Squaw Transit Co. v. U.S., 76-1929

Decision Date11 April 1978
Docket NumberNo. 76-1929,76-1929
Citation574 F.2d 492
PartiesThe SQUAW TRANSIT COMPANY, Petitioner, v. The UNITED STATES of America and Interstate Commerce Commission, Respondents. J. H. Rose Truck Line, Inc., Intervenor.
CourtU.S. Court of Appeals — Tenth Circuit

Lloyd Scurlock, Fort Worth, Tex. (Clayte Binion, III, Fort Worth, Tex., with him on the brief), of Sayers, Scurlock, Binion & Brackett, Fort Worth, Tex., for petitioner.

Jeffrey A. Knoll, Atty., I. C. C., Washington, D. C. (Donald I. Baker, Asst. Atty. Gen., Lloyd John Osborn, Atty. Dept. of Justice, Mark L. Evans, Gen. Counsel, Peter A. Fitzpatrick, Asst. Gen. Counsel, Washington, D. C., with him on the brief), for respondent I. C. C.

James M. Doherty, of Doherty, Robertson & Birnbaum, Austin, Tex., for intervening respondent J. H. Rose Truck Line, Inc.

Before McWILLIAMS, DOYLE, and LOGAN, Circuit Judges.

LOGAN, Circuit Judge.

This appeal seeks to set aside an order by the Interstate Commerce Commission (hereafter referred to as ICC or Commission) which partially denied a "gateway" 1 elimination application filed by Petitioner, Squaw Transit Company (hereafter referred to as Squaw).

Two issues are raised by petitioner Squaw. It challenges the Commission's holding that Squaw did not demonstrate that it had substantial traffic and was an effective competitor between certain of the points served through its gateways. Squaw also asserts that the ICC erred in ignoring or misapplying "grandfather" procedures it bound itself to follow in gateway elimination cases.

A brief review of the background of the relevant regulations and of the instant situation will aid an understanding of our resolution of the issues raised. The practice of tacking operating authorities through gateways, which the ICC tolerated for years, allowed trucker carriers to serve many areas by highly circuitous routings. With the advent of the fuel crisis in 1973, the ICC became concerned about these practices as wasteful of fuel. The result was a major rule-making proceeding and adoption of regulations designed to curtail gateway operations by irregular route carriers. See 49 C.F.R. § 1065.1. The regulations provide, as pertinent, that when the circuity involved in a gateway movement exceeds 20% of the most direct highway distance between the two points, a gateway elimination application to operate directly between the two points must be filed by the carrier. As a result the carrier either will be permitted to carry its goods by direct routes without being required to use its old gateways, or will be prohibited from hauling at all between the points. Inter alia, the carrier is required to show its operations via the gateway for the two years preceding November 23, 1973. 49 C.F.R. § 1065.1(d)(2)(iii). The regulations by reference to the processing procedures of Gateway Elimination, 119 M.C.C. 530 (1974) commit the ICC to evaluation of the application under the traditional criteria of Childress -- Elimination Sanford Gateway, 61 M.C.C. 421, 428 (1952). Under Childress a carrier is required to show two things to eliminate a gateway: (1) that it is actually transporting a substantial volume of traffic between the points, and in so operating is effectively and efficiently competing with the existing carriers, and (2) that the elimination of the gateway requirement will not enable it to institute a new service or one so different from that which it has been providing as to materially improve its competitive position to the detriment of existing carriers. The gateway elimination regulations have been upheld as a valid exercise of the rule-making power of the ICC. Thompson Van Lines, Inc. v. United States, 399 F.Supp. 1131 (D.D.C.1975), aff'd mem., 423 U.S. 1041, 96 S.Ct. 763, 46 L.Ed.2d 630 (1976).

Squaw is an irregular route common carrier for the transportation of oil field and earth drilling machinery, equipment, materials and supplies. As required by the regulations, it filed an application seeking to eliminate certain gateways, thereby allowing direct service between the points. As is here pertinent, Squaw was authorized to transport oil field items between points in Michigan, Illinois, Indiana and Ohio on the one hand, and, on the other, points in Arkansas, Louisiana, Mississippi, Alabama, Georgia and Florida. The gateways to be eliminated were in Oklahoma, Arkansas and Texas.

In support of its application, Squaw submitted a traffic abstract documenting about 250 shipments, but only 76 were within the two-year period prescribed by 49 C.F.R. § 1065.1(d)(2)(iii), and five of those did not pass through any gateway. Of the 71 shipments then remaining for consideration by the ICC, 49 were from Ohio to Louisiana. This portion of Squaw's application was granted and is not in issue on this appeal. The other shipments over the two-year period are the support for petitioner's appeal.

The only protestant to file a verified statement in opposition to Squaw's application was J. H. Rose Truck Lines, Inc. It exhibited authorities substantially like that of Squaw, but presented no evidence of the number of shipments it carried between the points involved in Squaw's application. The nearest it came was a showing that it had a terminal in Illinois, several in Louisiana, a significant volume of business overall, but only a statement by its executive vice president that, "Traffic of the kind involved in this application and traveling within the scope of this application accounts for an important portion of Rose's business."

As mentioned above, Squaw's application for direct service between points in Ohio to points in Louisiana was granted by ICC Review Board No. 1. The remainder of the application was denied. The order found that only with respect to shipments from points in Ohio to points in Louisiana did Squaw demonstrate "that it has transported substantial traffic through its gateways, and is an existing effective competitor for this traffic," in compliance with the evidentiary requirements of Childress, supra. Three shippers had given statements in support of Squaw's application, but it was ruled that they did not establish a public need for the proposed through service. The statements were considered deficient to establish a public need in various respects, including failure to identify the volume of freight to be shipped, origins and destinations of shipments expected to be made through Squaw, and the inadequacy of other services available to handle the shipments.

ICC Division 1, acting as an appellate division, denied Squaw's petition for reconsideration, with one Commissioner dissenting. The dissenter stressed that Squaw was a small specialized carrier of oil field equipment, with traffic of a sporadic nature and an experience of shifting traffic patterns. He stressed that Squaw had demonstrated that it shipped some traffic between most of the points at issue, while the only protestant had submitted no evidence of any traffic by it between these points. Squaw's contentions on appeal are along the same lines, that protestant's failure to show that it had any shipments to or from the points in question is conclusive evidence under the Childress standard that Squaw's traffic was substantial and that it was an effective competitor, thus requiring a holding by the ICC that Squaw be allowed to provide direct service between the locations in issue. It also argues this is bolstered by the Commission's own commitment to apply "grandfather" type rules.

We are cognizant of the limited scope of the review of agency decisions by this Court under the Administrative Procedure Act. We are not to set aside or modify the ICC order if it has a rational basis supported by the record and is not arbitrary or capricious. 5 U.S.C. § 706; Squaw Transit Co. v. United States, 402 F.Supp. 1278 (N.D.Okl.1975) (a three-judge case treating another aspect of this same litigation).

We first treat the "grandfather" issue. 49 C.F.R. § 1065.1(d)(2)(iv) refers to Gateway Elimination, 119 M.C.C. 530 (1974) for its procedures in processing these applications. That case states:

In deciding such an application we will apply the criteria enunciated in the Childress case, supra, as amplified in other Commission precedent decisions. This will not, as many parties fear, impose a greater burden of proof than that governing regular elimination-of-gateway applications, but will be somewhat more akin to the standard "grandfather" procedures utilized by this Commission in the past. The principal difference between such a gateway-elimination application and the usual one will be that the former will be assigned priority and be determined as expeditiously as possible given the severe strains now upon our staff and budgetary resources. Because we do not otherwise intend to alter the burden of proof in these applications or materially change the existing competitive situation, protests will be permitted in any application proceeding filed under this regulation. (Emphasis supplied.) 119 M.C.C. 550.

Squaw argues that the reference to grandfather procedures ties the ICC to the same standard as the original grandfather clause in 49 U.S.C. § 306(a) where Certificates of Public Convenience and Necessity were issued without proof beyond a showing that applicant was in bona fide operation over the routes with respect to which petition was made at the time the act becomes effective. We do not agree. The same paragraph...

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