C & H Transp. Co., Inc. v. I. C. C., 77-1389

• Decision Date: 21 February 1979
• Docket Number: No. 77-1389,77-1389
• Citation: 589 F.2d 565,191 U.S.App.D.C. 42
• Parties: C & H TRANSPORTATION CO., INC., Daily Express, Inc., & Dallas & Mavis Forwarding Co., Inc., Petitioners, v. INTERSTATE COMMERCE COMMISSION & United States of America, Respondents. Ace Doran Hauling & Rigging Co., Home Transportation Company, Inc., Aero Trucking, Inc., Miller's Motor Freight, Inc., Wales Transportation, Inc., J. H. Rose Truck Line, Inc., et al., Intervenors.
• Court: U.S. Court of Appeals — District of Columbia Circuit

Page 565

589 F.2d 565

191 U.S.App.D.C. 42

C & H TRANSPORTATION CO., INC., Daily Express, Inc., &amp Dallas & Mavis Forwarding Co., Inc., Petitioners, v. INTERSTATE COMMERCE COMMISSION & United States of America Respondents Ace Doran Hauling & Rigging Co., Home Transportation Company, Inc., Aero Trucking, Inc., Miller's Motor Freight, Inc., Wales Transportation Inc., J. H. Rose Truck Line, Inc., et al., Intervenors.

No. 77-1389.

United States Court of Appeals, District of Columbia Circuit.

Argued April 27, 1978.

Decided Oct. 10, 1978.

Rehearing Denied Oct. 31, 1978.

Certiorari Denied Feb. 21, 1979.

See 99 S.Ct. 1222.

William A. Chesnutt, Washington, D. C., for petitioners.

Carl E. Howe, Jr., Atty., Interstate Commerce Commission, Washington, D. C., with whom Mark L. Evans, Gen. Counsel, Charles H. White, Jr., Associate Gen. Counsel, Interstate Commerce Commission, and James F. Ponsoldt, Atty., Dept. of Justice, Washington, D. C., were on the brief, for respondents.

John P. McMahon, Columbus, Ohio, was on the brief for intervenor, Aero Trucking, Inc.

James M. Doherty and Robert J. Birnbaum, Austin, Tex., were on the brief for intervenor, J. H. Rose Truck Line, Inc.

J. Michael Alexander, Salem, Or., was on the brief for intervenors, Wales Transportation, Inc. & H. J. Jeffries Truck Line, Inc.

Jeffrey Kohlman, Atlanta, Ga., was on the brief for intervenor, Home Transportation Company, Inc.

Jeremy Kahn and S. Harrison Kahn, Washington, D. C., entered appearances for intervenor, Miller's Motor Freight, Inc.

William A. Chesnutt, Washington, D. C., also entered an appearance for intervenor, Ace Doran Hauling & Rigging Co.

Carl D. Lawson and James F. Ponsoldt, Attys., Dept. of Justice, Washington, D. C., entered appearances for respondent, United States of America.

Before DANAHER, Senior Circuit Judge, and TAMM and WILKEY, Circuit Judges.

Opinion for the court filed by TAMM, Circuit Judge.

TAMM, Circuit Judge:

This appeal seeks to set aside orders of the Interstate Commerce Commission (Commission) authorizing a gateway elimination in conjunction with the grant of an application to purchase motor carrier authority. Because we find that a portion of the Commission's broad authorization is not supported by substantial evidence, we vacate the Commission's orders in part and remand for further proceedings.

Background

Prior to 1974, the Commission permitted irregular-route motor carriers ¹ holding two or more separate unrestricted grants of operating authority having a common point, or "gateway," to "tack," or join, those separate authorities. As long as the gateway was traversed, the carrier could provide through service between points contained in the separate authorities. ²

Inefficient use of limited fuel resources resulted from the circuity frequently involved in tacking. In response to national concern for energy conservation, 41 Fed.Reg. 2459 (1976), the Commission revised its policy and promulgated restrictive tacking and gateway elimination rules. 49 C.F.R. § 1065 (1977). ³ The thrust of the policy is twofold to conserve diminishing resources by authorizing necessary service as directly as possible without unduly disrupting the competitive status quo. As relevant to this case, the rules prohibit tacking unless the applicant proves, in accordance with the standards of section 207 of the Interstate Commerce Act (Act), 49 U.S.C. § 307 (1970), that public convenience and necessity require through service. ⁴ If such a showing is made, the gateway is eliminated and direct authority is issued. 49 C.F.R. § 1065.1(b).

The requisite showing of public convenience and necessity may be made in either of two ways: (1) in the traditional manner, through public testimony that the proposed authority will fulfill public need which cannot be satisfied by existing service, and, in so doing, will not affect operations of other carriers in a manner contrary to the public interest, See Pan-American Bus Lines Operation, 1 M.C.C. 190, 203 (1936); or, in the absence of such evidence, (2) through proof that special gateway elimination criteria have been met. See F-B Truck Line Co., Extension Colorado/Utah, 128 M.C.C. 628, 635 (1978); Gray Moving & Storage, Inc. Purchase (Portion) Thomas C. Warner, 122 M.C.C. 316, 330 (1976). The gateway elimination criteria, first announced in Childress Elimination Sanford Gateway, 61 M.C.C. 421, 428 (1952), and found by the Commission to be applicable under the new rules in Ex parte No. 55 (Sub.-No. 8), Motor Common Carriers of Property, Routes & Service, 119 M.C.C. 530, 543, 550 (1974), require proof that:

(1) . . . applicant is actually transporting a substantial volume of traffic from and to the points involved by operating in good faith through the gateway and, in so operating, is effectively and efficiently competing with the existing carriers, and (2) . . . the elimination of the gateway requirement would (not) enable applicant to institute a new service or a service so different from that presently provided as to materially improve applicant's competitive position to the detriment of existing carriers.

61 M.C.C. at 428.

Facts

In October 1974, Aero Trucking, Inc. (Aero), an intervenor in this appeal, filed an application under section 5(2) of the Act, 49 U.S.C.A. § 5(2) (1978), ⁵ for approval of the purchase of the Sub.-No. 33 operating rights of Miller's Motor Freight, Inc. (Miller's). Miller's was authorized to transport "size and weight" ⁶ commodities from points within ten miles of York, Pennsylvania, to all points in the United States, with several exceptions. ⁷ In connection with this application, on January 29, 1975, Aero sought, pursuant to section 207(a) of the Act, 49 U.S.C. § 307(a) (1970), ⁸ to combine Miller's authority with the authority it already held and to eliminate the resulting gateway at York. A grant of both applications would authorize Aero to provide direct-route service from points in the eighteen states ⁹ and the District of Columbia contained within its existing authority, to points in the thirty-nine states included in the authority it sought to acquire. Joint Appendix (J.A.) II at 845, 980.

Nine shippers supported Aero's applications; ¹⁰ thirteen carriers were in opposition. ¹¹ Hearings were held before an administrative law judge (ALJ) in July and August, 1975. An initial decision, served on December 11, 1975, granted both applications. Id. at 844-71. On September 24, 1976, a three-Commissioner Division 3, in the main accepted the ALJ's decision, but modified slightly the territorial scope of the authority granted. ¹² Petitions for further reconsideration were denied on February 24, 1977. Id. at 1029. Petitioners then sought review in this court of the Commission's grant of Aero's section 207 application. ¹³

Review of the Commission's Orders

A. Scope of Review

The Administrative Procedure Act requires that the reviewing court set aside all agency action that is unsupported by substantial evidence in those cases subject to 5 U.S.C. §§ 556, 557 (1976). 5 U.S.C. § 706(2)(E) (1976). A section 207 application invokes the adjudicatory procedures of sections 556 and 557, See 5 U.S.C. § 558(c) (1976), and our review is therefore governed by the strictures of the substantial evidence test. We conclude that the major portion of the Commission's orders cannot withstand the scrutiny of this standard.

In so ruling, we are mindful of the restricted scope of our review and of the broad discretion traditionally lodged in the Commission when determining issues of public convenience and necessity. See United States v. Pierce Auto Freight Lines, Inc., 327 U.S. 515, 535-36, 66 S.Ct. 687, 90 L.Ed. 821 (1946); ICC v. Parker, 326 U.S. 60, 65, 65 S.Ct. 1490, 89 L.Ed. 2051 (1945). Nonetheless, the Commission's discretion under section 207 is not limitless, See Burlington Truck Lines, Inc. v. United States, 371 U.S. 156, 167-68, 83 S.Ct. 239, 9 L.Ed.2d 207 (1962), nor can it be shielded from "thorough, probing, in-depth review." Citizens to Preserve Overton Park, Inc. v. Volpe,401 U.S. 402, 415, 91 S.Ct. 814, 28 L.Ed.2d 136 (1971).

A careful review of the record shows that the proffered evidence is fatally deficient and will not support the award of direct-route authority between all of the jurisdictional origin and destination points encompassed within the Commission's orders. Aero submitted two traffic studies as well as public testimony in support of its application. The ALJ and thereafter Division 3 concluded that the studies satisfied the special gateway elimination criteria set forth in the Childress case, and that the testimony met the rigors of the traditional, and independent, public convenience and necessity test. J.A. II at 866-69. We find, however, that a substantial number of the more than 600 new direct-route authorities granted, See note 14 Infra, are without any evidentiary foundation there is no public testimony pertaining to them, nor are the Childress criteria met. We further find the evidentiary basis for many of the remaining authorities inadequate in more than one respect.

B. Public Testimony

The ALJ concluded that the testimony presented by the nine supporting shippers demonstrated that public convenience and necessity required elimination of the gateway. J.A. II at 869. Review of the record reveals, however, that the evidence adduced through these witnesses falls far short of the "substantial evidence" necessary to uphold the Commission's orders in their entirety.

The geographic scope of the shippers' testimony is extremely limited. Of the nine shippers, three Jones & Laughlin Steel Corp., Id. at 852; Elwin J. Smith Division of Cyclops Corp., Id.; and Colt Industries, Crucible, Inc., Id. at 854 support Aero's application only insofar as it pertains to the shipment of commodities from Pennsylvania to North Carolina, South Carolina, Georgia, and Florida. Bethlehem Steel Corp., Id. at 851, expressed a need for transportation from Pennsylvania...