Alamo Exp., Inc. v. I. C. C.

• Decision Date: 22 April 1982
• Docket Number: No. 81-4112,81-4112
• Citation: 673 F.2d 852
• Parties: ALAMO EXPRESS, INC., Petitioner, v. INTERSTATE COMMERCE COMMISSION and United States of America, Respondents.
• Court: U.S. Court of Appeals — Fifth Circuit

Page 852

673 F.2d 852

ALAMO EXPRESS, INC., Petitioner, v. INTERSTATE COMMERCE COMMISSION and United States of America Respondents.

No. 81-4112.

United States Court of Appeals Fifth Circuit.

April 22, 1982.

James M. Doherty, Austin, Tex., for petitioner.

Colleen J. Bombardier, Atty., I. C. C., Washington, D. C., for respondents.

Leonard R. Kofkin, Chicago, Ill., for intervenor Yellow Freight System, Inc.

Petition for Review of an Order of the Interstate Commerce Commission.

Before WISDOM, RANDALL and TATE, Circuit Judges.

TATE, Circuit Judge:

Yellow Freight System, Inc. ("Yellow"), applied to the Interstate Commerce Commission ("ICC") in 1980 for motor contract carrier authority to transport general commodities between all points in the United States, under continuing contracts with Yellow Forwarding Company ("Forwarding"). Three common carriers who operate almost exclusively in Texas, including the appellant, Alamo Express, Inc. ("Alamo") filed protests to the application. Despite the protests, the ICC granted Yellow the requested authority. Yellow Freight System, Inc., Contract Carrier Application (Overland Park, KS), No. MC-149443 F (March 6, 1981). After exhausting administrative appeals to no avail, Alamo appeals to this court.

We find no merit to Alamo's contention that no substantial evidence supports the ICC's findings (a) that Yellow's proposed service qualifies as motor contract carriage and (b) that granting Yellow authority to conduct it will be consistent with the public interest and the national transportation policy; nor to its further contention that the Commission failed to make requisite subsidiary findings. Finally, in the light of the contentions as raised before the Commission and the factual findings by it that support the grant of contract carrier authority, we do not reach or decide Alamo's further contention that the ICC is in error in concluding that 49 U.S.C. § 10923(d)(1) requires grant of nationwide authority where contract carrier authority is granted. Finding that the ICC's decision is lawful, rational, and supported by substantial evidence, we therefore affirm.

Overview

These proceedings arise under the Motor Carrier Act of 1980. July 1, 1980, P.L. 96-296, 94 Stat. 793. Among its broad general purposes were to reduce unnecessary federal regulation and to remove regulatory inhibitions to market entry and carrier growth in the trucking industry, id. §§ 2, 3, as well as to promote competitive and efficient motor transportation services, id. § 4 (49 U.S.C. § 10101(a)(7) ).

The present litigation concerns an application by a motor common carrier ¹ for authority to act as a motor contract carrier of property. ² The applicant desires to provide contract carrier service to its wholly owned subsidiary, an ICC-licensed freight forwarder. ³ The application implicates several of the 1980 Act's provisions that specifically removed or lessened former restrictions upon the grant of motor contract service authority, as well as its general policy favoring broader grant of such authority. Among the specific provisions so implicated are: (a) The 1980 Act's amendment, § 10(b), which deleted from 49 U.S.C. § 10930(a)(1) the former prohibition against a person holding both a motor common carrier certificate and also a motor contract carrier permit; (b) the 1980 Act's modifications of § 10923(d)(1), which, with specific regard to a motor contract carrier of property, states that "the Commission may not require such carrier to limit its operations to carriage for a particular industry or within a particular geographic area;" and (c) a 1980 Act amendment adding a § 10923(b)(3)(B), which provides that, although (now as formerly) § 10923(b)(2) directs the Commission to consider the effect of granting the permit would have on the transportation of protesting carriers, in deciding whether to grant the permit the Commission should consider that effect "if such grant would endanger or impair their operations to an extent contrary to the public interest" (emphasis supplied), and (d) the 1980 Act's amendment, § 10(d), to § 10766 (which formerly authorized freight forwarders only to contract only with motor common carriers) which expressly authorized freight forwarders to contract also with motor contract carriers, allowed the latter to provide transportation to the forwarder, and allowed the forwarder to use the services and instrumentalities of the contract carrier.

In this overview of the context in which the issues arise, it may be relevant to discuss the background of freight forwarder services, statutorily defined at 49 U.S.C. § 10102(13)(B) (quoted in footnote 3). As described by the United States Supreme Court, a freight forwarder "cannot perform the physical transportation except in its terminal areas. (Citation.) It assembles shipments, consolidates them, ships them by common carrier (usually a railroad), receives them and separates and distributes them to individual consignees.... It is obvious that there is a good deal of overlap between the work of the freight forwarders and that of the other common carriers." American Trucking Associations, Inc. v. Atchison, Topeka & Santa Fe Railway Company, 387 U.S. 397, 418-19, 87 S.Ct. 1608, 1620, 18 L.Ed.2d 847 (1967). See also description of freight forwarder services at Mercury Motor Express, Inc. v. Brinke, 475 F.2d 1086, 1088-89 (5th Cir. 1973).

By way of background, because the railroad common carriers less-than-carload tariff rates were regarded by small shippers as unduly expensive, initially a service was provided by "freight forwarders" to assemble such small shipments together for shippers and to obtain the benefit of the full-carload rates in delivering the goods to the various destinations. See Interstate Commerce Commission v. Delaware, Lackawanna & Western Railroad Company, 220 U.S. 235, 31 S.Ct. 392, 55 L.Ed. 448 (1911); C. A. Miller, Interstate Commerce Law and Procedure 318-321 (1939). Initially, freight forwarders themselves were not regulated under the provisions of the Interstate Commerce Act. However, because certain abuses by way of preferential and non-tariff authorized rates resulted from carrier-dominated freight forwarders, see Freight Forwarding Investigation, 229 I.C.C. 201 (1938), the Act was amended in 1942 to grant the Commission authority to regulate the rates, practices, and services provided by freight forwarders. Part IV of Interstate Commerce Act, as added May 16, 1942, c. 318, 56 Stat. 284 (former 49 U.S.C. §§ 1001 et seq.). The legislation provided, inter alia, that freight forwarder permits could not authorize the holder to conduct direct railroad, water, or motor-carrier operations, except insofar as incidental to service by transfer, collection, or delivery services within a terminal area. Former 49 U.S.C. § 1010(h), now 49 U.S.C. § 10930(b) (2). On the other hand, the Commission was prohibited from issuing a forwarders permit to any common carrier, although (somewhat illogically, from a layman's point of view) the Commission was also prohibited from denying such a permit to a forwarder because it was controlled by or under the common control of such a carrier. Former 49 U.S.C. § 1010(c), now 49 U.S.C. §§ 10930(b)(1), 10923(b)(3)(A). Likewise, a freight forwarder was prohibited from acquiring control of a rail, motor, or water carrier regulated by the Act. Former 49 U.S.C. § 1011(a); now 49 U.S.C. § 11323(a).

A thrust of the protestant Alamo's petition for review is that, under the circumstances before us, some of the policies underlying limitations on common carrier-freight forwarder relationships are subverted by the grant to Yellow, a common carrier, of authority for it to act as contract carrier for Forwarding, Yellow's wholly-owned subsidiary, a freight forwarder. Alamo also argues that, by granting Yellow authority to act as nationwide contract carrier for its subsidiary Forwarding, the latter has in practical effect been awarded authority to conduct nationwide motor common carrier services.

These arguments, largely based upon jurisprudence arising under the statutory enactments prior to the 1980 revision, are not unforceful. Nevertheless, we are unable to hold that by granting Yellow's application the ICC exceeded its intended post-1980 authority. In reaching this conclusion, we take into consideration the 1980 changes now permitting motor common carriers also to hold a motor contract carrier permit and now permitting freight forwarders to contract with motor contract carriers for the performance of transportation services, as well as the other 1980 statutory changes favoring the broad grant of authority to motor contract carriers of property. For reasons more particularly set forth below, we find that under the 1980 Act the Commission properly applied the statutory criteria in its grant of the motor contract carrier authority to Yellow and that its findings are supported by substantial evidence.

Standard of Review

Preliminarily, we observe: with regard to ICC orders granting authority or permits, judicial review is limited in scope. The court may not disturb the order unless it finds that the Commission's substantive findings and conclusions were arbitrary and capricious, an abuse of discretion, not in accordance with law, or not supported by substantial evidence: 5 U.S.C. § 706(2); Bowman Transportation, Inc. v. Arkansas-Best Freight System, Inc., 419 U.S. 281, 95 S.Ct. 438, 42 L.Ed.2d 447 (1974); Refrigerated Transport Co., Inc. v. I. C. C., 616 F.2d 748, 751 (5th Cir. 1980).

"Under the 'arbitrary and capricious' standard the scope of review is a narrow one. A reviewing court must 'consider whether the decision was based on a consideration of the relevant factors and whether there has been a clear error of judgment.... The court is not empowered to substitute its judgment for that of the agency'.... The agency must articulate a 'rational connection between the facts found and the...