro Contractors, Inc., 388 F.2d 495 (2d Cir. 1967).

II. Avoidability of Labor Costs

13
The first issue in this case centers on the question of whether or not the wages paid to railroad employees who presently work on the Rushville and Connersville branches could be saved by N&W if the lines were abandoned.  The ICC overturned the administrative law judge's findings and held that the wages are avoidable costs.  Because the labor expenses are so large, this materially shifted the balance away from a finding of profitability on the two lines.

14
The repair and maintenance crews on the two branches spend a portion of their time working on other lines.  Since the employees' wages are paid for both work done on these branches and on other lines, the petitioners say, the employees still will have to be retained, and there will be no saving to N&W. Thus, petitioners claim, the wages that presently are paid to these employees on the branch are jointly shared with other of N&W's operations, and will not be reduced if the branches are abandoned.  They contend that this case represents a "true joint cost" situation.

15
The ICC rested its conclusion about the avoidability of labor costs on one of its own cases, Illinois Central Gulf Company Railroad Abandonment, 363 I.C.C. 93 (1980), rev'd and remanded on review sub nom., City of Cherokee v. I.C.C., 641 F.2d 1220 (8th Cir.), cert. filed, 49 U.S.L.W. 3969, No. 80-2122 (June 15, 1981).  Petitioners contend that the case does not support the ICC's conclusions since it concerns circumstances that do not implicate joint costs.  As framed by the petitioners, then, our consideration of this issue turns on the existence vel non of a joint cost situation in the branches at issue.

16
We first note that while a true joint cost may almost always be unavoidable, not all unavoidable costs are joint ones.  The ICC defines joint cost to cover a particularized subset of unavoidable costs.  According to the ICC definition, a true joint cost exists when two services run over the same line, and only one of the services is eliminated.  The repair work done on the line, for example, must usually be maintained at the same level for the remaining service, hence effecting no savings for the railroad.  The repair crew's wages, then, are joint costs.  See Illinois Central Gulf, 363 I.C.C. at 99 n.6.  Since in our case there are no other services travelling this line (with one exception to be discussed later in this section), no joint cost situation is involved.

17
N&W proffered uncontradicted evidence that the employees worked a specific percentage of time on each branch.  The evidence also showed that N&W's local management has the flexibility to assign and re-assign its employees as it wishes, although specific placements in the event of abandonment had not yet been considered at the time the evidence was entered.

18
This evidence demonstrates the ICC reasonably found that this case does not involve a true joint cost situation.  No one disputes that the wages for work on each line can be separately apportioned to that line.  It is clear which portion of the wages are paid for the work done on each line.  Should operations over the branches terminate, the wages that would have to be paid to employees for their work on those branches need no longer be paid.  The employees' time is freed for productive work elsewhere in the N&W network: work that otherwise might require the hiring of new personnel or the payment of overtime or premium wages.  Thus, contrary to the petitioners' assertions, the circumstances here are far different from those implicated by the ICC's definition of a true joint cost situation.

19
The questions then become whether the ICC properly relied on the Illinois Central Gulf case, and whether the labor costs are avoidable even if not joint.  We conclude that the ICC properly relied on the case, and acted within its discretion in concluding the labor costs are avoidable.

20
In Illinois Central Gulf the ICC held that a collective bargaining agreement guaranteeing wages to employees on a certain line regardless of whether or not the line was abandoned, did not preclude a railroad designating the labor expenses as an avoidable cost when an abandonment is sought.  Language in the ICC's opinion suggested that the only un avoidable costs were those which are joint.  The majority of the panel in Cherokee opted for a more flexible reading of the statutory definition regarding avoidable costs, and concluded that where wages must be paid pursuant to a collective bargaining agreement regardless of operations over the line, the labor expenses cannot be considered avoidable.  The majority did not state that the ICC's definition of a joint cost was incorrect in any manner.  Rather, on this issue, the majority in Cherokee held only that avoidable costs do not include employee wages guaranteed under a labor agreement such as the one involved in that case.  Since, as the petitioners recognize, there is in the present case no issue about a restrictive collective bargaining agreement, the majority's discussion in Cherokee does not apply.

21
Nor does Judge Adams's dissenting opinion in Cherokee alter our conclusions in this case.  He simply disagreed with the majority's view that the ICC had equated avoidable costs with joint costs.  Like the Cherokee majority, Judge Adams had no complaint with the ICC's definition of joint cost.

22
That the ICC relied on a case subsequently overturned on review does not mandate a reversal here.  The general principles underlying the Illinois Central Gulf decision remain intact; it was only the application of those principles to a certain narrow fact situation that caused the controversy in Cherokee.  Thus, there remains a venerable line of cases in which the ICC has deemed labor expenses avoidable costs where the circumstances indicate employees will be shifted to other productive service upon abandonment.4 The majority in Cherokee viewed the labor agreement involved in that case as pointing so clearly to the unavoidability of wages that there was no room for the ICC to come to the contrary conclusion.  Since the present case does not involve such a labor agreement or any other similar evidence that could serve to limit the ICC's discretion, and does not involve a true joint cost situation, the principles in Illinois Central Gulf on which the ICC relied support its decision here.

23
The decision on whether or not employee transfers in fact will result in savings to the railroad is one for the ICC, not this court.  We see no reason to disturb the ICC's conclusions in this case, at least as regards most of the line.

24
There is, however, one remaining issue that requires a remand to the ICC.  ConRail operates pursuant to trackage rights over approximately a six-mile stretch of the Connersville branch.  The ICC argues in connection with another issue in this case, see Section VII, infra, that ConRail will be allowed to use that stretch regardless of N&W's abandonment, implying that N&W is contractually bound to maintain the track.  The record before us does not indicate whether the wages attributable to that portion of the track were included in the computation of avoidable labor costs.  Because the extent of avoidable labor costs is the linchpin of much of the cost-accounting in this case, it is advisable that we remand for the ICC's determination of the amount of wages attributable to potential future upkeep, and a decision on whether this readjustment (if one need be made) affects the decision on the propriety of abandoning the Connersville branch.

25
III. Inclusion of Normalized Maintenance Figures

26
The petitioners object to the ICC's use of a calculation for normalized maintenance in determining the past and future profitability of the branches at issue here.  Normalized maintenance is the amount needed for economic and efficient operation of the branches over the long term.  See Illinois v. United States, slip op. at 18 n.5 os. 78-1762, 78-2020 and 78-2043, (7th Cir. Jan. 20, 1981).  In railroad accounting it is contrasted with actual maintenance, which is the minimum expenditure necessary for safe short term operation.  The petitioners contend that by using a larger normalized maintenance figure to determine true present profitability, the ICC artificially inflated expenses to make the branches appear unprofitable.  We cannot agree.

27
The petitioners' argument is grounded on several incorrect assumptions.  First, contrary to petitioners' characterization, the ICC did not use the figures to determine profitability as an initial matter.  The figures instead were used only after the ICC determined that even deducting labor costs, and considering actual rather than normalized maintenance expenditures, the branches operated at a profit.  The ICC then applied its normalized maintenance calculation to the actual maintenance figures for 1976 and 1977, when N&W admittedly deferred maintenance.  This gave a more accurate picture of what it would have cost N&W to run the branches those years, but only after the ICC acknowledged that as computed on actual expenditures, the lines earned a profit.  This was in keeping with the ICC's practice as described in New York, New Haven and Hartford Railroad Company Abandonment, 324 I.C.C. 345, 351 (1965): "Costs for normalized maintenance when compared to actual maintenance expenditures are indicative of deferred maintenance on any given branch and are to be given consideration in determining whether or not the public convenience and necessity permit abandonment of the line."

28
The petitioners have not suggested why the ICC should calculate the true extent of deferred maintenance without taking the further step of readjusting for a more accurate picture of past profitability.  An important aspect of the ICC's determination is whether the branches were profitable.  If the deferral of maintenance skewed profitability figures for certain years, it is important that the ICC know that fact when considering an abandonment application.  The calculation need not be an abstract accounting exercise.  See Chicago and Northwestern Transportation Company Abandonment, 348 I.C.C. 708 (1976) (comparison of projected normalized maintenance figures to actual expenditures in order to determine whether in absence of deferred maintenance railroad would have incurred loss).

29
The second incorrect assumption on which the petitioners base their argument is the implication that the ICC's calculations on normalized maintenance prejudiced them.  The petitioners claim that the ICC improperly used the actual maintenance figures of 1975 as its standard for the normalized maintenance applicable in 1976 and 1977.  This argument ignores the fact that the petitioners themselves urged a normalized maintenance figure that was twice the amount the ICC used in its calculation.  There would, on these facts, appear to be no basis on which the petitioners can now complain that the ICC used an amount that over-inflated the expense side of its calculations.  If anything, the ICC was overly generous in the other direction.

30
Moreover, the petitioners drew their figures based on actual maintenance expenditures on those branches in 1975.  That fact likewise undercuts their complaint that the ICC erred in failing to average at least three years' actual maintenance figures in order to derive its own normalized maintenance level.  The record indicates that before the ICC handed down its decision, the petitioners expressed no dissatisfaction with the administrative law judge's use of the same single year to make his calculation.  Given the absence of reliable data on actual maintenance levels for any year except 1975, the ICC and the administrative law judge properly used that single year as a yardstick.  Cf. Northern Pacific Railway Company Abandonment, 342 I.C.C. 1 (1970) (used three years' figures where those were available).  The ICC cannot be faulted here for taking the only solid figure it had as a basis to compute normalized maintenance, especially where the figure is less than that proposed by the petitioners.5

IV. Rehabilitation Costs

31
The ICC concluded that both lines are in need of rehabilitation, and that this added expenditure would make continued operation of the branches unfeasible.  Rehabilitation is a one-time activity, so it is considered as a short-term expenditure, unlike the recurring cost of normalized maintenance.  An ICC regulation, promulgated for use in computing subsidies, specifies that rehabilitation costs are not be to included in calculations unless the line does not presently operate at minimum safety standards. 49 C.F.R. 1121.42(m).  IMC challenges the use of rehabilitation figures in this case because the Rushville branch presently operates at the minimum safety standard.6

32
Evidence before the administrative law judge indicated that the eighty-year-old, lightweight rail in use on the Rushville branch required extensive work in order to be assured of future operation at minimum safety levels.  The evidence suggested that the ties on which the rails rest need to be more closely spaced in order to avoid eventually stressing the rail beyond its yield point.

33
As the petitioners point out, there is an ICC regulation limiting use of rehabilitation costs when a line presently operates at the minimum safety level.  That regulation, however, applies to computations for railroad subsidies.  A rule limiting the use of rehabilitation costs makes sense in that context since a subsidy involves a commitment of cash in the nature of a short-term expenditure that may be terminated upon short notice.7 Continuation of the Rushville branch, in contrast, represents a financial commitment for a far longer term, and it is not unreasonable for the ICC to weigh the costs of rehabilitation in determining what the actual expense of maintaining the branch will be.  This is in keeping with ICC precedent approving "abandonment applications in such cases where, despite the fact that minimal maintenance for presently 'safe' operations was being performed, a proven need for rehabilitation existed to insure such operations in the future."  Baltimore and Ohio Railroad Company, 342 I.C.C. 751, 754 (1973).

34
Moreover, rehabilitation costs need not be figured with exactness.  Id. at 755.  Even eliminating the necessity for closing the space between ties, estimated rehabilitation costs are extensive in this case, rising well above a quarter million dollars on each branch.  The ICC was entitled to take into account the generally large rehabilitation figures reflected in the record as necessary for long term operation at a reasonable level of safety.8

V. Computation of Opportunity Cost

35
The petitioners assert that the ICC improperly considered N&W's opportunity costs as bearing on the public's interest in maintaining rail service over these branches.  Here, opportunity costs measure the economic loss N&W experiences by foregoing more profitable use of its resources.  See Abandonment of Rail Lines Use of Opportunity Costs, 360 I.C.C. 571 (1980), upheld on petition for review sub nom.  Farmland Industries, Inc. v. United States, 642 F.2d 208 (7th Cir. 1981).9 The petitioners alternatively argue that even if opportunity cost was an appropriate factor for ICC consideration, the ICC used incorrect figures in making its determination.

36
The ICC properly considered opportunity costs in this case.  In Missouri Pacific Railroad Company v. United States, 625 F.2d 178 (8th Cir. 1980), the court held that the ICC must consider a railroad's opportunity cost when balancing the public interest in permitting an abandonment.  The ICC had disregarded Missouri Pacific's evidence concerning opportunity costs, and the court remanded the case for reconsideration.  The court concluded that previous ICC cases presaged such a requirement, giving due notice to the parties that opportunity costs could be considered. 625 F.2d at 182.  And the Eighth Circuit concluded that the absence of a regulation governing use of opportunity costs at the time of decision did not limit the requirement that the ICC consider such costs.  Id.

37
Like the petitioners in Missouri Pacific, the petitioners here were put on notice by precedent and by N&W's attempt to place opportunity costs into evidence on administrative appeal.  The ICC, perhaps taking its cue from the Missouri Pacific case decided two months prior to the ICC's decision in this case, considered N&W's arguments and noted that, including labor expenses as an avoidable cost, the branches failed "by a wide margin" to return a reasonable amount on investment.  There was no error in that action.

38
The ICC, however, erred in the figures used to make its computations.  The ICC applied figures for salvage value which had been submitted by N&W as an exhibit before the administrative law judge.  N&W had later reduced those figures by $100,000 in connection with the Rushville branch, and about $200,000 in connection with the Connersville branch.  The change in salvage value would also alter the tax figures taken into account by the ICC as part of its calculation, see note 9, supra; Abandonment of Railroad Lines and Discontinuance of Service, Proposed Rulemaking and Order, 41 Fed.Reg. 31883 (July 30, 1976), and would result in a new calculation figure that indicates a reasonable rate of return.  The ICC's decision, then, is arbitrary and capricious since it lacks any basis in the record.  See Doe v. Hampton, 566 F.2d 265, 272 n.15 (D.C.Cir.1977).

39
The ICC and N&W have made little attempt before this court to rebut the charge of miscalculation, but hypothesize that it would have made no difference in the final outcome of the case.  Alternatively, say the ICC and N&W, certain figures that were left out of the initial calculation would substantially replace the excess amounts contained in its computations.

40
We cannot tell from the record before us whether a correction of the miscalculation would have made a difference in the ICC's ultimate disposition of this case, even when hefty rehabilitation and normalized maintenance costs are entered into the calculus.  Nor have the ICC or N&W directed our attention to any authority permitting us to calculate and determine on our own the effect such a switch in profitability figures could have on the public interest.  We must, therefore, remand to the ICC for recalculation of opportunity costs and a determination of the effect such a recalculation would have on the public interest in this abandonment.

VI. Deliberate Downgrading

41
Those protesting the Rushville branch abandonment assert that N&W's deferral of maintenance represented an improper, deliberate attempt to downgrade the branches in order to perfect a case for abandonment.  The ICC concluded that since the line was not, according to the ICC's computations, a profitable operation, N&W properly deferred maintenance in recent years.  The ICC found no evidence of specific intent to deliberately downgrade the line.

42
Since the ICC on remand may alter its conclusions about the profitability of the branches and that change could affect its view of the justifications for N& W's deferring maintenance we cannot address with certainty the propriety of the ICC's conclusions.  In order to provide some guidance to the ICC, however, we consider it necessary to discuss the ICC's findings as they now stand.

43
We can find no error in the ICC's conclusion on N&W's intent in deferring maintenance, based as it was upon a finding that the Rushville branch was an unprofitable operation.  Both sides in this case cite Missouri-Kansas-Texas Railroad Company Abandonment, 338 I.C.C. 728 (1971) in support of their positions.10 There the ICC set out criteria rail companies should address to demonstrate that a genuine need to economize prompted deferral of maintenance.  The petitioners claim that the ICC did not consider these factors when it overturned the administrative law judge's conclusion that N&W exhibited an intent to defer maintenance to perfect its case for abandonment.  As evidence of this failure to consider the criteria, the petitioners point particularly to the absence of any mention in the ICC's opinion of the incident in which N&W, prior to filing its abandonment application, told the Rush Grain Company that the railroad anticipated abandoning the branch.  This discouraged the Rush Grain Company from building a spur track which would add traffic to the Rushville branch.

44
The ICC properly stated that once it had made its determination that deferring maintenance was financially justified, the governing standard required it to accept N&W's decision to defer maintenance for economic reasons unless the evidence showed "some ulterior motive to downgrade deliberately."  The ICC was not required to discuss each factual point brought out by the petitioners, especially since the administrative law judge's contrary finding primarily rested on a conclusion about economic viability, albeit different from that of the ICC.  For the administrative law judge, the Rush Grain incident took on significance only because N&W had no financial incentive to abandon the Rushville branch.  N&W, in his view, should have been actively encouraging new business on the branch.  But N&W's informing a prospective shipper of an action expected to be made by the line takes on a different cast when the branch is thought to be highly unprofitable.  While it is true that the ICC is obliged adequately to address the evidence presented by one protesting an abandonment, see Harborlite Corporation v. ICC, 613 F.2d 1088 (D.C.Cir.1979), the requirement cannot be carried beyond any reasonable necessity.  Once the reason prompting the administrative law judge to consider the evidence dropped from the case upon a finding of unprofitability, the ICC was under no obligation to discuss the evidence further.

VII. Condition to Abandonment

45
Those protesting the Connersville branch abandonment challenge the portion of the ICC's decision that conditions abandonment upon N&W's good faith offer to sell to ConRail the stretch over which the latter railroad operates pursuant to a trackage rights agreement.  The requirement was placed on N&W in order to protect the interests of the Ford plant, which presently is served by ConRail.  The petitioners claim that the condition is pointless since it does not guarantee train service to Ford: if no sale is consummated, the petitioners say, ConRail must stop operations on the line.

46
The petitioners' argument is meritless.  Aside from questions of these petitioners' standing to attack that portion of the decision (Ford has not sought review), it is evident that ConRail will retain its trackage rights regardless of abandonment by N&W. On this point the ICC and the administrative law judge were in agreement.  The ICC must approve termination of ConRail's present operation, and the ICC's order permits rather than requires N&W's abandonment of this Connersville segment.  See Chicago and North Western Railway Company v. Milwaukee, St. Paul and Pacific Railroad Company, 502 F.2d 193 (7th Cir. 1974).  The order to attempt a sale protects Ford's interests, and leaves open the possibility that an orderly transfer of the affected segment will obviate the need for the ICC either to approve abandonment by ConRail or to order continued upkeep by N&W. The ICC's order, as it stands, leaves the option in the carriers' hands as an initial matter, subject to further ICC inquiry should the need arise.  The decision was rational, and we deny the challenge to it.

VIII. Conclusion

47
We grant the petition for review.  The case is vacated and remanded to the ICC for further proceedings not inconsistent with this opinion.  In regard to the Connersville branch, the ICC must determine whether maintenance and repair crew expenses are avoidable labor costs on the portion served by ConRail; whether correct salvage value figures will result in an adequate rate of return for N& W; and, if necessary, whether rehabilitation costs play a role in the decision on this branch.  As regards the Rushville branch, the ICC must consider whether or not accurate salvage value figures result in an adequate rate of return for N&W, and if so, whether this requires a reconsideration of the significance of the Rush Grain Company incident and the justification for rehabilitation in light of recent increases in tonnage over the branch.11

*
 The Honorable William J. Jameson, Senior District Judge of the United States District Court for the District of Montana, is sitting by designation

1
 Another shipper who used the branch, Ralston Purina Company, entered an appearance there to protest abandonment, but took no active part in the proceedings, and is not a party to this petition

2
 Kinsinger Coal & Feed Sales entered an appearance before the administrative law judge to protest the proposed abandonment, but did not otherwise participate in the proceeding, and is not a party here

3
 The parties in this case have not argued whether or not the substantial evidence test applies in our consideration of the ICC's decision.  We have doubts as to whether that test does apply, since it is unclear that the statute governing railroad abandonments requires a hearing, even if a decision on abandonment is considered an adjudication.  Illinois v. United States, slip op. at 8-11 Nos. 78-1762, 78-2020 and 78-2043 (7th Cir. Jan. 20, 1981).  The substantial evidence test applies when hearings are statutorily required.  The parties have not cited, nor has our research disclosed, an express statutory mandate for a hearing in rail abandonments.  See 49 U.S.C. § 10904(c) (1): "An investigation (on abandonment) may include public hearings ...." (Emphasis added.)  In the absence of argument on this point, we decline to decide that an adjudication implies a hearing for purposes of applying the substantial evidence test, and do not apply the test in this case.  See Illinois v. United States, slip op. at 9

4
 IMC cites ICC cases to support its arguments that labor costs are not avoidable unless it can be shown that direct savings will result from the abandonment, and will not simply be reallocated to other of the carrier's operations.  Upon scrutiny, the cases serve as good examples of the latitude accorded the ICC to reach precisely the opposite result.  For example, Erie Lackawanna Railway Company Discontinuance, 336 I.C.C. 206 (1969), concerned discontinuance of passenger service over lines that also carried other train traffic.  The case involved the more usual joint cost situation.  Yet even there, the ICC deemed avoidable certain employees' wages.  In regard to a challenge to the avoidability of wages paid to a yard crew, the ICC commented (without citation to record evidence), that "(u)pon discontinuance, these crews would be available to offset overtime and premium wage expenses elsewhere in the yards." 336 I.C.C. at 232.  In the present case N&W has made substantially the same showing by presenting evidence that its local management can flexibly reassign the work crews.  Moreover, N&W does not purport entirely to avoid the wages of the affected employees, but only that portion devoted to service on these two branches.  The ICC reasonably could infer, as it did in Erie Lackawanna, that direct savings will come from the "offset (to) overtime and premium wage expenses elsewhere."
The case of New York, New Haven and Hartford Railway Company Discontinuance, 320 I.C.C. 714 (1964), likewise lends no support to the petitioners' position.  Once again facing a joint cost situation, the ICC stated generally that an avoidable cost must be one directly attributable to the service unit at issue, and not merely be an expense that may be added to another existing service unit. 320 I.C.C. at 718.  It is clear from the context of the case that the other service units to which a purported avoidable cost could not be transferred were those units that travelled the same tracks; e. g., freight service, as opposed to the commuter service that was the subject of the discontinuance.  As the Appendix to the case specifies, the ICC recognized as needing no discussion the avoidability of certain crew and repair expenses attributable solely to the commuter service; but the ICC, consistent with our analysis here, excluded as unavoidable maintenance of way expenses for track over which other service units travelled.  Moreover, the ICC noted that "(t)he avoidance of costs at (a station beyond the stretch at issue in the case), if in fact the discontinuance would have such an effect, would not come from a reduction in force, but from releasing men for other productive work." 320 I.C.C. at 724.  The ICC, then, recognizes that shifting employees from one work location to another pursuant to termination of rail service may effect a savings, even when the terminated service involves a joint cost situation.  Accord, Consolidated Rail Corporation Discontinuance, 360 I.C.C. 324 (1979) (where commuter service terminated but freight service continued over same trackage, certain labor costs not proven avoidable in absence of direct evidence of savings).

5
 The petitioners contend that the ICC's discussion on normalized maintenance is insufficiently clear to allow adequate review by this court.  See United States v. Chicago, Milwaukee, St. Paul and Pacific Railroad, 294 U.S. 499, 55 S.Ct. 462, 79 L.Ed. 1023 (1935).  They point out that the respective N&W and government briefs differ in characterizing the ICC's action, and more particularly that N&W claims the ICC accepted N&W's much higher figures when making its calculation.  As the ICC's opinion shows, it did not "accept" any figures as being the accurate ones, but merely noted that even using the lowest figures possible, its result was the same.  Our conclusions render the petitioners' contention irrelevant, since we look only to the figures actually used in the ICC's opinion.  The petitioners could not be harmed by the ICC's use of maintenance figures that were lower even than those the petitioners sought.  A remand in order to clarify the ICC's discussion would be an idle exercise

6
 The record on appeal does not indicate that those protesting the Connersville branch abandonment had any quarrel with the administrative law judge's conclusion that the branch needed $363,000 of rehabilitation to meet minimum safety standards.  The ICC's opinion, however, is somewhat vague on precisely what role rehabilitation costs play in its decision that the Connersville branch should be abandoned as unprofitable.  The ICC should address this vagueness during its consideration on remand of this case

7
 Financially responsible persons, including private individuals or government entities, may subsidize a rail line in order to avoid the line's abandonment or discontinuance.  See 49 U.S.C. § 10905(d).  The subsidy may be terminated with sixty days notice. 49 U.S.C. § 10905(f)(5)

8
 IMC in its Reply Brief on this point cites us an unpublished order of this court issued in a case unrelated to the one before us.  Rule 35 of this circuit prohibits citation of this court's unpublished orders as precedent, except to support a claim of res judicata or collateral estoppel.  This is an important rule of practice, and one to which we expect counsel scrupulously to adhere.  In any event, the case cited is clearly distinguishable

9
 The petitioners point out that the ICC's opinion in the present case misstated the basis of its computation.  The ICC said it derived its figures on 9.9% of the branch's salvage value.  In fact, the opportunity cost figures were derived on the proper basis of the sum total of salvage value, income tax benefits and working capital for fifteen days.  For clarity, the ICC should so explain on remand

10
 The ICC concluded that there were no prospects for increased traffic over the Rushville branch, and that taken together with the finding of unprofitability, there was no justification for spending large amounts to rehabilitate the line.  Although IMC argues that the tonnage has increased over the branch in recent years due to the use of larger railroad cars, we see nothing arbitrary or capricious in the ICC's conclusion that revenues from this traffic did not justify the expenses for rehabilitation.  Given a potentially changed profitability picture on remand, however, the ICC will wish to reconsider this question
As discussed elsewhere, see note 6, supra, the ICC's opinion is somewhat unclear on the role that rehabilitation expenses played in the decision to authorize N&W to abandon the Connersville branch.  To the extent that decreased traffic aside from the shipping activity at the Ford plant was used by the ICC in its determination, we can perceive nothing arbitrary or capricious in the ICC's action.  The increased Ford traffic was addressed in the portion of the ICC's opinion concerning ConRail's trackage rights, and there was nothing arbitrary or capricious in the ICC's dealing with that component of Connersville branch traffic separately from the minimal number of rail cars otherwise moving on the branch.

11
 We regret that this matter cannot end with this proceeding.  The case as presented to this court has been marked by thorough briefing and argument by each side's respective counsel.  The court hopes that the ICC on remand will engage in the same thoroughness of consideration and discussion


                                                                                ACCEPTED
                                                                                03-15-00819-CR
                                                                                11262454
                                                                                THIRD COURT OF APPEALS
                                                                                AUSTIN, TEXAS
                                                                                6/21/2016 4:11:45 PM
                                                                                JEFFREY D. KYLE
                                                                                CLERK
                             CAUSE NO. 03-15-00819-CR

            _________________________________________________
                                                           FILED IN
                                                     3rd COURT OF APPEALS
                                                         AUSTIN, TEXAS
                          IN THE COURT OF APPEALS    6/21/2016 4:11:45 PM
                      FOR THE THIRD DISTRICT OF TEXAS JEFFREY D. KYLE
                               AUSTIN DIVISION               Clerk
            _________________________________________________

TIMOTHY STEVEN BLACKARD §
                             §
v.                           §
                             §
THE STATE OF TEXAS           §
        _______________________________________________

                APPELLANT’S SECOND MOTION TO EXTEND
                    TIME TO FILE APPELLANT’S BRIEF
             _______________________________________________

                                           Justin Bradford Smith
                                           Texas Bar No. 24072348
                                           Harrell, Stoebner, & Russell, P.C.
                                           2106 Bird Creek Drive
                                           Temple, Texas 76502
                                           Phone: (254) 771-1855
                                           FAX: (254) 771-2082
                                           Email: justin@templelawoffice.com

                                           ATTORNEY FOR APPELLANT

Appellant’s Second Motion to Extend Time to File Appellant’s Brief              Page 1
Blackard v. State; Cause No. 03-15-00819-CR
TO THE HONORABLE COURT OF APPEALS:

       COMES NOW, Appellant, TIMOTHY STEVEN BLACKARD who files

this Second Motion for Extension of Time to File Appellant’s Brief, and shows

unto the Court as follows:

                                             I.

       Appellant’s brief is due on or before June 22, 2016.

                                             II.

       Appellant is asking for an additional thirty days to file his brief, which

should make his brief due on or before July 21, 2016.

                                            III.

       Facts relied on to reasonably explain the need for an extension include the

following:

       1.            Preparation for oral argument delivered in Dwayne Darnell

                     McGowan v. State, 07-15-00270-CR involving complex, novel

                     question of whether the common law ability-to-pay defense has

                     been superseded by statute. (argued on May 25, 2016; work

                     since brief was last due in this case performed on May 23,

                     2016; May 24, 2016; May 25, 2016; May 26, 2016 (detailed

Appellant’s Second Motion to Extend Time to File Appellant’s Brief          Page 2
Blackard v. State; Cause No. 03-15-00819-CR
                     communication        with    client    regarding   oral   argument

                     impressions)).

       2.            Review clerk’s record and reporter’s record in Eian Tilor

                     Hurlburt v. State; Cause No. No. 10-15-00400-CR, 10-15-

                     00401-CR, No. 10-15-00402-CR, No. 10-15-00403-CR; Draft

                     and file four briefs and perform/review legal research. Detailed

                     client communication regarding brief, next steps.           (Work

                     performed on May 27, 2016; May 31, 2016; June 1, 2016; June

                     2, 2016; June 3, 2016; June 7, 2016).

       3.            Review reporter’s and clerk’s records, perform research, and

                     draft and file brief; review State’s brief; letters to client

                     regarding above in Justin Keith Vega v. State; Cause No. 08-16-

                     00057-CR. (Work performed on June 1, 2016; June 2, 2016;

                     June 6, 2016; June 7, 2016; June 8, 2016; June 9, 2016; June

                     14, 2016).

       4.            Draft and file motion for rehearing (and perform related legal

                     research), and have telephone conferences with client’s husband

                     regarding PDR/motion for rehearing, in Sherrill Ann Small v.

Appellant’s Second Motion to Extend Time to File Appellant’s Brief                Page 3
Blackard v. State; Cause No. 03-15-00819-CR
                     State, 14-15-00039-CR, capital murder case. (Work performed

                     on May 25, 2016; May 31, 2016; June 3, 2016).

       5.            Review State’s Motion to Dismiss for Lack of Jurisdiction and

                     perform/review legal research regarding same (involving

                     question of first impression for 10th Court of Appeals—whether

                     a criminal defendant has authority to appeal an order granting

                     shock probation), and draft and file response; review State’s

                     brief on the merits; all in Fernando Smith v. State, Cause No.

                     10-15-00263-CR. (Work performed on June 9, 2016 and June

                     10, 2016).

       6.            Legal research and detailed letter to client regarding concurrent

                     versus    consecutive     sentencing     in     federal    versus    state

                     sentencing; telephone with client, and work related to

                     confirming     whether client’s        state    sentence    is   running

                     concurrently with his federal sentence. Santos Salinas v. State,

                     Cause No. 13-15-00310-CR. (Work performed on May 31,

                     2016; June 6, 2016)

       7.            Draft and file Notice of Past Due Findings of Fact and

                     Conclusions of Law and letter to court regarding same;

Appellant’s Second Motion to Extend Time to File Appellant’s Brief                       Page 4
Blackard v. State; Cause No. 03-15-00819-CR
                     complete and file docketing statement; review proposed

                     findings of fact and conclusions of law from opposing counsel

                     and perform related legal research in Phillip Randall Clemons

                     v. Vianney Lynn; Cause No. 03-16-00360-CV (In re: H.C.C., A

                     Child; Cause No. 254,204 in the 426th District Court of Bell

                     County, Texas). (Work performed on May 25, 2016; June 6,

                     2016; June 8, 2016).

       8.            Review court’s opinion/judgment and send to client in

                     compliance with Rule 48.4 of the Texas Rules of Appellate

                     Procedure, as well as draft and file Rule 48.4 letter, in Stanley

                     Bernard Abney v. State, Cause No. 03-15-00421-CR. (Work

                     performed on June 10, 2016 and June 21, 2016).

       9.            Draft and file First Motion for Extension of Time to File Brief

                     in Jesse Daniel Sabedra, III v. State, Cause No. 10-16-00033-

                     CR. (Work performed on June 1, 2016).

       10.           Draft and file Rule 48.4 letters in Raymond Ross Mormino, II v.

                     State; Cause No. 10-15-00167-CR and No. 10-15-00173-CR.

                     (Work performed on June 1, 2016)

Appellant’s Second Motion to Extend Time to File Appellant’s Brief              Page 5
Blackard v. State; Cause No. 03-15-00819-CR
       11.           Initial work (draft motion for new trial, request reporter’s

                     record, request clerk’s record, complete and file docketing

                     statement) related to four new appeals:

                        a. Andre Rynell Edwards v. State; Cause No. 10-16-00193-

                           CR (15-22854; 52nd District Court, Coryell County,

                           Texas) (Work performed June 6, 2016).

                        b. Major Thomas Davis v. State; Cause No. 03-16-00334-

                           CR (Work performed on May 27, 2016).

       12.           Work related to easement agreement/settlement of Shawn Jones

                     and April Jones v. Juanita C. Smith, et al, Cause No. 223,129-

                     B; 146th District Court of Bell County, Texas.                   (Work

                     performed on May 31, 2016).

       13.           Meet with client, and review/revise proposed discovery to send

                     in Girly Bennett v. Susanna Allen, Cause No. D-1-GN-15-

                     005031; 98th District; Travis County (Work performed on June

                     June 10, 2016 and June 21, 2016).

       14.           Preparation     for   CLE     to   deliver      on   May   27,    2016

                     (reviewing/revising materials, practicing delivery, etc.—May

                     26, 2016) and delivering CLE to Highland Lakes Bar

Appellant’s Second Motion to Extend Time to File Appellant’s Brief                    Page 6
Blackard v. State; Cause No. 03-15-00819-CR
                     Association in Marble Falls (approximately an hour and a half

                     away, one way) on May 27, 2016.

       15.           Miscellaneous work related to non-litigation (e.g., advising on

                     independent contractor agreement, laser hair removal rental

                     agreement, etc.) or cases not yet in litigation (e.g., demand

                     letter, hot check) (performed variously over the course of the

                     last month or so).

       16.           Time lost out for funeral for stepgrandmother in San Antonio

                     on June 13, 2016.

       17.           Time lost on May 30, 2016 for Memorial Day because office

                     was closed.

       18.           Time lost on June 7, 2016 for eye doctor appointment.

                                            IV.

       No previous extension have been requested and granted in this matter.

                                        PRAYER

       WHEREFORE, PREMISES CONSIDERED, Appellant asks this Court to

extend his time for filing his brief to thirty (30) days from the date his brief is

currently due.

Appellant’s Second Motion to Extend Time to File Appellant’s Brief             Page 7
Blackard v. State; Cause No. 03-15-00819-CR
                                                  Respectfully submitted:

                                                  /s/ Justin Bradford Smith
                                                  Justin Bradford Smith
                                                  Texas Bar No. 24072348

                                                  Harrell, Stoebner, & Russell, P.C.
                                                  2106 Bird Creek Drive
                                                  Temple, Texas 76502
                                                  Phone: (254) 771-1855
                                                  FAX: (254) 771-2082
                                                  Email: justin@templelawoffice.com

                                                  ATTORNEY FOR APPELLANT

                            CERTIFICATE OF SERVICE

       I hereby certify that, on June 21, 2016, a true and correct copy of the

Appellant’s First Motion to Extend Time to File Appellant’s Brief was provided to

counsel via the method indicated below:

Burnet County District Attorney
c/o Gary W. Bunyard
1701 E. Polk, Ste 24
Burnet, Texas 78611
Phone: (512) 756-5449
Fax: (512) 756-8572
Email: g.bunyard@co.llano.tx.us
VIA ESERVICE
            Attorneys for State of Texas

                                                  /s/ Justin Bradford Smith
                                                  Justin Bradford Smith

Appellant’s Second Motion to Extend Time to File Appellant’s Brief              Page 8
Blackard v. State; Cause No. 03-15-00819-CR


                 IN THE SUPREME COURT OF PENNSYLVANIA
                            EASTERN DISTRICT

COMMONWEALTH OF PENNSYLVANIA, : No. 276 EAL 2015
                              :
              Respondent      :
                              : Petition for Allowance of Appeal from the
                              : Order of the Superior Court
         v.                   :
                              :
                              :
JAMES GRAHAM,                 :
                              :
              Petitioner      :

                                     ORDER

PER CURIAM

     AND NOW, this 25th day of August, 2015, the Petition for Allowance of Appeal is

DENIED.


                                          Slip Op. 11-20

                UNITED STATES COURT OF INTERNATIONAL TRADE

 MARSAN GIDA SANAYI VE TICARET
 A.S.,

                                  Plaintiff,                 Before: Richard W. Goldberg,
                                                                     Senior Judge
                        v.                                       Court No. 09-00483

 UNITED STATES,
                                  Defendant.

                                               OPINION

[Plaintiff’s Motion for Judgment on the Agency Record is denied and the final results of the
countervailing duty changed circumstances review are sustained.]

                                                                         Dated: February 16, 2011

Law Offices of David L. Simon (David L. Simon), for the Plaintiff.

Tony West, Assistant Attorney General; Jeanne E. Davidson, Director; Patricia M. McCarthy,
Assistant Director, Commercial Litigation Branch, Civil Division, U.S. Department of Justice
(Joshua E. Kurland); Office of the Chief Counsel for Import Administration, U.S. Department of
Commerce (Deborah R. King), Of Counsel, for the Defendant.

       Goldberg, Senior Judge: Marsan Gida Sanayi ve Ticaret A.S. (“Marsan” or

“Plaintiff”), a Turkish producer and exporter of pasta brought this appeal to contest the final

results of the changed circumstances review of the countervailing duty order on pasta from

Turkey, published as Certain Pasta from Turkey: Final Results of Countervailing Duty Changed

Circumstances Review, 74 Fed. Reg. 54,022 (Dep’t Commerce Oct. 21, 2009) (“Final Results”).

The changed circumstances review examined whether Marsan was the successor-in-interest to
Court No. 09-00483                                                                                Page 2

Gidasa for countervailing duty cash deposit purposes. Commerce determined that Marsan was

not the successor to Gidasa. Id. at 54,023.1 Consequently, Commerce determined that Marsan’s

merchandise was not entitled to Gidasa’s countervailing duty cash deposit rate, and instead,

should enter under the “all others” cash deposit rate of 9.38 percent. Id. Marsan challenges the

methodology Commerce employed and its final determination as unsupported by substantial

evidence and contrary to law.

                                               Background

        A. Commerce’s Position on CVD CCRs

        In December 2006, several years prior to Marsan’s petitions for an antidumping (“AD”)

and countervailing duty (“CVD”) changed circumstances review (“CCR”), Commerce stated it

might change the successor-in-interest analysis for CVD CCRs. See Stainless Steel Sheet and

Strip in Coils from the Republic of Korea: Preliminary Results of Countervailing Duty Changed

Circumstances Review, 71 Fed. Reg. 75,937 (Dep’t Commerce Dec. 19, 2006) (“Stainless

Steel”).

        Thus, in January 2007, Commerce published a Federal Register notice indicating its

intention to change the successorship analysis in CVD CCRs. Countervailing Duty Changed

Circumstances Reviews: Request for Comment on Agency Practice, 72 Fed. Reg. 3,107 (Dep’t

Commerce Jan. 24, 2007) (“Request for Comment”). At that time, Commerce applied the same

criteria for both AD and CVD successor-in-interest CCRs to examine whether an alleged

successor and predecessor company were the same business entity. Commerce’s criteria
1
 Commerce determined that Marsan was the successor to Gidasa for antidumping duty cash deposit purposes.
Certain Pasta from Turkey: Notice of Final Results of Antidumping Duty Changed Circumstances Review, 74 Fed.
Reg. 26,373 (Dep’t Commerce June 2, 2009).
Court No. 09-00483                                                                                Page 3

compared the companies’ (1) management; (2) production facilities; (3) supplier relationships;

and (4) customer base before and after the changed circumstances. Id. at 3,108. Commerce

stated it may not be appropriate to use the same analysis, given that AD and CVD determinations

focus on different issues. Id. Commerce noted the analysis focused on pricing behavior, which

is less relevant in the CVD context where subsidization, not price discrimination, is the

analytical focus. Id.

        According to Commerce, “an examination that focuses largely or solely on changes in the

legal or managerial structure or the productive capacity of a company may overlook other

important considerations that also may be relevant in the context of subsidies and countervailing

duties.” Id. In response to the Request for Comment, Commerce received comments from two

parties, which were summarized in the Preliminary Results of Marsan’s CVD CCR, published

as Certain Pasta from Turkey: Preliminary Results of Countervailing Duty Changed

Circumstances Review, 74 Fed. Reg. 47,225 (Dep’t Commerce Sept. 15, 2009) (“Preliminary

Results”).

        B. Marsan’s CVD CCR

        In August 2007, the Sabanci Group, a Turkish conglomerate and then-owner of Gidasa,

agreed to sell Gidasa to MGS Marmara Gida for cash. In March 2008, the parties finalized the

agreement. In June 2008, Gidasa’s new shareholders changed the name of the company to

Marsan. In December 2008, Marsan filed petitions requesting that Commerce conduct CCRs for

both the AD and CVD orders on pasta from Turkey.2 Marsan asserted it was the successor-in-
2
 Notice of Countervailing Duty Order: Certain Pasta from Turkey, 61 Fed. Reg. 38,546 (Dep’t Commerce July 24,
1996); Notice of Antidumping Duty Order and Amended Final Determination of Sales at Less Than Fair Value: Certain
Pasta From Turkey, 61 Fed. Reg. 38,545 (Dep’t Commerce July 24, 1996).
Court No. 09-00483                                                                                Page 4

interest to Gidasa for purposes of those orders. Thus, Marsan claimed it was entitled to Gidasa’s

AD and CVD cash deposit rates.

        On January 28, 2009, Commerce published its Notice of Initiation regarding Marsan’s

CVD CCR.3 Notice of Initiation of Countervailing Duty Changed Circumstances Review:

Certain Pasta from Turkey, 74 Fed. Reg. 4,938 (Dep’t Commerce Jan. 28, 2009) (“Notice of

Initiation”). Commerce reiterated that the successor-in-interest test used in AD and CVD CCRs

might not “fully address whether it is appropriate to apply the CVD cash deposit rate of a

previously examined company” to a different company claiming to be its successor. Id. at 4,939.

Referencing its language from Stainless Steel and its Request for Comment, Commerce

specifically stated that it did not intend to apply the AD CCR successor-in-interest methodology

in Marsan’s CVD CCR to determine whether Marsan was the successor to Gidasa for CVD cash

deposit purposes. Id.

        In September 2009, Commerce published the Preliminary Results of Marsan’s CVD

CCR. Commerce announced that, in consideration of the comments it received, and drawing on

the Department’s experience, it would be utilizing a new successor-in-interest methodology for

CVD CCRs, including Marsan’s CVD CCR. Preliminary Results, 74 Fed. Reg. at 47,227.

Under the new CVD CCR successor-in-interest methodology, Commerce makes “an affirmative

CVD successorship finding (i.e., that the successor company is the same subsidized entity for

CVD cash deposit purposes as the predecessor company) where there is no evidence of

significant changes in the respondent’s operations, ownership, corporate or legal structure” that
3
 Commerce also published a Notice of Initiation for the AD CCR in January 2009. Notice of Initiation of
Antidumpting Duty Changed Circumstances Review: Certain Pasta from Turkey, 74 Fed. Reg. 681 (Dep’t
Commerce Jan. 7, 2009).
Court No. 09-00483                                                                            Page 5

could have affected the nature and extent of the company’s subsidy levels. Id. Commerce

provided a non-exhaustive list of the changes it considered “significant and would affect the

nature and extent of the requesting party’s subsidization: (1) changes in ownership, other than

regular buying and selling of publicly owned shares held by a broad array of investors; (2)

corporate mergers and acquisitions involving the respondent’s consolidated or cross-owned

corporate family and outside companies; and (3) purchases or sales of significant productive

facilities.” Id. at 47,227-28.

       In addition, under the new methodology, where a change occurs in a company’s

operations, ownership, corporate, or legal structure that is not reflected in the abovementioned

non-exhaustive list, Commerce will assess whether the “change could affect the nature and

extent of the respondent’s subsidization.” Id. at 47,228. Commerce outlined additional non-

exhaustive, objective criteria for this assessment: “(1) [c]ontinuity in the cross-owned or

consolidated respondent company’s financial assets and liabilities; (2) continuity in its

production and commercial activities; and (3) continuity in the level of the government’s

involvement in the respondent’s operations or financial structure (e.g., government ownership or

control, the provision of inputs, loans, equity).” Id. According to Commerce, the particular

criteria “better reflect [the] aspects of a company that are most impacted by, the target of, or the

vehicle for subsidy benefits.” Id. Commerce also highlighted that the successor-in-interest

analysis focuses on whether a significant change occurred and not whether those changes, in

fact, affected a company’s subsidization. Id.
Court No. 09-00483                                                                           Page 6

       Using the new criteria, Commerce preliminarily determined that Marsan was not the

successor to Gidasa for CVD cash deposit purposes because there was a significant change in the

company’s operations, ownership, corporate, or legal structure. Commerce reasoned that the

change in ownership was a significant change because new investors and a new corporate entity

owned and controlled all of Gidasa’s assets, including its facilities and brand names. Id.

According to Commerce, these changes “could impact the nature and extent of the respondent’s

subsidization.” Id. However, Commerce did not analyze whether the change of ownership

actually affected Marsan’s subsidy levels because that analysis is only appropriate in a full

administrative review. Id.

       Ultimately, Commerce determined that Marsan’s merchandise was not entitled to enter

under the CVD cash deposit rate previously established for Gidasa. Id. at 47,229. Instead,

Marsan’s merchandise should enter under the “all others” cash deposit rate of 9.38 percent. Id.

Commerce published the Final Results of Marsan’s CVD CCR on October 21, 2009, adopting its

new successor-in-interest methodology for CVD CCRs, as well as the findings set forth in the

Preliminary Results.

       Marsan challenges Commerce’s new CVD CCR successor-in-interest test as unlawful.

Marsan also challenges Commerce’s final determination that Marsan was not the successor to

Gidasa for purposes of the CVD cash deposit rate, claiming it is not supported by substantial

evidence and is unlawful.
Court No. 09-00483                                                                       Page 7

                                 Jurisdiction and Standard of Review

       This case deals with countervailing duty proceedings. Plaintiff brought this action

pursuant to section 516A(a)(2)(B)(iii) of the Tariff Act of 1930, 19 U.S.C. § 1516a(a)(2)(B)(iii)

(2006). This Court has jurisdiction pursuant to section 201 of the Customs Court Act of 1980,

28 U.S.C. § 1581(c) (2006).

       This Court must “uphold Commerce’s determination unless it is ‘unsupported by

substantial evidence on the record, or otherwise not in accordance with law.’” Micron

Technology, Inc. v. United States, 117 F.3d 1386, 1393 (Fed. Cir. 1997) (quoting 19 U.S.C. §

1516a(b)(1)(B)(i) (1994)). “Substantial evidence” means “more than a mere scintilla” and has

been characterized as “such relevant evidence as a reasonable mind might accept as adequate to

support a conclusion.” Consol. Edison Co. v. NLRB, 305 U.S. 197, 229 (1938) (citations

omitted). “[T]he possibility of drawing two inconsistent conclusions from the evidence does not

prevent an administrative agency’s finding from being supported by substantial evidence.”

Consolo v. Fed. Mar. Comm’n, 383 U.S. 607, 620 (1966) (citations omitted). When reviewing

agency determinations, findings, or conclusions for substantial evidence, this Court determines

whether the agency action is reasonable in light of the entire record. See Nippon Steel Corp. v.

United States, 458 F.3d 1345, 1350-51 (Fed. Cir. 2006). The Court must find evidence that

reasonably led to the agency’s conclusion, ensuring it was a rational decision. See Matsushita

Elec. Indus. Co. v. United States, 750 F.2d 927, 933 (Fed. Cir. 1984).

       Commerce’s interpretation of a statute is reviewed pursuant to the two-prong analysis

adopted by the Supreme Court in Chevron U.S.A., Inc. v. Natural Res. Def. Council, Inc., 467
Court No. 09-00483                                                                            Page 8

U.S. 837 (1984). The first prong of the Chevron analysis requires the Court to determine

“whether Congress has directly spoken to the precise question at issue. If the intent of Congress

is clear, that is the end of the matter; for the court, as well as the agency, must give effect to the

unambiguously expressed intent of Congress.” Id. at 842-43. However, if the statute is silent or

ambiguous, prong two of Chevron requires the Court to assess whether the agency’s

interpretation of the statute is reasonable. Id. at 843.

         “As long as the agency’s methodology and procedures are reasonable means of

effectuating the statutory purpose, and there is substantial evidence in the record supporting the

agency’s conclusions, the court will not impose its own views as to the sufficiency of the

agency’s investigation or question the agency’s methodology.” Ceramica Regiomontana, S.A. v.

United States, 10 CIT 399, 404-05, 636 F. Supp. 961, 966 (1986), aff’d, 810 F.2d 1137 (Fed. Cir.

1987).

                                                  Discussion

         A. Commerce’s Interpretation of Changed Circumstances Review Is
            Reasonable and the Successor-in-Interest Methodology Employed Therein Is
            in Accordance with Law

         Marsan asserts that “Commerce created a per se rule that, whenever there had been a

change in ownership since the most recently completed administrative review, the resulting

company would not qualify as successor to the old company.” Pl.’s Br. 11. Marsan argues that

Commerce is, in effect, applying an irrebuttable presumption that a corporate acquirer brings

subsidies into the acquired company. Marsan challenges Commerce’s analysis because
Court No. 09-00483                                                                                Page 9

“decision-making based on an irrebuttable presumption is irreconcilable with the requirement

that decisions be supported by substantial evidence . . . . ” Pl.’s Br. 13.

         In the reply brief, Marsan characterizes differently Commerce’s alleged “irrebuttable

presumption.” Marsan posits that “Commerce has adopted a criterion that a change in ownership

is per se a significant change. In other words, there is an irrebuttable presumption that a change

in ownership is a significant change.” Pl.’s Reply Br. 2. Marsan asserts that “Chevron deference

does not allow Commerce to sidestep the substantial evidence requirement . . . . ” Pl.’s Reply

Br. 6.; see Tariff Act of 1930, § 516A(b)(1)(B)(i), 19 U.S.C. § 1516a(b)(1)(B)(i). Therefore,

Marsan contends that Commerce must formulate criteria that provide an evidentiary basis for

making its determination as to whether there is an essential continuity between the pre-sale and

post-sale company.4

         As Commerce noted, the statute authorizing Commerce to conduct a changed

circumstances review, 19 U.S.C. § 1675(b)(1), does not explicitly define what a CCR is or what

a CCR entails.5 In fact, a CCR may address a broad range of matters and the only limitation in

the statute is the requirement that there be “changed circumstances sufficient to warrant a

review.” See Mittal Canada, Inc. v. United States, 30 CIT 1565, 1572, 461 F. Supp. 2d 1325,

1332 n.7 (2006) (emphasis added). Thus, as Commerce pointed out, it has discretion to construe

4
  The Court notes the agency action also may have been challenged as arbitrary and capricious. See SKF USA Inc.
v. United States, No. 07-CV-0393, 2011 U.S. App. LEXIS 324, at *17-18 (Fed. Cir. Jan. 7, 2011) (noting that a
change in agency practice requires adequate explanation and laying out the factors to consider when determining
whether agency action is arbitrary and capricious). However, the Plaintiff did not raise that issue. Therefore, the
Court will not address it.
5
  Section 751(b)(1) of the Tariff Act of 1930, 19 U.S.C. § 1675(b)(1) provides that Commerce shall conduct a review
of a determination whenever the administering authority receives information concerning, or a request from an
interested party for a review of a final affirmative determination that resulted in a countervailing duty order which
shows changed circumstances sufficient to warrant a review of such determination.
Court No. 09-00483                                                                           Page 10

the breadth of CCRs because statutory silence provides “an express delegation of authority to the

agency to elucidate a specific provision of the statute by regulation.” See Chevron, 467 U.S. at

843-44.

       In matters of statutory construction, the Court will accord “great deference to the

interpretation given the statute by the officers or agency charged with its administration.” Koyo

Seiko Co., Ltd. v. United States, 31 CIT 1512, 1514, 516 F. Supp. 2d 1323, 1329 (2007) (quoting

Udall v. Tallman, 380 U.S. 1, 16, 85 S.Ct. 792, 13 L. Ed. 2d 616 (1965)), aff’d, 551 F.3d 1286

(Fed. Cir. 2008). Specifically, the Court must defer to Commerce’s reasonable interpretation of

the antidumping and countervailing duty statute. See Hangzhou Spring Washer Co., Ltd. v.

United States, 29 CIT 657, 659, 387 F. Supp. 2d 1236, 1240 (2005). In order to survive judicial

scrutiny, Commerce’s construction need not be the only reasonable interpretation or even the

most reasonable interpretation. See Zenith Radio Corp. v. United States, 437 U.S. 443, 450, 57

L. Ed. 2d 337, 98 S. Ct. 2441 (1978).

       Commerce argues that its CVD CCR successor-in-interest methodology is a reasonable

interpretation of 19 U.S.C. § 1675(b)(1) because Commerce articulated well-grounded reasons

for implementing a new successor-in-interest methodology in CVD CCRs, it identified concrete

factors for its methodology, and it related those factors to the purposes and limitations of CCRs.

Commerce notes that the statute does not require the standards and analysis used in an AD CCR

to parallel those used in a CVD CCR. See 19 U.S.C. § 1675(b)(1). Moreover, Commerce

highlights that the AD successorship analysis focuses on pricing, which is not relevant in the

CVD context because subsidization is the focus.
Court No. 09-00483                                                                         Page 11

       1. Commerce’s Interpretation of Changed Circumstances Review Is Reasonable

       Commerce interpreted a CCR addressing successorship as a review in which it only

analyzes whether an alleged successor company is essentially the same entity as (i.e., virtually

unchanged from) an alleged predecessor company such that it succeeds to it for purposes of an

existing AD or CVD order. Commerce’s interpretation that a CVD CCR need only examine the

changes to the company that could impact subsidy levels is reasonable because only certain

types of changes to a company may render it different from a former company such that it is

inappropriate to apply the CVD cash deposit rate of the former company to the new company.

       Commerce underscores that it would be “infeasible and inappropriate for it to conduct a

fact-intensive analysis of the extent to which significant changes affect a company’s

subsidization level, and that such an analysis is the province of a full administrative review.”

Def.’s Br. 17. Thus, when Commerce conducts a CCR to determine whether a company is

entitled to a previously calculated CVD cash deposit rate, it is reasonable for Commerce to

refrain from delving into an analysis of subsidization because that requires deeper analysis,

appropriate for a full administrative review. Therefore, Commerce’s interpretation of “changed

circumstances review,” including its construction that it is a review limited in scope and purpose,

is reasonable.

       2. Commerce’s CVD CCR Successor-in-Interest Methodology Is in
          Accordance with Law

       Pursuant to Commerce’s reasonable interpretation of a CCR, it devised a methodology

for CVD CCRs focusing on successorship. It has been recognized that the antidumping statute

“reveals tremendous deference to the expertise of the Secretary of Commerce in administering
Court No. 09-00483                                                                                Page 12

the anti-dumping law.” Fujitsu General Ltd. v. United States, 88 F.3d 1034, 1039 (Fed. Cir.

1996) (citations omitted). In fact,

    [t]his deference is both greater than and distinct from that accorded the agency in
    interpreting the statutes it administers, because it is based on Commerce’s technical
    expertise in identifying, selecting and applying methodologies to implement the dictates
    set forth in the governing statute, as opposed to interpreting the meaning of the statute
    itself where ambiguous.

Id. Therefore, this Court will not question Commerce’s methodology “[a]s long as the agency’s

methodology and procedures are reasonable means of effectuating the statutory purpose.”

Hangzhou, 387 F. Supp. 2d at 1240. In addition, if Commerce has discretion to create a

methodology, Commerce may revise it, and this Court will uphold the revised methodology if it

is reasonable. See Koyo Seiko Co., Ltd., 516 F. Supp. 2d at 1331.

         As this Court previously noted, the “successor-in-interest analysis was not explicitly

created by statute or by regulation, but is an agency practice designed to facilitate the proper

implementation of the [trade] laws.” East Sea Seafoods, LLC v. United States, 34 CIT ___ , ___,

703 F. Supp. 2d 1336, 1352 (2010). Thus, the successor-in-interest analysis is precisely the type

of methodology Commerce is tasked with identifying and applying, and the Court must not

direct Commerce on how to create that methodology. Rather, the Court must defer to

Commerce’s methodology if it is reasonable. See JTEKT Corp. v. United States, 33 CIT ___,

___, 675 F. Supp. 2d 1206, 1219 (2009).

        As early as 2006, Commerce stated that it was considering changing the successor-in-

interest analsysis for CVD CCRs.6 Commerce noted it was not appropriate to use the same

6
 Stainless Steel Sheet and Strip in Coils from the Republic of Korea: Preliminary Results of Countervailing Duty
Changed Circumstances Review, 71 Fed. Reg. 75,937 (Dep’t Commerce Dec. 19, 2006).
Court No. 09-00483                                                                            Page 13

analysis for AD and CVD CCRs, given that AD and CVD determinations focus on different

issues. In 2007, Commerce published a notice requesting comments on its plan to change the

CVD successor-in-interest methodology. Then, in the Notice of Initiation for this case,

Commerce clearly stated it would not be utilizing the former successor-in-interest criteria in

Marsan’s CVD CCR. Finally, in the Preliminary Results of the present case, Commerce

summarized the comments it received, articulated its reasons for implementing a new

methodology, and provided the specific criteria applicable. Commerce asserts that its revised

criteria better address the focus (i.e., subsidization) of a successor-in-interest analysis in the

CVD context than the factors examined in the AD context because the new criteria better reflect

those aspects of a company that generally are the most impacted by, the target of, or the vehicle

for subsidy benefits. In light of the foregoing, and for the following reasons, Commerce’s CVD

successor-in-interest methodology is reasonable.

        Marsan challenges Commerce’s CVD CCR successor-in-interest methodology as

unlawful, claiming it constitutes decision-making by irrebuttable presumption. Marsan asserts

that Delverde SRL v. United States held decision-making by irrebuttable presumption unlawful,

by stating:

    [the Court] ha[s] come to the conclusion that the Tariff Act as amended does not allow
    Commerce to presume conclusively that the subsidies granted to the former owner of
    Delverde’s corporate assets automatically “passed through” to Delverde following the
    sale. Rather, the Tariff Act requires that Commerce make such a determination by
    examining the particular facts and circumstances of the sale and determining whether
    Delverde directly or indirectly received both a financial contribution and benefit from a
    government.
Court No. 09-00483                                                                                Page 14

202 F.3d 1360, 1364 (Fed. Cir. 2000). However, the Court in Delverde also stated that “before

Commerce imposes a countervailing duty on merchandise imported into the United States, it

must determine that a government is providing, directly or indirectly, a countervailable subsidy

with respect to the manufacture, production, or export of that merchandise.” Id. at 1365. More

specifically, the Court read the portion of the statute at issue in that case as “plainly requiring

Commerce to make a determination that a purchaser of corporate assets received both a financial

contribution and benefit from a government, albeit indirectly through the seller, before

concluding that the purchaser was subsidized.” Id. at 1367.

        Thus, Delverde addressed Commerce’s methodology for analyzing subsidization and

levying countervailing duties in the course of a CVD investigation.7 In this case, on the other

hand, the methodology at issue is applied in the context of a CCR; Commerce did not assess

subsidization or make a countervailing duty determination. Therefore, Commerce did not

presume that subsidies granted to a seller passed through to the purchaser or conclude that

Marsan was subsidized. Ultimately, “[t]he question in a successor-in-interest determination is

whether an alleged successor should qualify for the cash deposit rate last calculated for the

alleged predecessor.” East Sea Seafoods, 703 F. Supp. 2d at 1352. Here, Commerce utilized its

methodology to answer that question.

        Commerce’s methodology simply evaluates the changes to a company to determine

whether those changes would make it inappropriate to treat the former and subsequent company

7
  In Delverde, the plaintiff challenged Commerce’s methodology, which assumed that a pro rata portion of the
former owner’s nonrecurring subsidies “passed through” to Delverde as a consequence of the sale, as erroneous and
inconsistent with the Tariff Act as amended by the Uruguay Round Agreements Act. Id. at 1363.
Court No. 09-00483                                                                         Page 15

as if they were the same entity and entitled to the same cash deposit rate. As Commerce

explained, subsidization often seeks to stabilize a company’s financial position or facilitate

investment. Thus, changes in a company’s name, ownership, or structure because of corporate

reorganization, merger, or acquisition by another company are relevant to subsidy benefits.

Accordingly, a methodology that examines whether a company underwent these types of

changes to determine whether the company is entitled to the CVD cash deposit rate Commerce

assigned to the former company is reasonable. If, as here, the changes indicated the companies

are not the same entity, the “all others” rate would be assigned until the respondent requested a

full administrative review to determine its specific rate.

       Thus, contrary to Marsan’s assertions, the successor-in-interest methodology does not

entail an irrebuttable presumption that the corporate acquirer has subsidies because the analysis

is not focused on the company’s subsidization. Moreover, the governing principle of Delverde,

that Commerce could not conclusively presume subsidization, is inapplicable because

Commerce’s methodology does not determine, analyze, or presume subsidization. Instead, the

methodology examines the changes that warranted the CCR. The methodology also does not

entail an irrebuttable presumption that any change constitutes a significant change. The analysis

simply focuses on certain changes to a company that would make it inappropriate to treat the old

and new company similarly for purposes of the CVD order.

       Therefore, the successor-in-interest methodology in a CVD CCR, which concentrates on

whether there were significant changes to a company’s operations, ownership, corporate, or legal
Court No. 09-00483                                                                                Page 16

structure to determine whether the changed company may receive a previously calculated CVD

cash deposit rate, is reasonable and in accordance with law.

         B. Commerce’s Determination that Marsan Is Not the Successor to Gidasa
            for CVD Cash Deposit Purposes Is Supported by Substantial Evidence
            and Otherwise in Accordance with Law

         Marsan argues that “Commerce simply leapt from the fact of the acquisition to the

conclusion that the post-acquisition company probably had subsidies even though it had none

prior to the acquisition, with no evidentiary basis whatsoever and only its new irrebuttable

presumption as rationale.” Pl.’s Br. 15. Marsan contends that Commerce did not make any

effort to determine whether the purchaser brought any subsidies. According to Marsan,

Commerce’s only factual analysis was to find that Marsan had acquired Gidasa.8 Thus, Marsan

claims that “in the absence of any evidence or reason to believe that the transfer of ownership

brought any subsidies into the company, Commerce could not lawfully determine that Marsan

was not the successor to Gidasa for purposes of the CVD CCR.” Pl.’s Br. 22.

         In support of Marsan’s claim that it was the successor-in-interest to Gidasa, Marsan

stresses that it had the same productive facilities as Gidasa, it was in the same line of business as

Gidasa, and the sale was a private-to-private transaction with a holding company whose sole

asset was the shares of Marsan. Marsan asserts that these facts demonstrate a continuity of

structure, function, and operations between Gidasa and Marsan.

8
 Specifically, Marsan asserts that Commerce never considered that Gidasa did not have subsidies according to its
most recent review, that there was no possibility of any infusion of domestic subsidies, that the holding company that
acquired Gidasa did not have subsidies, or that a review of recent Turkish CVD cases establishes that there is little or
no likelihood of subsidies applicable.
Court No. 09-00483                                                                         Page 17

       Marsan’s arguments that Commerce did not find that Marsan had subsidies and that

Marsan had similar productive facilities, customers, and suppliers are misplaced. Pursuant to

Commerce’s reasonable interpretation of a CCR, the review was limited to an analysis of

successorship, not subsidization, which is analyzed in a full administrative review. In addition,

pursuant to Commerce’s expertise, it reasonably determined that an analysis of productive

facilities, customers, and suppliers is relevant to an AD determination, whereas the company’s

ownership and assets are relevant to a CVD determination. Thus, the Court only determines

whether Commerce’s final determination is supported by substantial evidence on the record. See

Tariff Act of 1930, § 516A(b)(1)(B)(i), 19 U.S.C. § 1516a(b)(1)(B)(i) (2006). Substantial

evidence review essentially inquires into the reasonableness of the determination. See Nippon

Steel Corp., 458 F.3d at 1351.

       As Commerce explained, it examined information Marsan submitted which shows

evidence of a significant change in ownership and corporate structure. Marsan contends that the

“evidence in the present case establishes that Marsan is substantially identical to its predecessor,

Gidasa, and Commerce’s refusal to consider that evidence resulted in a decision based on

speculation rather than substantial evidence.” Pl.’s Reply Br. 12. However, Commerce argues

that regardless of the factors Marsan claims demonstrate it is the successor, the record supports

Commerce’s decision to the contrary. According to Commerce, even if the Court considered the

information Marsan offers to support its claim of successorship, substantial evidence still

supports Commerce’s conclusion because the record demonstrates that Marsan underwent

significant changes, and therefore, was not the successor to Gidasa for CVD cash deposit
Court No. 09-00483                                                                         Page 18

purposes. Indeed, if there is evidence that reasonably led to Commerce’s conclusion, such that it

was a rational decision, the conclusion is supported by substantial evidence. See Matsushita

Elec. Indus. Co., 750 F.2d at 933.

       By requesting a CCR, Marsan acknowledged it could not automatically succeed to

Gidasa’s CVD cash deposit rate without a declaration by Commerce that it is essentially the

same entity as Gidasa and thus entitled to similar treatment. In fact, without such a

determination, Marsan’s merchandise would automatically enter under the “all others” rate, the

rate applicable to companies that have not been reviewed, until there was an administrative

review to determine the new or changed company’s specific rate. Thus, the CCR was necessary

to examine the changes that occurred in order for Commerce to determine whether it could treat

Marsan as it had treated Gidasa. There is not a guarantee that a CCR will result in an affirmative

finding of successorship.

       In this case, Commerce made a negative determination as to Marsan’s successorship

status because there is substantial evidence to support the conclusion that the two companies,

Gidasa and Marsan, are not the same entity. The record shows that the ownership of Gidasa

changed, as well as its name. A change in ownership is a significant change because it entails

different assets and a different corporate identity, which are relevant to subsidization. Thus, the

change in ownership is “such relevant evidence as a reasonable mind might accept as adequate to

support” the conclusion that Marsan is not the successor to Gidasa for CVD cash deposit

purposes. See Consol. Edison Co., 305 U.S. at 229.
Court No. 09-00483                                                                      Page 19

                                          Conclusion

       Commerce’s interpretation of “changed circumstances review” is reasonable, the

methodology it employed therein is in accordance with law, and its final determination is

supported by substantial evidence.

       For the foregoing reasons, Marsan’s motion for judgment upon the agency record is

denied and judgment is entered in favor of the United States.

                                                                       /s/ Richard W. Goldberg
                                                                           Richard W. Goldberg
                                                                              Senior Judge

Dated: February 16, 2011
New York, New York


440 F.2d 1199
UNITED STATES of America, Plaintiff-Appellee,v.Sabas RUACHO-ACUNA, Defendant-Appellant.
No. 29985.
United States Court of Appeals, Fifth Circuit.
April 5, 1971.

Joseph J. Rey, Sr., El Paso, Tex., for defendant-appellant.
Seagal V. Wheatley, U. S. Atty., San Antonio, Tex., Haskell Shelton, Asst. U. S. Atty., El Paso, Tex., for plaintiff-appellee.
Before GOLDBERG and DYER, Circuit Judges, and GROOMS, District Judge.
PER CURIAM:

1
A jury found appellant Ruacho-Acuna guilty of illegal importation of approximately two pounds of heroin and the knowing concealment of it after importation in violation of 21 U.S.C.A. § 174. At trial appellant admitted the essential elements of the offenses. On appeal he attacks the District Court's denial of various motions made during the trial, challenges the admissibility of three Government exhibits, and contends that his sentence constitutes cruel and unusual punishment. We affirm.

2
Appellant moved in limine to suppress, on the ground of his illegal arrest, heroin found on his person and in plain view in the hotel room which he had entered to consummate a sale to a Special Agent of the Bureau of Customs and a cooperating state agent. The motion was properly denied. Uncontroverted evidence, including appellant's testimony, conclusively proved that appellant (and his co-defendant who pled guilty) exhibited about two pounds of heroin to the agents in the hotel room. By pre-arranged signal two agents in the next room then entered appellant's room, saw heroin on the bed and table, and found more in appellant's pockets. It would be difficult to imagine a case in which a stronger showing has been made that at the time of arrest, the officers had probable cause to make it. United States v. Acosta, 5 Cir. 1969, 411 F.2d 627. Indeed, the officers would have been derelict in their duty if they had not then and there arrested appellant and seized the heroin.

3
At the hearing on his motion to suppress, appellant requested that the court invoke the rule excluding witnesses from the courtroom; the court obliged. Nevertheless, the court subsequently permitted a Government agent, who had been present during the hearing, to testify. Appellant contends this was error. "The sequestration of witnesses, long practiced in English and United States courts, rests within the sound discretion of the trial judge * * *." United States v. Harris, 4 Cir. 1969, 409 F.2d 77, 81, cert. denied, 396 U.S. 965, 90 S.Ct. 443, 447, 24 L. Ed.2d 430. We find no abuse of discretion or prejudice resulting from the presence of the witnesses during the hearing on the motion. To a large extent the second agent's testimony was non-cumulative and pertained to matters which took place out of the presence of the witnesses who had previously testified.

4
Appellant next assigns as error the court's denial of his request for the name of an informer. This contention is without merit. "There was no showing as in Roviaro v. United States, 1957, 353 U.S. 53, 77 S.Ct. 623, 1 L.Ed.2d 639, that the identity of the informer was relevant to the defense on the merits. There was in fact no defense here other than the motion to suppress. There was no showing whatever that the informer played any part in the transaction with which the defendant was charged." United States v. Acosta, supra, 411 F.2d at 630.

5
Appellant's objection to the admissibility of three Government exhibits borders on the frivolous. In his brief he concedes: "This evidence was not damaging." In any event, his argument that seizure of the exhibits was concomitant to appellant's illegal arrest is, as we have noted, without foundation.

6
Finally, we reject appellant's argument that his sentence constitutes cruel and unusual punishment. The sentence imposed was within the statutory limits. Castle v. United States, 5 Cir. 1968, 399 F.2d 642, 652.

7
Affirmed.