United States Court of Appeals
FOR THE DISTRICT OF COLUMBIA CIRCUIT
Argued September 3, 1997 Decided November 14, 1997
No. 96-1069
Old Town Trolley Tours of Washington, Inc.,
Petitioner
v.
Washington Metropolitan Area Transit Commission,
Respondent
Double Decker Bus Tours W.D.C., Inc., t/a Double Decker
Bus Washington, D.C.,
Intervenor
On Petition for Review of an Order of the
Washington Metropolitan Area Transit Commission
Joel C. Weingarten argued the cause and filed the briefs
for petitioner.
William S. Morrow, Jr., General Counsel, Washington
Metropolitan Area Transit Commission, argued the cause and
filed the brief for respondent.
Richard T. Tomar filed a brief for intervenor Double
Decker Bus Tours W.D.C., Inc.
Before: Edwards, Chief Judge, Sentelle and Randolph,
Circuit Judges.
Opinion for the Court filed by Circuit Judge Randolph.
Randolph, Circuit Judge: Old Town Trolley operates buses
modeled after turn-of-the-century trolleys. The buses take
visitors to and from tourist attractions around the nation's
capital. Double Decker, wanting to do the same with open-
air, double decker buses, applied to the Washington Metro-
politan Area Transit Commission for a certificate of authority.
Over Old Town's protest, the Commission granted the certifi-
cate for a probationary period and attached conditions. Old
Town then filed this petition for judicial review.
The Commission's first line of defense is that Old Town has
no standing to challenge Double Decker's certificate, for three
reasons. One is that Old Town will suffer no "injury in fact."
Lujan v. Defenders of Wildlife, 504 U.S. 555, 560 (1992). An
affidavit filed in this court by Old Town's CEO puts this
contention to rest. Old Town and Double Decker are compet-
itors; their routes overlap; the service they provide is simi-
lar; both cater to the tourist trade. Old Town's affidavit
alleges not merely that Double Decker will compete, but that
it will compete unfairly by circumventing regulations and
operating buses without proper inspections. Evidence devel-
oped in the administrative proceedings showed that Double
Decker's commonly-controlled affiliate ran into such trouble
with New York City authorities. Competitive injury is a
common and acceptable basis for establishing standing to
challenge agency licensing decisions. See Associated Gas
Distrib. v. FERC, 899 F.2d 1250, 1258 (D.C. Cir. 1990);
Investment Co. Inst. v. Federal Deposit Ins. Co., 815 F.2d
1540, 1543 (D.C. Cir. 1987). And so we move on to the
Commission's second, and related, reason for denying stand-
ing.
Increased competition, the Commission tells us, cannot give
rise to a cognizable injury because Old Town has no right to
be free of competition. In the jargon of standing, Old Town
has not suffered "invasion of a legally protected interest" as a
result of Double Decker's entry into the D.C. tour bus
market. Lujan, 504 U.S. at 560. This line of reasoning, we
believe, is wide of the mark. The point is not simply that Old
Town's business will suffer from increased competition. The
point is that the competition will come from what Old Town
considers to be an unfit competitor willing to flout the regula-
tions with which Old Town complies at significant expense.
As Old Town sees it, Double Decker's operations will threaten
the safety of D.C. tourists using the service and will therefore
harm the reputation of the region's tour bus industry. These
interests, we believe, are sufficiently related to the Commis-
sion's regulatory aims and the laws it administers, of which
more in a moment. See Clarke v. Securities Indus. Ass'n,
479 U.S. 388, 399 (1987); Water Transp. Ass'n v. ICC, 819
F.2d 1189, 1195 (D.C. Cir. 1987).
The Commission's remaining reason for opposing Old
Town's standing is procedural. The Washington Metropoli-
tan Area Transit Regulation Compact, Pub. L. No. 101-505,
104 Stat. 1300 (1990), required Old Town to present for the
Commission's reconsideration any "error" it will "use[ ] as a
ground for judicial review." Compact, tit. II, art. XIII,
s 4(g). The Commission found that Old Town would suffer
no harm (other than loss of revenue) from Double Decker's
entry into the market. Old Town never asked the Commis-
sion to reconsider this finding. Therefore, the Commission
argues, Old Town cannot now maintain that it has standing.
This argument confuses the injury needed to establish stand-
ing with the harm the Commission addressed in its findings.
The Commission said, in effect, that although a partial col-
lapse of the tourist bus industry in the Washington area
brought on by Double Decker's entry would be grounds for
denying the application, Old Town had not carried its burden
of showing this would happen. The threshold for showing an
injury sufficient for the purposes of standing is not so high.
Old Town does not have to prove that Double Decker will
eventually go out of business, leaving its competitors in such a
weakened state that they will be unable to fill the resulting
void--does not have to prove, in other words, the "public
interest" claim Old Town advanced in the administrative
proceedings. Old Town was not obligated to ask the Com-
mission to "reconsider" whether its injury sufficed for stand-
ing purposes because the Commission never addressed that
question in the first instance. Old Town's burden was to
demonstrate its competitive injury to this court, which it has
done through an affidavit the Commission has seen fit not to
counter.
We therefore proceed to the merits. A preliminary ques-
tion presents itself: what standard of review applies? To
answer this question, some background is needed. The Com-
mission was established by the Washington Metropolitan
Area Transit Regulation Compact. Maryland, Virginia, and
the District of Columbia entered into the Compact in 1960,
with the consent of Congress, in order to regulate private
transportation service in the metropolitan area. See Com-
pact, preamble; Democratic Cent. Comm. v. WMATC, 84
F.3d 451, 453 (D.C. Cir. 1996). In 1990, the signatories
amended the Compact, in large part for the purpose of
"lower[ing] barriers to market entry ... while maintaining a
regional approach to transportation and keeping those con-
trols necessary for the security of the public." Granting the
Consent of Congress to Amendments to the Washington
Metropolitan Area Transit Regulation Compact: Hearing on
H.J. Res. 520 Before the Subcomm. on Admin. Law and
Governmental Relations of the House Comm. on the Judicia-
ry, 101st Cong. 35 (1990) (statement of Carlton R. Sickles,
Chairman, WMATRC Review Committee). To this end, the
amended Compact replaced certificates of public convenience
and necessity with certificates of authority. This is the first
case in which our court has been asked to pass on a Commis-
sion order granting a certificate of authority.
Congress consented to the Compact pursuant to its authori-
ty under Article I, s 10, clause 3 of the Constitution. Al-
though an early Supreme Court decision (People v. Central
R.R., 79 U.S. (12 Wall.) 455 (1870)) suggested that interstate
compacts could not be considered federal laws, the Court
abandoned this position in Delaware River Comm'n v. Col-
burn, 310 U.S. 419, 427 (1940), holding that the "construction
of such a compact sanctioned by Congress" involves a federal
question. Congressional consent thus "transforms an inter-
state compact ... into a law of the United States." Cuyler v.
Adams, 449 U.S. 433, 438 (1981); see Reed v. Farley, 512 U.S.
339, 347 (1994). As to the Compact before us, the "judicial
Power of the United States" (see Article III of the Constitu-
tion) therefore extends to cases arising under it.
While the Compact may be treated as a federal law, it does
not follow that the Commission is a federal agency governed
by the Administrative Procedure Act. An "agency," accord-
ing to the APA's definition, "means each authority of the
Government of the United States...." 5 U.S.C. s 551(1).
The Commission is an authority, not of the federal govern-
ment, but of Virginia, Maryland, and the District of Columbia.
As a result there is a gap in need of filling. The amended
Compact provides for judicial review of Commission orders
here or in the Court of Appeals for the Fourth Circuit, but it
does not specify any standards of review:
5. (a) Any party to a proceeding under this Act may
obtain a review of the Commission's order in the United
States Court of Appeals for the Fourth Circuit, or in the
United States Court of Appeals for the District of Co-
lumbia Circuit, by filing within 60 days after Commission
determination of an application for reconsideration, a
written petition praying that the order of the Commis-
sion be modified or set aside.
(b) A copy of the petition shall be delivered to the
office of the Commission and the Commission shall certi-
fy and file with the court a transcript of the record upon
which the Commission order was entered.
(c) The Court shall have exclusive jurisdiction to af-
firm, modify, remand for reconsideration, or set aside the
Commission's order.
(d) The court's judgment shall be final, subject to
review by the Supreme Court of the United States upon
certiorari or certification as provided in Title 28 U.S.C.
sections 1254 and 2350.
Compact, tit. II, art. XIII, s 5(a)-(d).
Of one thing we can be fairly confident--that our review
should not be de novo. That would deprive the Commission's
judgment of importance and would, in effect, place the court
in the position of the licensing authority. Yet the granting of
licenses may be a non-judicial function, outside Article III of
the Constitution. See Federal Radio Comm'n v. General
Elec. Co., 281 U.S. 464 (1930); Stephen G. Breyer & Richard
B. Stewart, Administrative Law and Regulatory Policy 59 (2d
ed. 1985). We may also say with some assurance that the
"substantial evidence" test, at least in its APA formulation,
does not fit this case. The Compact requires the Commission
neither to hold hearings in these licensing proceedings nor to
make findings on the record of the hearings. Even if the
APA covered the Commission, the substantial evidence stan-
dard contained in 5 U.S.C. s 706(2)(E) would therefore be
inapplicable. See Camp v. Pitts, 411 U.S. 138, 140-41 (1973);
5 U.S.C. s 557(c)(3)(A).
Of the remaining standard-of-review options, we have de-
cided to adopt by reference the standards contained in 5
U.S.C. s 706(2)(a)-(d), which provide that reviewing courts
shall:
(2) hold unlawful and set aside agency action, findings,
and conclusions found to be--
(A) arbitrary, capricious, an abuse of discretion, or
otherwise not in accordance with law;
(B) contrary to constitutional right, power, privilege,
or immunity;
(C) in excess of statutory jurisdiction, authority, or
limitations, or short of statutory right;
(D) without observance of procedure required by
law ...
We do so because this court had basically been following
those standards in reviewing Commission actions under the
pre-amended Compact. See, e.g., Bebchick v. WMATC, 805
F.2d 396, 408 (D.C. Cir. 1986); D.C. Transit Sys., Inc. v.
WMATC, 466 F.2d 394, 414 (D.C. Cir. 1972); D.C. Transit
Sys., Inc. v. WMATC, 452 F.2d 1321, 1325 (1971). Anyone
familiar with these decisions--that is, anyone involved in
drafting and approving revisions to the Commission's licens-
ing authority--would likely have taken it for granted that we
would follow the same course in cases arising under the
amended Compact. See Merrill Lynch, Pierce, Fenner &
Smith, Inc. v. Curran, 456 U.S. 353, 378 (1982). For another
thing, federal judicial review of agency action according to the
standards just quoted is so commonplace that, wholly aside
from our past practice, it would have been natural to assume
that courts would treat Commission decisions in the same
manner. Finally, it is worth remembering that subsections
(a) through (d) of APA s 706(2) contained no innovations.
When signed into law in 1946, these provisions merely "re-
state[d] the present law as to the scope of judicial review."
United States Department of Justice, Attorney General's
Manual on the Administrative Procedure Act 108 (1947),
reprinted in Administrative Conference of the United
States, Federal Administrative Procedure Sourcebook 67,
174 (2d ed. 1992).
Was it "arbitrary" or "capricious" for the Commission to
grant the certificate of authority to Double Decker? There is
no disagreement among the parties about essential facts
bearing on the application. Old Town's protest included
allegations that New York Apple Tours, Double Decker's
commonly-controlled affiliate, had been the subject of com-
plaints filed with the New York City Department of Consum-
er Affairs concerning regulatory infractions. This was of
potential significance. To issue a certificate of public conve-
nience, the Commission must find, among other things, that
the applicant will "conform to the rules, regulations, and
requirements of the Commission," Compact, tit. II, art. XI,
s 7(a)(i). If Double Decker's affiliate had not been conform-
ing to another jurisdiction's regulations, one might expect
Double Decker to conduct itself in the same manner. Con-
cerned about this prospect, the Commission undertook an
investigation. It found that the affiliate--Apple Tours--had
indeed been sanctioned in New York City for operating buses
without safety certificates. But the Commission also found
that the New York authority had only recently begun enforc-
ing the inspection requirement, that Apple Tours had brought
itself into compliance, and that it had expended a considerable
amount of money in doing so. When Old Town, in its
application for reconsideration, provided evidence that the
New York department was investigating Apple Tours for
other violations, the Commission deferred action and conduct-
ed another investigation. Shortly thereafter Apple Tours
settled the matter, agreeing to a fine without admitting any
wrongdoing.
There is no doubt that the poor record of the New York
affiliate raised serious questions regarding Double Decker's
fitness. And there is no doubt that the Commission treated
the matter seriously--but not seriously enough by Old Town's
lights. While we do not agree with the Commission's argu-
ment that it would have been arbitrary for it to deny, or on
reconsideration, rescind Double Decker's certificate of author-
ity, neither do we agree with Old Town's view that it was
arbitrary for the Commission to give Double Decker permis-
sion to operate. Licensing proceedings such as this involve
predictive judgments. See FCC v. National Citizens Comm.
for Broad., 436 U.S. 775, 813-14 (1978). The Commission
considered the "relevant factors," indeed it considered them
very carefully and at length. Citizens to Preserve Overton
Park v. Volpe, 401 U.S. 402, 416 (1971). It did not take
account of extraneous factors and the explanation it provided
for its action had evidentiary support. See Motor Vehicle
Mfrs. Ass'n v. State Farm Mut. Auto. Ins. Co., 463 U.S. 29,
43 (1983). As to the Commission's ultimate conclusion, we
detect no "clear error of judgment" on its part. Citizens to
Preserve Overton Park, 401 U.S. at 416. Far from disregard-
ing the New York situation, the Commission fashioned its
order in response to what had occurred there. It placed
Double Decker on probation for one year, during which the
company had to present each of its vehicles to the Commis-
sion's staff for inspection, and to report any infraction of
Apple Tours' settlement agreement with the New York au-
thority. If, in this period, Apple Tours' operating authority is
revoked or suspended, that would be a sufficient ground for
suspending or revoking Double Decker's. One may debate
the Commission's judgment that these measures were suffi-
cient. Old Town does. But the judgment, which embodies a
prediction about Double Decker's future behavior in view of
the conditions imposed on its first year of operations, does not
constitute an abuse of the Commission's authority or arbi-
trary and capricious agency action.
Old Town's remaining contentions have been considered
and found wanting.
The petition for judicial review is denied.
So ordered.