356 U.S. 412 (1958), 415, County of Marin v. United States

Docket Nº:No. 415
Citation:356 U.S. 412, 78 S.Ct. 880, 2 L.Ed.2d 879
Party Name:County of Marin v. United States
Case Date:May 19, 1958
Court:United States Supreme Court
 
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Page 412

356 U.S. 412 (1958)

78 S.Ct. 880, 2 L.Ed.2d 879

County of Marin

v.

United States

No. 415

United States Supreme Court

May 19, 1958

Argued April 9, 1958

APPEAL FROM THE UNITED STATES DISTRICT COURT FOR THE

NORTHERN DISTRICT OF CALIFORNIA

Syllabus

Asserting exclusive and plenary authority under § 5(2)(a) of the Interstate Commerce Act, the Interstate Commerce Commission approved a proposed transaction in which an interstate motor carrier would transfer its operations in the San Francisco Bay area (largely local commuter service) to a non-carrier subsidiary organized for that purpose, in exchange for the capital stock of the subsidiary. The admitted purpose of the transaction was to escape the ratemaking practices and policies of the California Public Utilities Commission, which held that the carrier's applications for increases in rates in these local operations should be determined in the light of total revenues from all of its intrastate operations in California. Appellants sued to set aside the order of the Interstate Commerce Commission.

Held: the proposed transaction is beyond the scope of the power of the Interstate Commerce Commission under § 5(2)(a). Pp. 413-420.

(a) The congressional purpose in the sweeping revision of § 5 of the Act in 1940, enacting § 5(2)(a) in its present form, was to facilitate mergers and consolidations in the national transportation system. Pp. 416-418.

(b) The proposed transaction does not involve the "acquisition" of any "carrier" within the meaning of §5(2)(a), because the subsidiary is not a "carrier." P. 418.

(c) Even if the plan were viewed at its consummation, when the subsidiary would become a "carrier," the proposal contemplates, in reality, a split-up -- something beyond the purpose and language of § 5(2)(a). P. 418.

(d) This holding does not create a vacuum in regulation, because the Interstate Commerce Commission would have jurisdiction over the transfer of interstate operating rights under § 212(b), and the transfer of intrastate right would be subject to the approval of the State Commission, the body most directly concerned with the local operations. P. 419.

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(e) That it may have been the prior administrative practice of the Interstate Commerce Commission to exercise jurisdiction under § 5(2)(a) in similar cases is insufficient to outweigh the apparent congressional purpose and the clear language of the statute -- especially in this delicate area, where the sustaining of federal jurisdiction leads, by statute, to the complete ouster of state authority. P. 420.

150 F.Supp. 619 reversed and cause remanded.

CLARK, J., lead opinion

MR. JUSTICE CLARK delivered the opinion of the Court.

At issue here is the exclusive and plenary authority of the Interstate Commerce Commission to approve a transaction in which Pacific Greyhound Lines, a motor carrier subsidiary of the Greyhound Corporation,1 would transfer its operations in the San Francisco Bay area to Golden Gate Transit Lines, a subsidiary of Pacific Greyhound organized by it for that purpose. Pacific Greyhound would receive all Golden Gate capital stock in exchange for the operating rights, certain equipment, and an amount in cash. Appellants, two counties in the area and their respective commuter associations, opposed the transaction, and challenged the power of the Commission

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to authorize it,2 but the Commission asserted jurisdiction and, on certain terms and conditions, approved the plan on the merits. 65 M.C.C. 347. A three-judge District Court, in which appellants sought to set aside the order, held that the Commission had jurisdiction under § 5(2)(a) of the Interstate Commerce Act.3 150 F.Supp. 619. In view of the importance of the jurisdictional question and its impact on federal-state relations, we noted probable jurisdiction. 355 U.S. 866 (1957). We conclude that the proposed transaction is beyond the scope of Commission power under § 5(2)(a).4

At the time of the application, Pacific Greyhound was a motor common carrier of passengers in seven western and southwestern States under certificates issued by the

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Interstate Commerce Commission. In combination with members of the Greyhound system and other lines, it provided joint through service to and from more distant areas of the country. In California, the extensive services of Pacific Greyhound included the operations in the San Francisco Bay area which are involved here. These routes are within 25 or 30 miles of the city, extending north into Marin County, east into Contra Costa County, and south on the Peninsula. Measured in terms of revenue, only 5.7% of the traffic is in interstate movement; 94.3% is intrastate, largely commuter.

The corporate transaction for which Commission approval was sought was conceived in an environment of financial difficulties plaguing the Bay area operations. The service consistently was operated at a loss, and Pacific Greyhound to some extent blamed the ratemaking practices and policies of the California Public Utilities Commission. In proceedings for commutation rate increases over these routes, for example, the State Commission had held that Pacific Greyhound's applications should be determined in light of total revenues from all intrastate operations in California. Pacific Greyhound Lines, Fares, 50 Cal.P.U.C. 650. This the company deemed to be an unjustified subsidization of the local losses with profits from unrelated operations.5

The transfer in question admittedly was designed to escape, upon approval of the Interstate Commerce Commission, the practices and policies of the State Commission. Golden Gate was incorporated in 1953, but had

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engaged in no business activity and was not a carrier. Under the agreement, arrived at early in 1954, Pacific Greyhound would transfer to Golden Gate substantially all interstate and intrastate operating rights in the Bay area, $150,000 in cash, and certain equipment.6 Golden Gate would, in turn, issue all of its capital stock to Pacific Greyhound. The result is obvious: for ratemaking purposes before the State Commission, the deficit-ridden local operation, after the split-up of operating rights into separate corporations, would be forced to stand on its own -- or collapse.

Although it did not formally intervene, the State Commission filed its views regarding the transaction with the Interstate Commerce Commission. It was stated that the proposed transfer of "local" operations was wholly unnecessary, would create questionable expense, and would tend to inject confusion into intrastate ratefixing. Further, the State Commission feared that Golden Gate's [78 S.Ct. 883] resulting capital structure would be of "questionable soundness."

The Interstate Commerce Commission conditioned its approval of the proposal on an increase in the cash consideration to $250,000, after the hearing officer had recommended disapproval of the plan in its entirety.

The congressional purpose in the sweeping revision of § 5 of the Interstate Commerce Act in 1940, enacting § 5(2)(a) in its present form, was to facilitate merger and consolidation in the national transportation system.7

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In the Transportation Act of 1920, the Congress had directed the Commission itself to take the initiative in developing a plan "for the consolidation of...

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