Cargo Express, Inc. v. United States

• Citation: 345 F. Supp. 577
• Decision Date: 21 March 1972
• Docket Number: Civ. No. C 71-189.
• Parties: CARGO EXPRESS, INC., an Ohio Corporation, and Ohio Fast Freight, Inc., an Ohio Corporation, Plaintiffs, v. UNITED STATES of America and Interstate Commerce Commission, Defendants.
• Court: U.S. District Court — Northern District of Ohio

345 F. Supp. 577

CARGO EXPRESS, INC., an Ohio Corporation, and Ohio Fast Freight, Inc., an Ohio Corporation, Plaintiffs, v. UNITED STATES of America and Interstate Commerce Commission, Defendants.

Civ. No. C 71-189.

United States District Court, N. D. Ohio, E. D.

March 21, 1972.

John A. Kundtz and Daniel W. Hammer, Thompson, Hine & Flory, Cleveland, Ohio, Paul Beery, Beery & Pemberton, Columbus, Ohio, for plaintiffs.

Frederick Coleman, U. S. Atty., Robert R. Bauer, Cleveland, Ohio, Lee A. Rau, Dept. of Justice, Richard H. Streeter, Interstate Commerce Comm., Washington, D. C., for defendants.

Before CELEBREZZE, Circuit Judge, GREEN, District Judge, and KALBFLEISCH, Senior District Judge.

MEMORANDUM

KALBFLEISCH, Senior District Judge.

Pursuant to 28 U.S.C. §§ 1336, 1398, 2284, and 2321-2325, plaintiffs have brought an action to set aside an order of the Interstate Commerce Commission (hereinafter called Commission) directed against them. A three-judge court has been convened to hear this action. 28 U.S.C. § 2284. Plaintiff Cargo Express, Inc. (hereinafter called Cargo) is an Ohio corporation desirous of becoming a common carrier of certain commodities by motor vehicle, while plaintiff Ohio Fast Freight, Inc. (hereinafter called OFF) is presently a Commission authorized common carrier by motor vehicle.

On or about April 8, 1969, pursuant to § 212(b) of the Interstate Commerce Act (hereinafter called Act) (49 U.S.C. § 312(b)), Cargo and OFF sought Commission approval to transfer from OFF to Cargo a portion of OFF's Certificate of Public Convenience and Necessity, MC-14702 (Sub. No. 17), which reads as follows:

"Iron, steel, manufactured iron and steel articles, motors, machinery, and machinery parts between points in Portage County, Ohio, on the one hand, and, on the other, Buffalo and Rochester, N.Y., all points in Indiana, points in Illinois and the Chicago, Illinois commercial zone as defined by the Commission, points in Erie, Crawford, Mercer, Venango, Lawrence, Beaver, Washington, Allegheny, Butler, and Greene Counties, Pa., those in Hancock, Brook, Ohio, and Marshall Counties, West Virginia, and those in Michigan on and south of Michigan Highway 46."

Citing the inadequate financial position of the transferee, Cargo, the Commission denied the application on May 21, 1969. On August 4, 1969, a petition by Cargo and OFF for reconsideration of the order of May 21 was denied.

On or about September 5, 1969, Cargo filed a revised application under § 212(b) of the Act "identical in content to the first application, except additional financial information as to the transferee was included in the second application," to wit, the proposed transferor (OFF) was, in lieu of debt securities, to receive preferred stock of the transferee. On October 31, 1969, the Commission (by its Motor Carrier Board) approved and authorized the transaction.

On December 3, 1969, one Ace Doran Hauling & Rigging Co., as an interested party, filed a petition for reconsideration of the Board's order. Cargo filed a response thereto, and on February 19, 1970, the Commission (by Division 3 acting as an Appellate Division) granted Doran's petition for reconsideration. That order, in pertinent part, is as follows:

"* * * That the proposed division of rights would be contrary to the provisions of section 1132.5(a) (1) * * * (49 C.F.R. 1132) for the reason that the proposed division of rights would create duplicating rights as defined in section 1132.1(c) of said rules; and would be contrary to section 1132.1 sic (a) (2) of said Rules, for the reason that the proposed division of the operating rights granted in * * * would constitute a minute and multiple division of operating rights so that numerous carriers might ultimately operate under rights initially granted as a unit."

Cargo then proceeded to file a petition for reconsideration of the February 19, 1970 order, which petition was denied by the Commission on May 4, 1970. In that denial the Commission made the following statement:

"* * * That the petition presents no facts or arguments not previously considered or which would warrant a conclusion that the proposed transfer is in conformity with Sections 1132.5(a) (1), 1132.1(c) and 1132.1 sic (a) (2); of the Rules * * * 49 C.F.R. 1132; that proposed amendments and restrictions to the operating rights have not been shown to be in the public interest."

Section 212(b) of the Act reads as follows:

"Except as provided in section 5 of this title, any certificate or permit may be transferred, pursuant to such rules and regulations as the Commission may prescribe." (See 49 C.F.R. 1132.)

In enacting § 212(b) Congress intended to exempt small carriers from the stringent procedural requirements of § 5 of the Act, thereby expediting such transfers. Bradley v. United States, 322 F.Supp. 369, 371-372 (D.Alaska 1971); Chemical Leaman Tank Lines, Inc. v. United States, 251 F.Supp. 269, 272-273 (E.D.Pa.1965); Stearn v. United States, 87 F.Supp. 596, 601 (W.D.Va.1949). Obviously, therefore, the transfer rules (49 C.F.R. 1132) should not be more restrictively applied than the criteria used by the Commission in comparable § 5 proceedings. Stearn, supra, 601-602. Section 212(b) proceedings can be ex parte, without a formal hearing. A. L. Root Transportation, Inc. v. United States, 280 F.Supp. 152, 155-156 (D.Vt. 1968); Leaman, supra; Monumental Motor Tours, Inc. v. United States, 316 F. Supp. 663, 666-667 (D.Md.1970); Bradley, supra.

A district court may only set aside orders of the Commission if they are not supported by substantial evidence; are arbitrary or capricious (without rational basis); an abuse of discretion (e. g. petitions for reconsideration); in excess of statutory jurisdiction; or contrary to the Constitution. United States v. Pierce Auto Freight Lines, 327 U.S. 515, 533-536, 66 S.Ct. 687, 90 L.Ed. 821 (1946); Lake Shore Motor Freight Company v. United States, 310 F.Supp. 957, 959-960 (N.D. Ohio, E.D.1970 1968 sic); Dixie Ohio Express, Inc. v. United States, 263 F. Supp. 993, 999 (N.D.Ohio, E.D.1966); 5 U.S.C. § 706. The Commission will be presumed to have properly performed its duties and due deference will be paid to its expertise. Boston and Maine Railroad v. United States, 208 F.Supp. 661, 670 (Mass.1962), aff'd 371 U.S. 26, 83 S.Ct. 117, 9 L.Ed.2d 95; Eastern Central Motor Carriers Ass'n v. United States (per curiam), 239 F.Supp. 591, 594 (D.D.C.1965); Campbell Sixty-Six Express, Inc. v. United States, 258 F. Supp. 529, 532-533 (W.D.Mo.1966). Any petition for reconsideration is addressed to the sound discretion of the Commission, the exercise of which, absent abuse, will not be disturbed. Interstate Commerce Commission v. Jersey City, 322 U.S. 503, 514-519, 64 S.Ct. 1129, 88 L.Ed. 1420 (1944); Root, supra, 280 F.Supp. 156. Nonetheless, a reviewing court is not to rubber stamp a Commission decision. Monumental, supra, 316 F.Supp. 668-669; Campbell, supra, 258 F.Supp. 533.

The principal issues herein are: (1) whether the Commission's written reasons for denying the transfer were arbitrary and capricious and (2) whether the Commission abused its discretion in denying plaintiffs' petition for reconsideration.

THE DUPLICATING RIGHTS RATIONALE

49 C.F.R. 1132.1(c) and 1132.5(a) (1), as pertinent, read as follows:

"Duplicating rights. Operating rights which authorize the transportation of passengers, or of the same commodities, from and to, or between the same points." (1132.1(c).)

"Division of rights. An application for transfer of part of an operating right as to routes or commodities will be denied if it is found that the partition (1) would create duplicating rights as defined in § 1132.1(c) * * *." (1132.5(a) (1).)

In order to fully understand why the duplicating rights rationale of the Rules applies herein, it is necessary to consider some additional facts.

In 1966, pursuant to § 5 of the Act, OFF filed with the Commission an application to acquire, through the purchase of stock, the operating rights of Trumbull Cartage Company (hereinafter called Trumbull) and a related § 207 (49 U.S.C. § 307) application for a certificate of public convenience and necessity encompassing Trumbull's operating rights. On January 20, 1967, pursuant to § 210a(b) of the Act (49 U.S.C. § 310a(b)), OFF received temporary authority to lease and operate the Trumbull properties pending final determination of the § 5 proceeding. The Commission, on May 19, 1969, approved both applications (109 M.C.C. 88 (1969)) and the parties consummated the merger on December 11, 1969.

The Trumbull operating rights acquired by OFF from this merger encompass the transportation of general commodities, with exceptions not here pertinent, between points in Trumbull County and Youngstown on the one hand, and, on the other, points in Ohio over irregular routes. (MC-14702 (Sub-No. 16).) See Ohio Fast Freight, Inc.-Control and Merger-Trumbull Cartage Co., 109 M.C.C. 88 (1969). The OFF certificate (MC-14702 (Sub.-No. 17)), a portion of which was sought to be transferred herein, encompasses the transportation of iron and steel, among other things, between Portage County and six other contiguous counties, including Trumbull, in eastern Ohio, on the one hand and, on the other hand, points in six eastern states over irregular routes. Thus, by using any point in Trumbull County as a gateway (a common authorized point of service) and tacking (a combination of separately described routes at a common point to provide continuous through service) the retained Sub.-No. 17 authority with the acquired Trumbull operating rights, OFF could, albeit at times indirectly, transport iron and steel, etc., between points in Portage County on the one hand and, on the other hand, points in the aforementioned six eastern states. Consequently, a violation of 49 C.F.R. 1132.5(a) (1), as defined in 49 C.F.R. 1132.1(c), would result. See Frederickson Motor Express Corp.-Purchase-Cope, 104 M.C.C. 670,...