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Transport applied to the Interstate Commerce Commission for approval and certification of the proposed purchases under Section 5 (2) (formerly 213) of the Interstate Commerce Act, or, in the case of originated operations, for a certificate under Section 207. From 1939 to 1942 the Interstate Commerce Commission issued to Transport 16 certificates of convenience and necessity, each of which covered a portion of Transport's route as it was acquired, and which together make up the integrated operation presently conducted by Transport.

Each of the 16 certificates contain various conditions upon the type of service to be conducted by Transport. All of the certificates, however, provide that the Commission reserves the right to add "such further specific conditions as we, in the future, may find it necessary to impose in order to restrict applicant's operation to service which is auxiliary to, or supplemental of, rail service."

In 1941 Transport petitioned the Commission to reopen the certification proceedings covering that portion of Transport's route from Pecos to El Paso, a distance of 214 miles, for the purpose of determining its authority to transport freight. The Commission issued a report on March 21, 1942 (33 M.C.C. 38) recommending that certain conditions be imposed in the certificate. The Commission stayed this order and reopened the proceeding for further consideration of eight of Transport's certificates. The Commission then issued a report on January 21, 1943 (41 M.C.C. 721) ruling that Transport was without authority to operate on the basis of all-motor rates or to participate in joint all-motor rates. Transport and the Railway filed a petition for reconsideration of this ruling, and for modification of certain of the Commission's tariff regulations which prevented the Railway from participating in joint rates with motor carriers. The Commission reopened the proceedings to include a reexamination of whether modification should be made in the conditions attached to all of Transport's sixteen certificates. Transport and the Railway then filed a petition requesting that the further hearing be cancelled. This petition was denied, and a hearing was held at which Transport asserted that it wished to maintain the status quo and refused to introduce any evidence, objecting to the questioning of its employees by the examiner. The Commission issued a report and order on January 22, 1948 (47 M.C.C. 753), in which it set forth five conditions to be imposed upon all of Transport's certificates, including the limitation that service was to be auxiliary and supplementary to rail service and that Transport could not carry shipments between or through more than one of certain key points. (consisting of designated large cities on its routes). The report made clear that the limitation to auxiliary and supplemental service prohibited Transport from engaging in a general motor carrier business at motor carrier rates, and that Transport was confined to carriage of railway freight at rail rates and on railway bills of ladings as incidental to a pick-up and delivery service for the railroad.

Transport petitioned for reconsideration and for vacation of the report and order. This petition was denied by the Commission on May 9, 1949.

Transport brought this action in the United States District Court for the Northern District of Texas, Dallas Division, under Title 28, United States Code, Sections 1336 and 2321 to review the ruling of the Commission. The district court set aside the reports and orders of the Commission of January 22, 1948 and May 9, 1949, one judge dissenting. The court found that the issuance by the Commission of the certificates of purchase and of convenience and necessity granted to Transport the right to operate a trucking business at motor rates over the designated routes. Over the Government's objection, the court received additional evidence regarding the scope and nature of Transport's operations. The court found that Transport's activities are auxiliary and supplemental to the railway, and ruled that the Commission's action was a revocation of these certificates requiring a proceeding under Section 212 of the Interstate Commerce Act, and that, since the Commission had not followed this procedure, it had exceeded its authority under the Act, and had confiscated Transport's property without due process of law.

THE QUESTIONS ARE SUBSTANTIAL

[If from a state court, see Rule 15 (1) (e).]

The issues involved in this appeal are similar to those raised by Rock Island Motor Transit Company v. United States and Interstate Commerce Commission in the United States District Court for the Northern District of Illinois, in which an appeal was taken on January 27, 1950. These issues are of importance to the motor carrier and railroad industries and to the administration of the Interstate Commerce Act. The national transportation policy provides for the preservation of the inherent advantages of each form of transportation (49 Stat. 899; note to 49 U.S.C. 1). Section 5 (2) (b) of the Interstate Commerce Act, which reenacted in 1940 a provision formerly contained in Section 213 of the Act, authorizes acquisition of motor carriers by railroads only if the transaction will enable the railroad to use motor service to public advantage in the railroad's operation, and will not unduly restrain competition. The Commission's authority under the Act to supplement its earlier orders for the purposes of confining motor carriers controlled by railroads to non-competitive activities is in accord with the intent of Congress, as expressed in the national transportation policy and the provision in both the 1935 and 1940 Acts requiring the independent development of the two means of transportation. The decisions of the Commission from the first enactment of motor carrier regulatory statutes have confined captive motor carriers to the performance of coordinate and supplemental services for the rail carriers, and these decisions have been sustained by the Supreme Court. The judgment of the district court is in direct conflict with this policy and contrary to provisions of the Act. In addition, the district court has refused to recognize the Commission's express authority, under its earlier certificates issued to appellee, to add further specific conditions confining Transport's motor carrier operations to auxiliary and supplemental service.

1. The Interstate Commerce Act provides for continuing supervision by the Commission of the operating activities of motor carriers in order to effectuate the national transportation policy. Transport's purchase transactions required, and received, Commission approval under Section 5 (2) (49 U.S.C. 5 (2)). Section 5 (9) specifically provides that "the Commission may from time to time, for good cause shown, make such orders, supplemental to any order made under paragraph 5 (2), as it may deem necessary or appropriate." With respect to certificates of convenience and necessity issued pursuant to Section 207, Section 208 (a) (49 U.S.C. 308 (a)) provides that "there shall, at the time of issuance and from time to time thereafter, be attached to the exercise of the privileges granted by the certificate such reasonable terms, conditions, and limitations as the public convenience and necessity may from time to time require," and Section 221 (b) provides that Commission orders shall continue in force "until its further order." The Act thus contemplates that the Commission maintain a continuing check upon carriers in order to assure that they do not exceed the scope of activities permissible under the Act and the Commission's orders.

The conditional basis upon which the sixteen certificates were issued to Transport over the period of five years is thus in accord with the statutory authority of the Commission. During the process of Transport's gradual acquisition of disconnected segments of its present route, the Commission was under no statutory obligation to foresee every specific limitation that ultimately might be required to be placed upon Transport's service. It is sufficient that the Commission defined the type of service permitted, and later added more specific conditions when necessary to hold the carrier to the type of service originally authorized. "Because the applications were not considered as parts of an overall scheme of establishing a connected system of routes, we attached to each certificate as it was granted only those conditions which we considered at the time to be necessary . . . Without exception, however . . we reserve the right in the future to impose such additional revised conditions as we might find necessary in order to restrict applicant's operation to a service auxiliary to or supplemental of rail service" (47 M.C.C. 753, 755). Transport's authority was limited by this restriction both in the case of the purchase transactions which, under Section 5(2) (b) were "subject to such terms and conditions and such modifications as [the Commission] shall find to be just and reasonable" and in the certificates issued under Section 207. This reservation was a clear expression of the terms upon which Transport's authority to engage in motor operations was granted, and implemented the limitations required by the Act and the duty of the Commission to supervise the carrier's continuing performance of these terms and conditions.

2. The authority of the Interstate Commerce Commission to impose upon motor carriers the type of conditions contained in its order of January 22, 1948, is settled. In Interstate Commerce Commission v. Parker Motor Freight, 326 U. S. 60, 63, the Supreme Court notes the appropriateness of such restrictions:

As a further assurance that [the carrier] 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 [the carrier's] operation "to service which is auxiliary to, or supplemental of rail service."

And at pages 70-72, the Court discusses the very type of key-point restriction imposed in the instant case, and the authority of the Commission to add additional conditions if necessary at some subsequent time, to prevent undue competition by the captive motor carrier:

Certificates of the general character of the one proposed by the Commission for [the carrier] 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 Southern Transport Co., Common Carrier 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 waystation 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 Southern Transport Co., Common Carrier 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.

... 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 requirement or otherwise.

To the same effect is American Trucking Associations v. United States, 326 U. S. 77.

3. Appellee's contention that it received a vested right to engage in unlimited and competitive motor carrier operations by virtue of the issuance

...

of these certificates is thus without merit. Even aside from the caution contained in Section 207 of the Act that "No certificates . . . shall confer any proprietary or property rights in the use of the public highways," the short answer is that Transport was never authorized by the Commission to perform more than a service which is auxiliary and supplemental to railway service. In engaging in all-motor competitive service Transport exceeded the limits of its charter and, by requiring it to conform to these limitations, the Commission took nothing from the appellee. Not only did each of the sixteen certificates specifically limit Transport's activities to auxiliary and supplemental service, but the requirements of the statute and the consistent policy of the Commission were sufficient warning of the prohibition. Prior to the issuance of any of these certificates to Transport the Commission established, in Pennsylvania Truck Lines, Inc.-Control-Barker Motor Freight, Inc., 1 M.C.C. 101, 5 M.C.C. 9 and 49, that under the limitations imposed by the Act, captive motor carriers would not be permitted to engage in independent and competitive activities, and the Commission has followed this policy consistently. Kansas City S. Transport Company, Inc., Com. Car. Application, 10 M.C.C. 221; Illinois Central Railway Company, Common Carrier Appl., 12 M.C.C. 485, 18 M.C.C. 721; Missouri Pacific R. Company, Extension of Operations-Illinois, 19 M.C.C. 605; Willett Company of Ind., Inc., Extension-Illinois, and Kentucky, 21 M.C.C. 405.

4. Further, the district court erred in permitting the introduction of evidence as to the scope and nature of Transport's operations. Appellee raised no issues in the district court upon which it did not have full opportunity to be heard and to present evidence before the Commission. The scope of judicial review does not include the introduction of new evidence which could have been, but was not, presented to the Commission. New York v. United States, 331 U. S. 284, 334-336. The Commission did not refuse to receive evidence; it was appellee which refused to tender evidence. See Railroad Commission of California v. Pacific Gas Company, 302 U. S. 388; Baltimore and Ohio Railroad Company v. United States, 298 U. S. 349.

It is submitted that the decision of the district court fails to recognize the authority granted the Commission by the Act to maintain compliance by carriers with the limitations imposed by the Act, and that it authorizes the appellee to engage in activities prohibited by the Act and the Commission's general policy under the Act. We believe that the questions presented by this appeal are substantial and that they are of public importance.

Respectfully submitted.

Counsel for Defendants-Appellants.
Address

APPENDIX A

Text of statutes involved.

APPENDIX B

Copies of opinions and judgments below.

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