Bowman Transportation, Inc v. Freight System, Inc Johnson Motor Lines, Inc v. Freight System, Inc Red Ball Motor Freight, Inc v. Freight System, Inc Corporation v. Freight System, Inc United States v. Freight System, Inc 8212 1055, 73 8212 1069 73 8212 1070 73 8212 1072

Decision Date23 December 1974
Docket NumberARKANSAS-BEST,LORCH-WESTWAY,Nos. 73,s. 73
Citation95 S.Ct. 438,42 L.Ed.2d 447,419 U.S. 281
PartiesBOWMAN TRANSPORTATION, INC., Appellant, v. FREIGHT SYSTEM, INC., et al. JOHNSON MOTOR LINES, INC., Appellant, v.FREIGHT SYSTEM, INC., et al. RED BALL MOTOR FREIGHT, INC., Appellant, v.FREIGHT SYSTEM, INC., et al.CORPORATION et al., Appellants, v.FREIGHT SYSTEM, INC., et al. UNITED STATES and Interstate Commerce Commission, Appellants, v.FREIGHT SYSTEM, INC., et al. —1055, 73—1069 and 73—1070 to 73—1072
CourtU.S. Supreme Court

See 420 U.S. 956, 95 S.Ct. 1340, 1341.

Syllabus

In 1969 hearing examiners for the Interstate Commerce Commission (ICC), following hearings in 1966 and 1967 and the subsequent filing of extensive briefs, rejected appellant motor carriers' applications for certificates of public convenience and necessity to transport general commodities between specified points in the Southwest and Southeast. In 1971 the ICC, over the opposition of appellee competing motor carriers, authorized the issuance of the certificates. Appellees then brought action in the District Court to set aside the ICC's order. The District Court refused to enforce the order on the ground that the ICC had acted arbitrarily in refusing to credit certain evidence introduced by appellees. Held:

1. The District Court erred in refusing to enforce the ICC's order. Pp. 284—294.

(a) Under the 'arbitrary and capricious' standard the scope of review is a narrow one whereby 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.' Citizens to Preserve Overton Park v. Volpe, 401 U.S. 402, 416, 91 S.Ct. 814, 823, 28 L.Ed.2d 136. Pp. 285—286.

(b) The ICC's observation that appellees' exhibits as to the acceptability of their existing service covered periods subsequent to the ICC's notice of hearing supported its refusal to credit this evidence. The ICC was entitled to regard such exhibits as nonrepresentative of the usual service, to reason that the shortcom- ings were greater than the exhibits showed, and to conclude that service would be improved by granting the applications. Pp. 286 289.

(c) There was a rational basis for the ICC's attributing little significance to appellees' exhibits showing appellants' transit times over other routes. The question was whether service on the routes at issue would be enhanced by new entry and, as to this, performance by prospective entrants on other routes was of limited relevance. The ICC erred in not attributing the same qualification to appellants' transit time exhibits, but its finding that service would be improved by new entry was supported by other evidence. Pp. 289—292.

(d) The ICC's conclusion that consumer benefits of new entry outweighed any adverse impact upon the existing carriers reflects the kind of judgment that is entrusted to it, namely, the power to weigh the competing interests and arrive at a balance that is deemed 'the public convenience and necessity.' Pp. 292—294.

2. The lapse of time between the conclusion of evidentiary hearings and the ultimate agency decision in this case does not justify a reviewing court's requiring that the record be reopened. Pp. 294—296.

3. The ICC was entitled to take an approach, divergent from that of its examiners, favoring added competition among carriers. Pp. 297—299.

4. Whether or not the certificate granted appellant Bowman Transportation Co. conformed to the authority set forth in its application, an issue not briefed or argued in this Court, should be considered by the District Court on remand. Pp. 299—300.

364 F.Supp. 1239, reversed and remanded.

William L. Patton, Jr., Little Rock, Ark, for appellants in No. 73—1072.

Charles S. Rhyne, Washington, D.C., for appellants in Nos. 73 1055, 73—1069, 73—1070, and 73—1071.

Phineas Stevens, Jackson, Miss., for appellees in all cases.

Mr. Justice DOUGLAS delivered the opinion of the Court.

This is a direct appeal from a final judgment of a three-judge District Court, 28 U.S.C. §§ 1253, 2101, invalidating an order of the Interstate Commerce Commission. Ten applications of motor carriers to conduct general commodities operations between points in the Southwest and Southeast were consolidated in one proceeding. Three additional applicants were allowed to intervene. The hearing examiners, after extensive hearings, rejected each application. The Commission granted three of the applications of appellant carriers. Appellees, competing carriers, brought an action in the District Court, 28 U.S.C. § 1336, to suspend, enjoin, and annul that portion of the order of the Commission that authorizes issuance of certificates of public convenience and necessity to Red Ball, Bowman, and Johnson. The District Court refused to enforce the Commission's order because its findings and conclusions were arbitrary, capricious, and without rational basis within the meaning of the Administrative Procedure Act, 5 U.S.C. § 706, and likewise refused to remand the case believing that no useful purpose would be served, 364 F.Supp. 1239, 1264.1

The Administrative Procedure Act in 5 U.S.C. § 706 provides that:

'The reviewing court shall . . . (2) hold unlawful and set aside agency action, findings, and conclusions found to be—

'(A) arbitrary, capricious, an abuse of discretion, or otherwise not in accordance with law (or) . . .

'(E) unsupported by substantial evidence . . ..'

These two provisions of 5 U.S.C. § 706(2) (2) are part of six which are 'separate standards.' See Citizens to Preserve Overton Park v. Volpe, 401 U.S. 402, 413, 91 S.Ct. 814, 822, 28 L.Ed.2d 136, 151 (1971). The District Court properly concluded that, though an agency's finding may be supported by substantial evidence, based on the definition in Universal Camera Corp. v. NLRB. 340 U.S. 474, 71 S.Ct. 456, 95 L.Ed. 456 (1951),2 it may nonetheless reflect arbitrary and capricious action. There seems, however, to be agreement that the findings and conclusions of the Commission are supported by substantial evidence. The question remains whether, as the District Court held, the Commission's action was 'arbitrary, capricious, an abuse of discretion, or otherwise not in accordance with law' as provided in 5 U.S.C. § 706(2)(A). We disagree with the District Court and accordingly reverse its judgment and remand the cases for consideration of one issue not reached by the District Court or by this Court.

I

The Motor Carrier provisions of the Interstate Commerce Act, 49 Stat. 551, 49 U.S.C. § 307, empower the Commission to grant an application for a certificate if it finds (1) that the applicant is 'fit, willing, and able properly to perform the service proposed'; and (2) that the service proposed 'is or will be required by the present or future public convenience and necessity.' The Commission made both findings, relying upon the applicants' general service record in support of a finding of fitness, and upon expressions of customer dissatisfaction with the existing service in support of its conclusion that the service proposed was consistent with the public convenience and necessity. The competing appellee carriers made presentations designed to show that their existing service was satisfactory and that the applicants would not offer measurably superior performance. The District Court concluded that the Commission had acted arbitrarily in its treatment of the presentations made by the protesting carriers. While the Commission had acknowledged the appellees' evidence, its reasons for refusing to credit it would not, in the District Court's view, withstand scrutiny, making its action tantamount to an arbitrary refusal to consider matters in the record.

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. . . . Although this inquiry into the facts is to be searching and careful, the ultimate standard of review is a narrow one. The court is not empowered to substitute its judgment for that of the agency.' Citizens to Preserve Overton Park v. Volpe, supra, 401 U.S. at 416, 91 S.Ct. at 824. The agency must articulate a 'rational connection between the facts found and the choice made.' Burlington Truck Lines v. United States, 371 U.S. 156, 168, 83 S.Ct. 239, 246, 9 L.Ed.2d 207 (1962). While we may not supply a reasoned basis for the agency's action that the agency itself has not given, SEC v. Chenery Corp., 332 U.S. 194, 196, 67 S.Ct. 1575, 1577, 91 L.Ed. 1995 (1947), we will uphold a decision of less than ideal clarity if the agency's path may reasonably be discerned. Colorado Interstate Gas Co. v. FPC, 324 U.S. 581, 595, 65 S.Ct. 829, 836, 89 L.Ed. 1206 (1945). Having summarized the appropriate scope of review, we proceed to consider the District Court's objections seriatim.

A. Evidence as to Existing Service

The applicant carriers presented exhibits showing the time in transit of selected shipments that had been consigned to appellee carriers by particular shippers during a designated study period. As the Commission acknowledged, the selection of particular shipments from those occurring during the study period had been made with an eye toward demonstrating service inadequacies.3 These 'worst case' studies figured in the Commission's finding that service would be improved by the entry of new carriers to the routes at issue.

The appellee carriers offered studies of their own. These covered the same period and the same shippers as the applicants' presentations, but whereas the applicants had selected particular shipments to emphasize inadequacies, the appellee carriers included in their presentations all of the shipments consigned during the study period. These exhibits,...

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