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AAACON AUTO TRANSP., INC. v. UNITED STATES

July 6, 1972

AAACon Auto Transport, Inc., Plaintiff,
v.
United States of America and Interstate Commerce Commission, Defendants, and Nationwide Auto Transporters, Inc. Intervening Defendant



The opinion of the court was delivered by: FRIENDLY

FRIENDLY, Chief Circuit Judge:

This is an action by Aaacon Auto Transport, Inc. (Aaacon), holder of a certificate under the Motor Carrier Act for the driveaway of automobiles, *fn1" to enjoin an order of the Interstate Commerce Commission. The order, No. MC-FC-72889, summarized at 36 F.R. 22795 (1971), authorized Dealers Transit, Inc. (Dealers) to transfer to Nationwide Auto Transporters, Inc. (Nationwide) Dealers' non-radial rights to transport automobiles in secondary movements *fn2" in driveaway service between points in 44 states, with an exception not here material. The price was $300,000, of which Nationwide paid $25,000 into escrow in advance. An additional $10,000 was to be paid on consummation and $265,000, plus 6 1/2% per annum, in 60 monthly installments. The order, as modified, contained a condition that neither Dealers nor its affiliates should engage in service similar to that permitted under the authority being transferred to Nationwide, although the certificates of one company affiliated with Dealers when the proceeding began and another acquired by it thereafter authorized such service. *fn3"

The order avowedly was made pursuant to § 212(b) of the Motor Carrier Act of 1935, now Part II of the Interstate Commerce Act, 49 U.S.C. § 312(b), which provides:

 
Except as provided in section 5 of this title, any certificate or permit may be transferred, pursuant to such rules and regulations as the Commission may prescribe.

 This provision was intended to permit the Commission to design a simple and expeditious procedure for the relatively free transfer of certificates as to which Congress determined that any minor effect on competition did not warrant "a great deal of red tape with the Commission." *fn4" After appropriate rulemaking procedures under § 4 of the Administrative Procedure Act, 5 U.S.C. § 553, the Commission promulgated regulations, commonly referred to as the Transfer Rules, now 49 C.F.R. Part 1132.

 Broadly speaking, the scheme of the Transfer Rules is as follows: In the first instance the application is solely a matter between the applicants and the Commission, acting through its Motor Carrier Board subject to review by a division of the Commission, acting as an appellate division. See 49 U.S.C. § 17. Section 1132.3 provides that the application is to be granted if it is shown that the transaction is not subject to § 5 and that the transferee is fit, willing and able to perform the services and to conform to the Act and the Commission's requirements thereunder; otherwise the application is to be denied. Section 1132.5 sets forth "general bases for disapproval," of which more hereafter. An order granting approval must be published in the Federal Register, § 1132.4. Only at this point does the opportunity for opposition arise. Section 1132.4 provides in part:

 
The notice accompanying such publication will refer to section 17(8) of the Interstate Commerce Act and include a requirement that if a petition is timely filed by an interested person seeking reconsideration or oral hearing, such petition must specify with particularity the alleged errors and shall cite in all cases the particular section or sections of this part, and the arguments based thereon, which petitioner believes warrant a conclusion different from that set forth in the affirmative order. In the absence of citation of the particular section relied upon, the petition may be rejected. If the petition contains a request for an oral hearing, the request shall be supported by an explanation as to why the evidence sought to be presented cannot reasonably be submitted in affidavit form.

 Several decisions have upheld these regulations against challenges by parties who were objecting to a permitted transfer that they violated § 5 of the Administrative Procedure Act, 5 U.S.C. § 554(a), and the Due Process clause of the Fifth Amendment. Chemical Leaman Tank Lines, Inc. v. United States, 251 F. Supp. 269, 273-74 (E.D. Pa. 1965); A.L. Root Transportation, Inc. v. United States, 280 F. Supp. 152, 157 (D. Vt. 1968); Monumental Motor Tours, Inc. v. United States, 316 F. Supp. 663, 667 (D. Md. 1970). Cf. Pfizer, Inc. v. Richardson, 434 F.2d 536, 542-43 (2 Cir. 1970). Plaintiff does not challenge the validity of the Transfer Rules in general, as distinguished from their application to the particular facts.

 In this case, the statute and regulations, intended to provide a simple procedure and avoid unnecessary oral hearings, have led to labyrinthine proceedings, too complex to warrant description here, stretching over some twelve months. These have included a full-scale opinion by Division 3, - M.C.C. - (1971), reversing the Motor Carrier Board's original denial, without benefit of a presentation by any private party in support of the Board's action. Somewhere along the line, the Commission might well have considered whether an oral hearing, which could hardly have taken more than a day or two, might not have saved time and reams of paper, as well as satisfying Aaacon and another protestant that they had been given a full opportunity to present their case. However, our task is not to instruct the Commission how to conduct its business, but to determine whether it violated plaintiff's legal rights.

 The initial question is whether the Commission erred in determining that the transfer could be processed under § 212(b) of the Motor Carrier Act, 49 U.S.C. § 312(b), rather than under § 5 of the Interstate Commerce Act, 49 U.S.C. § 5, where an evidentiary hearing would have been mandatory, 49 U.S.C. § 5(2)(b), unless the transaction came within the exception provided in § 5(10) for transactions between motor carriers where the aggregate number of vehicles does not exceed twenty. To answer this, we must state the facts that led to the transaction at issue.

 Nationwide, owned by Neddie Herman and her son Allen, had engaged since 1965 in automobile driveaway business as an agent in the Insured Driveaway System (Insured). Insured, in turn, participated in a joint rate operation of two authorized carriers, Insured Transporters, Inc. and George F. Burnett Company, Inc., whose combined certificates permitted driveaway operations throughout the United States with minor exceptions not here material. Effective June 1, 1971, Burnett cancelled its concurrence, thereby limiting the operations of insured and its agents, including Nationwide, to the transport of stolen and repossessed automobiles and, to a limited extent, unrestricted driveaway service in thirteen western states. It was this threat of a drastic curtailment of their agency function that led the Hermans to negotiate for the purchase of the non-radial rights of Dealers for secondary automobile driveaway service in forty-four states. These rights, as will hereafter appear, produced a relatively inconsequential percentage of Dealers' revenue under its broad authority to transport automobiles and other types of motor vehicles and parts throughout a large part of the United States. Since Nationwide had not theretofore been a carrier, § 5 would apply only if, as provided in subparagraphs (5) and (6), it was affiliated with a carrier at the time of consummation. Paragraph (6) defines affiliation as follows:

 
(6) Affiliation with a carrier defined. For the purpose of this section a person shall be held to be affiliated with a carrier if, by reason of the relationship of such person to such carrier (whether by reason of the method of, or circumstances surrounding organization or operation, or whether established through common directors, officers, or stockholders, a voting trust or trusts, a holding or investment company or companies, or any other direct or indirect means), it is reasonable to believe that the affairs of any carrier of which control may be acquired by such person will be managed in the interest of such other carrier.

 Aaacon's contention is that Nationwide was and continues to be an affiliate of Insured Transporters. The basis for this claim is that at the time of the transfer Nationwide had not yet terminated its agency agreement with Insured and that, in some unspecified sense, Insured Transporters is actually the "alter ego" of Nationwide. Inspection of the agreement shows that this conferred only limited agency authority, with Insured Transporters, Inc. remaining the carrier, cancellable by either party on thirty days' notice. We see nothing in this which remotely suggests that the rights acquired by Nationwide "will be managed in the interest" of Insured Transporters, Inc. Nor have we seen any documented support for the allegations that Nationwide dealt at less than arms length with Insured Driveaway System and Insured Transporters, Inc. or that there is any "alter ego" relationship between the two firms. We thus do not reach the question whether in a case where there was room for fair debate concerning the applicability of § 5, the Commission would be required to hold an evidentiary hearing on that issue before determining to proceed under § 212(b). See also Chemical Leaman Tank Lines v. United States, supra, 251 F. Supp. at 272.

 One reason that had led the Motor Carrier Board to deny approval in the first instance was its belief that the transfer would come under one of the "General bases for disapproval" stated in the Transfer Rules, namely, that it would "permit the separation of a commodity or commodities from a class of substantially related commodities or from general-commodity authority." § 1132.5(a)(3). *fn5" Implicit in this was the thought that the ...


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