Ligon Specialized Hauler, Inc. v. I. C. C.

• Decision Date: 14 November 1978
• Docket Number: 77-3253,Nos. 77-3202,s. 77-3202
• Citation: 587 F.2d 304
• Parties: LIGON SPECIALIZED HAULER, INC., Petitioner, v. INTERSTATE COMMERCE COMMISSION and United States of America, Respondents. TRANSAMERICAN FREIGHT LINES, INC., Petitioner, v. UNITED STATES of America and the Interstate Commerce Commission, Respondents.
• Court: U.S. Court of Appeals — Sixth Circuit

Page 304

587 F.2d 304

LIGON SPECIALIZED HAULER, INC., Petitioner, v. INTERSTATE COMMERCE COMMISSION and United States of America,

Respondents.

TRANSAMERICAN FREIGHT LINES, INC., Petitioner, v. UNITED STATES of America and the Interstate Commerce

Commission, Respondents.

Nos. 77-3202, 77-3253.

United States Court of Appeals, Sixth Circuit.

Argued June 5, 1978.

Decided Nov. 14, 1978.

William E. Scent, Tarrant, Combs & Bullitt, Lexington, Ky., Bert T. Combs, Louisville, Ky., Carl U. Hurst, Jr., Madisonville, Ky., for petitioner in 77-3202.

Griffin B. Bell, Atty. Gen. of U. S., Dept. of Justice, and Kenneth G. Caplan, I. C. C., Washington, D. C., for respondents in both cases.

Joen Grant, Atty. Gen., U. S. Dept. of Justice, Washington, D. C., Robert B. Nicholson, Mark L. Evans, Raymond M. Ripple, Interstate Commerce Commission, Washington, D. C., for respondents in 77-3202.

Thomas E. Reiss, McClintock, Donovan, Carson & Roach, Detroit, Mich., James W. Hagar, William A. Chesnutt, McNees, Wallace & Nurick, Washington, D. C., for petitioner in 77-3253.

Barry Grossman, Wm. D. Coston, Gen. Counsel, Interstate Commerce Commission, Washington, D. C., for respondents in 77-3253.

Before EDWARDS, Circuit Judge, PECK, Senior Circuit Judge, and BALLANTINE, District Judge. ^*

JOHN W. PECK, Senior Circuit Judge.

Respondent Interstate Commerce Commission (ICC) has the responsibility under 49 U.S.C. §§ 306-07 of issuing certificates of convenience and necessity to carriers of goods in interstate commerce. Without such a certificate of convenience and necessity, a carrier cannot lawfully transport goods in interstate commerce. Before the ICC approves an application, however, it must determine that (1) the carrier is fit, willing, and able to perform the service proposed ("operational fitness"), (2) the carrier is fit, willing, and able to conform to the provisions of the Interstate Commerce Act and the requirements of the ICC ("compliance fitness"), and (3) the proposed service is warranted by the public convenience and necessity.

The ICC has employed a "flagging" procedure in considering applications for new operating authority submitted by established carriers. Under this practice, when an applicant's fitness as a carrier has been placed in issue in any formal proceeding conducted by the ICC, final disposition of any application for new authority submitted by that carrier thereafter will be stayed until the investigation pursuant to the proceeding is resolved or terminated.

Petitioner Ligon Specialized Hauler, Inc. (Ligon), a Kentucky corporation, has had, as of the filing of its main brief, fifty-seven applications for operating authority stayed under this "flagging" procedure. Petitioner Transamerican Freight Lines, Inc. (Transamerican), a Michigan corporation, has had, as of the filing of its main brief, six applications for operating authority stayed under the flagging procedure. Both Ligon and Transamerican have filed petitions seeking relief in this Court from the flagging procedures employed in their cases and to have their applications for operating authority promptly considered. ¹ This relief we grant.

I

Petitioners Ligon and Transamerican transport goods in interstate commerce as authorized under the ICC certificates of convenience and necessity. The ICC issues precise, limited certificates, listing both the exact goods to be carried and the original destination of the transportation. Because the ICC issues only product-specific and route-specific certificates, virtually all new business secured by a carrier must be approved by the ICC. A carrier's business will thus stagnate unless it obtains new certificates of convenience and necessity in order to meet the transportation needs of new customers and the new shipping demands of old customers. See North American Van Lines, Inc. v. United States, 412 F.Supp. 782, 785 (N.D.Ind.1976) (NAVL II ); R. Fellmeth, The Interstate Commerce Omission 120-21 (1970). This effect of the ICC flagging procedure must be kept in mind as we review the factual background of Ligon's and Transamerican's petitions to this Court.

NO. 77-3202

On November 9, 1972, Ligon filed with the ICC an application, numbered MC-119777 (Sub-No. 245), for a certificate of convenience and necessity in order to transport certain commodities (valves, fittings, hangers, gaskets, hydrants, forgings, castings, pipe, sprinkler heads, connections, heaters, and parts and accessories for these commodities) between the plant sites and warehouse facilities of ITT Grinnel Corporation in nine southern and western states. The ICC Bureau of Enforcement replied that the Bureau would participate in the hearing on Sub-No. 245, primarily with respect to the issue of the "fitness" of Ligon. At this time, Ligon had many other applications for additional operating authority pending before the ICC, applications which had been approved but which had not been fully processed. After Ligon's application in Sub-No. 245 the ICC refused to issue the certificates, an action which constituted an informal flagging of these applications.

The ICC then reopened an earlier application for further consideration of Ligon's fitness. The ICC had found Ligon fit in that application and had granted Ligon authority, which was for the transportation of lumber and lumber products from Leola, Sheridan, and Pine Bluff, Arkansas to points in fifteen southern and midwestern states. This was the first formal Ex parte flagging order that ICC entered against Ligon. All subsequent Ligon grants of authority flagged by formal order were, until late 1976, by the ICC's own action, either held open or reopened for further consideration of Ligon's fitness at a date subsequent to the final determination of that issue in Sub-No. 245.

By the time formal hearing on Sub-No. 245 was held, the ICC had withheld twelve grants of authority to Ligon. During the period of time between the close of the Sub-No. 245 hearing and the filing of the administrative law judge's decision nearly a year later, the ICC flagged eleven additional grants of authority to Ligon.

On September 23, 1974, an administrative law judge determined in Sub-No. 245 that Ligon was fit and that Ligon should be given a grant of authority. Approximately one month later, the ICC's Bureau of Enforcement filed exceptions to the administrative law judge's recommended order. The exceptions did not challenge the administrative law judge's finding as to Ligon's fitness and merely sought some changes in the findings of fact made by the judge. Consequently, Ligon promptly replied that it agreed with the Bureau and urged that a ruling on the exceptions be expedited so that Ligon's applications for authority being flagged due to the question of Ligon's fitness in Sub-No. 245 could be processed. Nevertheless, the ICC took no action with respect to Sub-No. 245 for more than one year after the administrative law judge rendered his report. Moreover, the ICC continued to flag Ligon's applications for certificates of operating authority, even in a number of applications in which Ligon was found fit.

Following an investigation by the ICC's Bureau of Enforcement, the ICC instituted two complaint proceedings against Ligon and several other companies. On October 7, 1975, the ICC's Bureau of Enforcement filed a petition for further hearing on Ligon's fitness in Sub-No. 245 and for consolidation of that hearing with the two complaint proceedings. Ligon protested that the delays were costing it much revenue because the flags on its applications for certificates of operating authority remained in effect. Despite this protest, the ICC reopened Sub-No. 245 and consolidated it with the two complaint proceedings, in accordance with the request of the ICC's Bureau of Enforcement. Ligon petitioned the ICC to reconsider that decision, but the request was denied.

On March 1, 1976, Ligon filed a petition with the ICC to have certificates of operating authority issued in fifty-two pending application proceedings. This petition was accompanied by an affidavit of Herbert A. Ligon, Jr., who stated that because of the flagging Ligon had lost and was continuing to lose 15,808 to 23,712 shipments annually and $8.7 million to $13 million in revenues. The ICC's Bureau of Enforcement did not reply to or oppose Ligon's petition until the ICC issued a show cause order on September 15, 1976. Still, the ICC delayed for seven months ruling on Ligon's petition but then on September 29, 1976, denied Ligon's application, except with respect to two applications.

By this time, the ICC was following a new flagging procedure. On July 28, 1976, the ICC had issued an order in Ex Parte No. 55 (Sub-No. 23), setting forth fitness flagging procedures, which were proposed rules governing flagging. The order was issued as a result of the decision in NAVL II, Supra, 412 F.Supp. 782. In that case, a three-judge district court held that the ICC's ex parte practice of automatically flagging all applications of a carrier for operating authority wherever the carrier's fitness was in question in any one application was unlawful because it was arbitrary under the Administrative Procedure Act and because it was in excess of statutory authority under the Interstate Commerce Act. The ICC did not appeal that decision but instead instituted rules to govern flagging in an apparent effort to make the practice of flagging lawful under the NAVL II decision.

These rules provided for a show cause hearing when an application was made by a carrier for operating authority and the carrier had applications flagged because of the question of the carrier's fitness. The proposed procedures were made immediately applicable to carriers subject to fitness questions.

In the case of Ligon, on September 15, 1976, the ICC issued a show cause order. As directed by the order the Bureau of Enforcement filed Unverified assertions of fact alleging improper conduct of Ligon which the...