Schaffer Transportation Company v. United States/Opinion of the Court

The issue in this case is whether the Interstate Commerce Commission adequately and correctly applied the standards of the National Transportation Policy in denying a motor carrier's application to provide service between points now served exclusively by rail. The applicant, A W. Schaffer, a common carrier by motor doing business as Schaffer Transportation Co., holds a certificate of public convenience and necessity authorizing him to transport granite from Grant County, South Dakota, to points in 15 States. In the present application he sought additional authority under § 207(a) of the Motor Carrier Act of 1935, as amended by the Transportation Act of 1940, to transport granite from Grant County to various new points as well as authority to transport from points in Vermont to several States in the Midwest and South. From all that appears in the Commission's report, rail service is currently the only mode of transportation available to shippers of granite between the points sought to be served by Schaffer.

The evidence adduced to demonstrate the need for Schaffer's service came from three shippers, six receivers and an association composed primarily of Vermont manufacturers of finished granite products. Their evidence, as summarized in the report of Division 5 of the Commission, disclosed the following advantages to be gained from motor carrier service:

'They all agree that (existing rail) service, in the main, is     satisfactory for the transportation of carload shipments but      entirely inadequate for the transportation of      less-than-carload shipments, not only from the standpoint of      cost, but also and primarily from a service standpoint. In     this respect, the record shows that on movements of small      shipments the supporting witnesses have experienced delays,      damage to their merchandise, and have been hampered to some      degree by the lack or insufficiency of rail sidings. In many     instances, they have been asked by customers to furnish      delivery by motor carrier but because of the lack of such      service they have been unable to comply with these requests. Moreover, and no less important from a business point of     view, the shippers are faced with the competitive      disadvantage of having to compete with producers of granite      at other locations which have truck delivery available. Then,     too, the lack of truck service has impeded shippers' ability      to increase their sales and expand their markets in this      area. By use of the proposed service, certain other benefits     also would accrue to the shippers or dealers. For example,     the latter would be able to maintain lower inventories,      receive their freight faster and more frequently, and thus,      be able better to meet erection deadlines, especially during the peak seasons. Furthermore, the amount     of crating now necessary would be reduced with resultant      savings in time and money.'

Relying on these factors, Division 5 approved the application, but the full Commission reconsidered the application on the same record, and, with four Commissioners dissenting, ordered it denied. A. W. Schaffer Extension-Granite, 63 M.C.C. 247. Schaffer brought an action before a statutory three-judge court under 49 U.S.C. § 305(g), 49 U.S.C.A. § 305(g) to set the order aside. The District Court denied relief and ordered the complaint dismissed. 139 F.Supp. 444. The case is here on direct appeal. 28 U.S.C. §§ 1253, 2101(b), 28 U.S.C.A. §§ 1253, 2101(b).

We noted probable jurisdiction. 352 U.S. 923, 77 S.Ct. 220.

The National Transportation Policy, formulated by Congress, specifies in its terms that it is to govern the Commission in the administration and enforcement of all provisions of the Act, and this Court has made it clear that this policy is the yardstick by which the correctness of the Commission's actions will be measured. Dixie Carriers, Inc. v. United States, 351 U.S. 56, 76 S.Ct. 578, 100 L.Ed. 934; Eastern-Central Motor Carriers Ass'n v. United States, 321 U.S. 194, 64 S.Ct. 499, 88 L.Ed. 668; McLean Trucking Co. v. United States, 321 U.S. 67, 64 S.Ct. 370, 88 L.Ed. 544. Of course, the Commission possesses a 'wide range of discretionary authority' in determining whether the public interest warrants certification of any particular proposed service. United States v. Detroit & Cleveland Navigation Co., 326 U.S. 236, 241, 66 S.Ct. 75, 77, 90 L.Ed. 38; Interstate Commerce Commission v. Parker, 326 U.S. 60, 65 S.Ct. 1490, 89 L.Ed. 2051. But that discretion must be exercised in conformity with the declared policies of the Congress. To see whether those policies have been implemented we look to the Commission's own summary of the evidence, and particularly to the findings, formal or otherwise, which the Commission has made. 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 mandate of Congress.

The Commission denied Schaffer's application on the following basis:

'On the foregoing facts, we are unable to conclude that the     public convenience and necessity require the proposed      operation. It is seen that for one reason or another the     supporting witnesses find fault with the presently utilized      rail service. Actually, however, the evidence warrants the conclusion that the witnesses are     reasonably satisfied with rail service except for the one      complaint that all share, namely, that rail service is too      slow. Nevertheless, it is the practice for the Vermont     shippers to hold finished granite until they can accumulate a      poolcar load in order that the shipments may move at the      lower pool-car rate. This practice is followed with the     knowledge and consent of the consignees, and the sole purpose      therein is to take advantage of the lower rail rate. Less-than-carload rail service, while not as expeditious as     the proposed service, is fairly good, but because of the      higher rate involved this service is seldom used by the      supporting witnesses. The testimony of the South Dakota     shipper also indicates that its support of the application is      largely motivated by anticipated cheaper transportation.

'We have carefully considered applicant's arguments to the     contrary, but are forced to conclude that the service      presently available is reasonably adequate. The evidence     indicates that the witnesses' main purpose in supporting the      application is to obtain lower rates rather than improved      service. It is well established that this is not a proper     basis for a grant of authority, and the application,      therefore, must be denied.'

Viewing these conclusions in light of the National Transportation Policy we find at the outset that there has been no evaluation made of the 'inherent advantages' of the motor service proposed by the applicant. That policy requires the Commission to administer the Act so as to 'recognize and preserve the inherent advantages' of each mode of transportation. Dixie Carriers, Inc. v. United States, supra; I.C.C. v Mechling, 330 U.S. 567, 67 S.Ct. 894, 91 L.Ed. 1102. When a motor carrier seeks to offer service where only rail transportation is presently authorized, the inherent advantages of the proposed service are a critical factor which the Commission must assess. How significant these advantages are in a given factual context and what need exists for a service that can supply these advantages are considerations for the Commission.

Rather than evaluate the benefit that Schaffer's proposed motor service might bring to the public, the Commission cast its first principal conclusion in terms of the adequacy of existing rail service, finding that service to be 'reasonably adequate.' Yet the Commission itself has previously stated: 'That a particular point has adequate rail service is not a sufficient reason for denial of a certificate (to a motor carrier).' Bowles Common Carrier Application, 1 M.C.C. 589, 591. Of course, adequacy of rail service is a relevant consideration, but as the Commission recognized in Metler Extension-Crude Sulphur, 62 M.C.C. 143, 148, 'relative or comparative adequacy' of the existing service is the significant consideration when the interests of competition are being reconciled with the policy of maintaining a sound transportation system. The record here does not disclose the factors the Commission compared in concluding that existing rail service is 'reasonably adequate.' For example, the Commission has not determined whether there are benefits that motor service would provide which are not now being provided by the rail carriers, whether certification of a motor carrier would be 'unduly prejudicial' to the existing carriers, and whether on balance the public interest would be better served by additional competitive service. To reject a motor carrier's application on the bare conclusion that existing rail service can move the available traffic, without regard to the inherent advantages of the proposed service, would give one mode of transportation unwarranted protection from competition from others. As the report of Division 5 emphasizes, 'No carrier is entitled to protection from competition in the continuance of a service that fails to meet a public need, nor, by the same token, should the public be deprived of a new and improved service because it may divert some traffic from other carriers.'

The Commission's second basic conclusion from the record was that the main purpose of the witnesses in supporting the application was the prospect of obtaining lower rates. For this reason the Commission discounted the testimony of these witnesses, apparently without even evaluating the claimed advantages of the proposed service other than reduced rates. We think this approach runs counter to the National Transportation Policy. The ability of one mode of transportation to operate with a rate lower than competing types of transportation is precisely the sort of 'inherent advantage' that the congressional policy requires the Commission to recognize. Dixie Carriers, Inc. v. United States, supra. The Commission asserts that it has always considered rates irrelevant in certification proceedings under § 207(a), yet, with but one exception, it relies on administrative decisions involving applications by a carrier to provide service to an area already served by the same mode of transportation. Those decisions are entirely different from the situation presented here, where a motor carrier seeks to compete for traffic now handled exclusively by rail service. In these circumstances a rate benefit attributable to differences between the two modes of transportation is an 'inherent advantage' of the competing type of carrier and cannot be ignored by the Commission.

Since the Commission has failed to evaluate the benefits that Schaffer's proposed service would provide the public, including whatever benefit may be determined to exist from the standpoint of rates, and since the findings as to the adequacy of rail service do not provide this Court with a basis for determining whether the Commission's decision comports with the National Transportation Policy, that decision must be set aside, and the Commission must proceed further in light of what we have said.

We do not minimize the complexity of the task the Commission faces in evaluating and balancing the numerous considerations that collectively determine where the public interest lies in a particular situation. And we do not suggest that the National Transportation Policy is a set of self-executing principles that inevitably point the way to a clear result in each case. On the contrary, those principles overlap and, may conflict, and where this occurs, resolution is the task of the agency that is expert in the field. But there is here no indication in the Commission's findings of a conflict of policies. Shippers and receivers now served exclusively by rail have testified to the advantages they would gain from a proposed motor carrier service. There is no finding that the authorization of the proposed service would impair the sound operation of the carriers already certificated. Nor has the Commission properly evaluated the advantages urged by the supporting witnesses to determine whether the standard of public convenience and necessity has been met.

For the foregoing reasons, the judgment is reversed and the cause is remanded to the District Court with directions to set aside the Commission's order and remand the cause to the Commission for further proceedings in conformity with this opinion. It is so ordered.

Judgment reversed and cause remanded to the District Court with directions.

Mr. Justice FRANKFURTER (dissenting).