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July 12, 1963

PENNSYLVANIA TRUCK LINES, INC., Maryland and West Virginia Company, Western Maryland Truck Lines, Inc., Reading Dispatch, Inc., and Black Diamond Transport Company, Plaintiffs,
UNITED STATES of America and Interstate Commerce Commission, Defendants, and Carroll Transport, Inc., Chemical Leaman Tank Lines, Inc., James, R. Hahn, E. Brooke Matlack, Inc., M. I. O'Boyle & Sons, Inc., and American Trucking Associations, Inc., Intervening Defendants

The opinion of the court was delivered by: MILLER

This is an action pursuant to 28 U.S.C. §§ 1336, 1398, 2284 and 2321 to 2323, Section 17(9) of the Interstate Commerce Act (49 U.S.C. § 17(9)) and Section 10 of the Administrative Procedure Act (5 U.S.C. § 1009) to set aside portions of two orders of the Interstate Commerce Commission, entered July 19, 1961 (H. C. Gabler, Inc., Extension -- Cement from Maryland and Pennsylvania Counties, No. MC-27817 (Sub No. 35), 86 M.C.C. 447) and August 13, 1962 (Pennsylvania Truck Lines, Inc., Extension -- Cement, No. MC-19201 (Sub No. 108), 91 M.C.C. 167), to the extent that they denied plaintiffs certificates to transport cement from areas in Pennsylvania's Lehigh District *fn1" to points in fourteen eastern states and the District of Columbia, and to remand to the Commission with directions for further proceedings consistent with the Court's opinion.

For many years, the railroads handled most of the huge volume of cement from the Lehigh District to consumers in the destination areas here involved. Generally, the cement producers made no effort to use motor service or to provide facilities at their plants for loading bulk cement for motor transportation. In 1958, eastern cement producers began installing expensive facilities to load bulk cement into tank vehicles for transport by motor carrier and now express a need for motor service.

 Between December 1958 and March 1959, 43 applications seeking either common carrier certificates of public convenience and necessity or contract carrier permits authorizing the transportation of cement from the mills in the Lehigh District were filed. Some of the applicants had secured the support of the cement producers while others were backed by cement users. The producers, with one exception, supported only one independent motor carrier, while the cement users did not limit their support to a single carrier.

 To meet the new developments, three of the railroads had each formed a new wholly owned and controlled trucking subsidiary; two other railroads had existing trucking subsidiaries. All five were among the 43 applicants for motor carrier authority. While the rail subsidiary applicants were supported by none of the producers, they had obtained the backing of some of the cement users.

 After a consolidated hearing before a single examiner for all but one of the applicants, the examiner recommended that the producer-supported, contract carrier applicants (except Modern) be granted specific contract carrier authority and that the applications in all other respects be denied. The application of Coastal Tank Lines, Inc. was filed later and heard separately by a joint board, which recommended that it be granted to a limited extent.

 Exceptions were filed and oral argument heard by the entire Commission, which found that there was a need for motor carrier service in the area, that two motor carriers should be authorized to serve each of the cement producers on a common carrier rather than a contract carrier basis, that the independent carriers were fit, willing and able to perform the needed services and that all the rail subsidiary applications, except one, *fn2" should be denied. Following further oral argument and reconsideration, the Commission affirmed its prior report with respect to the independent motor carriers, but concluded that 'under existing law we may not grant functionally unrestricted motor carrier operating rights to these rail subsidiary applicants.' This resulted in a reversal of its earlier decision regarding Black Diamond Transport Company, concluding that the railroad's economic plight did not justify placing its subsidiary in a position that would unduly restrain competition.

 The plaintiffs appealed to this Court, asserting that they do not dispute the Commission's findings of fact but question its conclusion that it is without power to issue motor carrier certificates to trucking lines which are affiliated with and controlled by railroads. This action is limited to that issue.

 '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 * * * so administered as to recognize and preserve the inherent advantages 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 -- and 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 * * * shall be administered and enforced with a view to carrying out the above declaration of policy.'

 The Commission has enforced the Interstate Commerce Act and the National Transportation Policy so as to preserve the inherent advantages of motor carrier service by preventing railroads from entering into open competition with independent motor carriers because it believes that a motor carrier with the financial backing of a railroad would be in such an advantageous position as to eventually restrict competition in the motor carrier filed. The test which it applies in carrying out this policy is expressed in the following statement from Rock Island Motor Transit Company -- Purchase -- White Line, 40 M.C.C. 457, 474, quoted with approval by the Supreme Court in United States v. Rock Island Motor Transit Company, 340 U.S. 419, 71 S. Ct. 382, 95 L. Ed. 391 (1951):

 'In other words, a railroad applicant for authority to operate as a common carrier by motor vehicle, though required to do no more than prove, as any other applicant, that its service is required by public convenience and necessity, has a special burden * * * by reason of the very circumstance that it is a railroad. Where it fails to show special circumstances negativing any disadvantage to the public from this fact, a grant of authority to supply motor service other than service auxiliary to and supplemental of train service is not justified.'

 Railroads are restricted in acquiring control of, or merging with, independent motor carriers by a proviso to Section 5(2)(b) of the Interstate Commerce Act, 49 U.S.C § 5(2)(b), which reads as follows:

 'Provided, That if a carrier by railroad subject to this chapter, or any person which is controlled by such a carrier, or affiliated therewith within the meaning of paragraph (6) of this section, is an applicant in the case of any such proposed transaction involving a motor carrier, the Commission shall not enter such an order unless it finds that the transaction proposed will be consistent with the public interest and will enable such carrier to use service by motor vehicle to public advantage in its operations and will not unduly restrain competition.'

 Although this proviso refers to mergers and acquisitions rather than applications for certificates under Section 207, the Commission has applied the National Transportation Policy so as to read the proviso into Sectio *fn207" ; it has served as a guiding light in the ...

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