Hudson Transit Lines, Inc. v. U.S.I.C.C.

• Decision Date: 17 June 1985
• Docket Number: 262,Nos. 105,393,s. 105
• Citation: 765 F.2d 329
• Parties: HUDSON TRANSIT LINES, INC., Hudson Transit Corp., Petitioners, v. UNITED STATES of America, INTERSTATE COMMERCE COMMISSION and Pine Hill-Kingston Bus Corp., Respondents, HUDSON TRANSIT LINES, INC., Hudson Transit Corp., Petitioners, v. UNITED STATES of America, INTERSTATE COMMERCE COMMISSION and Adirondack Transit Lines, Inc., Respondents, American Bus Association, Intervenor. STATE of NEW JERSEY, DEPT. OF TRANSPORTATION, Petitioner, v. INTERSTATE COMMERCE COMMISSION and United States of America, Respondents. to 396, Dockets 83-4165, 83-4171, 84-4077, 84-4079, 84-4105 and 84-4107.
• Court: U.S. Court of Appeals — Second Circuit

Page 329

765 F.2d 329

HUDSON TRANSIT LINES, INC., Hudson Transit Corp., Petitioners, v. UNITED STATES of America, INTERSTATE COMMERCE COMMISSION and Pine Hill-Kingston Bus Corp., Respondents, HUDSON TRANSIT LINES, INC., Hudson Transit Corp., Petitioners, v. UNITED STATES of America, INTERSTATE COMMERCE COMMISSION and Adirondack Transit Lines, Inc., Respondents, American Bus Association, Intervenor.

STATE of NEW JERSEY, DEPT. OF TRANSPORTATION, Petitioner, v. INTERSTATE COMMERCE COMMISSION and United States of America,

Respondents.

Nos. 105, 262, 393 to 396, Dockets 83-4165, 83-4171,

84-4077, 84-4079, 84-4105 and 84-4107.

United States Court of Appeals Second Circuit.

Argued Nov. 19, 1984.

Decided June 17, 1985.

Samuel B. Zinder, Great Neck, N.Y. (Samuel B. Zinder, P.C., Great Neck, N.Y., of counsel), for petitioners Hudson Transit Lines, Inc. and Hudson Transit Corp. Masha D. Rozman, Deputy Atty. Gen., Trenton, N.J. (Irwin I. Kimmelman, Atty. Gen. of N.J., James J. Ciancia, Asst. Atty. Gen., Trenton, N.J., of counsel), for petitioner N.J. Dept. of Transp.

Laurence H. Schecker, Washington, D.C. (Robert S. Burk, Ellen D. Hanson, I.C.C., Washington, D.C., (J. Paul McGrath, Robert B. Nicholson, Margaret Halpern, Dept. of Justice, Washington, D.C., of counsel), for respondents.

Before LUMBARD, MANSFIELD and CARDAMONE, Circuit Judges.

CARDAMONE, Circuit Judge.

Since the end of World War II Americans' overwhelming preference for the use of their private automobiles has been the primary cause of a seriously eroded public transport. As a result, the intercity passenger bus industry in the United States is in a state of decline that shows little sign of turning about. During the depths of the depression in the 1930's there was widespread concern over the creation of an oversupply of passenger transportation. To meet this concern, Congress in 1935 empowered the Interstate Commerce Commission to bring about equality of regulation between intrastate and interstate motor carriers to prevent such an oversupply. In the last decade the winds of deregulation have swirled through the legislature, first sweeping away the ICC's authority over rail and air travel, and then leading Congress to enact the Bus Regulatory Reform Act of 1982, designed to deregulate the ailing bus industry. Congress's new prescription for the financially ailing bus industry, embodied in the 1982 legislation, places a new emphasis on increased competition and aims to rejuvenate intercity bus travel.

These consolidated appeals are taken from decisions of the Interstate Commerce Commission (ICC or Commission) granting applicant bus companies unrestricted authority to transport passengers in the suburban New York City area and to Atlantic City, New Jersey. In the first group of cases an existing commuter service carrier has challenged the Commission's refusal to impose operating restrictions on its grant of certain licenses permitting applicants to provide service. In the second group of cases the State of New Jersey has challenged ICC orders that authorized two carriers to provide bus service to Atlantic City, claiming that such service would constitute prohibited special operations. These issues require us to analyze, for the first time, the Bus Regulatory Reform Act of 1982. Before analyzing these issues, it is necessary to review briefly Congress's involvement in the interstate bus industry.

I REGULATORY BACKGROUND

Intercity bus transportation in the United States had its genesis around 1910. By 1930 virtually every state regulated the industry. Because of the Supreme Court's ruling in Buck v. Kuykendall, 267 U.S. 307, 45 S.Ct. 324, 69 L.Ed. 623 (1925), the scope of state regulation was limited to intrastate bus transportation, leaving unregulated the growing interstate bus industry. In the 1930's bus companies, trade associations, railroads, and state regulatory agencies called for federal legislation. The depression had undercut the financial stability of many carriers, and it was feared that competition would drive them out of business. Falling prices had caused many carriers to lower their service and safety standards.

In response Congress enacted the Motor Carrier Act of 1935 which led to the organization of a highly regulated, public utility-type bus industry. That Act empowered the Commission to control the number of carriers and the service provided. The Act's licensing provisions, which applied equally to motor carriers of property and passengers, required motor carriers to demonstrate to the ICC that they were "fit, willing, and able" to perform the proposed service, and that the service was "required by the present or future public convenience and necessity." Motor Carrier Act of 1935 Sec. 207(a), 49 U.S.C. Sec. 307(a) (1976) (later codified at 49 U.S.C. Sec. 10922(a) (Supp. IV 1980)), amended by Bus Regulatory Reform Act of 1982 Sec. 7, 49 U.S.C. Sec. 10922(c) (Bus Regulatory Reform Act sections hereinafter referred to by sections of Title 49, U.S.C.). The Commission could issue a certificate only for operations over a "regular route and between specified places." 49 U.S.C. Sec. 10922(e)(3) (Supp. IV 1980). Regular-route service involves scheduled transportation between fixed points over specific routes or highways. See Falwell v. United States, 69 F.Supp. 71, 77 (W.D.Va.1946), aff'd, 340 U.S. 807, 67 S.Ct. 1087, 91 L.Ed. 1264 (1947). This type of service operates on a published timetable so that passengers can wait at a terminal or roadside stop on a designated route and be confident that sooner or later a bus will come along to collect them. The regular-route system eventually covered all of the United States, Canada, and Mexico and it is now possible to make a journey by bus from Alaska to Panama. See Thoms, Unleashing the Greyhounds--The Bus Regulatory Reform Act of 1982, 6 Campbell L.Rev. 75, 87 (1984).

The Commission first established the test which it would use to apply the "public convenience and necessity" standard in Pan-American Bus Lines Operation, 1 M.C.C. 190, 203 (1936), stating:

The question, in substance, is whether the new operation or service will serve a useful public purpose, responsive to a public demand or need; whether this purpose can and will be served as well by existing lines or carriers; and whether it can be served by applicant with the new operation or service proposed without endangering or impairing the operations of existing carriers contrary to the public interest.

To prevent an oversupply of transportation, the Commission applied this test for over 40 years.

By the early 1970's economists and administrators clamored for a change and urged the creation of a regulatory scheme that would abandon the protectionist system of the 1935 Act and encourage free market management of the industry. See Adams, A Changing Transportation Policy for the 1980's, 17 Harv.J. on Legis. 397, 397-98 (1980). As a consequence, the ICC began more frequently to consider the benefits of competition in reaching its decisions, see Bowman Transportation, Inc. v. Arkansas-Best Freight System, Inc., 419 U.S. 281, 297-99, 95 S.Ct. 438, 447-48, 42 L.Ed.2d 447 (1974) (recognizing the Commission's "prerogative" to adopt a "policy of facilitating competitive market structure"). It shifted the burden with respect to the third part of the Pan-American guidelines to require the objectant to show that existing operations would be impaired in a way that would harm the public interest, see Airport Shuttle Service, Inc. v. I.C.C., 676 F.2d 836, 839 n. 5 (D.C.Cir.1982), and modified the Pan-American test by eliminating the second, and most "protectionist," criterion, see Assure Competitive Transportation, Inc. v. United States, 635 F.2d 1301, 1305-06 (7th Cir.1980) (finding it within the Commission's power to give more weight in its decisions to "the benefits of healthy competition and less to protecting existing carriers"). The Commission concluded that a more competitive market with easier entry would allow new carriers to provide efficient service using modern technology.

Thus, although the Commission had shifted its decision-making emphasis, the 1935 Act remained virtually unchanged until Congress enacted the Motor Carrier Act of 1980. This Act effected two major revisions. First, it eased entry into, and significantly reduced barriers to competition in, the trucking industry. The House Report, H.R.Rep. No. 1069, 96th Cong., 2d Sess. 3, reprinted in 1980 U.S.Code Cong. & Ad.News 2283, 2285, stated:

The legislation establishes a new Federal policy which is to promote a competitive and efficient motor carrier industry in order to accomplish certain goals. Those goals include meeting the needs of shippers, receivers, and consumers; allowing price flexibility; encouraging greater efficiency, particularly in the use of fuel; and providing service to small communities.

Congress designed the 1980 Act "[to] increase[ ] opportunities for new carriers to get into the trucking business and for existing carriers to expand their services." Id. It virtually eliminated collective ratemaking in the trucking industry. Id. at 2285-2286. Second, it revised the procedural handling of all motor carrier cases to expedite the proceedings before the Commission. The new procedures allowed the ICC to handle almost all of its cases without formal hearings or personal appearances by the parties. Oral hearings are used infrequently. 49 C.F.R. Secs. 1160.68, 1160.72 (1984). See American Transfer & Storage Co. v. ICC, 719 F.2d 1283, 1301 (5th Cir.1983). The 1980 Act did not affect the licensing of buses.

In 1982 Congress enacted the Bus Regulatory Reform Act (Bus Reform Act or Act), the statute before us on this appeal. Picking up where the Motor Carrier Act of 1980 left off, the Bus Reform Act was designed to facilitate entry into the intercity passenger carriage market by replacing the traditional "public convenience and necessity" test with a ...