Eastern Central Motor Carriers Ass'n v. United States, Civ. A. No. 1234-64.

• Decision Date: 26 March 1965
• Docket Number: Civ. A. No. 1234-64.
• Citation: 239 F. Supp. 591
• Parties: The EASTERN CENTRAL MOTOR CARRIERS ASSOCIATION, Inc., et al., Plaintiffs, v. The UNITED STATES of America and The Interstate Commerce Commission, Defendants.
• Court: U.S. District Court — District of Columbia

239 F. Supp. 591

The EASTERN CENTRAL MOTOR CARRIERS ASSOCIATION, Inc., et al., Plaintiffs, v. The UNITED STATES of America and The Interstate Commerce Commission, Defendants.

Civ. A. No. 1234-64.

United States District Court District of Columbia.

March 26, 1965.

COPYRIGHT MATERIAL OMITTED

Guy Postell, Atlanta, Ga., Bryce Rea, Jr., and Donald E. Cross, Rea, Cross & Knebel, Washington, D. C., Homer S. Carpenter and John S. Fessenden, Rice, Carpenter & Carraway, Washington, D. C., for plaintiffs.

William H. Orrick, Jr., Asst. Atty. Gen., John H. D. Wigger, Dept. of Justice, David C. Acheson, U. S. Atty., Washington, D. C., for the United States.

Robert W. Ginnane, Gen. Counsel, I. K. Hay, Deputy Gen. Counsel, Betty Jo Christian, I. C. C., Washington, D. C., for Interstate Commerce Commission.

Paul F. McArdle, Covington & Burling, Washington, D. C., Carl Helmetag, Jr., Philadelphia, Pa., for intervenors.

Before FAHY, Circuit Judge, and PINE and McGARRAGHY, District Judges.

PER CURIAM.

This is an action brought by plaintiff motor carrier associations pursuant to 28 U.S.C. §§ 1336, 1398, 2284 and 2321-2325 (1958) and Section 10 of the Administrative Procedure Act, 5 U.S.C.A. § 1009 (1958), to set aside and annul the report and orders of the Interstate Commerce Commission entered in Investigation and Suspension Docket No. M-17133, Drugs and Related Articles, New Jersey to Chicago (August 8, 1963), 322 I.C.C. 734 (1963) in which the Commission found proposed motor carrier rates to be just and reasonable under the principles adopted in Iron or Steel Scrap — Conn., Mass. & R. I. to Pa., 318 I.C.C. 567 (1962).

Plaintiffs have exhausted their administrative remedies and the assailed decision is administratively final in accordance with the Commissions' General Rules of Practice¹ and the procedure prescribed by the Interstate Commerce Act.² By Court order of June 3, 1964, upon consent of all parties, numerous railroad companies were joined as intervening plaintiffs.

In reviewing an order of the Interstate Commerce Commission, as with any administrative agency order, the court is limited in scope by settled principles of administrative law, both general³ and statutory.⁴ An exploration of these limitations is appropriate at the outset.

The Commission is presumed to have properly performed its official duties; and this presumption supports its actions in absence of clear evidence to the contrary.⁵ This presumption stems from the deference due the Commission because of its familiarity with the conditions in the industry which it regulates.⁶ "The Supreme Court has kept the boundary-line dividing judicial and I. C. C. functions a stark one, even when reversing a Commission judgment. For `it is the Commission, not the courts, that brings an expertise to bear on the problem, that makes the findings, and that grants or denies the applications'".⁷ However, judicial deference to expertise is not boundless; and expertise is not sufficient in itself to sustain a decision. The order must be supported by substantial evidence⁸ and must be made within the statutory limits placed on the Commission's powers by Congress.⁹

With the Commission's expertise in mind, it is our duty to review the record and the conclusions reached, as required by the provisions of the Administrative Procedure Act. Under Section 10 of the Administrative Procedure Act, as applicable here, an order of the Interstate Commerce Commission may be invalidated if it is either "(1) arbitrary, capricious, an abuse of discretion, or otherwise not in accordance with law * * * (3) in excess of statutory jurisdiction, authority, or limitations, or short of statutory rights * * * (5) unsupported by substantial evidence * * *".¹⁰

"Arbitrary" and "capricious" are to be understood in their legal sense as distinguished from their opprobrious or popular meaning. Accordingly these words mean "without rational basis".¹¹ So, if a rational basis for the order is found, then, so far as arbitrariness or capriciousness is concerned, the court will have exhausted its judicial function.¹²

To merit judicial approbation, the Commission's order also must be within the statutory limits and authority expressed by Congress. The National Transportation Policy, 49 U.S.C. preceding §§ 1, 301, 901, and 1001 (1958), "is the yardstick by which the correctness of the Commission's actions will be measured".¹³

"It is hereby declared to be the national transportation policy of the Congress to provide for fair and impartial regulation of all modes of transportation subject to the provisions of this Act, so administered as to recognize and preserve the inherent advantages of each; to promote safe, adequate, economical, and efficient service and foster sound economic conditions in transportation and among the several carriers; to encourage the establishment and maintenance of reasonable charges for transportation services, without unjust discriminations, undue preferences or advantages, or unfair or destructive competitive practices; to cooperate with the several States and the duly authorized officials thereof; and to encourage fair wages and equitable working conditions; — all to the end of developing, coordinating, and preserving a national transportation system by water, highway, and rail, as well as other means, adequate to meet the needs of the commerce of the United States, of the Postal Service, and of the national defense. All of the provisions of this Act shall be administered and enforced with a view to carrying out the above declaration of policy." (Italics supplied)

As here relevant, Section 216(b) of the Interstate Commerce Act, 49 U.S.C. § 316(b) (1958), requires all motor common carriers "to establish, observe, and enforce just and reasonable rates * * * and just and reasonable regulations and practices relating thereto * * * and all other matters relating to or connected with the transportation of property in interstate or foreign commerce".

Section 216(d) requires all charges to be "just and reasonable" and prohibits and declares unlawful every "unjust and unreasonable charge". Section 216(g) places the burden of proof upon a carrier at any hearing involving a change of rate to show that the proposed changed rate or practice is "just and reasonable".

The court must satisfy itself that these policies have been followed. "Just as we would overstep our duty by undertaking to evaluate the evidence according to our own notions of the public interest, we would shirk our duty were we summarily to approve the Commission's evaluation of the record without determining that the agency's evaluation had been made in accordance with the mandates of Congress".¹⁴

As to the sufficiency of evidence to support the order, it is not the proper function of the court to substitute its judgment or to weigh evidence in place of the Commission.¹⁵ On the other hand, the court must review the record without a rubber stamp approach. As stated in Nashua Motor Exp., Inc. v. United States, supra note 15, 230 F.Supp. at 650:

"This court is bound to inquire into every aspect of the proceedings below wherein it may appear that the Commission has otherwise applied an erroneous standard of law, or has made arbitrary findings, or has reached ultimate conclusions without adequate subordinate findings, or has failed in any other way to observe those procedures of investigation and elaboration which have become the hallmarks of proper administrative determination."

Background and Facts

Since the beginning of Federal Government regulation of the motor carrier industry, and even before, there have been two basic methods of operation for motor carrier transportation. One method has been for the carrier to assume full responsibility for all aspects of its service to the public — i. e., to own its vehicles and equipment, to maintain and service this equipment, and to hire its own employees — in general, a self-sustaining operation. The other method (called herein the "owner-operator" method) has been to purchase or hire "owner-operators" to perform a portion or all of its service to the public. These owner-operators are not carriers and are not directly regulated by the I. C. C. They own the furnished vehicles, provide the drivers, and assume responsibility for many of the operation details, such as the maintenance and servicing of vehicles. The compensation of the owner-operators is on the basis of a fixed sum or a percentage of the revenue of the carrier from the operations.

In regulating the motor carrier industry, the Commission frequently is required to determine whether the rates charged the public are "just and reasonable".¹⁶ This question arises often in connection with a proposed rate reduction — as in the present case. In order to meet the criterion of justness and reasonableness, the Commission has consistently held that the rates must be "compensable" — i. e., that the revenues must defray operation expenses and yield a reasonable return.¹⁷ This standard is not in dispute. Rather, the controversy in this litigation goes to the type of evidence required to prove that a rate is compensatory.

One of the methods¹⁸ used to prove the compensativeness of rates, and the prevailing method, is to introduce evidence of total costs and to compare them with evidence of total revenue. This is the "costs method" with which we are concerned in this litigation. Self-sustaining carriers, owning and operating their equipment are required to furnish evidence of their own actual costs for comparison with their revenue. However, carriers using the owner-operator method present the problem out of which grows this litigation, and it is this: Should they be required to show their own costs and the actual costs incurred by the owner-operators for comparison with total revenue? Or should they be allowed to show only their own costs plus the lump sum paid to the owner-operators, without evidence of the actual costs incurred...