AMERICAN TRUCKING v. A., T. & S. F. R. CO.
Legal provision: Interstate Commerce, as amended
Argument of Robert W. Ginnane
Chief Justice Earl Warren: Number 59, National Automobile Transporters Association of Detroit, Michigan, Appellant, versus the Atchison, Topeka, and Santa Fe Railway Company et al., and Number 60, United States et al., Appellants, versus the Atchison, Topeka, and Santa Fe Railway Company et al.
Mr. Robert W. Ginnane: Mr. Chief Justice, and may it please the Court.
I'm appearing on behalf of the United States and the Interstate Commerce Commission and I am sharing the argument with Mr. Sigmon who is counsel for the Motor Carrier Associations in the case.
These are consolidated appeals from that part of judgment of a three-judge court in the Northern District of Illinois which held unlawful two rules prescribed by the Interstate Commerce Commission with respect to trailer-on-flatcar service, often referred to as piggyback.
The rules involved are printed at pages 74 up to 75 of the Government's brief.
Rule 1, in effect, defines TOFC service or piggyback as the transportation of truck trailers and railroad flatcars.
Rules 2 and 3 are the rules which were declared unlawful by the court below.
Rule 2 entitled available -- availability to all TOFC service provides that TOFC service, if offered by a rail carrier through it's open-tariff publications, shall be made available to any person at a charge no greater and no less than that receives of any person or persons were doing for him or them, a like and contemporaneous service for the transportation of a like kind of traffic under similar circumstances and conditions.
The second rule, Rule 3 provides and accepts as otherwise prohibited by these rules motor common and contract carriers, water common and contract carriers, and freight forwarders may use TOFC service for all or any part of their authorized service.
For convenience, all the parties argued this case as though it involves only the utilization of real piggyback services by motor carriers.
Thus, in our brief, we stated the questions as to whether Commission acted within its authority in ruling that railroads which offered piggyback services to the shipping public must offer it on the same terms to motor carriers.
And secondly, that subject to a certain restrictions, motor carriers are entitled to use rail piggyback service in the performance of their own authorized services.
For a brief background as a generality, large quantities of freight can be moved for long distances, most cheaply by rail.
However, for the many shippers and consignees not located on rail tracks, traditional rail transportation has limitations.
It involves loading the freight on a truck, transfer it to the railhead, unloading into a railroad car and the reverse procedure at the other end of the rail movement.
The characteristic flexibility of the motor carrier is the ability to pick up freight at a shipper's door and transfer it in a single movement to the door of a consignee.
And so during recent years, both for hire motor carriers and private motor carriers, that is shippers owning their own motor vehicles, came to comprise a large and growing segment of intercity transportation.
TOFC service or piggyback combines the flexible door-to-door service of the motor carrier, motor vehicle with the line haul efficiency of the railroad or stated in a recently published study by the Commission of Bureau of Economics, piggyback combines the advantages of movement by truck with the long haul economies of rail under conditions which hold total expense to a minimum.
Now, no one suggest that piggyback is always more efficient than all rail or all motor transportation.
But no party in this case disputes, however, that this is so for many movements involving relatively long hauls.
Piggyback service has had a dramatic development from a mere trickle in 1954.
By 1965, the railroads had moved -- were moving in that year 1,430,000 trailers in piggyback service.
And that produced rail gross revenues of $384 million or 4.3% of total rail gross revenues.
TOFC or piggyback service has been performed -- is being performed under five basic arrangements which are in popular industry usage called Plans I, II, III, IV, and V.
Under Plan I, the shipper's property is carried in a motor carrier's trailer at motor carrier rates and on the motor carrier's bill of lading with the motor carrier making an arrangement with the railroad to substitute rail movement, piggyback rail movement for part of the long -- all are part of the long haul trip.
Plan -- under Plan II, the railroad offers its own trailers to shippers for a door-to-door service using piggyback for the line haul movement.
Justice Potter Stewart: Who operates the trucks that haul those trailers under Plan II?
Mr. Robert W. Ginnane: For those other railroad's trucks operated by its personnel or it can -- or it can hire a local hauler to do it.
Justice Potter Stewart: But by contracts?
Mr. Robert W. Ginnane: But it's -- it's an all rail operation.
Justice Potter Stewart: It's an all rail operations.
Mr. Robert W. Ginnane: Yes sir.
Under Plan III, the railroad offers to -- to haul trailers owned by other persons, say shippers or freight forwarders from railhead to railhead at a flat charge without pick up or delivery.
Under Plan IV, the shipper furnishes both the trailer and the flatcar with the -- with the railroad providing only motor power and rails.
Plan V is the classical joint arrangement, joint rate arrangement between a railroad and the motor carrier for a through service which the -- the then joint rate is negotiated between the railroad and the motor carrier and embodied in their official tariffs.
The property moves on a rail or motor bill of lading depending upon whether the railroad or the motor carrier originates the shipment.
To show the relative use made at the plans, in 1965, 23% moved -- and 23% of the trailers move in Plan I, 42% in Plan II, the all-rail -- the all-rail method, 26% in Plan III, 5% in Plan IV, and 4% in Plan V, the joint rail motor.
You'll see that Plans I and V are bimodal plans involving a coordination of rail and motor carrier services.
Plan II is essentially an all-rail plan.
And Plans III and IV are the open-tariff plans and that they are not inter-carrier arrangements but are published operate in tariffs to the shipping public, to shippers and freight forwarders.
The net competitive result of piggybacking is this, traditionally, only motor carriers could provide a flexible door-to-door service.
However, as the Commission pointed out in this case, all three, rail carrier, motor carrier and freight forwarder today provide through the use of piggyback services which in physical characteristics are substantially identical.
Anyone of the three can offer a transportation service which the door-to-door pickup is by -- is by motor vehicle.
The freight is on a trailer and the trailer is moved for line haul in TOFC, rail TOFC or piggyback service.
But a crucial fact is this.
Railroads can provide shippers with a complete door-to-door piggyback service without utilizing independent motor carriers.
Motor carriers cannot provide such a service without using the facilities of a railroad.
The TOFC rules here involved resulted from the Commission's biggest investigation of piggybacking.
An investigation and rulemaking -- an investigation and rulemaking procedure which began in June 1962, and I think it's fair to say to state that three factors led to the institution of this procedure.
The Commission had stated before in 1939 and in 1954 that it was repugnant to the Act, the motor carrier to Act as a common carrier by motor vehicle and as a shipper by railroad.
And that was widely interpreted to mean that a motor carrier could not utilize these open-tariff piggyback tariffs of the railroads such as Plans III and IV.
That meant that the rail motor coordinated service was being forced in the Plans I and V which are voluntary arrangements and in which the roads may refused to join, and some have.
Secondly, the whole major development of piggybacking has taken place since 1954 when the Commission last looked at the problem.
And third, in April 1962, President Kennedy had recommended that Congress enact a legislation to ensure all carriers the right to ship on the carriers of other branches of the transportation industry at the same rates available to non-carrier shippers.
So it seemed clear to the Commission that that time was right for a fresh look.
Now, on a more current record and more detailed record, the Commission's notice a rulemaking announced that the proceeding would embrace every aspect of piggybacking including the extent of which motor carriers, water carriers, should be permitted to use Plans III and IV, the open-tariff rail rates and services following the receipt of written presentations on examiner's report in an oral argument before the entire showing.
Justice Byron R. White: Mr. Ginnane under what authority did the Commission purport to proceed in its rulemaking?
Mr. Robert W. Ginnane: To apply the prohibition which it found in the antidiscrimination provisions of the Act.
Justice Byron R. White: That's Clause II --
Mr. Robert W. Ginnane: II and III.
Justice Byron R. White: I mean, Section 2 --
Mr. Robert W. Ginnane: And 3.
Justice Byron R. White: Did it expressly purport to invoke 3?
Mr. Robert W. Ginnane: It invoked 2 specifically and invoked the decision of this Court, I believe on the Nashville case which I should discuss later which was based upon Section 3 (1).
Justice Byron R. White: And what expressed authority does the Commission have to make rules or -- or regulations?
Mr. Robert W. Ginnane: These are essentially -- these two rules are essentially interpreted rules, other rules which are promulgated at the same time, other TOFC rules in dealing with such matters as the details of tariff publication are under express authority to issue rules governing tariffs.
The Commission emphasized in its report that all TOFC service is inherently bimodal and that its basic characteristic is the combination of the inherent advantages of rail and motor transportation.
And the Commission stated that it is obvious to us that the inherent advantages of each mode of transportation can be given free as plates with the highest degree of coordination.
And that encouragement of such coordination is in the public interest.
We contend that contrary to the decision below that the Commission correctly concluded that the inters -- that the antidiscrimination provisions of the Interstate Commerce Act forbid the railroads to discriminate with respect of the availability or terms of piggyback service upon the basis of the sender's identity and so charge a higher rate or flatly refuse service altogether to a motor carrier tendering its trailers for shipment.
In its report and the report appears in the back of the second printed volume of the record, in its report at page 385 -- 335, the Commission referred specifically for this proposition to Section 2 of the Interstate Commerce Act which requires railroads to make like and contemporaneous service in the transportation of a like kind of traffic under substantially similar circumstances and conditions available to any person at a charge no greater and less or less than that received from any other person.
The Commission concluded, we see no reason why the fact that the user of a service was another carrier rather than a private shipper would compel the conclusion that this similar circumstances and conditions were present, and the Commission modeled its rule on Section 2.
Justice Byron R. White: So it interpreted Section 2 as covering service as well as rates?
Mr. Robert W. Ginnane: We contend that this Court has an effect equated to the withholding of service with discriminatory rates under 2.
Justice Byron R. White: Under -- and what the --
Mr. Robert W. Ginnane: And -- and that in any event if we are wrong there, that a carrier which is tendering freight to another carrier is a shipper, is a patron of the second carrier under Section 3 (1) and must be treated on --
Justice Byron R. White: I suppose you'll get to --
Mr. Robert W. Ginnane: -- the same terms as another shipper.
Justice Byron R. White: I suppose you'll get to your authority for that composition under Section 2, and you say this Court has.
Mr. Robert W. Ginnane: Yes sir, immediately.
Justice Byron R. White: Okay.
Mr. Robert W. Ginnane: So I say the Commission modeled its rule in -- partly verbatim upon the provisions of Section 2, where it provided that if a railroad offers TOFC service to shippers, it must make it available to any person at a charge no greater and no less than that received on any other persons for doing for them a like and contemporaneous service in the transportation of a like kind of traffic under substantially similar circumstances and conditions.
Now, the appellees contend and the lower court held that Section 2 of the Act relates only to discrimination on rates and does not apply to a total denial of service.
They also contend that Section 3 (1) with which -- which is in pari materia to Section 2 only prohibits a carrier from discriminating between shippers and provides no protection for a carrier acting as a shipper in tendering freight to another carrier.
The principal evil at which the entire Act was directed was discrimination in all its forms that this Court held in -- in New York case.
And we contend that under this Court's decisions, when a carrier tenders a shipment of freight to another carrier for transportation, this first carrier must be treated as a patron of a second and is protected against the discrimination prohibited by Section 2 and 3 (1).
To begin with, in Wight v. United States, in 167 U.S. and in later cases, this Court reiterated that Section 2's phrase under substantially similar circumstances and conditions refers to the physical transportation of -- the principal transportation characteristics, not to various competitive considerations.
At the same time other decisions made it clear that it is immaterial that the sender of the freight is a carrier.
For example, on ICC v. Baltimore & Ohio, in 225 U.S. this Court held that Section 2 prohibited a railroad from establishing for coal shipped by another railroad for its own use, rates lower than those applicable to coal shipped for the uses -- for other uses.
And this Court said it is not the relationship of one railroad to another with which we have any concern here, but the relation of a railroad to its patrons, in that case an -- another railroad which it could not favor just because it was a railroad.
We think closely in point as this Court's decision in ICC v. Delaware and Lackawanna, in 220 U.S., in that case this Court held unlawful, the practice of some railroads of charging less than carload rates on carload shipments presented by freight forwarders.
The rates charged that freight forwarders were substantially higher than the carload rates charged other shippers who submitted -- who presented carload shipments.
And this Court said that that discrimination was improper even though the freight forwarders were competitors of the railroads, in the sense that if they were permitted to use the carload rates --
Justice William O. Douglas: Is that the 220 U.S.C?
Mr. Robert W. Ginnane: 225 U.S.--
Justice William O. Douglas: 225.
Mr. Robert W. Ginnane: 326, they could sift off a portion of the rail revenues from less than carload truck.
These cases clearly stand for the principle that when it turn -- when a carrier tenders freight to another carrier for a transportation the first carrier is a patron of the second, as a patron, as a shipper he must be treated with equality with other shippers.
He cannot be favored as the attempt was on some of these cases.
He may not be discriminated against as -- as in the Lackawanna case.
We submit that this principle of equal rate treatment enunciated in such cases as the Lackawanna case applies equally to the greater discrimination involved in a complete refusal to serve.
This Court recognized in the Lackawanna case that the practical economic effects of a total refusal to serve and exacting a discriminatorily high rate are precisely the same.
But even if we are wrong as to this, the same result follows from Section 3 (1) of the Act, that's in our brief at page 71 which admittedly prohibits both rate and service discriminations between shippers.
Justice Byron R. White: Could you give me the citation of where the Commission talks about Section 3?
Mr. Robert W. Ginnane: It did not mention Section 3 in haec verba but at page 336 of its report, it relies upon and discusses the Louisville & Nashville decision in 282 U.S. 760 which is a 3 (1) case.
In the Louisville & Nashville case which the Commission relied upon, this Court held that Section 3 (1) was violated when a railroad moved private passenger and office cars owned by another railroad at lower rates than it moved such cars when owned by other persons.
This case again makes it clear that for the purpose of -- purposes of Section 3 -- 3 (1) that when a carrier tenders goods as a shipper it is entitled under Section 3 (1) to the same but only the same treatment as any other shipment.
Now, the appellees contend and the court below held that motor carriers desiring to use rail piggyback service are excluded from the protection on Section 3 (1) by the proviso in Section 3 (1) which reads that this paragraph shall not be construed to apply to discrimination, prejudice or disadvantage, the traffic of any other carrier of whatever description.
In our brief, we demonstrate that the purpose of this proviso was to ensure that the sweeping antidiscriminatory provisions of Section 3 (1) did not apply to the rate and other practices by which a carrier seeks to divert traffic from other carriers.
We point out that nothing in the purposes or history of the proviso even suggests that it was intended to authorize a railroad to refuse to accept a shipment tendered by a motor carrier on the same terms that it accepts shipments from everybody else.
It briefly contend that the antidiscrimination provisions of the Act as interpreted by this Court prohibit a railroad which offers TOFC services to the shipping public from refusing to make it available upon the same terms to motor carriers.
I should like to refer to some obvious economic implications of the Commission's Rules 2 and 3 in relation to the objectives of the National Transpiration Policy which the Commissions has commanded both by the policy itself and by the decisions of this Court to keep in mind and apply in administering and interpreting the Act.
That policy states that it is hereby declared to be the National Transportation Policy to provide for a fair and impartial regulation of all modes of transportation, so administered as to recognize and preserve the inherent advantages of each to promote economical and efficient service all to the end of developing and coordinating and preserving a national transportation system.
As to the policies objective of preserving the inherent advantages of each, the Commission pointed out, had found at page 322, that there can be no doubt of the benefit which TOFC service has already rendered the railroads in allowing them to recapture traffic loss to competing modes of transportation and especially the private carriage.
Also benefiting had been the motor carriers which had been provided an opportunity through the use of Plan I of TOFC service that the railroads will concur and abuse, to obtain efficient line haul transportation for themselves, and thus, to help themselves even while their business helps the rail competitors.
I wish to emphasize that the Commission's TOFC Rules 2 and 3 do not require a railroad to move a single trailer load at less than compensatory rates.
Assuming that their open-tariff rates for TOFC service are compensatory, we have not yet heard a plausible reason as to why they should not welcome the piggyback business tendered by motor carriers.
In their various briefs, they conjure up horrible operating problems which they say would be created if they must allow motor carriers to utilize piggyback service.
I think one of them is that they would be -- have, could have a lot of trailers dropped down on late Friday afternoon.
The simple answer to all that sort of conjure -- conjuncture problem is that the railroad's duty under Section 1 (4) is to provide transportation upon reasonable demand.
A motor carrier like a large shipper can get good piggyback service only by detailed planning and coordination with the railroad.
It would be like General Motors, at noon asking a railroad for a thousand flatcars of -- for the next morning, that sort of thing just doesn't happened in highly coordinated transportation operations.
Again, it is undisputed that piggyback TOFC is the only significant technique which has been developed for coordinated rail motor carrier service.
The National Transportation Policy talks about it, everybody's been talking about the need for coordinated service for decades, this is the only possibility which has developed.
The Commission's rules permit and encourage motor carriers to use it whenever they find it advantageous to do so.
To the extent that this happens and the rapid growth of Plan I operations in which motor carriers do permit -- can permit, can participate if the railroads agree, it will occur on a substantial scale and it will generally will reflect a more advantageous use of the nation's transportation resources including perhaps some relief of congestion on -- on our highways.
Basically, all the arguments of the railroads actually affect that the Interstate Commerce Act and the National Transportation Policy are too rigid to permit this pouring of new line into the old bottle.
In a similar situation, they took essentially the same position and was rejected by this Court in United States v. Pennsylvania Railroad, in 323 U.S. in 1945, an opinion written by Mr. Justice Black.
It really sounds like this, in that case the Seatrain Lines had -- had devised an economical method of carrying loaded railroad cars on specially designed ships.
The railroads refused to interchange cars to Seatrain and the Act did not specifically require them to do so.
However, looking to their objectives of the National Transportation Policy, this Court sustained the Commission's order requiring the railroads to interchange cars with Seatrain.
And hereto, we submit, that implementation of the objectives of the National Transportation Policy requires that the Commission be upheld in construing the Act as prohibiting a motor carrier from offering piggyback service to the shipping public unless it makes it available on the equal terms --
Justice William O. Douglas: What was that?
Mr. Robert W. Ginnane: -- to motor
Justice William O. Douglas: Sea --
Mr. Robert W. Ginnane: -- carriers.
Justice William O. Douglas: Seatrain, 323 what?
Mr. Robert W. Ginnane: 323 U.S. 612.
Justice William O. Douglas: 612, thank you.
Chief Justice Earl Warren: Mr. Sigmon.
Argument of Richard R. Sigmon
Mr. Richard R. Sigmon: Mr. Chief Justice, may it please the Court.
I appear as Mr. Ginnane indicated for the motor carrier appellants in both numbers 57 and 59.
Mr. Ginnane has discussed the lawfulness of the open-tariff piggyback rules under the antidiscrimination provisions of the Act.
The District Court also concluded that the rules, the two open-tariff rules must fall because they come into direct conflict with the provisions of Section 216 (c) of Part II which relates to through routes and joint rates between motor carriers and between motor carriers and rail and water carriers, and also because of a conflict with the provisions of Part IV of the Act regulating freight forwarders.
The District Court and the Commission --
Justice William O. Douglas: Is your brief the blue one?
Mr. Richard R. Sigmon: The red one.
Justice William O. Douglas: Thank you.
Mr. Richard R. Sigmon: The District Court and the Commission take a basically different view of trailer-on-flatcar service, and this difference of view leads to enlarged measure.
I think there are different conclusions with respect to the lawfulness of the open-tariff rules.
The District Court looked at the Interstate Commerce Act as a rigid division of service transportation in the four modes as they are regulated by the four Roman numeral parts of the Act and it spoke of each mode being confined to transportation by that mode in terms of both the -- the actual separation into four parts and in terms of the internal logic of the Act, therefore, it concluded that a motor carrier is confined to transportation by motor vehicle unless there are some special exception.
The Commission, however, as Mr. Ginnane has noted after reviewing the history of the development of piggyback or trailer-on-flatcar transportation, concluded that it is a bimodal service, it combines elements of both rail and motor transportation as the more formal name trailer-on-flatcar service that suggest two necessary elements, a trailer and a flatcar and the trailer is just as essential to the successful operation of the service as the flatcar.
But a bimodal service won't fit into the rigid modal pattern that the District Court suggests for the Act.
The District Court accepted the argument of the appellees that trailer-on-flatcar service is a rail service.
It did not discuss and didn't specifically overturn the Commission's conclusion that it is a bimodal service.
The appellees of course do dispute it and in their briefs they, they based their arguments on the violations with respect to Section 216 and Part IV on the theory that this is a rail service that we are dealing with.
The Commission was in this case dealing with a new transportation development which combines elements of the old.
It combines them in such a way that they cannot be separated.
If a highway trailer is not used, trailer-on-flatcar transportation simply will not be successful.
The whole theory of developing it and its whole success in this rapid growth that Mr. Ginnane referred to has been the ability to transport a loader freight from shipper's door to consignee door in the same highway vehicle without a transfer of lading in route.
The District Court, however, viewing the Act as confining each carrier to transportation by its separate mode absent some exception looked to Section 216 (c) covering the through routes and joint rate arrangements for motor carriers, as the only possible exception to this rigid modal pattern which modal pattern would confine the motor carriers to operations strictly by motor vehicle.
The District Court --
Justice Hugo L. Black: Mr. Sigmon, did you say your brief was the blue one?
Mr. Richard R. Sigmon: No, the red one sir.
Justice Hugo L. Black: Oh!
The red one?
Mr. Richard R. Sigmon: Yes.
Justice Hugo L. Black: I thought you said blue.
Mr. Richard R. Sigmon: I'm sorry.
The District Court said that the Interstate Commerce Commission did not dispute the premise of the appellees' arguments below that a de facto through routes is created when a motor carrier utilizes a rail movement under an open rail tariff.
Actually, an answer to that argument as it was made to the Commission, it said that what is a through route is a matter of fact and it's cited among other cases Thompson versus U.S., 343 U.S. being a question of fact what is a through a route is not subject to any general rule but depends on the particular circumstances.
In Thompson, this Court said that the test of a through route is whether the participating carriers hold themselves out as offering a through transportation service.
The District Court compared the, what it called, the operative features of the Plan I which everybody with one possible exception on the side, the appellees concedes is a valid through route-joint rate arrangements between a railroad and a motor carrier.
And the motor carrier participation in trailer-on-flatcar service under the Commission's proposed open-tariff rules.
It concluded -- the only difference is the consent of the railroads.
And if the consent is lacking, I think all parties agree the 216 (c) would preclude the through route arrangement.
But the test of a through route as the Court said in Thompson is whether the carriers hold themselves out to perform a through service.
When a motor carrier under its own billing secures a trailer load of freight takes it to a railroad raft and under a railroad tariff holding out a ramp-to-ramp Plan III service offers that trailer to the railroad, picks it up at the terminal ramp of the rail run, carries it onto the ultimate customer and delivers it, the railroad and the motor carrier are not holding out a through service.
The railroad tariff covers only the rail movement between the ramps.
The rail bill of lading is with the motor carrier.
The rail has no contract with the shipper.
The railroad rate for this rail portion of the service is determined by itself, the rules and regulations which cover the applicability of the service are set by the railroad in a -- through route arrangement under a Plan I operation or a conventional Plan V operation.
The participating carriers joining together and holding out the through route joined together and determine the rate that is to be applied on the through transportation.
The bill of lading which the shipper covers the entire shipment and both the rail and the motor carrier are obligated to the shipper for the proper performance of the entire transportation service.
The differences in the obligations and liabilities are set at in our brief, the -- essentially the -- under a through route arrangement, be the railroad or motor carrier is liable to the shipper for the proper completion of the trip and for any loss or damage that may occur.
Now, the motor carrier is the only one who contracts with the shipper.
The railroad's contract is exclusively with motor carrier and only for the rail portion of the trailer.
The railroad is not liable to the shipper for this removal.
The District Court assumed that there is a de facto through route created and dealt with the question of compulsion and as I said, if there is a through route created, then it cannot be compelled under Section 216 (c) because through routes and joint rates between motor carrier of property or between motor carriers of property and railroads are permissive under 216 (c), but when there is no through route involved, there is no compulsion on the railroad entering a through route.
The only compulsion that there is and this is the compulsion mentioned in the Commission's Report is to hold out its service.
The Commission said there's no compulsion on the railroad either to provide this trailer-on-flatcar service or on the motor carrier to make use of.
The only compulsion there is on the railroad where it holds out its service to the public in an open-tariff to serve the public without discrimination, without attempting to select among the shippers that it will serve.
The other aspect of the District Court case which deals with a direct conflict between the open-tariff rules and provisions of the Act are those really in Part IV of the Act relating to the regulation of freight forwarders.
Now, the District Court in its decision only considered the extreme case, it spoke of a carrier who performed only an assembly in distribution service and use another carrier to perform the entire transportation service.
It spoke of a carrier who's -- who's only tied with the motor carrier operation with an unexercised certificate.
But the Commission specifically said that where a motor carrier holds out to perform only this, an assembly in distribution service and uses an underlying transportation company between points that it itself cannot serve in a practicable manner, then no doubt in the Commission's own line, it would be acting a forwarder and not as a carrier itself.
There is a specific section of the Commission's Report which was not discussed in the District Court opinion which dealt with the question of the abandonment of service by motor carriers at authorized points through the use of trailer-on-flatcar transportation.
A rule had been suggested which would have set requirements for actual operations over the highway.
The Commission considered the rule.
It noted its power under Section 204 (a) (1) of the Act to regulate motor carriers and to that end to establish reasonable requirements with respect to continuous and adequate service.
It noted in fact that every certificate of public convenience and necessity issued to a motor carrier by it carries forward this requirement as to the performance of a reasonably continuous and adequate service.
Based on it's consideration of it's power under the Act and under the condition that they have put in the certificate, the Commission found it unnecessary to prescribe an additional rule relating to the motor carrier performance of an adequate service over the highway where it were -- was also using the trailer-on-flatcar service between the points.
It clearly, in that discussion showed that it would not permit a motor carrier to operate as the -- in the Court's example and the only example the Court used that is to pre -- stop carrying itself on the highway and only perform an assembly in distribution service.
Under Sections 402 (a) (5) of the Act, a freight forwarder is defined as a person who otherwise and as a carrier subject to Part I, Part II or Part III holds out to transport or to provide transportation in a certain manner.
Part I, Part II, and Part III of course are the three parts that covered the -- the physical modes of carriage, railroads, motor carriers and water carriers.
That language had parenthetical exclusory language otherwise than as a carrier subject to Part I, II or III, is recognition by Congress that there are operational similarities between what freight forwarders do and -- in our example that we are using, what motor carriers do.
And it is a recognition that Congress did not intend to carve out a -- an exclusive area of operation for the freight forwarder.
These operational similarities, motor carriers for years have assembled small shipments into volume shipments or trailer load shipments for movement and perform distribution service.
As long as a motor carrier is acting as a motor carrier and holds out the motor carrier service over the highway, we submit that the definition of the freight forwarder and particularly noting the exclusory language does not say that a motor carrier becomes a forwarder simply because it may use trailer-on-flatcar service in the performance of some of its authorized service.
I must again mention some of the horrible examples of what might happen where these rules adopted that the appellees have included in their brief.
Most of these examples have been referred to and -- and primarily they are directed to either the question of aggravating an imbalance of operation for the railroad or pushing off on to the railroad undesirable or traffic -- or traffic which is difficult to handle.
The thing is that this happens right today.
This is one of the -- the necessary incidence of performing a transportation service that all transportation agencies deal with.
We all have imbalances of operations.
We all have the balloon freight or the -- the oversized freight that we have to handle.
As to the railroad's open-tariff, trailer-on-flatcar service, today a private carrier, a shipper as Mr. Ginnane explain who uses his own motor vehicle to transport his freight, he can decide that he does not want to send his drivers out on the weekend and he would rather take a group of his trailers which normally he would send over the highway with his own equipment taking down to the railroad station and put them on the railroad and let the railroad carry it.
Obviously, all private carriers are -- are reasonable and intelligent businessmen, the difficult to handle freights, the freight which is more expensive to carry, they will if possible shipped by a for hire carrier and they will tend to utilize themselves, their own equipment in as much as possible a balanced economical operation.
And of course freight forwarders and shippers associations, shippers associations operating in much the same manner as freight forwarders but under partial exemptions from economic regulations, they have a choice of the carriers they may use.
They may decide because of weather conditions, I think it was one of the examples suggested that they will take a majority of their trailers that are ready to move to the railroad instead of shipping them by some other means.
All of these happens today and of course, as Mr. Ginnane said we view the problems whether they are caused by motor carriers making use of the trailer-on-flatcar service or as they exist already in the railroad operations, with a consideration of reasonableness, no favored shipper of a railroad is going to be able to come down Friday afternoon with an additional hundred trailers and get them moved out.
If the carrier does not have the facilities available, it calls for planning, it calls for cooperation, it calls for advance notice.
Mr. Ginnane mentioned the compensatory rates.
The Commission in its report at page 329 points out that a number of the people who had supported the open-tariff trailer-on-flatcar rules had asked why should a railroad object to receiving additional business, that question still hasn't been answered.
And assuming that the railroad rates for this service are compensatory and this is a minimum requirement for lawfulness of rate is that it be compensatory, additional business should mean additional profit.
If the rates are too low, they attract this traffic now.
No shipper is going to remain loyal indefinitely to a motor transportation if it can secure a comparable service at a lower cost from another mode and we are dealing here with comparable services.
Justice Abe Fortas: Can the railroads obtain from the truckers a correlative service?
Mr. Richard R. Sigmon: Sir?
Justice Abe Fortas: Can the railroads obtain from the truckers a correlative service?
Mr. Richard R. Sigmon: I -- I've --
Justice Abe Fortas: -- as they could -- is there anyway about which railroads can engage the truckers to take freight from railhead to shipper or railhead to destination?
Mr. Richard R. Sigmon: The rail itself is authorized within the --
Justice Abe Fortas: I understand that.
Mr. Richard R. Sigmon: -- the terminal areas, but a number of railroads -- well, let me say that of course under 216 (c), a railroad and a motor carrier may voluntarily enter into a -- a through route arrangement and end-to-end arrangement where the -- the motor carrier would carry beyond the railroad.
A number of the railroads almost since the enactment of the Motor Carrier Act in 1935 have been securing themselves or through affiliates.
Motor carrier operating authority --
Justice Abe Fortas: Through what?
Mr. Richard R. Sigmon: Motor carrier operating authority certificates or permits, it would have to be certificates in the example that you're talking about, as common carriers --
Justice Abe Fortas: Yes, but that isn't quite my question which I've made clear.
If a railroad wants a trucking company to take on the burden or the duty of transporting goods from the railhead to the destination or to pick the goods up at the door of the shipper and deliver it to the railhead, can the railroad get that service at the same rate as any other shipper?
Mr. Richard R. Sigmon: I don't know whether other than with their own affiliate motor carriers, railroads are securing such a service.
I think that the reasoning that Mr. Ginnane used so far as the antidiscrimination provisions of the Act are eminently correct, and I would say to you that I do not believe a motor carrier could decide to accept a shipment or not depending on who the shipper was.
If the shipper meets the tariff requirements for the shipment then the motor carrier just as the railroads should have no concern about whether it is a railroad who is shipping.
Justice Abe Fortas: What you're saying then is that the -- your understanding that as a matter of law the trucker would have to carry the freight for the railroads --
Mr. Richard R. Sigmon: Yes sir.
Justice Abe Fortas: -- as the same term the trucker have to carry up anybody else and -- and that's the principal point which you're contending here on behalf of the truckers with respect to railroads.
Mr. Richard R. Sigmon: Yes sir.
The -- any discrimination provisions are comparable in the two parts of the Act and they apply with the equal force.
The Interstate Commerce Commission here was carrying out its duty to administer and enforce the Act in the light of the National Transportation Policy.
And particularly the -- the end objective of that policy is to develop, coordinate, and preserve the national transportation system.
Here the Commission was dealing with a new and explosive development in transportation, new and combining two elements of the old by creating something apart from the modal divisions that have been known before.
And this new development has caused a substantial alteration in our transportation system.
Now, the motor carrier who historically was the carrier who had the inherent advantage of the flexibility of providing a door-to-door service is meant with competition in the provision of a substantially similar service by railroads and by freight forwarders.
What this meant was more than this because while the railroads and the freight forwarders can utilize this new bimodal transportation service, the motor carrier may make use of it because of past Commission decisions only at the sufferance of the railroads, only under the permissive through route and through rate arrangements of Section 216 (c) where he has to get the railroad's consent.
The Commission here recognized the bimodality of the service.
It recognized that all carriers should be equally allowed to participate in it without restriction.
If the District Court position on the -- the sharp modal separation in the Act is actually followed through and the rules as it said must stand or fall despite of altered circumstances in the transportation industry that the logic of that modal division should preclude railroads from making use of trailer-on-flatcar service because if the motor carrier is not providing transportation by motor vehicle when it participates in trailer-on-flatcar service, the railroad is not providing transportation by train when it makes use of a service, the key element of which is a highway vehicle which it moves over the highway and is utilized to provide a door to door movement without transfer of lading.
Unfortunately, from the motor carrier point of view, in 1954 in the trailer, then what is called the New Haven case in 293 ICC, the Commission considered the question of -- a number of questions relating to trailer-on-flatcar service, it did not have a record, it made its decision on a basis of questions that were presented, in briefs, and in oral argument.
Without a record before, the Commission held that a railroad may utilize trailer-on-flatcar service.
And the railroads have exploited that use of that -- this bimodal transportation service to divert a substantial quantity of rate for the motor carriers as the Commission's Report shows.
What the Commission has attempted to do in this case ultimately comes down to restoring the competitive balance.
The railroads have had an opportunity to make use of trailer-on-flatcar service, the inherent advantage of the motor carrier for years to divert traffic from it.
The railroads have been able to limit or actually preclude motor carrier use of this bimodal service.
The Commission here simply seeks to permit the motor carriers to share in the use of this bimodal service.
With the Court's permission, we would like to reserve --
Chief Justice Earl Warren: I wish you'd elaborate a little more on your -- your view of the exemption in Section 3.
Mr. Richard R. Sigmon: The exemption in --
Chief Justice Earl Warren: Yes, from discrimination.
Mr. Richard R. Sigmon: The Section 3, the proviso relating to the --
Chief Justice Earl Warren: Proviso, yes.
Mr. Richard R. Sigmon: -- the traffic.
We referred to the remarks of Senator Wheeler when a comparable proviso was being put into the -- the provision in the motor carrier part of the Act.
And Senator Wheeler noted that a number of the smaller trucking companies were concerned about the broad sweep of this antidiscrimination provision in what is comparable to Section 3 that it could be used by railroads to claim that the motor carriers were discriminating against them in the rates that the motor carriers would buy out, that they would be discriminating against the railroad rates to the filing of the motor carrier rates.
And Senator Wheeler statement is to the effect that the discrimination provisions relate to the carrier's patrons --
Chief Justice Earl Warren: Carrier what?
Mr. Richard R. Sigmon: The carrier's patrons.
Chief Justice Earl Warren: Oh, yes.
Mr. Richard R. Sigmon: But to make assurance, doubly assure for these small motor carriers that were concerned about this, they put the proviso in to deal with the particular problem that was raised.
That proviso subsequently in substantially similar words was then subsequently I think five years later incorporated into what is now Section 3.
The Congress did not indicate when it carried the proviso over into Section 3 a different reason for placing it in Section 3.
And the reason given in its original enactment was to prevent harassment of contentions that a rate filed by a carrier in effect discriminated against the rate filed by another carrier.
Does that answer your question Mr. Chief Justice?
Chief Justice Earl Warren: Is it just that statement of -- of Senator Wheeler?
Is that the end of it?
Mr. Richard R. Sigmon: That is the only material that I was able to look at in the legislative history which bears on the reason for the proviso in either Section -- either in Section 3 and Part I or in the comparable provision in Part II, and that I want to make clear to the Court, Senator Wheeler was discussing the comparable proviso in Part II which was later carried over in the Section.
Justice Byron R. White: Now, do you -- I take it what Mr. Ginnane said that -- that in his view the Commission really did rely on Section 3.
I suppose, if we disagree with that and don't read it -- this Court that way, are we free to affirm on Section 3 or not?
Mr. Richard R. Sigmon: Free to affirm on Section 3?
Justice Byron R. White: I mean, free to uphold Commission on Section 3.
Mr. Richard R. Sigmon: The Commission dealt -- was dealing here with -- with a very large case and this is a very substantial report that we have here, some 100 pages and we're talking about approximately ten of them that directly relate to the open-tariff rule.
The Commission at page 324 of its report which is tipped in at 795 of the record, Volume 2 of the record, the Commission discussed the various types of rules that it was proposing.
It said some of the rules to be adopted here are simply interpretive.
We think it will to have them summarized and assembled.
Other rules take the form of tariff and the billing requirements and still others maybe said to implement the broad provisions of existing regulations.
Justice Byron R. White: What page is that?
Mr. Richard R. Sigmon: On 324 --
Justice Byron R. White: 324.
Mr. Richard R. Sigmon: -- of the Commission Report.
Then it noted that some parties quarreled with their authority to make rules particularly the latter type, the implementing type and they referred to their rulemaking power under the various parts of the Act and this Court's opinion in American Trucking Associations versus United States.
I believe that the open-tariff rules that the Commission enacted are rules which implement the broad legislative provisions.
I do not read the Commission Report as relying solely on Section 2.
In that portion of the report where -- where it discusses Section 2, it was discussing a number of objections that were being made to its rules and the Section 2 discussion as I read it was a part of its answer to particular objections.
It was not attempting there to set up the rule and exclusive authority.
So I -- I believe that Section 3 as well as Section 1 (4), Section 6, all of the provisions of the Act which relate to what in a -- in a shorthand term in our brief, we called the common carrier obligation to serve all the public on equal terms.
Chief Justice Earl Warren: Very well.
Mr. Richard R. Sigmon: Thank you.
Chief Justice Earl Warren: Mr. Miller.
Argument of Thormund A. Miller
Mr. Thormund A. Miller: Mr. Chief Justice and may it please the Court.
We begin our analysis by examining the congressional expressions of public policy directly relating to coordination of motor and rail service.
We maintain that Rules 2 and 3 are unlawful because they permit a motor carrier to perform its authorized service by utilizing rail service under a tariff open to ordinary shippers.
Part II, the provisions of Part II of the Act, Interstate Commerce Act, requires a motor carrier to perform its authorized service by motor vehicle on a public highway.
Common in contract carriers since the enactment of the Motor Carrier Act are entities created by the Act, their authority is defined by the Act.
The certificate and permit provisions of Section 206 (a) (1) and 209 (a) (1) defined the operations or business referred to as that of a motor vehicle on a public highway.
The definition of a motor vehicle under 203 (a) (13) in the Act refers to vehicle or trailer used on highways.
Not only does the Act affirmatively describe a motor carrier's operations in this respect, it also negatively states that a motor vehicle does not include any vehicle or car operated exclusively on rail.
Accordingly, a grant of authority to a carrier by motor vehicle specifically excludes by definition the use of a vehicular car operated exclusively on rail --
Justice Byron R. White: Well, I know that the Plan V arrangement involved an element of consent by the railroad, but when you have a joint arrangement like that, and I understand that the property moves under a bill of lading issued to private service carrier to make the movement?
Mr. Thormund A. Miller: That's correct sir.
Justice Byron R. White: And the motor carrier undertakes or at least negotiates with the shipper to get it from A to B and he really is issuing a bill of lading which involves a rail shipment.
Mr. Thormund A. Miller: Well, the essential element I think that distinguishes that, Mr. Justice White, is that by consent they become partners in the provision of the joint service and in the necessary tariffs held out to the shipper, they both come to him and say we have a combination of a motor and a rail service, so the motor carrier in that circumstance is not performing its authorized service on a railroad.
They are partners performing a joint service and this was provided specifically by permission of Section 216 --
Justice Byron R. White: Does it make any difference if they say it makes a critical difference in terms of the issue you're talking about if the railroad hasn't consented?
Mr. Thormund A. Miller: Yes sir, that the -- the --
Justice Byron R. White: That it -- or that -- or that it has to consent?
Mr. Thormund A. Miller: Yes, that's correct.
Justice Abe Fortas: Suppose a trucking company wants to use a ferry?
Mr. Thormund A. Miller: Use a ferry?
Its routes are defined in the course of issuing its certificate.
We have cited in our case to illustrate this point, a certificate that authorized operations by ferry across the Hudson River and the Lincoln Tubes have been constructed since that time and the -- the holding in the case was that the certificate did not include the right to deviate from the particular routes that were included.
Now, if the certificate has specified a given highway and there was a ferry linked in that highway, I would assume that the certificate authorized the use of that ferry.
Justice Abe Fortas: But that wouldn't supersede the statute and your argument was a statutory argument?
Mr. Thormund A. Miller: That's correct.
The, we are resting on -- on the definition of the -- that arises from the statute.
Now, we have both in the New Haven case and in this case, the Commission's agreement that a flatcar is -- is a rail car and that piggyback operations on that flatcar is a rail service.
Rules 2 and 3 purport to allow carriers by motor vehicle to utilize a car operated exclusively on rails in the performance of its authorized service.
And we say this is contrary to the plain meaning of these authority and definitional provisions to the Part II of the Act.
Now, there are three different but interrelated lines of cases that confirm our interpretation on the plain meaning of the Act.
One I'll call the Acme line of cases arising from applications for grandfather rights.
The second is the Substituted Freight Service line of cases dealing with request or arrangements in which one mode substitutes the service of another mode.
The third line of cases reached this Court in the Parker case in 326 U.S. where railroads made applications for limited, auxiliary and supplemental motor carrier rights.
Chief Justice Earl Warren: We'll recess now.