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August 7, 1969

Tose, Inc. and O'Connor's Express
United States of America and Interstate Commerce Commission

The opinion of the court was delivered by: WOOD


This is an appeal from a Decision and Order of the Interstate Commerce Commission which approved the acquisition by Tose, Inc., of O'Connor's Express, Inc., but refused to allow the transfer of certain operating rights formerly held by O'Connor's. Pursuant to 28 U.S.C. § 2284(1) it was determined that the issues involved were appropriate for hearing by a three-judge court whereupon Chief Judge of the Third Circuit, Hon. William H. Hastie, appointed a panel to hear the matter. We subsequently permitted the intervention of several other shipping firms to defend the Commission's decision.

A statement of the legal context and the pertinent proceedings before the Commission is appropriate before reaching the issues at hand. Tose filed an application with the Commission on February 4, 1966, seeking approval of the Commission pursuant to Section 5 of the Interstate Commerce Act, 49 U.S.C. § 5 to acquire control of O'Connor's through purchase of its capital stock and concurrently to merge the acquired carrier into itself. Section 5(2) of the Act provides in relevant part that:

"(a) It shall be lawful, with the approval and authorization of the Commission, as provided in subdivision (b) of this paragraph -
"(i) for two or more carriers to consolidate or merge their properties or franchises, . . .
"(b) Whenever a transaction is proposed under subdivision (a) of this paragraph, the carrier or carriers . . . shall present an application to the Commission . . . . If the Commission finds that, subject to such terms and conditions and such modifications as it shall find to be just and reasonable, the proposed transaction is within the scope of subdivision (a) of this paragraph and will be consistent with the public interest, it shall enter an order approving and authorizing such transaction, upon the terms and conditions, and with the modifications, so found to be just and reasonable: . . ."

 In its application, Tose requested that its prior operating rights be merged, with some modification, into those of O'Connor's, so as to expand its area of operation. Prior to filing, Tose had authority to operate as a "regular route" common carrier between Bridgeport, Pennsylvania, and New York City, serving several intermediate points, and as an "irregular route" carrier of specified commodities from, to, and between specified points in Pennsylvania, New York, New Jersey, Delaware, Maryland, Virginia, and the District of Columbia. Prior to filing, O'Connor's held authority to provide "irregular" route service between a specified area in and around New York City and described territory in Pennsylvania and New Jersey, and between a specified area in New Jersey and points in eastern New York, western Connecticut, and southwestern Massachusetts. Pending hearing, the Commission, pursuant to its authority in Section 210a(b) of the Act, 49 U.S.C. § 310a(b) and Section 9(b) of the Administrative Procedure Act, 5 U.S.C. § 558, granted Tose temporary authority to operate in the areas requested.

 The hearing of Tose's application was held before a Hearing Examiner in New York between October 17 and October 28, 1966. Some 22 shippers who had existing operating rights in the areas where Tose and O'Connor's were authorized to render service, entered appearances to oppose the granting of authority for the merger of assets and operating rights. One of the protestant's contentions which is of immediate relevance was that certain of O'Connor's operating rights had become dormant through disuse. In a Section 5 application proceeding the burden is upon the applicant to show that a new service will not be created. To do this it must establish that substantial operations had continued under authority already existing, and that the purchased rights would not be put to a use different from their prior use. Braswell Motor Freight Lines, Inc. v. United States, 275 F. Supp. 98 (W.D. Tex. 1967); aff'd per curiam 389 U.S. 569, 88 S. Ct. 692, 19 L. Ed. 2d 779 (1968); Great Coastal Express, Inc. v. United States, 243 F. Supp. 943 (E.D. Va. 1965) aff'd per curiam, 382 U.S. 369, 86 S. Ct. 546, 15 L. Ed. 2d 424 (1966). If the Commission finds that a new service will be performed, either because of reactivation of dormant rights or because of a different use, the carrier has the burden of proving that public convenience and necessity require a grant of the new authority. Braswell Motor Freight Lines v. U.S., supra; C & H Transportation Co. v. United States, 249 F. Supp. 97 (N.D. Tex. 1965); Shein v. United States, 102 F. Supp. 320 (D.C.N.J. 1951), aff'd per curiam, 343 U.S. 944, 72 S. Ct. 1043, 96 L. Ed. 1349 (1952).

 With respect to the questions which are relevant in the instant appeal, the Examiner found that the "operations of O'Connor's prior to the agreement with Tose were substantial but that such substantial operations were confined to a limited geographic area consisting of authorized portions of New York and New Jersey and did not extend to points in the states of Pennsylvania, Massachusetts, and Connecticut." 104 M.C.C. 869, 890-1. He therefore concluded, inter alia, that O'Connor's operating rights in Pennsylvania, Connecticut and Massachusetts were dormant but that the evidence of O'Connor's past operations showed sufficient service to a representative number of points in New York and New Jersey to negate a finding that service to authorized portions of these states had been abandoned. He then considered the evidence introduced by Tose to establish that a public need for reactivation of the dormant O'Connor's rights existed and concluded that "the testimony of the shipper witnesses falls short of establishing a public need for the additional services of Tose to and from the O'Connor's points in Pennsylvania, Connecticut and Massachusetts." 104 M.C.C. 892. After rejecting a number of the protestant's contentions which would have defeated the merger but which are not directly relevant here, the Examiner recommended to the Commission that the proposed merger was in the public interest and ought to be approved subject to the cancellation of O'Connor's dormant operating rights in Pennsylvania, Massachusetts, and Connecticut.

 In a Memorandum and Order released on October 1, 1968, the Commission affirmed and adopted in toto the Examiner's report and recommendations without oral argument and without additional findings and conclusions.

 Tose and O'Connor's have advanced three arguments in this Court in seeking to upset the decision of the Commission. They first contend that the finding of dormancy in O'Connor's routes to Pennsylvania, Massachusetts and Connecticut was arbitrary and unwarranted. Secondly, they argue that the Examiner and the Commission acted arbitrarily in not finding a public need for the reactivation of operating rights to Massachusetts and Connecticut. Finally, they contend that the Commission acted arbitrarily by adopting the Hearing Examiner's findings and conclusions in toto without further findings or conclusions of its own or answers to the numerous exceptions filed in opposition to the Examiner's report.

 With respect to the first two contentions, it should be clear that this Court's function on review of the Commission's conclusions and order is extremely limited. We are not to substitute our judgment for that of the Commission because we disagree with the conclusion it has reached from the evidence presented to it; we are to consider only whether the Commission's conclusion has a rational basis and is supported by the evidence. In United States v. Pierce Auto Freight Lines, Inc., 327 U.S. 515, 90 L. Ed. 821, 66 S. Ct. 687 (1946), the Supreme Court, in reversing a District Court which had substituted its judgment for that of the Commission stated that:

"We think the court misconceived not only the effects of the Commission's action in these cases but also its own function. It is not true, as the opinion stated, that ' . . . the courts must in a litigated case, be the arbiters of the paramount public interest.' This is rather the business of the Commission, made such by the very terms of the statute. The function of the reviewing court is much more restricted. It is limited to ascertaining whether there is warrant in the law and the facts for what the Commission has done. Unless in some specific respect there has been prejudicial departure from requirements of the law or abuse of the Commission's discretion, the reviewing court is without authority to intervene. It cannot substitute its own view concerning what should be done, whether with reference to competitive considerations or others, for the Commission's judgment upon matters committed to its determination, if that has support in the record and the applicable law." 327 U.S. 515, 535, 536, 66 S. Ct. 687, 90 L. Ed. 821.

 Similarly, the Supreme Court stated in McLean Trucking Co. v. United States, 321 U.S. 67, 88 L. Ed. 544, 64 S. Ct. 370 (1944) with respect to the Commission's determination of what is in the ...

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