United States District Court, Southern District of Illinois, N.D
April 7, 1969
DRUM TRANSPORT, INC., A CORPORATION, PLAINTIFF,
UNITED STATES OF AMERICA AND INTERSTATE COMMERCE COMMISSION, DEFENDANTS, AND AYERS & MADDUX, INC., INTERVENOR.
Before Kerner, Circuit Judge, Poos and Morgan, District Judges.
The opinion of the court was delivered by: Per Curiam.
MEMORANDUM DECISION AND ORDER
Plaintiff, sometimes herein referred to as Drum, filed this
action for judicial review of the final order of the Interstate
Commerce Commission, hereinafter I.C.C., granting operating
rights to intervenor, hereinafter Maddux, in Docket No.
MC-129262, Ayers & Maddux, Inc., Common Carrier Application.
Maddux filed its application with the I.C.C., seeking authority
to operate as a common carrier by motor vehicle, in interstate or
foreign commerce, over irregular routes, transporting "alcoholic
beverages or alcoholic liquors, in bulk, in tank vehicles * * *
from all United States ports of entry on the International
Boundary Line between the United States and Mexico, to points in
California, Michigan, Illinois and Ohio." That application
requested that the grant of authority contain the express
restriction, "with no authorization to transfer property from one
vehicle to another."*fn1
Drum and Ringsby-Pacific, Ltd., both motor carriers engaged in
the transportation of alcoholic liquors, in bulk, in tank
vehicles, from such ports of entry to points within the United
States, opposed the Maddux application. Drum requested an oral
hearing and the right to cross-examine witnesses supporting the
Maddux application. The I.C.C. rejected that request. The
application was considered under the Commission's rules for
modified procedure upon the written pleadings and supporting
written documents alone.
The I.C.C. report and order found that public convenience and
necessity required that Maddux be granted authority to operate as
a common carrier, and to undertake the requested transportation
from ports of entry at Laredo and El Paso, Texas, and ports of
entry in Arizona and California, to Los Angeles, Menlo Park and
San Francisco, California, Detroit, Michigan, Peoria, Illinois,
and Cincinnati, Ohio. The requested restriction against transfer
of lading between vehicles was omitted from the order upon the
Commission's statement that such a restriction would be
"difficult of enforcement and administratively undesirable."
After the I.C.C. denied Drum's Petition for Reconsideration,
the instant complaint was filed seeking judicial review.
Drum has authority to operate as a common carrier, over
transporting alcoholic liquors, in bulk, in tank vehicles, from
all ports of entry on the United States-Mexico border in Texas,
New Mexico, Arizona and California, except San Ysidro,
California, to points located in the 48 adjacent states of the
United States. Since 1959, its equipment has been used
exclusively for the transportation of alcohol and alcoholic
Operating from its East Peoria, Illinois, home office, Drum
transports, as here pertinent, tequila and kahlua of Mexican
origin, in stainless steel tank vehicles, from such ports of
entry to consignees throughout the 48 adjacent states. Liquor is
transported by Mexican carriers in tank vehicles to the given
International Border port. A Drum vehicle meets the Mexican
carrier at the port of entry, and the liquor is pumped from the
Mexican tanker to a Drum tanker for transport within the United
A like service, employing the same change of lading procedure,
is provided by Ringsby from the port of entry at San Ysidro,
California, to Los Angeles, Menlo Park, and San Francisco,
Neither Drum nor Ringsby has authority to operate as a common
carrier within Mexico. Thus, a change of lading between
connecting carriers, the one Mexican and the other domestic, is
necessary in all transportation operations undertaken by both.
The I.C.C. found that Maddux owned six tractors and two
stainless steel tank trailers, and that it had four additional
stainless steel tank trailers on order. Its existing equipment is
licensed for operation both in Mexico and the United States. The
president of Maddux owns a substantial interest in Arrendadora
"AMA", S.A., a Mexican corporation and common carrier by motor
vehicle, located in Nogales, Sonora, Mexico.
The Maddux application proposed a through service, provided
jointly by Maddux and AMA. The Maddux equipment would be operated
in Mexico by AMA, thereby enabling shippers to load tequila and
kahlua into the Maddux tankers at points of origin within Mexico
for shipment to points within the United States without the
necessity for a change of lading between vehicles. The loaded
vehicle would be transported by AMA to a port of entry, at which
point the equipment would be taken over by Maddux for the
necessary transportation within the United States.
The I.C.C. found that neither Drum nor Ringsby was willing or
able to provide a like through service. It further found that the
service proposed by Maddux was a substantially better service
than that provided by existing carriers, and a new and unique
service not presently available to shippers. There was no finding
that the present service was inadequate.
In the view which we take of this case, we need not consider
Drum's principal argument that the case must be remanded to the
I.C.C. for a formal hearing for the general purpose of permitting
cross-examination. We think the Commission's findings are
supported by substantial evidence under the approved modified
procedure, and that the findings are adequate to support the
grant of operating rights to Maddux, if the authority granted is
restricted in accordance with the proposal in the Maddux
application. However, with that restriction removed, we believe
the grant of a new certificate requires a finding, upon
sufficient evidence, that existing service is inadequate. No such
evidence or finding appears in the record before this court.
The Congress has stated the guidelines for the promotion of
adequate systems of transportation, and the avoidance of ruinous
competition, by its adoption of the National Transportation
Policy, 49 U.S.C.A., Ch. 1, Hist. Note, p. 9, as follows:
"It is hereby declared to be the national
transportation policy of the Congress to provide for
fair and impartial regulation of all modes of
transportation subject to the provisions of this Act
(chapters 1, 8, 12, 13, and 19 of this title), so
administered as to recognize and preserve the
of each; to promote safe, adequate, economical, and
efficient service and foster sound economic
conditions in transportation and among the several
carriers; to encourage the establishment and
maintenance of reasonable charges for transportation
services, without unjust discriminations, undue
preferences or advantages, or unfair or destructive
competitive practices; to cooperate with the several
States and the duly authorized officials thereof; and
to encourage fair wages and equitable working
conditions; — all to the end of developing,
coordinating, and preserving a national
transportation system by water, highway, and rail, as
well as other means, adequate to meet the needs of
the commerce of the United States, of the Postal
Service, and of the national defense. All of the
provisions of this Act [chapters 1, 8, 12, 13, and 19
of this title] shall be administered and enforced
with a view to carrying out the above declaration of
policy." (Emphasis added.)
The emphasized language reflects a concern over fair competition
in the transportation industry which was voiced by the courts
even before the Policy was enacted. See, e.g., Pennsylvania R.R.
Co. v. Pittsburgh, L. & W.R.R. Co., 83 F.2d 861, 863 (6th Cir.
1936). Since the enactment of the Policy, many courts have held
that it is a guide for the I.C.C. and its decisions and the Act
must be read in the light of the Policy. See, e.g., McLean
Trucking Co. v. United States, 321 U.S. 67, 64 S.Ct. 370, 88
L.Ed. 544 (1944); American Trucking Associations, Inc. v. United
States, 170 F. Supp. 38 (D.D.C. 1959), rev'd on other grounds,
364 U.S. 1, 6-7, 80 S.Ct. 1570, 4 L.Ed.2d 1527 (1960); New York
S. & W.R.R. Co. v. United States, 200 F. Supp. 860 (D.N.J. 1961),
rev'd on other grounds, 372 U.S. 1, 83 S.Ct. 614, 9 L.Ed.2d 541
(1963); Roadway Exp., Inc. v. United States, 213 F. Supp. 868
(D.Del. 1963); and Southern Pac. Co. v. United States,
277 F. Supp. 671 (D.Neb. 1967), aff'd per curiam, 390 U.S. 744, 88
S.Ct. 1442, 20 L.Ed.2d 275 (1968).
Generally, in the absence of a presently competing carrier, the
I.C.C. may authorize new service upon a showing that shippers
need the service and this will satisfy the Policy and the public
interest. Cf. Acme Fast Freight, Inc. v. United States,
281 F. Supp. 314, 319 (D. Del. 1967, supp. opinion 1968). Where there
is existing service, it may even authorize competition in order
to compel adequate service. Atlanta-New Orleans Motor Freight Co.
v. United States, 197 F. Supp. 364 (N.D.Ga. 1961). However, the
I.C.C.'s powers over competition are not all-inclusive, and, if
destructive competition arises by virtue of a grant of authority,
it may give rise to a private antitrust action. Marnell v. United
Parcel Serv. of Amer., Inc., 260 F. Supp. 391 (N.D.Cal. 1966).
Maddux asks us to hold that the I.C.C. may grant a certificate
of public convenience and necessity whenever it finds that a
proposed service would be a "substantial improvement" over
existing service or constitute "a new and unique service not
presently available to the shipping public." Texas Mexican Ry.
Co. v. United States, 250 F. Supp. 946, 949 (S.D. Tex. 1966). We
agree that these are proper standards for the granting of a
certificate, if the application of the standards is supported
by proper findings based on sufficient evidence and if the
actual certificate granted is not inconsistent with the findings
made by the I.C.C.
An examination of some of the cases cited to us demonstrates
the correctness of our decision.
In Dixie Highway Exp., Inc. v. United States, 287 F. Supp. 473,
474 (S.D.Miss. 1968), on remand, the Court said:
"* * * The action of the Commission in granting the
franchise under the facts and circumstances
previously stated seems to have created the greatest
problem with respect to the franchise of Roadway and
Mercury which were granted only five days prior to
the filing of the application of Braswell herein. But
criticism of such treatment of said franchises did
not properly reckon with the fact that the
Commission was not obliged to specifically find the
transportation service of such carriers inadequate in
order to find additional transportation service
necessary in the public interest in the particular
area. The Commission had a right to find a further
need of service by the general public without a
specific finding of the existence of inadequate
service by either carrier. That was merely one of
the elements for its consideration but was not
indispensable as a specific finding by the Commission
to a proper award of a certificate. * * *" (Emphasis
added and note omitted.)
It is debatable whether the District Court, on remand, was
justified in stating the rule as broadly as it is there stated.
The source of its statement is the remanding opinion in United
States v. Dixie Highway Exp., Inc., Braswell Mtr. Freight Lines,
Inc. v. Dixie Highway Exp., Inc., 389 U.S. 409
, 411-412, 88 S.
Ct. 539, 540, 19 L.Ed.2d 639 (1967), wherein the Court said:
"The District Court erred in holding that it is the
`invariable rule' of the Commission to grant existing
carriers an opportunity to remedy deficiencies in
service, and in holding that carriers have a property
right to such opportunity before a new certificate
may be issued upon a lawful finding of public
convenience and necessity pursuant to the statute.
The Commission's power is not so circumscribed. No
such limitation has been established by the
Commission's own decisions or by judicial
determinations. It is, of course, true that the
Commission should consider the public interest in
maintaining the health and stability of existing
carriers, see United States v. Drum, 368 U.S. 370,
374 [82 S.Ct. 408, 410, 7 L.Ed.2d 360] (1962); but it
is also true that, upon the basis of appropriate
findings, `the Commission may authorize the
certificate even though the existing carriers might
arrange to furnish successfully the projected
service.' ICC v. Parker, 326 U.S. 60, 70 [65 S.Ct.
1490, 1495, 89 L.Ed. 2051] (1945). * * *"
Moreover, the Supreme Court further said, id. at 410, 88 S.Ct.
"Pursuant to § 207(a) of the Interstate Commerce
Carrier Act, 49 Stat. 551, 49 U.S.C. § 307(a), the
Interstate Commerce Commission concluded that a
certificate of public convenience and necessity
should issue to Braswell Motor Freight Lines, Inc.,
authorizing Braswell to extend its motor carrier
services to stated points. This conclusion was based
upon the Commission's finding that existing service
to those points was inadequate to serve public
needs. Upon suit by several competing motor carriers
serving the area, the District Court enjoined the
Commission from proceeding with the grant to Braswell
on the ground that the Commission had failed to make
adequate findings and that it had failed to afford
existing carriers an opportunity to rectify
deficiencies in their service. Upon remand, the
Commission did not take further evidence, but it made
additional findings in considerable detail. It again
concluded that shippers and receivers were hampered
by the inadequacy of existing service, and it held
that, despite numerous complaints, existing carriers
had not demonstrated that they could be depended upon
to furnish adequate service." (Emphasis added).
Thus, the I.C.C. made the very findings the absence of which
concerns us here.
In Nat'l Bus Traffic Assn. v. United States, 284 F. Supp. 270
(N.D.Ill. 1967), aff'd, 391 U.S. 468, 88 S.Ct. 1847, 20 L. Ed.2d
750 (1968), the Court noted that the I.C.C. found the existing
bus service adequate and then went on to find that the proposed
service offered four "distinctive" improvements, three of which
existing service did not, and could not, offer.
In the Acme Fast Freight case, supra, 281 F. Supp. at 317,
the Court quoted that portion of the examiner's report which
showed that he had considered the competitive effect of his
recommendation. The Court remanded the case to the I.C.C. upon
its determination that the grant of
authority was broader than that which the evidence supported,
i.e., the certificate did not contain a restriction to shipping
only in trailer-load lots. Id. at 323-324. In the latter
respect, Acme is virtually indistinguishable from our case.
In Texas Mexican Ry. Co., v. United States, supra, 250
F. Supp. at 948, the Court noted that the examiner "discussed
fully and made findings" on whether existing facilities could
meet the need which the proposed "new and unique" service would
meet. The Court held, id. at 950, that the Commission's
conclusion was supported by its findings and that inadequacy of
existing service "is certainly an element to be considered"
though "a specific finding of inadequacy" is not necessary. While
the basic facts in the case are similar to ours (the improvement
was through in-bond service from points in Mexico to points
within the United States without interchange of lading),
apparently the case presented no problem of a certificate
inconsistent with the findings.
As we analyze the opinion, V. Van Dyke Trucking, Inc. v. United
States, 291 F. Supp. 97 (W.D.Wash. 1968), (per curiam, No. 7753,
September 30, 1968), is not in conflict with our approach. There,
the I.C.C.'s denial of a request for a certificate was upheld.
Though that opinion may appear to conflict with ours, we think
that it does not, but simply says that the applicant there failed
to prove either the offering of a distinctive service or the
inadequacy of existing service as a predicative basis for the
grant of operating authority.
We are faced with the problem that the certificate ordered by
the I.C.C. did not contain the restriction which Maddux proposed
and which is implied by the findings. Without that restriction,
the grant of authority does not require Maddux to provide
through, in-bond service without interchange of lading between
vehicles. It would permit Maddux to offer the same service which
Drum now provides. Under those circumstances, the "new and unique
service" standard has no application, and we must hold that the
findings of the I.C.C. are insufficient to support the
certificate which it granted. The certificate authorizes
duplicating, competitive service, and it cannot stand without a
finding that presently existing service is inadequate. No such
finding was made and the record before us on modified procedure
does not set forth facts which would support such a finding. See
Blodgett Uncrated Furniture Service, Inc. v. United States,
288 F. Supp. 591 (W.D.Mich. 1968).
Where such competition arises due to the omission of a
restriction in a certificate, we may remand the case for
correction of the certificate, or, if the I.C.C. chooses to do
so, for new hearings to develop evidence which would support a
finding of inadequacy of existing service. Acme Fast Freight
case, supra. Cf. American Trucking Assns., supra, 364 U.S. at
6-15; Pennsylvania Truck Lines, Inc. v. United States,
219 F. Supp. 871, 872-873 (W.D.Pa. 1963).
The contention is made before us that Drum did not question
before the I.C.C. the variance between the certificate and the
findings of fact, and that, therefore, Drum cannot raise the
issue now. See United States v. L.A. Tucker Truck Lines, Inc.,
344 U.S. 33, 35-37, 73 S.Ct. 67, 97 L.Ed. 54 (1952); Watkins Mtr.
Lines, Inc. v. United States, 252 F. Supp. 1017, 1019-1020
(M.D.Ga. 1966). It is true that no objection upon that ground was
made before the I.C.C. We are convinced that such objection was
unnecessary, where, as here, the certificate authorizes the same
service which Drum offers and a timely objection was made to the
I.C.C. that there was no evidence to support a finding of
inadequacy of existing service, which is a necessary legal basis
for the certificate ordered. It is clear that the evidence was
insufficient to support such a finding since the evidence was not
specific but was limited to general conclusory statements.
Moreover, if we are to apply the National Transportation Policy,
we cannot approve a certificate which is inconsistent with the
findings and the
inconsistency is such that existing carriers might be endangered.
Given this disposition of the case, it is unnecessary to reach
the modified procedure question, except to note that the absence
of a full hearing here precluded the development of evidence
which would have enabled the I.C.C. to determine the fact as to
the adequacy of existing service. The affidavits before the
I.C.C. are adequate to show the proprosal of a new and unique
service, especially in view of Drum's admission that it could not
provide through, in-bond service without the interchange of
lading. They are not sufficient, untested by a full hearing and
cross-examination, to prove inadequacy of existing service.
Accordingly, the case is remanded to the I.C.C. so that it may
either (1) place the restriction against transfer of lading in
any certificate issued to Maddux, or (2) conduct such hearings as
may be necessary to the determination of the facts as to the
adequacy of existing service. The injunction heretofore issued by
the Court, enjoining the issuance of the Maddux certificate, will
remain in full force and effect pending action by the I.C.C.
consistent with this opinion.