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January 24, 1966

BEST WAY MOTOR FREIGHT, INC., Consolidated Freightways Corporation of Delaware, Interstate Freight Lines, Inc., Portland-Seattle Freight Lines, Inc., Pacific Intermountain Express Co., Garrett Freightlines, Inc., Oregon-Nevada California Fast Freight, Inc., and United Buckingham Freight Lines, Inc., Plaintiffs,
UNITED STATES of America and Interstate Commerce Commission, Defendants, and Helphrey Motor Freight, Inc., Intervening Defendant

The opinion of the court was delivered by: HAMLEY

This is an action to enjoin and set aside orders of the Interstate Commerce Commission (Commission) entered on August 19, and December 18, 1964, in the three proceedings, consolidated, referred to below. The eight plaintiffs engage in interstate freight transportation by motor carrier in the state of Washington. Helphrey Motor Freight, Inc., in whose favor the questioned orders were entered, has intervened in support of those orders.

 The three agency proceedings are Docket Nos. MC-F-8083, MC-F-8229, and MC-107353 (Sub-No. 14). Docket No. MC-F-8083, Helphrey Motor Freight, Inc. - Purchase - Manning Freight Lines, Inc. (Manning purchase), is the result of a joint application filed February 14, 1962, wherein Helphrey and Manning sought authority under Section 5 of the Interstate Commerce Act (Act), 24 Stat. 380 (1887), as amended, 49 U.S.C. § 5 (1964), for the purchase by Helphrey of the operating rights and property of Manning. By the same application, Harold Morse and Henry J. Holien, who control Helphrey through ownership in the aggregate of ninety-eight percent of its outstanding capital stock, sought authority under the same section of the Act to acquire control of the operating rights and property through the purchase.

 Docket No. MC-107353 (Sub-No. 14) Helphrey Motor Freight, Inc. (Helphrey extension) is an application by Helphrey for a certificate of public convenience and necessity authorizing certain operations as a motor common carrier of general commodities with certain exceptions, in interstate commerce, over certain routes in the state of Washington between Spokane, Seattle, Yakima and Wenatchee, under Section 207 of the Act, 49 Stat. 551 (1935), 49 U.S.C. § 307 (1964).

 The rights sought under the certificate were similar to the operating rights which Okanogan purported to hold pursuant to the second proviso of Section 206(a)(1) of the Act (this proviso was deleted by amendment, October 15, 1962). *fn1" Although Okanogan's second-proviso rights were included in the merger proposal, Helphrey, nevertheless, made a separate application under Section 207.

 These three applications were heard concurrently. The Manning purchase and the Okanogan merger were heard by an Examiner sitting jointly with the Joint Board of the State of Washington which heard the Helphrey extension. Plaintiffs protested because of the assertedly adverse effect rulings favorable to Helphrey would have on their respective interstate operations. As a result of this hearing the Examiner approved the Manning purchase and the Okanogan merger. The Joint Board denied the Helphrey extension. Exceptions were filed and the rulings of the Examiner and Joint Board were reviewed by division 3 of the Commission.

 By decision and order dated August 19, 1964, division 3 approved all three applications. Plaintiffs in the case before us petitioned for reconsideration, which petition was denied by division 3 on December 18, 1964. This action was then commenced.

 In seeking the extension, and also in seeking approval of the merger, Helphrey produced testimony tending to show that the Okanogan interstate operation purportedly under the second proviso, which would be discontinued as a result of the merger, had served the public convenience and necessity and that for this reason Helphrey should be given similar rights. Before the agency, however, plaintiffs challenged the propriety of considering the Okanogan second-proviso interstate operation in determining whether public convenience and necessity required that Helphrey be given such rights.

 Such reference to the Okanogan second-proviso operation was inappropriate, plaintiffs argue, because the validity of Okanogan's interstate operations under that proviso was in issue in a proceeding then pending before the Commission; *fn2" and under applicable law, that issue must necessarily be resolved against Okanogan. The plaintiffs moved, at the outset of the agency proceedings, when it became known that Helphrey would produce such evidence, that the proceedings be continued until such time as the Commission had decided the Okanogan matter.

 This motion was denied, as were subsequent motions, made from time to time throughout the hearing, to strike testimony based upon Okanogan's interstate operations. The decision and order of August 19, 1964, indicate that with respect to both the Okanogan merger and the Helphrey extension, the Commission placed reliance upon the facts pertaining to Okanogan's interstate operations under the second proviso.

 The Commission rejected, on two grounds, plaintiffs' contention that it was not appropriate to consider Okanogan's second-proviso operations in determining the question of public convenience and necessity. The first ground was that the validity of Okanogan's second-proviso operation is "* * * not for determination in these proceedings." The second reason why the Commission rejected plaintiffs' contention on this point, was stated as follows in the report of division 3:

"In summary, Motor Freight [Okanogan] has provided necessary and adequate service. Assuming that its operations were unlawful, as charged by protestants, such operations were under color of right and therefore are entitled to consideration as evidence that a continuance thereof would meet a public need. Bowman Transportation, Inc., Extension - Five Point Authority, 92 M.C.C. 651. In our opinion such evidence, together with that of the supporting shippers, warrants a grant of authority."

 Plaintiffs renew in this court, as a basis for setting aside the Commission orders, the contention that it was improper for the agency to take into account the facts concerning Okanogan's second-proviso operations in ...

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