BEFORE THE



BEFORE THE

PENNSYLVANIA PUBLIC UTILITY COMMISSION

Application of Dafix Enterprises, Inc., a corporation :

of the Commonwealth of Pennsylvania, for the right :

to transport, as a common carrier, by motor vehicle, :

household goods in use: (1) from points in the :

North Side section of the city of Pittsburgh, the :

boroughs of Avalon, Bellevue, Ben Avon, Ben :

Avon Heights, Emsworth and Westview, and Ross :

Township, Allegheny County, to other points in :

Pennsylvania within twenty-five (25) miles by the :

usually traveled highways of the City-County :

Building in the city of Pittsburgh; (2) between :

points in the city of Pittsburgh, Allegheny County; :

(3) from points in the city of Pittsburgh, Allegheny : A-00122357

County, to points in the county of Allegheny within :

twenty (20) miles by the usually traveled highways :

of the city of Pittsburgh, and vice versa; and :

(4) between points in the borough of Bellevue, :

Allegheny County, and within thirty (30) miles by :

the usually traveled highways of the limits of said :

borough, excluding the county of Washington, and :

excluding the right to transport household goods in :

use for distances in excess of forty (40) miles; :

which is to be a transfer of all the rights authorized :

under the certificate issued at A-00108586 to Gary :

Martin Geiger, t/a Deily Moving & Storage :

Company, subject to the same limitations and :

conditions. :

INITIAL DECISION

Before

John H. Corbett, Jr.

Administrative Law Judge

HISTORY OF THE PROCEEDING

This decision grants an application, which Dafix Enterprises, Inc. (“Applicant” or “Dafix”) filed on November 14, 2005. In this application, Dafix seeks to obtain by transfer from Gary Martin Geiger, t/a Deily Moving & Storage Company, (“Transferor” or “Geiger”) his authority to transport, as a common carrier by motor vehicle, household goods in use as described in the caption of this case. Notice of this application was published in the Pennsylvania Bulletin on January 28, 2006. Protests were to be filed on or before February 21, 2006. See, 52 Pa. Code §3.381(d).

Two certificated carriers possessing operating rights in conflict with at least a part of the authority Dafix seeks in this application filed protests on February 23, 2006. These Protestants are: South Hills Movers, Inc. (“South Hills”) and Central Van & Storage of Charleston, Inc., d/b/a Central Van & Storage Company, Inc. (“Central Van”), collectively the “Protestants.” On March 13, 2006, the Transferor filed a motion to dismiss the joint protests, a motion for judgment on the pleadings and a motion for summary judgment. On March 20, 2006, the Applicant filed a petition seeking to join in the motions. On March 24, 2006, the Protestants answered the motions. By Order entered on April 28, 2006, Chief Administrative Law Judge Veronica A. Smith granted the Applicant’s petition for joinder, but denied the motions.

I received this case assignment on May 12, 2006 and issued a standard Prehearing Order on May 19, 2006. At the request of counsel for the Applicant, a hearing scheduled for June 9, 2006 was postponed until July 13, 2006. On the latter date, a hearing was held in the Commission’s offices in Pittsburgh. All parties were represented by counsel. The Applicant offered eight exhibits and the Protestants submitted two exhibits, all of which were admitted into the record. The hearing generated 168 pages of notes of testimony. The Applicant and the Protestants filed main and reply briefs. The Transferor filed a reply brief only. The record closed on September 22, 2006.

FINDINGS OF FACT

1. The Applicant, Dafix Enterprises, Inc., was incorporated in Pennsylvania in January 2005. The corporation is currently in good standing. Its sole shareholder and principal officer is David Fix, who graduated from the Berkeley College of Music in Boston, Massachusetts in 2004 (N.T. 8-10, 70-71, 93; Applicant’s Exh. 1).

2. David Fix has worked in the moving industry all of his life, because his father, Donald Fix, owns Don Farr Moving & Storage (“Don Farr”) and his brother, Donald Fix, Jr., owns Hindman Moving & Storage (“Hindman”) (N.T. 8-9, 24-25, 70).

3. On April 21, 2005, Dafix executed an Agreement of Sale to purchase the business of Gary Martin Geiger, t/a Deily Moving & Storage Company, and also entered into a Management Agreement with the same entity (N.T. 11-12; Applicant’s Exhs. 2 & 3).

4. On the same day, David Fix began managing the day-to-day operations of Deily Moving & Storage under its Commission authority pursuant to the Management Agreement. Deily operates from 6:00 a.m. to 6:00 p.m. seven days a week or as needed. It currently has 30-40 employees and three separate telephone lines. As manager, Mr. Fix handles all claims or complaints personally, manages the marketing material, ensures compliance with Commission regulations, conducts background checks, hires and fires employees, and reviews the daily inspection reports of the drivers to ensure the operating equipment is in good repair. During the first year of operating under the Management Agreement, Deily spent around $70,000 on repairing its vehicles (N.T. 12-13, 17, 19-20, 71, 110, 121-22, 124-25, 137).

5. Under the Management Agreement, Deily has incurred no safety violations with the Commission (N.T. 13-14).

6. In May 2005, enforcement officers from the Commission’s Bureau of Transportation and Safety (“BTS”) audited Deily’s files. One complaint is pending from a person, who says that she had to sign an estimated cost of service sheet under duress. Mr. Fix disputes the claim, because the person signed the sheet a month before the move occurred (N.T. 17, 74-75, 100-04).

7. Under the Management Agreement, Deily almost doubled its gross revenue. From April 2005 through June 2006, its gross revenues were $637,041.60 (N.T. 14-15; Applicant’s Exh. 4).

8. Since April 21, 2005, Deily has performed approximately 1,400 moves (N.T. 16, 71, 120).

9. Deily currently has nine vehicles that are in good operating condition. This fleet includes six operable vehicles and one inoperable one that Deily owned at the time that it signed the Sales and Management Agreements, and three vehicles that Dafix subsequently purchased for Deily. These latter three vehicles were registered in Dafix’s name (N.T. 16-17, 44-45, 53-55, 58-60, 64-65, 119, 136; Applicant’s Exh. 5).

10. To register the six vehicles in Deily’s name, Mr. Fix consulted with Mr. Geiger (N.T. 111, 131-32).

11. Dafix does not have any type of lease agreement for Deily to use Dafix’s vehicles. Mr. Fix believes a lease is unnecessary, since Dafix does not charge Deily for using its vehicles (N.T. 56-58, 116-17, 135-36).

12. On occasion, Dafix has used Don Farr and Hindman vehicles when performing shipping for Deily, but it has used magnetic placards showing the Deily name and authority number on these vehicles when doing so. Other than Deily paying for the fuel, Don Farr and Hindman have provided these vehicles to Deily gratis (N.T. 99-100).

13. When other carriers have used Deily’s vehicles, Deily has entered into lease agreements with them (N.T. 115-16).

14. Deily pays mechanics at local garages to repair its vehicles (N.T. 68).

15. Under the Management Agreement, Deily applied to the Commission and received approval to increase its tariff rates by 3%. To do so, Mr. Fix consulted with Mr. Geiger and Deily’s former accountant (N.T. 18, 77, 110-11, 113-14, 130).

16. Under the Management Agreement, Gary Geiger, owner of Deily Moving & Storage, retains authority over all operations of Deily. He has not disagreed with anything that Dafix has done under that Agreement. Fix and Geiger have held meetings to discuss the business (N.T. 20-23, 31, 34, 106-10; Applicant’s Exh. 3).

17. Dafix is not affiliated with any other person or business entity nor does it share the profits with anyone else, including Mr. Fix’s father (N.T. 20, 104, 122).

18. Counsel for Dafix did not submit the Management Agreement to the Commission with this application (N.T. 23-24).

19. To purchase Deily, Dafix has agreed to pay $33,000 for its operating authority and $220,000 for its entire operation. To finance this purchase, David Fix has obtained a loan from Brentwood Bank in the amount of $193,000. Mr. Fix has personal assets of a home and $115,000 in stock, which he has pledged for this loan (N.T. 18-19, 54, 105-06; Applicant’s Exhs. 1 & 6).

20. If Dafix obtains ownership of Deily, David Fix will repair several vehicles that are currently inoperable and continue advertising strongly in Verizon’s Yellow Book and Verizon’s Internet Super Pages (N.T. 15).

21. Don Farr has offices located at 4920 Buttermilk Hollow Road, West Mifflin, Pennsylvania (N.T. 25).

22. Hindman has offices and a storage facility located at 106 Hindman Lane, Butler, Pennsylvania (N.T. 25).

23. Prior to execution of the Management Agreement on April 21, 2005, Deily operated out of facilities located in Portersville, Pennsylvania; after that date, Deily has been operating out of Hindman’s facilities located at 106 Hindman Lane in Butler (N.T. 26-27).

24. Mr. Geiger sold the building from which Deily operated in Portersville (N.T. 27, 123-24).

25. Hindman allows Deily to operate out of its 14,000 square foot facility without paying rent (N.T. 28, 120-21).

26. Mr. Fix intends to purchase a separate building for Dafix’s operation, if the Commission approves this application (N.T. 28, 44, 68-70, 122-23).

27. When Deily moved its office, Mr. Geiger assisted in transferring the telephone lines to the new location (N.T. 124).

28. While Dafix employs one office person and pays for Deily’s movers, laborers and movers, Don Farr and Hindman at various times furnish as many as nine other personnel to Deily gratis. Deily employees paid by Dafix were reported to the Internal Revenue Service as employees of Dafix on their W-2’s. Once he owns the business, Mr. Fix intends to hire all of his own employees. Mr. Fix has not prevented any former Deily employee from working for him (N.T. 29-30, 40-52, 61-68, 121, 123).

29. Before the Management Agreement, Deily employed 4-5 movers. One or two of these employees came to work at the new location after the Management Agreement took effect. Now it employs on average around 30 movers and helpers (N.T. 137).

30. After execution of the Management Agreement, Dafix opened a bank account in its name, doing business as Deily Moving & Storage, as permitted under Paragraph 3.3 of that Agreement; David Fix is the sole signatory on the account. All transportation revenues that Deily receives are deposited in this account. All expenses, as well as all claims, that Deily incurs are paid from this account. All expenses and claims incurred before the effective date of the Management Agreement are the responsibility of Deily and Geiger. Once the Management Agreement terminates, any outstanding expenses or claims will be the responsibility of Dafix. All revenues earned during the term of the Management Agreement are reflected in Dafix’s federal and state income tax returns. Once the Management Agreement terminates, any new expenses or claims will be Deily’s responsibility (N.T. 30-40, 56-60, 72-73, 77-89, 94, 111-13, 115, 120, 125-30, 132-34, 138-39; Applicant’s Exhs. 3 & 4).

31. All revenues that this business received in 2005 were reflected in Deily’s 2005 annual assessment report filed with the Commission. Deily’s accountant was also consulted for information to file this assessment. This assessment was paid from Dafix’s bank account (N.T. 112, 114, 124-34, 138, 140-42; Applicant’s Exh. 7).

32. Dafix has not registered to do business with the Commonwealth of Pennsylvania Department of State under the trade name of Deily Moving & Storage (N.T. 37).

33. Under the Management Agreement, Dafix receives all revenues from Deily’s business, but it must pay Geiger $3,000 a month during the busy season and $1,000 a month in the off-season for Dafix to act as manager of the business (N.T. 40, 71-73, 94-98, 107; Applicant’s Exhs. 3 & 4).

34. After execution of the Management Agreement, Deily ceased providing any shipping operations, except under the aegis of Dafix (N.T. 90).

35. After execution of the Management Agreement, Deily continued to use the same insurance carrier (N.T. 91).

36. After execution of the Management Agreement, Dafix hired a new accountant for Deily’s business (N.T. 92).

37. In early 2006, Mr. Fix filed Deily’s 2005 annual assessment report with the Commission using his new accountant, but with some information obtained from Deily’s former accountant. Fix consulted with Geiger to file the assessment report (N.T. 105, 111-13).

38. After execution of the Management Agreement, Deily continued to use the same telephone numbers for its business (N.T. 92).

39. David Fix also is paid for work that he performs for his father’s business. He has an interest in marketing and has negotiated a contract for Don Farr with the Pittsburgh Pirates. He has set up health insurance for the employees of Don Farr, as well as insurance for its vehicles. He has negotiated advertising contracts with Verizon Yellow Books and appeared in a commercial for Brentwood Bank on behalf of Don Farr. He has handled regulatory issues for Don Farr with the Commission. He has also performed some word processing work on computers for that business (N.T. 97-99).

40. David Fix asserts that he has tried to abide by the rules, regulations and orders of the Commission (N.T. 117-18).

41. Deily submits a balance sheet for its operations, which discloses total assets of $88,729.27 and total liabilities of $24,806.81 as of June 30, 2006. The total owner’s equity amounts to $63,922.46 (N.T. 118-19, 134; Applicant’s Exh. 8).

42. South Hills submits by stipulation of the parties a copy of its Commission authority at Docket No. A-00109506, F. 1, Am-C that is relevant to this application (N.T. 142-45; South Hills Exh. 1).

43. Leonard C. Papa is the manager of administrative services for Central Van, which has a facility located in the Meadowlands Industrial Park at the Meadowlands exit of I-79 in Washington Country. Central Van submits a copy of its Commission authority at Docket No. A-00121979 that is relevant to this proceeding (N.T. 146-52, 157, 162-64; Central Van Exh. 1).

44. Allegheny County is the most significant portion of the territory within which Central Van is authorized to provide transportation of household goods (N.T. 152).

45. Central Van operates from a 22,000 square foot warehouse and storage facility situated on eight acres of property in the Meadowlands. It spent $2.4 million on renovating a former truck terminal building. It also has two facilities in West Virginia and one in Ohio. It has $1 million in rolling equipment, which includes six tractor trailer units, 12 straight trucks and four pack vans, as well as other specialized equipment such as drop-deck trailers and heavy lifting equipment. Central Van owns 80% of its equipment. Owner/operators own the remaining 20% and lease it to Central Van (N.T. 152-54).

46. Central Van presently does not use all of its equipment at full capacity. Mr. Papa estimates it uses about 70% of its equipment at a maximum (N.T. 155-56, 164).

47. Central Van employs 45 full-time people, of which 18 are certified drivers and the remainder are helpers, packers and administrative people (N.T. 156-57).

48. Central Van is an agent for Allied Van Lines. It operates six days a week from 6:00 a.m. to 7:00 p.m. depending upon the type of work required (N.T. 157).

49. Central Van advertises in eight telephone books in Allegheny County and on the Internet. It also produces mailers through a real estate referral system (N.T. 157).

50. Central Van incorporated in 1999. It purchased the authority of another carrier, Anderson Transfer, in 2005, together with some of its equipment. It purchased storage accounts and some equipment, as well as the right to advertise and use the name of another carrier, Stumpf Moving Company. It recently began advertising as Central Van & Storage and Anderson Transfer. Mr. Papa has been in the moving business for 42 years, while his son has worked in the same business about 21 years (N.T. 152, 158-160, 165-66).

DISCUSSION

A. The Burden of Proof

Section 332(a) of the Public Utility Code (“Code”), 66 Pa. C.S. §332(a), generally provides for the party seeking affirmative relief from the Commission to bear the burden of proof. In this proceeding, the Applicant seeks to obtain by transfer from an existing carrier his authority to transport, as a common carrier by motor vehicle, household goods in use as described in the caption of this case. Thus, as the party seeking affirmative relief from the Commission, the Applicant bears the burden of proof. Id.

The Protestants respond that the Applicant fails to meet this burden in two respects. First, the Protestants claim they have rebutted the presumption of continuing necessity by demonstrating that the authority sought to be transferred was abandoned. Next, the Protestants argue the Applicant lacks a propensity to operate legally, since the Applicant, as a result of entering a Management Agreement with the Transferor, has taken control of the Transferor’s operations without Commission approval. I address each of these issues seriatim.

B. The Legal Standard

An applicant, who seeks authority to begin to offer, render, furnish or supply intrastate carriage service to the public for compensation in this Commonwealth, must obtain from the Commission a certificate of public convenience. 66 Pa. C.S. §§102, 1101-1103. Such a certificate will be granted “... only if the Commission shall find or determine that the granting of such certificate is necessary or proper for the service, accommodation, convenience, or safety of the public.” 66 Pa. C.S. §1103(a).

Prior to January 1, 1983, the Commission traditionally required a motor common carrier applicant requesting a certificate of public convenience to produce evidence establishing: (1) a public need for the proposed service; (2) the inadequacy of existing service; and (3) the financial and technical capacity to meet the need in a satisfactory fashion. See, Morgan Drive Away, Inc. v. Pa. P.U.C., 512 A.2d 1359 (Pa. Cmwlth. 1986). On November 19, 1982, the Commission adopted the regulation at 52 Pa. Code §41.14, which was further amended on July 23, 2004 and which provides:

(a) An applicant seeking motor common carrier authority has a burden of demonstrating that approval of the application will serve a useful public purpose, responsive to a public demand or need.

(b) An applicant seeking motor common carrier authority has the burden of demonstrating that it possesses the technical and financial ability to provide the proposed service. In addition, authority may be withheld if the record demonstrates that the applicant lacks a propensity to operate safely and legally. In evaluating whether a motor carrier applicant can satisfy these fitness standards, the Commission will ordinarily examine the following factors, when applicable.

(1) Whether the applicant has sufficient capital, equipment, facilities and other resources necessary to serve the territory requested;

(2) Whether the applicant and its employees have sufficient technical expertise and experience to serve the territory requested;

(3) Whether the applicant has or is able to secure sufficient and continuous insurance coverage for all vehicles to be used or useful in the provision of service to the public;

(4) Whether the applicant has an appropriate plan to comply with the Commission’s driver and vehicle safety regulations and service standards contained in Chapter 29, 52 Pa. Code Ch. 29;

(5) The applicant’s record of compliance with Commission orders and regulations if any; and

(6) Whether the applicant or its drivers have been convicted of a felony crime of moral turpitude and remains subject to supervision by a court or correctional institution.

(c) The Commission will grant motor common carrier authority commensurate with the demonstrated public need unless it is established that the entry of a new carrier into the field would endanger or impair the operations of existing common carriers to an extent that, on balance, the granting of authority would be contrary to the public interest.

Adoption of these criteria effectively eliminated the applicant’s evidentiary burden of demonstrating the inadequacy of existing service. Seaboard Tank Lines, Inc. v. Pa. P.U.C., 502 A.2d 762 (Pa. Cmwlth. 1985). Subsections (a) and (b) clearly place on the applicant the burden of proving its proposed service will serve a useful public purpose, responsive to a public need or demand, and that it is financially and technically fit to provide the proposed service.

1. Public Demand or Need

Usually, an applicant for new authority must satisfy its burden of proof under Section 41.14(a) by showing a public demand or need generally throughout the service territory. Application of Blue Bird Coach Lines, Inc., 72 Pa. P.U.C. 262, 274 (1990); Morgan Drive Away, supra; Purolator Courier Corp. v. Pa. P.U.C., 414 A.2d 450 (Pa. Cmwlth. 1980); Pa. P.U.C. v. Purolator Courier Corp., 355 A.2d 850 (Pa. Cmwlth. 1976); and Eagle Courier and Limousine Service, Inc., 57 Pa. P.U.C. 404 (1983). This proceeding, however, involves the transfer of existing operating rights from one carrier to another. In transfer of certificate cases, certain principles have evolved, which differentiate transfer cases from applications for new authority. As the Commission stated in Re Francis J. Palumbo, II, 49 Pa. P.U.C. 736, 739 (1976):

The element of the legal standard for the granting of a certificate of public convenience to transfer motor carrier rights are initially the same for the granting of a new certificate; however, there is a substantial difference in the underlying presumptions and the burden of proving these elements.

The difference between these two types of proceedings arises from the issue of proof of need.

In a transfer proceeding, the doctrine of “presumption of continued necessity” applies, which the Commission first articulated in Application of Louis L. Grimm, 17 Pa. P.U.C. 25 (1937). Under this doctrine, an applicant seeking a transfer of existing rights is not required to prove a need for the proposed service. Byerly v. Pa. P.U.C., 440 Pa. 521, 270 A.2d 186 (1970); and Hostetter v. Pa. P.U.C., 160 Pa. Superior Ct. 94, 49 A.2d 862 (1946). In Byerly, the Supreme Court of Pennsylvania emphasized this fact, stating:

In transfer of certificate cases the principle has evolved that it is not necessary for the transferor or transferee to show that the certificate under review is necessary for the public convenience. W.D. Rubright Co. v. Pennsylvania Public Utility Commission, 197 Pa. Super. Ct. 242, 253, 177 A.2d 119 (1962); Paradise v. Pennsylvania Public Utility Commission, 184 Pa. Super. Ct. 8, 17, 132 A.2d 754 (1957); Modern Transfer Company v. Pennsylvania Public Utility Commission, 179 Pa. Super. Ct. 46, 52, 115 A.2d 87 (1955); Hostetter v. Pennsylvania Public Utility Commission, 164 Pa. Super. Ct. 94, 98-99, 49 A.2d 862 (1946). It is presumed that the convenience once found continues until the contrary is shown.

Accordingly, an applicant seeking to acquire by transfer from another carrier existing common carrier authority does not carry the burden of proving under Section 41.14(a) that approval of the application will serve a useful public purpose, responsive to a public demand or need.

The doctrine of continuing necessity is a rebuttable presumption. In rebutting this presumption, the burden of persuasion is on a protestant. “Once continuing need has been established it continues to exist, unless it is clearly rebutted.” Morgan Drive-Away, Inc., 6 Pa. Cmwlth. at 233. To rebut the presumption of continuing necessity, mere evidence that the transferring carrier has not provided the service under the rights to be transferred is not sufficient. Byerly, 270 A.2d at 189.

The presumption of continuing necessity, however, does not apply where the record demonstrates that the transferring carrier has abandoned the rights sought to be transferred or where the acquiring carrier proposes to provide a service that is different from that which the transferring carrier has provided. Re Edward R. Simpson, 50 Pa. P.U.C. 655 (1977); and Re Anthony Babusci, d/b/a Tosh Moving and Storage, Inc., 51 Pa. P.U.C. 39 (1977). To constitute an abandonment, there must be an intention to abandon together with external acts by which the intention is carried into effect. Byerly, 270 A.2d at 189; Susquehanna Area Regional Airport Authority v. Pa. P.U.C., 2006 Pa. Commw. LEXIS 618 (November 21, 2006); and Re Carr, 38 Pa. PU.C. 593 (1961).

In the case sub judice, the Protestants argue the Transferor quit operating when he signed the Management Agreement on April 21, 2005, more than a year before the hearing. Since the Transferor ceased operations on that date, they contend the Transferor abandoned his authority. They claim the Transferor’s actions in turning over his operations to the Applicant constituted an overt act indicating an intention to abandon the authority now sought to be transferred. Consequently, the Protestants assert that they have rebutted the presumption of continuing necessity for the proposed authority (Protestants’ M.B. at 22-23; Protestants’ R.B. at 13-14).

More specifically, the Protestants note that Gary Geiger, the owner of the Transferor, was not involved in the day-to-day operation after he executed the Management Agreement with the Applicant (N.T. 22). While the Applicant as manager handled more than 1,400 moves, it did not consult with the Transferor on a single one of them (N.T. 71). Furthermore, the Transferor did not provide any of his own service under his PUC authority after he signed the Management Agreement (N.T. 90). Instead, he closed his office in Portersville and sold the building (N.T. 63). The Applicant took possession of all of the Transferor’s vehicles and he has not been paid for their use (N.T. 59). Thus, the Protestants reiterate that the Transferor abandoned his authority by turning over control of his operation to the Applicant after executing the Management Agreement.

Initially, one must note that the Protestants’ basic premise that the presumption in favor of continuing necessity can be rebutted by evidence of abandonment is erroneous. The issue of whether a continuing necessity exists for the Transferor’s operating rights is a totally separate issue from the question of whether the operating rights of the Transferor have been abandoned. As the Supreme Court explained in Byerly:

It is necessary for us to restate the principles applicable to transfer cases for it appears that some confusion has developed…. It is presumed that the convenience once found continues until the contrary is shown. All parties agree that this is a fair statement of the law as it now stands. What seems to have happened, however, is that the concepts of (a) abandonment and (b) public necessity and convenience have become confused.

The Commission found that Forney (the transferor) did not abandon the rights represented by his certificate. It stated “To constitute an abandonment there must be an intention to abandon together with external acts by which the intention is carried into effect.” We have reviewed the record in detail and agree that there is substantial evidence to support the Commission’s finding of no abandonment. That finding, however, is completely independent of and has absolutely no relation to Byerly’s claim that there is no longer a public necessity for this certificate. In Rubright, supra, it was argued that the transferor abandoned all rights under his certificate prior to the transfer. An entirely separate argument was made, 197 Pa. Superior Ct. at 245, that “no proof of continuing public necessity was produced.” It is entirely possible to have a situation in which a certificate holder abandons his rights by intention and external acts at the same time as there is great public necessity for his service. It is also possible to have a situation in which a certificate holder in no way abandons his rights at the same time as there is no longer any public necessity. Therefore the Commission erred when it equated a claim of absence of public necessity with a claim of abandonment. (Citations omitted).

Id., 270 A.2d at 189. Consequently, the Protestants cannot meet their burden of rebutting the presumption of continuing necessity by arguing that the Transferor has abandoned the operating rights sought to be transferred. Furthermore, no abandonment has occurred here.

Noteworthy is the Commission’s determination that a transferring carrier did not abandon its rights, even though it provided no transportation service under its rights, where the transferring carrier maintained tariffs for the service, filed annual reports, paid annual assessments, and had equipment available to provide the service. Francis J. Palumbo, II, supra; App. of Norman M. Earhart, 48 Pa. P.U.C. 607 (1975); App. of McNaughton Bros., Inc., 42 Pa. P.U.C. 750 (1966); App. of Jones Motor Co., Inc., 26 Pa. P.U.C. 132 (1946); and App. of Frank J. Cotler, Jr., 26 Pa. P.U.C. 146 (1946). Here, no evidence exists to suggest the Transferor intended to abandon his authority. W.D. Rubright, supra. He continued to operate under his PUC authority, although under the guise of a Management Agreement with the Applicant, which permitted him to provide over 1,400 moves for the public after April 21, 2005 while using his equipment.

Moreover, the Transferor continued to maintain tariffs on file with the Commission and in the fall of 2005, he submitted a request to the Commission for a 3% increase in his published tariff rates (N.T. 76, 114). The Transferor filed evidence of insurance with the Commission (N.T. 91). Deily continued to use the same insurance company and telephone numbers after the management change (N.T. 91-92). In March 2006, the Transferor filed his 2005 Annual Report with the Commission, setting forth the revenues earned while operating under his authority (N.T. 15, 112; Applicant’s Exh. 7). Also, the Transferor paid his 2005 annual assessment to the Commission (N.T. 134). All of these factors confirm the Transferor’s intention to continue operating under his PUC authority while under the Management Agreement. As noted in Yellow Cab Company of Pittsburgh v. Pa. P.U.C., 431 A.2d 1106, 1108 (Pa. Cmwlth. 1981):

The transferor’s continued maintenance of tariffs and insurance, filing of annual reports and payment of annual assessments contradict the assertion of abandonment and provides substantial support for the Commission’s determination (that the transferor did not abandon his operating rights).

In addition, a plain reading of the Management Agreement itself discloses the Transferor’s intent for the Applicant to manage the Transferor’s household goods moving operation, while continuing to conduct the operation under the Transferor’s PUC operating rights. The Management Agreement states the Transferor retains the ongoing right, not only to monitor the activities and decisions of the Applicant in managing his business, but also to retain control over that operation (N.T. 21; Applicant’s Exh. 3, ¶¶ 1.1 & 4). Hence, substantial evidence supports the conclusion that the Transferor retained ultimate control over his PUC authority and he continued to remain involved in a viable business. Accordingly, no evidence supports the Protestants’ assertion that the Transferor abandoned his operating rights.

2. Fitness

Every application for motor carrier authority requires a determination that an applicant possesses the technical and financial ability to provide the proposed service. Thus, irrespective of any concern regarding an applicant’s burden of proof under 52 Pa. Code §41.14(a) in a transfer application proceeding, an applicant must always satisfy the burden under 52 Pa. Code §41.14(b) to show that it possesses the technical and financial ability to provide the proposed service. Further, if required by the record, consideration must also be given to an applicant’s propensity, or lack thereof, to operate safely and legally. 52 Pa. Code §41.14(b). We turn now to review each of these factors to determine whether Dafix possesses the financial, technical and legal fitness to provide the proposed service.

a. Financial Fitness

To purchase Deily, Dafix has agreed to pay $33,000 for its operating authority and $220,000 for its entire operation. To finance this purchase, David Fix has obtained a loan from Brentwood Bank in the amount of $193,000. Mr. Fix has personal assets of a home and $115,000 in stock, which he has pledged for this loan (N.T. 18-19, 54, 105-06; Applicant’s Exhs. 1 & 6). In addition, Dafix purchased three vehicles that it operates, while managing Deily’s moving business (N.T. 16-17, 44-45, 53-55, 58-60, 64-65, 119, 136; Applicant’s Exh. 5).

On the issue of financial fitness, the Commission has explained, “. . . an applicant should possess the financial ability to give reliable and respectable service to the public. Applicant should own or have sufficient financial resources to obtain the equipment needed to perform the proposed service.” Re Perry Hassman, 55 Pa. P.U.C. 661 (1982); and Blue Bird, supra. The Protestants have not challenged the financial fitness of the Applicant to provide the proposed service. Substantial evidence shows quite clearly that Dafix possesses the financial resources to provide the proposed service.

b. Technical Fitness

Likewise, the Protestants do not claim that the Applicant lacks the technical fitness to provide the proposed service. Indeed, while he is still a young man, David Fix, the Applicant’s principal, has worked in the moving industry all of his life, because his father, Donald Fix, owns Don Farr Moving & Storage and his brother, Donald Fix, Jr., owns Hindman Moving & Storage (N.T. 8-9, 24-25, 70).

Upon executing the Management Agreement on April 21, 2005, David Fix began managing Deily’s day-to-day operations under its Commission authority. Deily operates from 6:00 a.m. to 6:00 p.m. seven days a week or longer, if needed. It currently has 30-40 employees and three separate telephone lines. Before the Management Agreement, Deily employed only 4-5 movers. Now it employs on average around 30 movers and helpers (N.T. 137). Since April 21, 2005, Deily has performed approximately 1,400 moves (N.T. 16, 71, 120). During this time, Deily has almost doubled its gross revenue. From April 2005 through June 2006, its gross revenues were $637,041.60 (N.T. 14-15; Applicant’s Exh. 4). As manager, David Fix handles all claims or complaints personally, manages the marketing material, ensures compliance with Commission regulations, conducts background checks, hires and fires employees, and reviews the daily inspection reports of the drivers to ensure the operating equipment is in good repair. During the first year of operating under the Management Agreement, Deily spent around $70,000 on repairing its vehicles (N.T. 12-13, 17, 19-20, 71, 110, 121-22, 124-25, 137).

Deily currently has nine vehicles in good operating condition. This fleet includes six operable vehicles and one inoperable one that Deily owned at the time that it signed the Sales and Management Agreements, and three vehicles that Dafix subsequently purchased for Deily. These latter three vehicles are registered in Dafix’s name (N.T. 16-17, 44-45, 53-55, 58-60, 64-65, 119, 136; Applicant’s Exh. 5). Under the Applicant’s management, Deily pays mechanics at local garages to repair its vehicles (N.T. 68).

Prior to execution of the Management Agreement on April 21, 2005, Deily operated out of facilities located in Portersville, Pennsylvania. After that date, Deily has been using Hindman’s facilities located in Butler (N.T. 26-27). Mr. Geiger sold the building from which Deily operated in Portersville (N.T. 27, 123-24). Mr. Fix intends to purchase a separate building for Dafix, repair inoperable vehicles and increase advertising, if the Commission approves this application (N.T. 15, 28, 44, 68-70, 122-23).

Having assumed responsibility for its financial affairs, David Fix submitted Deily’s financial statements and received Commission approval to increase its tariff rates by 3% to increase its profitability (N.T. 18). He personally handles and resolves all claims that come in within 90 days (N.T. 17). As noted, Deily has maintained evidence of insurance on file with the Commission while under Dafix’s management (N.T. 91). Sufficient revenues generated under Dafix’s management suggest maintaining this insurance in the future will not be a problem.

Also while under Dafix’s tenure, Deily has incurred no safety violations with the Commission (N.T. 13-14). In May 2005, BTS enforcement officers audited Deily’s files. One complaint is pending from a person, who says that she had to sign an estimated cost of service sheet under duress. Fix disputes this claim (N.T. 17, 74-75, 100-04). On the whole, the Applicant has a good record of compliance with Commission orders and regulations. Further, no evidence suggests that either the Applicant or the drivers it has hired have ever been convicted of a crime. In summary, the Applicant possesses the technical ability to provide the proposed service in the requested territory.

c. Propensity to Operate Safely and Legally

A lack of fitness may be demonstrated by persistent disregard for, flouting or defiance of the Code, Commission Orders and regulations, or by violations in matters affecting the safety of operations. Re: William O'Connor, 54 Pa. P.U.C. 547, 549 (1980). The Protestants raise a question concerning the propensity of Dafix to operate legally. An applicant for motor common carrier authority does not bear the burden of proving it will operate legally and safely. Rather, the language of Section 41.14(b) presumes an applicant will operate legally and safely. It is the duty of the presiding Administrative Law Judge, however, to monitor the record as a whole, in the public interest and in the interest of maintaining the integrity of the regulatory process, to discern whether an applicant lacks such a propensity. Once the record fairly suggests an applicant lacks a propensity to operate legally or safely, then the applicant must carry the burden of showing such is not the case. When the record, as a whole, affirmatively demonstrates an applicant lacks a propensity to operate legally, administrative discretion must be exercised to determine whether, and to what extent, the application should be granted. Brink’s, Inc. v. Pa. P.U.C., 500 Pa. 387, 456 A.2d 1342 (1983); Bunting Bristol Transfer, Inc., et al. v. Pa. P.U.C., 418 Pa. 286, 210 A.2d 281 (1965); and D.F. Bast, Inc., et al. v. Pa. P.U.C., 397 Pa. 246, 154 A.2d 505 (1959).

In cases, however, where evidence exists that an applicant has engaged in unauthorized transportation services, evidence of unlawful operations per se does not preclude approval of an application for motor carrier authority. For such evidence to serve as a basis for denying an application for authority, one must demonstrate that the unauthorized service was provided in willful violation of the Public Utility Code and that an applicant was not providing the service in good faith or was not acting as a result of a bona fide misunderstanding of the law. Brinks, supra.

Here, the Protestants argue the application must be denied because the Applicant, as a result of entering into the Management Agreement with the Transferor, has taken control of the Transferor’s operation without Commission approval (Protestants’ M.B. at 12-22; Protestants’ R.B. at 3-12). The Protestants note that once the parties signed the Management Agreement, the Applicant opened a bank account in its name with David Fix as the single signatory on the account. Subsequently, all revenues received from the business were deposited in and all of its expenses were paid from that account. While the Applicant receives all profits from the Transferor’s business, it pays the Transferor $3,000 a month during the busy season and $1,000 a month in the off-season so the Applicant can manage the business. The Applicant reported these revenues and expenses on its federal and state income tax returns. Further, when the Management Agreement terminates, the Applicant will retain any money remaining in this account.

Moreover, the Protestants note that Geiger was not involved in the day-to-day operation of the business, but he only became involved when the Applicant needed to file a document. After they signed Management Agreement, the Transferor closed his office and the Applicant moved the Transferor’s operation to another facility owned by Fix’s family. Fix’s family provided this facility gratis, without payment of rent, and at least nine employees, who answered phones, made sales calls, prepared bills of lading or gave estimates. Geiger was not involved in any of the 1,400 moves made since the Management Agreement was signed.

In addition, the Protestants object that the Applicant is using seven of the Transferor’s vehicles in the business without paying the Transferor for their use. While the Applicant is using three of its own vehicles in the Transferor’s business, no written lease exists for their use. Thus, the Protestants argue the Applicant has assumed control not only of the equipment, but of the business as well and operated it as if it were its own. Consequently, they claim the Applicant is illegally leasing the operating rights of the Transferor.

For support, the Protestants cite Samuel Coraluzzo Company v. McNulty Bulk Transport, Inc., 73 Pa. P.U.C. 440 (1990), which involved complaints of illegal transportation. There, the Commission confronted a ten-year agency agreement with a corresponding equipment lease. In determining that these arrangements constituted an illegal de facto transfer of ownership, the Commission found that all indicia of ownership control passed to the party assuming responsibility under the agency agreement, including the right to solicit business, handle all shipments, prepare all billings, pay all costs and provide the insurance and equipment. Consequently, the Commission declared the agreements invalid and fined the parties.

Distinctly different, however, is the situation in the case sub judice. While the case here admittedly presents many of the same factors that the Commission found repugnant in Coraluzzo, the distinguishing fact is that the parties here executed a Sales Agreement contemporaneously with the Management Agreement. The Sales Agreement committed the parties to “file and diligently prosecute an application to secure the [Commission’s] approval of the transfer” of the Seller’s operating rights (Applicant’s Exh. 2 at 1, ¶ D).[1] Thus, the parties could not have made their intention any clearer. They intended to save a struggling enterprise and not circumvent regulatory oversight. By any measure, that venture has proven successful. Under the Applicant’s management in less than a year and a half, the business has almost doubled its revenues, increased the number of its movers and helpers from 4-5 to 30, and provided 1,400 moves for the public.

While doing so, the Transferor retained “ultimate control over the operations in order to comply with the rules and regulations and decisions” of the Commission (Applicant’s Exh. 3 at 1). The Transferor also retained the “ongoing right to monitor the activity and decisions” of the manager (Applicant’s Exh. 3 at 4). In fact, Geiger, Deily’s owner, held meetings with David Fix, the manager, to discuss the business. Geiger was involved in filing assessment reports with the Commission and registering his vehicles. Geiger and Fix jointly decided to raise tariff rates and Fix worked with Geiger’s accountant to file the requisite assessments. All moves that Deily made while under the Management Agreement were reflected in those assessments. All revenues received were deposited in a bank account for use in meeting Deily’s obligations. In summary, no attempt was made to engage in a subterfuge or ruse to avoid regulatory oversight.

Moreover, even if this managerial relationship is deemed to be an illegal de facto transfer of operating rights and a subterfuge, the inquiry does not end. One must then determine whether Dafix operated under this arrangement in bad faith, knowing that it was illegal to do so. Brinks, supra. The fact that Dafix retained the services of legal counsel for advice on the subject belies any finding that it acted in deliberate disregard of the law. The dearth of precedent on this subject renders all the more reasonable Applicant’s reliance upon counsel’s advice to believe it was operating lawfully. An applicant’s good faith or lack thereof in committing the alleged illegal activity is an essential element in determining whether such conduct indicates a lack of a propensity to operate legally. Id.

Indeed, this case is more akin to Application of John Casper, Jr., et al., 1989 Pa. PUC LEXIS 184 (1989), where a protestant asserted that the applicant had engaged in an unlawful equipment lease for two years while also providing service to another business beyond the scope of its authority. There, the Commission held the unlawful transportation was not performed willfully or intentionally, but resulted from a bona fide misunderstanding of the law.

Likewise, counsel in the case at bar drafted the Management Agreement and advised the Applicant to sign it and manage the Transferor’s business under its terms.[2] It is not unreasonable for someone to rely upon legal advice to conduct one’s affairs in such an arcane area of the law. The inescapable conclusion, therefore, is that the Applicant, if it is deemed to have acted illegally, did so from a bona fide misunderstanding of the law. As noted in Application of Central Transport, Inc., Docket No. A-00108155 (Order entered June 26, 1992), an applicant’s propensity to operate legally is only one aspect of fitness. “The fitness criteria are intended to protect the public and not to punish the carrier.” Slip Op. at 8. An applicant’s unlawful conduct should clearly demonstrate that allowing the applicant to conduct the proposed service would endanger the public or place the public at some risk by threat of continuing the illegal conduct in the future. No evidence suggests the public requires such protection here.

3. Adverse Public Impact

In new application proceedings, a protestant carries the burden under 52 Pa. Code §41.14(c) to prove the entry of a new carrier will so endanger or impair the operations of existing carriers that, on balance, the granting of authority will be contrary to the public interest. That burden is a heavy one. Evidence consisting merely of a diversion of traffic volume from a protestant is insufficient to sustain this burden of proof. Blue Bird, supra. The Commission is vested with the discretion to determine whether, and the extent to which, competition between public utilities may be permitted. Yellow Cab Co. v. Pa. P.U.C., 161 Pa. Superior Ct. 41, 54 A.2d 301 (1947); John Benkhart & Sons v. Pa. P.U.C., 137 Pa. Superior Ct. 13, 7 A.2d 588 (1939); Collins v. Pa. P.S.C., 84 Pa. Superior Ct. 58 (1924); Application of the Harmony Electric Company, 1 Pa. P.S.C. 75 (1914); and Application of Wilkes Barre Light Company, 2 Pa. P.S.C. 913 (1915). Only the threat of unrestrained and destructive competition, which is inimical to the public interest, precludes granting an application pursuant to Section 41.14(c). Blue Bird, supra. See also, Harmony Electric Company v. Pa. P.S.C., 78 Pa. Superior Ct. 271 (1922); Yellow Cab of Pittsburgh v. Pa. P.U.C., 524 A.2d 1069 (Pa. Cmwlth. 1987), and Seaboard Tank Lines, Inc. v. Pa. P.U.C., 502 A.2d 762 (Pa. Cmwlth. 1985).

A protestant in a proceeding involving the transfer of existing authority, however, is not required to meet the burden of proving under Section 41.14(c), that entry of a new carrier would endanger or impair the operations of existing carriers to such an extent that the granting of the authority would be contrary to the public interest. Although an acquiring applicant is technically a “new carrier,” the operating authority sought to be transferred here is not new authority. The Commission has already determined that a public need exists for the rights to be transferred.

Moreover, in Application of H.E. Shoup, 45 Pa. P.U.C. 371, 373 (1971), the Commission considered the matter of competition to be irrelevant in a transfer proceeding. Likewise, adverse economic impact resulting from increased competition is an insufficient basis upon which to deny a transfer application. Edward R. Simpson, supra; and App. of McNaughton Bros., Inc., supra. For these reasons, the Protestants in the present case do not claim that the Applicant’s entry will so endanger or impair their operations that granting the requested authority will be contrary to the public interest.

For the foregoing reasons, this application is approved. Approval of this application, however, is conditioned upon the Applicant satisfying any and all obligations due and outstanding for payment of Public Utility Commission annual assessments and/or fines.

CONCLSUIONS OF LAW

1. The Commission has jurisdiction over the subject matter and the parties to this proceeding.

2. The Transferor has not abandoned his operating authority.

3. The Protestants have not rebutted the presumption of a continued public need for the requested operating authority.

4. The Applicant has demonstrated the requisite fitness to provide the services sought in this application.

5. Granting this authority to the Applicant will not endanger or impair the operations of existing common carriers to such an extent that, on balance, the granting of authority will be contrary to the public interest.

ORDER

THEREFORE,

IT IS ORDERED:

1. That the Application of Dafix Enterprises, Inc., docketed with this Commission at No. A-00122357, for the transfer of all of the rights of Gary Martin Geiger, t/a Deily Moving & Storage Company, at Docket No. A-00108586, is hereby approved granting the following rights:

To transport, as a common carrier, by motor vehicle, household goods in use: (1) from points in the North Side section of the city of Pittsburgh, the boroughs of Avalon, Bellevue, Ben Avon, Ben Avon Heights, Emsworth and Westview, and Ross Township, Allegheny County, to other points in Pennsylvania within twenty-five (25) miles by the usually traveled highways of the City-County Building in the city of Pittsburgh; (2) between points in the city of Pittsburgh, Allegheny County; (3) from points in the city of Pittsburgh, Allegheny County, to points in the county of Allegheny within twenty (20) miles by the usually traveled highways of the city of Pittsburgh, and vice versa; and (4) between points in the borough of Bellevue, Allegheny County, and within thirty (30) miles by the usually traveled highways of the limits of said borough, excluding the county of Washington, and excluding the right to transport household goods in use for distances in excess of forty (40) miles.

Subject to the following general conditions:

A. That the approval herein given is not to be understood as committing this Commission, in any proceeding that may be brought before it for any purpose, to fix a valuation on the rights to be acquired by Applicant from the present certificate holder equal to the consideration to be paid therefor, or equal to any value that may be placed thereon by Applicant, or to approve or prescribe rates sufficient to yield a return thereon.

B. That Applicant shall not record in its Utility Account 1321-Franchises, any amount representing the rights herein granted, in excess of the actual cost of such rights to the original holder thereof.

C. That the Applicant charge to Account 1341-Other Intangible Property, $220,000.00, being the amount of consideration payable by it for the rights and going concern value attributable thereto in excess of the amount recorded under Condition B above.

2. That the operating authority granted herein, to the extent that it duplicates authority now held by or subsequently granted to the carrier, shall not be construed as conferring more than one operating right.

3. That the Applicant shall not engage in any transportation granted herein until it shall have complied with the requirements of the Pennsylvania Public Utility Code and the rules and regulations of this Commission relative to the filing of insurance and the filing and acceptance of a tariff establishing just and reasonable rates.

4. That upon compliance with the requirements herein, a certificate of public convenience shall be issued to the Applicant evidencing the Commission’s approval of the right to operate as above determined.

5. That the certificate holder shall not transfer, sell or in any way, convey any of its outstanding capital stock to any individual, partnership, corporation or any entity, without the prior filing of an application and approval thereof by this Commission under Section 1102(a)(3) of the Public Utility Code, 66 Pa. C.S. §1102(a)(3).

6. That in the event said Applicant has not, on or before 60 days from the date of service of this Order, complied with the requirements set forth above, this application shall be dismissed without further proceeding.

7. That upon compliance with this Order, the rights granted the Transferor, Gary Martin Geiger, t/a Deily Moving & Storage Company, at Docket No. A-00108586, shall be canceled and the record shall be marked closed.

Date: December 13, 2006

John H. Corbett, Jr.

Administrative Law Judge

Commonwealth of Pennsylvania

Pennsylvania Public Utility Commission

P.O. Box 3265

Harrisburg, Pa. 17105-3265

Gary Martin Geiger,

t/a Deily Moving & Storage Company A-00108586

SUPPLEMENTAL ORDER CANCELING

CERTIFICATE OF PUBLIC CONVENIENCE

BY THE COMMISSION:

It appearing that all the rights granted to Gary Martin Geiger, t/a Deily Moving & Storage Company, under the Certificate of Public Convenience issued at A-00108586, have been transferred to Dafix Enterprises, Inc. at A-00122357 and are now contained under the Certificate of Public Convenience issued to it, and that the Transferor has no other operating authority; and that the matter and things involved having been duly considered by the Commission:

THEREFORE,

IT IS ORDERED:

That the rights authorized to Gary Martin Geiger, t/a Deily Moving & Storage Company, under the Certificate of Public Convenience issued at A-00108586, be and are hereby canceled and all rights, powers and privileges thereby granted shall forthwith cease and terminate.

BY THE COMMISSION:

James J. McNulty

Secretary

(SEAL)

ORDER ADOPTED:

ORDER ENTERED:

-----------------------

[1] A seven month delay between execution of these agreements on April 21, 2005 and the filing of this application on November 14, 2005 does not appear to be excessive or unreasonable, considering the move to new facilities, hiring additional employees and acquiring sufficient revenue to pay the expenses of the business and to prosecute this action.

[2] Counsel also advised the Applicant to submit the Sales Agreement with this application, but without the Management Agreement (N.T. 23-24). Counsel explains that he believed the copy of the Management Agreement was unnecessary, because the application materials that the Commission provided did not request it (N.T. 24). Similarly, Fix believed an equipment lease agreement with Deily was unnecessary, since all of the vehicles were used on behalf of Deily pursuant to the Management Agreement (N.T. 135-36).

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