Alleghany Corp. v. U.S.

• Decision Date: 27 April 1977
• Docket Number: No. 76-1493,76-1493
• Parties: ALLEGHANY CORPORATION d/b/a Jones Motor et al., Petitioners, v. UNITED STATES of America, and Interstate Commerce Commission, Respondents, Robert E. Mack, II et al., Intervenor-Respondents.
• Court: U.S. Court of Appeals — Third Circuit

Page 615

554 F.2d 615

ALLEGHANY CORPORATION d/b/a Jones Motor et al., Petitioners, v. UNITED STATES of America, and Interstate Commerce

Commission, Respondents,

Robert E. Mack, II et al., Intervenor-Respondents.

No. 76-1493.

United States Court of Appeals, Third Circuit.

Argued Feb. 22, 1977.

Decided April 27, 1977.

Ira G. Megdal, Hyland, Davis & Reberkenny, Cherry Hill, N. J., for petitioners.

Mark L. Evans, and Robert Lewis Thompson, I.C.C., Donald I. Baker, and Lee I. Weintraub, Dept. of Justice, Washington, D.C., for respondents.

Daniel B. Johnson, Clyde E. Herring, Washington, D.C., for intervenor-respondents.

Before GIBBONS and ROSENN, Circuit Judges, and HANNUM, District Judge. ^*

OPINION OF THE COURT

HANNUM, District Judge.

Presently before the Court is an appeal from an order of the Interstate Commerce Commission (Commission) which authorized Mack Transportation Company of Philadelphia (Mack) to convert from contract carrier to common carrier status pursuant to section 207 of the Interstate Commerce Act (Act), 49 U.S.C. § 307.

Mack, a family-controlled partnership, has operated as a motor carrier since 1919. It first came under regulation after the passage of the Motor Carrier Act of 1935, 49 U.S.C. §§ 301 et seq., and was granted authority to serve as an "open-ended" contract carrier. In 1957 an amendment to § 203(a)(15) of the Motor Carrier Act, 49 U.S.C. § 303(a)(15), limited the definition of contract carrier to persons contracting "with one person or a limited number of persons" for furnishing of transportation services. Following the passage of the 1957 amendments, the Commission, on its own motion, reviewed Mack's status as a contract carrier pursuant to section 212(c), 49 U.S.C. § 312(c). ¹ In proceeding MC-105809 Sub-No. 9 the Commission concluded that even though Mack was serving 18 shippers it was still serving a "limited number" in compliance with the amended definition of contract carrier.

In 1969, Mack filed an application for an extension of its contract authority to permit it to serve a present shipper from Philadelphia to additional points in fourteen states. In proceeding MC-105809 Sub-No. 13 of the Commission, in effect, reversed its earlier determination and held that Mack was serving shippers in excess of the "limited number" permitted contract carriers. The application was thus denied although Mack was offered recourse to: (1) reduce the number of shippers served to conform to the restrictions placed upon contract carriers, or (2) convert to a common carrier by filing for a certificate of public convenience and necessity, or (3) take any other action deemed proper.

Initially Mack filed a proposal under which the number of shippers it contracted to serve would be reduced to nine. However, this proposal was rejected by the Commission. Thereafter, Mack sought to convert its entire operation from contract carrier to common carrier. It is the Commission's grant of this authority which is presently before us.

Essentially, two issues are presented:

I. Whether the Commission properly applied the test set forth in Fischbach Trucking Company Common Carrier Application (Fishbach), 61 M.C.C. 539 (1953) for determining "public convenience and necessity" to Mack's instant application; and

II. Whether the Commission's conclusion granting Mack's application for a certificate is based upon adequate findings supported by substantial evidence on the record as a whole.

I.

Section 207(a) of the Act provides in pertinent part:

(A) certificate shall be issued to any qualified applicant therefor, . . . if it is found that . . . the proposed service, to the extent to be authorized by the certificate, is or will be required by the present or future public convenience and necessity; otherwise such application shall be denied . . . .

The phrase "public convenience and necessity" is not defined in the Act, however, the purpose of the Motor Carrier Act of 1935 was to "leave to the Commission authoritatively to decide whether additional motor service would serve public convenience and necessity," I.C.C. v. Parker, 326 U.S. 60, 65, 65 S.Ct. 1490, 1493, 89 L.Ed. 2051 (1945). Consequently, the Commission is afforded a wide degree of administrative discretion in its decisions. However, the Commission must rationally articulate the reasoning supporting its decisions so that a reviewing authority can determine whether discretion was exercised within the statutory mandate. In SEC v. Chenery Corp., 318 U.S. 80, 63 S.Ct. 454, 87 L.Ed. 626 (1942), the Supreme Court stated, ". . . the orderly function of the process of review requires that the grounds upon which the administrative agency acted be clearly disclosed and adequately sustained." 318 U.S. at 94, 63 S.Ct. at 462. We will affirm a decision of the Commission acting within its discretion, even if the decision is of "less than ideal clarity if the agency's path may reasonably be discerned." Bowman Transportation, Inc. v. Arkansas-Best Freight System, Inc., (Bowman) 419 U.S. 281, 286, 95 S.Ct. 438, 442, 42 L.Ed.2d 447 (1974); Burlington Truck Lines, Inc. v. United States, 371 U.S. 156, 83 S.Ct. 239, 9 L.Ed.2d 207 (1962).

Prior to the passage of the 1957 amendments, the Commission recognized in Fischbach that the distinction between contract and common carriage was not clearly drawn and that as a result many supposedly contract carriers had become in fact, common carriers. This occurred despite the fact that in many instances the operations were not essentially different from their original holding out. In ruling on the conversion application of one such contract carrier the Commission observed that:

Obviously, carriers of this type who come before us with conversion applications seeking, in effect, to correct mistakes of the past to which we, as well as they, may have contributed, are in a class by themselves. Unless the facts are such as to show that their individual problems are of their own making in the sense that they knowingly claimed and exploited an incorrect status, there would appear to be certain equities in their favor. Fischbach, supra at 546.

The problems faced by the Commission in these circumstances ultimately led to the amendment of section 203(a)(15) of the Act, and the addition of section 212(c). Clearly Congress' intent was to preserve the basic distinctions between common and contract carriers.

The amendment to section 203(a)(15) restricted the definition of motor contract carriage to those carriers serving ". . . one person or a limited number of persons . . ." The section does not, however, specify what shall constitute a "limited number of persons." It would, therefore, appear that it is for the Commission to determine under the facts of each case, whether a carrier serves a limited number of shippers. In 1962, after the proceeding in which it decided that for Mack 18 shippers was a limited number, the Commission defined "limited number," excluding certain unique situations, i. e., where carriage is highly specialized, as seven contracts. See: Umthun Trucking Co. Ext. Phosphatic Feed Supplements (Umthun), 91 M.C.C. 691 (1962).

Under section 212(c) of the Act, enacted simultaneously with the amendment to section 203(a)(15), the Commission was directed to review outstanding contract permits and after notice and hearing revoke a permit and issue in its place a certificate of public convenience and necessity, if it found, essentially, that a contract permit holder no longer satisfied the amended definition and should from that point forward operate as a common carrier of the same commodities between the same points or within the same territory as authorized in the permit. After the 180 day period during which section 212(c) was applicable, conversion applications would be considered only under section 207(c).

In Connell Transport Co., Inc., Conversion Application, (Connell), 95 M.C.C. 312 (1964), the Commission articulated the general standard applicable in a conversion proceeding under section 207(c) subsequent to the 1957 amendments. In accordance with Connell a carrier seeking conversion from contract to common carrier status is required to produce evidence of past lawful operations under the authority sought to be converted and to offer shipper testimony demonstrating a need for service as a common carrier rather than a contract carrier. The essential changes brought about by Connell in post-amendment cases are (1) a requirement of greater shipper support than was previously required by Fischbach and (2) a more strict view taken regarding the applicant's prior lawful activity.

With respect to Mack's post-amendment application to convert, the Commission applied the Fischbach standard rather than the more stringent Connell standard. Application of Fischbach in post-amendment cases is not without precedent. See: T. T. Brooks Trucking Co., Inc., 86 M.C.C. 667 (1961); Bankers Dispatch Corp., Conversion Application, 110 M.C.C. 294 (1969). In our view such action is warranted here, as well, and, thus, will not be disturbed on appeal.

We believe that underlying the stiffer standard articulated in Connell is the assumption that subsequent to the 1957 amendments and the Commission's section 212(c) inquiries into the operations of contract carriers, any conversion applicant would, at that time, be serving only a "limited number" of shippers. It naturally followed that the Commission would require more extensive shipper support evidence in order to sustain a carrier's burden of proving public need for the proposed common carrier service than had previously been required. In addition, since presumably the distinction between contract and common carriage had been more clearly drawn the

. . . mitigating factors, which contributed to the establishment in Fischbach of liberal criteria for section 207 conversions, have largely been obviated by the 1957 amendments. Carriers which at that time found that their operations had...