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SMITH & SOLOMON TRUCKING CO. v. UNITED STATES

April 7, 1954

SMITH & SOLOMON TRUCKING CO.
v.
UNITED STATES et al.



The opinion of the court was delivered by: MCLAUGHLIN

This matter consists of two separate actions by a motor vehicle common carrier which were consolidated for hearing purposes.

The first of these, originally bearing the docket number 989-53, is to set aside the report and order of the Commission of April 20, 1953 and the order of the Commission of October 5, 1953 denying the plaintiff's petition for further consideration of the April 20, 1953 order.

 Plaintiff, a New Jersey corporation, is the holder of a certificate of public convenience and necessity in No. MC-59264, originally issued to it by the Commission March 21, 1941. Under that certificate for about ten years, down to sometime early in 1951, plaintiff served a shipper, Clorox Chemical Company, in the transportation of sodium hypochlorite solution (a household bleach) from Jersey City to Baltimore and Washington. Shortly after the beginning of 1951 the Clorox Company, having built a new plant at Camden, New Jersey, notified the plaintiff that it intended to ship its product from Camden to Baltimore and Washington instead of from Jersey City. Plaintiff therefore on January 19, 1951 obtained temporary authority from the Commission to transport the Clorox freight from Camden to Baltimore and Washington. This was confirmed by order of the Commission of February 7, 1951 under which the authority was to expire August 4, 1951. However, by the Administrative Procedure Act, Section 9(b), 5 U.S.C.A. § 1008, the order became conditioned to remain in effect until the application for permanent authority designated as No. MC-59264 (Sub.-No. 16) 'shall have been finally determined by the Agency.'

 On February 19, 1952, plaintiff's application as amended was denied by order of the Commission, Division 5. On reconsideration, by its Report Order of October 7, 1952, the Commission, Division 5 allowed a certificate authorizing the requested operations and set the order of February 19, 1952 aside. On April 20, 1953 the full Commission, having reconsidered the report and order of October 7, 1952, filed its report and by its order dated the same day set aside the order of October 7, 1952 and denied the application. On May 5, 1953 plaintiff filed a petition for reconsideration of and for revision of its original certificate in MC-59264 or for oral argument on that issue before the Commission. On May 27, 1953 plaintiff filed a petition for further consideration of the April 20, 1953 report. This was denied October 5, 1953. Thereafter in due course this proceeding was commenced.

 The so called 'follow the traffic' theory is not a rigid rule automatically enforced by the Commission whenever invoked. It is a commerce principle which time and again has entered into the facts of applications to the Commission. Where this element is present, its importance depends upon the circumstances of the case. The Commission considers it together with the other evidence before it.

 The chief reason urged by plaintiff that it be allowed to follow its customer is that its traffic from that source amounted to 8% of its gross business from 1948 to 1950 inclusive. The protestant carriers assert that 6,5% is the correct figure. Plaintiffs state that taking either percentage it would suffer seriously from the loss of the freight involved especially since it operates on a modest margin of profit. The Clorox account, according to plaintiff, is essential to the maintenance by it of an efficient operation. Plaintiff's claim on this phase of the case under the proofs goes no further than this. There is no showing of irreparable injury.

 The chief concern of the Commission, and rightly so, was to determine whether public convenience and necessity required the granting of this application. Interstate Commerce Commission v. Parker, 326 U.S. 60, 65, 65 S. Ct. 1490, 89 L. Ed. 2051; United States v. Detroit & Cleveland Navigation Co., 326 U.S. 236, 241, 66 S. Ct. 75, 90 L. Ed. 38. This is the primary test under the statute and unless the application qualified under that test the Commission had no authority to allow it. We agree with plaintiff that the Commission is entitled to exercise reasonable discretion in determining whether public convenience and necessity requires a particular project. Admittedly in this instance there was and is adequate existing service in the areas contemplated by the application. The Commission, confronted with the possibly disturbing results of forcing a new and unneeded carrier into that territory, refused to ignore the rights of currently operating transportation. It is completely unrealistic to argue that there was no reasonable ground for considering plaintiff an additional carrier which, under the facts, was neither needed nor desirable. Plaintiff insists that it is solely interested in transporting the Clorox product. That may be the thought at this time but conditions change; certainly the petition of May 5, 1953 asking for the extension of the original 'grandfather' certificate under which plaintiff now operates is for general carrier privileges over the same routes here requested and contains no intimation of restricting service to the named Clorox product.

 The Commission was unable to find that public convenience and necessity required favorable action on this application. It saw no justification to deal an uncalled for blow to the motor carriers of the territory who were functioning under Commission certificates and for whom decent regard should be had. The national transportation policy which the Commission had very much in mind and which is of vital importance in any decision on the instant type of transportation problem does make it mandatory on the Commission, as the latter states, 'to foster sound economic conditions in transportation.' By reason of that policy itself the Commission must carefully weigh the entire relevant situation. It after that, a carrier application based on a 'follow the traffic' conception is shown to be reasonably required by public convenience and necessity (which would include proper allowance for other carrier rights and for the national transportation policy) the 'follow the traffic' principle invoked might very well be the determining feature in the decision as to whether the application should be granted. In this issue the Commission gave plaintiff's application that very consideration and concluded that public convenience and necessity did not call for the granting thereof.

 That holding is not incompatible with prior decisions of the Commission. In Petroleum Transportation Co. Extension -- Umatilla, 19 M.C.C. 637 the special facts of that case persuaded the Commission to allow a carrier to follow its traffic as it had other carriers with similar operations. The decision helped materially to prevent unfair competitive disturbance. In Empire Express Inc. Extension -- New Brunswick, N.J., 47 M.C.C. 727 a 'follow the traffic' application was denied. Plaintiff seeks to construe the report there as establishing a firm precedent for its idea of the Commission view but in effect that report stands for the rule which the Commission has reiterated in its denial of the present application, namely, that where '* * * public convenience and necessity required certain motor carriers to follow their principal traffic * * *' the Commission in specific instances has allowed their applications. The Empire Express report stressed the importance of the question whether the existent facilities in 'follow the traffic' applications were adequate as did the report in George F. Alger Co. Extension -- Avon Lake, Ohio, 48 M.C.C. 226. In Clark Transport Co. Extension -- Duluth, Minn., 53 M.C.C. 237, 244, the latest Commission expression of opinion on this problem, a 'follow the traffic' application was denied primarily because of failure of proof indicating the inability or unwillingness of existing carriers to provide a proposed service, irreparable injury to applicant or that such injury would outweigh the harm a grant of authority would have upon existing carriers. That decision of the Commission was sustained in Clark Transport Co. v. United States, U.S.D.C.N.D.Ill., January 11, 1954.

 The denial of plaintiff's application has ample support in the record; it was within the reasonable discretion of the Commission it was not arbitrary or capricious. The Commission by its decision is not, as asserted, reversing commerce law of the last fourteen years on 'follow the traffic', nor is it destroying that principle. On the contrary it is merely restating its policy on that subject as it derives from its decisions to date.

 'Grandfather Clause' Action

 Immediately following the denial of its 'follow the traffic' application plaintiff, on May 5, 1953, filed a petition *fn1" for reconsideration of and for revision of its original certificate (as revised down to and including its latest certificate date, June 27, 1952) in MC-59264. That certificate had been issued pursuant to an application under the 'grandfather' provisions of Section 206(a)(1) of the Interstate Commerce Act as amended, 49 U.S.C.A. § 306. The petition sought enlargement of the scope of the operating authority set out in the said certificate to include the right to specifically transport general commodities over irregular routes between Philadelphia, Pa. (including Camden, N.J.) and Baltimore, Md. and Washington, D.C. in connection with its other operations or for oral argument on that issue. Answers of the defendants United States and the Commission and of intervenors Interstate Common Carriers Council of Md., Inc., and Joint Northeastern Motor Carrier Assn., Inc., intervenors were thereafter filed. The Commission considered the matter on the pleadings and the record and on January 22, 1954 denied the petition. It held that the carrier '* * * has failed to establish that it was engaged in bona fide operations in the transportation of such commodities over irregular routes, between the aforesaid points, in interstate or foreign commerce, on June 1, 1935, and continuously thereafter; and that oral argument on that issue is not warranted; * * *.' This suit followed and, until consolidated with No. 989-53, bore the docket Number 109-54.

 Plaintiff argues that it was not accorded a fair and impartial hearing on its original application. In so doing more than twelve years after its certificate was granted and for the first time it attacks the procedure ...


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