Interstate Commerce Commission v. Parker/Opinion of the Court

There appeals bring here for review a final judgment of the Special District Court which enjoined the enforcement of an order of the Interstate Commerce Commission. The proceedings below and the appeals here were brought under 28 U.S.C. § 41(28), §§ 43-48 and § 345, 28 U.S.C.A. §§ 41(28), 43-48, 345. The report of the Commission appears under the title Willett Co. of Ind., Inc., Extension-Fort Wayne-Mackinaw City, 42 M.C.C. 721. The district court did not file an opinion.

The applicant, the Willett Company, is a wholly owned, common carrier by motor, sunsidiary of the Pennsylvania Railroad Company. Previous to this application it held motor carrier operating rights for some twenty-five routes which paralleled lines of the Pennsylvania Railroad at other points than these covered by this application. Fort Wayne was included. Willett sought to secure from the Commission in this case certificates of convenience and necessity for seven additional routes extending along the lines of the Pennsylvania Railroad between Fort Wayne, Indiana, and Mackinaw City, Michigan.

The applications were granted after findings that Willett would r nder service auxiliary to and supplemental of the Pennsylvania's service in the transportation of less-than-carload freight. The service is to be rendered on railroad billings and is to employ railroad fixed and clerical facilities. The Commission found that Willett's service would be coordinated with the rail service and under railroad supervision. 42 M.C.C. 725; 21 M.C.C. at 407. It also found that the present and future public convenience and necessity required those motor carrier operations.

In accordance with the policy of the Commission in granting certificates to railroad motor carrier affiliates to improve the service of the railroad, the Commission limited the carrier to service which is auxiliary to or supplemental of the rail service of the Pennsylvania. It forbade service to 'any point not a station on a rail line of the railroad,' and took steps to keep the Commission informed of the contractual arrangements between Willett and the Pennsylvania.

While the routes paralleled the lines of the Pennsylvania in northern Indiana and the southern peninsula of Michigan, the authorization to Willett forbade the transportation by applicant as a common carrier of any shipments from Fort Wayne, Indiana, to Grand Rapids, Michigan, or through or to or from more than one of said points. The purpose of this limitation was to restrict Willett to transportation truly supplemental or auxiliary to the rail traffic. The two cities are break-bulk or key points. Less-than-carload freight comes to or leaves them in carload lots. When a mixed carload reaches one of these key points, the contents are distributed to the smaller, intermediate points of destination as way-freight by 'peddler' cars. The Willett Company seeks to take over this 'peddler' work and not to do over-the-road trucking. Such motor-rail coordination has proven successful in improving service and reducing carrier costs.

As a further assurance that Willett might not inadvertently have received privileges beyond the Commission's intention to grant, a right was reserved by the Commission to impose such further specific conditions as it might find necessary in the future to restrict Willett's operation 'to service which is auxiliary to, or supplemental of, the rail service.'

The operation of the order of the Commission was enjoined by the district court because there was no substantial evidence to support the order of the Commission that public convenience and necessity required the issuance of a certificate to Willett. The district court said in the findings of fact that there was no proof that the present highway, common motor carrier transportation service by certificated carriers was or would be inadequate to serve the public need. The appellants, of course, contest here the soundness of the district court judgment.

The Interstate Commerce Commission insists that its order authorizing the issuance to Willett of the certificates of convenience and necessity for the specified routes is valid. It bases its contention on the statutory provisions which authorize the Commission to act in regulation of motor carriers and asserts its compliance with them. Under the Interstate Commerce Act, part II, Sec. 206(a), 49 Stat. 551, 49 U.S.C.A. § 306(a), no motor vehicle subject to the act may operate on the highways without a certificate of public convenience and necessity. Section 207(a) provides for issuance of the certificate on application, if the proposed service 'is or will be required by the present or future public convenience and necessity.' No other provisions are here involved. The entire subsection appears below. A finding of public convenience and necessity was made, 42 M.C.C. at 726, but that ultimate finding must have been based on the proper statutory criteria and must have had the necessary factual findings to support it.

Public convenience and necessity is not defined by the statute. The nouns in the phrase possess connotations which have evolved from the half-century experience of government in the regulation of transportation. When Congress in 1935 amended the Interstate Commerce Act by adding the Motor Carrier Act, it chose the same words to state the condition for new motor lines which had been employed for similar purposes for railroads in the same act since the Transportation Act of 1920, § 402(18) and (20), 41 Stat. 477, 49 U.S.C.A. § 1(18, 20). Such use indicated a continuation of the administrative and judicial interpretation of the language. Cf. Case v. Los Angeles Lumber Co., 308 U.S. 106, 115, 60 S.Ct. 1, 7, 84 L.Ed. 110. The Commission has assumed, as its duty under these earlier subsections, the finding of facts and the exercise of its judgment to determine public convenience and necessity. This Court approved this construction. Chesapeake & Ohio Ry. v. United States, 283 U.S. 35, 42, 51 S.Ct. 337, 339, 75 L.Ed. 824. Cf. Gray v. Powell, 314 U.S. 402, 411, 412, 62 S.Ct. 326, 332, 86 L.Ed. 301. The purpose of Congress was to leave to the Commission authoritatively to decide whether additional motor service would serve public convenience and necessity. Cf. Powell v. United States, 300 U.S. 276, 287, 57 S.Ct. 470, 476, 81 L.Ed. 643. This, of course, gives administrative discretion to the Commission, cf. McLean Trucking Co. v. United States, 321 U.S. 67, 87, 88, 64 S.Ct. 370, 380, 381, 88 L.Ed. 544, to draw its conclusion from the infinite variety of circumstances which may occur in specific instances. The disputants, here, do not clash over the power of the Commission to determine the need for the new service or that it will serve the public convenience and necessity. The evidence is ample and uncontradicted that delivery by motor of less-than-carload freight to way stations is a more adequate, efficient and economical method for railroads than by 'peddler' car. They join issue on the Commission's determination as to the carrier which will render that service. Shall it be by the railroad through the use of its trucking subsidiary or by the existing common carriers by motor? The National Transportation Policy has recently been authoritatively summarized by Congress. That declaration requires administration so as to preserve the inherent advantages of each method of transportation and to promote 'safe, adequate, economical, and efficient service.' Such broad generalizations, while well expressing the Congressional purpose, must frequently produce overlapping aims. In such situations, the solution lies in the balancing by the Commission of the public interests in the different types of carriers with due regard to the declared purposes of Congress. Cf. Interstate Commerce Comm. v. Inland Waterways Corp., 319 U.S. 671, 691, 63 S.Ct. 1296, 1307, 87 L.Ed. 1655; United States v. Pennsylvania R.R. Co., 323 U.S. 612, 65 S.Ct. 471.

When Congress directed that the act should be administered to preserve the inherent advantages of each mode of transportation, it is abundantly clear that it was not intended to bar railroads from the operation of off-the-rail motor vehicles. In 1938 when committee hearings were being held to consider amendments to the Motor Carrier Act, 1935, Mr. Eastman explained the difference in opinion as to whether or not railroads should acquire motor carriers. Section 213(a) of the 1935 act specifically regulated acquisition of motor carriers by railroads. Provision for such acquisitions appear now in Section 5 of the Interstate Commerce Act, 54 Stat. 905, 49 U.S.C.A. § 5. See McLean Trucking Co. v. United States, supra. Section 202(c)(1) of the 1940 Interstate Commerce Act, part II, as amended, withdraws railroad operation of motor carriers in terminal areas from the scope of motor carrier regulation and leaves such operations under part I. Railroads may, therefore, in appropriate places operate trucks. However, since the preservation of the inherent advantages of motor carriers is of equal importance with efficiency under the national transportation policy, the Commission must weigh the needs of the railroad against disadvantages to the motor carriers to find the balance of public convenience and necessity in determining whether to grant a railroad application for motor operation where these certificates are required. Cf. State of Texas v. United States, 292 U.S. 522, 530, 54 S.Ct. 819, 824, 78 L.Ed. 1402.

This the Commission did in its findings and conclusion. It said:

'The motor-carrier service proposed by applicant, operated in close coordination with the railroad's service, will effectuate a reduction in cost, and will result in an increase in efficiency in the transportation over the routes herein considered, which will inure to the benefit of the general public. Furthermore, it does not appear that the restricted service would be directly competitive or unduly prejudicial to the operations of any other motor carrier. * *  * ' 42 M.C.C. at 726.

In support of this statement the evidence showed that Willett served, similarly and satisfactorily, other localities along the Pennsylvania lines in Ohio, Indiana and Illinois. The coordination of Willett's linehaul method of operations with the rail service has been explained. The existing schedules of protestants do not fit into the needs of the projected service. Common management of railroad and trucks gave promise of better cooperation than would be obtained by arm's-length contracts or agreements. While the evidence shows that there were operating truck lines in the area which individually could serve all the way-stations by securing extensions to their present routes, it also shows that no motor carrier is now in a position to render this complete service. Cf. Kansas City S. Transport Co., Inc., Com. Car. Application, 10 M.C.C. 221, 232. The Commission on this evidence had a basis to conclude that a railroad subsidiary offered the most satisfactory facilities for making less-than-carload deliveries to way-stations.

The contention of appellees, protestant motor carriers, is that since no evidence was offered as to the inadequacy of the presently duly certificated motor carriers to serve the railroad's need, there was a failure of proof as to convenience of and necessity for a new motor truck operation in the territory. Public convenience and necessity should be interpreted so as to secure for the Nation the broad aims of the Interstate Commerce Act of 1940. Cf. New England Divisions Case, Akron, C. & Y.R. Co. v. United States, 261 U.S. 184, 189, 43 S.Ct. 270, 273, 67 L.Ed. 605; Interstate Commerce Comm. v. Railway Labor Ass'n, 315 U.S. 373, 376, 377, 62 S.Ct. 717, 719, 720, 86 L.Ed. 904; United States v. Lowden, 308 U.S. 225, 230, 60 S.Ct. 248, 251, 84 L.Ed. 208; Taxas & N.O.R. Co. v. Northside Belt Ry. Co., 276 U.S. 475, 479, 48 S.Ct. 361, 362, 72 L.Ed. 661. In protestant's view a certificate of convenience and necessity should not be granted to railroads for motor truck operation when existing motor carriers are capable of rendering the same service. Appellants take the position that this precise issue need not be decided in this case. They look upon the application as asking for authority to improve 'an existing service.' We think that it was for a motor service to improve an existing rail service. Consequently, the issuance of the ertificate is subject to all the requirements of any other application for a certificate for operation of motor lines. Since, however, on adequate evidence the Commission found that the motor service sought was of a different character from the existing motor service and not directly competitive or unduly prejudicial to the already certificated motor carriers, 42 M.C.C. 725, 726, we hold that the Commission had statutory authority and administrative discretion to order the certificate to issue. The public is entitled to the benefits of improved transportation. Where that improvement depends in the Commission's judgment upon a unified and limited rail-truck operation which is found not 'unduly prejudicial' to motor carrier operations, the Commission may authorize the certificate even though the existing carriers might arrange to furnish successfully the projected service.

Certificates of the general character of the one proposed by the Commission for Willett have been granted heretofore. The motor service was not the normal over-the-road type but restricted to services auxiliary or supplemental to the rail service. In order to restrict motor carriers, which were operated by railroads to this coordinated service, the Commission customarily inserted a provision in the order granting the application that the motor shipments must have prior or subsequent movement by rail. E.g. Kansas City S. Transport Co., Inc., Com. Car. Application, 10 M.C.C. 221, 240. The rail carriers pointed out, however, that this restriction interfered with the efficiency of their operations, since commodities might be offered them at one way-station for transportation to another way-station within ordinary motoring distance. In such a case a way-freight train would be required. It was to meet this situation that the key-point or break-bulk rule, which is employed here, was developed. Kansas City S. Transport Co., Inc., Com. Car Application, 28 M.C.C. 5, 9, 11, 22 (par. 3), 25 (App. B).

This key point requirement is one factor of differentiation between this certificate and the normal over-the-road motor certificate of convenience and necessity. Other differentiations are found in the limitation of service to rail station points and the condition that the Commission reserved the right to impose such other requirements as might be found necessary to restrict the rail subsidiary to coordinated rail service instead of permitting general competition with motor carriers in over-the-road service.

It is, of course, obvious that opportunity exists for limited encroachment upon the over-the-road business of the existing motor carriers. A shipper from one way-station to another station on the same railroad within the permitted key point limitation may use the railroad motor carrier instead of the motor carrier. Free pickup and delivery service may extend the competition to the limits of the territorial boundaries of the railroad terminal areas and give a further advantage to the railroad where the motor carrier does not furnish the same service. If the Commission later determines that the balance of public convenience and necessity shifts through competition or otherwise, so that injury to the public from impairment of the inherent advantages of motor transportation exceeds the advantage to the public of efficient rail transportation, the Commission may correct the tendency by restoration of the rail movement re uirement or otherwise.

Administrative discretion rests with the Commission to further improveents in transportation. The Interstate Commerce Act contains no provision by which the Commission may compel non-rail motor carriers to coordinate their road service with rail service or may compel rail carriers to coordinate their service with motor carriers. When in railroad applications for coordinated motor service the Commission finds public convenience and necessity for such motor service on evidence of transportation advantages to shippers and economy to the rail carriers, cf. State of Texas v. United States, 292 U.S. 522, 530, 54 S.Ct. 819, 824, 78 L.Ed. 1402, it is in a position to determine by its administrative discretion whether the projected service may be better rendered by the railroad or existing motor carriers. In the absence of power to compel coordination between the modes of transportation and in the presence of the probable gains in operative efficiency from unified management, we think the Commission, in view of the limitations on the railroad's motor service, is entitled to conclude that the public will be better served by the rail operation than by use of the available motor carrier facilities. The alternative to the existence of this discretion is that the language of the Interstate Commerce Act, part II, forbids the granting to railroads of a certificate of convenience and necessity for the operation of motor trucks, under specially limited certificates, when there are certificated motor carriers, independent of railroad authority or supervision, with whom arrangements for the service might be made by the rail carriers. There is no such prohibition in terms. Any such implication is negated by the discretion to grant certificates conferred on the Commission by the Act.

Protestants, the appellee motor carriers, point out that under this interpretation in every case of an application by a rail carrier or its wholly owned subsidiary for a certificate of convenience and necessity to operate a motor line to render service at way-stations, the Commission will have power, under facts and with limitations in the certificate, previously described, to grant the certificate. This is true. It must be expected, however, that the Commission will be as alert to perform its duty in protecting the public in the maintenance of an efficient motor transportation system as it is in protecting that same public in the successful operation of its rail system. The Commission is trusted by Congress to guard against the danger of the development of a transportation monopoly. 49 U.S.C. § 5(2)(a) and (b), 49 U.S.C.A. § 5(2)(a, b). It has the duty to preserve the inherent advantages of each mode of transportation.

Appellees raise here an objection to the failure of the Commission to reopen the case to hear evidence on the bias of the railroad witnesses. No valid reason for failure to bring out the alleged bias at the trial is suggested.

We pass also without further discussion the appellees' complaint of material error in the refusal to produce the contract between the Pennsylvania and Willett at the hearing. It does not seem material in view of our conclusions. The Joint Board directed that the contract be filed as a 'late exhibit.'

Reversed.

Mr. Justice DOUGLAS, dissenting.

Sec. 207(a) of the Interstate Commerce Act authorizes the issuance of a certificate to a common carrier by motor vehicle if the proposed service 'is or will be required by the present or future public convenience and necessity.' But the present decision allows the Commission to construe the statute as if 'railroad convenience and necessity' rather than 'public convenience and necessity' were the standard.

I can find in the Act no indication whatsoever that railroad applicants for a motor vehicle certificate are to be considered any more favorably than any other type of applicant. Yet it is plain that this decision permits just that. For if any applicant other than a railroad affiliate were before the Commission with an application for a certificate to serve this precise territory, it would have to show that existing transportation facilities were inadequate to serve the needs of the public efficiently. No such showing has been made here. None has been attempted.

That necessity is sought to be avoided by holding that the motor carrier service to be rendered is 'auxiliary to or supplemental of rail service.' If, as the Commission at first required (Kansas City Southern Transp. Co., 10 M.C.C. 221), this motor carrier service was restricted to goods which had a prior or subsequent rail haul, the service might properly be designated as an auxiliary or supplemental one. But the Commission changed its position and withdrew that condition. Kansas City Southern Transp. Co., 28 M.C.C. 5. The keypoint condition was substituted. Between those points the railroad will operate like any motor carrier. The service which it seeks to render is not a combined rail-and-truck service. As the Commission states in its report in the present case, 'The railroad, through its subsidiary, merely seeks the substitution of a more efficient for a less efficient means of service.' This 'substituted' service differs from the adequate independent motor carrier service already existing only in its being under railroad control. In that respect and in that respect alone is the service of a new and different character.

The Commission justifies that 'substitution' of service on the grounds of the operating convenience of the rail oad and a reduction in its costs. That is a standard of 'railroad' not 'public' convenience. Would it be thought for a moment that motor carriers could obtain authority to build a new competing railroad by any such standard of 'motor carrier' convenience?

Whether it is wise policy for the railroads to enter and dominate this field is neither for us nor the Commission to decide. If the railroads are to be given this preferred treatment when they seek to substitute motor carrier service for rail service, the authority should come from Congress, not this Court. Meanwhile, we should be alert to see to it that administrative discretion does not become the vehicle for reshaping the laws which Congress writes.

If the railroad company was acquiring an existing motor carrier to render this service, the Commission could approve the acquisition only if it found, among other things, that the acquisition would 'not unduly restrain competition.' 49 U.S.C. § 5(2)(b), 49 U.S.C.A. § 5(2)(b). See McLean Trucking Co. v. United States, 321 U.S. 67, 64 S.Ct. 370, 88 L.Ed. 544. This provision was inserted so as to protect the motor carrier industry from the domination of other types of carriers which 'might use the control as a means to strangle, curtail, or hinder progress in highway transportation for the benefit of the other competing transportation.' 79 Cong.Rec. 12206.

The same standard should be applied whether the railroads enter the motor carrier field by acquisition of existing facilities or by establishment of their own motor carrier affiliates. The potentialities for abuse may be as great in one case as in the other. Railroads, like other business enterprises, are subject to the anti-trust laws except as Congress has created exemptions for them. Georgia v. Pennsylvania R. Co., 324 U.S. 439, 65 S.Ct. 716. And the anti-trust policy is one of the components of the public interest which the Commission is supposed to protect in the transportation field. McLean Trucking Co. v. United States, supra.

The preservation of healthy competitive conditions must therefore be an ingredient of 'public convenience and necessity' which the Commission is under the duty to determine in issuing certificates under § 207(a). Certainly the effect on competition looms large when one type of carrier seeks to enter another field of transportation. The Commission paid lip-service to that policy when it said in the present case that the restricted service to be rendered by this railroad affiliate would not appear to be 'directly competitive or unduly prejudicial to the operations of any other motor carrier.' But where is the evidence to support that finding? I do not find it. It is suggested that there can be no competition because the railroad now has the business. But the railroad is not restricted to business which it now has. Between the key-points it is entitled to any and all business which it can get. Every future movement of freight will be the subject of competition. If, as assumed, the present railroad service is poor as compared with the proposed new motor carrier service, a new and important competitive element will certainly be introduced. The railroad wants this broad certificate so it can better compete with existing motor carriers. If the railroad really wants a purely auxiliary service, let the service be limited to commodities which have a prior or subsequent rail haul. But it is not so conditioned. The railroad is entering the motor carrier field and rendering a pure motor carrier service. If the policy of Congress is to be honored, there must be a finding supported by evidence that competition will not be unduly restrained. On this record no such finding has been or can be made.

Mr. Justice BLACK and Mr. Justice RUTLEDGE join in this dissent.