Baggett Transportation Co. v. United States

206 F. Supp. 835, 1962 U.S. Dist. LEXIS 4816

• Court: District Court, N.D. Alabama
• Decided: May 28, 1962
• Docket: Civ. A. No. 9984
• Status: Published

Opinions

GROOMS, District Judge.

This action was brought by Baggett Transportation Company under 28 U.S. C.A. §§ 2321-2325, to enjoin, annul and set aside certain orders of the Interstate Commerce Commission issued in Baggett Transportation Company Purchase — Hunt Freight Lines, Inc., Docket No. Mc-F-6034. The question presented is whether the Commission had the power after issuing a certificate of convenience and necessity on August 30, 1960, to amend certain orders entered prior to the issuance of the certificate, thereby imposing protective labor provisions for Hunt’s employees.

On July 25, 1955, Baggett and Hunt filed a joint verified application with the Commission seeking the approval of the purchase by Baggett of certain certificates of convenience and necessity and specified properties owned by Hunt. Included in the application were the following sworn statements:

“Transferee (Baggett) would employ all of transferor’s (Hunt) employees.

“The approval of this transaction will not adversely affect the interests of the carrier employees of Hunt. While it is contemplated that common terminals will be eliminated, the employees of Hunt in such terminals will be absorbed by Baggett.” (This language was italicized in the original application.)

Under the General Rule of Practice No. 1.19 of the Commission, such statements are taken as part of the record and accepted as evidence unless specifically denied in a counterpleading.¹ Baggett claims that these statements were specifically denied by the protest of Malone Freight Lines, an intervenor, who specifically denied all the allegations of the application. We question whether a general denial of all the allegations in the application puts all the allegations in issue merely by including the word “specifically,” but in any case, we need not face that issue since we are of the opinion that Hunt’s employees represented no valid interest of the intervenor so that Malone had no standing to put these sworn promises in issue. Hearings on this application and one other between Baggett and Holloway Transfer Co., Inc., were held in Birmingham, Alabama, on December 4-8, 1955. The testimony in the Hunt hearing with respect to the issue of Hunt’s employees was brief. Whatever the Baggett officials intended their testimony given at the hearing to mean, it cannot be interpreted as a denial of the statements in the application.²

From this record, the Examiner indicated in his report of May 24, 1956, that “Baggett would employ those employees of Hunt and Holloway which meet its standards.” In actual fact there was nothing in the Baggett-Hunt record which withdrew the promises to employ all of Hunt’s employees; the “standards” qualification appears only in testimony with respect to the Holloway transaction. The Commission in its later reports of October 22, 1956, and March 1, 1957,³ approved the transfer without any mention of Hunt’s employees.

On May 18, 1957, Baggett consummated the transaction with Hunt. Ten days later, by means of a Petition for Leave to Intervene and Motion to Vacate Order or Afford Relief, the Union representing Hunt’s employees objected to the approval of the transaction on the ground that Hunt’s employees were adversely affected contrary to the promises in the application. It is alleged that on May 7, nine days prior to the consummation of the transaction, Hunt discharged all its drivers and warehousemen and that Baggett refused to employ them. This petition for leave to intervene was denied by Commissioner Mitchell on behalf of the Commission on July 17, 1957, “for the reason that the proceeding is closed and intervention in the proceeding is not warranted at this late date.” On August 16, 1957, the Union filed a Petition for Reconsideration by the entire Commission. On August 30, however, and pending disposition of said petition, a certificate of convenience and necessity covering the rights purchased was issued by Division 1 of the Commission.

On September 3, 1957, Baggett answered the petition for reconsideration and on December 6 the Commission, Division 4, granted the petition and reopened the proceeding on the then existing record. On April 9, 1958, Division 4 rendered a report upholding the Union and recommending that Hunt’s employees be given three months’ severance pay. This report and order was vacated by the full Commission and remanded for a hearing by an Examiner since the dispute involved evidence not a part of the record. After a full hearing in July, 1959, the Examiner issued a report on March 25, 1960, affirming the former recommendations of Division 4 that, due to the failure of Baggett to live up to the statements made in its application, protective labor provisions should be added to the earlier orders providing for three months’ severance pay for Hunt’s employees. The Examiner’s report was affirmed on March 29, 1961, by the full Commission.

From the evidence already outlined, supra, we are satisfied that Baggett never withdrew the sworn statements in its application prior to the final approval of the transaction by the Commission in its order of March 1, 1957. If Baggett had intended to withdraw or modify these statements at the hearing, it should have done so clearly and expressly. As noted, these statements were part of the record under Rule No. 1.19 .and could be relied on by the Commission. Under the statutory standards for the approval of this transaction found in Section 5(2) (e) of the Interstate Commerce Act, 49 U.S.C.A. § 5(2) (c), it was the duty of the Commission to give weight to the following consideration, among others: “(4) the interest of the carrier employees affected.” We are, therefore, of the opinion that the Commission relied upon the sworn statements in the application in its determination that this transaction was in the “public interest.”

Baggett first argues that it actually lived up to the statements made in the application. It would appear undisputed, however, that there were 25 employees on Hunt’s last full payroll, 17 of which were represented by the Union. Of these, two managerial employees were hired by Baggett, but none of the others received unqualified employment offers. At best, four of Hunt’s drivers were offered contracts to serve Baggett as individual owner-operators, provided they were willing to purchase their own tractor-trailers (which Baggett offered to help finance). This is clearly not an unrestricted offer of employment. Baggett argues, however, that unrestricted offers were made to all of Hunt’s employees by Chattanooga Service, Inc., who, as of May 1, 1957, handled all of Baggett’s terminal operations as an independent contractor. This first became clear to the Commission during the July 1959 hearings. At that time, Howard Durden, Baggett’s Vice President, testified that during 1957 Baggett changed its former mode of operations and, instead of conducting its own terminal operations as represented in its application, it hired Chattanooga Service as an independent contractor to take them over. Assuming that an offer made by Chattanooga Service may be considered to be an offer by Baggett, Baggett indicates in its brief, with citations to the record, that Chattanooga Service offered employment to five Hunt employees (other than the two managerial employees mentioned above) during May, 1957. Most of these had left by June, however, due to fear of Union reprisals. This leaves some 17 Hunt employees who never received an unqualified offer of employment by either Baggett or Chattanooga Service prior to June, 1957. Upon these facts, the Commission was entitled to conclude that Baggett had not lived up to the statements made in the application.

Baggett contends that Chattanooga Service sent out offers of employment to all the rest of Hunt’s employees in late September, 1957 (after it appeared that the Union petition to intervene might be entertained). This offer, six months after Hunt’s employees were fired, could correctly be ignored by the Commission as too late to have any practical effect; further, testimony cited by the Government indicates that Chattanooga Service could only have hired two or three of them at that time and that the effort was made for the record only.

For the reasons presently indicated, we are of the opinion that, notwithstanding the issuance of the certificate of convenience and necessity, the Commission had authority to modify and supplement the report and order of Division 4, of October 22, 1956, notice and hearing having been had, by imposing an employee protective condition for the failure of Baggett to abide by material statements asserted in its application.

At the conclusion of its report and order of March 29, 1961, the Commission stated:

“We are reluctant to institute revocation proceedings or even move to temporarily suspend the certificate issued to Baggett with the ensuing loss of customers and interruption of employment for employees, especially since it has been the established policy of the Commission to go no further than to require 3 months’ severance pay for displaced employees.

“Upon further hearing we affirm the findings in the prior report, decided October 22, 1956, as modified in the report on reconsideration, decided April 9, 1958.”

Thus, it is seen that the Commission did not purport to revoke or suspend the certificate issued to Baggett nor to amend it as such, nor to curtail its operations.

Did the Commission have power to enter the supplemental order imposing the employee protective conditions? Section 5(9), 49 U.S.C.A. § 5, par. (9), provides that:

“The Commission may from time to time, for good cause shown, make such orders, supplemental to any order made under paragraph * * * (2) * * * as it may deem necessary or appropriate.”

The rationale of the pertinent decisions of the Supreme Court carefully; gleaned from the settings of those decisions sustain the power of the Commission.

The most recent pronouncements of the Supreme Court with respect to the matter with which we are here concerned were made in Civil Aeronautics Board v. Delta Air Lines, Inc., 367 U.S. 316, 81 S.Ct. 1611, 6 L.Ed.2d 869, decided June 12, 1961, and subsequent to the date of the last order of the Commission made in this case. . The case involved the powers of the Civil Aeronautics Board to alter a “certificate” after the same had become effective. The eertificate was issued and became effective while numerous petitions, including that of Lake Central Air Lines, Inc., were pending. Thereafter, the Board issued a new order disposing of the pending petitions. By this order the Board amended the certificate in response to the restrictions proposed by Lake Central. The Board barred Delta’s operations between ten pairs of intermediate cities unless the flights initiated at Atlanta or points farther south; the effect of this order was to bar certain Delta flights Delta was then operating. The Board’s disposition of the petitions “was taken summarily, without formal notice to the parties or opportunity for hearing prior to decision.” The Court, four judges dissenting, held that Congress had not authorized the Board to alter, without formal notice or hearing, a certificate once the certificate had gone into effect. 49 U.S.C.A., § 1371(f) (g). In the course of its opinion, the Court said:

“We are not saying that the Board cannot entertain petitions for reconsideration after effective certification, nor are we holding that such petitions cannot be denied summarily ; all we hold is that the petitions cannot be granted and the certificated carrier’s operations curtailed without notice or hearing. * * * ”

The Court again reemphasized the limit of its decisions and pointed to the power of the Commission with respect to the reconsideration of an effective certificate, saying:

“In the first place, it bears repetition that we are not deciding that the Board is barred from reconsidering its initial decision. All we hold is that, if the Board wishes to do so, it must proceed in the manner authorized by statute. Thus, for example, the Board may reconsider an effective certificate at any time if it affords the certificated carrier notice and hearing prior to decision * * (Emphasis supplied.)

Adverting to United States v. Rock Island Motor Transport Co., 340 U.S. 419, 71 S.Ct. 382, 95 L.Ed. 391, where it was held that the Commission could modify a motor carrier’s certificate pursuant to a reservation in the initial order, the Court stated:

“However, two important distinctions between that case and this are apparent: (1) The Motor Carrier Act makes express provision for summary modifications after certification, 49 U.S.C. § 308, — ⁴ and (2) the Court in Rock Island was very careful to limit its holding to the particular modification made in that case.” (Emphasis supplied.)

In Footnote 11, 367 U.S. at page 328, 81 S.Ct. at page 1620, the Court noted that:

“ * * * Congress has shown no intent to preclude reconsideration, either judicial or administrative, after notice of hearing.”

It will be observed that we have here no question of action taken to execute a subsequently adopted policy as was the case in United States v. Seatrain, 329 U.S. 424, 67 S.Ct. 435, 91 L.Ed. 396 (1947).⁵

The statute, 49 U.S.C.A. § 5(2) (c), provides that:

“In passing upon any proposed transaction under the provisions of this paragraph, the Commission shall give weight to the following considerations, among others: (1) * * (2) * * * (3) * * * (4) the interest of the carrier employees affected.” (Emphasis supplied.)

In Transcontinental Bus System, Inc., 50 M.C.C. 305, 310 (1948), the Commission reserved jurisdiction for a period of two years to impose such employee protective condition as may appear necessary. Jurisdiction was reserved for three years for a like purpose in Greyhound Corporation, 67 M.C.C. 123, 155-157 (1950). And in Short Line, Inc., 75 M.C.C. 33, decided February 10, 1958, certain carrier employees were afforded protection by the Commission’s order. See also, United States v. Lowden, 308 U.S. 225, 60 S.Ct. 248, 84 L.Ed. 208, as to the policy respecting the protection of railway employees, and Western Air Lines v. Civil Aeronautics Board, 9 Cir., 194 F.2d 211, as to air line employees.

The action of the Commission in entering the supplemental order for the protection of Hunt’s employees was in keeping with an established policy clearly inferred from the statute, § 5(2) (c) (4), and consistently followed by the Commission.

Although Lake Central’s petition for reconsideration was pending in Delta Air Lines, as was the Union’s petition here, when the certificate was granted, that case, as noted, turned on the lack of notice and opportunity for a hearing. After Division 4 reopened the proceedings in this case on December 6, 1957; and following that Division’s report and order of April 9, 1958, the Commission as a whole, by order of April 17, 1959, reopened the proceedings for further hearing. A further hearing was had with full opportunity to present evidence. The proceedings closely paralleled those in American Trucking Association, Inc., v. Frisco Transportation Company, 358 U.S. 133, 79 S.Ct. 170, 3 L.Ed.2d 172, where the issue presented was whether the Commission had the power to modify a certificate issued due to inadvertence. The Court held that the power existed. There was no question of notice and opportunity for a hearing.

In United States v. Seatrain Lines, Inc., supra, the Commission reopened the proceedings on its own motion, can-celled the certificate and directed the issuance of a new one, which deprived Seatrain of the right to carry “commodities generally,” as authorized by the initial certificate and limited it to carrying liquid cargoes in bulk, empty railroad cars, and property loaded in freight cars received from and delivered to rail carriers. In affirming the District Court in reversing the Commission, the Court stated that the certificate marked the end of the proceedings, but significantly it added:

“The certificate, when finally granted and the time fixed for the rehearing it has passed, is not subject to revocation in whole or in part except as specifically authorized by Congress.” (Emphasis supplied.)

In Delta Air Lines, Seatrain, and American Trucking Association, Inc., the issue was with respect to the power of the Commission to modify an existing “certificate,” as distinguished from the supplementing or modifying of an “order.”

As observed by the Court in Seatrain, 329 U.S. p. 432, 67 S.Ct. 435, and in Delta Air Lines, 367 U.S. p. 327, 81 S.Ct. p. 1620, Footnote 10, the word “order” and the word “certificate” as employed in the statute denote something different. Section 5(9) empowers the 'Commission to make supplemental “orders,” while § 212(a), 49 U.S.C.A. § 312, empowers it to amend or revoke a “certificate,” permit or license. Therefore, it will not do to extend to the limit the analogy of an “order” to a “certificate”; and the error is compounded when the analogy is predicated on the premises that the “hearing” required must be “prior to decision,” and only in a separate and plenary proceeding,⁶ and that an order cannot be supplemented except upon a showing of fraud or inadvertence. This is not to say that by the agency of an order the Commission may devitalize a certificate. That case is not here presented.

While we agree that the Commission h«.s inherent power to amend any order infected by or to change any certificate procured by fraud without reference to 49 U.S.C.A. § 312, we strongly believe that there is in this record no substantial evidence to support a finding that Baggett misrepresented its intention to absorb Hunt’s employees in its verified application of July 25, 1955, or that it intentionally abandoned its purpose to do so before the issuance of the certificate on August 30, 1957.

As heretofore noted, Delta Air Lines had not been decided when the final decision was rendered by the Commission. Although the decision was adverse to the Commission, the impact of that decision cannot be overlooked.

The Commission having concluded on controverted evidence that Baggett had not complied with the terms of its application with regard to employee protection, we are of the opinion, apart from inadvertence and fraud, that under the teaching of Delta Air Lines, the Commission, after due notice and opportunity to be heard, had the power under Section 5(9) to supplement and modify its original order. In Delta there was neither inadvertence [See footnote 7, p. 329 of 367 U.S., p. 1618 of 81 S.Ct.] nor fraud, yet, as heretofore noted, the Court conceded that:

“ * * * the Board may reconsider an effective certificate at any time if it affords the certificated carrier notice and hearing prior to decision.”

If a certificate can be reconsidered after notice and hearing so may the order in issue under the facts here presented.

The failure to abide by the material statements asserted in the application, although arising from a mere breach of obligation to do so, would, in our opinion, constitute “good cause shown” [§ 5(9)] for supplementing an order based upon such application, where, as here, the proceedings to redress the failure were in fieri when the certificate was issued and notice and opportunity to be heard was afforded the carrier.

In addition to what we have heretofore said, we make it plain that we limit our result to the special facts of this case which include the pendency of an application for reconsideration undisposed of at the time of the issuance of the certificate and notice and opportunity to be heard afforded Baggett before amendment of the order underlying such certificate.

Under the facts of this case and the applicable statutes and decisions, the plaintiff is not entitled to the relief prayed for, and this action is due to be dismissed. An order of dismissal will be prepared and entered.

1 . Rule 1.19, 49 C.P.A. 1.19, states:

“Pleadings part of record. Recitals of material and relevant facts in a pleading filed prior to oral hearing in any proceeding, unless specifically denied in a counterpleading filed under these rules, shall constitute evidence and be a part of the record without special admission or incorporation therein, but if request is seasonably made, a competent witness must be made available for cross-examination on the evidence so included in the record. Pleadings may contain specific reference to or quotation from the tariffs or schedules containing the several rates, fares, charges, schedules, classifications, regulations or practices alleged to be material.”

2 . Raymond H. Jones, Director of Traffic for Baggett, testified in part:

“Q. With respect to the Hunt employees at Chattanooga and Rome, and Gadsden, have you made any proposal with respect to taking any or all of those employees ?

“A. Well, I’m sure we’re going to be able to use them. We haven’t made any commitments yet, but I’m sure that we will be able to use them.

“Q. But you propose, if — suppose that they all would make application and you would be able to place them, if you can, throughout your operation?

“A. Yes, sir.

“Q. Mr. Jones, would it be fair to state that it’s your opinion, based on your experience with the applicant, that additional employees would be needed but you’re not in position to state the number or locations?

“A. That is true.

“Q. All right. ■ And did I also correctly understand your testimony that, in so far as the present employees of Hunt are concerned, that no arrangements, negotiations with any of them have been undertaken by Baggett?

“A. Not than, other than was brought out in the contract.

“Q. That is, the contract between Mr. Osborne and Mr. Jones?

“A. That’s correct.

“Q. And in so far as the other employees of Hunt are concerned, that there have been no arrangements or negotiations with them?

“A. No, sir; there’s been no commitments made. I’ve talked with one or two of them, but other than that, that’s all.

“Q. Have you made any investigation—

“Mr. Bishop: Strike that.

“Exam. Collins: Are you prepared to talk over these employees?

“The Witness: Yes, sir.”

3 . By the order of the full Commission of March 1, 1957, the report and order of Division 4 became effective on that date.

4 . Title 49 U.S.C.A. § 308, provides:

“ * * * and there shall, at the time of the issuance (of the certificate) and from time to time thereafter, be attached to the exercise of the privileges granted by the certificate such reasonable terms, conditions, and limitations as the public convenience and necessity may from time to time require.”

5 . The Court noted that Seatrain’s application was not reopened until the Commission’s decision in Foss Launch & Tug Co., 260 I.C.C. 103, where the Commission had ruled for the first time that a certificate to carry “commodities generally” did not authorize water carriage of loaded or unloaded freight cars. The Court then stated:

“Since the proceedings apparently were not reopened to correct a mere clerical error hut were more likely an effort to revolee or modify substantially Sea-train’s original certificate under the neio policy announced in the Foss case, the question remains whether the Act authorizes such alterations.” (Emphasis supplied.)

See also, American Trucking Association, Inc. v. Frisco Transportation Company, 358 U.S. 133, 146, 79 S.Ct. 170, 3 L.Ed. 2d 172.

6 . See Footnote 13, 367 U.S. p. 331, 81 S.Ct. p. 1622, in Delta Air Lines, and dissenting opinion on pages 338-339, of 367 U.S., at pages 1625-1626 of 81 S.Ct.