author: MOORE, Circuit Judge: LUMBARD, Circuit Judge

text:
    COLUMBIA PICTURES INDUSTRIES, INC., et al., Plaintiffs-Appellants, v. AMERICAN BROADCASTING COMPANIES, INC., et al., Defendants-Appellees, and Columbia Broadcasting System, Inc., et al., Defendants.
    No. 922, Docket 74-1172.
    United States Court of Appeals, Second Circuit.
    Argued March 8, 1974.
    Decided July 3, 1974.
    Whitney North Seymour, New York City (Simpson Thacher & Bartlett, New York City), for plaintiffs-appellants.
    Louis Nizer, New York City (Phillips, Nizer, Benjamin, Krim & Ballon, New York City), for plaintiff-appellant United Artists.
    Paul, Weiss, Rifkind, Wharton & Garrison, New York City, for plaintiff-appellant Warner Bros.
    Herbert A. Bergson, Washington, D. C. (Bergson, Borkland, Margolis & Adler, Washington, D. C.), for defendants-appellees American Broadcasting Companies, Inc. and others.
    Hawkins, Delafield & Wood, New York City, for defendants-appellees American Broadcasting Companies, Inc., and others.
    Cravath, Swaine & Moore, New York City (Bruce Bromley, Robert S. Rifkind, Robert F. Mullen, Paul C. Saunders, and Steven M, Edwards, New York City), for defendant Columbia Broadcasting System, Inc., as amicus curiae.
    Seward & Kissel, New York City, for defendant CBS, Inc.
    Hughes, Hubbard & Reed, New York City, for defendant Viacom International, Inc.
    Before LUMBARD, MOORE and OAKES, Circuit Judges.
   MOORE, Circuit Judge:

Plaintiffs-appellants appeal from an order of Judge Palmieri denying their motion for a preliminary injunction which sought temporarily to enjoin “the defendant American Broadcasting Companies, Inc. (‘ABC’), during the pen-dency of this case, from exhibiting or offering on the ABC television network any theatrical feature film produced or financed in whole or part or acquired on negative pick-up by ABC or a subsidiary of it . . .

The complaint in this action was filed on September 28, 1970, and in substance alleges a violation by d^udants of federal antitrust laws (Sherman Act, 15 U. S.C. §§ 1-3). Appellees interposed an answer, defenses and counterclaims. Under date of July 3, 1973, plaintiffs by motion sought the preliminary injunction. During this almost three-year period, extensive discovery has taken place and on at least one occasion appellants sought the aid of the court to restrain defendants from exhibiting their films. The long period of “big case” preparation appears to be drawing to a close because even as of July 3, 1973, discovery was proceeding “apace” and could “be expected to be expeditiously completed.” (A120.)

Voluminous affidavits have been submitted in support of, and in opposition to, the motion. In addition, letters, documents, interdepartmental correspondence, financial statements, etc., form part of the record consisting of some 999 pages before Judge Palmieri. One of the affidavits supporting the motion alleged that ABC “has advised us [presumably the plaintiffs] of its plans to show four of its own films on its own television network in the forthcoming television season [1973-74] and indicates that more will follow.” The four films are “Lovers and Other Strangers,” “For Love of Ivy,” “Charly” and “Krakatoa/East of Java.”

Against the background of a highly-concentrated industry, appellants’ underlying assertion is that ABC, by exhibiting its own-produced films over its own network is violating the federal antitrust laws by “self-dealing.” The exhibition by ABC of its own films it is argued, eliminates its need to buy appellants’ films, thus depriving appellants of a principal market for feature films. They also inject a “public interest” argument which, viewed in one light, is as much to say that they believe the public has more of a right to view their films than those of ABC; in any event, the public’s interest in “ ‘the widest possible dissemination from diverse and antagonistic sources,’ ” Mt. Mansfield Television, Inc. v. FCC, 442 F.2d 470, 478 (2d Cir. 1971), quoting Associated Press v. United States, 326 U.S. 1, 20, 65 S.Ct. 1416, 89 L.Ed. 2013 (1945), is, we do not have to be reminded, of the greatest importance. Cf. Red Lion Broadcasting Co. v. FCC, 395 U.S. 367, 89 S.Ct. 1794, 23 L.Ed.2d 371 (1969).

Despite appellants’ expressed fears that over the years ahead ABC may show a large number of self-produced films, although apparently with 39 it has stopped production, at this time and for purposes of this decision we will consider only the four films which ABC has indicated it would show during the 1973-74 season. To be sure, both parties have argued the case otherwise— ABC as if it were now free to show any of its feature films, appellants as if ABC were about to show them all. It is also true that the district court’s denial of the temporary injunction is not by its terms limited to those four films. The injunction was sought, however, only when ABC scheduled those four. The district court opinion appears to us premised on the proposition that only those four are sought to be shown before the case proceeds to trial on the merits.' It refers to “the four feature films in question.” Its discussion of irreparable harm is based upon the exhibition of only these four films. Thus, while for strategic reasons ABC would like to treat the denial of a temporary injunction as a carte blanche, and appellants apparently for similar reasons would like to have us treat the ease here and now on the merits, we see no reason to do so. The trial may be under way by the autumn of 1974 and, if not, the trial judge will be available to consider such further relief as may be warranted. Thus our affirmance of the denial of preliminary relief by the district court is only to the extent of permitting the other three films to be shown, though by virtue of the date of entry of this decision it is immaterial to us whether they are shown in the 1973-74 or the 1974-75 season.

The standard factors which this court now considers upon an application for a preliminary injunction are well known: (1) clear likelihood of success on the law and the facts then available and possible irreparable injury, or (2) sufficiently serious questions on the merits making them fair ground for litigation and a balance of the equities tipping decidedly in favor of preliminary relief. Sonesta International Hotels Corp. v. Wellington Associates, 483 F.2d 247, 250 (2d Cir. 1973); Gulf & Western Industries, Inc. v. Great Atlantic & Pacific Tea Co., 476 F.2d 687, 692-693 (2d Cir. 1973). The district judge’s careful opinion read as a whole demonstrates that he gave full consideration to all of the factors involved in the light of the facts available to him, and, while another judge might have arrived at a different result, we cannot say that this result constitutes an abuse of the wide discretion normally accorded a district court on the issue of preliminary relief. Stark v. New York Stock Exchange, 466 F.2d 743, 744 (2d Cir. 1972).

Here it is sufficient to say, without in any way indicating our views on the merits, that there are “substantial, serious, difficult and doubtful” questions so “as to make them a fair ground for litigation and thus for more deliberate investigation.” Hamilton Watch Co. v. Benrus Watch Co., 206 F.2d 738, 740 (2d Cir. 1953). As we have said, plaintiffs assert that ABC’s entry into production of feature films and its exhibition on its own network, in light of ABC’s own position in the television industry, would violate antitrust laws. ABC responds that its course of action was and is merely vertical integration by internal expansion which is not per se illegal and which could under certain circumstances be pro-competitive.” Legality, ABC argues, depends upon purpose or intent, as to which the trial court found that “(1) the defendants have apparently acted without any intent to injure the plaintiffs, [and] (2) they appear to have acted against the background of a product shortage and rapidly escalating prices for the licensing of film product for television production.” The trial court found, and we agree with it, that there are “vast and intricate problems of fact and law . . . which cannot be fairly resolved short of . .a trial ff

On this basis, it would be impossible for either party to make out a clear showing of probable success on the merits, thus eliminating the basis for a grant of a preliminary injunction under the more traditional test of clear showing of probable success plus a showing of irreparable injury. This finding, however, certainly satisfies the first prong of our more recently articulated test for injunctive relief — that prong being the presence of complex legal and factual issues.

Appellants argue that the district court never actually “balanced the equities” after finding that appellants had met the first prong of the applicable test. We disagree. It appears to us that the district court, in balancing the “equities,” first gave thorough consideration to the type of damage appellants claimed that they would suffer were preliminary injunctive relied to be denied. The district court concluded that appellants “failed to make a persuasive showing that they are in hanger of immediate irreparable injury if this temporary relief is not granted.” This conclusion was based on the following two findings:

1. “[T]he injury feared by plaintiffs is represented only in small part by the four films which ABC proposes to exhibit,” and “The essence of plaintiffs’ claim of injury at this point clearly is not the showing of four movies by ABC, but plaintiffs’ prognostications as to subsequent practices by ABC . . .,” “as to the basis of [which] predictions” plaintiffs have offered “no persuasive evidence.”

2. Neither prospective difficulty in computing damages nor the fact that computations will be based on the effects of foreclosed competition necessarily preclude such computations; the damages alleged “are susceptible to monetary computation.”

Appellants dispute each of these findings, as follows. They argue that for every feature film that is shown a valuable network spot is foreclosed, thereby not only making it harder to sell films to ABC for television licensing, but delaying the flow of revenues from the licenses already purchased from appellants by the network. But we are talking, as the district court was talking, about only four films; as to these ABC is on notice, concededly and from the district court’s opinion, that it may be liable in treble damages. We refuse, as we say, to treat this case as if ABC were showing a substantial number of films before the trial on the merits; it will be open to appellants to seek a temporary injunction anew if ABC goes beyond these four. Moreover, all seven appellants operated more profitably than ABC in 1972. And, while damages may be difficult to compute, they are provable by inference from the acts and their tendency to injure, as well as from evidence of business, prices, profits and values, Bigelow v. RKO Radio Pictures, Inc., 327 U.S. 251, 264-265, 66 S.Ct. 574, 90 L.Ed. 652 (1946), as to which on the issue of causality ABC if found liable would appear to have the burden of proof. Klinger v. Baltimore & Ohio Railroad Co., 432 F.2d 506, 516 (2d Cir. 1970).

Having thus found that there had been no showing by appellants of harm of either “great” or “irreparable” dimensions, the district court turned to consideration of other factors relevant to a balancing of the equities in this case. That court referred to three matters as follows:

1. The plaintiffs did not seek injunc-tive relief until almost three years after the litigation began;

2. Plaintiffs are to some extent in pari delicto as some of them have engaged in “block-booking,” i.e., requiring ABC to license feature films in groups which include low quality films;

3. Institution of litigation by the Justice Department against the networks together with continuous regulation by the FCC, takes the ground from under appellants’ argument that they are the vindicators of the “public interest” ; indeed, the public’s interest is transcendent of and more complex than, not eo-extensive with, the appellants’ own interests.

The district court concluded that “the equitable considerations militate against” the grant of preliminary in-junctive relief. We agree.

Apparently on oral argument for a stay pending appeal the trial judge qualified his finding of laches by saying “I don’t charge you with laches but with the unhurried pursuit of the remedy,” and appellants argue that they moved promptly on July 3, 1973, as soon as ABC announced its planned showing of the four films on April 6, 1973. In weighing the equities, however, it certainly was proper for the trial court to take into account that the action itself was not instituted until three years after appellants learned of ABC’s making of films and that the motion for injunc-tive relief was not made until three years after the action was begun.

Appellant United Artists argues that it was not involved in block-booking, and all appellants claim that ABC plans to use films of its own of low quality. But these are issues for trial and the trial court was certainly justified in considering that appellants were not as pure as Pauline in their peril. It is true that the in pari delicto doctrine is not a defense on the merits, Perma Life Mufflers, Inc. v. International Parts Corp., 392 U.S. 134, 138-140, 88 S.Ct. 1981, 20 L.Ed.2d 982 (1968), but the practice of block-booking certainly can be taken into account in determining the equities as a prelude to ruling on a preliminary injunction, at least where a clear showing of “public interest” has not been made out. See Heldman v. United States Lawn Tennis Association, 354 F.Supp. 1241, 1249 (S.D.N.Y. 1973). Appellants assert that “The preservation of competition is the fundamental public interest underlying the antitrust laws.” (Appellants’ Brief at 34.) But here the question is whether it is in the public interest to condemn in advance of trial.

Appellants are fearful that ABC’s alleged monopoly over the air waves will give ABC a monopoly over the ideas broadcast. Presumably appellants would by means of judicial assistance substitute their ideas for those of ABC. However, it is too premature (and scarcely feasible, if material) at this stage to determine whether ABC or plaintiffs gives the public better, “social, political, esthetic, moral, and other ideas and experiences . . . .” Red Lion Broadcasting Co. v. FCC, 395 U.S. at 390, 89 S.Ct. at 1807. As in many cases, one detects less concern with the public’s interest than with appellants’ financial interests.

Of no small importance in reviewing Judge Palmieri’s denial of a preliminary injunction is the fact that under the individual calendar system he will be the judge who will preside over the trial. His present judgment as to issues of fact and law still unresolved should be entitled to the greatest consideration. In his opinion, “[T]he essence of plaintiffs’ claim of injury at this point clearly is not the showing of four movies by ABC, but plaintiffs’ prognostications as to subsequent practices by ABC, and CBS against whom plaintiffs do not seek a preliminary injunction.” When, and if, these “subsequent” practices become threatened realities, application can be made for such relief as the circumstances may warrant. For the moment we are concerned only with the threatened showing of the four films previously mentioned. This threat Judge Palmieri has found to be insufficient to warrant the granting of a preliminary injunction. In our opinion his exercise of discretion in denying the motion and the order entered thereon should be affirmed, without prejudice to renewal in the event ABC plans any further showing of its own films before trial.

Affirmed.

LUMBARD, Circuit Judge

(dissenting) :

I dissent.

We have recently held that a preliminary injunction may be granted if a showing has been made (1) of sufficiently serious questions going to the merits to make them a fair ground for litigation and (2) a balance of hardships tipping decidedly toward the party requesting the preliminary relief. Gulf & Western Industries v. Great Atlantic & Pacific Tea Company, 476 F.2d 687, 692-693 (2d Cir. 1973); Sonesta International Hotels Corporation v. Wellington Associates, 483 F.2d 247 (2d Cir. 1973).

With regard to the first of these prerequisites, there can be little doubt that several substantial and highly complex issues involving antitrust law have been raised by the plaintiffs here. This view was shared by Judge Palmieri, who wrote in his opinion for the district court that:

There are vast and intricate problems of fact and law inherent in the contentions advanced by the plaintiffs which cannot be fairly resolved short of a thorough examination of the facts, which only a trial proceeding can afford.

A further indication of the substan-tiality of these antitrust issues involving allegations of unreasonable restraints of trade and monopolization is the antitrust suit which the Justice Department has commenced against the three major networks in the Central District of California. This suit also challenges on antitrust grounds the networks’ policy of televising programs produced by their own subsidaries.

Moreover, we are confronted here with unique and unsettled questions regarding how the antitrust laws are to be applied to the government-licensed, limited-frequency, entry-proof market of television in which the three networks have a virtual monopoly on the type and quality of programs and ideas that are disseminated to the public by television.

Indeed, ABC’s interest actually reach far beyond television itself to encompass production of motion pictures and ownership and operation of motion picture theatres.

This court has previously recognized the monopoly position and the inclination of the networks to engage in predatory and restrictive trade practices. Mt. Mansfield Television, Inc. v. F.C.C., 442 F.2d 470 (2d Cir. 1971). This makes it all the more essential that the issues here raised be preserved for trial, where these questions will be given the full consideration they require.

As for the second prerequisite for a preliminary injunction, it, too, is satisfied by the record before us. Little, if any, damage would be suffered by ABC were it to be enjoined from showing its own films on its television network. Whatever the merit to the assertion by ABC that in 1967 there was a shortage of films which prompted it to enter film production, it seems clear that ABC presently has an adequate supply of motion pictures of varying quality to fulfill its programming needs for at least another year or two, if not longer. The trial should be concluded within that time, especially in light of Judge Palmi-eri’s stated intention of expediting this litigation as much as possible. Under the circumstances, ABC would suffer no substantial harm by the granting of a preliminary injunction.

In contrast, the injury that might be suffered by some, if not all, of the appellants could be serious. An important factor to consider in this regard is ABC’s concession at oral argument that if we affirm the decision below, ABC will feel free to show during the pen-dency of this litigation as many of its own productions as it deems desirable, even conceivably all of the thirty-nine films presently available. This would deny the independent producers many millions of dollars in potential income. It could also have the additional adverse effect of postponing the exhibition of independently produced ABC-owned films, thereby denying the plaintiffs further income which they might otherwise have earned, as a substantial portion of the fees from these films are not paid until the pictures are actually shown.

Even if ABC was permitted to show only the three movies presently scheduled to be televised, which is the approach adopted by the majority, substantial potential revenues running into the millions of dollars would be lost by independent producers, since each theatrical film has an average network television value of approximately $700,000. The fact that the plaintiffs here face a multimillion dollar loss, while the defendant is in no way threatened with material injury, brings this case squarely within the “balance of hardships” test set forth in Gulf & Western and Sonesta International Hotels and supports the granting of the preliminary injunction sought by the plaintiffs.

The argument made by the defendant that preliminary relief should, nevertheless, be denied because the plaintiffs can always recover damages later if they prevail ultimately on the merits in the district court is not entitled to any weight. As plaintiffs have pointed out, it will be impossible to determine at that point which companies’ films would have been purchased and thus which companies would be entitled to relief. While conceivably some solution to the damages problem could be worked out, any solution would be highly speculative and would be best avoided.

Although the hardships would weigh dramatically against the plaintiffs were we to deny the plaintiffs preliminary relief, defendant argues that the plaintiffs are barred by laches and unclean hands. This argument lacks merit. Plaintiffs have not been dilatory in seeking a preliminary injunction. While it is true that the plaintiffs did not initially seek injunctive relief when the ABC produced movie “Whatever Happened to Aunt Alice” was scheduled for viewing on October 29, 1972, as soon as ABC indicated on April 4, 1973 that it would be following a policy of televising on a regular basis films which it had produced, the plaintiffs forthwith sought relief. It was good judgment, and proper regard for the court’s time, not to press forward for preliminary relief until it was entirely clear that ABC was about to show some of the films it had produced.

The claim of unclean hands, resting on the allegation of block-booking, should be given no weight. The claim has been vigorously denied by the plaintiffs and Judge Palmieri made no findings with regard to this disputed issue. But aside from the fact that there has been no finding that any of the plaintiffs employed block-booking, the thrust of the Supreme Court’s decision in Per-ma Life Mufflers v. International Parts Corporation, 392 U.S. 134, 88 S.Ct. 1981, 20 L.Ed.2d 982 (1968), if not its holding, was precisely “the inappropriateness of invoking broad common-law barriers to relief where a private suit serves important public purposes,” 392 U.S. at 138, 88 S.Ct. at 1984, such as “the overriding public policy in favor of competition.” 392 U.S. at 139, 88 S.Ct. at 1984. Since this is the very interest which plaintiffs assert to be at stake, the unclean hands defense should not influence our determination whether to grant relief.

Defendant’s further argument that the preliminary relief sought here is equivalent to the ultimate relief sought is also without foundation. As was emphasized at oral argument by plaintiff’s counsel, the permanent relief requested goes considerably further and includes fundamental restrictions on ABC’s participation in the feature film industry as well as a prohibition against its producing, distributing, or having any interest in television entertainment programming.

In sum, I would reverse and grant the relief prayed for without expressing any views on the merits, for the reason that complex and important questions of law have been raised and the hardships which would result from a denial of the preliminary injunction would weigh, far more heavily against the plaintiffs than a grant of the injunction would weigh against ABC.

      . Plaintiffs/appellants are a number of major independent film producers and distributors, from whom ABC has purchased prime-time programming amounting in 1969-73 to some $288.9 million, or over 50 per cent of its total dollar expenditures for such programming. CBS is a codefendant but participated in this appeal only as ami-cus curiae since, because it had not indicated any intent to exhibit on its network telecasts any films it had made, it was not sought to be enjoined.

      . “Whatever Happened to Aunt Alice” was scheduled for showing on October 29, 1972, and shown despite appellants’ objection and Judge Palmieri’s warning ABC that it was proceeding at its peril.

      . “Lovers and Other Strangers” was shown after the preliminary injunction was denied. Another panel of this court refused to stay that showing scheduled for the evening of February 11, 1974, the day the stay argument was heard, but did stay the showing of the other three films pending this appeal.

      . ABC has a library of 39 theatrical feature films which it has produced. CBS’s library is 34.

      . Mt. Mansfield Television, Inc. v. FCC, 442 F.2d 470 (2d Cir. 1971), upheld the FCC’s “prime time access,” “financial interest” and “syndication” rules, 47 C.F.R. §§ 73.658(j) & (k), seeking to “provide opportunity — now lacking in television' — for the competitive development of alternate sources of television programs . . . ."Id. at 479 n. 29. Appellants argue here that ABC’s power as a network will enable it to use its theatrical feature films as leverage as well as to support their products, thus resulting in illegal restraints of trade and monopolization.

      . The United States on April 14, 1972, sued all three national television networks in the Central District of California, Civil Nos. 72-819, -820, -821. NBC does not produce feature films or television programming. Both ABC and CBS own licenses to operate key television stations in five of the larger local markets.

      . The urgency asserted by plaintiffs as a ground for injunctive relief is based upon ABC’s announced intention to exhibit four of these films on its television network before this case can proceed to trial and specifically in January and February of 1974.

      . Contrary to the contentions of plaintiffs, the Court is not persuaded that ABC, in proposing to exhibit the four feature films in question, has deliberately embarked upon a policy of selecting inferior programming to its own financial advantage and to the prejudice of plaintiffs.

      . Plaintiffs allege that they will be irreparably injured if ABC is not enjoined from executing its plan to exhibit four motion pictures that it has produced.
      However, it appears from the papers that the injury feared by plaintiffs is represented only in small part by the four films which ABC proposes to exhibit.
      Plaintiffs argue that if ABC is permitted to exhibit the four pictures in question the floodgates will be cast open and ABC may be expected to escalate the exhibition of its own films to the full extent that such films are available to it.
      Plaintiffs also argue that the result of allowing ABC to proceed with its plan to show these four movies will be to effectively preempt the possibility of adequate relief in the future.

      . AYe do not think that Judge Palmieri intended to let ABC show any film at all without restriction pending trial.

      . The circumstances here are a claimed “product shortage” resulting from prior utilization of the major producers’ libraries coupled with the manufacture of fewer films by them (162 in 1966 as opposed to 333 in 1956) while the television consumption of films has been increasing (and is now about 150 per year). There is some indication in the discovery documents that the “majors” foresaw this as early as 1965 and at least by 1967. As with other shortages to which the public has become accustomed, prices have gone up; production costs have risen but there are indications that the average price per feature film license has increased from $100,000 in 1961 to $800,000 in 1967.

      . The challenged four films would occupy eight hours of prime time programming, less than 14 of 1 per cent of the 3,276 hours of prime time available to the three networks

      . It gives one pause for thought to follow the suggestion of appellants that ABC rates its films on the basis of their anticipated “audience share” so that an “A” rating means a film that will command “audience shares” of 33 or better. We have been unable to fathom whether there are other criteria for film quality rating but this too will doubtless be a subject for further exploration at the trial.

      . The sale of films to television networks by block-booking has been held to violate the Sherman Act. E. g., Fields Productions, Inc. v. United Artists Corp., 318 F.Supp. 87, 88 (S.D.N.Y. 1969), aff’d, 432 F.2d 1010 (2d Cir. 1970), cert. denied, 401 U.S. 949, 91 S.Ct. 932, 28 L.Ed.2d 232 (1971).

      . Since 1967, ABO has produced or financed 39 theatrical feature films. Recently, however, it ceased production.

      . Apparently, ABC’s stake in motion picture theatres is considerable. While we are not advised as to the figures at the present time, the record shows that in 1967 ABO owned and operated the largest theatre circuit in the United States, on which distributors were dependent for between 10% and 11% of their annual turnover. At oral argument appellants’ counsel stated that ABC owned some 400 theatres. Ilis statement was not denied.

      . The defendant’s frank concession supports plaintiffs’ fears of a massive foreclosure by ABC and runs counter to Judge Palmieri’s conclusion that these fears are based on “prognostications” backed by “no persuasive evidence.”

      . Although CBS also has produced films for television, no preliminary injunction has been sought against it because it has yet to indicate any definite plans to televise these films on its own network. As for NBC, unlike the other two national networks, it does not produce theatrical feature films.


source: Caselaw Access Project

author: McWILLIAMS, Circuit Judge.

license: Public Domain

text:
    INTERNATIONAL UNION OF OPERATING ENGINEERS, LOCAL 953, et al., Plaintiffs, Intervenors-Appellees, v. CENTRAL NATIONAL LIFE INSURANCE COMPANY, Defendant-Appellant.
    No. 73-1813.
    United States Court of Appeals, Tenth Circuit.
    Argued May 15, 1974.
    Decided July 30, 1974.
    Rehearing Denied Aug. 27,1974.

      John M. Eaves, Albuquerque, N. M. (Malcolm L. Shannon, Jr., and Kool, Kool, Bloomfield, Eaves & Mayfield, on the brief), and Don S. Willner, Willner, Bennett, Meyers, Riggs & Skarstad, Portland, Or., for plaintiffs, interve-nors-appellees.
    C. Vance Mauney, Albuquerque, N. M. (Nielson, Conder, Hansen & Henriod, Salt Lake City, Utah; and Botts, Botts & Mauney, Albuquerque N. M., on the brief), for defendant-appellant.
    Before LEWIS, Chief Judge, and HOLLOWAY and McWILLIAMS, Circuit Judges.
   McWILLIAMS, Circuit Judge.

This is a breach of contract case wherein a policyholder made claim against an insurance company for damages arising out of the insurer’s unlawful cancellation of an insurance policy. In a trial to the court, sitting without a jury, the policyholder prevailed and the insurance company now appeals. The principal issue raised on appeal is whether under the circumstances of this case a mistake by the insurance company’s agent in computing the premium rate is grounds for rescission. The trial court concluded that it was not, and we agree. Reference to the background facts will place the several related issues in context.

The plaintiffs are eight unincorporated local unions of the International Union of Operating Engineers which operate in New Mexico, Arizona, Wyoming, Oregon and Washington. The Western States Conference of Operating Engineers (WCOE) is a voluntary unincorporated association of local unions, including the eight locals which are the present plaintiffs, organized for the purpose of assisting the local unions in solving their common problems by serving as a clearing house. The locals, however, are themselves autonomous, and WCOE has no power or authority, as such, over them.

In the latter part of 1970, numerous locals in WCOE, though by no means all, were interested in obtaining group life insurance coverage under a single master group policy, through which they hoped to obtain a lower premium rate than many of them were then individually paying because of the larger number of lives which would be thus insured. To further this aim, WCOE was authorized by the locals to gather information and obtain for the interested locals a group life insurance policy along the lines indicated.

In attempting to secure such a group policy, WCOE contacted representatives of the Central National Life Insurance Company, an Illinois corporation authorized to do business in New Mexico, which company will hereinafter be referred to as Central. Based on certain statistical information given Central, the latter offered to issue a group life insurance policy at a premium rate of 470 per $1,000 of life insurance per member per month. And the crux of this case is that the aforesaid “monthly premium rate [was] guaranteed for three (3) years.”

Bids were submitted by several insurance companies, and WCOE finally narrowed the bids to those of Central and Safeco, the former’s being the lowest offer. Safeco’s was the next lowest bid at apparently either 520 or 550 per thousand per member per month, depending on the particular plan of insurance.

The plaintiffs eventually accepted the offer of Central and the latter issued its group policy to the eight locals who are the present plaintiffs, as well as to other locals who are not parties to the present proceeding. At the same time, the various locals began to pay the monthly premium rates called for by the policy.

Some eight months after the issuance of the policy, during which period of time Central accepted premiums from the various participating locals and in turn had been paying death claims, Central notified the plaintiffs in writing that the policy was being cancelled. The only reason given by Central for cancellation was that “since the Presidential wage freeze prevents us from increasing premiums, we have no other alternative other than to cancel the above contract, effective September 1, 1971.” Although the foregoing was the only reason given for cancellation, the record reflects that the cancellation was precipitated by the fact that death benefits were far exceeding the premiums paid during the eight months the group policy was in effect.

Central’s attempted cancellation of the group policy engendered the present dispute. Negotiations between the parties ensued. Out of these negotiations emerged a Memorandum of Understanding between Central and all of the locals which are plaintiffs in this case, except Local Number 953. Under the terms of this memorandum the locals, except for 953, agreed to pay a higher premium from October 1, 1971, till March 1, 1972, and in return Central agreed to process pending death claims. The memorandum, however, reserved to all parties their respective rights under the group life insurance policy.

Local Number 953, as indicated, did not sign the Memorandum of Understanding, and it immediately sought other insurance to replace the policy it had with Central. In this regard Local Number 953 thereafter entered into a contract with Hartford Life & Accident Insurance Company, effective October 15, 1971, the premium rate therefor being 700 per thousand per member per month. The other locals which are plaintiffs in the present case later entered into a contract with Safeco, effective March 1, 1972, which was the expiration date for the Memorandum of Understanding, the premium rate for such insurance being $1.00 per thousand per member per month.

It was in this setting that Local Number 953 brought the present case against Central in the state courts of New Mexico, alleging that in cancelling the group policy Central breached the contract which called for a fixed premium rate for a three-year period. The case was later removed to the United States District Court for the District of New Mexico on the grounds of diversity. Seven other locals then sought to intervene as parties plaintiff and their respective motions to intervene were granted. The measure of damages sought was the difference between the premium rate agreed to by Central and guaranteed for three years and the cost of replacement insurance for the same three-year period of time. As indicated, in a trial to the court the judge found for the eight plaintiffs and awarded each its separate damages for the increased cost of replacement insurance. On appeal the central issue, as we see it, concerns the effect of a mistake made by an agent of Central in determining the 470 per thousand per member per month figure. We shall develop that phase of the controversy a bit.

Although Central realized throughout 1971 that its death benefits were exceeding its premiums, Central did not discover its own mistake till sometime in 1972. It did later develop, however, that the employee of Central who calculated the 470 premium rate had made a mathematical mistake in her computations, which resulted in the quoting of a lower premium rate than should have been the case. If the error in addition had not been made, the premium rate would have been 73%0 per thousand per member per month. Additionally, it developed that the person who made the rate computation also did not get all of the statistical information from the plaintiffs necessary to make an actuarially sound computation.

It is Central’s position in this court, as it was in the trial court, that it is entitled to equitable rescission because of the arithmetical mistake made by one of its employees in computing the premium rate on the group policy issued the plaintiffs. In support thereof, Central first argues that the plaintiffs either knew, or should have known, of this mistake in computation and that the plaintiffs are now seeking to reap a profit from the mistake. In this particular connection we find it somewhat anomalous for Central to contend that the plaintiffs either knew, or should have known, of a mistake which Central did not itself discover for over a year. Cf. General Electric Supply Corp. v. Republic Const. Corp., 201 Or. 690, 272 P.2d 201 (1954). In any event, the trial court made a finding of fact that the plaintiffs did not know of Central’s mistake, nor that they should have known, and such finding is supported by the record.

Admittedly Central’s was the low bid, but, as indicated, Safeco’s bid was either 520 or 550 per thousand and was described by one witness as being in the “same ball park.” To make certain of Central’s bid, the plaintiffs during the negotiations leading up to the issuance of the group policy insisted that an officer of Central be present at a subsequent meeting of the parties in order to verify the premium rate. This was done. Additionally, there was evidence that Central was trying to be the low bidder in order to gain the opportunity to perhaps sell additional insurance to other locals in the International Union which as of that time were not going to participate in the program. All things considered, the trial court’s finding that the plaintiffs did not know of Central’s mistake is certainly not clearly erroneous and on appeal such may not be disturbed by us.

On the question of mistake, Central additionally argues that even a so-called unilateral mistake may under certain circumstances be ground for rescission. It is true that the law on this point is perhaps not quite as harsh as it formerly was. In this connection, in 3 Corbin on Contracts § 606 (2d ed. 1960) appears the following comment:

“Relief for mistake depends, not only upon the materiality of the mistake, but also upon the stage in the transaction at which the mistake is discovered and notice given. How far has performance already gone? To what extent and at what cost can the status quo ante be restored? What changes of position in reliance on the contract, by a party to it or by third parties, have occurred? * * *.
“It is often stated as a reason for denying relief that the mistaken party was negligent in making the mistake. A century ago it was often thought that in refusing relief it was sufficient to say that a man must bear the consequences of his own ‘folly.’ Court decisions now indicate that prevailing opinion is less harsh in its judgment of those who fail to act in accordance with some standard of care and prudence. We must still bear ‘the consequences’ of our own folly; but the court decisions have moderated some of those ‘consequences.’ They seem to justify the statement that one is held responsible for harm to others if it is caused by his ‘folly’ or his negligent mistake, but his responsibility need not be carried so far as to permit others to profit by reason of his mistake.”

The parties to this controversy agree that the instant case is governed by Illinois law, and the law of that state would appear to be in general accord with the quotation from Corbin. For example, People ex rel. Dept. of Public Works & Buildings v. South East Nat’l Bank, 131 Ill.App.2d 238, 266 N.E.2d 778 (1971), is illustrative. In that case an engineering contractor made an arithmetical mistake in computing his bid on a public works project due to an inadvertently misplaced decimal point. The contractor caught his error and notified the state of the error and his desire to withdraw his bid. The state ignored this notification and proceeded to award him the job on his earlier bid. In such circumstance the contractor was held to have the right to rescind and in so holding that court declared as follows:

“The rule is often stated that relief will not be granted if but one party to a contract has made a mistake. See, e. g. Restatement of the Law of Contracts, sec. 503; Restatement of the Law of Restitution, sec. 12. Professor Williston argues in his treatise on contracts that affirmative relief for a unilateral mistake is justified only where the mistake was known to the other party to the transaction or where the person against whom relief is sought is in the position of a donee or volunteer. Williston on Contracts (Rev. ed. 1937), Vol. V., secs. 1573, 1579. However, in numerous cases relief has been granted under less rigorous conditions (Annot. 59 A.L.R. 809; Corbin on Contracts, Vol. 3, secs. 608, 609) and the professor himself concedes that rescission should be allowed where a bid was predicated on erroneous arithmetical processes and the party not in error knew or should have known of the mistake. Williston on Contracts, Rev. ed., Vol. 5, sec. 1578.
“The conditions generally required for rescission are that the mistake relate to a material feature of the contract; that it occurred notwithstanding the exercise of reasonable care; that it is of such grave consequence that enforcement of the contract would be unconscionable, and that the other party can be placed in statu quo. Pomeroy’s Equity Jurisprudence, Vol. 3 (5th ed. Symons 1941), sec. 870a; annot. 52 A.L.R.2d 792; 59 A.L.R. 809. Evidence of these conditions must be clear and positive. Winkelman v. Erwin, 333 Ill. 636, 165 N.E. 205 (1929).”

Applying the foregoing principles to the facts of the instant case, we hold that the trial court did not err in finding that the unilateral mistake on the part of Central did not justify rescission. The facts of the instant case do not meet the requirements necessary for rescission as set forth in the Illinois case cited above. Certainly, for example, the plaintiffs in accepting the low bid of Central have lost the opportunity to accept the next lowest bid of Safeco, and it is difficult to see how the plaintiffs could at this late date be placed in status quo. Under the circumstances, then, this is not a case for rescission and Central must bear the consequences of its own folly.

Central advances numerous other grounds for reversal, many of which were not presented to the trial court and none of which merits extended comment. We are disinclined to consider those matters which were not presented to the trial court for its consideration and are raised for the first time either after trial or on appeal to this court. Ordinarily a defendant may not lose in a trial court on one set of defenses and then on appeal expect to win on another and different theory of defense. Eureka-Carlisle Company v. Rottman, 398 F.2d 1015 (10th Cir. 1968), and Schenfeld v. Norton Company, 391 F.2d 420 (10th Cir. 1968).

One argument which was presented to the trial court, and rejected by it, is that the group life insurance policy here involved is between Central and WCOE, and that the present plaintiffs, i. e., the eight local unions, not being parties to the contract, have no capacity to maintain the present action. This argument we believe to be specious. The policy itself refers to the “members” of WCOE, and the present plaintiffs are “members” of WCOE. All concerned understood that WCOE was acting at the behest of certain of its local unions who were desirous of getting a group life insurance policy. The monthly premiums for the eight months the policy was in effect were all paid for by the locals, not WCOE, and these premiums were accepted by Central. Furthermore, Central sent its notice of cancellation to the locals, not WCOE. Under such circumstances we agree with the determination of the trial court that the insurance contract was between Central and the locals. Assuming arguendo the validity of this particular argument, Central would then be faced with the related doctrines of waiver and estoppel, which we need not here consider. Significantly, Central’s overall position is weakened by the fact that in its cancellation notice it gave but one reason for cancellation, namely, that because of the Presidential freeze on prices it could not raise its premium rates. This reason is of course a non sequitur, since Central had agreed to the 47^ per thousand rate for a term of three years.

Another matter submitted to the trial court was the contention of Central that the policy provisions required that at least 75% of the members of all locals having membership in WCOE be enrolled. In this regard Central states that in 1971 the total membership of all locals belonging to WCOE was approximately 108,000, and that only 72,528 members obtained coverage under Central’s group policy, which is less than the required 75%.

As concerns the 75% requirement, the plaintiffs contend that this simply meant that 75% of the members of those locals which subscribed to the group policy must enroll and that 75% of the members of those locals subscribing to the policy did in fact enroll. The trial court found the 75% requirement to be ambiguous and agreed with the plaintiffs that it was the intent of the parties that the provision in question only required that 75% of the members of those locals which elected to come under the group policy be enrolled. This finding is supported by substantial evidence and is not clearly erroneous, and should therefore not be disturbed by us. Certainly all parties knew that there were many locals in WCOE which were satisfied with the insurance they then had, and were not interested in Central’s offer. Central’s acceptance of premiums without questioning the enrollment percentage is certainly in accord with the trial court’s interpretation of the policy. And again, if the argument itself had intrinsic merit, Central would be subject to the defenses of waiver and estoppel.

Central also complains that the trial court erred in its measure of damages, which, as indicated, was the difference between the premium rate guaranteed by Central for a term of three years and the cost of replacement insurance of a similar quality for a three-year term. Central states that the measure of damages should have been the difference between what its premium rate would have been, but for the arithmetical error, and cost of replacement error. For reasons set forth above, Central should not be permitted to thus benefit from its own error. The measure of damages used by the trial court would seem to be in accord with the general rule as set forth in 20 J. Appleman, Insurance Law & Practice § 11255 (2d ed. 1963):

“The safest general rule adopted by the courts is that the measure of damages is the value of the policy at the time of breach. If the insured can secure insurance of a like character and value to that cancelled, the difference between the cost of carrying the can-celled insurance for the term stipulated and the cost of new insurance for a like term would be his measure of damages.”

There is also minor complaint that the plaintiffs failed to mitigate their damage in that they failed to find replacement insurance the cost of which more nearly approximated the mistaken bid of Central. There is nothing in the record to substantiate this argument. Many new factors entered into the cost of the replacement insurance, including the fact that the present dispute between Central and the locals became generally known in the insurance industry and resulted in some very careful computation of the premium rates for the replacement insurance.

Local 701 of the International Union brought a similar-action against Central in the state courts of Oregon based on about the same sequence of facts as the present proceeding and involving the same group policy. In that case, as here, the local prevailed and Central appealed. On appeal the Oregon Supreme Court affirmed and their disposition of the matter parallels ours. See International Union of Operating Engineers, Local 701 v. Central National Life Insurance Company, 519 P.2d 85 (Or.1974).

Judgment affirmed.


author: GIBSON, Circuit Judge.

text:
    INTERSTATE COMMERCE COMMISSION, Appellant, v. CHICAGO, ROCK ISLAND AND PACIFIC RAILROAD COMPANY, Appellee.
    No. 73-1920.
    United States Court of Appeals, Eighth Circuit.
    Submitted May 14, 1974.
    Decided July 24, 1974.
    Rehearing and Rehearing En Banc Denied Aug. 27, 1974.

      Lawrence W. Chamblee, Atty., Interstate Commerce Commission, Washington, D. C., for appellant.
    Kenneth C. Stephan, Knudsen, Berk-heimer, Endacott & Beam, Lincoln, Neb., for appellee.
    Before GIBSON and WEBSTER, Circuit Judges, and WILLIAMS, District Judge.

       The Honorable Paul X Williams, United States District Judge for the Western District of Arkansas, sitting by designation.

   GIBSON, Circuit Judge.

This litigation might be considered another chapter in the saga of the vanishing American railroads. Due to an abandonment of approximately 39 miles of track by the Chicago, Rock Island and Pacific Railroad Company (the Rock Island), the residents of Gladstone, Gilead, Hebron, Deshler and Ruskin, Nebraska, no longer have to “stop, look, and listen” before crossing the Rock Island’s Ruskin line. More importantly in terms of the statutory scheme embodied in the Interstate Commerce Act, shippers have been forced to turn to alternate methods of transporting goods due to the abandonment of rail service. However, in this proceeding we are not called upon to determine the merits of the abandonment application pending before the Interstate Commerce Commission (ICC), but rather must determine where the proper means of redress lies for an unauthorized abandonment of lines subject to the jurisdiction of the ICC.

The Congressional scheme is set forth in 49 U.S.C. § 1. Section 1(18) provides in pertinent part:

[N]o carrier by railroad subject to this chapter shall abandon all or any portion of a line of railroad, or the operation thereof, unless and until there shall first have been obtained from the Commission a certificate that the present or future public convenience and necessity permit of such abandonment, (emphasis supplied).

Section 1(20) further provides:

The Commission shall have power to issue such certificate as prayed for, or to refuse to issue it * * * and. may attach to the issuance of the certificate such terms and conditions as in its judgment the public convenience and necessity may require. From and after issuance of such certificate, and not before, the carrier by railroad may * * * proceed with the * * * abandonment covered thereby. Any * * * abandonment contrary to the provisions of this paragraph or of paragraph (18) or (19) of this section may be enjoined by any court of competent jurisdiction at the suit of * * * the Commission * * *. (emphasis supplied).

The ICC and the Nebraska Public Service Commission brought suits pursuant to 49 U.S.C. § 1(20) for an injunction compelling the Rock Island to restore service on its Ruskin line. After a hearing on the consolidated actions, the District Court refused to enjoin the abandonment; instead it ordered dismissal of the actions. The court felt that the ICC should exercise primary jurisdiction in the matter because its special expertise would allow it to resolve the issues of the effect of abandonment on the Rock Island, the probable cost of restoration of service, the financial ability of the Rock Island to bear the cost of restoration, and what effect the outlay of funds on the Ruskin line would have on service to shippers in other parts of the country — in short, those issues relative to the merits of the Rock Island’s abandonment application. The ICC appeals the dismissal of its complaint, arguing that the doctrine of primary jurisdiction does not apply. Before proceeding to the legal issues presented, a detailing of the relevant facts will be helpful in understanding the issues.

The controversy took form March 2, 1973, when the Rock Island issued an “embargo”, a notice to patrons on the line that service would be terminated because of poor track conditions. An “embargo” issued by a common carrier is an emergency measure used when for some reason the carrier is unable to perform its duty as a common carrier. Froehling Supply Co. v. United States, 194 F.2d 637, 641 (7th Cir. 1952). If justified, an embargo serves to relieve the carrier of its liability for failing to provide transportation. See 49 U.S.C. § 1(4) (Duty to furnish transportation); 49 U.S.C. § 8 (Liability of carriers for damages).

Suit by the Nebraska Public Service Commission was filed May 5, 1973, seeking to enjoin “abandonment”; the Rock Island’s application for abandonment was filed with the ICC May 21, 1973; and the instant suit was filed August 22, 1973, and consolidated with the prior Public Service Commission action.

The threshold question for the District Court’s determination was whether an abandonment had occurred. If the cessation of operations continued because of conditions over which the Rock Island had no control, no abandonment within the meaning of 49 U.S.C. § 1(18) would be established. Zirn v. Hanover Bank, 215 F.2d 63, 69 (2d Cir. 1954); Myers v. Arkansas & O. Ry., 185 F.Supp. 36, 41 (W.D.Ark.1960).

Abandonment, unlike an embargo, implies an intention to indefinitely or permanently cease all service. Meyers v. Jay Street Connecting R. R., 259 F.2d 532, 535 (2d Cir. 1958); Wheeling & L. E. Ry. v. Pittsburgh & W. V. Ry., 33 F.2d 390, 392 (6th Cir. 1929). Factually, determination of the question revolves around the intent of the railroad; cessation of service for lack of physical equipment has been determined not to be an abandonment, Zirn v. Hanover Bank, supra,, as has the impossibility of operation due to flood damage to tracks and railway bridges. Myers v. Arkansas & O. Ry., supra.

Here there is no difficult question of fact as to whether an abandonment occurred. The District Court determined there was an abandonment in May or June, 1973, when weather conditions would have allowed track restoration. The Rock Island admitted on oral argument that there was a “technical” abandonment in June, 1973. The Rock Island maintains that an unusual winter and spring, marked by abnormal precipitation and temperature fluctuation, caused the softening of the roadbed and deterioration of ties to the extent it was no longer safe to run a train on this line. This must be considered a matter of degree, as the fact that 50 derailments occurred on this line from February, 1971, through January, 1973, could have led to a conclusion that the line was no longer safe prior to March 2, 1973.

The Commission admits the impossibility of operation over the Ruskin line in March, 1973. However, it asserts that these weather conditions would not have necessitated abandonment of operations had the railroad not consciously withheld essential maintenance from the line over the preceding years. The record shows that the Rock Island had been looking for a way to abandon the line since at least October, 1970. Because it could foresee no success with an abandonment petition before the Commission, it considered itself to be in a dilemma. The Ruskin line has continually shown a profit. The Rock Island felt that the cost of performing essential rehabilitation on the line would not be warranted by the revenue it produced. If the Rock Island did rehabilitate the line, it would be able to show an operating loss and thereby improve its chances of having abandonment approved. If it did not rehabilitate the line, it would continue to show a profit, thus decreasing the chances on its abandonment petition. Opting for the short run profit until the Rock Island’s management determined the time was auspicious for approval of its planned abandonment application, the matter continued to be much debated from October, 1970, to March, 1973, when the railroad was spared any further debate by the unusual weather conditions which finally put the track out of service.

The Commission’s view that the track would not have become impassable in March, 1973, except for the Rock Island’s failure to perform essential maintenance finds support in the record. Minutes of a November 27, 1970, Branch Line Committee meeting indicate that the Ruskin line was even then in “deplorable condition.” A memo from W. C. Hoenig, General Manager of the Kansas City, Kansas, operating department to R. J. Lane, Senior Operating Assistant of the Rock Island, dated March 24, 1971, stated: “Almost every trip made on the Ruskin line involved one or more derailments, and we are rapidly reaching a point of cessation of service unless a general rehabilitation program is established.” June 4, 1971, Mr. Lane wrote “the physical condition of the line is probably the worst on the system.” He further acknowledged that there was no alternative but abandonment or rehabilitation of the line. However. Mr. Dixon, President of the Rock Island, determined prior to June 29, 1971, that abandonment should not be pursued, nor rehabilitation begun, but rather suggested spending “the minimum amount necessary to make the branch passable and keeping it in a minimal safe operating condition.”

This apparently was a continuation of the Rock Island policy of many years. Mr. Lane wrote in February, 1973, that “one of the principal reasons it has shown a profit is the fact that we have, for years, performed an absolute minimum of maintenance on the line.” (emphasis supplied). However, taking Mr. Dixon’s suggestion to heart, the Rock Island managed to further reduce maintenance expenditures on the Ruskin line from $84,828 in 1971 to $48,289 in 1972. And the testimony at the hearing revealed that at least 50% of the maintenance expenditures on the Ruskin line went not to improve the “deplorable condition” of the line but to fix the numerous derailments. With this factual background in mind we turn now to the legal issues presented for our review.

Although the District Court felt an unlawful abandonment had occurred, it determined that the suit should be dismissed so that the ICC could exercise primary jurisdiction in the matter. We think this determination was a clear error of law. The doctrine of primary jurisdiction has no application in this proceeding.

The challenge instituted is expressly authorized by the Interstate Commerce Act without mention of any prior resort to ICC administrative proceedings. The fact that suit may be maintained at the instance of the Commission is a strong indication that such matters are properly determined by the court. Indeed, the Supreme Court has stated in regard to suits under § 1(20):

Upon presentation by the carrier of application for a certificate, the commission, for the purpose of determining whether it is authorized by the act to consider the merits, may pass incidentally upon the question whether the project is one covered by section 1(18). But the decision of that question is for the court in either a suit to set aside an order granting a certifi cate or in a suit under section 1 (20) to enjoin a violation of section 1(18). * * * That paragraph 1{20)\ provides the only method for enforcing section 1(18).

Powell v. United States, 300 U.S. 276, 287, 57 S.Ct. 470, 476, 81 L.Ed. 643 (1937) (emphasis supplied).

Secondly, absent the express provision of the statute requiring the district court to exercise its jurisdiction, the rationale of primary, jurisdiction has no application to the facts of this case. We have had occasion to recently consider the doctrine of primary jurisdiction. See Izaak Walton League v. St. Clair, 497 F.2d 849 (8th Cir., 1974). Therein we stated, quoting from United States v. Western Pac. R. R., 352 U.S. 59, 63-64, 77 S.Ct. 161, 1 L.Ed.2d 126 (1956):

“ ‘Primary jurisdiction,’ * * * applies where a claim is originally cognizable in the courts, and comes into play whenever enforcement of the claim requires the resolution of issues, which, under a regulatory scheme, have been placed within the special competence of an administrative body; in such a case the judicial process is suspended pending referral of such issues to the administrative body for its views.”

Here, there are no issues requiring the views of the administrative agency. The concerns expressed by the District Court to justify application of the doctrine of primary jurisdiction relate to the merits of the pending abandonment application. An action under § 1(20) to enjoin abandonment concerns the maintenance of the procedural integrity of the processes provided in the Interstate Commerce Act and is not an action in which the court may concern itself with the merits of the railroad’s abandonment application. The only question for resolution is whether there has been an abandonment within the in-tendment of § 1(18). This is a legal question for the courts to determine. Wheeling & L. E. .Ry. v. Pittsburgh & W. V. Ry., supra, 33 F.2d at 393. See also Meyers .v. Jay Street Connecting R. R., supra; Pennsylvania v. Penn Central Transportation Co., 348 F.Supp. 28 (M. D.Pa.1972), aff’d, 475 F.2d 1394 (3d Cir. 1973); Asbury v. Chesapeake & O. Ry., 264 F.Supp. 437 (D.D.C.1967); Myers v. Arkansas & O. Ry., supra, wherein the courts proceeded to determine the abandonment issue without resort to the Commission.

Here, without denoting it as a finding, the District Court stated, “I am inclined to the view that there has been an unlawful abandonment.” We emphasize that the question before the District Court does not concern the merits of the abandonment application — this is a matter for the ICC — but merely the narrow issue of whether an abandonment has occurred. Once this question is resolved with a finding of abandonment, the District Court then must proceed to determine whether an injunction should issue. The record before us admits of no finding but that an illegal abandonment has occurred; whether it be May or June, 1973, is immaterial for the purposes of this case. We therefore must reverse the decision of the District Court dismissing the complaint on grounds of primary jurisdiction.

We will not on this appeal direct entry of an injunction compelling the Rock Island to restore service. This is a matter which should first be determined by the District Court, taking into consideration the factual circumstances of the case and the strong Congressional policy and substantial public interest in not permitting abandonment of railroad service without approval of the ICC was required by § 1(18) of the Interstate Commerce Act. As the complaint was dismissed due to application of the primary jurisdiction doctrine, the court made no more findings of fact than absolutely necessary so as not to interfere in any manner with the ICC proceedings. We think the District Court should have the opportunity to make factual findings and determine in the first instance whether an injunction should issue.

Section 1(20) states that an illegal abandonment “may be enjoined by any court of competent jurisdiction.” (our emphasis). This language implies the existence of discretion in determining whether an illegal abandonment should be enjoined. Ordinarily a reviewing court applies the principle that the grant or denial of an injunction will be reviewed only to determine whether there has been an abuse of discretion. Yakus v. United States, 321 U.S. 414, 440, 64 S.Ct. 660, 88 L.Ed. 834 (1944); Minnesota Public Interest Research Group v. Butz, 498 F.2d 1314 (8th Cir., 1974) (en banc; E. W. Bliss Co. v. Struthers-Dunn, Inc., 408 F.2d 1108, 1113 (8th Cir. 1969); 7 Moore’s Federal Practice jf 65.04[2] (2d ed. 1974). The same standard would appear applicable in the present case. We note the Supreme Court decisions in Thompson v. Texas Mexican Ry., 328 U.S. 134, 66 S.Ct. 937, 90 L.Ed. 1132 (1946) and Texas & P. Ry. v. Gulf, C. & S. F. Ry., 270 U.S. 266, 46 S.Ct. 263, 70 L.Ed. 578 (1926) contain language which arguably denies discretion to withhold an injunction once a violation of § 1(18) is found.

In Thompson, a trackage agreement which allowed one railroad to operate over the tracks of another expired. The Supreme Court held that operations over the track must continue until abandonment is authorized, even though there was no longer a contract right to do so. In Texas •& P. Ry. the railroad attempted an extension of its tracks without authorization from the ICC, also a violation of § 1(18). In discussing a court’s role upon application for injunction under § 1(20) the Court stated:

The function of the court upon the application for an injunction is to construe the statutory provision and apply the provision as construed to the facts. The prohibition of paragraph 18 is absolute. If the proposed track is an extension and no certificate has been obtained, the party in interest opposing construction is entitled as of right to an injunction.

Texas & P. Ry. v. Gulf, C. & S. F. Ry., supra at 273, 46 S.Ct. at 264. In neither of these cases was the question of a physical impossibility of operation presented. In cases where a court has been confronted with a physical impossibility of operation without substantial expenditures for repair, the determination as to whether to issue an injunction has been viewed as one of equity, whether it would be equitable to require substantial expenditures when shortly thereafter the Commission may approve the railroad’s abandonment application.

Thus, in Pennsylvania v. Penn Central Transportation Co., supra, an injunction was denied which would have required restoration of service on two branch lines badly damaged by Tropical Storm Agnes at a cost found by the district court to be approximately $650,000. In Asbury v. Chesapeake & O. Ry., supra, an injunction was denied where the abandonment proceeding before the Commission was in its last stages, and restoration of service would have entailed repair of a tunnel at substantial cost. There is nothing in the reported decision indicating what necessitated the tunnel repair in Asbury. And in Myers v. Arkansas & O. Ry., supra, the court held there was no abandonment as the cessation of service was involuntary, being caused by severe rains and flooding which damaged the tracks and certain bridges lying within an area of property the United States had condemned and where the railway had no right to enter and make repairs.

The Commission argues that the above cases indicate only that the termination of service for reasons beyond the railroad’s control may justify the exercise of discretion in refusing an injunction, but that no case has allowed “abandonment by neglect,” i. e., permitting a railway by a deliberate neglect of essential maintenance which allows tracks to deteriorate to a “deplorable condition” to then successfully argue that restoration of service would be inequitably expensive. In such a case it is argued that the equities of the situation significantly favor the shippers on the line and require the issuance of an injunction. We would agree that this practice, if found by the District Court, would be a factor militating against the Rock Island’s argument of conditions beyond its control necessitating termination of service.

The Commission further argues that the weak financial basis of the. railroad does not afford a sufficient basis for denial of an injunction, citing Meyers v. Jay Street Connecting R. R., supra. In Meyers a preliminary injunction requiring the continuance of service was affirmed despite the fact the railroad had lost money for five years, had current liquid assets of only approximately $400, and in view of the undisputed fact of increasing larger monthly losses. The court noted that relief for the railroad lay in an application for reorganization under the Bankruptcy Act and stated:

Unless they do so, and relief is denied to them, it is our opinion that the hardships imposed by the injunction do not outweigh the strong purpose of the Interstate Commerce Act to prohibit the abandonment of railway service without the approval of the ICC.

Meyers v. Jay Street Connecting R. R., supra 259 F.2d at 536.

Obviously the Rock Island must present a compelling financial case in light of the persistent profit shown by the Ruskin line, the railroad’s own projections of increasing grain production in the area which would increase car traffic, and the statutory prohibition against unauthorized abandonment.

There is one related aspect of this case we find particularly disturbing. Service on this line was terminated March 2, 1973. An abandonment application was filed May 21, 1973. At oral argument we were informed the matter had not yet been docketed for a hearing and no estimate of when a final Commission decision will be rendered is available. One of the factors affecting the balancing of equities in Penn Central Transportation Co., Asbury, and Myers, was the fact that the abandonment proceedings before the Commission were expected to be resolved within a reasonable period of time, and thus while cessation of service was no doubt a burden on shippers during the interim, abandonment would either soon be authorized or denied. Where a Commission decision might soon be forthcoming authorizing abandonment, courts were justifiably reluctant to compel expenditures which in a few months could be seen to be wasteful or senseless. Here neither shippers nor this court can see any prospect of resolution of the abandonment issue within the near future.

The effects of this inordinate delay are felt most directly by shippers who no longer can move their goods by rail, for most shippers the cheapest method of transportation. The increased cost of transportation will of course increase the cost of the goods and thereby indirectly affect consumers. Moreover, businesses left without rail transportation may be forced to close or relocate, directly affecting the economies of the cities and towns along the abandoned line.

The effect on the railroad may not be entirely beneficial either. In the short run they are spared the expense of maintaining the line. But until abandonment is authorized they are liable for damages resulting from breach of their duty to provide transportation, 49 U.S.C. § 1(4); Johnson v. Chicago, M. & St. P. R. R., 400 F.2d 968, 971-972 (9th Cir. 1968), and should abandonment not be authorized, the cost of restoration a few years hence may safely, though regreta-bly, be assumed to be substantially higher than at present.

Finally, no doubt shippers and citizens of towns to be affected upon approval, of an abandonment application receive the impression of a dereliction of duty on the part of the ICC when final resolution may be years in the future. It is frustrating and thoroughly regretable that the ICC could not in a matter of weeks determine whether or not this branch line should be abandoned, saving litigation expenses and more importantly giving a definitive answer to the future of the road. But no, our legal system is now so complex, so overburdened with contradictory requirements, that the system has almost ground to a halt.

The reason underlying this unreasonable delay is Congressional pyramiding of additional requirements on a system already enmeshed in bureaucratic delay. This disturbing situation is exacerbated by the application of the National Environmental Policy Act (NEPA), 42 U.S.C. § 4321 et seq., to railroad abandonment applications. See Harlem Valley Transportation Ass’n v. Stafford, 360 F.Supp. 1057 (S.D.N.Y. 1973) , aff’d, 500 F.2d 328 (2d Cir., 1974) ; City of New York v. United States, 337 F.Supp. 150, 158-60 (E.D. N.Y.1972).

The decision of the district court in Harlem Valley reqúires the ICC to determine whether a particular abandonment is a “major Federal action significantly affecting the quality of the human environment” and if so, to prepare an impact statement for circulation to parties and use in the agency process. We were informed on oral argument that the ICC is presently attempting to assemble a staff, and based on the appellate decision in Harlem Valley (now decided against the ICC), would shortly begin work on the accumulated abandonment petitions, some 320 as of January, 1974. How long this process may take before this particular application reaches the hearing stage is unknown, but we can rest assured it will be considerable.

Such a delay in the determination of an abandonment application significantly affects the traditional balancing of equities upon application for injunction. The efficacy of the procedural process is called into question any time a railroad abandons a line without ICC approval in light of the clear statutory direction that service be maintained. However, as the district courts in Penn Central Transportation Co., Asbury, and Arkansas & O. Ry., determined, there are situations in which it would be inequitable to require restoration of service on a line where, caused through no fault of the railroad, the costs of restoration would be substantial, and the ICC could be expected to shortly determine whether abandonment would be authorized. We do not intend to intimate a feeling on the merits of an injunction in this particular case but merely are attempting to demonstrate the effects that the delay in agency processes caused by application of NEPA may have upon the discharge of that agency’s statutory responsibilities in its field of expertise. This is a matter which the courts, bound to apply the statutory mandates of both NEPA and the Interstate Commerce Act, cannot satisfactorily resolve. In view of the importance of rail transportation to the overall transportation needs of this country, we can only express a hope that Congress will recognize the difficulties created and attempt a satisfactory resolution.

Opr reversal of the District Court’s application of primary jurisdiction in this case compels a remand to the District Court to determine whether the injunction sought by the ICC should issue. We feel the District Court should have the initial opportunity to resolve the contested issues of fact in this record.

The judgment of the District Court dismissing the complaint is reversed and the cause remanded for further proceedings consistent with this opinion. We further express the hope that the ICC will undertake to give this abandonment proceeding speedy consideration consistent with the fulfillment of its statutory responsibilities.

      . 49 U.S.C. § 1 et seq.

      . The Nebraska Public Service Commission did not appeal the dismissal of its suit by tlie District Court.

      . According to Professor Davis, the doctrine of primary jurisdiction received its first formulation in Texas & Pacific R. R. v. Abilene Cotton Oil Co., 204 U.S. 426, 27 S.Ct. 350, 51 L.Ed. 553 (1907). 3 K. Davis, Administrative Law Treatise § 19.02 (1958). There it was held the reasonableness of rates must first be determined by the Interstate Commerce Commission. The courts are not strangers to the doctrine of primary jurisdiction as it affects railway eases. See cases collected in Great Northern Ry. v. Merchants Elev. Co., 259 U.S. 285, 295 n. 1, 42 S.Ct. 477, 66 L.Ed. 943 (1922). Mr. Justice Brandéis formulated the doctrine’s application to ICC cases as follows :
      Whenever a rate, rule or practice is attacked as unreasonable or as unjustly discriminatory, there must be preliminary resort to the Commission. Sometimes this is required because the function being exercised is in its nature administrative in contradistinction to judicial. But ordinarily the determining factor is not the character of the function, hut the nature of the controverted question and the nature of the inquiry necessary for its solution.

      Great Northern Ry. v. Merchants Elev. Co., supra at 291, 42 S.Ct. at 479 (emphasis supplied) .

      . This is not to say that those factors which enter into a decision on the merits of an abandonment application may not be considered by the district court in deciding whether an injunction should issue.

      . The Rock Island admitted to a “technical” abandonment of the line in June, 1973, when it says t conditions would have permitted restoration of the line to service. The District Court viewed abandonment as occurring in May or June, 1973.

      . Noting that in Asbury there was no indicat 1 of the reason for the necessity of tunnel repair.

      . Not an inconsequential part of the delay in the ICC processes lies not so much in the application of NEPA to abandonment applications but in the ICC’s refusal to recognize that the NEPA requirements do apply. See Harlem Valley Transportation Ass’n v. Stafford, 500 F.2d 328, at. 331-332 (2d Cir., filed June 18, 1974).