Full opinion text
MEMORANDUM OF DECISION AND JUDGMENT Before PELL, Circuit Judge, and ESCHBACH and SHARP, District Judges. ESCHBACH, District Judge. The Interstate Commerce Commission, charged under 49 U.S.C. §§ 306-07 with the duty of issuing certificates of convenience and necessity to carriers of goods in interstate commerce, employs a “flagging” or deferral rule in considering applications for new operating authority submitted by established carriers. Under this practice, when an applicant’s fitness has been placed in issue in any formal proceeding or inquiry being conducted by the ICC, final determination and disposition of any application for new authority submitted by that carrier is thereafter automatically stayed until the investigation or inquiry is resolved or terminated. North American Van Lines (NAVL) has had some 31 applications stayed under this flagging rule and now seeks a determination that the rule has been improperly applied to it, that the practice should be enjoined, and that the ICC should proceed with the disposition of its applications notwithstanding the pendency of formal investigations and proceedings involving NAVL now before the ICC. Jurisdiction was laid under 28 U.S.C. § 1336. A three-judge court was convened pursuant to 28 U.S.C. §§ 2325 and 2284. This suit is, to an extent, the outgrowth of an earlier challenge by NAVL to the ICC flagging practice. See North American Van Lines v. Interstate Commerce Comm’n, 386 F.Supp. 665 (N.D.Ind.1974). The factual background and statement of issues presented in that opinion are applicable here as well. Factual Background North American Van Lines transports diverse goods in interstate commerce, subject to approval by the ICC. It is the ICC’s practice to issue precise, limited certificates of convenience and necessity, listing the exact goods to be carried and the origin and destination of the carriage. A sample application, for example, seeks authority to carry “carpet and carpet padding, uncrated, (1) from El Segundo, Calif., to points in Texas, Georgia, South Carolina, and Florida, and (2) from Sparks, Nev., to points in California, Oregon, and Washington.” This type of authority is usually called “new products” authority, since it is generally applied to carriage of newly manufactured goods in transport from the manufacturer to the wholesaler or to the retailers. Since the ICC issues only such product-specific and route-specific certificates, virtually all new business secured by a carrier must be approved by the ICC. A carrier’s business will stagnate unless new certificates of convenience and necessity can be obtained to meet the transportation demands of new customers or new shipping demands of old customers. NAVL also holds three certificates for the transportation of household goods. The ICC regulates the interstate transportation of household goods (domestic furnishings transported when a customer changes residence) under a different regulatory scheme. Wholly different regulations apply to this form of carriage, see 49 C.F.R. pt. 1056 (1975), and the contents of the certificate authorizing carriage are not similar to the narrowly drawn new products certificates. The present dispute over the ICC’s flagging practice as applied to NAVL’s new products applications had its origin in the, ICC’s decision in 1970 to revise its regulations regarding transport of household goods. 35 Fed.Reg. 4754, now 49 C.F.R. pt. 1056 (1975). These regulations set new, stricter standards of performance for carriers of domestic furnishings. The regulations did not (and still do not) set minimum levels of conformity which, if met, would be deemed to be permissible compliance levels. The ICC’s Bureau of Enforcement determined that full 100% compliance was the appropriate conformity standard, such that any shortfall would subject the carrier to discipline. In 1972 the ICC commenced audits of major carriers of household goods, including NAVL. The investigations directed against certain of NAVL’s competitors were terminated, however, when those carriers (in particular Aero-Mayflower Transit Co. and Allied Van Lines) agreed to sign a consent order assuring 100% compliance. NAVL was offered the option of signing this order or subjecting itself to formal investigation. It chose the latter course, protesting that 100% compliance was physically impossible. On September 28, 1972, the ICC commenced the threatened investigation into NAVL’s “fitness.” North American Van Lines, Inc., Investigation and Revocation of Certificates, No. MC-C-7901 [hereinafter referred to as 7901]. The investigation encompassed various aspects of NAVL’s household goods operations, but central to the investigation was the question of acceptable compliance levels under the newly promulgated household goods regulations. Throughout the course of the 7901 proceedings the ICC gave NAVL reason to believe that if it would sign the proffered consent order setting 100% compliance levels, NAVL would be found “fit” and the 7901 proceedings would be terminated. At the time the 7901 proceedings were commenced, NAVL had pending before various hearing officers of the ICC some eleven applications for new products authority which had proceeded to the point that the initial fitness determination had been made, and all that was left to do was to issue the certificates. These certificates were withheld, however, for the reason that “matters concerning applicant’s fitness are in issue in a pending proceeding in No. MC-C-7901, which makes it inappropriate at this time to determine applicant’s fitness to perform the proposed service in conformity with the requirements of the [Interstate Commerce] Act and the Commission’s rules and regulations thereunder.” The practice of staying or “flagging” all of NAVL’s applications for new operating authority was likewise applied to applications which thereafter were presented for determination to the various hearing officers and boards. It appears that since September 8, 1972, the ICC has failed to grant a single application made by NAVL but has instead stayed consideration of each new products application for the duration of the investigations which have been instituted against NAVL. There are now three pending investigations before the ICC involving NAVL. The institution of each investigation has been the occasion for sua sponte orders by the ICC reopening each application proceeding and imposing an additional “flag” on each application proceeding. Thus, NAVL now faces three piggy-backed flags which must be lowered before it can hope to have a final decision in any of its pending application proceedings. The first flag which the ICC has imposed resulted from the initiation of the 7901 investigation proceedings mentioned above. That investigation was announced Septem-. ber 28, 1972; on March 14, 1973 the ICC ordered hearings to be held. On July 9, 1973 hearings were begun before Administrative Law Judge Glennon; the record was closed in October 1973. ALJ Glennon’s ruling was issued June 4, 1974. As to the collateral questions presented, the ALJ found for NAVL on certain questions and against it on others. Those charges which the ALJ found to be true related to tariffs, warehouse space allocation among customers, and estimating techniques. The ALJ specifically found that the nature of these violations did not warrant revocation of NAVL’s certificates; rather, a cease-and-desist order was deemed sufficient. The ICC does not here contend that NAVL has violated any of the cease-and-desist orders. The central issue in the 7901 proceedings was resolved in NAVL’s favor. ALJ Glen-non agreed with NAVL that full 100% compliance with the household goods regulations was impracticable, such that violations of the regulations could not be made out merely upon a showing that an isolated shortfall had occurred. In order to determine feasible compliance levels, the ALJ accepted NAVL’s offer that a field study be conducted in which NAVL’s household goods operations would be audited for the purpose of determining what compliance level could reasonably be demanded. This decision, undermining the Bureau of Enforcement’s efforts to secure voluntary compliance with the 100% compliance level, was handed down June 4, 1974. On June 5, 1974 — the following day — the ICC announced a new and unrelated “investigation” into NAVL’s operations, designated MC-C-8372. This “investigation” concerned various new products certificates held by NAVL. As counsel for the ICC admitted at oral argument, however, these proceedings hardly constitute an “investigation.” Instead, it appears that it is ICC practice to utilize adversary proceedings for the purpose of defining the meaning of certain carriage classifications under which carriers such as NAVL operate. A carrier with existing authority seeks to transport goods which are arguably within the authorized classification, but for which there is no clear guidance from the ICC’s regulations. In lieu of rulemaking, the ICC determines the issue by challenging the carrier in a “declaratory” proceeding. In the case of 8372, for example, one of the “violations” involved was whether NAVL had exceeded its authority by transporting certain lawn mowers. The purpose of the challenge is to determine whether such mowers properly belong to the class “agricultural equipment” or to some other class. Similar “violations” involved in 8372 concerned the carriage of ping-pong tables, pool tables, and crated musical organs. Counsel for ICC admits that the purpose of the 8372 proceedings is to construe the existing regulations, not to seek punishment of NAVL. The relevance of the 8372 proceedings was not made clear, however, until May 13, 1975, when for the first time the ICC indicated that the pendency of these proceedings would constitute grounds for imposing a second flag on all of NAVL’s applications. After the ALJ’s order in the 7901 proceedings had been entered, the Bureau of Enforcement petitioned for review by Division 1 of the ICC. The issues were fully briefed, and NAVL continued to offer a settlement based on the field study approved by the ALJ. On August 10, 1974, the Enforcement Bureau announced its opposition to the offer of settlement, without stating reasons. On August 19, 1974, the ICC ordered ALJ Glennon’s decision to be stayed indefinitely. No reasons were given. Thus, by August 19,1974, numerous NAVL applications were being held in abeyance pending termination of the 7901 proceedings, the 7901 proceedings were being held open by ALJ Glennon’s order directing a field study to determine feasibility levels, and the commencement of the field study was stayed by the ICC. In each instance, the sole reason for staying consideration of the new products applications was that NAVL’s “fitness” was under investigation in the 7901 household goods proceedings, such that it would be “inappropriate” for the ICC to make an independent determination of “fitness” in any of the individual new products application proceedings. It was at this stage that the decision in North American Van Lines v. Interstate Commerce Comm’n, 386 F.Supp. 665 (N.D.Ind.1974) was handed down. At that time some 24 applications were being held in abeyance. The court ruled that while a carrier’s “fitness” is clearly an appropriate criterion to be considered in determining new products applications', and while the ICC may consider the record of parallel proceedings in reaching its determination, the Interstate Commerce Act does not delegate to the ICC “the power to institute a rule withholding all certificate applications any time and every time there is a carrier investigation pending, regardless of [the] facts concerning the individual [new products] application^] and the nature of the complaint at issue in the [fitness] investigation.” 386 F.Supp. at 676 (emphasis in original). “ ‘[F]itness’ in respect to new certificate applications is a case-by-case determination (so long as there is no consolidation of cases).” Id. at 677. The court therefore held that NAVL was entitled to a hearing and determination under 5 U.S.C. §§ 556-58 (Administrative Procedure Act) as to whether it was appropriate to stay the new products applications in light of the 7901 proceedings. ICC was mandated either to issue the certificates in question, or to provide NAVL with a meaningful hearing at which facts relevant to the propriety of issuing the stays could be considered in advance of the decision to stay proceedings. See 386 F.Supp. at 677-78. No appeal was taken from that decision. NAVL responded to this decision by filing a petition on Nov. 21, 1974 seeking issuance of the six informally stayed applications and by filing petitions for reconsideration of the 18 formally entered stays. The petitions for reconsideration incorporated by reference the ruling in 386 F.Supp. 665, and sought to dissolve the stay in order to have a hearing on the propriety of applying the flagging practice. On December 20, 1974, the ICC ruled against NAVL’s request that the six informally stayed applications be issued, and reopened each application proceeding for a determination as to whether flagging was appropriate. NAVL submitted a lengthy brief setting forth many of the facts the court had found to be relevant to a flagging determination. As for the petitions for reconsideration of the 18 formally stayed applications, the ICC on Jan. 2, 1975 denied the petitions on the grounds that NAVL had not shown in its petitions seeking a hearing on the flagging issue that it was entitled on the merits to have the stays lifted. This suit was filed Feb. 26,1975. At that time the ICC’s blanket denial of NAVL’s motion for reconsideration of the 18 formally stayed applications presented NAVL with administratively final determinations formally adopting the flagging practice, At this time, the six applications subject to the mandate in 386 F.Supp. 665 were still under reconsideration by the ICC as to the propriety of employing the flagging rule.. New applications during this period continued to be stayed, however, without hearing or factual determination as to the propriety of such a stay. On March 5, 1975, the logjam of stayed applications appeared to break at last, as the ICC lifted its stay in the 7901 docket and approved ALJ Glennon’s findings in the household goods investigation. 121 M.C.C. 126. The only modification of the order was that the field audit to determine feasibility levels was to be conducted jointly by NAVL and the ICC, rather than by NAVL alone. It was NAVL’s understanding at this point that the 7901 proceedings, originally cast as a “fitness investigation,” had now been transformed into a cooperative fact-finding proceeding, similar to fact-finding in preparation for rule-making, whereby the ICC could set feasible compliance levels for its household goods regulations. Accordingly, NAVL filed on April 9, 1975, a petition for clarification of the March 5 order, asking that the status of the numerous stayed new products applications be clarified. On April 19, however, the ICC responded thusly: “[NAVL’s] pending application proceedings are being held open for further consideration of [NAVL’s] finness after final determination of [7901]; that in its present posture, [7901] is not administratively final; and that, accordingly, it is inappropriate at this time to determine [NAVL’s] fitness.” On May 1, 1975, NAVL filed a second petition for clarification, asking exactly what it could do to have its new products applications considered, and suggesting the possibility of limited-term certificates during the administrative pendency of 7901. This second petition was denied on May 13, 1975, the ICC ruling that so long as the fitness of a carrier was under investigation, no new certificates of convenience and necessity could be issued. The ICC also noted that more than 7901 was involved, since the declaratory 8372 proceedings were likewise pending, and there had been an adverse determination in one of NAVL’s new products applications. Without any prior indication that the issue was to be addressed in its response to NAVL’s petition for clarification, the ICC sua sponte ruled that all of NAVL’s application proceedings were now subject to a second flag on account of the pendency of the 8372 proceedings. On June 2, 1975, the ICC sua sponte reopened the six application proceedings which had been informally stayed and imposed the second (8372) stay on them. No prior notice or opportunity for hearing was given, and the order imposing the stay contained no findings of fact as to the need for or propriety of issuing the second stay. An order formally imposing the second stay on the 18 orders previously stayed was entered June 17, 1975. NAVL’s response to these developments was to file on May 21, 1975 a plenary petition under Rule 102 (49 C.F.R. § 1100.102 (1975)) under the 7901 docket, but embracing all pending application proceedings, the 8372 proceedings, and the Sub-No. 170 proceedings. In this petition, NAVL gave assurances of compliance with reasonable performance criteria under the household goods regulations and invited an audit of NAVL’s operations in order to demonstrate good faith and effective compliance with those regulations. NAVL also suggested that should the audit show interim compliance, the ICC should lift the stays of its applications and issue either regular or limited-term certificates. The requested audit was in fact conducted by the ICC during July and August, 1975. At this point, then, NAVL could expect that its Rule 102 petition, with the attendant audit, might close the 7901 proceedings, or at least serve to demonstrate “fitness” under 49 U.S.C.A. § 307, and that the 8372 proceedings, in which the record had been closed April 15, 1975, might reach conclusion shortly. This did not happen. Instead, on September 23, 1975, the ICC entered an order in the 7901 docket, apparently in response to the Rule 102 petition, “recalling” all outstanding applications and reopening the Sub-No. 170 proceedings. The ruling did not expressly deal with the 8372 proceedings. The ICC reiterated its position that when any investigation proceeding is pending, the applicant’s “fitness” is in issue, and that “fitness” is a criterion in any application proceeding. Since it is more efficient to determine fitness in a single proceeding, and since a carrier’s fitness as revealed in all pending proceedings is relevant to each proceeding, the fitness investigation should first proceed to termination before individual applications may be acted upon. The ICC then determined that the Sub-No. 170 proceedings should be reopened since serious questions as to NAVL’s fitness had been raised there, and that every pending application should be made subject to a third stay. The Commission indicated, however, that a determination in Sub-No. 170 might well settle the fitness question presented in all investigation proceedings. No mention was made of the results of the recently completed audit of NAVL’s operations. Also, no notice had been given that the ICC intended to use the Rule 102 petition as a vehicle for imposing a stay based on the sua sponte reopening of the Sub-No. 170 proceedings. NAVL petitioned for reconsideration of this order, arguing that the imposition of the stay had been made without notice or hearing, that the decision was substantively wrong in that it failed to take into account the ICC’s own audit of NAVL’s operations, and that in any event it was inappropriate to stay the applications simply because a fitness investigation was pending. NAVL also requested limited term certificates as an alternative remedy, and suggested that the ICC accept a settlement offer. By this offer, NAVL would agree to sign a cease- and-desist order in the household goods matter, whereby NAVL would agree to maintain 90% compliance. The 90% figure was drawn from a litigation settlement between the ICC and Global Van Lines, whereby Global agreed to a 90% compliance level. By an order dated December 22,1975, the ICC denied NAVL’s petition. It reaffirmed its prior holding that so long as “fitness” is involved in any pending proceedings, no new products applications may be processed. The ICC also rule that as to “notice,” since NAVL by then must have known that the ICC was likely sua sponte to impose stays, it had actual notice of the practice. As for NAVL’s opportunity for a hearing, the ICC explained that it had ample opportunity in the case now before this court to take advantage of a hearing on the merits. Finally, and again without warning, the ICC sua sponte decided to rescind its earlier decision in the 7901 docket agreeing to the joint field study of compliance levels in household goods operations. The results of the field audit undertaken in July and August 1975 were not mentioned. Finally, the ICC found it not to be “appropriate” to extend the terms of the “Global Settlement” to NAVL. Instead, 7901 was reopened and consolidated with Sub-No. 170. Further hearings in Sub-No. 170 were ordered on the question of fitness. No mention was made of the 8372 proceedings. It is NAVL’s contention that on these facts, the ICC has “unlawfully withheld or unreasonably delayed” consideration of its various new products applications, within the meaning of 5 U.S.C. § 706(1). The ICC’s “Flagging” Policy The Interstate Commerce Commission is required by 49 U.S.C. § 307 to make certain determinations before a carrier’s application for a certificate of convenience and necessity may be approved. First, the applicant must be found “fit, willing, and able properly to perform the service proposed.” Next, the carrier must be found to be “fit, willing, and able ... to conform to the provisions of [the Interstate Commerce Act] and the requirements, rules, and regulations of the Commission thereunder.” Finally, the proposed service must be found to be warranted by the public convenience and necessity. These three requirements, the first two of which require scrutiny of the applying carrier’s fitness, are explicit statutory criteria. 49 U.S.C. § 307. The ICC agrees, and considers each criterion separately. See Commission’s Order in 7901 (entered September 23, 1975). In each application proceeding here on review, the ICC made favorable findings of operational fitness (ability to perform the proposed service) and of public convenience and necessity (need for the proposed service). It is the ICC’s contention, however, that NAVL’s fitness, willingness, and ability “to conform to the provisions of [the Interstate Commerce Act] and the requirements, rules, and regulations of the Commission thereunder” cannot be sufficiently made out in any particular application proceeding so long as a general fitness investigation involving NAVL is elsewhere pending. This rule has never been promulgated under formal rulemaking procedures, 5 U.S.C. § 553 or published pursuant to 5 U.S.C. § 552; hence, the first task is to determine exactly what the ICC’s flagging rule is. There is, of course, no requirement that an agency formulate its substantive rules by the rulemaking process; a case-by-case or adjudicative approach is permissible. Securities & Exch. Comm’n v. Chenery Corp., 332 U.S. 194, 203, 67 S.Ct. 1575, 1580, 91 L.Ed. 1995, 2002 (1947). The most extensive explanation of the flagging rule appears in the ICC’s order of September 23, 1975, in the 7901 docket: “[T]he issue of a carrier’s fitness involves two separate considerations, (1) the applicant’s fitness, willingness and ability to perform a particular operation (operational fitness), and (2) its fitness, willingness, and ability to conform to the Act and the Commission’s rules and regulations thereunder. . . . [W]hile the issue in (1) may involve matters related only to a specific proceeding, those in (2) constitute a general issue which can be resolved by consideration of its status as revealed through the records in all its pending proceedings. . . . [I]n the instance where this second overriding aspect of a carrier’s fitness has been raised as an issue in a particular case . the question of a carrier’s fitness, willingness, and ability to conform its operations to lawful requirements is a matter that relates to all its pending proceedings and this issue, by statute, must be resolved before any certificate may be issued. . [I]t is a long-established Commission policy ... to withhold issuance of new authority ... to any applicant while such carrier’s fitness is under investigation in a formal proceeding. . . . ” It is thus the ICC’s practice, whenever a formal investigation involving a carrier’s fitness is commenced, to quickly disseminate that fact to the various boards and hearing officers considering new operating applications, and for those boards and officers to withhold final certification until the fitness question is resolved. The flagging policy thus contemplates a certain benign delay, contrary to the ICC’s usual policy favoring speedy processing of applications, cf. 49 C.F.R. §§ 1100.45-1100.54 (1975), but serving arguably plausible goals of administrative efficiency. In evaluating the application of this policy to NAVL’s applications, two precepts must be kept in mind. First, as a general matter, 5 U.S.C. § 558(c) requires: “When application is made for a license required by law, the agency, with due regard for the rights and privileges of all the interested parties or adversely affected persons and within a reasonable time, shall set and complete proceedings . . . .” (emphasis added). The requirement of timely processing of license applications is complemented by the relief provisions of 5 U.S.C. § 706(1) (“compel agency action unlawfully withheld or unreasonably delayed”). Thus, a deliberate policy of institutionalized delay must be closely scrutinized, and the purported justifications tested against the actual practice employed. Secondly, there is great potential for abuse where a criterion for receiving a public license is an applicant’s willingness to obey the agency’s directives. A company may indeed be unwilling to conform to an unreasonable regulation, and may refuse to consent to the agency’s insistence of compliance, in order to create a genuine controversy ripe for judicial review under the Administrative Procedure Act. It would be unseemly to punish as “unfit” a company whose only misstep was its temerity in seeking judicial review of agency decision-making. Likewise, where the agency utilizes investigation proceedings in lieu of the rulemaking process as a means of construing existing regulations, it would seem unjustified to characterize the company’s participation in such declaratory proceedings as evidence of “unfitness.” The Court’s Jurisdiction Title 28 U.S.C. § 1336 provides that district courts have jurisdiction of actions “to enforce, enjoin, set aside, annul or suspend . any order” of the ICC. Section 1336 jurisdiction is usually governed by the provisions of 28 U.S.C. §§ 2321-25. North American Van Lines v. ICC, 386 F.Supp. 665, 680 (N.D.Ind.1974). Since plaintiff seeks in part an injunction “restraining the enforcement, operation or execution . of any order,” 28 U.S.C. § 2325, jurisdiction rests with a three-judge court. Section 1336 applies to review of “final” orders of the ICC. Technical finality under 49 U.S.C. § 17(9) requires that plaintiff have first petitioned the ICC for rehearing or reconsideration of the order sought to be reviewed. In this case, each stay order has been reconsidered by the ICC under the procedures provided by 49 C.F.R. § 1100.101 (1975). Likewise, the propriety of the stay orders has repeatedly been reheard by the ICC on NAVL’s numerous petitions for clarification in the 7901 docket, on NAVL’s Rule 102 Petition in the 7901 docket, and on the formal petitions for reconsideration of orders in the 7901 docket refusing to lift the stays entered in the various individual application proceedings. The imposition of the stays is not only final in the technical sense, but in a practical sense as well. NAVL has sought relief from the stays in every manner allowed by the Commission: formal petitions for reconsideration filed in each application proceeding, formal petitions for reconsideration and clarification filed in the investigation proceeding, and plenary petitions filed under Rule 102 to consider the precise question presented in this suit. Although a stay order is not a final adjudication of the merits, but rather is in the form of an interlocutory order, the “finality” requirement of 28 U.S.C. § 1336 is met, and the order is reviewable, if the order is “final” in its general sense — “sufficiently final to be appropriate for judicial review.” North American Van Lines v. ICC, supra, 386 F.Supp. at 681, and cases there cited. And since 5 U.S.C. § 706(1) provides a remedy for administrative action unlawfully withheld or unreasonably delayed, the withholding of certificates and the purposeful delay in processing applications must at some point be judicially reviewable if Section 706(1) is to have effect. That point is reached, as here, where the decision to delay or withhold action has become concrete, and where the agency’s firm commitment to the decision is evidenced by affirmative actions on its part. Nor is the ICC’s practice of deferring decision in application proceedings a matter “committed to agency discretion by law,” 5 U.S.C. § 701(a), and thus exempt from judicial review. Commitment by law of an issue to discretionary agency determination “is a very narrow exception. . The legislative history of the Administrative Procedure Act indicates that it is applicable in those rare instances where ‘statutes are drawn in such broad terms that in a given case there is no law to apply.’ ” Citizens to Preserve Overton Park, Inc. v. Volpe, 401 U.S. 402, 410, 91 S.Ct. 814, 820, 28 L.Ed.2d 136, 150 (1971), quoting S.Rep. No.752, 79th Cong., 1st Sess. 26 (1945); Secretary of Labor v. Farino, 490 F.2d 885, 888-89 (7th Cir. 1973). Title 49 U.S.C. § 307(a) directs that a certificate “shall be issued” if the applicant is found fit; “otherwise such application shall be denied.” The statute does not, by its terms, commit to agency discretion the decision of whether it will act upon the application or not; rather, the ICC is charged with the duty of granting or denying the applications, and in applying reviewable statutory criteria of fitness in rendering its decision. Of course, the ICC may well determine that application proceedings should, in individual cases, be stayed because of the pendency of a fitness investigation involving the carrier. A carrier’s fitness may be placed in such doubt by virtue of findings made in an investigation that the public interest would be best served by withholding new operating authority until creditable assurances have been made that all violations have been remedied, and the carrier’s fitness rehabilitated. The cross-relation of such a fitness investigation to the individual new authority applications involves complex questions of fact and law. The ICC’s superior expertise and experience in evaluating such cross-relevance deserves proper judicial deference. In this sense, the ICC has considerable discretion in determining whether and when to stay pending application proceedings. But judicial deference is not complete in this area, and agency discretion is not unfettered. Unlike a matter truly committed to agency discretion by law, an arbitrary refusal by the ICC to consider an application is reviewable. The distinction to be made is that where the governing statute commits the matter to agency discretion, there can be no judicial review; but where the nature of the matter requires administrative expertise, agency discretion, while broad, is bounded by the rules of review set forth in 5 U.S.C. § 706. In the latter case, agency discretion is not complete, but exists by virtue of a form of statutory “commitment” which presupposes judicial review that is subject to standards of judicial deference as codified in Section 706. Since we do not find that the ICC by statute is clothed with the discretion whether or not to process applications, we find that its delays in processing NAVL’s applications are reviewable under the Administrative Procedure Act. See generally North American Van Lines v. ICC, supra, 386 F.Supp. at 675-77. Scope of Review Under 5 U.S.C. § 706(1) the reviewing court may “compel agency action unlawfully withheld or unreasonably delayed.” The “agency action” involved in this suit which has been withheld or delayed is the final determination of NAVL’s applications. “Unlawful,” as the term is used in Section 706(1), includes but is not limited to the meaning given in Section 706(2): “(A) arbitrary, capricious, an abuse of discretion, or otherwise not in accordance with law; . (D) without observance of procedure required by law.” If some or all of the applications have been unlawfully subjected to flagging, then the delay suffered by NAVL would be unreasonable as well. But in addition, even if some or all of the stays cannot be deemed to be unlawful, the question remains whether NAVL is entitled to relief under Section 706(1) requiring the court to direct the ICC to conclude the application proceedings with dispatch and, by implication, to take other steps which are prerequisite thereto. Cf. NLRB v. J. H. Rutter-Rex Mfg. Co., 396 U.S. 258, 266 & n. 3, 90 S.Ct. 417, 421, 24 L.Ed.2d 405, 412 (1969). Although this suit is in the form of a review of ICC actions on 18 separate applications (under the original complaint) and additional applications (under the supplemental complaint), identical questions as to the lawfulness of the flagging policy in itself are raised in each application proceeding. NAVL charges that the ICC has no authority to establish a flagging rule, that even if the ICC has the power to declare such a rule, the ICC has failed to properly promulgate the rule as required by the Administrative Procedure Act, and that even if properly promulgated, the rule has been unlawfully applied to NAVL’s application proceedings. The Flagging Practice as a Rule Under 5 U.S.C. § 553 It is NAVL’s contention that the flagging practice may not properly be applied to the new products applications since the flagging rule has never been promulgated under the provisions of 5 U.S.C. § 553. In fact the flagging rule has never been the subject of advance notice, followed by responses from interested persons and by publication described in that section. Whether or not the flagging rule is the type of substantive regulation governed by Section 553, it is settled that an agency may choose to announce such a rule in the course of adjudication rather than by formal rulemaking. SEC v. Chenery Corp., 332 U.S. 194, 202-03, 67 S.Ct. 1575, 1580, 91 L.Ed. 1995, 2002 (1947). In that case, the Court reasoned that in the course of an adjudication, an agency might face a new problem not covered in existing regulations, or “the agency may not have had sufficient experience with a particular problem to warrant rigidifying its tentative judgment into a hard and fast rule,” or where the problem is “so specialized and varying in nature” that a simple rule would be inadequate. The nature of the flagging rule is not among these categories. Yet the ICC relies on Chenery’s rule that the decision whether to proceed with rulemaking or adjudication is primarily a matter of agency discretion. Id. at 203, 67 S.Ct. at 1580, 91 L.Ed. at 2002. The Chenery rule has been much criticized, see, e. g., C. J. Peck, A Critique of the National Labor Relations Board’s Performance in Policy Formulation: Adjudication and Rule-Making, 117 U.Pa.L.Rev. 254 (1968); Bernstein, The NLRB’s Adjudication-Rule Making Dilemma Under the Administrative Procedure Act, 79 Yale L.J. 571 (1970). The Supreme Court has not yet overruled Chenery, however; consequently, we cannot say that it was unlawful per se for the ICC to adopt its flagging practice by announcement in an adjudicatory proceeding. We must note, however, that many of the concerns voiced by the plurality in NLRB v. Wyman-Gordon Co., 394 U.S. 759, 89 S.Ct. 1426, 22 L.Ed.2d 709 (1969), are applicable here. One of the dangers with adjudicatory rulemaking is that the litigant will be prejudiced by the application of a rule of which it had no advance warning. See Chenery, supra at 203, 67 S.Ct. at 1580, 91 L.Ed. at 2002. This danger is lessened where the agency abides by the requirements of 5 U.S.C. § 554(b) by timely notifying the applicant for a license of “the matters of fact and law asserted” as relevant to the determination of the license application. See Wyman-Gordon, supra, 394 U.S. at 771 n. 3, 89 S.Ct. at 1432, 22 L.Ed.2d at 718. (Black, J., concurring in the result). The Flagging Practice as a Rule Under 5 U.S.C. § 552 “Rules of agency organization, procedure, or practice” are exempted from the notice and hearing requirements of Section 553. 5 U.S.C. § 553(b). Rules of procedure must, however, be first published in the Federal Register, and “[ejxcept to the extent that a person has actual and timely notice of the terms thereof, a person may not in any manner be required to resort to, or be adversely affected by, a matter . . . not so published.” 5 U.S.C. § 552(a)(1). The Flagging rule has never appeared in the Federal Register. The ICC urges that NAVL has had actual knowledge of the flagging rule at all times relevant hereto. Actual knowledge of the rule is sufficient if the rule is properly a Section 552 rule. Kessler v. FCC, 117 U.S.App.D.C. 130, 326 F.2d 673, 689 (1963). In Kessler, the FCC ordered a freeze on all new filings for licenses, in that the agency had determined that existing regulations were inadequate. The Kessler freeze was properly published in the Federal Register, see 326 F.2d at 682; and applicants who filed during the time between entry of the freeze order and its publication were found to have had actual knowledge of the contents of the order. Id. at 689. The Kessler rule finds only limited application here, however, in that the Kessler court had before it the concrete expression of the rule as published in the Federal Register; here, we have various explanations of the flagging practice as articulated by the ICC in its orders, explanations which are not completely consistent with one another. The ICC has not submitted any document or publication, other than the orders here under review, which sets forth the scope and requirements of the flagging practice. We therefore find that NAVL’s knowledge of the rule, if any, is no greater than this court’s. Validity of the Flagging Rule Supposing that a disreputable carrier committed such serious violations of the Interstate Commerce Act and the ICC’s regulations thereunder that the carrier’s very willingness to conform its behavior to lawful requirements was placed in issue: would the ICC be required to routinely process the carrier’s applications for new operating authority during the pendency of a formal fitness or revocation proceeding? Plainly not. North American Van Lines v. ICC, supra, 386 F.Supp. at 676. A rule allowing withholding of decision, in appropriate cases, surrounded with procedural safeguards required by the Administrative Procedure Act, would be fully in harmony with the purposes of the Interstate Commerce Act. The ICC urges that the flagging rule is a discretionary rule, applied only after a consideration of the cross-relation between the individual application proceeding and the outstanding fitness investigation. Indeed, in its most recent order in the 7901 docket (Dec. 22,1975), the ICC contended that “the Commission considers whether an application proceeding should be held open pending fitness [determination] at the time it considers the evidence in the particular case.” The record is barren of any support for this contention. In each order staying decision of NAVL’s applications, the only “findings” related to the flagging rule are as follows: “It appearing, That matters concerning the fitness of applicant are in issue in a pending proceeding in No. MC-C-7901, which makes it inappropriate here to determine applicant’s fitness properly to perform the proposed service in conformity with the requirements of the Interstate Commerce Act and the Commission’s rules and regulations thereunder.” Despite the repeated requests of this court at pre-trial conference that the ICC locate and submit that part of the record in any of the application proceedings in which the hearing officer or review board heard evidence as to the cross-relevance of the 7901 proceedings to the application proceeding under consideration, no such record has been forthcoming. The inference that the ICC’s flagging rule is in fact an automatic rule is further supported by the ICC’s own explanation of the rule: “[I]t is established Commission policy to withhold issuance of new authority to any applicant while said carrier’s fitness is under investigation in a formal proceeding; that, in such instances, it is not determinative that the application is unopposed or that the applicant has been previously found fit; and that once an investigation proceeding is instituted, all new authorities that have not been issued are withheld pending the final determination of the investigation proceeding.” Order of June 17, 1975, denying reconsideration of the stays imposed in 18 application proceedings. It will be noted that by this order the flagging rule is made applicable to any “investigation proceeding,” not merely a fitness investigation. It was in this order that the ICC first indicated that the pending “investigation” in 8372 (declaratory proceedings as to the classification of lawn mowers, etc.) was reason to impose a second flag. The ICC order denying clarification of the ICC’s order of March 5, 1975 (in which the ICC approved ALJ Glennon’s decision) also supports the inference that the flagging rule is applied automatically, if not blindly. After the ICC had approved the ALJ’s decision, the 7901 proceedings were in this posture: the Bureau of Enforcement’s position that 100% compliance was required had been finally rejected; NAVL’s proposition had been accepted that the regulations contemplated a conformity level set at feasibility levels of compliance; and NAVL’s offer to participate voluntarily in an audit of its operations to determine such a level had been accepted. All other charges against NAVL had either been resolved by cease-and-desist orders or had been dismissed. Only the fact that the 7901 proceedings remained technically open stood in the way of final determination of NAVL’s new products applications. Yet in its order of April 18, 1975, the ICC noted tersely that “the [7901] proceeding is not administratively final; and that, accordingly, it is inappropriate at this time [etc.] We conclude that the stays imposed on NAVL’s application proceedings by virtue of the pendency of the 7901 and 8372 proceedings were issued solely on the basis of an automatic rule requiring the withholding of action whenever an investigation involving the carrier was technically unresolved. In North American Van Lines v. ICC, supra, 386 F.Supp. at 676-77 & n.2, it was determined that the Interstate Commerce Act did not delegate to the Commission the power to declare by a rule that all certificate proceedings are stayed whenever an investigation proceeding involving the carrier was instituted. At that time the ICC fully agreed with this proposition, admitting that “the Commission must apply its expertise in determining whether the issues involved in the formal investigation are sufficiently serious to require the Commission not to make any more fitness findings in the carrier’s application proceedings until the issues under investigation have been resolved.” Id. at 677 n. 2. The court ruled that “ ‘fitness’ in respect to new certificate applications is a case-by-case determination (so long as there is no consolidation of cases), and must ultimately be litigated in each application proceeding.” Id. at 677. Within the limits of its discretion, it may find that the fitness investigation is indeed relevant to the determination of pending applications; it may determine that the potential harm discernible from the yet unproven charges in the fitness investigation outweigh the public’s need for immediate service; it may weigh the possible delay to the public against the possible harm to the public if the application is not stayed; but it must exercise its expertise, it must exercise its discretion. It is true that the Commission may validly adopt rules which define in advance particular elements of fitness of carrier applicants or, as is affirmed by the court in the prior case, state relevant circumstances in which certificate application proceedings will be stayed pending the outcome of investigation proceedings. It may not, however, substitute a blind rule staying each and every application so long as any investigation whatever, involving the same carrier, is pending. Id. at 676-77. The decision in North American Van Lines v. ICC was not appealed. Although there have been few cases dealing with an agency’s attempt to withhold adjudicatory action by application of a self-imposed rule, that rests on other proceedings, the cases reviewing the National Labor Relations Board’s “blocking charge rule” are analogous. Under 29 U.S.C. § 159(c)(1), the NLRB is charged with the responsibility of processing petitions for decertification of a bargaining representative. The NLRB is required to conduct a hearing as to whether a question of the union’s majority status exists, and if such status is in fact questionable, the NLRB shall conduct a new election. However, the NLRB has formulated a “blocking charge rule,” see Annot., 18 A.L.R.Fed. 420 (1974), by which it refuses to proceed with the determination of majority status if an unfair labor practice based on 29 U.S.C. §§ 158(a)(2), (a)(5), or (b)(3) has been filed. Further consideration of the decertification petition is stayed until the merits of the unfair labor practice charge have been determined. The rationale underlying this practice is that unfair practices may have improperly poisoned the employees’ minds against the union, such that it would not be proper to hold a decertification election until the effects of the unfair practices had become attenuated. To compare the NLRB and ICC practices: the NLRB (ICC) has a statutory duty to process and act upon decertification petitions (applications). While such petition (application) is pending, a union (the Bureau of Enforcement) files an unfair practice charge (charge of unfitness) which is immediately set for investigation. The charges contained in the unfair practice charge (unfitness complaint) may be relevant to the decertification (application) proceedings, such that it might be inappropriate to proceed in haste in the decertification (application) proceedings. The NLRB (ICC) policy is to stay the decertification (application) proceedings until the unfair practice (fitness) investigation is concluded. In Templeton v. Dixie Color Printing Co., 313 F.Supp. 105 (N.D.Ala.1970), aff’d, 444 F.2d 1064 (5th Cir. 1971), the court ordered the NLRB to proceed with its consideration of the decertification petition notwithstanding the pendency of an unfair practice charge. “The union cannot avoid the consequence of the loss of its majority status by the mere filing of unfair labor practice charges against the employer. Nor does the filing of such unproved charges relieve the Board of its statutory duty to consider and act on a petition for decertification.” 444 F.2d 1069 (per Clark, Associate Justice). The Templeton rule was further explained in Surratt v. NLRB, 463 F.2d 378, 381 (5th Cir. 1972): “[T]he Board should not be allowed to apply its ‘blocking charge practice’ as a per se rule without exercising its discretion to make a careful determination in. each individual case whether the violation alleged is such that consideration of the election petition ought to be delayed or dismissed. We are of the view that the record before us clearly demonstrates a failure to give that careful consideration to the petition of the employees for the decertification election.” See also NLRB v. Gebhardt-Vogel Tanning Co., 389 F.2d 71, 75 (7th Cir. 1968); NLRB v. Minute Maid Corp., 293 F.2d 705, 710 (5th Cir. 1960). In this case, the ICC stays all of a carrier’s pending license application proceedings upon the filing of an investigation by the Bureau of Enforcement against the carrier. The stays are imposed immediately upon the filing of the investigation, whether or not the investigation is truly a fitness investigation, and are not lifted until the investigation has been fully terminated or dismissed. The stays are automatically imposed whether or not the charges in the investigation are proved, unproved, or disproved.. The decision to impose the stay is made ex parte, without the formal taking or recording of evidence relevant to the decision, and without furnishing factual findings upon which a reviewing court could determine that the ICC had in fact exercised its discretion within permissible limits. We conclude that the ICC’s statutory duty under the Interstate Commerce Act to determine a carrier’s fitness in an application proceeding may not be fulfilled by the expedient of promulgating an informal rule automatically withholding a fitness determination whenever an investigation involving the carrier is filed by the ICC’s Bureau of Enforcement. We conclude that such a rule is arbitrary within the meaning of 5 U.S.C. § 706(2)(A), that it is in excess of statutory authority under 49 U.S.C. § 307 within the meaning of 5 U.S.C. § 706(2)(C), that it therefore is unlawful within the meaning of 5 U.S.C. § 706(1). The delay attendant upon the application of the rule is not reasonable, within the meaning of 5 U.S.C. § 558(c) and 5 U.S.C. § 706(1). Individual Applications of the Rule NAVL requests that we now look to the individual applications of the rule and determine that the imposition of the stays was “arbitrary, capricious, an abuse of discretion, or otherwise not in accordance with law,” 5 U.S.C. § 706(2)(A). NAVL urges, and the record fairly supports the finding, that in each application proceeding all determinations necessary for a grant or denial of the individual license had been made of record, but the final issuance had been withheld because of the automatic imposition of the improper stays. Our option at this point is either to remand each application to the ICC in order to allow it to exercise its discretion by developing a factual underpinning for its stay decision, or to review at this point the propriety of the stays themselves. Since the decision to stay an individual proceeding involves the interpretation of 49 U.S.C. § 307, we believe a limited form of review as to the propriety of each stay is warranted. The statutory fitness criterion in issue here is a carrier’s fitness, willingness, and ability “to conform to the provisions of [the Interstate Commerce Act] and the requirements, rules, and regulations of the Commission thereunder.” 49 U.S.C. § 307(a). In imposing the stay in a particular case, the ICC implicitly determines that the existing record in the relevant fitness investigation could in some manner relate to the carrier’s willingness to abide by legal requirements. This court has now had the benefit of extensive examinations of the record, briefing and argument as to the nature of the 7901 proceedings, and has the benefit of the ICC’s own rulings in that docket. Were the nature of those proceedings unclear, or the status of the charges ambiguous, we would hesitate to determine whether such charges might support a finding of unfitness. But the actions of the ALJ and the ICC itself, ruling on every charge lodged against NAVL, present a firm record from which this court can determine whether the ICC’s stay orders were arbitrarily maintained in view of developments in the 7901 docket. Likewise, the nature of the 8372 proceedings, as revealed in the papers submitted to this court is unambiguous as counsel for the Commission agreed at oral argument. The 7901 proceedings involved a central charge that NAVL had violated the household goods regulations by failing to meet 100% compliance levels, and certain unrelated charges dealing with household goods. The unrelated charges were dismissed in part, and those found to be true were remedied by a cease-and-desist order. ALJ Glennon specifically found that the gravity of those charges was not sufficient to warrant revocation of certificates. As to the central charge, the administrative law judge rejected the Bureau of Enforcement’s contention that a violation of the household goods regulations could be made out upon a showing that the carrier had failed to meet the 100% compliance level insisted upon by the ICC. The ICC affirmed the ALJ’s decision in every respect, modifying the relief only in that the proposed field study would be conducted jointly by NAVL and the ICC. The field study was to be a cooperative venture whereby the ICC could formulate a rule as to acceptable compliance levels by studying NAVL’s household goods operations. The ICC decision was entered in this case on March 5, 1975. None of the stay orders entered on account of the 7901 proceedings relied upon the adverse findings in some of the unrelated charges. Each stay was entered because the decision as to the main charge was not yet administratively final. The 8372 proceedings, by admission of counsel for the ICC, are declaratory proceedings in which the meaning of certain classification terms is determined in an adversary hearing rather than in a formal rulemaking process. The 8372 proceedings were initiated by the Bureau of Enforcement in order to determine the proper carriage classification for such items as lawn mowers, ping-pong tables, pool tables, and musical organs. The 8372 investigation was filed by the ICC the day after ALJ Glennon ruled against the ICC on the question of 100% compliance. There has been no final decision in this proceeding. The question presented is whether the pendency of either of these proceedings may, as a matter of law, be construed to involve a carrier’s “fitness” for purposes of 49 U.S.C. § 307. We conclude that by March 5, 1975, no question of fitness was involved, and that the refusal of the ICC to process the applications then stayed was arbitrary, capricious, an abuse of discretion, and in excess of statutory authority. A carrier’s “fitness” properly involves a finding that it is willing to act in accordance with the dictates of law, and that it is able to so behave. 49 U.S.C. § 307(a). NAVL’s ability to conform to the 100% compliance levels was placed in issue in the 7901 proceedings. The 100% requirement was repudiated by the ICC itself. Thus, NAVL’s professed inability to meet 100% levels cannot provide a basis for finding it unable to conform its conduct to lawful requirements. The ICC has not promulgated a new compliance level. There is thus no “requirement, rule, or regulation of the Commission” in existence which NAVL is unable to meet. There is no contention raised in the 8372 proceedings that if the carriage classifications are decided adverse to NAVL, it will be “unable” to cease hauling the particular items. The central issue, however, is not NAVL’s inability, but its supposed unwillingness to abide by the ICC’s rules and regulations. Such unwillingness might be shown by evidence of past uncorrected violations denoting an indifference by the carrier towards lawful standards of behavior, or a pattern of neglect of its duties towards the public that betokens a refusal voluntarily to meet its duties under the Interstate Commerce Act. We hold, howevér, that resort by a carrier to the courts may not lawfully be made evidence of an unwillingness to abide by the Commission’s rules. Nor may a carrier’s utilization of the ICC’s internal appeals processes be counted as evidence of such unfitness. True, where the underlying regulations are sustained in court the seriousness of the violations may remain. But where the rule supposedly violated has been repudiated by the ICC itself, the fact that the carrier chose to challenge the rule rather than acquiesce in it is not evidence of unfitness within the meaning of 49 U.S.C. § 307. Likewise, when the Bureau of Enforcement involves a carrier in a declaratory proceeding, there is no inference of an unwillingness to conform to the rules and regulations of the Commission. The purpose of the declaratory proceeding is to determine what the rule shall be. It is unclear just how a carrier can be said to have violated a rule not yet determined, or how it could be deemed to be unwilling to obey lawful requirements at a time when the requirements had not yet taken shape. After March 5,1975, the 7901 proceedings evolved into an investigation in the nature of a declaratory proceeding. Certainly it remains possible that the audit of NAVL will not only set a feasible compliance level, but will in the same stroke uncover violations of that new compliance level. But since there is as yet no “requirement, rule or regulation” by the Commission as to acceptable compliance levels, it would be absurd to determine in advance that NAVL has been unwilling to meet the yet-to-be-fixed compliance levels. We are therefore unable to find any evidence of an unwillingness by NAVL to meet its lawful duties. The stays maintained by the ICC on account of the 7901 and 8372 proceedings are justifiable, if at all, because of the possibility that NAVL’s conduct might some day be determined to be in violation of a future regulation, or because NAVL’s refusal to sign the consent decree offered by the Bureau of Enforcement in the 7901 proceedings was evidence of an unwillingness to obey the Commission. We find neither supposed justification to be sufficient. Our determination is supported, in part, by the history of NAVL’s attempts to settle or compromise this case. Repeatedly, NAVL has sought to settle the 7901 proceedings by allowing a complete audit of its operations so as to dispel the inference that its household goods operations fail to meet reasonable requirements. ALJ Glennon found this to be an excellent manner by which the 7901 proceedings could be ended and a new regulation as to compliance levels formulated. The ICC first stayed implementation of this project, then approved it, and only recently repudiated its participation. No reasons for the stay or for the repudiation have been given. An audit was made, at NAVL’s request, in the Rule 102 proceedings. The audit was conducted by ICC examiners and covered millions of operational data. The plenary solution which NAVL sought was denied, however, without mention of the audit. Indeed, the results of the audit have never been referred to by the ICC, and attempts by this court to determine from the ICC how well NAVL performed in that audit have been unsuccessful. Even NAVL has not been shown the results of the audit. For a time it was hoped that this litigation could be avoided by the issuance of limited term certificates, pending outcome of 7901. 49 U.S.C. § 308. Counsel for the ICC represented at that time that there would be no objection to the issuance of such conditional certificates, and that in this way the fitness investigations could proceed. If NAVL were found unfit, the conditional certificates could be readily revoked. Subsequent to this, the ICC concluded that it had no authority to issue such certificates. NAVL has repeatedly offered to settle this suit on the basis of a 90% compliance level approved by the ICC in the Global Van Lines case. The “Global Settlement” was arranged in a lawsuit challenging t