Jurisdictional Statement — Lorch-Westway Corp., et al. v. Arkansas-Best Freight System, Inc., et al.

Nog 3 J Q ms 4

IN THE

SUPREME COURT OF THE UNITED $TATES p59

OCTOBER TERM, 1973 FILED

| JAN 8 1974

LORCH-WESTWAY CORPORATION, C8 AENPEALL RM , 2h PLE

Appellants, .

v.

ARKANSAS-BEST FREIGHT SYSTEM, INC.., et al.

Appellees.

ON APPEAL FROM THE UNITED STATES DISTRICT COURT

FOR THE WESTERN DISTRICT OF ARKANSAS-

FORT SMITH DIVISION

JURISDICTIONAL STATEMENT

CHARLES S. RHYNE

COURTS OULAHAN

400 Hill Building

839 Seventeenth Street, N.W.

Washington, D.C. 20006

Attorneys for Appellants

Lorch-Westway Corporation, et al.

ROBER? L. JONES, JR.

412 Merchants National

Bank Building

Fort Smith, Arkansas 72901

a aaasassssssssssnsannnanannnnnann

Washington OC © CLS PUBLISHERS « LAW PRINTING CO. « (202) 393-0675

(i)

TABLE OF CONTENTS

Page

FUREREICTPONOAL STATERGEE nce cc cc cccccvess ]

i . vivencenes oes ob as eden ban es 3

Den se ne, ss de been esaddneeas 3

ee kc iuadaddaceeaa ede wes 3

QUESTIONS PRESENTED 2... cccccccccccvcccsccss 3

EE OPE TT ee TC eT TT ere eee 4

THE QUESTIONS OF JUDICIAL ADMINISTRA-

TION AND APPELLATE REVIEW HERE PRE-

SENTED ARE SUBSTANTIAL ............-00008. 9

A. Verbatim Adoption of Appellees’ Findings

CE .55 4) son es bhhebnet econ s 10

a eee 13

C. Novel Concept of De Novo Judicial Review ....... 16

D. Misconception of Relationship Between

Agency and Hearing Examiner ............... 18

GE. 6. Gh 0664 wh USS Ss Chiewicceteedons ve 20

SE a Venecdenchenendaeeeieavete pew la

TABLE OF AUTHORITIES

Cases:

Allied Van Lines Co. v. United States, 303 F.Supp.

RE no occe ends 4bk 0 osbonneeen 17

American Truckiiig Ass'ns, Inc. v. United States, 364

Me En nehee606e dues bosons cede neeeeess som

Arkansas-Best Freight System, Inc. v. United States,

350 F. Supp. 539 (W.D. Ark. 1972) «2... eee eee eee 7

Ayshire Collieries Corp. v. United States, 331 US.132 ..... 11

Bradley v. Maryland Casualty Co., 382 F.2d 415 (8th

GD. bb os 6656466050660 56 606.060 00000006 11

Braswell Freight Lines, Inc. Extension-Atlanta, \00 ;

i < wee hs swe pee edhe keebee wes 15

(it)

Page

Chicopee Manufacturing Corp. v. Kendall Co., 288

F.2d 719 (4th Cir. 1961), cert. denied, 368 US.

Pe 6 ctwu edn oeaed pees cone nieaan 12

Citizens to Preserve Overton Park, Inc. v. Volpe, 401

DG ‘cnndedsivbdaesened sdosebee bees 17, 18

Columbia Shippers & Receivers Ass'n, Inc. v. United

States, 301 F. Supp. 310(D. Del. 1969) ............ 17

Consolo v. Federal Maritime Commission, 383 US.607 .... 17

Continental Southern Lines, Inc. v. United States,

265 F. Supp. 218 (W.D. La. 1967)... 2.2... e eens 17

Dance Freight Lines, Inc. v. United States, 149 F.

Supp. 367 (E.D. Ky. 1957) «0... eee ee ee ees 17

FCC v. Allentown Broadcasting Corp., 349 US.358 ...... 19

Featherstone v. Barash, 345 F.2d 246 (10th Cir. 1965) ..... 12

Florida Lime & Avocado Growers, Inc. v. Jacobsen,

/ - & Steerer were ba te Pee ee 12

Frozen Food Express, Inc. v. United States, 301 .

F. Supp. 1322 (N.D. Tex. 1969) ..........-502 eee 19

Garrett Freightlines, Inc. v. United States, 353 F.

Supp. 1329 (W.D. Wash. 1973)... 2... ee eee 17

Herrin Transportation Co. Extension—Atlanta, Ga.,

No. MC-1124 (Sub-No. 206), 114 M.C.C. 571

ED v0.04. 462 O48 S's b0 bu 0600605004064 6 0.08 0% 3

Illinois Cent. R.R. v. Norfolk & W. Ry., 385US.57 ...... 17

In Re Las Colinas, Inc., 426 F.2d 1005 (ist Cir.

1970), cert. denied, 405 U.S. 1067 ..........2.005. 12

ICC v. City of Jersey City, 322US.503 .........2055. 18

Industrial Building Materials, Inc. v. Interchemical

Corp., 437 F.2d 1336 (9th Cir. 1970) .......-...64-. 12

James Hughes, Inc. v. United States, 292 F. Supp.

4 SAY Tecene LT i rete 17

(itt)

Page

Louis Dreyfus & Cie. v. Panama Canal Co., 298 F.2d

ni uct du uek cutest uetnec es 12

Metropolitan Shipping Agents of IIL, Inc. v. United

States, 342 F. Supp. 1266 (D.N.J.1972) ............ 17

Mississippi Valiey Barge Line Co. v. United States,

TE a a ee bi dae 0:6 a % ook ew tke we 17

Phillips v. United States, 312 U.S. 246 ................ 12

Roberts v. Ross, 344 F.2d 747 (3d Cir. 1965) ........... 12

Swift & Co., Inc. v. Wickham, 382 US.111 ............ 11

Twin City Freight, Inc. v. United States, 360 F. Supp.

none db an Uuld tds cue shee 17

United States v. Dixie Highway Express, Inc., 389

RE .0 Gdabuwe ida ches P64 GOS 85 Rie kot toe 15

United States v. El Paso Natural Gas Co., 376U.S.651 ....... 11

United States v. Forness, 125 F.2d 928 (2d Cir.

1942), cert. denied, 316 U.S.694 .............005. 12

United States v. National City Lines, Inc., 334U.S.573 ..... 2

United States v. Philadelphia National Bank, 374 US.

Eee So, Crear ea wen © + as Rae 14

United States v. Pierce Auto Freight Lines, Inc., 327

(SiR hs eb e HeeWEeed CCT E Cab vee He 17

United Trucking Service, Inc. v. United States, 359

F. Supp. 100(E.D. Mich. 1973) ........cccccccees 17

United Van Lines, Inc. v. United States, 266 F. Supp.

ai ale eho ek Che bok: bed 0.0 17

Universal Camera Corp. v. NLRB, 340 U.S.474 ....... 18, 19

Western Pacific R.R. Corp. v. Western Pacific R.R.,

PEED. 9:05,0000 5 \etbewbesh ned bWeeper ee 2

(tv)

Page

Statutes:

National Transportation Policy, 49 U.S.C. preceding

DG Scbeweneceste00g6b 60 600840 S405 40RE 3

DU EE wecccevececesneséenssveusuaeks 3

, & — Serer re ee Ts reo 3, 18

PE EE 06 6660 be edwenbaetd Coker ee been 3,17

SUED on 00 00ese5bs sé ge eeree eens ery

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TOUR. BRUNO ENED Sec ccc ewes esisewees 3, 10, 11

WUSLC. SEIM1), G@)and(S) 2. cc ccrvccccvcees 3,6

Ss ED 0 vc cece edorenenseweys 3

GGG. BPD 6 vc ccc vc eswtaceceuses 3

Miscellaneous:

Burger, C.J., Report on the Federal Judicial Branch,

SOBER SEIITED ccc ccs stecteccedes seeenbs 11

2 K. DAVIS, ADMINISTRATIVE LAW TREATISE

BOOTIES. ceeesccesinvoscveresecceseors 19

eR 8 frre rr rere eS 12,13

STAFF OF SENATE COMM. ON THE JUDICIARY, 93d

CONG., Ist SESS., JUDICIAL REVIEW OF DECI-

SIONS OF THE INTERSTATE COMMERCE COM-

MISSION (Comm. Print 1973)... 2.2.2... 005 il

IN THE

SUPREME COURT OF THE UNITED STATES

OCTOBER TERM, 1973

No.

LORCH-WESTWAY CORPORATION, et al,

Appeliants,

ARKANSAS-BEST FREIGHT SYSTEM, INC., et al.,

Appellees.

ON APPEAL FROM THE UNITED STATES DISTRICT COURT

FOR THE WESTERN DISTRICT OF ARKANSAS-

FORT SMITH DIVISION

JURISDICTIONAL STATEMENT

Appeilants Lorch-Westway Corporation, et al.,' forty-

one shippers (Shippers) supporting the application and

certificate of Johnson Motor Lines, Inc. (Johnson), also

' Lorch-Westway Corporation; Simmons Co., Southern Division;

Dunham-Bush, Inc.; Leff Brothers Dry Goods Co.; Seneca Textile

Corp.; Morgan and Lindsey, Inc.; Western Textile Products Co.;

Metal Trims, Inc.; Ero, Inc.; Capitol Bolt and Screw Co.; Olinkraft,

Inc.; Jantzen Southern, Inc.; S. Klein (Division of McCrory Corp.);

Monroe Wholesale Drug Co.; Ethyl Corp.; Hanna Barber & Beauty

Supply C».; Stayon Products, Inc.; American Greetings Corp.;

Canteen Corp.; Campus Sweater and Sportswear Co.; Walgreen Co.;

M. Lowenstein & Sons, Inc.; McNeil Laboratories, Inc.; Congoleum

Nairn, Inc.; Her Majesty Underwear Co.; Avco-Bay State Abrasive

2

an Appellant, appeal from an Order and Judgment, dated

September 11, 1973, and an Order and Opinion, dated

October 4, 1973, of the Three-Judge District Court

sitting in the United States District Court for the Western

District of Arkansas—Fort Smith Division, 364 F. Supp.

1239. These orders reversed a decision of Division | of

the Interstate Commerce Commission (Commission),

which granted certificates of public convenience and

necessity to Johnson, Red Ball Motor Freight, Inc. (Red

Ball), and Bowman Transportation, Inc. (Bowman).

The Court has jurisdiction of this appeal. Substantial

and novel questions requiring this Court’s exercise of its

“general power to supervise the administration of justice

in the federal courts” are presented with respect to

Three-Judge District Courts and warrant the filing of

briefs and oral argument in this case. United States v.

National City Lines, Inc., 334 U.S. 573, 589; accord,

Western Pacific R.R. Corp. v. Western Pacific R.R., 345

U.S. 247, 260.

Products Co.; Tupperwear Co.; Lois Hand, Inc.; Carol Wir. & Cable

Corp.; Foxboro Co.; Dapol Plastics, Inc. and Worcester Toy Co.,

Inc.; Berkshire Hathaway, Inc.; Pennsylvania Dutch Co.; Shiny

Brite Div. of Poloron Co. (formerly Max Eckardt & Sons, Inc.);

Magla Products, Inc.; KSM Division of Omark Industries, Inc.;

Warer-Chilcott Laboratories (Division of Warner-Lambert Co.);

Monroe International, Inc. (Division of Litton Industries); Becton,

Dickinson & Co.; American Cyanamid Co.; and Mississippi Bedding

Co.

3

OPINIONS BELOW

The Orders, Judgment, and Opinion of the Three-

Judge District Court are reported at 364 F. Supp. 1239

and also are contained in Appellants’ Joint Appendix

(J.A. J and N). The Report of Division |, acting for the

Commission, is reported at 114 M.C.C. 571 (J.A. B).

JURISDICTION

Appellees’ complaint sought to annul, set aside, and

enjoin the Commission’s Order entered December 30,

1971, Herrin Transportation Company Extension—

Atlanta, Georgia, No. MC-1124 (Sub-No. 206), 114

M.C.C. 571 (J.A.B). The suit was brought under 28 .

U.S.C. § §1336, 2284, 2321-2325; 49 U.S.C. § §305(g)

and (h); and 5 U.S.C. §706. The Orders of the

Three-Judge District Court were entered September 11

and October 4, 1973. 364 F. Supp. 1239 (J.A. J and N).

Notice of appeal was filed by Shippers November 5, 1973

(J.A. P). This Court has jurisdiction to review the

decision below on direct appeal under 28 U.S.C.

§ § 1253, 2101. American Trucking Ass'ns, Inc. v. United

States, 364 U.S. 1, 5.

STATUTES INVOLVED

The National Transportation Policy, 49 U.S.C. pre-

ceding §1 note; 49 U.S.C. § §17(4) and (5), 307(a) and

(b); 5 U.S.C. §§556, 557, and 706; and 28 U.S.C.

§ 2284(1) and (5) are set forth in J.A. A.

QUESTIONS PRESENTED

The following questions are presented by this appeal:

1. Whether a Three-Judge District Court constituted

4

under 28 U.S.C. §2284, in reversing the expert decision

of the Interstate Commerce Commission, abdicated its

judicial function by mechanically adopting verbatim the

proposed findings and conclusions of one set of parties

even when many of those proposed findings and con-

clusions contain egregious errors of fact and law.

2. Whether the Three-Judge District Court improperly

adopted a novel and unwarranted concept of de novo

review of Commission decisions and changed the statu-

tory relationship between hearing examiners and their

agency with respect to recommended and final decisions.

STATEMENT

This appeal seeks reversal of two Orders under which

the Three-Judge District Court set aside the Commission’s

grant of three certificates of public convenience and

necessity. The Court mechanically adopted verbatim

proposed findings and conclusions of Appellees, who

were Plaintiffs in the action before that Court. In the

administrative proceeding, Appellees unsuccessfully

opposed the Commission grant of these certificates to

three Appellants after an administrative proceeding of

over seven and a half years, nearly 24,000 pages of

testimony, and approximately 2,000 exhibits. The Court

also denied a Commission motion to remand the case to

the agency.

Reversal is sought on the grounds that, in an admin-

istrative proceeding which peculiarly called for the

exercise of an expert opinion by the agency statutorily

charged with that responsibility, the Court failed to

exercise its judicial function of limited review under well

established Supreme Court precedent. Instead without

that appearance and form of impartiality which the

judicial process requires, the Court mechanically adopted

5

verbatim the proposed findings and conclusions of

Appellees. Thereby, the Court failed to review the record

upon which the agency acted, adopted a novel rule of de

novo review by a Three-Judge District Court, refused to

be bound by the substantial evidence rule embodied in

the Administrative Procedure Act, and erroneously con-

strued the relationship of hearing examiners and the

agency involved. Such abdication of the judicial function

by a Three-Judge District Court imperatively calls for the

exercise of this Court’s responsibility for the proper

administration of justice by inferior Federal Courts.

Commenced on December 7, 1964, the administrative

proceeding involved applications initially by twenty

motor carriers. All sought to conduct general com-

modities operations between points in the Southwest and

Southeast. Ten of these applications were consolidated in

one proceeding, in which the administrative record in this

case was made. Hearings were held between March, 1966

and August, 1967. Nine hundred and fifty witnesses,

including Shippers, testified on behalf of the ten appli-

cants. Sixty protestants opposed the applications. The

record was “perhaps the most extensive... ever

developed in connection with a single group of motor

carrier application proceedings before [the] ...Com-

mission.” 114 M.C.C. at 573 (J.A. B, p. 103).

Two hearing examiners on November 19, 1969, issued

a recommended report and order (Report). Although

finding each of the applicants “capable of performing the

operations proposed” (Report, p. 3), every application

was denied (/d., p. 32).

Exceptions were filed by eight applicants, including

Red Ball, Bowman, and Johnson. Shippers, who were

permitted leave to intervene by the Commission, also

filed exceptions.

6

The hearing examiners, in rejecting every application,

used an atomized treatment of the evidence, with specific

findings of fact for about 45 separate commodities. In its

final decision, the Commission, by Division 1,? rejected a

commodity-by-commodity analysis of the evidence and

the examiners’ approach that “either all [applications]

must be granted or all must be denied.” 114 M.C.C. at

574 (J.A. B, p. 104). Instead, the Commission found that

“a clearer picture of the supporting witnesses’ needs in

these proceedings, in view of their magnitude and

complexity, can be presented by the grouping of the

supporting evidence on a geographic basis.” 114 M.C.C.

at 591 (J.A. B, p. 121).° These “supporting witnesses”

included Shippers.

The Commission found that “[t]he evidence con-

sidered in its entirety is convincing that the additional

services [proposed by Red Ball, Bowman and Johnson]

... Will serve a useful purpose, responsive to a public

demand and need.” 114 M.C.C. at 599 (J.A. B, p. 129).

According to the Commission, “sup»orting witnesses

have shown a valid public need for additional motor

carrier service [by three applicants]”’ in view of existing

“carrier restrictions or embargoes,” “‘outright refusals by

existing carriers to handle their traffic,” “pickup and

delivery problems,” “interline difficulties relating to loss,

damage, tracing, shortages, and misrouting,”’ and “lost

business and accounts”. 114 M.C.C. at 600 (J.A. B,

p. 130).

*See 49 U.S.C. §17(1).

*The “supporting evidence” accordingly was restated by the

Commission in Appendix E to its decision, 114 M.C.C. at 636-756

(J.A. B, pp. 182-318), supplanting Appendix C to the hearing

examiners’ report.

7

Petitions for reconsideration and other pleadings were

filed by protestants and unsuccessfu! applicants. By order

dated September 6, 1972, the Commission, by Division

1, acting as an Appellate Division, denied or rejected all

the petitions relevant to this case. °>titions seeking a

declaration by the Commission that the proceeding

involved an issue of General Transportation Importance

were denied by Order dated October 6, 1972.

The complaint was filed on October 4, 1972, by

sixteen Plaintiffs, later joined by three other intervening

Plaintiffs. After oral argument on November 1, 1972

(J.A. D), on November 7, 1972, the presiding Senior

District Judge entered a temporary restraining order

against the Commission decision. Arkansas-Best Freight

System, Inc. v. United States, 350 F. Supp. 539. Without

any substantiation therefo. in the body of its opinion,

the Court found that “(t]he plaintiffs have established

that they are likely to prevail on the merits.” 350 F.

Supp. at 545. The other two members of the panel did

not hear oral argument or participate in this decision.

Upon Appellees’ motion filed June 25, 1973, the

Court on June 26, 1973, granted them until July 16,

1973, to reply to the Appellants’ briefs theretofore filed

with the Court. On June 29, 1973, Appellees filed a

supplemental complaint, seeking to add Jones Truck

Lines, Inc. as an additional defendant and to have

reviewed a Commission decision with respect thereto,

117 M.C.C. 586 (Dec. 6, 1972). This matter was argued

before the three members of the Court on July 24, 1973

(J.A. E).

During argument on the proposed supplemental com-

plaint, the Senior District Judge stated that

“ .. [Wle [the entire Court] feel like the case has

been thoroughly argued ... in November [1972,

J.A. D] where the court [consisting solely of this

Judge] heard that motion for a T.R.O....” (Tr.

113) (J.A. E, p. 567).

8

Another member of the panel rejected “the big session

[on the merits] a couple of weeks from now that I have

heard so much about... .I will tell you right now, there

is no such thing... going to occur.” (Tr. 4) (J.A. E, p.

458). After Appellants then agreed to forego a full-dress

hearing on the merits (Tr. 113-114) (J.A. E, pp.

567-568), the Senior District Judge commented that,

with respect to the filing of briefs and a disposition of the

case on the merits, “there has always got to be

window-dressing” (Tr. 128) (J.A. E, p. 582).

Appellees jointly, the Commission, Bowman, and

Johnson, Red Ball, and Shippers jointly, submitted

proposed findings of fact and conclusions of law by

August 16, 1973 (J.A. F, G, H, and I). Twenty-six days

later the Court filed its decision (J.A. J), copying in

almost its entirety Appellees’ submission (J.A. 1).* The

decision contained no specific references to the agency

record but solely to portions of Appellees’ proposed

findings.© The Court acknowledged its “duty to review

the whole record” (J.A. J, p. 775; 364 F. Supp. at 1258).

Nowhere does the Court state that it reviewed or even

took cognizance of the entire record,® which remained

“Introductory remarks at pages 1-7 of the decision (J.A. J, pp.

742-748; 364 F.Supp. at 1242-1245) contain some departures

from Appellees’ proposed findings (J.A.1, pp. 697-702). The

Court’s substantive findings and conclusions (J.A. J, pp. 748-788;

364 F. Supp. at 1245-1264) are adopted verbatim from Appellees’

text (J.A. I, pp. 703-738).

SE.g., J.A.J, pp. 767, 769; 364 F. Supp. at 1254, 1255.

6“Extensive and thorough briefs have been submitted to the

court ... and proposed findings of fact and conclusions of law . . .

received, which the court has studied, alomz with a great many of

the exhibits and the Report of the Examiners and the Division |

Report.” (J.A.J, p. 748; 364 F. Supp. at 1245). “After full

consideration of the contentions of all the parties, the pertinent

portions of the entire record and the proposed findings of fact and

conclusions of law submitted by the parties, the court is convinced

that the propose’ findings and conclusions submitted and re-

quested Sy piaintiffs are correct, and they are adopted by the

Court [in toto] as hereinafter set forth.” (/d.).

9

unopened in the boxes in which it was shipped to the

Clerk of the Court.’

The Court, in effect, adopted the findings and con-

clusions of the hearing examiners, based upon a denial of

ten applications. It held that these findings and con-

clusions with respect to ten applications did not support

the Commission’s grant of certificates to only three

applicants. The Court refused to remand the case to the

Commission for the reason that “because the findings and

conclusions of the Division are arbitrary, capricious and

without rational basis, no useful purpose would be

served” thereby (J.A.J, pp. 787-788; 364 F. Supp. at

1264).

The Commission on September 17, 1973, moved the

Court to amend its judgment by remanding the case to

the Commission for further proceedings consistent with

the judgment (J.A. K). The Court denied the motion on

October 4, 1973 (J.A. N; 364 F. Supp. at 1266-1272).

THE QUESTIONS OF JUDICIAL ADMINISTRATION

AND APPELLATE REVIEW HERE PRESENTED

ARE SUBSTANTIAL.

This appeal presents substantial questions affecting the

judicial review of Commission decisions and the statutory

relationship between a hearing examiner and the admin-

istrative agency in which he serves.

The Three-Judge Court paid lip service to precedent

established by this Court. It then proceeded to apply a

broad and novel scope of review to the Commission’s

decision. By this process, the Court substituted its own

"See Jones Affidavit, November 16, 1973, App. A, Bowman

Jurisdictional Statement.

10

judgment and that of the hearing examiners for the

expert opinion of the Commission, charged by statute

with final administrative authority in the motor carrier

field.

This result was dictated by the Court’s mechanical and

verbatim adoption of Appellees’ proposed findings and

conclusions. The Court’s decision, whether or not in-

tended, is not the product of disinterested judicial minds

which is the necessary hallmark of Court review. Indeed,

the Court condemned its procedure by its own words. An

appellate Court “‘must review the record without a

rubber stamp approach’ ” (J.A. J, p. 785; 364 F. Supp. at

1263). Its decision “sounds more in advocacy than in

impartial adjudication” (J.A. J, p. 787; 364 F. Supp. at

1264).

The issue of the verbatim adoption, by a Three-Judge

District Court, of proposed findings and conclusions of

one party never has been presented squarely for decision

by the Supreme Court. This Court’s exercise of its

supervisory authority over the Federal judicial system

now is required in order that procedure before Three-

Judge District Courts reviewing I.C.C. decisions may be

clarified and fixed without question.

A. Verbatim Adoption of Appellees’

Findings and Conclusions

The key to the errors committed by the Three-Judge

District Court is its mechanical and verbatim adoption of

Appellees’ proposed findings and conclusions. 28 U.S.C.

§2325, the descendant of the Urgent Deficiencies Act,

provides:

“An interlocutory or permanent injunction re-

straining the enforcement, operation or execution,

in whole or in part of any order of the Interstate

Commerce Commission shall not be granted unless

the application therefor is heard and determined by

a district court of three judges under section 2284

of this title.”” (emphasis added).

Assuming, arguendo, all three Judges “fully perform[ed]

the judicial function” required by that statute at the oral

argument held July 24, 1973, Ayrshire Collieries Corp. v.

United States, 331 U.S. 132, 138, they did not “deter-

mine” the issues involved when they rubber-stamped

Appellees’ filings. The guidelines laid down by this Court

in United States v. El Paso Natural Gas Co., 376 U.S.

651, were not followed:

“* * * Those [District Court] findings, though

not the product of the workings of the district

judge’s mind, are formally his.... Those drawn

with the insight of a disinterested mind are, how-

ever, more helpful to the appellate court. * * *

Moreover, these detailed findings were ‘mechanically

adopted’ ... and do not reveal the discerning line

for decision of the basic issue in the case. * * *” 376

U.S. at 656-657.

Here, the District Court did not even “pick and choose

and temper and select those portions [of findings and

conclusions proposed by all parties] which better fit its

own concept of the case.” Bradley v. Maryland Casualty

Co. 382 F.2d 415, 423-424 (8th Cir. 1967). Indeed, the

review provided in this case hardly comports with the

kind of review envisioned by Congress under 28 U.S.C.

§2325.*

®The procedure followed by the Court below has been

condemned by the other Circuits. The continuation of Three-Judge

District Court review of Commission decisions also has been

questioned. Burger, C.J., Report on the Federal Judicial Branch, 94

S.Ct. 3, 5 (1973); Staff of Senate Comm. on the Judiciary, 93d

Cong., Ist Sess., Judicial Review of Decisions of the Interstate

Commerce Commission 2-3 (Comm. Print 1973) (“The Burden of

Three-Judge Courts”); see Swift & Co., Inc. v. Wickham, 382 US.

12

Verbatim adoption of one party’s findings and con-

clusions does not adequately manifest an independent

and uncritical exercise of judicial discretion. Jn Re Las

Colinas, Inc., 426 F.2d 1005, 1010 (1st Cir. 1970), cert.

denied, 405 U.S. 1067; United States v. Forness, 125

F.2d 928, 942 (2d Cir. 1942), cert. denied, 316 U.S. 694.

The practice does not “guarantee that each word is

impartially chosen.” Louis Dreyfus & Cie. v. Panama

Canal Co., 298 F.2d 733, 738 (Sth Cir. 1962); Jn Re Las

Colinas, Inc., supra. Uncritical adoption by the Court of

the findings and conclusions of the prevailing party fails

to indicate the basis of decision, and thereby “‘flies in the

face of the spirit and purpose” of F.R. Civ. P. 52(a).

Roberts v. Ross, 344 F.2d 747, 751 (3d Cir. 1965);

Featherstone v. Barash, 345 F.2d 246, 251 (10th Cir.

1965). The fundamental reason for this condemnation is

that the functions of an ardent advocate and an impartial

judge are essentially inconsistent. /ndustrial Building

Materials, Inc. v. Interchemical Corp., 437 F.2d 1336,

1340 fn.3 (9th Cir. 1970).

For purposes of review, “maximum doubt” is cast

upon findings of fact and conclusions of law which are

mechanically and uncritically adopted by the Court

below. Jn Re Las Colinas, Inc., supra at 1010. When the

proposed findings of fact and conclusions of law,

mechanically adopted, constitute all the essential ele-

ments of the Court’s opinion, the victorious counsel has

effectively prepared that opinion. This involves the

“failure of the trial judge to perform his judicial

function,” and mandates reversal. Chicopee Manu-

facturing Corp. v. Kendall Co., 288 F.2d 719, 724-725

(4th Cir. 1961), cert. denied, 368 U.S. 825.

111, 128-129; Florida Lime & Avocado Growers, Inc. v. Jacobsen,

362 US. 73, 92-93 (dissent by Frankfurter, J.); Phillips v. United

States, 312 U.S. 246, 250.

13

The District Court’s mechanical adoption of Appellees’

proposed findings resulted in findings which were

“clearly erroneous” under F.R. Civ. P.52(a). More

important, by its mechanization of the judicial review

process, the Court below departed from established

precedent for the limited scope of review of Commission

decisions, contrary to the overwhelming weight of

authority in other Three-Judge Court decisions. If this

Court does not take jurisdiction and set the matter to

rights, the decision below will become precedent for a

departure from the rule of law in such cases.

B. Failure to Review Record

The District Court’s failure to discharge its judicial

duties is exemplified by its adoption of erroneous

findings of fact proposed by Appellees. These findings

obviously were adopted without the Court itself checking

the record as a whole. Some more egregious examples of

this error follow.

Shippers’ Exceptions. The Court found that “‘shippers’

contentions were more political than judicial” (J.A. J,

p. 769; 364 F. Supp. at 1255), and the agency “should

not have permitted such parties to inject new issues,

particularly since the Examiners were given no oppor-

tunity to rule upon such issues” (J.A.J, p. 786; 364

F. Supp. at 1263).

The initial exceptions filed by Shippers March 24,

1970, related to tiie examiners’ findings concerning anti-

trust matters and thcir rejection of the public’s needs for

improved and expanded service.? Supplementary excep-

°See Appendix A attached, the table of contents of those initial

exceptions.

14

tions filed August 20, 1971, updated the initial filing’ °®

but were never accepted for the record by the Com-

mission. 114 M.C.C. at 577 (J.A.B, p. 107).

That “competition is our fundamental national

economic policy,” United States v. Philadelphia National

Bank, 374 U.S. 321, 372, is not a political issue.

Exceptions based upon specific findings and conclusions

of the examiners hardly involve “new” issues.

Exceptions to Examiners’ Report. The Court accepted

Appellees’ claim that, “‘applicants [Appellants] had not

challenged any specific findings of the Examiners .. .”

(J.A. J, p. 758; 364 F. Supp. at 1250). Appellant truck-

ing companies did except to certain of the examiners’

findings, as well as to their conclusions.'' Shippers

excepted to major conclusions of the examiners which

embodied subordinate findings of fact. For example, the

examiners held that the Commission must grant existing

carriers an opportunity to remedy deficiencies in service

before authorizing proposed service by another carrier

'°See Appendix B attached, the table of contents of those

proposed exceptions.

“Johnson (Mar. 24, 1970): Conclusion and subsidiary findings

that its application should be tre *ed as part of 10 applications and

not separately (pp. 4-14); conciusion and subsidiary findings that

no public need existed for Johnson proposed service (pp. 14-49).

Bowman (Mar. 10, 1970): Conclusion and subsidiary findings

in “considering all 10 applications collectively” (pp. 13-17); error

in “basing . .. Recommended Report on broad generalities without

specific findings as to the basic facts of record” (pp. 18-23).

Red Ball (Mar. 10, 1970): Conclusion and subsidiary findings

that “933 public witnesses failed to establish a need for additional

carrier service” (pp. 7-13); conclusion and subsidiary findings that

“a grant of the Red Ball application will have an adverse affect on

existing carrier services” (pp. 13-16); “treating these applications as

‘all or nothing at all’ ” (pp. 16-50).

15

(J.A.J, pp. 757-758; 364 F. Supp. at 1249-1250). The

Court, in effect, affirmed this finding, which is squarely

contrary to United States v. Dixie Highway Express, Inc.,

389 U.S. 409, 41!.

Transit Studies, The Court stated that the Commission

“acted ex mero motu” in finding that Appellees’ transit

time studies “were entitled to little weight,” thereby

“depriving ... [them] of any opportunity to defend

their propriety or correct the alleged deficiencies”

(J.A. J, p. 762; 364 F. Supp. at 1252).'? Had the Court

checked the record, it would have found that Appellant

Johnson challenged Appellees’ studies in its March 24,

1970 exceptions (pp. 25-27) and in its reply dated

August 16, 1972, to Appellees’ petitions for reconsidera-

tion of the Commission’s decision. The Commission did

not act on its own motion. In addition, the Court

criticized the Commission for subjecting the Appellees to

a “changed standard with regard to transit time studies,

which they were given no opportunity to meet” (J.A. J,

p. 769; 364 F. Supp. at 1260). However, the “standard”

applied by the Commission had been set about two

months prior to the hearings in this proceeding. Braswell

Freight Lines, Inc. Extension-Atlanta, 100 M.C.C. 482,

493-494 (Jan. 17, 1966). The parties had sufficient

opportunity to meet it. Similarly, the Court rebuked the

Commission for its alleged failure to consider recently-

issued single-line authorities as a part of the total

competitive situation (J.A. J, pp. 766-767; 364 F. Supp.

at 1253-1254). But the Commission’s report expressly

discussed those authorities and took them into account in

deciding whether, and to what extent, the public conveni-

ence and necessity required authorization of still more

service (114 M.C.C. at 576; J.A. B, p. 106).

"This is the same as Appellees’ proposed finding (J.A. 1, p.

715).

16

Inadequate Service. The Court conceded that “{m] ost

shippers generally expressed dissatisfaction with incon-

sistent and excessive transit time” and “expressed other

criticisms of existing service, including the pickup and

delivery of shipments. It was also shown that certain

carriers maintain various types of formal or informal

restrictions as to certain types of traffic, while others fail

to render consistent service to authorized points... .”

(J.A. J, p. 750; 364 F. Supp. at 1245-1246). These facts

alone established a rational basis for the Commission’s

finding of inadequate service. The Court, however,

chose to ignore the Commission’s, and its own, findings

and to copy the proposed findings submitted by Appel-

lees (J.A. I, p. 704). Further, the Court held that the

Commission erred in failing to find that Appellant

trucking companies were guilty of the same deficiencies

in service as those found to have been produced by

Appellees (J.A. J, p. 780; 364 F. Supp. at 1261).'® Had

the Court reviewed the Commission’s decision, instead of

copying Appellees’ proposed finding, it would have found

that (1) specific complaints against Johnson were de

minimis, involving nine criticisms by shippers in Georgia

and Louisiana;'* and (2) findings by the examiners

themselves supported the Commission’s conclusions as to

existing inadequate service.'S

C. Novel Concept of De Novo Judicial Review.

Plaintiffs’ proposed findings stated, and the District

Court ruled, that, despite the substantial evidence rule

"This is Appellees’ proposed finding (J.A. I, p. 730).

“Exhibits to Brief of Lorch-Westway Corporation, et al., May

1, 1973 (pp. 190-191), Doc. No. 4, Index to Briefs, Certificate of

District Court Clerk dated Nov. 15, 1973, transmitted to this Court

the same date. See 114 M.C.C. at 660 (J.A. B, p. 206).

'Sid., pp. 211-421.

i/

and a rational basis for Appellants’ contentions, the

Commission’s decision was arbitrary and capricious under

5 U.S.C. §706. By its conclusion that the Commission’s

action was “arbitrary and capricious” (J.A. J, p. 775; 364

F. Supp. at 1259), the District Court misread the decision

in Citizens to Preserve Overton Park, Inc. v. Volpe, 401

U.S. 402.'* This result defies clear precedent of this Court

as applied by the Federal Courts.'’ The proper standard

of judicial review for an adjudicatory administrative

decision is whether that decision is supported by sub-

stantial evidence upon the record as a whole. In making

such a review, the Court cannot substitute its own view

for the Commission’s expert judgment when the latter is

warranted by support in the record. Illinois Cent. R. R. v.

Norfolk & W. Ry., 385 U.S. 57, 66; Consolo v. Federal

Maritime Commission, 383 U.S. 607, 620-621; Mississippi

Valley Barge Line Co. v. United States, 292 U.S. 282,

286-287: United States v. Pierce Auto Freight Lines, Inc.,

'SApart from the misconstruction of Overton Park, the sole

authority cited for this proposition is Columbia Shippers &

Receivers Ass'n, Inc. v. United States, 301 F.Supp. 310, 319 (D.

Del. 1969). The decision there on this point was unprecedented

and has not since been cited, except for its contrast to established

law. See, Metropolitan Shipping Agents of lil, Inc. v. United

States, 342 F. Supp. 1266, 1268 (D. N.J. 1972).

"United Trucking Service, Inc. v. United States, 359 F. Supp.

100, 104 (E.D. Mich. 1973); Twin City Freight, Inc. v. United

States, 360 F. Supp. 709, 712 (D. Minn. 1972); Garrett Freight-

lines, Inc. v. United States, 353 F. Supp. 1329, 1333 (W.D. Wash.

1973); James Hughes, Inc. v. United States, 292 F. Supp. 372, 373

(S.D.N.Y. 1968); United Van Lines, Inc. v. United States, 266 F.

Supp. 586, 588-589 (E.D. Mo. 1967); Continental Southern Lines,

Inc. v. United States, 265 F. Supp. 218, 221 (W.D. La. 1967);

Dance Freight Lines, Inc. v. United States, 149 F. Supp. 367, 373

(E.D. Ky. 1957; Allied Van Lines Co. v. United States, 303 F.

Supp. 742, 746 (C.D. Cal. 1969).

327 U.S. 515, 536; ICC v. City of Jersey City, 322 U.S.

503, 512-513. While the District Court paid lip service to

this test in its opinion (J.A. J, pp. 771-772; 364 F. Supp.

at 1256-1257), it insisted upon following Appellees’

proposal, verbatim, that Overton Park mandated looking

beyond the “substantial evidence” test to whether there

was arbitrary and capricious action or abuse of discretion

on the part of the Commission (J.A.J, p. 773; 364

F. Supp. at 1258-1259).

Relying as it did upon Appellees’ proposed conclusions

of law, the Court disregarded this Court's limitation of

the de novo review provided in Overton Park to situations

where the administrative hearing was “nonadjudicatory,

quasi-legislative in nature [,] . . . not designed to produce

a record that is to be the basis of agency action—the basic

requirement for substantial-evidence review.” This type

of review does not apply “when the agency action is

based on a public adjudicatory hearing.” 401 U.S. at

414-415.

Here the Three-Judge District Court impermissibly

rejected the application of the substantial evidence rule

to a hearing on the record. Such judicial error, because of

its possible applicability to other cases involving the

review of Commission decisions, involves one of those

unique situations contemplated in Universal Camera

Corp. v. NLRB, 340 U.S. 474, 490-491, where jurisdic-

tion should be taken by this Court.

D. Misconception of Relationship Between

Agency and Hearing Examiner.

The Three Judge District Court accorded over-

whelming weight to the examiners’ report, to override the

Commission’s decision. (J.A. J, p. 756; 364 F. Supp. at

1250). Such a result contradicts 5 U.S.C. §557(b) which

19

provides that in such circumstances the “agency shail

have all the powers which it would have in making the

initial decision.”” See 2 K. Davis, Administrative Law

Treatise § 10.04 (1958). “The Commission is not bound

by the examiner’s conclusions. Rather the Commission is

free to make its own independent determinations,”

Frozen Food Express, Inc. v. United States, 301 F. Supp.

1322, 1324 (N.D. Tex. 1969); see also Universal Camera

Corp. v. NLRB, 340 U.S. 474, 493; FCC v. Allentown

Broadcasting Corp., 349 U.S. 358, 364-365.

While a reviewing Court must look to the examiner’s

report as part of the whole record, such a report remains

only a part of the record. It cannot be used, as here, as a

method of negating the Commission’s decision. The

Court held that the conclusions of the examiners, based

upon findings of fact to which specific exceptions

allegedly were not taken, were nonreviewable >y the

Commission and even by the Court. That exceptions were

taken to the examiners’ conclusions and that the Com-

mission reached different conclusions were disregarded

by the Court.

Under this novel theory of law, the role of hearing

examiners has been exalted to that of final decision, even

where, as here, the agency with statutory responsibility in

the motor carrier field reaches contrary conclusions. The

result of the Court’s action is to defeat the letter and the

spirit of the Administrative Procedure Act and the

Interstate Commerce Act.

: 20

CONCLUSION

Probable jurisdiction should be noted. Abdication of

the judicial function and usurpation of the Commission’s

function require that the Three-Judge District Court

decision be reversed, and the decision of the Commission

affirmed.

Respectfully submitted,

CHARLES S. RHYNE

COURTS OULAHAN

400 Hill Building

839 Seventeenth Street, N.W.

Washington, D.C. 20006

Attorneys for Appellants Lorch-

Westway Corporation, et al.

ROBERT L. JONES, JR.

412 Merchants National

Bank Building

Fort Smith, Arkansas 72901

la

APPENDIX A

EXCEPTIONS OF INTERVENING SHIPPERS

TABLE OF CONTENTS [p. i]

* * * * *

IV. ARGUMENT:

1. Federal Antitrust Policy Condemns

Restraint Of Trade Since It Operates

To The Prejudice Of The Public Inter-

est

2. The Antitrust Laws Are Not Impliedly

Repealed By Subsequent Legislation,

Absent A Clear And Manifest Intent

By Congress

3. The Interstate Commerce Act Does

Not Impliedly Repeal The Antitrust

Laws Except For Those Activities

Expressly Exempted

* * * * *

4. Both Public Convenience And Neces-

sity And The National Transportation

Policy Encourage Competition Among

Carriers

* * * * *

| page ii]

5. Carriers First In The Field Within A

Particular Area Do Not Enjoy Legal

Protection Against Competition Sub-

sequently Arising And Have No

Vested “Property Interest” In Serving

The Public

2a

A. The Commission May—And

Should—Authorize New Service

To Provide The Public With The

Benefit Of Competition

B. The Holder Of A Certificate Is Not

Entitled To Immunity From Com-

petition Since The Introduction

Of More Competition May Be In

The Public Interest

C. New Certificates Of Public Conven-

ience And Necessity May Be

Authorized Even Though Existing

Service Is Characterized As Satis-

factory

. The Commission Must Consider Mat-

ters Relating To Restraint Of Com-

petition And Monopolistic Tendencies

Which Are Specifically The Object Of

The Antitrust Laws, And Must Pre-

serve Competition As Fully As

Possible

o * * + *

. The Commission Should Reverse The

Conclusions Of The Hearing Exam-

iners And Grant The Application To

Johnson Motor Lines, In Accordance

With Authority Established By Both

The Courts And The Commission

A. The Examiners Erred In Substitu-

ting Understanding Cooperation,

And Communication For Com-

petition

[ page iii]

3a

The Examiners Erred In Con-

cluding That The Commission

Must Grant Existing Carriers An

Opportunity To Remedy Deficien-

cies In Service Before Issuing A

New Certificate Of Public Conven-

ience And Necessity

The Examiners Erred In Deter-

mining Public Convenience And

Necessity By Placing Considera-

tions Of Possible Detriment To

Existing Carriers Through In-

creased Competition Ahead Of

Benefit To The Public, Including

Intervening Shippers

In View Of The Established Needs

Of Intervenors, The Commission

Should Reverse The Conclusions

Of The Hearing Examiners And

Grant The Application Of Johnson

Motor Lines

* * * + ~

Ib

APPENDIX B

SUPPLEMENT TO EXCEPTIONS OF

INTERVENING SHIPPERS

TABLE OF CONTENTS

* * * * *

Il. Argument

1. Recent Court Decisions Reaffirm That

The Primary Consideration In An

Application Proceeding Is The Interest

Of The Public—Not The Economic

Advantages Of Competing Carriers

2. The Department Of Justice, Charged

With Enforcement Of The Antitrust

Laws, Increasingly Advocates Competi-

tion, As Opposed To Regulation, As

The Principal Regulator Of The Econ-

omy

A. Regulation Of Transportation Must

Be Aimed At Protection Of The

Public—Not At Protection Of The

Carriers

B. The Department Of Justice Urges

Increased Competition For Other

Regulated Industries, In Addition

To Transportation

3. The President Of The United States

Has Recognized That Regulatory Agen-

cies, And Specifically The ICC, Stifle

Opportunities For Progress Through

Competition By Protecting The Status

Quo