Petition — BHD. OF RAILWAY, AIRLINE v. UNITED STATES (Nos. 77-869, 77-868)

| Supreme Court, U. S.

FILED

OEC 15' 77

MICHAEL RODAK, JR., CLERK

IN THE

Supreme Court of the United States

OCTOBER TERM, 1977

we Y= 869

BROTHERHOOD OF RAILWAY, AIRLINE AND

STEAMSHIP CLERKS, FREIGHT HANDLERS,

EXPRESS AND STATION EMPLOYEES,

Petitioner,

Vv.

UNITED STATES OF AMERICA, ET AL.,

Respondents.

PETITION FOR A WRIT OF CERTIORARI

TO THE UNITED STATES COURT OF APPEALS

FOR THE SECOND CIRCUIT

JAMES L. HIGHSAW. JR.

JOHN O'BRIEN CLARKE. JR.

HIGHSAW. MAHONEY & FRIEDMAN

Suite 210

1050 Seventeenth Street. N.W.

Washington. D.C. 20036

Of Counsel:

WILLIAM J. DONLON

Brotherhood of Railway and Airline Clerks

6300 North River Road

Rosemont, Illinois 60018

December 15, 1977

Se eee

CASILLAS PRESS, INC.—1717 K Street, N.W.—Washington, 0.C.—223-1220

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(i)

TABLE OF CONTENTS

Page

ORDERS AND OPINIONS BELOW ................ 0c eeeeee 2

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EN TT OE TET eT Te TT eT Tere 2

STATUTES AND REGULATIONS INVOLVED .............. 3

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REASONS FOR GRANTING THE WRIT:

1. The Penalty Applied By the ICC to

Redress A Procedural Defect Was So

Unwarranted As To Call For An

Exercise Of This Court’s Power

RST Se ee ee 6

2. The Rulings Below Impair An Important

Element of Our National Transportation

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INDEX TO CITATIONS

CASES: Page

Gilbertville Trucking Co. v. United States,

i RT eer Terr TT Ter ee eT Ter eT 8

In re REA Holding.. Corp., SS8 F.2d 1127

(2d Cir. 1977) .

(ii)

Schaffer Transportation Co. v. United States,

pT RP EO See ree eee re pr 9,10

Securities and Acquisition of Control of

Railway Ex. Agency.

EE ee ee ee a ee 3

Trans World Airlines Inc.. v. Hardison,

PE OT EEE PPT eee eT 7

United States y. Lowden,

ee eon ed Cee cbedhewee been teooune ss 4

Statutes:

Bankeuptey Act. 01. U.S.C. Bb.e0 99g 2. ccccccnsccccccccscece a

p mf PPPS TTT TOT TTT ree eee 2.6

Railway Labor Act, 45 U.S.C. §15S1. ef seq... 0... eee ee eee 4

Rail Passenger Service Act.

ED oo cee deness cacccanbessveng 11

Interstate Commerce Act.

SOUSA... SemeeeEna Gl. 60 O0G. oc ccc cscccsvcsecs 3.4.6.9

Rule 247(f), ICC Rules of Practice.

GIFs TEESE Bev ccvcencecsousossease 2.3.6.8

IN THE

Supreme Court of the United States

OCTOBER TERM, 1977

n

BROTHERHOOD OF RAILWAY, AIRLINE AND

STEAMSHIP CLERKS, FREIGHT HANDLERS,

EXPRESS AND STATION EMPLOYEES,

Petitioner,

v.

UNITED STATES OF AMERICA, ET AL.,

Respondents.

PETITION FOR A WRIT OF CERTIORARI

TO THE UNITED STATES COURT OF APPEALS

FOR THE SECOND CIRCUIT

Petitioner’ Brotherhood of Railway and Airline Clerks

{hereinafter ““BRAC”], an intervenor in the proceedings

before the United States Court of Appeals for the Second

Circuit urging reversal of a decision by the Interstate Com-

merce Commission [hereinafter, ‘“‘ICC’’ or ‘“‘Commission’’],

‘Respondents to this instant petition are: The United States of

America, and the Interstate Commerce Commission, respondents

below; American Trucking Associations, Inc. and twenty-four motor

carriers, intervenors in support of respondents below; REA Express,

Inc., a bankrupt. and C. Orvis Sowerwine, Trustee, petitioners below;

and Alltrans Express. U.S.A., Inc., an intervenor in support of

petitioners below. Petitioner BRAC has been informed that REA Ex-

press. Inc., and its trustee, C. Orvis Sowerwine, will also be filing in this

Court a petition for a writ of certiorari.

2

respectfully requests that a writ of certiorari be issued to

review the judgment of the United States Court of Appeals

for the Second Circuit entered in this proceeding on Sep-

tember 16, 1977.

ORDERS AND OPINIONS BELOW

The judgment and opinion of the Court of Appeals for

the Second Circuit was entered on September 16, 1977, and

is not yet officially reported. It is reproduced as Appendix

A to this petition. The initial Report and Order of the In-

terstate Commerce Commission which was the subject of

this review proceeding was decided on November 17, 1976,

and was served on November 19, 1976. It is reproduced as

Appendix B to this petition. On January 27, 1977, the Com-

mission decided various petitions to reconsider and to in-

tervene, and on January 28, 1977, the Commission issued

that decision. It is reproduced as Appendix C to this

petition.

JURISDICTION

The judgment of the Court of Appeals for the Second

Circuit was entered on September 16, 1977, and this

petition for a writ of certiorari has been filed within 90 days

of that date. This Court's jurisdiction is invoked pursuant

to 28 U.S.C. §1254(1).

QUESTIONS PRESENTED

1. Whether the Interstate Commerce Commission’s

ostensible reliance on Rule 247(f) of its Rules of Practice to

dismiss an application for permanent authority for the

“hub system” and to thereafter mechanically rely on that

dismissal as a basis for revoking a temporary authority was

arbitrary, capricious and an abuse of discretion?

2. Did the Court of Appeals and the Commission err in

not considering the drastic effect that the Commission’s

decision to effectively end REA would have upon the reem-

ployment and monetary rights of REA’s thousands of long

and faithful employees?

STATUTES AND REGULATIONS INVOLVED

Sections 206(aX1) and 210a(a) of the Interstate Com-

merce Act. 49 U.S.C. §§306(aX1), and 310a(a), are involved

in this case and are reproduced in Appendix D to the

petition. Rule 247(f) of the Commission’s Rules of Practice,

49 C.F.R. §1100.247(f) (1976) (now, Rule 247(g)), is also

material to this petition and has been reproduced in Ap-

pendix D to this petition. The pertinent portion of Rule

247(f) reads as follows:

An applicant who does not intend timely to

prosecute its application, shall promptly request

dismissal thereof. Failure to prosecute an ap-

plication under procedures ordered by the Com-

mission will result in dismissal thereof. . . .

STATEMENT OF THE CASE

Railroads had provided an express package service for

many years by the early 1900's, and in 1929 the railroads

created the Railway Express Agency, Inc., a non-profit

agency, to perform that express service. See, Securities and

Acquisition of Control of Railway Ex. Agency, 150 1.C.C.

423 (1929). REA, however, was not designed to be

profitable, and by 1969 with the drastic decline in intercity

rail passenger service, the railroads ‘‘extricated themselves

from its ownership." App. A at Sa. REA Express, Inc.

emerged as an independent company carrying on the

business of Railway Express, and continued to employ

4

thousands of employees, most of whom were represented by

petitioner BRAC under the Railway Labor Act, 45 U.S.C.

§151, et seq.

Historically, REA was intertwined with the rail systems

for its routes, and by 1968 found itself “with an un-

coordinated and unmanageable system of interlocking rail

and motor routes.” App. A at Sa. In order to solve that

problem, REA proposed in 1968 a fundamental restruc-

turing of its routes and submitted an application to the ICC

under Section 206 of the Interstate Commerce Act, 49

U.S.C. §306, for permanent operating authority under what

has become known as the “‘Hub system”’ —i.e., twenty-four

central points for the receipt and dispatch of traffic. Upon

application of REA, the Commission on June 3, 1968, gran-

ted REA temporary authority under Section 210a(a) of the

Act, 49 U.S.C. §310a(a). J.A. at 877.2 REA continued to

operate, primarily under that temporary authority, until

November 6, 1975.

On February 18, 1975, REA Express, Inc. and its af-

filiated companies filed petitions with the United States

District Court for the Southern District of New York pur-

suant to the provisions of Chapter XI of the Bankruptcy

Act, 11 U.S.C. §701, et seg. REA’s attempt to solve its

financial problems, however, failed and on November 6,

1975, it petitioned for, and was adjudicated a bankrupt.

REA’s trustee, C. Orvis Sowerwine, immediately ordered

an embargo on its operations, but with one exception: the

trustee permitted REA’s Rexco Division to continue

operations.

As the Court of Appeals noted, ““Rexco amounted to little

more than a brokerage business.’’ App. A at 7a. Rexco

neither owned nor operated any equipment, but rather

solicited and arranged for truckload shipments over

*“J.A.” refers to the Joint Appendix filed in the Court of Appeals in

this case.

>

irregular routes. App. B at Sla. Between November 25,

1975, and December 11, 1975, many motor carriers filed

complaints with the Commission against REA and sought a

cease and desist order from the Commission to stop the

Rexco operations. These carriers asserted that the Rexco

operations were not express service, and consequently,

REA was not authorized to provide that type of service. The

American Trucking Associations, Inc., besides asking for a

cease and desist order, also sought a dismissal of REA’s ap-

plication for permanent authority for the hub system and a

cancellation of the temporary authority. App. B at 29a.

After a hearing, the ICC on November 17, 1976, decided

to issue a cease and desist order against the Rexco

operations for it concluded that such operations were in-

deed contrary to REA’s authority. App. B at 63a. However,

the Commission went further and found that:

[T]he so-called ‘Hub System” proceeding must

be dismissed. It has been on our docket for 8 years

and since the prehearing conference held on

January 12, 1970, no further action has been

requested by the applicant despite an initial asser-

tion at prehearing that it would be ready to

present its operating evidence in April of 1970.

Rule 247(b) [sic] of our General Rules of Practice

requires that an applicant who does not intend

timely to prosecute its application shall promptly

request dismissal thereof. This, we believe, places

some affirmative duty on an applicant to

prosecute or seek dismissal. App. B at 58a-59a.

Since the ‘‘hub system”’ application was dismissed, the ICC

concluded, the temporary authority must be revoked for it

was ‘‘conditioned upon the pendency of a corresponding

permanent authority application ... ."’ App. B at 60a.’

‘The Commission also concluded that the temporary authority

revocation was supported by good cause.

6

REA, petitioner* and others sought reconsideration, but

on January 28, 1977, the Commission issued its order

denying, among others, the various petitions for recon-

sideration. In its decision on reconsideration, the Com-

mission reaffirmed its view that REA’s failure to prosecute

its “hub system” application to a conclusion within 8 years

justified the dismissal. App. C at 73a.

Upor: review in the Court of Appeals pursuant to 28

U.S.C. §2342, the court affirmed the Commission's orders

of November 17, 1977, and January 27, 1977, and denied

the petition for review. The court concluded that the ICC's

interpretation of its Rule 247(f) was not unreasonable, that

its decision to dismiss the “hub system” application upon

that interpretation of Rule 247(f) was supported by sub-

stantial evidence and was not an abuse of discretion.

REASONS FOR GRANTING THE WRIT

I

THE PENALTY APPLIED BY THE ICC TO REDRESS A

PROCEDURAL DEFECT WAS SO UNWARRANTED

AS TO CALL FOR AN EXERCISE OF THIS COURT'S

POWER OF REVIEW

For over eight years the Commission permitted REA to

operate an express service which relied primarily upon a

temporary authority granted under Section 210a(a) of the

Interstate Commerce Act, 49 U.S.C. §310a(a). REA and its

predecessor had been the historical and traditional carrier

viewed as authorized to provide an express package service.

and it was partly based on that history that the Commission

authorized REA’s restructing of its routes and its continued

express operations pending resolution of the “hub system”

*Petitioner BRAC was not a party to the ICC proceedings, but sought

leave to intervene upon reconsideration. The Commission denied that

request in its decision on reconsideration. App. C at 69a-7 1a

application. J.A. 877-78. The “‘hub system” application,

however, for a variety of reasons, was not brought to a

hearing and remained pending during REA’s declining

financial posture. Finally, when many competing motor

carriers sought the discontinuance of a small part of REA’s

operations —the Rexco Division—the American Trucking

Associations, Inc. also sought the elimination of REA’s

primary right to exist by seeking a cancellation of the tem-

porary “hub system”’ authority.

As the record clearly shows, REA did not seek to bring

the ‘‘hub system”’ application to a hearing for a number of

reasons (see, App. A at 14a-15a), and, more importantly, it

is respectfully submitted, the Commission did not seek to

require a hearing or a dismissal of the application during

the eight years that it permitted the application to be pen-

ding. App. B at 38a-42a. Rather, the Commission and REA

permitted the hub system application to remain unresolved.

More importantly, when the Commission did finally take

action to control its docket, REA was in the process of tran-

sferring its authorities, including the duty to prosecute the

“hub system” application to Alltrans Express, U.S.A., Inc.,

an ertity which had clearly expressed an interest to proceed

with the pending REA application.

While petitioner BRAC agrees that the Commission’s

‘interpretation of its own rule or regulation is entitled to

great deference by the courts” (App. A at 13a), this does

not mean that the courts in reviewing an agency action

based on such an interpretation may never find such a con-

struction to be unreasonable, or indeed, to have been ap-

plied to justify a desired result. E.g., Trans World Airlines,

Inc. v. Hardison, U.S. ____ (1977) (slip op. at 11 n.

11). Moreover, even if a reviewing court should conclude

that the agency’s interpretation of its own rule should not

be disturbed, the penalty which the agency applied for the

violation of that rule or regulation may be found to have

8

rendered the agency action improper. E.g., Gilbertville

Trucking Co. v. United States, 371 U.S. 115, 129-31 (1962).

In the case at bar, petitioner BRAC respectfully submits,

the Court of Appeals erred in deferring to the ICC’s in-

terpretation and application of its Rule 247(f), for, it is sub-

mitted, the record shows that the Rule was used to give the

desired result — i.e., dismissal of the application and can-

cellation of the temporary authority—rather than the result

being mandated by the conclusion that the Rule had been

violated. Petitioner BRAC suvmits that when an ad-

ministrative agency first reaches a conclusion, but only

thereafter selects facts to rationalize that desired result, the

resulting decision of that agency is arbicrary and capricious

and should not be countenanced by any reviewing court.

As this Court made clear in Gilbertville Trucking Co. v.

United States, supra, 371 U.S. at 130, the Commission has

‘‘a heavy responsibility to tailor the remedy to the par-

ticular facts of each case so as to best effectuate’’ the

remedial purposes of the Act and to enforce our national

transportation policy. This requires, it is submitted, that

the remedy be designed to remove the violation; and not

that the violation be chosen for its remedy.

In the case at bar, a dismissal of the “hub system” ap-

plication meant that the primary source of REA’s operating

authority which had been relied upon for over eight years, was

taken away for all practical purposes. Whatever source of

income the bankrupt estate was to have received from this

sale was thus lost. And more importantly, petitioner BRAC

submits, whatever chances of reemployment existed in the

field in which they had labored for many years was lost to

over six thousand employees of the bankrupt. Such drastic

results could have been avoided if the Commission, once it

had iriterpreted Rule 247(f) to require of the applicant

prompt dismissal or prosecution of its applications, then

looked to the facts of the case to determine a just remedy

for that violation. This the Commission did not do.

9

Petitioner BRAC respectuflly suggests that this Court

should accept a review of this case to assure that ad-

ministrative agencies use the adjudicatory process to reason

from the facts to appropriate conclusions, and not, as in

this case, to rationalize backwards from the desired result

to supportive facts and rules.

II

THE RULINGS BELOW IMPAIR AN IMPORTANT

ELEMENT OF OUR NATIONAL TRANSPORTATION

POLICY

It is well settled that in rendering any decision, the Com-

mission should be guided by our National Transportation

Policy as formulated by Congress in a preamble to the In-

terstate Commerce Act, 49 U.S.C. preceding §1. As this

Court has stated: ‘[TJhis policy is the yardstick by which

the correctness of the Commission’s actions will be

measured.” Schaffer Transportation Co. v. United States,

355 U.S. 83, 88 (1957). That policy specifically declares

that:

It is hereby declared to be the national tran-

sportation policy of the Congress to provide for

fair and impartial regulation of all modes of tran-

sportation subject to the provisions of this Act, so

administrated as . . . to encourage fair wages and

equitable working conditions . . . . 49 U.S.C.

preceeding §1.

Moreover, this Court has stated that ‘“‘just and reasonable

treatment” of transportation employees is an essential aid

to the maintenance of an uninterrupted and efficient tran-

sportation system for employee morale suffers when the

demands of justice are ignored. United States v. Lowden,

308 U.S. 225, 235-36 (1939). The Commission and the

Court of Appeals, it is submitted, have ignored this im-

portant part of our national transportation policy.

10

In its decision initially cancelling REA’s temporary

authority, the Commission did not indicate whether it had

considered the ramifications of its action upon the thousan-

ds of employees of REA, and in its decision upon recon-

sideration, the ICC stated, without any discussion, that

petitioner BRAC in raising such an issue did not present

any argument which would “warrant a result different from

that found” in the Commission’s original decision. App. C.

at 71a. And upon review, the Court of Appeals rejected

petitioner BRAC’s argument that the Commission had

ignored the interests of employees, by stating in a footnote

that our “National Transportation Policy is not directly

concerned with the problems of unemployment and

creditors’ rights.” App. A at 24a n.16. Petitioner BRAC

respectfully submits problems of unemployment and

creditors’ rights are indeed part of the interests of em-

ployees included within our national transportation policy,

and that the Commission may not ignore such con-

siderations in reaching a decision.

This Court has stated in Schaffer Transportation Co. v.

United States, supra, that it is erroneous for the Com-

mission to fail to consider all of the relevant factors in our

national transportation policy in rendering a decision.

While this Court will not disturb a balancing of the

numerous considerations that collectively determine where

the public interest lies in a particular situation, Jd. at 92-93,

it will invalidate a conclusion that did not evaluate and

balance the relevant considerations. /d. In this case, as

petitioner BRAC informed the Commission in its petition

for reconsideration that:

[T}here are approximately 15,000 employees in-

volved (who either actively worked for REA Ex-

press in 1975S or who were on furlough with em-

ployment rights) whose average age is ap-

proximately 5S years, whose working experience

11

has been largely with REA, and whose chances of

employment elsewhere are minimal. J.A. at 734.

By cancelling REA’s temporary authority, the ICC, without

weighing the impact of its actions on those employees,

destroyed any chances which those employees may have

had to priority of employment with the purchaser of REA’s

operating rights, or reemployment with a reorganized

REA.*

Considerations of unemployment and employment rights

of employees are, it is submitted, well recognized elements

of the interests of employees included within our national

transportation policy. E.g., Section 405(bX1) and (4) of the

Rail Passenger Service Act, 45 U.S.C. §S6S(bX1) and (4).

And indeed, such rights are clearly part of the con-

sideration that employees are to be treated fairly and not to

be forgotten offhandedly. This Court, i. is respectfully

suggested, should accept review of this case in order to

prevent an important policy of Congress from being im-

paired and disregarded.

*An attempt to reorganize REA under Chapter 10 of the Bankruptcy

Act was recently rejected Jn re REA Holding Corp., 558 F.2d 1127 (2d

Cir. 1977).

12

CONCLUSION

For these reasons, a writ of certiorari should issue to

review the judgment and opinion of the Second Circuit.

Respectfully submitted,

JAMES L. HIGHSAW. JR.

JOHN O'BRIEN CLARKE. JR.

HIGHSAW. MAHONEY & FRIEDMAN

Suite 210

10S0 Seventeenth Street

Washington. D.C. 20036

Counsel for Petitioner

Brotherhood of Railway and

Airline Clerks

Of Counsel:

WILLIAM J. DONLON, GENERAL COUNSEL

Brotherhood of Railway and Airline Clerks

6300 North River Road

Rosemont, Illinois 60018

December 15, 1977