Pre-Fab Transit Co. v. U.S.

• Decision Date: 30 March 1979
• Docket Number: No. 78-1352,PRE-FAB,78-1352
• Parties: TRANSIT CO., an Illinois Corporation, Petitioner, v. UNITED STATES of America and Interstate Commerce Commission, Respondents.
• Court: U.S. Court of Appeals — Seventh Circuit

Page 384

595 F.2d 384

PRE-FAB TRANSIT CO., an Illinois Corporation, Petitioner, v. UNITED STATES of America and Interstate Commerce Commission,

Respondents.

No. 78-1352.

United States Court of Appeals, Seventh Circuit.

Argued Jan. 5, 1979.

Decided March 30, 1979.

Chandler L. Van Orman, Washington, D. C., for petitioner.

James P. Tuite, ICC, Washington, D. C., for respondents.

Before TONE and WOOD, Circuit Judges, and EAST, ^* District Judge.

EAST, District Judge.

Pre-Fab Transit Co. (Pre-Fab) petitions for review of an order of the Interstate Commerce Commission (ICC) denying its application for authority to carry prefabricated buildings and related accessories from Houston, Texas to points in 14 states. We note jurisdiction under 28 U.S.C. §§ 2321 and 2342, and affirm the ICC's order.

BACKGROUND

Pre-Fab, an Illinois corporation, is a common carrier engaged in nationwide transportation of specific commodities under authority grants from the ICC.

On October 14, 1975, Pre-Fab filed an application with the ICC for authority to transport over irregular routes: (1) buildings, complete, knocked down, or in sections, (2) building sections, and building panels, (3) parts and accessories used in the installation and completion of commodities in (1) and (2) above, and (4) metal prefabricated structural components and panels, and accessories used in the installation and completion thereof. Pre-Fab has been transporting some of these commodities under temporary and emergency temporary authority grants since 1974.

Section 207 of the Interstate Commerce Act, 49 U.S.C. § 307, provides:

"(A) certificate shall be issued to any qualified applicant therefor, authorizing the whole or any part of the operations covered by the application, if it is found that the applicant is fit, willing, and able properly to perform the service proposed and to conform to the provisions of this chapter and the requirements, rules, and regulations of the Commission thereunder, and that the proposed service, to the extent to be authorized by the certificate, is or will be required by the present or future public convenience and necessity; otherwise such application shall be denied . . . ."

The Administrative Law Judge (ALJ) found that the proposed shipments fell within the authority of "heavy haulers." ¹ Because heavy haulers were already available, the ALJ concluded that Pre-Fab's services were not required by "present or future public convenience and necessity" within the meaning of § 207.

The components of the buildings Pre-Fab proposed to carry included major structural items, secondary framing members, panels, sheets and accessories. The major structural items are undisputedly within heavy hauler authority. The focus of the dispute is the panels, which are shipped in bundles which exceed 200 pounds and require use of special equipment. If these panels were merely incidental to the heavy items, heavy haulers could carry them in the same shipment regardless of whether the panels were themselves appropriate subjects of heavy hauling certificates. But under the reasoning of Sammons Trucking, Extension Galesburg, Ill., 119 MCC 826, 834-35 (1974), the bundled panels constitute too great a portion of the entire building to be considered "related and incidental" to transportation of the larger items.

An obstacle to the panels qualifying in their own right for carriage by heavy haulers is the presumption that the individual commodity is the controlling consideration in determining which carriers have authority to transport aggregated commodities. W. J. Dillner Transfer Co. Investigation of Operations, 79 MCC 335, 358 (1959), Aff'd 193 F.Supp. 823, (W.D.Pa.1961), and 368 U.S. 6, 82 S.Ct. 16, 7 L.Ed.2d 16 (1961). The ALJ found that the panels fit within the limited exception which allows consideration of the aggregated items as a whole when the commodities require aggregation due to their "inherent nature." Ace Doran Hauling & Rigging Co., Investigation, 108 MCC 717 (1969), Aff'd sub nom. Pittsburgh & New England Trucking Co. v. United States and ICC, 345 F.Supp. 743 (W.D.Pa.1972), Aff'd, 409 U.S. 904 and 1070, 93 S.Ct. 235, 686, 34 L.Ed.2d 169, 660 (1972). With a great preponderance of the components found to be within heavy hauling authority, the accessorial items were determined to be incidental and likewise within heavy hauling operating authority.

Pre-Fab filed exceptions to the ALJ's decision, contending error in the conclusion that heavy haulers were authorized to carry the commodities. The ICC affirmed the ALJ's decision, and Pre-Fab filed this petition for judicial review.

ISSUES ON APPEAL

1. Whether the ICC acted arbitrarily or capriciously or abused its discretion in departing 2. Whether the ICC's decision was supported by substantial evidence.

from agency precedent to hold that the commodities were within the scope of heavy hauler certificates.

SCOPE OF REVIEW

The scope of review of an order of the ICC is governed by the Administrative Procedure Act, 5 U.S.C. § 706. Bowman Transportation, Inc. v. Arkansas-Best Freight System, Inc., 419 U.S. 281, 283-84, 95 S.Ct. 438, 441, 42 L.Ed.2d 447 (1974). The reviewing court is directed to:

"(2) hold unlawful and set aside agency action, findings, and conclusions found to be

"(A) arbitrary, capricious, an abuse of discretion, or otherwise not in accordance with law;

" . . . (or)

"(E) unsupported by substantial evidence . . . ."

This standard of review is narrow. The Court may not substitute its judgment for that of the agency. "The purpose of Congress was to leave to the Commission authoritatively to decide whether additional motor service would serve public convenience and necessity." ICC v. Parker, 326 U.S. 60, 65, 65 S.Ct. 1490, 1493, 89 L.Ed. 2051 (1945).

The ICC relies on Andrew G. Nelson, Inc. v. United States, 355 U.S. 554, 558, 78 S.Ct. 496, 2 L.Ed.2d 484 (1958), in which the Supreme Court held that interpretations by the ICC of its own permits are controlling on the courts unless clearly erroneous. The Eighth Circuit has, in some cases, applied the clearly erroneous standard in addition to the arbitrary or capricious or substantial evidence tests. Dart Transit Co. v. United States, 567 F.2d 818, 820 (8th Cir. 1977); Jones Truck Lines, Inc. v. ICC, 563 F.2d 899, 900 (8th Cir. 1977).

In Sawyer Transport, Inc. v. United States, 565 F.2d 474 (7th Cir. 1977), this Court reviewed the ICC's denial of an application for a certificate of public convenience and necessity. Without expressly declaring the proper scope of review, the Court considered Sawyer's allegations that the ICC's decision was arbitrary, capricious, unsupported by substantial evidence, and not in accordance with law. We now take the opportunity afforded by Pre-Fab's petition to join the many circuits which have explicitly held that 5 U.S.C. § 706 states the proper scope of review of an ICC order. ²

DEPARTURE FROM AGENCY PRECEDENT

Administrative agencies are not bound by the doctrine of stare decisis. And "the restrictiveness of our scope of review does not permit us to reverse an ICC action merely because the decision arguably may be inconsistent with prior ICC decisions." Sawyer, 565 F.2d at 477. Agencies have a duty, however, to explain departures from agency norms. Atchison, Topeka & Santa Fe Railway Co. v. Wichita Board of Trade, 412 U.S. 800, 808, 93 S.Ct. 2367, 37 L.Ed.2d 350 (1973). "The Commission cannot disregard its own precedents but must reasonably explain an alternation of policy." Hilt Truck Line, Inc. v. United States, 548 F.2d 214, 216 (7th Cir. 1977).

Pre-Fab complains that the ICC's decision is inconsistent with prior decisions holding the same or similar commodities beyond heavy hauler authority. It is true that the ICC's cases dealing with authority to carry aggregated bundles are confusing and unpredictable.

In Black Investigation of Operations, 64 MCC 443 (1955), the Commission was concerned with large flat thin sheets of steel and aluminum, which were bundled because Dillner applied the "inherent nature" test used in Black, but stated that Black represented a strictly limited exception to the general rule that the individual commodity controls a carrier's authority. 79 MCC at 358.

of handling difficulty and because damage to the sheets was likely if they were handled individually. The Commission distinguished between aggregation for the purpose of efficiency and aggregation required by the inherent nature of the commodity. It found that the inherent nature of the sheets required bundling; the bundles, which required use of special equipment, were, therefore, within heavy hauler authority.

The leading case on this subject is Ace Doran Hauling & Rigging Co. Affirming the prior developments in the agency case law on aggregated items, the Commission stated:

"(1) With respect to bundled, aggregated or palletized commodities, the presumption described in the Dillner case, 79 MCC 335, at 358 that such shipments, in the absence of a sound basis for a contrary conclusion, are outside the scope of heavy-hauler authority is reaffirmed without modification.

"(1a) That, again in accordance with Dillner, exceptions to the foregoing general rule will not be recognized when the use of aggregation is attributable solely to considerations relating to economy and efficiency; but, once a commodity's 'inherent nature' is found to necessitate aggregation, the latter concepts must be taken into account in determining the minimum size bundle required." 108 MCC at 757.

The Commission noted certain guidelines ³ to use in determining whether bundling is required by the inherent...