Appellants, two incorporated common carriers by motor vehicle
and their stockholders, applied to the Interstate Commerce
Commission under § 5(2) of the Interstate Commerce Act for approval
of a merger of the two corporations. Acting under §5(7), the
Commission initiated an investigation into the possibility of a
violation of § 5(4), and the two proceedings were consolidated.
After hearings and further proceedings, the Commission found that
informal
de facto management and control of the two
corporations in a common interest had been unlawfully effectuated
in violation of § 5(4); it denied approval of the merger; ordered
the violation terminated; and ordered one of the individual
appellants to divest himself of his stock in one of the
corporations. A suit by appellants to enjoin and set aside the
Commission's orders was dismissed by the District Court, on the
ground that the orders were reasonable and supported by substantial
evidence.
Held: the order denying approval of the merger is
affirmed; but the judgment is reversed in part, and the case is
remanded for further proceedings. Pp.
371 U. S.
116-131.
(a) On the record in this case, the Commission was justified in
concluding that the two appellant common carriers by motor vehicle
were in fact being managed and controlled in a common interest. Pp.
371 U. S.
117-122.
(b) Section 5 (4) is not limited to the proscription of holding
companies and other corporate devices; it applies to the
accomplishment or effectuation of control or management in a common
interest of two or more carriers, "however such result is
attained," and the Commission's conclusion that the informal
de
facto relationships found to exist in this case resulted in
control or management of the two corporations in a common interest
which violated § 5(4) is sustained. Pp.
371 U. S.
122-126.
(c) The Commission did not act arbitrarily in denying approval
of the proposed merger because of the violation of § 5(4), and its
order denying such approval is affirmed. Pp.
371 U. S.
127-129.
Page 371 U. S. 116
(d) Since the record contains no evidence that the parties were
heard on the issue of divestiture or that proper standards were
applied in determining that it was the appropriate remedy for the
violation of § 5(4) found to exist in this case, the judgment of
the District Court is reversed in part, and the case is remanded
for further proceedings. Pp.
371 U. S.
129-131.
196 F.
Supp. 351 affirmed in part and reversed in part.
MR. CHIEF JUSTICE WARREN delivered the opinion of the Court.
This case concerns disapproval by the Interstate Commerce
Commission of a proposed merger on the ground that "control and
management in a common interest" over the two applicant carriers
had been unlawfully effectuated prior to the merger application in
violation of § 5(4) of the Interstate Commerce Act, as amended, 54
Stat. 907, 49 U.S.C. § 5(4). [
Footnote 1]
The applicant carriers are L. Nelson & Sons Transportation
Co. and Gilbertville Trucking Co., both of whom are certificated by
the Commission as common carrier motor carriers. The principal
stockholders of Nelson Co. are two half brothers, Charles Chilberg
and Clifford Nelson; Gilbertville Co. is wholly owned by a third
brother, Kenneth Nelson.
The merger application was filed October 6, 1955, by the two
carriers and their stockholders pursuant to § 5(2) of
Page 371 U. S. 117
the Act. Two and a half months later the Commission initiated an
investigation into the possibility of a § 5(4) violation pursuant
to authority granted by § 5(7) of the Act. The two proceedings were
consolidated for hearing. The trial examiner determined that § 5(4)
was being violated, but recommended that the merger be approved on
the ground that the violation was neither intentional nor flagrant.
Division 4 affirmed the finding of a violation, but disapproved the
merger, and ordered the violation terminated. 75 M.C.C. 45. On
reconsideration, the full Commission affirmed the Division, but
further ordered that Kenneth Nelson divest himself of Gilbertville
Co. 80 M.C.C. 257. A suit before a three-judge United States
District Court for the District of Massachusetts to enjoin and set
aside the Commission's orders was dismissed on the ground that the
orders were reasonable and supported by substantial evidence.
196 F.
Supp. 351. An appeal was taken to this Court contesting (1) the
finding of a § 5(4) violation, (2) the denial of the merger, and
(3) the order of divestiture. We noted probable jurisdiction. 368
U.S. 983.
The factual issue in this case turns upon the development of
family, management, and operational relationships between Nelson,
Gilbertville, and a third carrier, R. A. Byrnes, Inc., which is
owned by the principal stockholders of Nelson.
The Nelson transportation business was first organized in 1930
as a partnership. In 1947, it was incorporated as L. Nelson &
Sons Transportation Co., and stock issued to Mrs. Nelson (formerly
Mrs. Chilberg) and four of her seven children (including Kenneth
Nelson, Clifford Nelson, and Charles Chilberg). Upon Mrs. Nelson's
death in 1950, equal numbers of shares of her stock in Nelson Co.
were devised to her seven children. In 1951, Kenneth Nelson sold
his original shares received in 1947 to Charles Chilberg and
Clifford Nelson, and agreed to sell to them
Page 371 U. S. 118
the remainder to which he was entitled on distribution of the
estate. The distribution and transfer were made on January 23,
1953. Since that date, Charles and Clifford have been the principal
stockholders in Nelson Co. Charles is now president and treasurer;
Clifford is secretary and assistant treasurer.
Upon the sale of his stock in 1951, Kenneth Nelson resigned as
an officer and director of Nelson Co. However, he kept his office
at Nelson Co. headquarters in Ellington, Connecticut, and was
retained by the company as a "free-lance tariff consultant." In
such capacity, he was paid approximately $15,000 in 1952 and
$13,000 in 1953. While he claims to have been an independent
contractor, his only client was Nelson Co. In the third week of
January, 1953, Kenneth Nelson wrote to Nelson Co.'s accountant, Mr.
Sanol Solomon, requesting advice on the acquisition of Gilbertville
Trucking Co. Soon thereafter, Kenneth began negotiations with
Gilbertville's owner, and on March 3, 1953, took over control.
Since July, 1953, all the stock in Gilbertville has been controlled
by Kenneth.
In April of 1954, Charles Chilberg and Clifford Nelson obtained
temporary authority from the Commission to take over the operations
of R. A. Byrnes, Inc.; their acquisition of Byrnes stock was
approved in August, 1956.
The routes of these three carriers form a cohesive network along
the eastern seaboard from Massachusetts to the District of
Columbia. Gilbertville is presently certificated by the Commission
as a common carrier for general commodities over regular and
irregular routes between points in Massachusetts, Connecticut,
Rhode Island, and New York City. Byrnes is certificated as a common
carrier for general commodities over irregular routes between New
York City, Philadelphia, the District of Columbia, and points
adjacent to these cities. It is also certificated as a contract
carrier of canned goods in Massachusetts,
Page 371 U. S. 119
Connecticut, and Rhode Island. Nelson is certificated as a
common carrier for textile commodities over irregular routes
between points in Massachusetts, New Hampshire, Rhode Island,
Connecticut, and areas adjacent to New York and Philadelphia. It is
also certificated for general commodities in intrastate traffic in
Connecticut and Massachusetts. Thus, the Gilbertville and Byrnes
general commodity routes complement each other perfectly, and
overlap to a considerable degree the textile routes of Nelson.
Soon after his acquisition of Gilbertville, Kenneth Nelson
instituted a number of permanent changes in the carrier's
operations tending to integrate the terminal facilities of Nelson
and Gilbertville; he received, where necessary, the cooperation of
Nelson Co. Kenneth obtained permission from the Commission to move
the business records and head offices of the acquired company from
Gilbertville, Massachusetts, the place of incorporation, to
Ellington, Connecticut, and took over the second floor of the
Nelson Co. office building. Where possible, Gilbertville used the
Nelson terminals, subletting from Nelson in Ellington, Connecticut;
New York City; Newton, Massachusetts; and Woonsocket, Rhode Island.
Its only other terminal was at Gilbertville, Massachusetts. In
seven cities, Gilbertville and Nelson were listed under the same
telephone number, and they shared inter-terminal telephone lines.
Almost identical changes took place in 1954 upon Commission
approval of Charles Chilberg and Clifford Nelson's acquisition of
Byrnes. Byrnes' offices were moved from Mullica Hill, New Jersey,
to the Nelson, Co. headquarters in Ellington, Connecticut; Byrnes
shared the Nelson terminal in New York; it listed under the Nelson
telephone number; it shared inter-terminal telephone lines. Since
the Byrnes changes were the direct result of control and management
in a common interest of Byrnes and Nelson in the hands of Charles
and Clifford, it
Page 371 U. S. 120
might be inferred that the Gilbertville changes were similarly
indicative of control and management in a common interest of Nelson
and Gilbertville.
Further substantiation of this terminal integration is provided
by a fourth corporation, Bergson Company, a real estate corporation
formed to receive the residual properties of Mrs. Linnea Nelson's
estate. Bergson owns the terminals leased to Nelson Co. at
Philadelphia, Ellington, Woonsocket, and Newton, three of which are
sublet to Gilbertville. Since Bergson is owned in equal shares by
all seven children, all of whom are directors, it provides a direct
corporate tie-in between Kenneth Nelson and his brothers.
While it is not unusual for independent carriers to share
terminal facilities, as indeed Gilbertville and Nelson do with
unrelated carriers in New York and Woonsocket, the repetition of
such practices throughout their respective systems makes their
alleged independence suspect. When these practices are then
supplemented by further day-to-day practices integrating business,
equipment, and managerial policies, the Commission is justified in
concluding the carriers are in fact being managed and controlled in
a common interest. Such additional practices are readily found in
the record of this case.
Most significant is the equipment interdependence between Nelson
and Gilbertville. When acquired for $35,000 in 1953, Gilbertville
had a deficit about equal to the purchase price, assets of only
$69,000, and a 1953 operating revenue of only $75,000. By 1956,
Kenneth Nelson had increased the operating revenue to a seven-month
figure of $444,777. This impressive growth was made in the face of
a continual short-term credit squeeze and lack of working capital
and equipment. Nelson Co., however, was operating in a declining
textile market in the Northeast, with highly periodic demands for
carriage. As a result, Nelson had a fluctuating overcapacity in
Page 371 U. S. 121
equipment which was leased only to Gilbertville and occasionally
Byrnes. Kenneth Nelson estimated that Gilbertville had from one to
six tractor-trailer units on trip-lease from Nelson Co. every day,
and up to five other pieces of equipment on permanent lease, an
amount equal at times to over one half of Gilbertville's own
carriage capacity. Added to this equipment interdependence between
Nelson and Gilbertville were certain interlining practices.
[
Footnote 2] Gilbertville
interlined between 25% and 30% of its business. Over one-third of
this interline business was with Nelson Co. and Byrnes, the
majority being in truckload quantities. Owing to its equipment
shortage, Gilbertville interlined with Nelson pursuant to a
practice whereby a trip-lease was made out at the start of a run to
take effect at the point of transfer to Gilbertville routes so that
the Nelson tractor-trailer operated throughout the trip; moreover,
the same driver might stay with the unit, changing employers at the
point of transfer. [
Footnote
3]
Page 371 U. S. 122
Finally, the record includes evidence that, on four occasions,
Commission employees discovered on highway spot checks that one of
the carriers carried small shipments belonging to the other; that
Nelson did about one-quarter of the Gilbertville repairs; and that
Charles Chilberg and Kenneth Nelson each exercised managerial
control over employees of both Nelson and Gilbertville. [
Footnote 4]
This evidence is sufficient to show that Nelson and Gilbertville
were, in fact, being controlled and managed in a common interest to
a considerable degree. If § 5(4) was intended by Congress to reach
such
de facto relationships, the Commission was warranted
in concluding the section was being violated.
I
Section 5(4) is part of a comprehensive legislative scheme
designed to place ownership, management, and operational control
over common carriers within the regulatory jurisdiction of the
Commission. Simply, § 5(2)(a) gives the Commission power to
authorize and approve the
Page 371 U. S. 123
joint operation of properties belonging to two or more common
carriers or the merger of such carriers; § 5(4) then declares,
"It shall be unlawful for any person, except as provided in
paragraph (2), to enter into any transaction within the scope of
subparagraph (a) thereof, or to accomplish or effectuate, or to
participate in accomplishing or effectuating, the control or
management in a common interest of any two or more carriers,
however such result is attained, whether directly or indirectly, by
use of common directors, officers, or stockholders, a holding or
investment company or companies, a voting trust or trusts, or in
any other manner whatsoever. . . . As used in this paragraph . . .
, the words 'control or management' shall be construed to include
the power to exercise control or management."
The complementary character of these two sections was discussed
at some length in
United States v. Marshall Transport Co.,
322 U. S. 31. As
originally enacted in the Emergency Railroad Transportation Act of
1933, 48 Stat. 217, § 5(4) was applicable only to railroads; it was
extended to cover motor carriers in the Transportation Act of 1940,
54 Stat. 905, 907-908. As the appellants correctly state, Congress,
in passing § 5(4) and the supplementary § 5(5) and (6), [
Footnote 5] was primarily concerned
with
Page 371 U. S. 124
reaching the elaborate corporate devices used to centralize
control over the railroads "without commission supervision and in
defiance of the will of Congress." [
Footnote 6] Although Congress had intended the
Transportation Act of 1920 to provide complete supervision, the Act
proved inadequate
Page 371 U. S. 125
to reach the holding company system. [
Footnote 7] On the basis of this history, the
appellants argue that § 5(4) is limited to proscription of
corporate devices, and will not reach the informal relationships
shown on this record.
Such a narrow interpretation of the statute, however, confuses
the particular manifestation of the problem with which Congress was
faced in 1933 with the ultimate congressional intention of
effectuating the Commission's jurisdiction under § 5(2). On its
face, § 5(4) proscribes not just corporate and legal devices, but
control effectuated "in any other manner whatsoever." Any doubt as
to the scope of this phrase was removed when Congress added the
definition of "control" to § 1(3)(b) of the Act in the
Transportation Act of 1940, 54 Stat. 899-900. This section states
that, for purposes of § 5 and other sections, "control"
"shall be construed to include actual, as well as legal,
control, whether maintained or exercised through or by reason of
the method of or circumstances surrounding organization or
operation. . . ."
We have construed this language to encompass every type of
control in fact, and have left to the agency charged with
enforcement the determination from the facts whether "control"
exists, subject to normal standards of review.
Marshall
Transport Co., supra, p.
322 U. S. 38;
Alleghany Corp. v. Breswick & Co., 353 U.
S. 151,
353 U. S.
163-165;
Rochester Telephone Corp. v. United
States, 307 U. S. 125,
307 U. S.
145-146. In this manner, the Commission may adapt § 5(4)
to the actualities and current practices of the industry involved
and apply it to the extent it feels necessary to protect its
jurisdiction under § 5(2) without having to return to Congress for
additional authority every time industry practices change.
A cursory glance at Commission experience shows the type of
informal practices in the motor carrier industry which the
Commission has decided are covered by § 5(4),
Page 371 U. S. 126
and must first be approved under § 5(2). Typical of these
practices have been attempts by active carriers to effectively
lease the routes of a dormant carrier by interlining and
trip-leasing their equipment continuously over the dormant
carrier's routes,
e.g., Nigro Freight Lines, Inc. -- Purchase
-- Coady Trucking Co., 90 M.C.C. 113; attempts by carriers to
acquire other carriers by supplying funds to allegedly independent
third-party purchasers,
e.g., Black-Investigation of Control --
Colony Motor Transportation, 75 M.C.C. 275;
Coldway Food
Express, Inc. -- Control and Merger -- Foodway Express, Inc.,
87 M.C.C. 123; attempts by inactive owners to allow an employee of
another carrier to manage and merge operations of the two carriers,
e.g., Gate City Transport Co. -- Control -- Square Deal Cartage
Co., 87 M.C.C. 591. In the present case, the trial examiner
held that the facts in this record "require a finding" of control
and management in a common interest in violation of § 5(4).
Division 4, after a similar review of the facts, concurred. On
reconsideration, the full Commission affirmed the finding and
conclusion of the examiner and Division 4. Judicial review of this
conclusion is limited to consideration of whether it has a rational
basis and is supported by substantial evidence.
United States
v. Pierce Auto Lines, Inc., 327 U. S. 515;
Mississippi Valley Barge Line Co. v. United States,
292 U. S. 282,
292 U. S.
286-287. [
Footnote
8] After our review of the facts and statutory sections
involved, we detect no reason to disturb this finding. [
Footnote 9]
Page 371 U. S. 127
II
However, even admitting a § 5(4) violation, the appellants
protest as arbitrary the denial of their application for approval
of the proposed merger of Nelson and Gilbertville. Section 5(2)
provides that a transaction within its scope is to be approved if
found to be "consistent with the public interest." The statute
entrusts the Commission with the duty to decide what considerations
other than those specifically mentioned in § 5(2)(c) shall be given
weight.
Cf. McLean Trucking Co. v. United States,
321 U. S. 67,
321 U. S. 86-88;
Schwabacher v. United States, 334 U.
S. 182,
334 U. S. 193.
As in the case of an original application for a certificate, the
Commission has chosen to give weight to an applicant's fitness.
E.g., Transamerican Freight Lines, Inc. -- Control and Merger
-- The Cumberland Motor Express Corp., 75 M.C.C. 423, 428;
cf. Interstate Commerce Act, § 207, 49 Stat. 551, 49
U.S.C. § 307. Integral to a determination of fitness is the
applicant's willingness and ability to fulfill its obligations
to
Page 371 U. S. 128
the Commission, considerations which may be demonstrated in part
by past or continuing violations of Commission regulations.
E.g., Powell -- Purchase -- Rampy, 57 M.C.C. 597. This has
not been contested by the appellants, and its relevance to a
finding of consistency with the public interest is self-evident.
Nor do they dispute the principle recently stated by the Commission
in
Central of Georgia R. Co. Control, 307 I.C.C. 39, 43,
that a § 5(4) violation may alone bar approval of a merger unless,
"upon consideration of all the facts, it clearly appears that the
public interest will be served best by such approval." Rather, they
contend that, in this case, the Commission refused to consider all
the facts presented and, in effect, made a § 5(4) violation an
automatic bar to approval of a subsequent merger. To support this
allegation, the appellants point to the undisputed findings of the
trial examiner that the violation in this case was neither willful,
flagrant, nor the result of persistent disregard for regulation.
They compare these findings with past Commission holdings that
violations will be overlooked in the absence of willfulness,
e.g., Gate City Transport Co. -- Control -- Square Deal Cartage
Co., supra, and conclude that the rule applied in the present
case must have been automatic.
However, even an automatic rule is not necessarily arbitrary. As
already noted, § 5(4) is integral to the success of the regulatory
scheme. To approve a merger in the face of a § 5(4) violation may
encourage others whose merger may or may not be consistent with the
public interest to either present the Commission with a
fait
accompli or avoid its jurisdiction altogether. As the
Commission pointed out in
Central of Georgia, if such
practices were encouraged, "our administration of the statute in
the public interest would be seriously hindered, if not defeated."
307 I.C.C. at 44. This additional interest in the proper
administration of the statute places
Page 371 U. S. 129
upon the applicant a heavier burden than may be the case for
other regulatory violations, and mere lack of willfulness or
alleged innocence need not suffice.
In fact, the Commission's rule is not automatic, and will give
way to a clear showing of public interest in approval. However, the
appellants cannot attack the Commission's order under even this
less stringent rule, since they made no clear showing of a public
interest in approval such as a public need for the merged service
or for larger consolidated carriers. The order denying the merger
is therefore affirmed.
III
The Commission's final order requires Kenneth Nelson to divest
himself of his stock in Gilbertville Co. in order to terminate the
§ 5(4) violation. No other reference to divestiture can be found.
In view of his recommendation that the merger be approved, the
trial examiner made no findings or recommendations on a remedy for
the violation. Division 4, upon denial of the merger, simply
ordered that each of the applicants is hereby "required to
terminate the violation." On reconsideration, the full Commission
reinstated Division 4's order, but added, without explanation in
its report, the order to divest. The District Court attempted to
provide the rationale by suggesting that divestiture was so
perfectly suited to the nature of the violation, an unlawful
acquisition, that no explanation was necessary.
There is little question that divestiture is within the scope of
the Commission's power, since, with respect to a § 5(4) violation,
it may order any party to "take such action as may be necessary, in
the opinion of the Commission, to prevent continuance of such
violation." § 5(7). Where the unlawful control is the result of an
acquisition, divestiture may be the only effective remedy. However,
as § 5(7) itself implies, the Commission's power is corrective,
Page 371 U. S. 130
not punitive. The justification for the remedy is the removal of
the violation.
The use of equitable powers to expunge a statutory violation has
been fully developed in the context of the antitrust laws, and is,
in many respects, applicable to § 5(7). The "most drastic, but most
effective" of these remedies is divestiture. And,
"[i]f the Court concludes that other measures will not be
effective to redress a violation, and that complete divestiture is
a necessary element of effective relief, the Government cannot be
denied the latter remedy because economic hardship, however severe,
may result."
United States v. E. I. du Pont de Nemours & Co.,
366 U. S. 316,
366 U. S.
326-327. Our duty is to give "complete and efficacious
effect to the prohibitions of the statute" with as little injury as
possible to the interests of private parties or the general public.
United States v. American Tobacco Co., 221 U.
S. 106,
221 U. S. 185.
As these cases indicate, the choice of remedy is as important a
decision as the initial construction of the statute and finding of
a violation. The court or agency charged with this choice has a
heavy responsibility to tailor the remedy to the particular facts
of each case so as to best effectuate the remedial objectives just
described.
Cf. Hecht Co. v. Bowles, 321 U.
S. 321,
321 U. S.
329-331.
As § 5(7) expressly states, the Commission is charged with
choosing the proper remedy in this case. Judicial review is
accordingly limited. "It extends no further than to ascertain
whether the Commission made an allowable judgment in its choice of
the remedy."
Jacob Siegel Co. v. Federal Trade Comm'n,
327 U. S. 608,
327 U. S. 612.
But prerequisite to such review is evidence that a judgment was, in
fact, made, that the parties were heard on the issue, that the
proper standards were applied. We find no such evidence in this
record. Rather, we are faced with evidence that the statutory
violation occurred not just from Kenneth Nelson's act of acquiring
Gilbertville,
Page 371 U. S. 131
but from the acquisition plus subsequent practices integrating
the management and operations of Nelson and Gilbertville, practices
that could conceivable be discontinued without divestiture. In
addition the trial examiner found that the violation was not
willful, and that the parties' experience in this proceeding would
make them more responsive to regulation in the future.
By referring to these mitigating considerations, we have no
intention of prejudging the Commission or implying that divestiture
would be unwarranted after proper treatment of the issue. These
considerations merely indicate that a doubt can be raised, and that
a remand to the Commission is not purely academic for the sake of
procedural regularity. When the Commission has exercised its
judgment and issued its considered opinion, the propriety of the
remedy chosen will be ripe for review.
Jacob Siegel Co. v.
Federal Trade Comm'n, supra; Administrative Procedure Act, §
8(b), 60 Stat. 242, 5 U.S.C. § 1007(b).
The judgment of the District Court is reversed in part and the
case remanded for further proceedings in conformity with this
opinion.
It is so ordered.
[
Footnote 1]
The Interstate Commerce Act, 49 U.S.C. § 1
et seq., is
hereinafter referred to as "the Act" or by the section number
alone.
[
Footnote 2]
"Interlining" is the practice whereby a carrier, whose
certificated routes do not reach the shipment destination,
transfers the shipment to another carrier for delivery.
"Interchanging" is a form of interlining whereby the two
interlining carriers switch trailers at the point of transfer. An
interchange is most common where the shipment involves a truckload
quantity, and the exchange of trailers obviates the necessity of
unloading the shipment from the trailer of the transferor and
loading it on the trailer of the transferee. The trailer taken in
exchange for the shipment-trailer may be either empty or loaded
with an interline shipment in the other direction. A further form
of interlining involves the use of a trip-lease for the
transferee's leg of the journey. There, the shipment-trailer is
taken by the transferee, but no trailer is given in exchange;
instead, the transferor will lease the shipment-trailer to the
transferee for the completion of the trip.
[
Footnote 3]
Commission employee Edward D. Shea testified that Gilbertville's
terminal manager, John Kashady, had informed him that both these
practices were regularly employed. Gilbertville records also
indicate that Gilbertville lists the names of all Nelson drivers,
and keeps their doctor's certificates on file. Other records
indicate that Nelson drivers are often hired by Gilbertville during
the same week, and sometimes on the same day. The trip-lease
arrangement is also supported by the fact that the majority of
Nelson-Gilbertville interlining is at Monson, Connecticut, where
Gilbertville Co. keeps only an open lot and, when possible, an
empty, unguarded trailer for the receipt of less-than-truckload
shipments. Kenneth Nelson's testimony on these practices is
ambiguous, but, if anything, supports their occurrence.
[
Footnote 4]
Edward D. Shea testified that he observed Charles Chilberg hire
and dispatch a Gilbertville driver at Newton.
He also testified that he observed Kenneth Nelson receive a
teletype message in the Nelson Co. offices in Ellington,
Connecticut, and direct Nelson Co. employees. The incident is
disputed on the ground that Shea did not hear all the remarks made.
On the other hand, it is to be noted that Kenneth Nelson refused to
turn over upon request the teletype message he received on that
occasion, an action in violation of Commission regulations.
[
Footnote 5]
Section 5(4) is supplemented by § 5(5) and (6) to cover specific
instances where control over another carrier is accomplished with
the aid of an intermediary. Section 5(5) provides in part that
control or management in a common interest is conclusively presumed
whenever a person "affiliated" with a carrier joins with that
carrier to acquire, or on his own acquires. control over another
carrier. Section 5(6) then provides that:
"For the purposes 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 . . . , 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."
Parenthetically, § 5(6) states that the relationship may be
shown "by reason of the method of, or circumstances surrounding
organization or operation. . . ."
[
Footnote 6]
The Committee reports on these sections prior to their passage
in the Emergency Railroad Transportation Act of 1933 stated their
purpose as follows:
"These paragraphs have been planned in the light of what has
already been done through myriad devices without commission
supervision and in defiance of the will of Congress. . . . The
provisions of paragraph [(4)] . . . would be of little effect
unless the language contained therein were construed to include
control or management effectuated or exercised indirectly through
the use of legal devices such as holding companies, voting trusts,
and combinations of affiliated interests. It is therefore intended
by the provisions of paragraphs [(5)], [(6)] . . . to make sure
that paragraph [(4)] . . . covers such types of control and
management."
S.Rep.No.87, 73d Cong., 1st Sess., pp. 9-10; H.R.Rep.No. 193,
73d Cong., 1st Sess., pp. 16-17.
The House manager of the bill similarly observed, 77 Cong.Rec.
4857:
"The important point is that unifications and groupings of
railroads have been accomplished entirely without supervision by
the Commission, and without any opportunity to consider the
question of public interest. . . . It is to correct this condition,
and to prevent through the use of holding companies and other
devices the defeat of the congressional will, that this bill has
been drawn."
Concrete examples of the devices Congress intended to reach are
found in the testimony of Committee counsel Mr. Walter Splawn and
Interstate Commerce Commissioner Joseph Eastman during the Hearings
on H.R. 9059 before the House Committee on Interstate and Foreign
Commerce, 72d Cong., 1st Sess. at 21-25, 34, 48-50, 61, 69-74
(1932).
[
Footnote 7]
Hearings,
op. cit., supra, note 6 pp. 16-19, 24-26; H.R.Rep.No.650, 66th Cong., 2d
Sess., pp. 63-64 (1920).
[
Footnote 8]
Rochester Telephone Corp. v. United States, supra, pp.
307 U. S.
145-146, this Court gave the following test for
reviewing a similar finding of "control" by the Federal
Communications Commission as that word is used in the Federal
Communications Act, 48 Stat. 1064, 47 U.S.C. § 152(b):
"This is an issue of fact to be determined by the special
circumstances of each case. So long as there is warrant in the
record for the judgment of the expert body, it must stand."
[
Footnote 9]
In view of the direct finding of a § 5(4) violation by the
Commission and our determination that such a finding was warranted
by the statute and evidence, we find it unnecessary to consider the
Commission's alternative holding that Kenneth Nelson was
"affiliated" with Nelson within the meaning of § 5(6), and is
therefore presumed to have effectuated control or management in a
common interest pursuant to § 5(5) when he acquired
Gilbertville.
The appellants attack the opinion of the District Court on the
ground that there are variations between its statement of facts and
the findings of the Commission. Such variations are insignificant
in light of the fact that the court then quotes the findings of the
Commission giving record citations for each statement. The
appellants also contend that, when the District Court found certain
of the Commission's findings to be "trivial" and "irrelevant," it
should have remanded for further findings. However, as the court
itself pointed out, its disagreements with the Commission were
minor, and did not affect the substance of the Commission's
ultimate finding of a violation.
Cf. Communist Party v.
Subversive Activities Control Board, 367 U. S.
1,
367 U. S. 67.