Schaffer Transportation Company v. United States

PETITIONER:Schaffer Transportation Company
RESPONDENT:United States
LOCATION:West Los Angeles Police Station

DOCKET NO.: 20
DECIDED BY: Warren Court (1957-1958)
LOWER COURT:

CITATION: 355 US 83 (1957)
ARGUED: Nov 13, 1957
DECIDED: Dec 09, 1957

Facts of the case

Question

  • Oral Argument – November 13, 1957 (Part 2)
  • Audio Transcription for Oral Argument – November 13, 1957 (Part 2) in Schaffer Transportation Company v. United States

    Audio Transcription for Oral Argument – November 13, 1957 (Part 1) in Schaffer Transportation Company v. United States

    Earl Warren:

    Number 20, Schaffer Transportation Company and American Trucking Associations, Incorporated, appellants, versus United States of America and Interstate Commerce Commission.

    Mr. Beardsley.

    Peter T. Beardsley:

    Mr. Chief Justice, may it please the Court.

    This case is an appeal from a decision of a three-judge District Court for the northern division of South Dakota.

    That court in turn upheld the action of the Interstate Commerce Commission which denied Schaffer’s application to transport granite between various points and places in the United States.

    The court’s decision is printed in the record at 359, the Commission’s report at 24 and the report of Division 5, of the Commission which granted most of Schaffer’s application and which was reversed by the entire Commission on reconsideration is shown in the record beginning at page 6.

    The appellants here are Schaffer, a very small motor common carrier of Revillo, South Dakota and American Trucking Association, the Trade Association of the Motor Carrier Industry.

    Appellees are the Interstate Commerce Commission and various rail organizations, which protested Schaffer’s application before the Commission.

    The government, which supported the Commission’s decision before the District Court, now supports the appellants here.

    Schaffer is presently authorized to transport granite from Grant County, South Dakota to points in 15 states ranging from Montana and Colorado on the west to Pennsylvania and New York on the east.

    By an application, which is involved here, Schaffer sought to expand this authority to transport granite from the same origin point that is Grant County, South Dakota to points in ten eastern states in District of Columbia and in the reverse direction from points in Vermont to 16 states primarily in the Midwest.

    The maps which are printed in the record at 294 and 296 show the method in which the proposed operation would dovetail or complement Schaffer’s present service.

    William O. Douglas:

    Which page is that?

    Peter T. Beardsley:

    The maps are shown in the record Mr. Justice Douglas at 294 and 296.

    They are Schaffer’s Exhibits 4 and 5 before the Commission.

    The Schaffer’s application was protested by various rail groups and by one motor common carrier, Dingmann.

    Hearings were held before an examiner, who recommended a grant of authority substantially as requested by Schaffer.

    Exceptions were filed for the examiner’s recommended grant of authority and Division 5 affirmed the examiner’s report except that it eliminated authority from Grant County, South Dakota to four eastern states in the District of Columbia, those states are Maryland, Connecticut, Massachusetts and Vermont.

    Because the Division held that since Dingmann, the one protested motor carrier, have authority to provide service to those points which service had not been shown to be in any manner inadequate.

    There was no reason to duplicate that authority in effect by another grant on the same authority to Schaffer.

    Now neither appellant has taken any exception at any stage of this proceeding to that partial denial of the authority.

    The railroads then petitioned for reconsideration and the Commission ultimately reversed the order of its Division 5 and denied the application all together.

    The only basis assigned in the Commission’s report for denying the application were, one that the existing rail service was adequate to meet the shippers’ needs and two that in any event the main purpose of the shippers here was to get lower rates rather than an improved service by virtue of Schaffer’s operations.

    The question as we see it maybe very simply stated is an applicant for motor carrier authority required to prove, among other things, that existing rail service is inadequate or to put in another way, are the shippers of the country entitled to service by all available forms of transport, or is the Commission authorized to determine as it has in this case that only the services of the railroad shall be utilized.

    The statutory provisions involved are the National Transportation Policy and Section 207 of the Interstate Commerce Act which is 49 US Code 307.

    The provisions of the policy are set forth in the original brief which we filed here at page 34, the provision of Section 207 are reproduced at page 38 of that brief and I might add that we have filed also in this case a reply brief.

    Coming now to the merits of the case, we point out that from the beginning of federal regulation of motor carriers, until 1950, the Commission in a long line of decisions held that shippers are entitled to adequate service by motor vehicle as well as rail.

    And the Bowles case which we cite at page 7 of our original brief here decided in 1937 is a landmark decision in this field.

    There, as in this case, the railroad protesters, who were before the Commission seeking to have the application to perform motor service to denied, contended that railroad service was adequate to meet the shippers’ need.

    As to this contention, when it was put then in 1937, the Commission said that a particular point has adequate rail service is not a sufficient reason for denial of a certificate.

    Peter T. Beardsley:

    Shippers and consignees of petroleum are entitled to adequate service by motor vehicle as well as rail.

    Does that — does that mean in your view that simply on the showing that particular a route has no motor service that’s enough to require a certificate or just by a certificate?

    Peter T. Beardsley:

    No Mr. Justice Harlan it does not mean that, we have never contended that here.

    It would mean I think that the burden which the applicant had to show would be somewhat less than if there were already service of the same kind in the field.

    But obviously he has to prove a need for service and in addition he has to show under the requirements of Section 207 that he is fit, willing and able to perform the service.

    In other words, if he were a near irresponsible character, regardless of the fact that —

    Well I assumed the latter.

    Peter T. Beardsley:

    Yes sir.

    Well as I was saying in our original brief we cited in more than 50 cases in which the Commission followed the principle which it established first in the Bowles case, including two which involved, as does this case, a transportation of granite.

    Now the shoe hasn’t always been on the same foot in these cases.

    There have been lots of instances in which motor carrier have appeared before the Commission and protested against applications by other forms of transport, for example, water transport, and they have said to the Commission, our service is adequate there is no need for this motor transport.

    The Commission has invariably told them in those cases, regardless of the adequacy of motor service that is no reason to deny an application to perform a different type of service, water service.

    The same holdings have come forth in instances in which motor carriers have appeared as protesters for example the application to perform freight forwarding service.

    And so in reality the Commission has assigned to the motor transport industry the dubious distinction of being the one transport agency which can be done without, if some other form of transport can be found to be adequate.

    Harold Burton:

    Are the rates material or immaterial?

    Peter T. Beardsley:

    The Commission contends they are material because they say the shippers were interested only in lower rates.

    We contend that they are immaterial.

    In other words, we say that the shippers are indeed entitled to service by both forms of transportation.

    What underlies their motives in wanting that transportation is immaterial.

    Now obviously if later on once the motor authority has recognized in put into being, then the Commission always have authority when these rate questions come up to determine what the rate should be by the particular form of transport involved.

    We haven’t reached that point in this case Mr. Justice Burton.

    The Bowles case of course was decided as I said before 1937, prior to the Transportation Act of 1940.

    Even then the provisions of Section 202 (a) of the Motor Carrier Act, among other things, required the Commission to preserve the inherit advantages of motor transportation.

    And in the Bowles case there Commission referred among other things to that requirement of the statute and based on that requirement ultimately concluded, as I said before, that shippers are entitled to adequate motor as well as rail service.

    And so our position is that when Congress in 1940 substantially reenacted as a part of the National Transportation Policy, the provisions of Section 202 (a) of the Motor Carrier Act, if approved the Commission’s consistent construction, which had previously been said forth and to which I previously referred.

    Now here we encounter two arguments from the appellees.

    First the railroad say, and I think they have to say it of necessity, that Section 202 (a) the Motor Carrier Act was repealed by the Transportation Act of 1940 and that the National Transportation Policy which was then enacted, required the Commission to change its rule of decision embodied in the Bowles case.

    Well first of all of course if that is so the Commission waited a mighty long time to change its rule decision, but that’s more or less beside the point.

    The first thing wrong with this rail argument I think is a fact that it overlooks the fact that when Congress enacted the National Transportation Policy, to a large extent it was simply putting in one package, requirements which were already imposed on the Commission by provisions of other statutes.

    For example, and I am reverting again to Bowles, the Commission said there we’re advised by statute that it is the policy of Congress to foster and preserve in full vigor both rail and water transportation.

    Peter T. Beardsley:

    Now that reference of course was to the Transportation Act of 1920, but the Commission went on to point out, as I said that, it was also required to preserve the inherited advantages of motor transport and it reached the ultimate conclusion that the shippers were entitled to both forms of service.

    Now I think the best way to demonstrate, the second thing wrong with this rail argument, because it’s essentially similar to the contentions I’m coming to, is to refer to the report of the entire Commission in Greyhound Corporation Control, Florida Motorlines Corp.

    Now while we have citied a good many cases in our brief, I’m frank to say we didn’t cite that, but it’s after (Inaudible) and I would like to quote it.

    The Commission there said this, “Greyhound also contends that in enacting the Transportation Act of 1940, Congress recognized that the emphasis which both it and the Commission have theretofore put upon the desirability of preserving competition between carriers engaged in the same mode of transportation was no longer necessary.”

    Skipping a few extraneous words, “There is nothing in the transportation policy which indicates that Congress intended that the preservation of competition among operators in the motor bus transportation field should be considered any less important than in other types of transportation or that the long established policy of preserving reasonable competition in transportation should be discarded.

    The administration of the Act so as to preserve the inherent advantage of each mode of transportation requires continued competition, among bus operators, striving to render the best possible service to the travelling public and the spec of competition goes far to encourage the establishment and maintenance of reasonable charges for transportation service without undue preferences or advantages or disruptive competitive practices,” and the ultimate conclusion that the Commission reached there was this.

    “We are unable to agree with Greyhound’s contention that Congress intended to substitute our regulation for the long established elements of competition in the field of motor bus transportation.”

    Well of course what they said there by motor bus transportation is equally applicable to motor truck transportation.

    Now the second argument that we meet comes primarily from the Commission, which says that we lay too much stress on the inherent advantages provisions of the National Transportation Policy and that we in effect overlook the other provisions of the policy.

    The Commission says on the contrary, that when it denied Schaffer’s application, it took into account all of the provisions of the policy.

    Now let me, if I may, attempt an analysis of the decision here to demonstrate just how it took in the account these various provisions.

    First, and admittedly it protects the railroads against Schaffer’s proposed competition both rate and service wise.

    And I assume the Commission will argue that in doing so it thus preserved the inherent advantages of rail service.

    But even so, the Commission’s brief itself notes that even if the application had been granted, the shippers involved would have continued to use rail carload service.

    And so a grant of Schaffer’s application would have recognized the inherent advantages of both modes of transportation, instead of excluding the one in favor of the other.

    So we say that right off the bat, the Commission’s decision violates the cardinal rule, that every part of a statute must be construed in connection with the whole, so as to make all the parts harmonize if possible and gives meaning to each, and of course that’s Washington Market case which is cited in our reply brief at page five.

    The second thing wrong with the Commission’s decision here is that it positively ignores its obligation under the National Transportation Policy to promote adequate economic and efficient service.

    I’ve already referred to the Greyhound case in which the Commission made it clear that reasonable competition is necessary if these aims of the policy are to be accomplished.

    We’ve also dealt with this subject at some length in our original brief and I won’t say more here except to point out the obvious, and that is that the Commission’s decisions maintaining as it does a rail monopoly can scarcely be said to promote adequate economic and efficient service as required by the National Transportation Policy.

    So if I may on this phase of the case, let me sum up by just trying to see how the Commission balanced these various requirements.

    As stated, we concede that the Commission sought to preserve the inherent advantages of rail service, but I’ve pointed out that, that was not necessary, that even if Schaffer’s application had been granted, the railroad’s inherent advantage would not have been destroyed, but look at the other side of the ledger.

    The Commission denied the shippers the inherent advantages of motor service and in doing so failed to provide the fair and impartial regulations of all modes of transportation, which again is required by the National Transportation Policy.

    By maintaining the existing rail monopoly, the Commission fails to promote adequate, economical and efficient service and fails to encourage the establishment and maintenance of reasonable charges.

    And for this reasons we say that the Commission’s contention that its decision here took into account all of the provisions of the National Transportation Policy simply doesn’t hold water.

    It would be far more accurate to say that the Commission’s decision here just ignores the provisions of the policy.

    Now in their briefs, the appellees have made several arguments which we don’t believe are properly available to them before the Court, for the reason that first they find no support in the record itself, second they are not even discussed in the report of the Commission which i before the Court.

    The first argument I’d like to touch on is the Commission’s argument that in denying Schaffer’s application it was complying with the requirement of the National Transportation Policy that it foster sound economic conditions in transportation.

    Now I assume this means that if in a given case the Commission has found that a grant of authority to a motor carriage would have such serious repercussions on the existing rail service as to make it less able to function (Inaudible) then it might deny the motor authority for that reason.

    Well, first we seriously doubt the validity of that theory, but I don’t really need to make any attempt to repudiate it here because there isn’t a bit of a evidence in the record to support the claim that Schaffer’s proposed operations would have any serious impact at all on the Commission and it isn’t even mentioned in the Commission’s report, and probably because the Commission didn’t want to get laughed out of court by making such a comment.

    Now what I said here is applicable equally to the rather lengthy discussion of other statutes, which occupy 16 pages in the rail brief, at pages 24 to 40 of their brief.

    Peter T. Beardsley:

    Now if we understand the argument that they put out there, it is that the Commission again has discretion to deny a motor authority where any serious impact would exist, would be effected upon the rail service, but we don’t have to meet with that argument.

    We’ve dealt in some detail in our reply with this phase of the case and I think I’ll just leave it there if I may.

    The second argument, not available to the Commission here, is that the traffic available wouldn’t support Schaffer’s proposed operation, again nothing in the record to support that contention and the subject is not discussed in the Commission’s report.

    As a matter of fact if the Court will turn to the only point where I find it discussed outside of the examiner’s report, is the report of Division 5 at record 22, it’s noted that the division said the proposed service would tie in nicely with Schaffer’s existing service and at the times available would enable Schaffer to provide an efficient and economical service.

    Now the third argument and it’s fair to say that only the Commission makes it, is that shippers supporting Schaffer should have used the service of existing motor carriers before seeking additional service.

    Well the short answer to that is there simply isn’t any existing motor service and the railroads admit it, in their question presented in their brief at page one of their brief and in their statement of the case, they make it clear that there isn’t any motor service.

    Despite this, the Commission’s brief refers to cases, which hold that existing motor carriers are entitled to transport all the traffic they can handle adequately, economically and efficiently without the competition of a new motor carrier service.

    We have no problem with those cases, except they have no application here.

    To the extent that Division 5 denied the authority requested by Schaffer’s insofar as it duplicated the existing service of the one motor protestant (Inaudible), it conformed to that theory.

    Commission’s brief also tells us that the decision in the (Inaudible) case, which is (Inaudible) versus US 139, Fed Sub 440 supports this decision here.

    Now really nothing could be farther from the fact.

    In that case, the plaintiff did allege that his application was denied because rail service was held to be adequate, but here is what the Court said about that allegation and I’m quoting from 139 Fed Sub 443, the Interstate Commerce Commission and the United States both take the position that this issue does not arise because they say that there is ample evidence in the record before the Commission to the effect that there is also motor carrier service available to serve the points involved in the complainant’s application and the Court went on to hold that, that was the fact in that case, which of course is decided is not the fact here.

    Coming next to the Commission’s argument about lower rates, their additional contention that in addition to the fact that they found that existing rail service was adequate, there is something reprehensible and shippers warning lower rates by motor carrier, and that’s not a good reason for granting an application.

    Now we have dealt with this argument rather extensively in our reply brief, and I just want to touch on it here.

    Going to back Commission’s holding again in the (Inaudible), as I stated before, if shippers are entitled to adequate motor as well as rail service, then what earthly difference does it make, what’s in the back of their mind when they come before the Commission and ask to have this service made available to them which does not presently exist.

    I refer to this Court’s decision in the Mechling case, in which you said this at 330 U.S. 567.

    You previously have referred in that decision through the provisions of the National Transportation Policy and certain provisions of the Transportation Act of 1940.

    And the court went on to say, “The foregoing provisions flatly forbid the Commission to approve barge rates or barge rail rates, which do not preserve intact the inherit advantages of cheaper motor — cheaper water transportation, but discriminate against as water carrier and the goods they transport.”

    Now the Commission has frequently held that motor transportation has certain inherited advantages, which I have no counterpart in rail service.

    In (Inaudible) an official territory which is cited in our brief, original brief at page 26, the Commission said that motor transport unlike rail transport is individualized expedited and more flexible than rail transportation.

    Now if the motor carriers have these inherent advantages, they can’t be here one minute and gone the next.

    They are there.

    This being so, we believe the language of the McLean case, which I just referred to, can properly be paraphrased to state something like this.

    The Commission is forbidden by the National Transport Policy to discriminate against motor transportation by refusal to preserve intact its inherited advantages by arbitrarily denying motor carriers the right to compete with the existing rail service and that in effect is just what we ask this Court to hold here.

    Now one final point, both of the appellees claim that this Court’s decision in the Alton case supports the Commission’s decision here.

    Commission’s brief even goes so far as to say that the rationale of the Alton decision, without more, demonstrates that it was proper for the Commission to take into account with other factors the adequacy of the existing rail service.

    I have already shown that the only other factors which the Commission’s report took into account here were one.

    The fact that the shippers were allegedly interested only in lower rates rather than improved service and I hope I have made the point that in this case where there is no existing motor service that that factor is a completely invalid.

    But coming to the Alton case itself, it was limited solely to the question of whether the Commission authorized motor operations greater in scope than had been performed prior to the so called grandfather date of the Motor Carrier Act of 1935.

    Now since the question there that is to say since the operation that it could be performed as a matter of right subsequent to the grandfather date providing only that it could be proved prior to it, Alton did not involve any question of adequacy of rail service nor even a question of whether — what motivated the shippers in supporting the application because obviously there wasn’t any need for shippers support there.

    Peter T. Beardsley:

    This Court when it upheld the Commission’s grant of the authority simply said that the railroads who were protesters before the Commission had standing to sue to set aside its order in the Federal Courts.

    Now we believe that holding has no application at all in this case.

    We have never contented here that the railroads weren’t properly protesters before the Commission, or that it had been, been less pleased with its decision, they couldn’t have brought a suit to set it aside.

    But we don’t think that that can be twisted to say in effect that once the Commission has held that rail service is adequate that bars the institution of the entirely different type of motor transport which Schaffer sought to provide.

    Railroads like any other protesters are entitled to participate in proceedings before the Commission.

    In an effort to defeat an applicant’s case by showing that he can’t need any one or more, the standards mentioned, but the Alton case which merely upheld their standing to do that and to take the necessary following step before the courts can’t be twisted, as the appellees seek to do, to support a claim that once the Commission has found that rail service is adequate, then the denial of a motor application to provide a entirely different type of motor service is justified on that basis.

    Thank you.

    Earl Warren:

    Mr. Weston.

    Charles H. Weston:

    May it please the Court.

    United States believes that the Commission’s action in denying Schaffer’s application rests on a misconstruction of the applicable statutory provisions.

    I would try to bring out the considerations which we think decides these.

    Mr. Beardsley has referred to most of them but my emphasis maybe slightly different and I hope to supplement what he has said.

    The principal point made in the Commission’s brief is that there is substantial evidence to support the Commission’s ultimate finding that Schaffer’s proposed service is not required by public convenience and necessity.

    As we see it, the appeal does not present this issue.

    The issue is whether the grounds upon which the Commission rejected the application and made this ultimate finding are valid grounds under the statute.

    This is a question of statutory construction and not of sufficiency of the evidence.

    Schaffer’s application was made under Section 207 of the act and Commission has directed to grant motor carrier applications which have been — certain other provision are required by public convenience and necessity.

    The Commission’s brief and that of the railroad appellee stress that the Commission has wide discretion in weighting the factors which enter into public convenience and necessity.

    We do not dispute this wide discretion, but in this case the Commission pinpointed the grounds upon which it acted.

    The question is whether these grounds are permissible under the statute.

    This Mr. Beardsley said and I wish to repeat that the Commission gave only two grounds for denying the application.

    I will take up first the ground that the existing railroad service is adequate.

    Now the National Transportation Policy, I repeat, is — embodies the direction to the Commission that it administer all provisions of the act so as to preserve and recognize the inherent advantages of each of three regulated forms of transportation, that is water, motor and rail.

    Section 207, the public convenience and necessity test, the Section 207 must be read in the light of this statutory command.

    The advantages which inhere in rail transportation rarely if ever coincide with the advantages which inhere in motor transportation.

    And the Commission must administer Sections 207 so as to give shippers the opportunities so far as feasible of making a choice between these competing forms of transportation and thereby a choice between the advantages which either one or the other may give.

    Certainly where there is only rail service available as here an application for motor carrier authority is presumptively in the public interest by the very circumstance that this varying different form of transportation is not presently available and is in the public interest and necessity absent some for countervailing consideration.

    It is irrelevant in these circumstances that the railroads are physically equipped to transport all the traffic tended to them and that the service is adequate in this sense to deny Schaffer’s application because the railroads were able to transport or handle all the traffic amounts to refusal to recognize the advantages which would inhere in the different form of transportation which he was proposed to furnish.

    It protects the railroads in the monopoly which they now have and it preserves whatever disadvantages inhere in that form of transportation.

    Now of course on a clear showing, the grant of a requested motor carrier certificate would infringe some other aspect of the National Transportation Policy.

    Charles H. Weston:

    The Commission would be required to balance the elements of that policy which seem to point in different directions, but in the present case the Commission did not find that grant of Schaffer’s application that was run counter to any another aspect of the National Transportation Policy and on the evidence it could not have made such a finding.

    The other ground upon which the Commission rejected the application was that the shippers who supported it were mainly concerned in obtaining lower rates rather than improved service.

    Commission did not find that shippers’ sole purpose was rate reduction.

    It could not have found this in view of its finding that all shipper witnesses complained that rail service is too slow, and it is additional finding that shippers proposed service would be more expeditious than rail less than carload service and even faster as compared with rail pool car shipments.

    Improved service does not cease to be a matter of public convenience and necessity because it is coupled with the advantage of lower cost service.

    The second advantage does not cancel out first, but we think that the error of the Commission is deeper than this.

    It was error for it to eliminate as a factor in public convenience and necessity, the fact that Schaffer might be able to furnish transportation at rates lower than those which the railroads maintain.

    Now the rationale of the Commission’s rulings that it is unwilling to consider lower rates as a fact of public convenience and necessity in certificate applications under Section 207 is that if the existing rates are too high, it has power to reduce them.

    This rationale to my mind is not very convincing.

    If the grantee, if the motor carrier is given operating authority and he puts in (Inaudible) unreasonably low rates, the Commission is equally empowered to raise those rates.

    If form of service which he provides results in operating economies so it is possible to perform the service of lower cost than that — than the cost of the railroads, the public is entitled to the benefit of the lower rates made possible by the lower operating cost.

    The National Transportation Policy directs Commission to promote economical service.

    In a regulated industry such as the transportation industry, the Commission perhaps may look with disfavor on rate competition as between railroad and railroad or as between motor carrier and motor carrier but the considerations are different where there is only rail service available where they have a monopoly of particular transportation and a motor carrier seeks to enter the field, that motor carrier if, as in the case of this one, offers a specialized service for particular class of shippers, may well be able to provide that at a lower cost than the railroads which necessarily must conduct their operation so as to provide service for goods and commodities of all kinds.

    And if this is so, this is an advantage inherent in the fact that this is — motor service is distinguished from rail service and it is one which the Commission is commanded to recognize and preserve.

    We therefore think that in circumstances of this case the Commission plainly erred when it denied Schaffer’s application upon the ground that the shippers were mainly motivated by the desire for lower rates.

    I will just mention that the Commission’s brief cites a number of Commission rulings for the proposition that proposed lower rates are not a proper consideration in Section 207 certificate applications.

    We think it is significant as pointed out both in the brief of the United States and in the brief by the appellants, their reply brief, I think with one exception these rulings all involved cases of a motor carrier application asking to provide, I believe to provide service for Schaffer’s, already served by motor carriers.

    In other words, it’s not the case where a motor carrier was seeking to come into a field exclusively occupied by the railroads.

    Thank you.

    Earl Warren:

    Mr. Garson.

    H. Neil Garson:

    May it please the Court.

    Pursuant to Section 207 (a) of the Interstate Commerce Act, the Commission in its discretion is authorized to grant certificates of public convenience and necessity to qualified applicants desiring to conduct operations as common carriers by motor vehicles in interstate commerce.

    Appellant A W. Schaffer of Revillo, South Dakota, doing business as Schaffer Transportation Company, applied to the Commission under Section 207(a) for such a certificate to authorize the transportation of granite which is to be used primarily for tombstones and grave markers from points in Grant County, South Dakota to points in ten states in the east and south including the District of Columbia and from points in Vermont to points of 16 states in the west and the south.

    However, before the Commission can grant a certificate to an applicant, Section 207(a) requires that the Commission find one that the applicant is fit, willing and enable properly to perform the proposed service and two that the proposed service to the extent authorized is required by the present and future public convenience and necessity.

    In order to determine these matters, the Commission set the matter down by hearing at which time all parties were given full opportunity to adduce evidence in support or against the proposed service.

    In due time the entire matter came on for final consideration by the entire Commission which ultimately concluded in its report of December 7th, 1955, “that applicant has failed to establish that the present or future public convenience and necessity require the proposed operation and that the application should be denied.”

    This ultimate finding was based upon substantial evidence of record, which is reflected in the thorough analysis of the evidence and the subsidiary findings found in the report of the Commission.

    These subsidiary findings include findings based upon the evidence as adduced by the applicants, the supporting shippers, and the protesting carriers.

    After making its subsidiary findings the Commission concluded that on the foregoing facts we are unable to conclude that the public convenience and necessity require the proposed operation.

    The Commission pointed out that the shippers are reasonably satisfied with the rail service except that they complain that it is too slow.

    H. Neil Garson:

    In this respect the Commission held that the shippers were purposely permitting the accumulation of pool-car shipments in order to benefit from the lower pool-car rate.

    And in that connection it is noteworthy that Exhibit 23 of the one of the intervening shippers Jones Brothers, a producer of granite in Barre, Vermont, the record page 330, these indicate that the number of shipments that were finished and the date upon which they were shipped.

    And the average number of days a shipment is held amounts to 99 days and a minimum number of days was 28 days, and the longest a 186 days from the time that granite was ready to be shipped until it was actually shipped.

    It further pointed out that while the less-than-carload the rail service was not as expeditious as the proposed service, nevertheless it was fairly good, but the shippers were not using the less-than-carload service because of the higher rate.

    The Commission thereupon concluded, “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 than improved service.

    It is well settled that this is not a proper basis for grant of authority and the application therefore must be denied.”

    In view of this conclusion, the Commission found it unnecessary to consider the question of applicant’s fitness to conduct the proposed service.

    Now this Court has held in Chesapeake & Ohio Railway Coal v. United States 283 U.S., there is no specification of a consideration by which the Commission is to be governed in determining whether public convenience and necessity required a proposed construction.

    Under the Act it was the duty of the Commission to find the facts and in the exercise of reasonable judgment to determine the question.

    Hugo L. Black:

    When was that case decided?

    H. Neil Garson:

    That was in, partly in 1931 or 1932.

    Hugo L. Black:

    Was that before the Act which required that the each mode of transportation be given its inherent advantages by the Commission?

    H. Neil Garson:

    It was prior to the Motor Carrier Act where that particular phrase was inserted.

    Now the latter case, concerned applications for certificates of public convenience and necessity for the abandonment of rail lines pursuant to Section 118 of the Act.

    When the Motor Carrier Act was passed in 1935 language similar to that used in Section 118 was added to the later act resulting in what is now designated as Section 207(a).

    In Interstate Commerce Commission v. Parker, this Court held that the purpose of Congress was to leave to the Commission, authoritatively, to decide whether additional motor carrier service would serve public convenience and necessity.

    This of course gives administrative discretion to the Commission to draw its conclusion from the infinite variety of circumstances which may occur in specific instances.

    We submit that the Commission when it made its ultimate conclusions was acting within the scope of its authority which has been sanctioned on several occasions by this Court.

    The record before the Commission is replete with evidence showing that the shippers were motivated by a desire for lower rates rather than for a need for additional or for better service.

    Hugo L. Black:

    Has this Court ever held that that’s not a — that either a barge line or motor carrier or railroad can be denied the right to operate on the basis that in view it has the capacity to carry cheaper than the other types of service?

    H. Neil Garson:

    No, this Court has not, but on the other hand if Your Honor is referring to the Dixie Carriers case —

    Hugo L. Black:

    I’m not referring to any case, I just wanted to know, I’m not familiar whether any time this Court has ever said that if one of the three types of services could carry cheaper than another, it’s to be denied the right to carry because of that ability to carry cheaper than the other.

    H. Neil Garson:

    Well I agree with Your Honor that if this is — if that is the situation in this case.

    Hugo L. Black:

    What’s meant by the Commission’s statement is well established is this, that is trying to get lower rates is not a proper basis for grant of authority.

    H. Neil Garson:

    Well, there is no —

    Hugo L. Black:

    I suppose that was one of the object of the act, was to give public the benefit of cheaper rates as advancing knowledge of mechanics and improved methods of transportation, makes old methods obsolete under certain circumstances.

    H. Neil Garson:

    I understand what Your Honor is driving at.

    However, if we had to measure inherited advantage solely on the basis of rates, why in this particular case the evidence definitely points that the rails can carry this low grade commodity much cheaper than the —

    Hugo L. Black:

    Well has that — did they make a finding to that objective, is that what they based this on, I can understand that if they’ve done that.

    H. Neil Garson:

    Well the Commission in its conclusions points out that the only time that there might be some traffic attracted to this motor carrier is on the less than carload service, and in no other case.

    Hugo L. Black:

    If you are say that the Commission based its finding here on the facts that the railroads can carry the cheap or cheaper than the other, then I can understand it, but if you are going on the basis that Commission has a right, despite that, to say public is not entitled to cheaper method of transportation on one of those three types, then I do not understand your argument.

    H. Neil Garson:

    Well the Commission’s report does not state so.

    It merely —

    Hugo L. Black:

    I so read it on that page 37.

    H. Neil Garson:

    Well, the Commission’s report as we have pointed out indicates that they have discussed and analyzed all of the testimony of the very shippers, and also —

    Hugo L. Black:

    They throw it all out because they say they want it cheaper, that’s most — they don’t want to get that stuff as cheaper as it could be done by any motor transportation, if that’s all right.

    H. Neil Garson:

    But this record doesn’t indicate whether or not the motor carrier service would be cheaper.

    Hugo L. Black:

    But then if you are going on the basis that — one basis that, that basis is one thing, you point out to me where they have found that they did not put this no the theory and on the premise precisely as they did on page 37, that they won’t grant this motor carrier because the only reason they could do it because it carries cheaper.

    H. Neil Garson:

    Well that was one of the reasons.

    The other reason was that the presently available service was adequate.

    Hugo L. Black:

    That’s railroad service.

    H. Neil Garson:

    Well —

    Hugo L. Black:

    The bill contemplates doesn’t it, that there shall be three types of service, where it can be and the Congress itself settled the problem didn’t it as to whether the public would be entitled to have those types of service when it passed that act?

    H. Neil Garson:

    May I add this Mr. Justice Black, that the Commission, the entire Commission when it considered this case, considered the entire matter and that the — there was involved here not only a westward movement, but also an eastward movement and in consideration of the entire case have decided that the presently available service whether motor or rail was adequate.

    Felix Frankfurter:

    Instead of dealing with negative or with questions undermining negatively as it were what the Commission did, would you mind stating what you concede to be the legal criteria on the basis of which the Commission, the legal criteria that the Commission invoked on the basis of which it reached result of denial of this certificate that it did.

    H. Neil Garson:

    The legal criteria is that under the Act the Commission must find that public convenience and necessity require this particular type of service.

    Felix Frankfurter:

    That’s the ultimate thing.

    H. Neil Garson:

    That’s the ultimate thing.

    Felix Frankfurter:

    That’s doesn’t tell how or what the ingredients are which added up equal public service either in granting or denying, does it?

    What I want to know is what parts were the governing considerations for denial which satisfy the requirement of the Act?

    H. Neil Garson:

    The government considerations in this particular case —

    Felix Frankfurter:

    That’s what we talk about —

    H. Neil Garson:

    Well number one the Commission looked to whether or not —

    Felix Frankfurter:

    Should what, I didn’t hear that.

    H. Neil Garson:

    Number one, the Commission looked to whether or not the shippers had disclosed a need for this service independent of rates, of rate considerations.

    Secondly whether or not —

    Felix Frankfurter:

    Meaning by that, would this be redundant, would this be a needless duplication, is that it?

    The message of that it is, that it would be.

    H. Neil Garson:

    Essentially that is true.

    Felix Frankfurter:

    I just want to know what it is they went on.

    We can’t go on the facts, but we can go on the basis on which they judge, by which they judge the facts and I’m trying to get from you what are the basis to which the criteria which they applied in reaching the result they did and I gather that, that underlying Justice Black’s (Inaudible) —

    H. Neil Garson:

    Well the criteria unless —

    Felix Frankfurter:

    They can’t merely say, oh well, did they go on the grounds that he would be a competitor to the railroad, the competitor would be cheaper, that the railroads need the money, ergo he’s denied the certificate, that wouldn’t be a sustainable position, would it?

    H. Neil Garson:

    No it wouldn’t be, but on the other hand the situation in this case happens to be that the Commission looked to the record, found that the shippers had not disclosed a need for this particular service and that the present service whatever it happened to be, whether motor carrier or rail appeared to be adequate to take care of any of the traffic which the shippers decide to offer to the carriers.

    Hugo L. Black:

    I am troubled with that premise (Inaudible) if you say that they had disclosed the need for this service because they were getting railroad service.

    H. Neil Garson:

    That’s right.

    Hugo L. Black:

    I thought when the act was passed it went on the assumption there was a need for both kinds of service and that the Congress was providing both kinds of service and borrowing service where they could be carried without considering or considering is crucial at all, in fact it might compete with one of the other lines of service and it is decided thing they wanted was to get it as cheap as they could by their particular type of transportation which could do it the cheapest, that’s my understanding of this.

    H. Neil Garson:

    Well, that maybe true Your Honor, but on the other hand in this particular case the evidence seems to indicate that the shippers would continue using the rail service regardless because it happens to be the cheapest service.

    Hugo L. Black:

    I could understand that thoroughly if that’s what the Commission based its ruling on, I could go with you on that.

    H. Neil Garson:

    Well if I may continue I will probably touch on that in discussing the Commission’s view regarding the National Transportation Policy which I think has a bearing on that particular point.

    Since there are adequate remedies to challenge the lawfulness of rates in other parts of the Act, the Commission has consistently refused to consider rates, as pertinent in certificate proceedings, whether the satisfaction results from rail or motor carrier rates, the Commission’s consistent policy applies because the essential requirement of Section 207(a) is that the applicant bears the burden of affirmatively showing that a need exists for the proposed service.

    Here the applicant failed to hurdle the first test that is to show that the service was needed independent of rate considerations.

    Thus the Commission concluded one, that the shippers are interested only in lower rates, rather than improved service and two that the service presently available which includes rail service is reasonably adequate.

    It was upon these two conclusions that the Commission made its ultimate finding that no need was shown for the service.

    Although the appellant —

    Felix Frankfurter:

    It’s a lot of — a jumble of words as far as I’m concerned.

    Do I gather that the Commission makes a sharp break between a certificate problem and rates and the considerations of rates that are excluded, is that what you saying?

    H. Neil Garson:

    In most cases —

    Felix Frankfurter:

    I don’t understand that.

    H. Neil Garson:

    — the Commission does do that because in most cases Mr. Justice Frankfurter the Commission does do that because rate considerations can be taken care of adequately under other sections of the Act, for example, Section 13 or Section 216, with respect to Motor Carrier Act.

    Felix Frankfurter:

    Well I understand that, put it that way, I understand that if a shipper thinks the rates are too high, he can move in and get them lowered, prove that they’re reasonable, but except for the simple cases such as a fellow wants a certificate because the particular points aren’t covered, the railroad doesn’t stop there, in plain English, or it doesn’t stop at intervening point, and a pick up motor traffic gives you that service or because the railroad is secured, it’s too slow if that’s possible (Inaudible) against swifter motor traffic etcetera, but why isn’t the quality of service you get for the competition you will stimulate by having a carrier, a motor carrier come in, a relevant consideration, wouldn’t that be shut out, because as Justice Black indicates, I don’t read the statute to mean you must have all three and I don’t suppose he means that, but it is indicated that on the whole there should be available as many sources of transportation as possible, would you agree to that general statement?

    H. Neil Garson:

    I agree to that, provided that the applicant affirmatively shows that there is a need for his service.

    Felix Frankfurter:

    Well then we get to the question that I’m trying to press you on namely what are the criteria that are thereon “need?”

    If you can — I think there have been cases, I remember cases where the Commission suggested that this would stimulate, if you get better traffic from the railroad if you have motor carrier, is that right?

    H. Neil Garson:

    That’s right.

    In various situations the Commission has stated where there hasn’t been any service available, either rail or motor, there is a need for this particular type of service —

    Felix Frankfurter:

    That is a needed case —

    H. Neil Garson:

    That’s needed.

    Then you get to the point where the shipper has both rail service and motor carrier service, but that rail service does not quite give him the expeditious type of service let us say, the door to door handling service and other so called inherent advantages which the motor carrier service provides, in those situations where the shipper has definitely shown that he requires this types of inherent advantage, then the Commission has in most cases granted the —

    Felix Frankfurter:

    Now let me ask you this, have there been cases before the Commission, one trouble with this whole problem is that we get an episodic case once in a while and the Commission has oodles of cases, and so we have to be informed by you, have there been cases where the physical facilities are ample, the physical facilities are ample for the shippers, the rate that the railroad charges is no motor carrier, is not deemed to be unreasonable, shippers aren’t complaining about that as such, but they think that on the whole if a motor carrier moves in, that will by way of competition lower the rates in order to get business.

    Has the Commission ever considered as a relevant factor that the railroad would have their revenues reduced undesirably by just having a competitor — competition from a motor carrier?

    Does that enter into the calculations?

    H. Neil Garson:

    It may.

    In the AJ Network case which is cited in the Commission’s brief and also in the statement through the Senate committee, Select Committee on the Small Business, the Commission pointed out, that in a given case where the question of limited amount of traffic and a question as to which carrier needs that type of traffic more than the other type of carrier, that the Commissioner in that situation would have to consider the needs of the carrier which may lose this traffic rather than putting in competing forms of service.

    Felix Frankfurter:

    I’m trying to press you to get down to the irreducible minimum in this case, it isn’t for want of physical, but they don’t claim that this was needed to given them physical facilities that they haven’t had.

    They do not have without this carrier, motor carrier, is that right?

    H. Neil Garson:

    That’s right.

    Felix Frankfurter:

    They do not claim that geographically they are not served, is that right?

    H. Neil Garson:

    That’s right.

    Felix Frankfurter:

    Well, therefore what is it, what is it then that the Commission said disapproves need?

    If you — I think was it you or was it Justice Black who suggested, that you suggested that presumptively if there is no motor carrier at all, if the railroad had the monopoly and a trucking concern comes in, a motor carrier says we can serve this territory in this way, but that’s a good beginning because on the whole by the Transportation Act or the Motor Carrier Act, doesn’t irate competition as such, the way the Sherman Law did, it’s rather contrary I should say, nevertheless there is an element of promoting competition in the Act, isn’t there?

    H. Neil Garson:

    There is.

    There is an element of promoting competition, but depending upon the particular case and the circumstances and each case much rest upon on the individual facts in that particular case.

    Felix Frankfurter:

    What in your opinion was fatal in this case to the existence of a need having due regard to the limited competitive policy of the Act?

    H. Neil Garson:

    The fatality in this particular case was that the applicant failed to show in the — as the Commission pointed out, for his particular type of service and in addition that the transportation which is now available to the shippers was adequate and that was the finding of the Commission —

    Felix Frankfurter:

    Adequate physically, adequate economically, adequate serviceably, all three elements?

    H. Neil Garson:

    I must assume that it was based on all three elements because as the subsidiary findings unfold, it is pointed out that the shippers failed to take advantage of faster service which is provided by the railroads primarily because of rate considerations, although it was available.

    I see that my time is up.

    I do want to mention one point that the Commission in this particular case has based its findings, it has concluded and denied the application on two findings, number one that there was a failure to show a need for the service and number two that the present service including rail is reasonably adequate.

    This was so found by the court below which said that the Commission purported to weigh all of the surrogate factors constituting proof of need of the service and in addition I would like to point to the Commission’s policy as announced in the AJ Metler case, which is cited in our brief at page 35 and for the reasons stated it is submitted that the opinion of the court below should be affirmed.

    Earl Warren:

    Mr. Mathews.

    Amos M. Mathews:

    Mr. Chief Justice, may it please the Court.

    I would like first of all to go into one thing that I am not sure is clear.

    This is quite an unusual case in the review of the order of an administrative agency in that no one has challenged the sufficiency of the evidence to support the Commission’s findings and conclusions.

    No one has challenged the Commission’s findings.

    Now it is almost a stereotype in review of an administrative order, and you heard a great deal about that yesterday in respect to the Milwaukee Suburban Fair case.

    In review of an administrative order, to say the evidence in the record is insufficient to support the findings and conclusions of the Commission, but no one has made that point in this case.

    As I understand Mr. Weston’s argument representing the Department of Justice, all of his argument, however, was an argument to the evidence, that the evidence is insufficient to support the Commission’s finding, but the Department of Justice in their brief, in their statement of the question presented did not present that question, that is on page two of their brief.

    They say, well it’s rather detailed, but they simply state that the question is the legal — is the proper construction of 207(a) of the Interstate Commerce Act.

    Amos M. Mathews:

    The appellants themselves did not raise any question as to the sufficiency of the evidence, whether the evidence supports the findings, whether the subsidiary findings support the ultimate finding or anything of that sort.

    As a matter of fact, if you examine the appellant’s brief, the appellant’s brief is quite clear on this I believe, in it’s entirely and in the question presented, the only question that the appellants have presented here, is whether or not, in an application under 207(a) of the Interstate Commerce Act, where there is no motor carrier service existing in the area for which the authority is sought, may the Commission in determining public convenience and necessity, take into consideration the existing railroad service in the area.

    Now we have stated that as the sole question presented in our brief and appellants filed a reply brief and they did not take exception to that in anyway.

    Therefore, we say at the outset, that a — quite a bit of the argument here, and it is somewhat beside the point, in that here we have purely a question of statutory construction and not a question, the ordinary and usual run of the mind question as to whether the administrative agency upon the evidence before it, reach the correct conclusion on the facts.

    Now —

    Felix Frankfurter:

    But you’ve got to have some standard by which the correct conclusion on the fact is to be judged?

    Amos M. Mathews:

    Oh that is correct.

    I’ll come back to that later on.

    Felix Frankfurter:

    That’s the crux of the case so far as our reviewing authority is concerned.

    Amos M. Mathews:

    Well —

    Felix Frankfurter:

    (Inaudible) fact that it isn’t urged as evident to sustain the finding, isn’t that true?

    You’re urging that this doesn’t raise the question of adequacy of evidence.

    Amos M. Mathews:

    That’s right.

    Felix Frankfurter:

    That being so it’s all the more incumbent I take it for the appellees to satisfy this Court that the Commission adopted the right criteria with the reference to which it adjudged the facts.

    Amos M. Mathews:

    Yes, I will go to that right now, and that I think involves the construction of 207(a) of the Interstate Commerce Act, which as I say is the point on which this case turns.

    Now counsel for the appellants stated that for a long period, the Commission had consistently held that where there was no motor carrier service available in an area, the Commission had held as a matter of law that the shipper was entitled to motor carrier service and therefore upon the applicant proving ability to perform and so forth, the fact that there was railroad service existing was not taken into consideration.

    Now it is true that that was the policy of the Commission from 1935 to 1940 and that was based upon the declaration of policy in the Motor Carrier Act of 1935, but in 1940 the Congress repealed the declaration of policy in the Motor Carrier Act of 1935 and substituted therefore the National Transportation Policy with which you are all familiar.

    And after that the Commission changed its policy and in 1942 in the first case so far as I can find in Bailey Common Carrier application, in that case there was no motor carrier service available in the area for which the new authority was sought.

    And the Commission, citing the National Transportation Policy, held that it nevertheless had statutory authority to deny the application despite the absence of railroad service in the area.

    And despite what counsel for appellants say to the contrary that has been the Commission’s consistent policy where the issue has come before it ever since 1942 and that is based upon the National Transportation Policy.

    And we certainly take the issue very sharply with the counsel for the appellants when they say that the National Transportation Policy simply picked up and repeated the declaration of policy in the Motor Carrier Act of 1935.

    Now — I will get to this later, but I want to briefly say here that the — it’s our view that this question was settled by the decision in Alton Railroad Company against United States 315 US 15.

    And because there that case the railroads were held to have standing to seek a review of a Commission order not upon any narrow technical grounds that merely — merely because the statute gave them the authority, but because as this court found citing Texas and Pacific against Colorado, Gulf, Santa Fe and so forth, that the Motor Carrier Act of 1935 was passed to protect the economic interest of the railroads in their competition with motor carriers.

    This Court cited decisions of railroad against railroad as protecting the interest, economic interest of one railroad as against another in holding that the Motor Carrier Act was enacted to protect economic interest of railroad against motor carrier and vice versa.

    Now the standards to be applied in determining whether to grant this application are set out in 207(a) of the Interstate Commerce Act.

    Public convenience and the criterion is public convenience and necessity.

    Now basically the appellant’s claim is this and that is all they’ve talked about in their brief and that is — there was a question presented when they sought a review of this case and that is question presented here and what they have argued.

    It’s this that Section 207(a) of the Interstate Commerce Act has an implied condition that where there is no motor carrier service in an area for which an application to institute new motor carrier service is filed that by reason of the absence of the motor carrier service there is an implied condition that the standards of public convenience and necessity are somehow lowered.

    In other words that you cannot — that the Commission cannot consider the existing railroad service in the area.

    Now, if the court please, that contention is entirely erroneous and it is contrary to a very well established legislative history.

    Amos M. Mathews:

    Congress has for the past 37 years dealt with this phrase ‘public convenience and necessity’ and with variance of the phrase.

    And Congress has very clearly established this principle that where Congress wants to give to the administrative agency an unlimited discretion in dealing with an application for new public service authority it uses the phrase ‘public convenience and necessity’ that is in Section 207(a), but where on the other hand Congress wants to attach to the granting power of an agency some condition such as appellants want to have read into 207(a) here, Congress does it in expressed terms.

    Earl Warren:

    We’ll recess now.