Cases by Issue - Truck or Motor Carrier Regulation

Pierce County v. Guillen - Oral Argument

Fri, 09 Jan 2009 14:50:36 +0000

Case:

Pierce County v. Guillen

Media File:

01-1229_20021104-argument.mp3

Related Transcript:

transcript.xml

Transcript:

Argument of Daniel R. Hamilton

Chief Justice Rehnquist: We'll hear argument now in Number 01-1229, Pierce County v. Ignacio Guillen.

Mr. Hamilton.

Mr. Hamilton: Thank you, Mr. Chief Justice, and may it please the Court:

From the enactment of the 1966 Highway Safety Act, a congressional report, specifically number 17 to the 89th Congress, which is quoted on page 2 of the blue brief, congressional reports noted that, quote, no other part of the State program is as basic to ultimate success, nor as demanding of complete cooperation, end quote, as State collection of accident reports, because they are the basis for hazard identification and correction.

However, soon after the 1973 Highway Safety Act made accident data collection a condition to Federal hazard elimination funds the Secretary of Transportation reported to Congress that States strongly objected, because they feared that their collection of accident data would be used against them in damage actions.

Because of this, unintended liability exposure threatened the integrity and proper operation of a cooperative Federal-State program that has saved thousands of lives--

Justice O'Connor: Would you help us figure out how to interpret this statute?

Mr. Hamilton: --Yes, Your Honor.

Justice O'Connor: It says data, highway safety data compiled or collected by a State.

Now, I suppose that in a crossing like we have here, where there might have been accidents from time to time, that there would be police reports or highway officer reports of motor vehicle accidents at that site, right?

Mr. Hamilton: Yes, Your Honor.

Justice O'Connor: And those presumably are not either compiled or collected for the purpose of getting highway funding from the Federal Government.

They're compiled, I gather, to serve the normal functions of law enforcement.

Mr. Hamilton: Your Honor, no, that's not completely correct.

Justice O'Connor: No?

Mr. Hamilton: They are collected and compiled for purposes of highway hazard identification, essentially, from the very beginning.

Justice O'Connor: --Well, don't you suppose that at least in some jurisdictions, maybe not Tacoma, but in some jurisdictions you will find just ordinary police reports--

Mr. Hamilton: Well, it's my--

Justice O'Connor: --of accidents, and sometime later, perhaps the State might decide, or the county, I'd like to have some Federal money to make some changes at that crossing, and maybe we can use some of the data to assemble it to try to apply for Federal money.

Now, how should we interpret that statute?

Mr. Hamilton: --Well, in the... if I understand the hypothetical, the... Your Honor is postulating a situation where there is an accident report purely State in origin.

Just to help the Court, I don't know that such a thing exists after the crash data forms.

It's to be understood that the Department of Transportation has been, since 1966, working with the States to develop a uniform crash data form, and that... I think it's becoming more and more successful as that goes on, so I'm--

Justice O'Connor: So your point is that the police officers are using a kind of a unified Federal traffic report--

Mr. Hamilton: --Essentially--

Justice O'Connor: --when there's an accident?

Mr. Hamilton: --The forms are not all the same, because each State has the right to choose how to put it together, but the elements of the forms are dramatically Federal in their nature, and they're Federal totally directed toward the issue of highway design.

That's why... Nation-wide there was a report cited by the Washington State amici and multi-State amicus, amici briefs that pointed out that Nation-wide before 1966 there was no standard at all.

Justice Kennedy: Well, let me ask you this.

At page 20 of the respondent's brief we have four different interpretations, possible interpretations of the acts set forth.

Do we have to choose among those in order, as a predicate before reaching the constitutional issue, and I'll just... and this is in line with Justice O'Connor's question.

If we took the most expansive view of the alternatives that she presents, then the opinion that we would write, it seems to me, would be different than if we took the more narrow, the most narrow view, and that leads me to the question, do we have to have a statutory construction at the beginning point of our holding?

Mr. Hamilton: I don't believe so, Your Honor, and the county's position, and we believe it's well-founded, is that the constitutional issue is not an excuse for artificially narrowly interpreting--

Chief Justice Rehnquist: Well, but I think that our Court has always preferred, along the lines suggested by Justice O'Connor and Justice Kennedy, to construe a statute to avoid constitutional problems if we can, and certainly the respondents here at least suggest there are several different constructions.

Are you not prepared to say which of those you favor?

Mr. Hamilton: --Well, I've... I'm happy... in fact, I had intended to, if given the opportunity, to provide the Court the way the county believes the statute should be interpreted.

Chief Justice Rehnquist: Well, I'll give you that opportunity right now.

Mr. Hamilton: Okay.

[Laughter]

Justice O'Connor: Yes, that's our question, and you might bear in mind if you wish that I think we generally construe evidentiary privileges narrowly.

Mr. Hamilton: Yes.

However, as the Court pointed out on that issue of narrow construction that... in the Shapiro case, I believe, which was also a raw data case whose purpose was to encourage participation, that even after quoting the standard, the test of a narrow construction... the test was first put to Congress' intent, and that the issue of, you know, that particular rule of construction is not to be used in a way to artificially narrowly interpret what Congress meant, and if Congress meant something, then that's the test.

To answer Justice... Chief Justice Rehnquist's question, how does the county say the statute should be interpreted, pretty much we agree with the logic of the United States Solicitor General, but just would suggest that the, their logic be extended to what we believe is the logical conclusion.

In other words, we disagree with plaintiffs that it only covers generated documents, because under 409 that's interpretation conflicts with what this Court has said the plain meaning of compiled means, as this Court has discussed in the John Doe case cited to the Court.

Also, this reads out of 409 the express protection also of data collected, not just generated.

It ignores the legislative history of why 409 was amended, and why it used the language compiled--

Justice Stevens: You're telling us what's wrong with the other reading.

Which is your reading?

Mr. Hamilton: --Our reading, Your Honor, is that there should be... this Court should establish a bright line rule that documents collect... as the language says, for... we would ask the Court to enforce the language of the statute, which reads, documents and data, quote, compiled or collected for the purpose, end quote, of specified highway safety programs, and here's the operative language, quote, shall not be subject to discovery or admitted into evidence in a Federal or State proceeding or considered for any other purposes in any action for damages arising from any occurrence at a location mentioned or addressed in those documents or data.

In other words--

Justice Scalia: It doesn't say documents.

I mean, you quoted it, you began the quote after--

Mr. Hamilton: --Yes--

Justice Scalia: --after the noun.

Mr. Hamilton: --Yes.

I--

Justice Scalia: The noun you inserted was documents.

Mr. Hamilton: --Yes.

There are specific--

Justice Scalia: It says--

Mr. Hamilton: --references to specific types.

Justice Scalia: --It says data, doesn't it?

Mr. Hamilton: It says data, and also lists reports, lists... and that sort of thing, and I was trying to condense it down, but yes.

Justice Ginsburg: To be plain, do you mean that everything that goes to the Public Works Department, everything that eventually gets to the Public Works Department and is relevant to the safety of highway crossings is exempt from discovery?

Mr. Hamilton: Yes, Your Honor, that is what we're saying.

Justice Souter: Every fact, so that if the Department of Environmental Protection has prepared a report saying the accidents are wrecking the grass and the flowers at an intersection, and that report is then given to whatever the data collection agency here is for this purpose, that all of that data, including the data in the Department of Environmental Protection, is then covered by the privilege?

Is that your position?

Mr. Hamilton: To the extent that characterization goes to the data that's in the reports.

It's not to say that... all we're saying--

Justice Souter: That's my question.

Mr. Hamilton: --Yes.

Justice Souter: The same data is in the environmental report.

That data is then given to the collection agency.

Does the data, even in the hands of the Environmental Department, become subject to the privilege at that point, on your reading?

Mr. Hamilton: We believe the... again, if it meets the test of dealing with an occurrence at a... again, following the language of the statute, an occurrence at the location mentioned or addressed in such reports in the damage action, then that report that it's collected and compiled by--

Justice Souter: I'm not talking about the report.

I'm talking about the fact which is reported.

Mr. Hamilton: --Yes.

Justice Souter: The data in the report.

Mr. Hamilton: Well--

Justice Souter: Does that... does that data--

Chief Justice Rehnquist: --You can answer that yes or no.

Justice Souter: --become subject to the privilege?

Mr. Hamilton: --Yes, if Your Honor means, when you say data, going to the report to get the data, to... if you were to... if that person who wanted to raise that issue were to go to the person who, or the entity that created that information, and were to depose that, those people, they could get the information that way.

All we're talking about--

Justice Souter: Then your... then the answer to my question, I guess, is no, the data does not become, as such, subject to the privilege.

It's only the data as held by the collection agency.

You can still go to the Environmental Department, depose them, get your information?

Mr. Hamilton: --Yes, you can.

Justice Souter: Okay.

Mr. Hamilton: Yes, and I'm sorry I misunderstood you.

Justice Kennedy: Well, could you--

Justice Souter: --What if you don't have to depose them?

Justice Kennedy: --go to the Police Department under this uniform Federal form you were telling us about it?

Mr. Hamilton: I'm sorry, I missed the question.

Justice Kennedy: You said at the outset that there's a uniform document for collisions or crashes or something.

Mr. Hamilton: Yes.

Justice Kennedy: And the Police Department fills it out.

Can you go to the Police Department and get that information?

Mr. Hamilton: Under our interpretation, you could find the officer, you could depose the officer, but you cannot get the report if it's collected and filed for hazard identification.

Justice Kennedy: Well, so then Justice Souter's hypothetical is different from this.

You said in Justice Souter's hypothetical that you could go to that Department and get the document, but if you go to the Police Department you can't get the document.

Mr. Hamilton: No--

Justice Scalia: You didn't say he could get the document.

Mr. Hamilton: --No.

Justice Scalia: You said you could depose him--

Mr. Hamilton: Yes.

Justice Scalia: --and that was what my question was going to be.

Are you drawing a distinction between getting the document that was generated in the Environmental Agency and deposing the person who made the document?

Mr. Hamilton: Yes, Your Honor.

That's a distinction that the cases make--

Justice Scalia: Why?

It says data.

I don't care about the cases.

I care about the text of the statute.

It says data.

It's data whether it's in a document or whether it's in some deponent's head.

Data is data.

Mr. Hamilton: --I think that certainly is a fair interpretation of the statute.

What we're trying to do is synthesize how the courts have looked at this, and they have drawn the distinction saying that really what the purpose of this was to put plaintiffs back in the position they were before.

All this mechanism of creating accident data existed beforehand.

That's what they had to do.

They didn't have this silver platter.

Justice Ginsburg: They could get a police report of an accident.

Isn't that standard routine in negligence cases?

Mr. Hamilton: Your Honor, before the 1966 Highway Safety Act they could not get an accident, a collection of accident reports, at least in Washington State, and it's my understanding Nation-wide, just by asking for them--

Chief Justice Rehnquist: But you could certainly get a police... at least judging from my own practice in Arizona you could certainly get an individual police report of an accident.

Mr. Hamilton: --Yes.

If you knew the... and that's the point.

You essentially have to know what plaintiffs are trying to find out to get the document, because you couldn't ask for all the accidents at this intersection.

You could ask for a date and people involved, but you couldn't ask for, give me all the accidents at a particular intersection.

Chief Justice Rehnquist: No, but you could ask for the police report of the particular accident that you were concerned with.

Mr. Hamilton: Prior to 1966, yes, Your Honor, that's correct.

That's--

Justice Breyer: I'm still slightly mixed up.

Mr. Hamilton: --Okay.

Justice Breyer: Imagine the forest service in the State collects, because they have tree lovers, a piece of paper that says the elm trees at the intersection of such-and-such were diseased, all right.

Now, that's done for purposes of tree health, and there's a piece of paper in the environmental tree section which has that written right on it, and one day the Transportation Department for safety reasons says, send us a Xerox of that, okay.

The question I think Justice Souter was asking and Justice Scalia, and I would certainly ask, is, in your view, when they send a subpoena or discovery to the tree department to get that piece of paper, can they get it?

Mr. Hamilton: No.

Justice Breyer: No?

Mr. Hamilton: No.

Justice Breyer: Very well.

Suppose that the Transportation Department one day wrote a witness' name down, an address which they got from the internal State government telephone book.

In your opinion, could a plaintiff go and ask for a telephone book?

The answer, I guess, is no.

Mr. Hamilton: Let me think about that for a minute.

Justice Breyer: Well, I don't see what the difference would be.

They didn't collect the telephone book for purposes of... they didn't make the telephone book for the purposes of accidents, but one day somebody went to the telephone book and copied some information out of it for the purpose of accidents--

Mr. Hamilton: I think what they copied--

Justice Breyer: --and that's why, you see, exactly why I find your interpretation of the statute rather strained, so what is the answer to what my hypothetical suggests?

Mr. Hamilton: --Well, since my answer would be strained if I said the photo, the telephone book, what I'm referring to would be what was written down for the purposes, and collected for the purposes--

Justice Breyer: But you said that they could not get the piece of paper--

Mr. Hamilton: --Yes.

Justice Breyer: --in the Tree Division--

Mr. Hamilton: The--

Justice Breyer: --and all I'm having trouble is distinguishing between the piece of paper written for tree health and the address in the telephone book written so people can know where people should be phoned.

Mr. Hamilton: --The piece of paper written for tree help... and I'm sorry I misunderstood the question.

I thought the Court was asking about the telephone book.

The telephone book, no.

The piece of paper that was written down from that, yes, because that's collected and compiled, and that's really what the SHOTS case said, that if there's a question about this of whether this was really fairly included for the purposes of 152, then for that purpose you have an in camera inspection.

Justice Ginsburg: But what is there that suggests that Congress wanted to change the game to that extent?

One can understand what you've suggested before, wanting to keep personal injury plaintiffs in the same place they were before this legislation, but your interpretation takes away from plaintiffs things that they would have had access to before.

Mr. Hamilton: Your Honor, we... respectfully, we disagree with that characterization of our position.

Justice Ginsburg: Well, you just, in response to the Chief's question, said that at least the police report of this accident was routine.

Mr. Hamilton: The police report of this accident, when you go and ask for... and the reason why is because... because of the Highway Safety Act, 1966 Highway Safety Act, the accident reports were indexed by location.

You could go and get a specific report if you knew the facts enough of the accident, but only that accident report, not all of them, and that is how 409--

Justice Souter: But that's not because of a privilege, is it?

Mr. Hamilton: --Yes.

It is because of a privilege.

Justice Souter: I thought the reason for that is the police said, look, we don't have to do your homework for you.

If you know what you want, we'll give it to you.

If you don't know what you want, we don't have to search for it.

Isn't that the reason?

Mr. Hamilton: Yes, because the police don't do that.

The police don't care about highway design factors other than because the form asks them to.

Justice Souter: Okay, so in the past, then, and in accordance with Justice Ginsburg's question, you could have asked for the police report, and in Justice Breyer's example, I presume you could have gone to the Tree Division and said, let's have the slip of paper that says the elm trees are diseased.

Now, you can't do that.

Mr. Hamilton: Well, Your Honor, I believe that--

Justice Souter: And Justice Ginsburg's question is, I thought it was supposed to leave things, as it were, level, the way they were, that a disadvantage was not being created, it was simply, the intent was simply to avoid creating a new advantage which would deter the State.

Isn't that the way we should read the statute?

Mr. Hamilton: --I think the purpose, yes, Your Honor, is to avoid discouraging States from participating, and allowing them to get accident reports from the hands of third parties does discourage States from participating.

Chief Justice Rehnquist: Would you like to reserve your time?

Mr. Hamilton: Yes, I would, Your Honor.

Thank you very much.

Argument of Paul D. Clement

Chief Justice Rehnquist: Mr. Clement.

Mr. Clement: Thank you, Mr. Chief Justice, and may it please the Court:

The 1995 amendment to section 409 is, contrary to the determination of the Washington State supreme court, constitutional.

The provision protects data that is compiled and collected for purposes of applying for Federal highway funds from being used in State and Federal court litigation.

The documents at issue are inherently Federal in character, and so Congress has the power to prohibit the use of those documents in both Federal and State court litigation.

Justice O'Connor: Well, what about documents created not for the purpose of getting Federal funds, not for section 152, but for some other purpose, some of which are later incorporated in a Federal funding application--

Mr. Clement: I think those documents--

Justice O'Connor: --by a different agency?

Mr. Clement: --I think those documents, Justice O'Connor, would be discoverable and admissible if the documents were sought from the party that collected them for a purpose different than the Federal highway funding purposes, but what the statute, I think, does prohibit is somebody going to the State Highway Traffic Department and essentially engaging in a one-stop shopping enterprise where they can get all sorts of documents that have been collected--

Justice O'Connor: But you differ from petitioner in your reading of the statute.

Yours is much narrower, I take it.

Mr. Clement: --That's exactly right, Justice O'Connor, and so as a result of our interpretation of the statute, the typical police accident report can be obtained from the Police Department and, I think with respect to Justice Breyer's hypothetical, the report about the tree can be obtained from the State Tree Department or the State Environmental Department.

Justice Kennedy: Let me ask a somewhat different question, although I'm not sure we've resolved the point that we've been inquiring about.

Would a State have the right to waive this privilege?

Mr. Clement: I think that's a difficult question, Justice Kennedy.

I think that as you know, as a general matter evidentiary privileges are waivable, and so... and that's the proposition this Court has established in cases like Menzonato and Hill, but there is a sense in which this privilege exists, in our view, primarily for the benefit of the Federal Government, so that we can obtain accurate, complete, and candid assessments of highway traffic safety requirements, and so, there's a suggestion, for example, in the Hill decision at footnote 3 that, when a third party's interests are at stake, that the court may not find waiver under those circumstances as readily as it would otherwise, so our view I think would be that although the Court need not definitively resolve it in this case, there's a strong argument that the privilege would not be waivable.

Justice Stevens: Let me just interrupt you, if I may.

Are you saying that the lawyer defending the county, if the plaintiff called him up and said, I'd like to see these reports, and the lawyer said, well, they're privileged, but I think I'll give them to you because I think it's in everybody's interests to know the facts, that would violate the Federal statute?

Mr. Clement: I think the admissibility of those materials--

Justice Stevens: I'm just asking you about showing them to the plaintiff.

Mr. Clement: --I think there's a sense in which it would violate the Federal statute, but I'm not suggesting that the Department of Transportation is going to be able to leap to the defense of the statute in that hypothetical and assert the interests of the statute.

I think, however, if a State wanted to take a systematic policy of disregarding section 409, I think that would implicate the Federal interests, and I'm not sure that a State would be able to do it.

Chief Justice Rehnquist: Well, supposing this simply comes up during a trial.

A witness is put on the stand, asked about the preparation of a report, and the State doesn't object, and it would be objectionable under the statute.

Now, is that something that could be challenged on appeal, say?

Mr. Clement: I don't think so, Chief Justice.

I think it is something that could be procedurally defaulted, but I do think if in a case like that the State went to the trial judge and said, look, there is this provision of Federal law, section 409, that says this material can't come in, but we're happy to just disregard that provision, I think the trial court might well be within its rights to say that no, we're not going to disregard that provision of Federal law, we're going to keep the material out, but I do think it could be--

Justice Ginsburg: With these rights, is it a matter of discretion for the trial court?

I mean, it would be one thing to say it's mandatory, it's a Federal requirement, and now you're suggesting that the lawyer can overlook it, and the court could or must act on its own?

Mr. Clement: --Well, I'm suggesting that the language of the statute is mandatory.

It says that it shall not be admitted, so I think if the language is brought to the attention of the trial court judge, he or she would be in a position where they ought to exclude the evidence.

Justice Ginsburg: How would this be enforced by the Federal Government?

I understand, and correct me if I'm wrong, that the Federal funding is not tied to the 409 privilege, but is tied to the 152 reporting obligations, so what Federal enforcement would there be for a county that says, we think it's fair for the plaintiff to have accident reports, so we'll give them.

What Federal... how would that mandatory requirement that you just stated be enforced by the Federal authorities?

Mr. Clement: I think under the circumstances that you're envisioning, Justice Ginsburg, the Federal Government would not provide funds under 152 or 130 or 144 to that particular locality.

Justice Ginsburg: So you're saying that the 409 privilege is not simply a right of the State agency, but is... that the funding depends on the State's asserting that privilege?

Mr. Clement: It certainly depends on the States or the localities abiding by that privilege as a general matter.

I don't think a State or a locality can take a cavalier position of saying, we're just not going to be bound by the provisions of this Federal statute, but yet we'd still like to take the money under those three statutes.

I don't think that's permissible, and the reason is, is that section 409, although it may benefit the State in a particular litigation, does serve an important Federal interest, and that is the interest in getting complete and candid information to assess and to award Federal highway funds.

By analogy, I would suggest this Court look to its decision in the Buckman Company v. Plaintiff's Committee case, because in that case this Court recognized that the FDA approval process, and the process for applying for FDA approval, is inherently Federal in character, and so this Court preempted State tort law that might distort the effect of applying for FDA approval.

In the same way, the process of applying for Federal highway funds and the documents that are used for that purpose have an inherently Federal character, and so the Federal Government has an interest in making sure that the information provided to the Federal Government is accurate and complete, and it has an ability, Congress has the power to take those essentially Federal documents and protect them both in State and Federal court litigation.

Now, I would suggest that the answer to the waiver question, unlike the answer to the statutory construction question, is not a necessary component of this Court's decision.

We think the better view is that it could be... is that it could not be waived, at least in gross.

Of course, if it could be waived, I think that is an additional answer to any accountability questions that may arise, but again, we think the better view is that it can't be waived.

Justice O'Connor: Mr. Clement, one of the arguments made by respondent Guillen is that... is a Tenth Amendment argument.

Do you think he has standing to make that argument?

Mr. Clement: I think the better view is that he doesn't have standing to raise that argument, and I'll also suggest that if they wanted to make a Tenth Amendment argument, and wanted this Court to decide the difficult question of whether or not an individual had standing to raise a Tenth Amendment argument, that they probably should have raised the Tenth Amendment argument before the conclusion section of their brief, and I think this Court would be well-advised not to definitively decide whether or not an individual had standing to raise a Tenth Amendment issue.

I--

Justice Scalia: Why... what's special about the... this is just an assertion that the Federal Government has no authority to do what it has done, and you say an individual who has been harmed by the Federal Government's exceeding its authority does not have standing to challenge?

It seems to me we do it all the time.

Mr. Clement: --Well, Justice Scalia, I don't think all Tenth Amendment challenges are created equal, and I think therein lies the difference.

If all the Tenth Amendment challenge is, is a mirrored reflection of Congress not having the enumerated power to enact a statute--

Justice Scalia: But that's all it--

Chief Justice Rehnquist: --How about a Commerce Clause challenge?

Justice Scalia: Yes.

Mr. Clement: --Absolutely.

In those kind of cases, the individual does have standing, but this Court on various occasions has suggested that there's an additional component to the Tenth Amendment, that it's not just a reflection of the enumerated powers of Congress, but, rather, there are certain special areas of State prerogatives that the Federal Government can't intrude through congressional acts.

Justice Kennedy: Well, we allow those challenges all the time in separation of powers cases.

Mr. Clement: I think that's right, but Justice Kennedy, I think there's something that certainly seems different.

If the gravamen of the complaint is that there's some element of State sovereignty that Congress cannot intrude upon, and the State doesn't object to that intrusion, it seems odd that the individual would have third party standing to raise that objection.

Justice Kennedy: Why couldn't you say the same thing for the Executive and the legislature in a case like Chadha?

Mr. Clement: Again, I think you could, and I think that's why with respect to a more typical Tenth Amendment challenge that's based on an enumerated power, or the lack of an enumerated power, there would be standing.

I think what this Court suggested--

Justice Scalia: I don't... whenever the Government goes beyond its enumerated power, it is infringing upon the powers of the States, isn't it?

Mr. Clement: --Well--

Justice Scalia: All the Tenth Amendment says is, you know, other than the enumerated powers, the other powers continue where they used to be, with the States.

In other words, I don't see anything special about a Tenth Amendment claim.

Chief Justice Rehnquist: In Buckley v. Valeo we held that the Appointment Clause, where the President had signed the legislation, could be raised by private individuals.

Mr. Clement: --No, I understand that, and that was also true in Chadha.

I think if there is a difference, and this Court suggested there might be a difference in the TVA case, if there is a difference it's because there are certain Tenth Amendment challenges that have the nature of just an intrusion on State sovereignty that's particularized.

The hypothetical that the cases have often talked about is moving a State capital, and if the State doesn't object to moving the State capital, it's hard to see why an individual ought to be able to raise that question.

I think the more important point, though, for this case is that there was a suggestion to this effect in this Court's TVA decision.

If this Court wants to revisit that decision, it probably doesn't want to do it in a case where the Tenth Amendment challenge is not properly raised and isn't even raised at all in the briefing before this Court until the conclusionary section of the brief.

With respect to the enumerated powers questions, which I think are the gravamen of respondent's case and the Washington supreme court's decision, there's no question the individual has standing.

That was true in this case, in this Court's decision in United States v. Lopez and would be equally true here.

And I think this Court can take comfort in knowing that this is, at bottom, an enumerated powers case, not a Tenth Amendment case in any specialized sense, because the Washington State supreme court found it unobjectionable that section 409 would apply in its pre-1995 amendment version, and what that indicates is that there's nothing sacrosanct about State courts' procedures, or State evidentiary rules.

Justice Kennedy: Don't you think that our opinion in the Commerce Clause case, in order to have persuasive force, should begin with an interpretation of the statute, recognize that a privilege can be waived or not waived?

I find it very difficult to see how this opinion can be written when we're not sure of the reach of the statute.

Mr. Clement: I agree with you entirely, Justice Kennedy, that this Court should define the scope of the statute before deciding whether or not it's constitutional, and we would urge the United States' construction of the statute.

I would say that the waiver question is somewhat different.

I don't think the constitutionality of the statute turns on the waiver question.

If the Court disagrees, we would urge the Court first to find that this privilege is not waivable at least in gross and, second, that even if it is waivable, the statute remains constitutional.

Justice Scalia: Do we have a final State decision here, Mr. Clement?

Mr. Clement: I think you do have a final State decision, and I think that's most clear with respect to the PDA action... that's the State Public Disclosure Act that was brought... because in that case the Washington supreme court held that the four documents were disclosable and said that attorney's fees would be appropriate.

In this--

Justice Scalia: There was a fifth document, though, and they didn't... there was no appeal on that one, right?

Mr. Clement: --Well, but there was no cross-appeal on that document either, Justice Scalia, so I think that document is no longer part of the case.

When the Washington court of appeals held that four of the five documents needed to be disclosed, Pierce County took an appeal to the Washington State supreme court, but I don't think that the Guillens filed a cross-appeal suggesting that the fifth document ought to be disclosed, and so I really think the fifth document is no longer in the case, and since the Washington supreme court found that attorney's fees were appropriate, that means that there was a final judgment.

That's true both at the--

Justice Ginsburg: Mr. Clement, there was... you said that the PDA suit, the four documents were required to be turned over under that, but I thought the Washington supreme court said that accident reports from nonofficers, from witnesses, would not be disclosable under the PDA, though they would be subject to discovery under rule 26(b), so the notion that the PDA suit was the one that determined that these four documents were required to be turned over, I don't understand that, because I thought there was one part at least, the reports from nonofficers, that the county prevailed on before the Washington supreme court, but that it was a Pyrrhic victory because they lost on that point under 26(b).

Mr. Clement: --That's not how I read the decision, Justice Ginsburg.

I thought... I read the decision as the four documents were clearly going to be disclosed as part of the PDA action.

Justice Ginsburg: Did you read the decision to say that these documents are not disclosable under our Freedom of Information Act, nevertheless they can be discovered in a civil litigation?

Mr. Clement: That's not, with respect, how I read the opinion.

I read the opinion that those four documents are disclosable under the PDA.

The only objection to disclosure under the PDA that was raised by the county was section 409, and with that issue resolved against the county, I took the import of the decision that those documents would be disclosed.

At that point, I think it's clearly a final decision, because this Court has held in the Beckton Dickinson case in the context of section 1291 that the fact that attorney's fees need to be resolved on remand doesn't deprive a decision of finality, and in that decision this Court relied on 1257 decisions, and so I would think that the same rule would apply in both contexts, so I think that the PDA action clearly is final.

I think the tort action is a more difficult question as to whether that's final.

I think this Court might have to change its... to modify its precedents a bit, but I think it might be a wise course in light of what Congress has done here.

I think this case is quite analogous to a case that this case found final called National Mercantile Bank v. Langdow, and in that case there was a State venue provision that a Federal statute trumped, and the State supreme court found that the... this Court found that the State's decision saying that State law trumped the Federal statute was final, and I think the cases are quite parallel.

They both involved congressional efforts to modify State procedure in order to serve a Federal interest, and in both cases when the State court disregarded the Federal interest and either through constitutional means or statutory means found the Federal statute inapplicable, this Court found that there was a final judgment in the Langdow case, and I think by extension of that decision, they could find a final judgment here.

I think the main difference between this case and Langdow is that in Langdow this Court took the position that upon remand there would be no further litigation available in the State court where the lawsuit was filed.

Here, there might be some litigation that would go on in the tort action, for example, but I think the important thing is that the Federal interest has been extinguished, and I think if there's any play in the joints in this Court's finality decisions, I think that this would be a particularly important case to find a final decision, because an act of Congress has been held unconstitutional.

Justice Scalia: Do we need to find finality with respect to both?

Mr. Clement: I don't think so, Your Honor.

I think that these actions are severable.

They were consolidated for purposes of appeal before the Washington supreme court, and I think that--

Justice Scalia: So if I don't want to wrestle with the complexities of the tort action, what would we do, just dismiss that case as improvidently granted and decide the other one?

Mr. Clement: --I think that would be fair, or this Court could just sort of ignore the tort case and say that it's going to take jurisdiction over the PDA action and decide this Federal statutory issue in the context of the State PDA action, and then--

Justice Scalia: Well, we can't ignore it.

I mean, we've taken the case.

We've granted certiorari.

We've got to do something with it.

Mr. Clement: --Well, I--

Justice Scalia: Just hide it under--

Justice Stevens: --There's only one case--

Mr. Clement: --I mean, I think that this Court could say that to the extent that the tort action is before it, that that action is not final, and that... or they're not going to... the Court's not going to definitively resolve that, and that the PDA action is final.

I would... this Court in a different context actually managed to bifurcate a single case and say that one part of the case was final and the accounting action that was subject to remand was not final.

That's the W. W.

Chief Justice Rehnquist: --We wouldn't want to do that too often, I think.

Unknown Speaker: [Laughter]

Mr. Clement: No, no, but I think if you can do that in a single case, I think you can certainly do it in a case like this, where they started as separate actions, were consolidated only for purposes of appeal, and really have separate life.

If, for example, this Court hadn't exercised jurisdiction, what would have happened is that the two cases would have gone back down.

The PDA action would have been essentially over, because as the county suggested, there's nothing left in the PDA action on remand.

The tort action would go on, and once the PDA action went back to the trial court, then it would have been appropriate to appeal that on a separate track from the tort action, and there would have been really no point to making the county go through that exercise, and so I think the PDA action is final.

If there are no further questions, I think the important submission from the Government is that the 1995 amendments can be given force in a way that renders them still quite well within the Congress' power under the Commerce, Spending, and Necessary and Proper Clauses.

Argument of Salvador A. Mungia

Chief Justice Rehnquist: Thank you, Mr. Clement.

Mr. Mungia, we'll hear from you.

Mr. Mungia: Mr. Chief Justice, and may it please the Court:

The statute does have to be construed, but regardless of how the statute's construed, it clearly does not meet this Court's requirements under South Dakota v. Dole because 409 is not conditional.

You read the plain language of 409, and it's not conditional in nature.

It's a mandate, and if somehow it could be construed as being conditional, it's certainly ambiguous, as we've seen many interpretations and many questions as to the operation of 409.

409 cannot be justified under the Commerce Clause.

It does not regulate commercial or economic activity.

Instead, it regulates State courts, and that is the peculiar nature of this dispute, because what is at issue is, is what does a State... this is completely an intrastate concern.

Justice Breyer: Why is it intrastate?

If you simply have a... if you interpret the statute to say, a document that is prepared primarily for this... for getting money, primarily for getting money out of the Federal Government can't be discoverable in a tort action?

What part of the Constitution would that violate, if that's how you interpret it?

You'd get all your documents, I guess, and so would anyone like you, but that seems to be basically what the Government's arguing--

Mr. Mungia: Justice--

Justice Breyer: --I... yes.

Mr. Mungia: --Justice Breyer, I agree with the Solicitor General's interpretation of the statute, we still get our documents, and I do want to make it clear for the record, and I think it's clear in the briefs, Pierce County took a different tack on this and had a very wide scope of interpretation.

However, despite that fact, there still has to be authority under the Commerce or Spending Clause, and I may not get it in this issue if we get our documents, that's correct, but I'm saying that no matter what, the act has to have authority under some article I, section (a) basis.

Justice Breyer: Well, that's certainly right, and so Congress says, we have a Federal interest in trying to minimize accidents, and in order to do that, we want to get information from the States when they want our money, and to be sure the information is accurate, we want to be sure that at least the information they give us, they're collecting with an eye towards being accurate rather than with an eye towards protecting themselves from tort litigation.

Mr. Mungia: Justice--

Justice Breyer: It sounds reasonable to me.

What's unreasonable about that?

Mr. Mungia: --Justice Breyer, because the analysis starts, is this commercial or interstate activity that in fact the Federal Government is regulating, and they're not, they're regulating State courts.

And again--

Chief Justice Rehnquist: But they're regulating in the interest of a commerce-type thing that's preventing automobile accidents.

Mr. Mungia: --That is the disputable part, as to whether or not there's any evidence in, within... not only in the record, or anywhere that can be found, whether this action, indeed, would prevent any further accidents.

All the statute does--

Justice Ginsburg: When Congress makes that judgment, don't we owe it substantial deference?

That is, we're not going to sit as a committee of Congress to determine whether there's a link between the condition of these intersections and vehicles going in and out of States.

If Congress made that judgment, it's not for us to question it, is it?

Mr. Mungia: --Justice Ginsburg, that is the historic and that is the correct analysis.

This Court has been very deferential to Congress', even if there's something within the information source that could support that reasoning, and again I'll go to U.S. v. Lopez and U.S. v. Morrison for that proposition, where in U.S. v. Lopez, there were no congressional findings at least this Court alluded to.

They do not have to make congressional findings, as long as there's something out there, some information, and the same thing with U.S. v. Morrison.

Even when Congress did make a congressional finding, this Court said we're not going to necessarily find that in fact they had a substantial effect on interstate commerce.

Justice Ginsburg: May I ask you just to back up for a moment to address the question that Mr. Clement did about the separateness of these two?

Is there anything in the tort action that you are seeking that's different from the PDA action, or are these essentially two actions seeking the same material?

Mr. Mungia: Justice Ginsburg, no.

They are seeking different materials, and the materials we sought in the tort action were much broader than what we sought in the Public Disclosure Act, and the materials... I do want to say this as far as that, there is no judgment in the tort action.

I mean, that should be clear.

There is no final judgment.

This is a discovery order that was taken up on interlocutory appeal.

Now, whether or not there is a final judgment in the PDA action is a closer question, but I would point out to the Court, page 114 of the Washington State supreme court's opinion that you'll find at Appendix A-114 directs the lower courts to make their rulings in accord with the court's opinion, and did not simply say these documents either are or are not discoverable, and thus it is debatable whether or not there is a final judgment even in the Public Disclosure Act case.

Justice Ginsburg: But the way you interpreted it, although you say it's debatable, is that everything that falls under the PDA, everything that... those four documents, those are not available to you.

That's what Mr. Clement said, I think, that that's what rendered the PDA action final.

Mr. Mungia: Correct, and I read the opinion differently, where in fact we do get those documents, and I... we may have a fight back at the trial court as to the language of the Washington State supreme court, because I realize in its opinion it said that those would normally not be discoverable under the PDA, but then you have to look at the purpose of the documents.

Justice Kennedy: You set forth four alternative interpretations at page 20 of your brief.

Do any of the documents involved in either of the tort action or the PDA action comprise just those set forth in your category 1, which is reports and data that the State agency actually prepares itself?

Mr. Mungia: Justice Kennedy, the documents that we sought under the PDA, even under the narrowest construction, under the narrowest construction, we get the documents, just on a statutory construction under the PDA request.

Justice Kennedy: But some of the documents you requested fit naturally within your category 1?

Mr. Mungia: Correct.

Justice Kennedy: All right.

Mr. Mungia: And so at least in this case, this Court need not address the constitutional issues, finding no final judgment in the tort action and, in fact, a narrow construction for the PDA action.

Justice Stevens: I'm sorry, I'm not sure I understood.

You say the documents that you requested fell within category 1?

Mr. Mungia: Of our interpretation, which is a very narrow construction of the statute.

That's correct, Justice Stevens.

Justice Stevens: In other words, they were documents that were actually prepared to get highway funds?

Mr. Mungia: No, I'm sorry, if I--

Justice Stevens: That's what I understood you to say.

Mr. Mungia: --Oh, no, I'm sorry.

I'm saying we would get those documents under our construction.

In other words, they do not fall within the parameters of that narrow construction, because these are documents that in fact were prepared by another agency.

Justice Stevens: So in your view, none of the documents that you're... that are in dispute fall within category 1.

Mr. Mungia: Correct, under the PDA action, that is correct, not the tort action but the PDA action.

Justice Kennedy: Do they fall in category 2?

Can you tell us?

Mr. Mungia: No.

If they don't fall within category 1... I'm sorry, Justice Kennedy.

If they fall within category 2, yes, they would.

Under the PDA action, those documents would fall within--

Justice Kennedy: Documents the agency has in its possession?

Mr. Mungia: --Correct, they fall within category 2.

And I do want to point out to this Court that, in fact, Pierce County's position, and it's shown in the record, was that we could not even discover the names of witnesses or the names of the people involved in the accidents, and that's surely not part of the Federal highway funding data, because why is the Federal Government concerned with the names of the people involved in the accidents, and I think this is a concern about putting documents, if you will, in a black hole and allowing certain information which our supreme court has held is essential to the proper determination of these claims, based upon State and local law.

They are essential to those determinations going in, and now no longer being discoverable.

I think that is a very basic concern with this statute, and why at least one reason it should take a narrow construction, or at the very widest, the construction put forward by the Solicitor General.

Justice Ginsburg: But the construction put forward by the Solicitor General, as I understand it, is you can get it from the agency, like a law enforcement agency, but not from the Public Works Department if the purpose is to implement the Federal program.

That's the Government's position?

Mr. Mungia: Yes, Justice Ginsburg.

Justice Ginsburg: But under that position, I suppose, in the day when we have this great data base and all reports are there initially, then under the Government's approach, everything would be exempt from discovery.

Do you read their position to say that?

Mr. Mungia: Correct, Justice Ginsburg, I do, and that is the day, if it's not today, that this court--

Justice Breyer: No, I didn't read it that way.

I thought what they were saying was consistent with if it... and maybe it's in this case.

I don't think it is, but I mean, if you ever have the great single data base, you'd look to see whether the document was primarily created for the one purpose or the other.

Where it's primarily created for accident reports, you get it.

Where it's primarily created to get money from the Government, you don't.

I mean, does that work as an interpretation?

I'm not sure we have to reach it, but if we did?

Mr. Mungia: --Justice Breyer, as far as interpreting the electronic portion, it probably is a reasonable interpretation, and you're right, I mean, it's not part of this case, but it probably will have to be faced sooner or later.

Going back to the scope, again, because we are talking about the interpretation of this, Pierce County took the position they were... and this is in the companion Witmer case, which is the one... there was a companion case at the State level, where private highway surveys done by, I believe it was the McDonald's and the Chevron Company, which the county then took within its possession, it was unwilling to disclose because under 409, so again I think the county's position was a very broad one, that anything that goes in within their possession then becomes nondiscoverable and you cannot use it, which I think is a completely unreasonable interpretation.

I do want to take a few minutes and talk about the Spending Clause, because this is not a condition.

If you read section 409, the plain language of 409, it's mandatory, and surely when Congress has intended to use its Spending Clause powers, I think especially in the Federal highway setting, it's been very clear.

Justice O'Connor: I don't see how you can characterize section 409 as a condition.

It's an incentive provided to... for the State to participate in this Federal funding program.

The Federal Government hopes to get information from the State, and thinks that they'll be more apt to get it by providing the protections of section 409.

I don't see it as a condition at all.

Mr. Mungia: Justice O'Connor, I agree.

I don't think it's a condition either.

Whether you want to term it as an incentive or something else... they term it as a mandate.

I think regardless of how you term it, then it cannot be authorized under the Spending Clause.

Chief Justice Rehnquist: But--

Justice O'Connor: --Well, why not?

It's a necessary and proper means of ensuring that the Federal money is spent wisely and efficiently.

Now, I don't see the big issue there, frankly.

Mr. Mungia: Under the Spending Clause analysis, this Court has long gone through through Pennhurst, through South Dakota v. Dole, and just recently in Durham v. Gorham, it's clear that the conditions have to be spelled out.

Now, this is clearly some sort of imposition, and if it's not Spending Clause, then they'd have to have it under the Commerce Clause authority, which goes under another analysis.

Justice Ginsburg: You'd have another--

Chief Justice Rehnquist: --No State has to participate in this program if it doesn't want to.

If a State wants to turn down Federal money it can, can it not?

Mr. Mungia: It can turn down Federal money, and that's the interesting, Mr. Chief Justice, about 409.

Again, just reading the plain language of 409, it is mandatory, and there's no provision... even if you cross-reference to 152, there's nothing which puts anybody on notice about how this... how a State can avoid the mandates of 409.

Justice Souter: Well, it can avoid--

Chief Justice Rehnquist: --But you can agree, nonetheless, that a State can refuse to participate?

You say you can't, by reading 409, tell that it isn't just a legislative command based on something other than the Spending Clause, but don't... you do agree, don't you, that if a State didn't take the Federal money, it would not be bound by 409?

Mr. Mungia: Mr. Chief Justice, I think that's an open question, and I don't necessarily agree with that.

I think you have to read the plain language, and it seems like Congress is saying you will do this.

Chief Justice Rehnquist: You think it's just categorical, then?

Mr. Mungia: Correct.

Justice Stevens: But how could that be if... how could any document be collected for the purpose of participating in the Federal program if the State doesn't participate in the Federal program?

Mr. Mungia: Because if you read section 152, what it mandates States to do is come up with a list and a survey of hazardous sites.

That's all it says, in 52(a), that's the mandatory part.

So Congress, if it has the authority, can tell the States, do this list.

Now, the question, that begs the question whether or not Congress has that authority.

I think then that's when you have to turn to the Commerce--

Justice Ginsburg: Do the list whether or not you have any Federal money, is that what you're saying?

This is not tied to Federal spending.

That's what you seem to be saying.

That it's independent Federal obligation on the States whether or not they receive any Federal money.

Is that how you read 152?

Mr. Mungia: --Justice Ginsburg, that's correct.

I think if you read the plain language, 152, unlike 23 U.S.C. 131, 141, 159, 161, where it's clear that Congress says you must control highway billboard signs or you lose 10 percent of your funding, you must control size and weights of vehicles that go on interstate highways or you lose 10 percent of your funding.

Those are all clear.

In fact, in the Dole case, under 23 U.S.C. 158, I think that the title of the act was withdrawal of Federal funds.

Justice Ginsburg: Aren't we losing sight of the fact, the rather plain fact that the States and the counties wanted this?

They weren't satisfied with the program originally because they feared these documents would be discoverable, and make the county liable.

Do you have another Spending Clause case where the States and the counties came to Congress and said, please give us a privilege, and then say, well, now it's mandatory and it's some kind of a club rather than a carrot?

Mr. Mungia: Justice Ginsburg, I have two responses.

One, I think actually this Court addressed that same sort of analysis in New York v. U.S., where the Solicitor General argued that because New York officials wanted the benefits of the Low-Level Hazardous Waste Act, therefore it cannot later challenge certain provisions of that act, and this Court rejected that argument.

Justice Ginsburg: But this very provision they wanted, not the thing in general.

Mr. Mungia: And that goes... then to my second part of my response is, and I think it's a fundamental part of the constitutional analysis, because here, if the States wanted this protection they had the means to do it themselves, and this Court has explained, again citing from New York v. U.S., State sovereignty isn't for the benefit of the States, it's for the benefit of the citizens to derive the benefits of liberty from the division of separate powers, so it really, just because State officials want it, it's clearly that the people of the State of Washington did not want this, because it infringed upon a State cause of action.

In fact, so much so that the State supreme court was willing to hold it was unconstitutional.

Justice Kennedy: Well, that goes to the waiver point.

I assume the State can waive it if its citizens instruct it to do so, or maybe not.

The Government says no.

Mr. Mungia: I... Justice Kennedy, you look at the language, and in fact you look at the early responses by Pierce County, where Pierce County clearly said, we cannot... I mean, we must... we don't have that choice.

We cannot--

Justice Kennedy: The hypothetical is that the State could waive it if it wanted to.

That's the--

Mr. Mungia: --And Justice Kennedy--

Justice Kennedy: --hypothetical question.

Mr. Mungia: --Yes, and I... Justice Kennedy, my response is, I don't see how the State could, because I think just for the very reasons, as was pointed out by the Solicitor General, where do you cross that line between, I guess, a single waiver, and then it becoming endemic.

I think that's the whole problem here.

Under the recent cases under the Commerce Clause, and again I just want to spend a couple of minutes on the U.S. v. Lopez and Morrison cases, it seems clear that again this type of activity, what's being regulated is, in fact, State courts, in fact, the admissibility, the discovery of evidence, and that is certainly intrastate, and there's no contention here that somehow justice, or the discovery of documents is somehow commercial in nature, and you cannot make that argument, so I think there is no basis under either the Spending or the Commerce Clause to support this legislation.

Justice Souter: Well, is it irrelevant under your argument that the object of the Federal legislation is safety in an artery of commerce?

Is that beside the point?

Mr. Mungia: Justice Souter, the object at least for the Federal Highway Act is safety.

I don't think the same thing can be said about 409, because then you're becoming... as this Court said in U.S. v. Lopez, you're building inference upon inference, because you have to go and say, if these documents are no longer, in fact, discoverable, would it result in safer interstate travel, and there's just too many intermediate steps.

Justice Souter: So you that think the Federal interest in this case is comparable to the Federal interest in Lopez, the ultimate interest?

Mr. Mungia: I think that the... Justice Souter, the Federal interest in section 409--

Justice Souter: No, I'm talking about the ultimate Federal interest that gives rise to all of this regulation, which is the safety of an artery of commerce.

Are you either disputing that that is the object, or are you saying that that object is on par for constitutional purposes with the significance of the Government's object in Lopez?

Mr. Mungia: --Justice Souter, I think it's more the latter.

I'm saying that the Federal Government certainly has an interest in the safe passage of interstate--

Rebuttal of Daniel R. Hamilton

Chief Justice Rehnquist: Thank you, Mr. Mungia.

Mr. Hamilton, you have 3 minutes remaining.

Mr. Hamilton: Thank you, Your Honor.

Very quickly... 3 minutes, quickly... I would like to correct I think what was a misstatement by respondent's counsel, or at least one of them, dealing with what the Court should do if it adopts the United States' position.

Plaintiffs say that if you adopt that position, then they get the documents.

I'll point out that on page 24 of their own respondents' brief they say their... interpretation number 2, which they say the U.S. reflects, they say on page 24, if the Court construes the statute in this fashion, then a remand would be necessary to determine which specific discovery requests would be precluded and which would be, still be allowed.

They're not entitled, even under their own admission, under the U.S. position, and in fact I would point out on page 20 of our reply, yellow brief, where we point out that in fact, if that were the case, even if the U.S. position were adopted, these particular documents would have to be protected.

Furthermore, obviously there is some confusion as to where we differ with the United States, and it's a very narrow difference.

We both agree that generated documents are protected.

We both agree that collected and compiled documents in the hands of Public Works are protected, and we both agree that in some situations they're protected in the hands of third parties.

They, though, very narrowly define that in situations where the third party gets it, is a transferee agency, where you can only get it by indexing, or where it's part of a computer base.

I would ask the Court to consider its own St. Regis Paper Company case, where it addressed a statute that only made a protection when it was in the hands of third parties or officials, and it contrasted the language of that statute with other statutes, 45 U.S.C. section 41, and 49-320, whose wording is almost identical to 409.

If you would compare those, you would see that the case distinguished those types of statutes from a statute only protecting in the hands of third parties.

So whatever 409 does, it certainly protects more than just in the hands of third parties, and I would also like to point out, the reason why we differ from the U.S., we believe their logic is correct with protecting in the transferee hands and in a computer data base and where it's indexed, but if you carry that logic through, we believe a bright line rule should be established by this Court, because obviously the State courts have been very... some State courts, a minority of State courts have been very resistant.

Other State courts have been trying to do their best to comply with the language of the statute, but some States, of course, have found every opportunity to try to misinterpret the statute, and it required Congress at least twice to amend the statute to get back to what they intended.

When you look at the situation of why they wanted, the Solicitor General believed that documents in the hands of the transferee agency are protected, they said that the reason for that was that they would not exist but for the planning agency's collection of that information.

Well, so, too, accident reports would not exist in their totally different form, they would not be indexed and therefore accessible, and they would not be in the county's possession but for the Highway Safety Act, so you extend that logic through, then you come to a bright line rule which we believe the Court should adopt.

Thank you, Your Honor.

Chief Justice Rehnquist: Thank you, Mr. Hamilton.

The case is submitted.

Attribution:

The Oyez Project

Featured:

Security Services, Inc. v. Kmart Corp. - Oral Argument

Fri, 09 Jan 2009 14:49:49 +0000

Case:

Security Services, Inc. v. Kmart Corp.

Media File:

93-284_19940228-argument.mp3

Related Transcript:

1993_93_284_argument.xml

Transcript:

Argument of Paul O. Taylor

Chief Justice Rehnquist: We'll hear argument now in Number 93-284, Security Services, Inc. v. The K Mart Corporation.

Mr. Taylor.

Mr. Taylor: Thank you, Mr. Chief Justice, and may it please the Court:

My client, Security Services, is a motor common carrier.

It filed a tariff, a tariff called 501-B, submitted it to the ICC, the ICC accepted this tariff, it put their stamp on it, "Received", they put it on their shelf, and it was there for the public to use.

The tariff was never rejected, it wasn't cancelled, it wasn't suspended, it wasn't set aside, it was never challenged until my client exercised its statutory rights under section 10761(a) to collect the filed tariff rates.

The district--

Unknown Speaker: Well, it was never enforced during the time that the actual carrier had it, whatever its validity.

Mr. Taylor: --I don't agree, Mr. Chief Justice, that it wasn't enforced.

The fact was that it was on file and gave notice to the public as to what the rate is.

This Court in Berwind, Berwind-White Coal Mining v. Chicago and Erie Railroad in 1914 said that a tariff, while arguably lacking some of the formalistic requirements that the act requires and that the Interstate Commerce Commission might require, is enforceable if it is received with no objection as to form and if it is adequate to give notice to the public of the rate.

This tariff disclosed a rate, the rates were not stated in cents per mile, but they were determinative on getting the mileage.

The tariff said you go to this mileage guide for purposes of getting a mile and applying this rate.

It contained everything essential to rate a shipment.

Unknown Speaker: But both the mileage guide itself and the commission regulations, as I understand it, advised whoever was going to check the tariff not to look to that mileage guide after a certain date, namely, the date when you were no longer listed as one of the people supporting that mileage guide.

Mr. Taylor: Well, Justice Scalia--

Unknown Speaker: Would that not confuse the public at least?

The public wouldn't know whether you continued to be using that mileage guide or not.

Mr. Taylor: --No, I don't believe the public would be confused, for several reasons, if I might elaborate.

First of all, the ICC's claimed voiding power does not come from this failure to be listed in the participating carrier's tariff.

The ICC's claimed voiding power comes from the failure to give a power of attorney to the publisher of the guide.

Unknown Speaker: Well, you don't have to call it a voiding power.

You just have to call it putting the public on notice.

The public reading the regs and reading the guide itself, or the things attached to the guide, would believe that you were no longer using that mileage guide after a certain date.

Mr. Taylor: Your Honor, what the public reads is a tariff, and the tariff discloses the rate.

The statute does not require a mileage guide, the statute requires disclosure of rates, and this tariff, this 501-B tariff, very plainly disclosed what the rate would be for Riss.

Unknown Speaker: Well, if the shipper had read the guide and seen the asterisk, then he would have known that the rate should not be enforced--

Mr. Taylor: I don't believe that's correct.

What happens is, there's lots of tariffs that are allowed to go into effect with defects.

This Court acknowledged it in Davis v. Portland Seed, said its defects are inevitable, and if there's a certain defect, what do you look to if you have, perhaps, tariffs that conflict, or tariffs that might be partially incomplete.

What you look to is the intent of the framers, and what is the disclo--

Unknown Speaker: --Well, this wasn't a defect in a calculation, it was a failure of a condition that must continue for the rate to be valid, and that condition failed.

Mr. Taylor: --I don't agree that the rate's not valid, Justice Kennedy.

The rate is still contained in the tariff, and let us assume for the sake of argument that we were not permitted to use this distance guide.

You still have this rate sitting out there.

You can calculate rates.

You certainly cannot apply the tariff without having a distance, but a mileage is not something that is abstract, a mileage is finite.

There is only one shortest, practical distance from Chicago to Minneapolis or from Baltimore to Boston.

Unknown Speaker: If that's so, why is it so complicated to have all these distances that you have to have a bureau do it?

Mr. Taylor: I don't think that you have to have a bureau do it.

As a matter of fact, during this time period, the Interstate Commerce Commission was allowing all sorts of methods of filing: Rand McNally road maps, mileage guides that weren't on file--

Unknown Speaker: Is it in fact true that it's very obvious... to Washington to Baltimore, that it's very obvious there's one and only one shortest practical route?

Mr. Taylor: --That's true.

I believe that to be true.

Unknown Speaker: Have you traveled it often?

Mr. Taylor: I have traveled it on several occasions.

I'm more familiar with the distance from Chicago to Minneapolis than I am from Baltimore to Washington, but by the--

Unknown Speaker: You don't take the position that there was something unreasonable beyond the statutory power on the ICC to require the filing of the mileage guide, do you?

Mr. Taylor: --No.

I don't think... I don't think--

Unknown Speaker: Don't we then have to take tariff as meaning what the ICC has construed it to mean to require both the mileage rate and the mileage distance specification?

Mr. Taylor: --No, Justice Souter, you take the tariff as to what it discloses, and this tariff disclosed the rate dependent upon mileage, the charge, the derivative charge, and that said we're going to use these mileages.

Unknown Speaker: You had one guide, and there were other guides that gave different distances between the same two points, were there not?

There was a choice.

You could have filed a map, you could have joined this guide, you could have joined another guide, and they weren't uniform, were they?

Mr. Taylor: No.

No, they weren't, Justice Ginsburg.

Mileage guides were not uniform, but there was only one mileage guide disclosed by my client.

We didn't say, we're using all sorts of other different mileage guides.

There was one mileage guide that our holding out to the public said we would use.

Unknown Speaker: Well, now, what if somebody else who read the ICC's rules said, I'm going to use this mileage guide to start off with, but after a certain date I'm going to withdraw from it, after which that will not govern me.

Now, couldn't a person do that?

Mr. Taylor: Sure, absolutely they could.

Unknown Speaker: Sure.

Now, how is the public to know whether you're that kind of person or whether you are your kind of person--

Mr. Taylor: Because, Justice Scalia--

Unknown Speaker: --who wants to continue to have the mileage guide applicable?

Mr. Taylor: --Because the public would know from the rate tariff.

When you rate a shipment, and what the reasonable user is going to use in using a tariff is, they are going to open this tariff and they are going to see this is the rates that Riss, in its own tariff, not in the tariff filed by a third party agent, but in a tariff that it has disclosed to the public saying these are our rates, the tariff that's circulated.

These are our mileage rates, and this is what we are going to use.

Unknown Speaker: And this is the mileage, but the reader might think well, of course, they are doing that on the assumption that they are following the ICC's rules, which means they only mean it for so long as they continue to subscribe to the mileage guide.

Mr. Taylor: Well, Justice Scalia, the fact is that during this time period, the ICC rules, the ICC had issued a rule in 1984 when it amended the tariff publishing regulations.

First of all, what they did was, they eliminated from that section of the notice of proposed rulemaking... it originally said, if you refer to a distance guide, you have to also provide a power of attorney or concurrence in that distance guide.

1) That was deleted.

2) The ICC issued an opinion called,

"Revision of Tariffs, All Carriers. "

When they made a complete overhaul of its rules, and it said, due to issues of copyright and general availability, we will no longer mandate for distance guides their filing with the commission or who must be parties to it.

This 1312.4(d) voiding power at least to the extent the commission attempts to retroactively apply it to Riss' tariff which continued in effect is something that is basically newfound.

It's not something that any reasonable reader of those regulations would have determined back in 1984, or in 1985 at the time Riss filed the tariff which is at issue in this case.

Unknown Speaker: How much were the dues involved that weren't paid that led to Riss not being a party to the--

Mr. Taylor: The dues I believe, Justice Ginsburg... and I'm only going from my personal knowledge and not from the record... were about $83 during this time period.

Unknown Speaker: --Is there anything that accounts for how widespread this failure to continue to be members of the guide were, because I think one figure in the record was that between the years 1984 and 1988, 40 percent of the common carriers weren't paying their dues.

Mr. Taylor: Yes, Justice Ginsburg.

That was in the record in the Jasper Wyman case, a portion of which is attached to amicus Overland's brief in this case.

In fact, during this time period, aside from 40 percent not participating, there were all sorts of other methods which were disclosed, and as a matter of fact, when the commission was made aware of actual violations, they did nothing to strike the tariffs.

Only--

Unknown Speaker: Was this because everybody was really making deals outside the tariff?

Mr. Taylor: --No, I don't believe so.

I believe it was because the commission had basically issued this decision in revision of tariffs in 1984 that said, we are no longer going to require filing of distance guides, and we are not going to require participation in them.

The commission now says, well, that means copyrighting or something like that, but I think the unequivocal language of that decision is... and I can quote it almost verbatim... is due to issues of copyright and general availability, we will no longer mandate for distance guides their filing with the commission or participation in them.

At least, it's language very similar to that, so I think--

Unknown Speaker: You didn't at the time Riss... the prebankruptcy Riss didn't have a whole lot of interest in adherence to this tariff, because in fact you were making deals for a price lower than the tariff.

Mr. Taylor: --Well, Justice Ginsburg, I don't agree with that.

In the vast majority of cases, Riss billed their tariff rate, and in the vast majority of these bankruptcies, I know there's a lot of these cases that have developed their way up through the system, this Court having had several in the last 3 years.

In the vast majority of the cases, the carrier bills the tariff rate.

The other thing in this case, it's not a matter of protecting the Riss, it's a matter of protecting the public and their ability to challenge rates that are on file.

There's no way, if... the core purpose of the act that this court said in Maislin was to disclose the rate and allow people to challenge them as discriminatory and also to provide stability in the rate by allowing the Commission's... the circuit court's application of the Commission rule, basically what the Court would be saying in that case would be that well, you can negotiate whatever you want, and if your tariff is somewhat defective, it doesn't meet the proper form, then, well, okay, you cannot collect it.

Unknown Speaker: I understand what your argument is now in collecting from customers who paid less, but suppose there had been no bankruptcy, could Riss have gone after the people that it gave discount rates to, or would there have been some kind of estoppel working prebankruptcy?

Mr. Taylor: I'm not sure I understand the question, Your Honor.

Unknown Speaker: All of these cases seeking more from customers who were given discounted rates come up in the context of a bankruptcy?

Suppose there had been no bankruptcy.

You made a deal with customers and said, forget the tariff, we are going to give you a better price, because there's competition out there, and then 2 months later you say, sorry, we were entitled, because of our filed rate, to charge you more, so we're going to send you an additional bill.

Would there have been some kind of estoppel operating prebankruptcy?

Mr. Taylor: No, I don't believe so.

First of all, the application of the filed rate doctrine has never been dependent on somebody being in bankruptcy.

It's not just my client's right to collect its tariff charge, it's my client's duty, whether bankrupt or not bankrupt, to collect the tariff charges, so by that same token the liability for the shipper exists whether or not we actually make the demand for payment.

They are charged with knowledge of what is contained in the tariff.

On top of it--

Unknown Speaker: And you say in addition, to answer Justice Ginsburg's... that Riss could have brought this action had no bankruptcy supervened?

Mr. Taylor: --Not only could they have, they should have, and were required to by the act to bring that action.

Congress has mandated the collection of--

Unknown Speaker: How do you explain the fact that no solvent carriers ever brought any of these actions?

Mr. Taylor: --Solvent carriers bring these types of actions not as frequently as bankrupt carriers.

Unknown Speaker: Do they bring any of them?

Are there any solvent carriers in this whole family of cases?

Mr. Taylor: Recently?

Unknown Speaker: Yes.

Mr. Taylor: Solvent carriers... yes, I have several carriers who I represent who have brought actions for undercharges.

For example... and I know many people who are engaged in the collection business, when a client comes in and says, I want to collect payment from a particular shipper--

Unknown Speaker: These are nonpaying shippers.

Mr. Taylor: --Yes, in that setting.

Unknown Speaker: Are there any undercharged suits that you know of brought by solvent carriers?

Mr. Taylor: Not that I'm aware... not recently.

In the past, yes, but not recently that I'm aware of.

I think what happens in a case such as this is that what the Interstate Commerce Commission advocates through its rules and through its newfound interpretation of its regulation is that somehow that there should be a punishment upon Riss for not filing this power of attorney and remembering that the voiding power does not come from not being listed in the tariff, the voiding power comes from not providing the power of attorney.

But the act is there to protect the public, and it's there to protect the core purpose there, being able to challenge a filed rate as discriminatory, as unduly preferential and perhaps unreasonable under some of the other criteria in the act, and it's really the public interest that's being protected.

Unknown Speaker: Can I ask another question--

Mr. Taylor: Yes, Justice--

Unknown Speaker: --about this general category?

Are there any suits brought by competitors of shippers claiming they were hurt by these discriminatory rates that you know of?

Mr. Taylor: --Not in recent years.

As a matter of fact, I think part of it--

Unknown Speaker: That's surprising, if there's this strong public interest supporting the full enforcement of the tariff rate.

Mr. Taylor: --Well, the fact is that the Interstate Commerce Commission does not reach the issue of reasonableness any more.

They have not yet that I'm aware of actually issued a dispositive ruling ever determining whether or not a rate is reasonable or... unreasonable.

They basically have adopted a hands-off approach, and in my opinion it would be futile for a shipper to make a challenge to a rate as unduly discriminatory because the Interstate Commerce Commission has allowed all sorts of rates that are discriminatory and it hasn't, that I'm aware of, actually issued an order finding that a rate might be discriminatory.

Unknown Speaker: Mr. Taylor, I assumed... well, under one of the regs of the Commerce Commission you can file a rate that has an expiration date on it, can't you?

Mr. Taylor: Yes.

Unknown Speaker: And what happens to that rate when the expiration date comes?

It automatically is no longer effective?

Mr. Taylor: It goes away.

Unknown Speaker: Now, why isn't this simply the same thing?

What the Commission's rule said is that if you file a rate that refers to this extrinsic mileage chart, your rate will automatically expire at the time that... it's simply telling the public that... it's just like saying, in the regs, when you say, we will round off your mileage to the nearest hundred so that if you say, 75 miles, that shall be deemed to be 100 miles.

Anybody that files a rate that says, 75 miles, will know that it means 100 miles.

Mr. Taylor: But in this case, Justice Scalia, the Riss 501-B tariff continued to be on the shelf, continued to be charged to people other than K Mart, and it was there for the public to view to see and to challenge if they wanted to.

Unknown Speaker: Yes, but the ICC had in effect said Riss' tariff shall be deemed to expire when Riss' membership expires.

That's what the ICC... now, do you say that the rule was unauthorized?

Mr. Taylor: No, the rule is authorized.

The rule is proper, but the application of the rule to have an effect saying this tariff that was on the shelf since 1984, we should pretend does not exist and should give no legal effect to it, that is contrary to law.

It runs contrary to this Court's precedent in Maislin, it runs contrary to this Court's precedent in Berwind.

Tariffs don't have to be perfect.

They frequently aren't.

A part of the problem is, frankly, lack of oversight by the Commission, for whatever reason.

Part of the problem is the Commission has shortened the time period for filing tariffs.

Statutorily, they can shorten it to less than 30 days, so you can decrease a rate, now, on 1 day notice, you can increase it on 7 days' notice.

That certainly doesn't give the Commission time to go through it and say, hey, there's something wrong with your tariff.

Unknown Speaker: How is determination shown?

If someone looks at the guide, they just looked at the mileage from X point to Y point, they wouldn't see anything, but the names of the people... how was that... when Riss dropped out, when it didn't pay the $83, how was notice of that conveyed to the shipping world?

Mr. Taylor: Well, it's affected through what's called a participating carrier's tariff, so what you have to do is, you have to start with the Riss tariff, which says it's governed by the mileage guide and only by the mileage guide, and then you go from the mileage guide, which says this only applies for people listed in tariff 107, so you make a two-step removal from Riss' tariff to see who's listed.

Then there's supplements that come out from time to time that the Household Goods Tariff Bureau would publish, which show through symbolization Riss's name being stricken and all sorts of other carriers being stricken from the tariff, but the Commission hasn't gotten to the point to where they go back and cancel Riss' here.

Unknown Speaker: But that would be in a different booklet than the mileage guide itself, the list of people who haven't paid up?

Mr. Taylor: Yes, that's exactly correct.

The fact is... and I think the principal point in a case such as this, however, is that what is the disclosed rate?

What does the statute require?

The statute requires us to file rates, it doesn't require us to file mileages.

You can determine mileages without having a mileage guide.

As a matter of fact, the Commission's own regulations at 49 C.F.R. part 1048, when referring to what are called commercial zones, refers to airline miles around a particular city, which would require some sort of external measurement, so the tariffs don't require precision.

What it requires disclosure of rates in such a fashion that would enable somebody to challenge the rates as discriminatory or unreasonable.

One thing this Court cited with approval in the Maislin case was the regular common carrier conference case by the D.C. circuit decided in 1986.

In that case, the Commission had put forth a rule which basically said, you can put in your tariff, or actually a group of carriers had published a rule which says, you can negotiate whatever you want to.

That was in the tariff.

That is basically the sum and substance of what was said, and it was challenged by a group of carriers which said, that doesn't meet the requirement for a rate in the tariff, and the D.C. Circuit said, that requirement is utterly central to the act, and the Commission came back and said, well, we have all these other methods of determining tariff rates.

And what the D.C. Circuit said is that while those tariffs haven't been challenged yet, what they said... and this is from page 380, 793 Fed 2d 380... for example, under volume discount rules, competing carriers cannot determine the per unit rate, but the carrier is charged with knowing the volume tendered by the shipper, but they do at least know how the per unit rate is determined, enabling them to protest the application of a different formula to a particular shipper.

So if for some reason some shipper took that extraordinary step and went two tariffs removed from Riss' tariff and was somehow confused about the mileages, at least we have a disclosed rate and a method of challenging that rate and perhaps challenging the application of that rate for a calculation of mileages in that case.

And by the circuit court's opinion, by upholding the retroactive effect of 1312.4(d), they basically got the filed rate doctrine.

It makes the disclosed rate unreliable, and this Court has said in Berwind, said it in Davis v. Portland Seed, that that disclosed rate, that the carriers at a certain point have to be able to place repose in the tariffs that are on file.

Unknown Speaker: Now, when you say, retroactive, this was not retroactive so that it voided the tariff before the date of the supplement to the rating bureau.

Mr. Taylor: That's correct, Justice Kennedy.

Unknown Speaker: So it's not... it's retroactive only in the conclusory sense that you say that the rating bureau publication is irrelevant.

Mr. Taylor: That's correct.

From that date forward, from the date after Riss was dropped from the list of participating carriers, those shippers who relied on that tariff, the 501-B tariff that Riss filed in its own name, those shippers that relied on it, paid that rate, at that point that tariff becomes retroactively voided for them and basically leaves us with no tariff.

The additional application of the rule, while not present in this case, but the record attached to Overland's brief, the amicus brief filed by Overland in this case, indicates that you can have the reverse effect.

In American trucking, all you had was a restoration to a cheaper rate, but if you void... if the Commission is allowed to void carriers' rates, it may... it doesn't in this case, but it may in other cases and does in other cases, result in higher rates, so the--

Unknown Speaker: Well, Mr. Taylor, what happens in the case of a rate which has passed its expiration date?

It remains on file, but it's no longer valid?

What are the rights of the carrier and the shipper in that case?

Mr. Taylor: --There is no right.

Nobody can claim a right to a rate that has expired.

In this case, the rate tariff continued on file, Mr. Chief Justice.

Unknown Speaker: So in that case, the shipper and the carrier could negotiate their own deal, so to speak?

Mr. Taylor: No.

Well, in those cases, 1)--

Unknown Speaker: Well, now, you've said no rate applies, so wouldn't the only alternative be for the carrier and the shipper to negotiate their own deal?

Mr. Taylor: --Mr. Chief Justice, in the case where there is no otherwise applicable rate, there would be no tariff and the carrier would be subject to whatever civil penalty... the civil penalties under the act, because the act does require you to maintain rates in other cases.

Unknown Speaker: But by hypothesis, you haven't maintained rates, and you've made a deal with the shipper to ship at a particular price.

Is that voidable, or can the carrier come back and charge more later?

Mr. Taylor: The carrier can always charge, and must always charge his tariff rate.

Unknown Speaker: But by hypothesis we have no--

Mr. Taylor: If you had no tariff rate at all, in any tariff, not just the 501-B tariff, but if there was no other tariff applicable that might be higher or lower, now at that point you would... I assume you would have an illegal contract and nobody would be entitled to any compensation.

Unknown Speaker: --So that the carrier would be carrying for nothing, in effect.

Mr. Taylor: I agree, yes.

Unknown Speaker: It seems a remarkably harsh result.

Mr. Taylor: I--

Unknown Speaker: I'm sure that is not how it works out.

Do you have a case for that proposition?

Mr. Taylor: --No.

Well, there's a split of case law among the district courts.

Some say that a carrier is entitled to a quantum meruit recovery, other cases say, well, the rates are determined on the tariff, and if you have no tariff you have no rate and thus there's nothing to collect, and assuming if you pay the negotiated rate you might leave the parties in the position as you find them, but that is assuming, again, you have no rate.

In this case there was a disclosed rate, and the operation of the court of appeals decision is such that it makes that disclosed rate unreliable, and anybody who looked at it, relied on it, paid it, could be penalized either up or down, as a matter--

Unknown Speaker: The carrier is acting unlawfully if it has no filed rate.

Mr. Taylor: --That is correct, Justice Ginsburg.

Unknown Speaker: What are the penalties, apart from what the shipper would owe?

What are the penalties for not having an operative filed rate?

Mr. Taylor: Well, there are certain civil forfei ure penalties.

The penalty provisions of the act are outlined at section 11901 through 11904.

At that point, one would assume that they would be liable for charging something that's discriminatory, because who knows what they would be charging in that case.

There's criminal and civil penalties that would provide up to... I believe the criminal penalties under the act are 2 years in jail and $10,000 per violation, and it's been construed that the violation is on a shipment-by-shipment basis.

But if I can leave with one point, and that is that there's never been a requirement of tariff perfection.

The question is, what is the public likely to see, what are their rights, and how do you justify them in this case?

How do we vindicate the public rights?

That is, upholding the disclosed rate, not allowing a negotiated rate to stand.

That's the core purpose that this Court stressed in Maislin.

Maislin cited American Trucking for the proposition that while the Commission can craft appropriate remedies, it cannot do something that undermines the core purpose of the act, and by stating, because this tariff has some sort of pimple or technical imperfection, it should be totally treated as void, and a negotiated rate should stand, really does undermine the intent of Congress.

Thank you very much.

I'd like to reserve the rest of my time for rebuttal.

Unknown Speaker: Very well, Mr. Taylor.

Mr. Augello.

Is that the correct pronunciation of your name?

Argument of William J. Augello

Mr. Augello: It is, Mr. Chief Justice.

Mr. Chief Justice, and may it please the Court:

The sole issue in this Court today is whether or not Riss had an effective tariff.

I think the Court has identified that problem, and I would like to refer you to the principal source of the cancellation of the tariff.

Now, you will find a copy of the note in the Household Goods Mileage Guide at Joint Appendix 35.

That note clearly says that

"This mileage guide may not be employed by a carrier as a governing publication for the purpose of determining transportation rates based on mileage or distance unless the carrier is shown as a participant in the above-named tariff. "

Riss was once a party to that carrier... to that tariff, and so its rates were complete when they initially filed the Riss 501 tariff.

That's the rate tariff.

They paid their dues until 1985, when they decided to stop.

It's irrelevant how much the dues were, because under the filed rate doctrine the carrier's name must be in every tariff that it publishes.

In 1985, as I said, it stopped paying.

The Household Goods Mileage Bureau duly cancelled Riss from the tariff by filing a cancellation supplement.

That supplement is a tariff.

The tariff is notice to the world that Riss is no longer a party to this tariff.

Unknown Speaker: Isn't it... I suppose, as your opposing counsel said, a separate publication?

If I wanted to ship goods, I know what the rate is, and I want to see what the mileage is.

I look at the mileage guide, but to find out whether Riss is still a party to that Household Goods, I have to look at yet a third book?

Mr. Augello: That's correct.

That's not a problem.

Unknown Speaker: So you pick up the... if you just pick up the rate, you can pick up the mileage book and stop there, then you don't know that Riss is no longer paying its $83 a year.

Mr. Augello: But the point is that it really is irrelevant whether you pick up the tariff or not, because carriers and shippers alike are charged with constructive notice of every duly filed tariff, and that I think is the problem that we ran into in the Overland case when the Court did not duly apply that principle.

They were talking about, well, did the shipper really check the tariff, did the shipper really check to see if the power of attorney was executed?

It's irrelevant.

Unknown Speaker: Mr. Augello, Mr. Taylor has told us that by 1985, when this tariff as you put it no longer governed because the company no longer participated in it, by that time, the Commission by decision had eliminated the requirement that you be a participant.

Mr. Augello: That is incorrect.

Unknown Speaker: Is that incorrect?

Mr. Augello: It is.

In the Jasper Wyman case at page 252 the Commission addressed that contention and said... first of all, I'm afraid that Mr. Taylor did not quote the language in that 1984 revision of tariffs regulation because... he didn't quote it correctly.

This is what the Commission said... and I'm reading now from page 252 of the Jasper Wyman case.

That the Commission would not

"mandate for distance guides who must be parties, or ICC filing of the publication. "

What the Commission was saying is, we're not going to mandate that any publisher of a mileage guide must file their tariff with the Commission because of copyright problems, and the Commission went on to say the Commission meant simply that because of the pending copyright litigation involving the right to author a mileage guide, it would not preclude any author from filing a mileage guide with the Commission nor deny any carrier's right to participate in any filed mileage guide.

That clarifies the situation.

The note at page Joint Appendix 35 acts like a stop sign.

It requires the tariff reader to stop, don't go any further until you see whether or not the carrier is listed in Household Goods Tariff Number 107--

Unknown Speaker: Assuming someone would get that book and look at it, but there is no question that the word, "participate" means nothing more than pay your annual dues to belong to this--

Mr. Augello: --No, Your Honor.

Section 1312.27(e) of the Commission's regulations state clearly that if a carrier refers to another tariff, it must participate in that tariff.

Unknown Speaker: --I'm just asking what participate means.

Mr. Augello: Means?

It means be listed as a participating carrier.

Unknown Speaker: And one gets listed by filing the power of attorney and paying annual fees?

Mr. Augello: Precisely.

Unknown Speaker: There's nothing else beyond that.

Participation doesn't mean anything fancier than--

Mr. Augello: No.

That's all it means.

Unknown Speaker: --Subscribe and pay your annual fee.

Mr. Augello: That's correct.

Unknown Speaker: Do you know why it is that the discontinuance was so widespread, so many carriers stopped paying their annual fees?

Mr. Augello: Yes.

I'd be happy to address that, Your Honor.

First of all, the estimate that you read in the Overland case is completely unreliable.

There is absolutely no factual basis for that estimate.

I tracked it down and found that it came from a newspaper interview of the President of the Household Goods Mileage Guide who said, I estimate that approximately 40 percent of the carriers that refer to my tariff are not parties to it.

When the Household Goods Mileage people finally realized what was going on... a lot of people were using their tariff without paying for it... they filed a petition with the ICC.

You'll see the citation at page 20 of our brief, in footnote 8.

It's the Household Goods Carriers Bureau Petition for Cancellation of Tariffs of Nonparticipating Carriers.

When they filed that petition, they found only 111 carriers that were not party to the tariff, that had referred to the tariff in their own rate tariff, but didn't participate.

Unknown Speaker: What percentage was that?

Mr. Augello: Well, there's prob... I think there are 12,800 carriers listed in the Household Goods... that's the figure that I recall from the Commission's brief in the Overland case, so 111 carriers.

That was a complete fabrication.

And as I said earlier, Riss originally was a party to the tariff, and so its rates were once legal.

They were once complete, but when you publish a mileage rate, it isn't just one rate, it is a combination of a mileage rate and distances.

The reason the Commission requires the publication of distance is to prevent discrimination, because if you don't do that, one carrier could say to a favored shipper, between New York and Chicago we'll call it 1,000 miles.

For another shipper, it will be 1 mile less.

You see, these distances do not operate on actual miles, or even actual traveled miles, or even the shortest distance.

It's whatever the carrier decides is going to be the basis for his mileage, and then he must stick to it.

He cannot--

Unknown Speaker: If we can go back to my question, I think your answer was that the percentage was in fact a lot lower, but 111 is still a significant number dealing with a rule of the Commission that says one must have a filed rate, and to have this rate complete we need two parts, the rate and the distance.

Is there any explanation why 111 carriers, knowing of the filed rate doctrine, simply didn't pay the $83?

Mr. Augello: --Beginning in 1980, Congress decided to open the doors up to trucking, and the Commission's certificates, authorized carriers, suddenly jumped from about 15,000 to 35,000.

There were a lot of owner-operators running their own trucks who never heard of the ICC before, and they suddenly got saddled with these tariff regulations, and you know, it was just a complete breakdown of the former method of formalized tariffs and everybody knew what they were doing.

There were a lot of people in the business who didn't know what they were doing.

Unknown Speaker: Well, it's the same reason Mr. Taylor's client didn't charge the tariffed rate.

They thought the old rules were all gone.

Mr. Augello: Exactly.

Unknown Speaker: Who cares about tariffs?

Mr. Augello: Exactly.

Unknown Speaker: The ICC's not enforcing them any more.

A reasonable rate is what the market will bear, and... part of the same development, I assume, wasn't it?

Mr. Augello: That's right, but the shippers who were in good faith negotiating these rates with carriers, believing that the carrier was in full compliance with his tariffs, are now being saddled with these billions of dollars of undercharges.

Unknown Speaker: Apropos of a comment you made a moment ago, Mr. Augello, in your view, would it be permissible, or have been, for a carrier to file a mileage guide that said the distance from New York to Chicago is 300 miles so long as he did that with every single shipper?

Mr. Augello: Yes.

See, that's one of the options he has.

The Commission gives you three options to file mileage rates, attaching that to the tariff, specify what the mileage is, or refer to a guide.

Unknown Speaker: And it doesn't matter how unrealistic the mileage is?

Mr. Augello: I... I don't... no, I don't say that.

I'm saying he has that option of specifying what the mileage is.

Unknown Speaker: My question was--

Mr. Augello: How close?

Unknown Speaker: --300 miles from New York to Chicago, which, you know, is very optimistic.

[Laughter]

Mr. Augello: I wouldn't expect anyone would do that, but, you know, from a hypothetical standpoint I suppose if a competitor found him doing that he'd have a right to file a complaint, and--

Unknown Speaker: I don't see why he couldn't file a tariff that says I'm only charged for the first 300 miles of the carriage, as sort of a... if he does it to everybody in a nondiscriminatory--

Mr. Augello: --As long as there's no discrimination.

Unknown Speaker: --He just in effect says, everybody knows it's farther, but this is a... you know, it's like all sorts of discount deals that you run into.

I'm most of the way there by then.

[Laughter]

Mr. Augello: That's a novel one, but... I suppose they could also say, you get a reduced rate if your freight travels over Saturday night, like the airlines.

But there are two components to a mileage rate, the point I was trying to make.

Unknown Speaker: It might save him a lot to truck in Findlay, Ohio, too, I suppose.

Mr. Augello: And both components must be published in a tariff.

When they are not, it voids the rate tariff that refers to that tariff.

You'll see a copy of all of the tariff pages in our briefs and in our joint appendix, showing you just how that works.

There must be a sequence, and under this Court's teachings, the filed rate doctrine must be strictly enforced.

The point is, it must be strictly enforced against carriers as well as shippers, and in this case... and incidentally, this is the first case where the strict application of the filed rate doctrine works against the carrier's interest, but it's the carrier who violated the law, and so we believe that the court below properly granted summary judgment and dismissed the actions because without an effective tariff there is no basis for an undercharge.

There's got to be the foundation of an effective, lawful tariff before you can file an undercharge claim.

Unknown Speaker: It works in the bankrupt carrier's interest.

You said it worked against the carrier's interest.

Mr. Augello: Yes, it does, because they're trying to collect the undercharges.

It doesn't matter whether the carrier's bankrupt or not.

But in closing I just would like to--

Unknown Speaker: Oh, I see, it means the absence of the... the filed rate doctrine is what... the filed rate is what the carrier is trying to enforce.

Mr. Augello: --Yes, even though that filed rate was not honored by him originally.

He negotiated his rates with the shippers, he told them that the rates are on file, but then didn't adhere to the rates, but met the market-driven competitive rates.

That's what's happened in this whole field, and then later on when his auditors come in and get hired by the bankruptcy trustee, they look for these defects.

Unknown Speaker: You're saying he wants to have an advantage from not having turned one square corner, but not the disadvantage of not having turned the other.

Or to put it another way, he can have his pound of flesh but not one drop of blood.

[Laughter]

Mr. Augello: But I... thank you, Your Honor.

Unknown Speaker: Thank you, Mr. Augello.

Mr. Manning, we'll hear from you.

Argument of John F. Manning

Mr. Manning: Thank you, Mr. Chief Justice, and may it please the Court:

Under the Commission's longstanding and consistent interpretation of the Interstate Commerce Act, if a carrier wishes to meet its filed rate obligation by referring to someone else's tariff, he must participate in a continuing agency relationship with that other entity.

That interpretation, which goes back more than 50 years, is currently reflected in the Commission's void for nonparticipation rule, which provides that if a carrier allows its participation in an agency tariff to lapse, the tariff becomes void as a matter of law as to that carrier.

Unknown Speaker: What's the reason for that nonparticipation rule, Mr. Manning?

Is it really just to enable the person who files the other tariff to be able to collect $83, or is there some other reason for it?

Mr. Manning: Well, as the ICC indicated in its Wonderoast decision, which is cited in our brief and which appears in 8 I.C.C. 2nd, that doctrine is an interpretation of the statutory requirement that appears in two sections.

In section 10702 of title 49, it provides that the carrier shall establish the rates for its transportation services subject to the jurisdiction of the Interstate Commerce Commission under the relevant subchapter, and section 10762 of title 49 provides that the carrier shall file a tariff containing those rates, and so in effect the ICC has interpreted the statute in a way that places the responsibility on the carrier to set its own rates.

Now, the practical reason, I think, for the policy is that these tariffs are very complicated and expensive to put together, and a lot of tariffs are put together by so-called rate bureaus which compile this information and set up the system of rules and practices and so forth that govern the transportation subject to the jurisdiction of the act, and if there were not a participation requirement in the ICC's rules, then everyone would literally free ride on these agency tariffs simply by filing a tariff that referred to the agency tariff.

That's why the ICC's rules are quite explicit in saying that when a carrier who is a party to a tariff, and that includes its own tariff, refers to a separate tariff, and when its rates are governed by that separate tariff, it must be a participant in that separate tariff as well, and that requirement is contained in section 1312.27(e), and I just want to pause for a moment and address petitioner's claim that the decision in this case is actually inconsistent with the ICC's regulations, when in fact it is not.

The HGB Mileage Guide, the tariff from which petitioners... I'm sorry, from which Riss' participation was cancelled, is governed by a provision contained in section 1312.30, which is in on pages 9a and 10a of the appendix to our brief, and on page 10a, subsection 4 provides that except as provided in the specified subsection, which refers to Government publications, only distance guides officially on file with the Commission may be referred to.

Now, that's another way of saying, as the Commission explained in its Jasper Wyman decision, that a distance guide is in fact a tariff.

Now, if you then turn to page 8a and look at section 1312.27(e), the provision I've just cited, it says that a carrier participating in a tariff which refers to... in tariffs which refer to and are governed by separate tariffs, they shall also participate in those governing separate tariffs, and that means that when a carrier refers to a mileage guide, and when its rates are governed by that mileage guide, it must also participate in that mileage guide.

Now, there's one other provision I want to refer you to, and that's the heart of this case, and that's 1312.4(d), which is cited on page 3a of our appendix, and that provision says that a carrier... and this... I'm starting at the third line down, after the word "however", a carrier may not participate in a tariff issued in the name of another carrier or an agent unless a power of attorney or concurrence has been executed.

Absent effective concurrences, or powers of attorney, tariffs are void as a matter of law.

Now, we believe and the Commission has so held in the Jasper Wyman decision as well as other decisions, that if you read those three provisions together, they require the conclusion that a carrier must participate, must maintain an agency relationship with the publishers of a mileage guide in order to be able to refer to that mileage guide as part of its filed rate.

Now, Riss did not do that in this case, as petitioners concede, and for that reason, although Riss did have a filed tariff, its tariff number 501-B was on file, it did not have a filed rate, because a shipper who consulted Riss' tariff 501-B would be referred to the mileage guide to determine the critical quantity term in the tariff, and examining the mileage guide, the carrier would see that the mileage guide in a notice that's in bold letters on page 2 of that tariff--

Unknown Speaker: Mr. Manning--

Mr. Manning: --I'm sorry.

Unknown Speaker: --the last sentence of 1312.4 on page 3a of the appendix of your brief says,

"Should a challenge to a tariff be made on this basis, carriers will be required to submit the necessary proof. "

"What sort of a challenge would be made by a carrier on that basis? "

Mr. Manning: Well, that refers to... I think that that sentence refers to the kind of proceeding that Mr. Augello described in which HGB might come in and say, there are 111 carriers who refer to our mileage guide, but they haven't maintained their powers of attorney, they haven't paid their participation fees, and what the Commission has done in those cases, and there are two recent cases that involve this, both of which are cited in Mr. Augello's brief, what the Commission will do is, it will issue an order to the carriers either to reinstate their participation in the Mileage Guide tariff, or to cancel any reference to that participation.

Unknown Speaker: But the sentence says carriers shall submit the necessary proof.

That suggests to me that it's a carrier... that a... would be challenging it.

Mr. Manning: No, no, I think that means that if someone challenges the tariff on the ground that a carrier has not--

Unknown Speaker: I see.

Mr. Manning: --maintained, then the carrier has to show that it has participated.

Unknown Speaker: Okay.

Mr. Manning: And that raises an important point, which--

Unknown Speaker: Mr. Manning, the Chief Justice's question brings up something that has... seems to me to underlie this whole matter.

You've done a very good job of telling us why a component of the rate has not been filed, but the question is, what should the consequence of that be, and the ICC says the cornerstone of this whole thing is the filed rate.

Then there's an absence, an incomplete aspect of this tariff, and instead of saying, carrier, you make that tariff complete, you pay your $83, it says, well, then, all bets are off, and we have no filed rate, when the filed rate is supposed to be so important.

It's your solution to say, we get rid of the filed rate, instead of, if you are true to that the filed that is fundamental to this whole regime, like it or not, to say, measure up.

Do what's necessary to have a filed rate.

Mr. Manning: --Well, the ICC does believe that the filed rate and the filed rate doctrine are central to the whole scheme of regulating the transportation industry, and the ICC does... has in recent years taken an aggressive stance in enforcing the requirement of participations.

In fiscal year 1993, I am advised by the Commission, the Commission entered 24 consent decrees with carriers who had let their participations in mileage guides and other tariffs lapse, and had sought and obtained one injunction, and the proceeding that Mr. Augello referred to, which is in 9 I.C.C. 2nd.

, was a proceeding in which HGB came to... the Household Goods Carriers Bureau came to the ICC and said, we are aware that this certain number of carriers have not participated in our mileage guide but are referring to it, and the ICC issued an order pursuant to its broad remedial powers saying that these carriers either had to make their participation current or strike any reference to the HGB Mileage Guide from their tariffs.

Now, the consequence of that obviously is that if they do not have a filed rate, any filed rate that covers transportation, it is unlawful for them to undertake transportation that's covered by the act.

Unknown Speaker: This is really a new belief in the centrality of filed rates by the Commission after our last few decisions.

It's fair to say that during the period at issue here, the Commission didn't believe in the centrality of filed rates.

Mr. Manning: Well, I think... I mean, I think that a lot of the problems that have arisen in this case and that are percolating up through the system do come from the era prior to Maislin in which the Commission was taking a less aggressive stance about the centrality of the filed rate and had a more tolerant view of negotiated rates.

Unknown Speaker: But you're saying now, at least, post Maislin, the Commission is proceeding logically and consistently.

Mr. Manning: Post Maislin the Commission is enforcing this requirement, yes, it is.

Before I close I'd like to make one final point, and that is the retroactivity point.

Unknown Speaker: Well, may I ask why--

Mr. Manning: Oh, of course.

Unknown Speaker: --in this very situation the Commission didn't say, if it is indeed saying the filed rate is it, didn't say, when such... when we detect such a thing, then we require the carrier to join, pay all the back dues, and slap a penalty on them.

Wouldn't that be the most effective way, if what we were genuinely concerned about was maintaining the filed rate, instead of saying, well, they didn't comply, therefore we allow the secret rates to operate?

Mr. Manning: Well, that might be... that might be an appropriate exercise of the Commission's remedial discretion.

That would obviously be a matter for the Commission to decide in the first instance.

I would simply point out that this case arises from a private lawsuit filed by Security Services, Incorporated against the K Mart Corporation, and it was not a proceeding before the Commission.

Unknown Speaker: Yes, but you are supporting the result that says, you missed your $83 so all bets are off and the privately negotiated rate is what sticks.

Mr. Manning: That is correct.

Whatever remedial action the Commission may take in the future concerning the enforcement of the filed rate, the fact remains that in this case there was no filed rate, and in order for petitioner to sustain its undercharge claim it must affirmatively point to and rely on the existence of a filed rate.

Unknown Speaker: Well, of course, I suppose it was much too late to give a remedy looking to the future, because the carrier was bankrupt, or out of business.

Mr. Manning: Well, that's true, the carrier is not providing any--

Unknown Speaker: --do something that enabled them--

Mr. Manning: --The carrier is not providing any additional services.

Unknown Speaker: --This is looking at a situation when that... it's much too late to order that particularly.

I'm curious to know about the significance of this case.

I had the impression from that other opinion we're talking about 40 percent of this package of litigation.

Do you agree with the estimate it's only 111 carriers out of 12,000?

Mr. Manning: Well, that's the only number that is... that the Commission has encountered in any official way.

I'm not sure where the--

Unknown Speaker: So this is really kind of a fly speck in the whole picture.

Mr. Manning: --Well, if... I mean, based on the number of violations that have been brought to the Commission's attention by HGB, which has every incentive to police the nonpayment of dues by those who refer to is mileage guide, I would think that the problem is not particularly significant as a percentage of the total participants.

If there are no further questions--

Unknown Speaker: Were you going to attempt to address the retroactivity?

Mr. Manning: --Oh, I'd be happy to.

The Government's position is that this is not a retroactive invalidation of the rule... I'm sorry, of the tariff.

This is, as the Chief Justice pointed out, precisely the same thing as if the carrier's own tariff had expired or been cancelled.

The Commission's consistent view has been that if a carrier cancels its own tariff, even if it's accidental, that cancellation is effective without the Commission's taking any form of action to validate or formalize the cancellation, and here, the participation of Riss in HGB Mileage Guide 100 tariff was cancelled by operation of its agent, the Household Goods Carriers Bureau.

That cancellation was duly published in a tariff filed by HGB pursuant to Commission rules.

Under Commission rules, and that's specifically rule 1312.10(a), if a power of attorney is cancelled, if a participation is cancelled, that cancellation is not effective until it is published in a tariff, and so in other words, the cancellation only becomes effective when the public gets notice of it, and in that respect it is very much like the expiration or cancellation of the carrier's own tariff.

Unknown Speaker: May I ask one other question?

Mr. Manning: Yes.

Unknown Speaker: We were directed to the attention of page 35 of the Joint Appendix, and treating that as though it were a third document as part of all the tariffs.

Do you agree that that is a tariff, that notice has the same presumptive effect in the sense that shippers are presumed to know about that notice just as they're presumed to know about everything in the filed tariff?

Mr. Manning: Oh, yes.

Yes, Your Honor.

I mean, that is part of the HGB Mileage Guide 100 tariff, and the shipper is on constructive notice of what's contained in that notice, but we would say that even if that notice were not part of the tariff, this would be the same case, because the Commission's rules clearly state that a tariff must list all of the participants in that tariff, either in the tariff or in a separate participating carrier's tariff, and that's 1312.13(c), and the tariff 1312.17, which pertains to amendments... that's subsection (b)(2)... also says that if a carrier's participation in a tariff is cancelled, that cancellation must be noted in the tariff.

Unknown Speaker: Thank you, Mr. Manning.

Mr. Taylor, you have 4 minutes remaining.

Rebuttal of Paul O. Taylor

Mr. Taylor: Thank you, Your Honor.

The voiding power that the Commission claims doesn't come from failure to be listed in the tariff, it comes from the failure to provide a private power of attorney, failure to provide it to the publisher of the distance guide, and the Commissioner has said those documents are no longer used by us.

That's where the voiding power comes from, so at the time... now, they say, well, it only comes... the Government says, well, it only comes about when you cancel your participation.

Well, that's simply not the case.

They claim it comes--

Unknown Speaker: Well, the Government... it only comes about effectively when notice is given to the public.

Mr. Taylor: --Well, that is not, however, what the regulation says.

The reg--

Unknown Speaker: Is that the way it works in practice?

I mean, do you know of any instance in which the rule has been evoked with respect to any carriage prior to the time of the filing so that the public could find out?

Mr. Taylor: --Justice Souter, you can't possibly know, because the powers of attorney are never filed.

When we don't know... this power of attorney that Riss had has disappeared.

There was a search made for it, and it's disappeared.

We don't know when it actually was cancelled.

We don't know... this is a carrier that is in bankruptcy proceedings.

We don't know if in fact they never did pay their fee, but one thing we know is that this tariff, the 501-B, continued on the shelf.

When a tariff is cancelled, the ICC physically removes it from the shelf.

This tariff remained on the shelf.

With regard to--

Unknown Speaker: Do you agree or disagree that the publication of the Household Goods 100 is a tariff?

Mr. Taylor: --It is a tariff.

Indeed, it is.

With respect to the proceeding to cancel the 111 tariffs, the Commission hasn't said that's a show cause proceeding to state, why shouldn't we cancel them?

Well, if they are void as a matter of law, there really is no reason to cancel them.

You just take them off the shelf.

They have allowed the opportunity to remedy that situation, recognizing that the tariffs that refer to it are still on the shelf, still relied on by the parties.

In addition, this 111 is just a starting number.

There is record in the Jasper Wyman proceeding that was attached to Overland's brief that said on page... their appendix page 8 of the amicus brief, affidavit by Don Norman,

"As an example, a study of filings for the months of April and May 1991. "

--a 2-month period... with the Commission, shows that more than 230 carriers filed tariffs that contained rates which referenced the Household Goods Mileage Guide as a methodology for determining miles applicable to those rates.

These publications have been accepted and passed to the tariff files without criticism or rejection by the ICC.

They simply did not enforce it.

Unknown Speaker: Well, wait... wait.

It just said that that many referred to.

Did it say that many carriers who were not participating?

Mr. Taylor: That continues on.

They were not participants.

Unknown Speaker: 230 out of 12,000.

Mr. Taylor: Yes, even though they did not... that's 230, Justice Stevens in a 2-month period.

That's what that is.

The Commission during this time period was simply not enforcing this regulation.

The other issue that we have to deal with is, assume that--

Unknown Speaker: All of the relevant events in this case come up pre-Maislin.

Mr. Taylor: --Yes.

Yes, they do.

Well, the actual shipping transactions came up pre-Maislin.

The question you deal with, now you have... assuming their argument is right, and you can't use the mileage guide, does that mean you have an incomplete tariff?

There's nothing in the law that says you have to have miles, a booklet of miles in order to determine mileages.

The same way Mr. Augello talked about being able to manipulate mileages, you can manipulate weight.

You have rates that are in cubic feet.

You can manipulate that.

There's all sorts of things that you can manipulate that would be illegal, but a mile is something that's finite.

This Court said, in a case called Hewitt Robbins v. Eastern Freightways in 1962, that a shipper is entitled to receive the rate over the cheapest route available.

There's nothing that says tariffs have to be perfect.

If we can't use the mileage guide, if you determine somehow that this reference was illegal, you still have this tariff that continued to be on the shelf that people continued to rely on.

By treating that tariff as void, by putting blinders on and saying, that tariff was there and accepted, nobody ever challenged is nonexistent, well then, of course, you're doing what Maislin says you shouldn't do.

You're allowing a negotiated rate to supersede a tariff that may have some imperfections, but a tariff that disclosed a rate that the public relied on.

Thank you very much.

Chief Justice Rehnquist: Thank you, Mr. Taylor.

The case is submitted.

Attribution:

The OYEZ Project

Featured:

Icc v. American Trucking Assns., Inc. - Oral Argument

Thu, 30 Aug 2012 22:14:31 +0000

Case:

Icc v. American Trucking Assns., Inc.

Media File:

82-1643_19840110-argument

Related Transcript:

82-1643_19840110-argument

Transcript:

ORAL ARGUMENT OF CARTER G. PHILLIPS, ESQ., ON BEHALF OF PETITIONERS

Chief Justice Warren E. Burger: We'll hear arguments next in Interstate Commerce Commission against American Trucking Associations.

Mr. Phillips, I think you may proceed whenever you are ready.

Carter G. Phillips: Mr. Chief Justice, and may it please the Court:

At issue in this case is the validity of a rule adopted by the Interstate Commerce Commission in 1980 that provides the Commission with authority to reject at any time tariffs filed by a motor carrier if those tariffs were adopted or published under procedures that are found to be in significant violation of a rate bureau agreement.

The importance of the rate bureau agreement is that it serves as the basis for the motor carriers' immunity from antitrust liability for jointly setting and publishing their rates.

This suit is an attack on the rule as adopted and not as applied, and accordingly the facts are rather sparse.

The rule was adopted in the aftermath of the enactment of Congress in 1980 of the Motor Carrier Act.

The primary purpose of that Act was to increase competition among motor carriers, and one of the significant means for achieving that particular purpose was Congress' attempt to restructure the operations of rate bureaus.

Rate bureaus had been created after 1948 when Congress adopted the Reed-Bulwinkle Act which conferred the initial antitrust immunity on rate carriers so that they could avoid the destructive competition that Congress had found to have existed in the past so that they could set their rates jointly in a way that would otherwise violate section 1 of the Sherman Act because the immunity was perfectly permissible.

During the 32 years that the Reed-Bulwinkle Act had been in effect both the Commission and Congress had become concerned about possible abuses in the rate bureau process, and some members of both Congress and the Commission began to doubt whether any antitrust immunity was appropriate at all.

In 1980 Congress comprised on the issue and retained a certain amount of antitrust immunity for rate carriers but did so only in return on the condition that the rate bureaus themselves operate under very strict requirements so that they would be more open to the public and provide greater opportunity for competition among the motor carriers.

For instance, Congress required that bureau meetings be open, that the name of the proponent of any rate increase be disclosable, and that members of the bureau not discuss various aspects with published rates.

With regard to enforcement under the Interstate Commerce Commission Act, however, Congress did not modify the Commission's preexisting powers.

In its notice of proposed rule making the Commission explained that most of the requirements of the Act were self-fulfilling, but nonetheless adopted several substantive provisions designed to provide very clear guidance to the motor carriers with regard to precisely how they should operate in order to assure the continuance of their antitrust immunity.

The only one of those rules that is at issue in this case is the Commission's decision to adopt rejection, as it is called, of the carrier's tariff filing as a potential sanction in cases where the Commission finds after a hearing and the possibility ultimately of judicial review that the tariff is the product of a significant violation of a rate bureau agreement.

The Commission thereby asserted its authority in appropriate cases to declare the filed tariff to be invalid ab initio and thereby to subject the carrier to overcharged liability under section 11705(b)(1).

Unidentified Justice: Under that, Mr. Phillips, was the usual remedy retroactive, cancel it out all the way?

Carter G. Phillips: The usual remedy in what context?

Unidentified Justice: You just said that they exercise their discretion under that rule?

Carter G. Phillips: Yes.

Unidentified Justice: Cancel the filed tariff.

Carter G. Phillips: In cases of significant rate bureau violations.

Unidentified Justice: But that was the only thing the Commission would do?

Carter G. Phillips: No.

The Commission retained the option of exercising any of its other enforcement powers.

Unidentified Justice: Such as?

Carter G. Phillips: It could bring a civil proceeding for a penalty, could decide to declare the rate invalid and prescribe a rate for the future, the traditional remedies it had always used.

Unidentified Justice: And require adjustments.

Carter G. Phillips: Could require adjustments.

Unidentified Justice: Well, could it cancel it out only for the future?

Carter G. Phillips: Yes, Your Honor.

Unidentified Justice: Could it also revoke approval of the rate bureau agreement itself?

Carter G. Phillips: Yes, Justice Stevens, it could revoke approval of the rate bureau agreement.

Unidentified Justice: May I ask if the issue in the Aberdeen case involving the symbolization rule, does that pertain to rate bureau or is that entirely separate?

Carter G. Phillips: Well, rate bureaus are the ones ordinarily who file tariffs, and as a consequence they are the ones who would be placing the symbols on the tariffs, but the symbolization requirement applies to anyone who files a tariff.

So if an individual motor carrier were to do so he would be obliged to comply with that rule.

Unidentified Justice: Is the failure to put the right symbol on the tariff a violation of a rate bureau agreement?

Carter G. Phillips: No, Your Honor.

It's an independent violation of the regulation.

Unidentified Justice: Would it be possible to decide this case one way and the other case the other way?

Carter G. Phillips: I think it would be possible.

Unidentified Justice: And not a necessary conflict.

Carter G. Phillips: Not a necessary conflict, no, Your Honor.

I don't believe so.

Unidentified Justice: Mr. Phillips, could you give examples of significant violations that would be subject to the retroactive rule?

Carter G. Phillips: Sure.

Presumably one of the purposes of the rate bureau review process was to make sure that the shippers have an opportunity to have some involvement in the negotiations for setting the rates so that if the meetings for the rate bureaus were closed to the shippers or if the shippers were in some other way excluded from that process so that rates were set higher than they might otherwise have been as the shipper had had an opportunity to participate and the Commission were to find in its own view that if the rate bureau open process had been allowed to function as it should have, that the higher rate would not have been set, then it might well be the Commission's judgment that that higher rate should not be permitted.

Unidentified Justice: Well, the Commission would have an opportunity when the rate is first filed to disallow it, would it not?

Carter G. Phillips: Yes.

It has the right to suspend it within the 30-day period, but it may or may not--

Unidentified Justice: Well, is this rule really a product of the Commission's lack of funding or staffing to get around these things earlier?

Carter G. Phillips: --Well, not nearly so much as the symbolization rule, Justice O'Connor.

Frankly the problem inherent in the rate bureau process is one of general secrecy.

I mean the whole reason Congress modified the rate bureau process was to make it less secret so that it could well be that violations of the requirements for rate bureaus would simply make them more secret and, therefore, make it more difficult to determine whether there have been violations.

So I think there was an inherent difficulty in complying with the 30-day problem even before the Commission's budgetary problems, but certainly having less resources makes it much more difficult frankly to be able to investigate rate bureau violations within the 30-days.

Rationale for the adoption of the rejection remedy by the Commission was that it simply lacked an effective remedy for significant violations of rate bureau agreements under the preexisting law and that the adoption of rejection was a direct and efficient administrative response to the peculiar problems that have been created by the operation of the rate bureaus.

Unidentified Justice: Mr. Phillips, rejection is a creature of statute in a sense.

The statute talks about rejection, does it not?

Carter G. Phillips: Yes, Your Honor.

In 10762(e) it makes specific reference to rejection.

Unidentified Justice: So presumably the Commission is bound to follow whatever constraints may be contained in the statutory creation of rejection.

Carter G. Phillips: Certainly the Commission is bound by the statute with regard to that; however, 10762(e) does not, by its terms, make any reference to rejection.

Moreover, the Commission--

Unidentified Justice: Does the terminology of rejection, though, indicate that it is something that has not yet gone into effect?

Carter G. Phillips: --Well, that was the position of the Court of Appeals--

Unidentified Justice: Is there a suggestion there that that is the meaning?

Carter G. Phillips: --Well, that is what the Court of Appeals believed that you can only properly define rejection that way.

However, a proper definition of rejection is to cast out or to eject which presumably would have something to do with something that was already effective.

Moreover, I do not think it is appropriate to tell an agency precisely how it should operate by reference to dictionary definitions.

There is nothing inherent in that particular phrase that evinces a clear intention by Congress to restrict how the Commission operates, and our submission is that that kind of a showing is what this Court's prior decisions have found.

Unidentified Justice: But does the whole structure set up by Congress suggest that when there is an interval in which the Commission can accept it or not and then it goes into effect and thereafter there are other procedures whereby the Commission could initiate an examination for the future?

Does that whole structure suggest something contrary to your position?

Carter G. Phillips: I don't believe that that's the inference to be drawn from this particular statutory scheme.

The remedies that are available all sort of miss the basic point of what the Commission's trying to achieve through the use of the specialized rejection power.

There are alternative remedies available, no question about that, but this Court has held in the American Trucking Association case before that you don't look down the list of provisions to see whether the specific one the Commission has sought to apply exist, but rather you determine whether given the mission of the Commission the particular enforcement device that it has in fact adopted is consistent with that mission, not with any specific provision.

I don't believe, frankly, that you can go through and find that... It might well be appropriate to say the Commission cannot follow this course of action if its efforts were to make superfluous some preexisting arrangement that Congress has set out, but that is not the case here.

So in the absence of that it would seem to me that the structure of the Act does not in any way cavern the Commission's discretion to choose an enforcement technique that is appropriate.

Unidentified Justice: What about the fact that subsection (e) is part of that one section which generally deals with processing of new rates?

Do you take the view that rejection can occur at any time, even ten years later?

Carter G. Phillips: Well, there is a three year statute of limitations for an overcharge liability so that--

Unidentified Justice: But you could reject ten years later.

Carter G. Phillips: --Sure.

You could reject, but you could not impose overcharge liability for the total period.

I think it is important to realize that Commission's position here is that we believe that the rejection authority made specifically a matter of statutory provision in 10762(e) is helpful but that the Commission also relies on its inherent authority, the broader sort of notion of rejection similar to what Court held in the United Gas Pipeline v. Mobil Gas case.

So we do have two alternative theories involve here.

Unidentified Justice: Mr. Phillips, what if Congress with respect to rates the Commission may do the following: it may reject; it may suspend; it may be hearing and find unreasonable.

It didn't say anything more.

Do you think the Commission given those three weapons to deal with rates filed could say, well, in addition we are going to have three or four other kinds of procedures that are a little bit different than anything like the three that Congress has set forth.

Carter G. Phillips: In absence of some indication, I submit, in the legislative history that says that Congress set out those three that those were the ones that had in mind and meant for the Commission not to go beyond those three.

Our position would be consistent with the earlier American Trucking Association case that Congress doesn't sit down and figure out every aspect of how the Interstate Commission is going to perform its job and that the specific reference to certain enforcement mechanisms in no way necessarily restricts the Comission from using additional mechansims so long as those satisfy the aim of the statute, which is the enforcment of the rate bureau agreements.

So I do not believe that that setting out would necessarily preclude what the Commission has done here.

Respondents filed this suit in the United States Court of Appeals for the Eleventh Circuit challenging many of the rate bureau regulations adopted by the Commission, and the court upheld most of the substantive regulations but rejected the rejection rule in this case.

In holding that the Commission had no power to reject the rate that had gone into effect after 30 days, the court did reject additional contentions that had been made by the Respondents.

First, the court held that the rejection authority mentioned in 10762(e) is not restricted simply to rejecting problems in rate filing procedural defects but is also available for substantive unlawfulness.

Second, it held that the Commission's authority over rate bureau agreements was not limited to declaring them unlawful, but rather the Commission could also adopt sanctions in addition to declaring the agreement unlawful.

The court held, however, that free or post-effective rejection was inappropriate on three grounds: first, the dictionary definition of rejection, which I have already discussed; second, the court held that it would violate a statutory policy favoring stability of rates; and third, the court reasoned that prior decisions of this Court precluded rejection of effective rates.

This Court has held that the determination of how best to enforce the national transportation policy as embodied in the Interstate Commerce Commission Act is a matter firmly committed to the discretion of the Interstate Commerce Commission, and the Commission's authority in this regard does not depend upon the express provision of a specific power.

There is a legitimate, reasonable and direct relationship between the asserted enforcement authority and a mandate of the statute, and the Commission's rule must be upheld.

I've already discussed the dictionary definition problem of the Court of Appeals' analysis.

Equally unavailing is the Court of Appeals' reliance on the stability of rates as a statutory policy.

It is clear that the 1980 Act was designed to increase flexibility in rates, not to guarantee their stability at all costs, and that the Commission's rejection rule in this context furthers the competition element of the Act and does not great--

Unidentified Justice: Let me just ask you one more thing, Mr. Phillips, and that is could the Commission reject a proposed rate within the time provided in the statute simply because it lacks enough information on the proceedings to let it make a sound decision?

Carter G. Phillips: --The Commission does have the power to reject for lack of information although the tariff filing--

Unidentified Justice: So why does it need this rather unusual power to go back on an issue?

Carter G. Phillips: --Justice O'Connor, in order to use the power you are talking about there would have to be something in the tariff filing itself that would make clear whether or not there has been a rate bureau operation problem, and tariff filings are just a set of numbers which do not in any way give you any insights into whether there may have been a tariff rate filing problem.

So the Commission would be obliged to do one of two things, either disregard the rate bureau operation problems or have to suspend every rate increase in order to investigate whether or not the rate bureau operation has been complied with.

Neither of those seem particularly appropriate, and this much more tailored remedy seems much, much more suitable at least in the view of the Commission.

Unidentified Justice: Is there not another consideration here?

As I understand it, if the filing violates the rate bureau agreement it does not have the immunity of the Reed-Bulwinkle Act.

Am I correct in that?

Carter G. Phillips: Yes, Your Honor.

Unidentified Justice: If that is true and then there is an incorrect tariff filed that violates the agreement, the people who file it run a very substantial risk of treble damage liability, do they not?

Carter G. Phillips: Well, there is no question that there is some deterrent value to having antitrust liability--

Unidentified Justice: I would think that would be a greater deterrence than the fear of rejection.

Carter G. Phillips: --Well, the Commission recognized that but nonetheless believed that... The antitrust liability notion is cumbersome.

It is in the hands of the shippers exclusively who may or may not have a direct interest in bringing the suits and who may not want to risk it whereas this is in the hands of the Commission--

Unidentified Justice: If they talk to a venturesome lawyer they would not have much trouble getting representation I would not think in a case like this because it is a clear violation if there is no immunity.

Carter G. Phillips: --Well, I do not doubt that the attorney may be willing to undertake the expense.

I do not know that the shipper would necessarily want to pursue the matter particularly.

It may just not be in their interest.

I do not dispute that there is some deterrent force, no question about that, but in the Commission's view it was simply not sufficient, and it was not in the Commission's hands which was the real problem in the preexisting rate bureau regulatory scheme.

They lacked the power to take action.

Moreover, perhaps in some respects treble damages is an overkill remedy for the particular problem that the Commission retains greater discretion to tailor this particular relief more effectively than a treble damage award might.

Unidentified Justice: Do we have any feel for how often these violations occur?

I take it it only applies to--

Carter G. Phillips: Significant violations?

Unidentified Justice: --The significant ones that this rule contemplates.

Carter G. Phillips: Well, the rule has been in effect since the end of 1980, and we do not have any--

Unidentified Justice: No, but the Reed-Bulwinkle Act has been in effect for a lot longer than that.

So there have been rate bureau agreements for a long time.

Carter G. Phillips: --The problem with the 1948 to 1980 period was that the thrust of the Commission's regulatory efforts was made in approving rate bureau agreements and reviewing what agreements furthered the national transportation policy.

There was virtually no attention paid to... once you had an agreement in effect... how it was to be operated.

The Commission believed that the 1980 Motor Carrier Act in that Act Congress expected for the Commission to review more carefully how the rate bureaus themselves operate and worry less about the agreements since Congress had provided the express requirements for those agreements.

Unidentified Justice: I had a little feeling in reading the briefs that maybe this was kind of a theoretical problem.

May I am just unsophisticated.

Carter G. Phillips: Well, there is certainly a theoretical element to it any time a litigant challenges a rule on its fact rather than wait for it to be applied.

That is going to be an inherent problem.

Certainly in our view in dealing with it as a theoretical matter we think it inappropriate to deal with extreme hypothetical applications but rather the more central purposes for which the Commission adopted this particular rule.

The Court of Appeals believed that this Court's decisions in Portland Seed and Berwind-White required rejection of the Commission's rule.

As we suggested in our brief, our position is that those decisions indicate that a shipper cannot seek a judicial order requiring rejection of an effective tariff, but they say nothing about the power of the Commission to modify the sanctions that will best enforce this particular legislation.

On that issue, it seems, that this Court's decisions in American Trucking, Chesapeake & Ohio and the Trans-Alaska Pipeline Rate Cases make plain that this is a matter clearly within the Commission's discretion.

Finally, I just suggest why we believe that this particular rule is reasonable under the circumstances since that's the standard to be applied.

In the first place, it serves a very powerful deterrent function.

In the second place, it deprives the motor carrier of the benefit of a clearly unlawful tariff which is a just consequence and one that the overcharge liability is designed to further.

Moreover, providing the overcharge relief to the shipper will encourage them to help the Commission to police these particular provisions in a way that should encourage enforcement of these operations that Congress believed were so important.

Finally, this particular remedy is one that the Commission itself can exercise, which is important in being able to tailor the relief to the particular circumstances where it is appropriate.

Accordingly, it seems clearly reasonable and under this Court's prior decisions the rule should be upheld.

Unidentified Justice: Has this always been the Commission's view?

Carter G. Phillips: Has what always been the Commission's view?

That we have the power to reject?

Unidentified Justice: The position that you are furthering.

Carter G. Phillips: Well, the Commission adopted the rule in 1980.

It has always taken the view that it can reject for various reasons unlawful rates and require overcharges.

Unidentified Justice: Retroactive?

Carter G. Phillips: Retroactively.

It has not often found need to undertake that, frankly, but the Commission, I think, reasonably concluded that Congress in 1980 placed a special burden on the Commission in enforcing rate bureau operations.

That's why this particular device was used in this particular context.

If there are no questions I reserve the balance of my time.

Chief Justice Warren E. Burger: Mr. McEligot.

ORAL ARGUMENT OF PATRICK MC ELIGOT, ESQ., ON BEHALF OF RESPONDENTS

Patrick Mc Eligot: Mr. Chief Justice, and may it please the Court:

I would first like to address some questions that were asked of counsel where we have a difference of opinion.

First, Justice Stevens, asked whether there was a direct conflict between this case and the Aberdeen case.

We submit that there is, Your Honor.

The holding here is the Commission cannot retroactively validate tariffs.

The holding in Aberdeen is that it can.

There is a direct conflict, and I think you have to decide both of these cases together.

Justice O'Connor asked if this rule was the result of the problem that the Commission is complaining about about not having enough funds to check tariffs before they become effective.

This case does not involve that, Your Honor, because the type of violations we are dealing with here would not be discovered by the tariff examiners who look at the tariffs and determine whether they are tariff informality violations.

They do not look at substantive violations at all.

This is not involved.

The Aberdeen case does involve that question.

You also asked, Justice O'Connor, whether the Commission could reject a tariff when it lacks sufficient information.

No, it would not reject the tariff.

It would suspend the tariff ending an investigation.

These are separate powers.

The tariff rejection power is simply to deal with tariff filing informalities, procedural matters.

If the tariff is not filed in accordance with the Commission's tariff circular rules, it would reject it.

If there is a substantive violation of the Act such as a violation of the rate bureau agreements, it would suspend the tariff.

Finally, Justice Stevens asked about the threat of antitrust liability, and you mentioned treble damage liability.

I would just like to mention that very recently the Justice Department brought a case, a criminal case, against some of the clients that I represent, a rate bureau, alleging just these violations, violations of rate bureau procedures.

That case was dismissed and was turned into a civil proceeding, but the threat is even more serious than you suggest.

I would like to begin by pointing out three misconceptions that are likely to arise from a reading of the ICC's decision and counsel's briefs: first, that the rule at issue interprets and implements the Motor Carrier Act of 1980; second, that the tariff rejection procedures satisfy the full hearing requirements of the Interstate Commerce Commission Act; and third, that the ICC will be in a position to exercise discretion in the matter of refunds to shippers.

None of these statements are correct as I will show.

While the ICC's decision states that it is intended to interpret and implement provisions of the Motor Carrier Act of 1980, there is nothing in that Act even addressing this subject.

The Commission admitted in its decision that it was concerned that in the Motor Carrier Act of 1980 Congress did not go far enough in providing remedies for violations of rate bureau.

It, therefore, took it upon itself to provide this additional remedy, which is the subject of this case.

Now, this is important because of what the Congress said in the Motor Carrier Act of 1980.

I would like to quote.

Congress said,

"The ICC should be given explicit direction for the motor carrier industry and well defined parameters within which it may act. "

"It should not attempt to go beyond the powers vested in it by statute. "

Now I'll admit that an agency ordinary should have some leeway in fashioning remedies for the statute that it is administering, but I think that this is not the case here.

Since Congress, I think we showed in our brief... We have a different reading of the legislative history than counsel.

Our reading of the legislative history and what we showed in our brief is that Congress was tempting to reign in the agency, and that they were being as explicit as they knew how to be in that Act.

So in those circumstances we feel that the Commission went far beyond the power vested in it by adopting this rule.

As to the question of the procedural rights, I would like to point out that this rule provides that the complaints will be filed with what is called the Tariff Integrity Board.

Now this is a creature of the ICC.

There is no provision for it in the statute.

This is an employee board that will act on these complaints that a rate bureau violation occurred.

The Tariff Integrity Board's procedures, which were adopted by the Commission, provide that the proceedings will be informal, that no transcript will be made, that subpoenas will not be issued, and that oaths will not be administered.

Now, the Tarrif Integrity Board does not itself act on the complaint.

It forwards its recommendation to the Commission.

But the rules do not say what happens next.

Two things are possible.

The Commission can act directly on a Tariff Integrity Board recommendation, strike the tariff retroactively, in which case the carriers will have been denied these procedural rights that I just mentioned, or it can start all over again and file its own complaint using the Tariff Integrity Board's recommendation as a basis for its complaint.

But if it does that it merely delays the proceedings and increases the liability of the carriers.

As we pointed out, while the complaint has to be filed within 60 days after the tariff became effective, there is no time limit on when the Commission has to decide the issue.

The tariff stays in effect and the Commission can drag on the proceeding as long as they want.

All increases that were placed into effect during this time would have to be refunded.

So what the Commission is doing with this duplicative procedure is merely trying... if that way it proceeds... is merely dragging out the proceedings.

There is no reason for this at all except that the Commission wants to bring this proceeding within its Tariff Integrity Board rule which is the place where it is stated that it has this authority retroactively reject tariffs.

So it just kind of made up this system so that it can bring it in within that rule.

The third misconception I mentioned was the ICC's refusal to acknowledge that it will be unable exercise discretion in the matter of refunds.

I think the best example of this is in the tariff missymbolization rule in the Aberdeen case.

That rule flatly provides that changes resulting in increases which are not identified by proper symbols shall be considered unlawfully published and filed and therefore invalid and not collectible such cases the lawful provisions will be those purportedly superseded.

Now it is not difficult to imagine what happen if there is a violation of that rule.

First of all, as we pointed out in our briefs the ICC has jurisdiction to entertain shippers' complaints for overcharges.

A shipper has to go directly to court.

It can either go to a state court or to a federal court, but in either case there would be no reason for the court to refer the matter to the ICC since it is a pretty easy matter to determine whether a tariff had been properly symbolized or not.

There will not even be any need for a hearing or anything.

If it is not symbolized, it is not symbolized.

The court then will be faced with the rule which flatly declares the tariff invalid and not collectible, and the provisions of the overcharge statute which provides that all such charges are to be refunded.

The court will have no discretion whatsoever in the matter.

So the ICC saying that it has discrection means nothing in that case.

In the case at issue here and the rule at issue here for violations of the rate bureau agreements, the ICC will have some discretion in this respect.

It can decide whether or not the violation has been significant as they put it in its order.

Now, there is no standard to determine what significant is, but even more important the ICC has boxed itself in.

If it determines that a violation of a rate bureau agreement is significant, then the tariff is stricken, overcharges are due and owing, and a court will have to award them.

The court cannot consider actual harm to the shipper, cannot consider the seriousness of the offense.

The Commission has said it is going to do this in motor carrier cases.

Yet, in the cases of the railroads where it has authority to deal in the railroad section of the Act, the ICC can award overcharges or damages.

It has said in those cases that it is going to consider violations of railroad rate bureau agreements under the damage sections of the Act so that it will require the shippers to show or not show harm, but not so in the case of motor carriers.

There is no reason for this distinction.

Neither counsel nor the ICC has ever given us any reason why the railroads should be treated any differently than the motor carriers.

Under the normal procedures before the Commission adopted this rule, if a shipper brought a complaint in court and said that there had been a violation of some provision of the Act, the court would have been free to decide whether damages were due at all, in the first place, and secondly, whether the shipper had been actually harmed.

We submit that that is the only fair way to handle this, and that is the way that your decisions in Davis v. Portland Seed require.

I would like to now turn to the authority of the ICC to retroactively invalidate effective tariffs.

I think counsel for the government put their finger on the issue here in their reply brief.

They said what the Commission is trying to do is create a basis for overcharged liability.

We submit that the statute says what is an overcharge and what is not, and that the Commission cannot create overcharge liability.

The overcharge provision of the Act states at paragraph 4 in the petition at the very last page of the petition if you would like to follow it,

"The common carrier providing transportation or service subject to the jurisdiction of the Commission under the Act is liable to a person for amounts charged that exceed the applicable rate for transportation or service contained in a tariff filed under the Act. "

Now to me this means simply that if a tariff is on file with the Commission and a carrier charges more than is called for in that tariff that carrier is subject to an overcharge claim and must refund the excess.

It does not involve this problem at all, violations of the Act.

In the very next sentence the Act states... it provides for damages sustained by a person as a result of an act or omission of the carrier in violation of the Act.

Now, this is what we are talking about in the case of both missymbolization and violations of rate bureau agreements.

We're talking about violations of the Act.

What the Commission has done is taking this whole Alouette case, which reached a strained interpretation of the Act and is trying to ride on it in this case by creating overcharge liability when there is none.

I think we pointed out in our briefs that every other court that has considered that Alouette decision except the one that is on appeal here, the Aberdeen case, has rejected it and has said that there is no basis whatsoever.

It has been rejected by the First Circuit, by the D.C. Circuit and by the Eleventh Circuit.

Unidentified Justice: Mr. McEligot, Mr. Phillips stressed reliance on American Trucking for the position that he took.

Do you plan to mention that?

Patrick Mc Eligot: Well, there are two points there.

The first, Your Honor, I think we discussed it in our brief.

There is a recent case called the Central Forwarding case that discusses that at some length, and the point there is that the American Trucking case was decided before the Motor Carrier Act of 1980.

The Motor Carrier Act of 1980 set new limits on the Commission, and really... I think the Court said it is still good law, but it has to be read in light of what Congress said later.

Congress said the Commission cannot go beyond the strict, statutory limits.

So, as I said, an agency ordinarily would have some leeway in this, but it cannot have that leeway here where Congress said otherwise.

Congress could not have made itself more clear.

I would next like to discuss the specific language of the Act, which the Commission says gives it authority to retroactively invalidate tariffs.

It relies solely on this rejection power in the Act.

The rejection authority provides that the ICC may reject a tariff submitted to it by a common carrier under the tariff filing section of the Act if that tariff violates that section or requirements of the Commission carrying out that section.

That provision is just in there for that one purpose so that the Commission can reject tariffs at the outset that do not meet the tariff filing requirements either of the statute or of its own tariff circular rules.

It is not meant to deal with retroactive invalidation of tariffs.

It is not meant to deal with substantive violations of the Act.

At least two courts have held... The Delta case cited in my decision held that.

But it is simply to deal with tariff filing informality violations... formality violations.

It is not to deal with substantive issues.

The rate bureau agreement violations obviously do not violate either the tariff filing provisions of the Act or of the Commission.

So in the first place we are saying that the Commission cannot even use it in this case.

However, they could in the Aberdeen case if that were the only issue.

I think Justice O'Connor put her finger on this.

If you read the statutory scheme it is clear what the rejection authority is mean to do.

It is meant merely to get at problems right at the outset.

There are no procedural steps to be taken.

If the Commission rejects it, that is it.

Later on the Commission in other sections of the Act can suspend and/or investigate for substantive violations, and it can after a full hearing order tariffs canceled prospectively.

Now, counsel said that their reading of the rejection authority would not make those other provisions superfluous, but we cannot see why the Commission would need them if they could do all this that they are saying they could do under the rejection authority.

If the Commission can come along three years or five years later and reject authority and render it invalid retroactively, it certainly has no need to suspend proposed tariffs or to cancel effective tariffs after a full hearing.

I think the Court was correct, too, in saying that the plain meaning of rejection contradicts this interpretation.

The plain meaning according to court was to refuse to accept or to decline to receive.

I think it is pretty clear that if that is the plain meaning... and I agree that it is... that Congress could not have intended the Commission to reject a tariff after it already accepted it.

Congress would have used the word "strike", I believe, if it were talking about the type of authority that counsel has indicated that the Commission needs because to strike a tariff it could do that after it was already effective, strike it from its record.

But, of course, if it had meant that, too, it would also have provided procedural remedies, and it would not have needed to provide for the suspension and investigation authority.

I think that is all I have.

Chief Justice Warren E. Burger: Do you have anything further, Mr. Phillips?

ORAL ARGUMENT OF CARTER G. PHILLIPS, ESQ., ON BEHALF OF PETITIONERS -- REBUTTAL

Carter G. Phillips: Mr. Chief Justice, and may it please the Court:

Justice Stevens, I may have been a little short in my answer to your question on whether there was a square conflict between this decision and the Aberdeen case.

In our view there is a conflict over the interpretation of the rejection language.

In order to avoid a conflict one would have to find that the missymbolization rule is itself an abuse of discretion or not consistent with the statutory authority.

So there is a conflict.

It is not one that could not be avoided, but certainly an ample justification for having granted the writ of certiorari in this case.

With regard to the scope of these various powers that are available, one point that I probably could have made earlier with regard to the difference between the suspension and the rejection authority that the Commission exercises here is that the power to suspend is expressly limited to the proposed tariffs whereas rejection is in no way limited to any kinds of times limits--

Unidentified Justice: Can I ask just one question?

Does it require any kind of a hearing under the proposed rule?

Carter G. Phillips: --The proposed rules themselves do not discuss what hearing would be provided for.

The Tariff Integrity Board is made mention of, and the Commission at that time did expect that the Tariff Integrity Board would be the body that would proceed on these matters.

However, the Eleventh Circuit declared the process followed by the Tariff Integrity Board to be unlawful, and the Tariff Integrity Board is for all intents and purposes defunct.

It is the Commission's intention to follow a complaint and full hearing procedure just as it would on any other investigation.

Unidentified Justice: Before the rejection or after?

Carter G. Phillips: After rejection.

Unidentified Justice: After--

Carter G. Phillips: After the effective date you mean?

Unidentified Justice: --No, the tariff is filed and goes into effect and then they think they found a violation.

Carter G. Phillips: Right.

Unidentified Justice: Do they have to have some kind of hearing to determine there was a violation before they reject, or they just go ahead and reject?

Carter G. Phillips: No, they file a complaint suggesting rejection and then go ahead and proceed with the entire... the same process they use for any other post-effective action on a particular rate that exists.

Finally, with regard to the American Trucking Association case, there is no indication in the 1980 Act that Congress in any way meant to modify that.

It did restrict the Commission's authority substantively to deal with rate bureaus.

It in no way intended to modify the Commission's ability to enforce the Act, and indeed expressly stated that it retained the same authority to deal with overcharges that it had always had so that American Trucking is still good authority and justifies rejection of the Court of Appeals' decision in this case.

If there are no further questions.

Chief Justice Warren E. Burger: Thank you, gentlemen.

The case is submitted.

Unidentified Justice: The Honorable Court is now adjourned until tomorrow at 10:00.

Featured:

Bowman Transp. v. Ark.-Best Freight System - Oral Argument

Thu, 23 Aug 2012 18:25:33 +0000

Case:

Bowman Transp. v. Ark.-Best Freight System

Media File:

73-1055_19741120-argument.mp3

Related Transcript:

73-1055_19741120-argument

Transcript:

Argument of William L. Patton

Chief Justice Warren E. Burger: We'll hear arguments next in 73-1055, 1069, 1070, and other consolidated cases, Bowman against Arkansas-Best and others.

Mr. Patton, you may proceed whenever you're ready.

Mr. William L. Patton: Mr. Chief Justice and may it please the Court.

These cases are here on direct appeal from the judgment of a three-judge court sitting in the Western District of Arkansas.

That Court set aside orders of the Interstate Commerce Commission, granting certificates of convenience and necessity to three motor carriers for service between points in the southeastern and southwestern states.

The United States and the Commission bring this appeal because we believe that the District Court, erroneous to relying on this Court's decision in Overton Park, has misapplied the Administrative Procedure Act in a fashion which fundamentally alters the scope of review of administrative findings.

And, because of limitations of time, I do not intend to discuss the prior history of these cases in detail.

That history has set forth at pages three through eight of our brief.

I do, however, want to make a few brief comments about the prior proceedings.

These cases are now nine years old.

They originally involved 10 applications for motor carrier service in the area generally lying to the east of Houston, Dallas, and Fort Worth, Texas into the west of Atlanta, Georgia, Birmingham, Alabama and Pensacola, Florida.

Hearings began on these consolidated applications in early 1966 and were held before two examiners in eight cities, primarily in the southeast.

The hearings consumed 149 days and over 900 witnesses appeared and testified in support of the applications with some 60 witnesses testifying in opposition.

66 rail and motor carriers appeared as protestants to the applications.

The transcript of the proceedings exceeds 23,000 pages and the documentary exhibits, number almost 2,000.

This was, as the Commission found, probably the most extensive record ever compiled in a motor carrier operating rights case.

In November of 1969, the examiners rendered their report, recommending that all of the applications be denied.

Exceptions were taken to their report and the case was considered by the Commission Division I.

In December 30, 1971, the Commission issued its decision finding that present or future public need justified the grant of three of the certificates and accordingly, Certificates of Convenience and Necessity were granted to three carriers: Red Ball, Bowman, and Johnson.

In September of 1972, motions for reconsideration were denied by the Commission by a 2:1 vote and a petition that the case be heard by the entire Commission as involving a matter of general transportation importance was also denied.

In October of 1972, 19 protestants filed suit in the District Court and approximately a year later, in September 1973, the District Court set aside the Commission orders, finding that the Commission's evaluation of certain of the evidence was arbitrary and capricious.

Now, before discussing the scope of review question, I would like to deal with one preliminary matter.

At page 1310 of the appendix, in conclusion, 11 of the District Courts opinion --

Justice Potter Stewart: What page?

Mr. William L. Patton: 1310.

The District Court finds that the Commission's decision fails to meet the requisites of clarity.

Justice William J. Brennan: Excuse me.

I don't have any 1310.

Mr. William L. Patton: There are two volumes to the --

Justice William J. Brennan: I have only one.

Justice Potter Stewart: There's volume two.

Justice William J. Brennan: I have only one.

Chief Justice Warren E. Burger: Here, you can look at mine.

Justice Potter Stewart: Page 1310, Finding 11?

Mr. William L. Patton: It's Finding 11, yes, sir.

The Court finds that the Commission's decision fails to meet the requisites of clarity and as an illustration, it says that it cannot determine whether the Commission rejected or approved the examiner's principal findings.

The District Court's finding is clearly wrong.

The Commission's ultimate conclusions and subordinate findings are set forth in its opinion.

Its ultimate conclusions appear at page 158 to 160 of the appendix, and its subordinate findings appear as follows.

Commission, like the examiners, determined that all the applicants were fit and able to perform the service.

That finding appears at page 121 of the appendix.

The Commission differed with the examiners on whether there was a public need for the service authorized, and the Commission's findings appear at pages 128 to 131 of the appendix.

Now, the District Court's conclusion is based in part on its labeling the appendices to the examiners and Commission's report as findings.

They are not findings.

Those appendices contain summaries of the testimony and exhibits introduced in this case.

They contain no inferences or conclusions drawn from the evidence, and I think the clearest indication that they are not findings is that no party to this case objects to them.

The District Court found that they present a comprehensive summary of the evidence.

We believe they do and they are not findings of fact.

Now, in considering the scope of review question, it is important to keep in mind what this case does and does not involve.

There is no question here the Commission statutory authority to issue certificates of the legal criteria governing the issuance of such certificates or the propriety of procedures used by the Commission.

The only question is whether the Commission erred in finding that there is a present or future need for the service proposed.

That is an essentially factual question and judicial review of the Commission's determination is, in our view, governed by the substantial evidence test.

Our position as to the scope of review is this.

Judicial review of the evidentiary basis of findings made on a record after hearing is governed by the substantial evidence test.

The arbitrary and capricious test does not apply.

That is not to say that the arbitrary capricious test has no application in adjudicatory proceedings.

As we say in our brief, there are many actions taken in such proceedings that would be subject to the arbitrary and capricious test, but it is not basically an evidentiary test.

The arbitrary and capricious test is really directed at review of discretionary policy decisions.

It is less stringent than the substantial evidence test.

Now, our position as to the proper application of judicial review in a -- is best illustrated by discussing a certificate convenience -- a certificate of convenience and necessity case, such as this one.

Judicial review would proceed as follows.

The Court would first, to ask that whether the Commission has considered all relevant factors, and the factors relevant to a grant of a certificate of convenience and necessity are provided by statute by Section 307 of the Interstate Commerce Act which is set out at page 95 of the appendix.

Section 307 provides that the Commission shall issue a certificate if it finds, one, that the applicant is fit and able to perform the service and, two, that there's a present or future need for the service.

As I've indicated, the Commission made those findings in this case.

The next question would be whether the Commission's findings as to those factors are supported by substantial evidence.

Now, the District Court did not apply the substantial evidence test in this case.

Rather, it held that a mere review of the sufficiency of the evidence is not enough where agency findings are alleged to be arbitrary and capricious.

It considered the arbitrary and capricious test, a more stringent test than the substantial evidence test, and it clearly viewed the test as permitting it to weigh the evidence.

Now, appellees say that the District Court did not weigh the evidence, that it simply reviewed the Commission's treatment of the evidence, but the District Court--

Justice Thurgood Marshall: Do we have to --

Mr. William L. Patton: I'm sorry.

Justice Thurgood Marshall: Do we have to read this 42,000 pages?

Mr. William L. Patton: You will not, Mr. Justice Marshall.

No sir.

And, I'll explain -- let me explain why.

This is an error of law.

We think it's a clear misapplication for the standard of review.

In fact, the complainant in this case never alleged that the decision was not supported by substantial evidence.

And, this massive record is summarized in the appendices to the Commission's report and there's really no dispute about what the evidence said.

The question is over inferences drawn from the evidence, and that involves weighing it.

That is something for the Commission.

Justice William J. Brennan: Mr. Patton, do I gather if we were to agree with you, what do we do, remand the three-judge court to apply the proper test?

Mr. William L. Patton: Mr. Justice Brennan, we believe that the case should be remanded with directions to dismiss the complaint.

We recognize that this Court, frequently when a standard of review is misapplied, does remand for further proceedings under the proper standard.

Chief Justice Warren E. Burger: Is there any occasion for considering remanding to the Commission?

Mr. William L. Patton: I don't believe so, Mr. Chief Justice.

I think that would only arise if you agreed with the District Court and there, as we have said in our brief, we think that the case should have been remanded to the Commission, if the District Court had been correct for further proceedings before the Commission, but that's -- at this stage, I think the case should either be sent back for further proceedings consistent with this Court's opinion or with directions to dismiss the complaint.

Justice William J. Brennan: I don't understand the latter, Mr. Patton, because if in fact they should have and did not apply the substantial evidence test --

Mr. William L. Patton: Well --

Justice William J. Brennan: How can we act and dismiss?

Mr. William L. Patton: Mr. Justice Brennan, they -- of course, the Court would ordinarily not apply on its own motion, unless they were asked to review the findings.

Justice William J. Brennan: Well, can we?

When -- is that the responsibility of the three-judge Court under the statutory standard?

Mr. William L. Patton: It ordinarily is, but there are --

Justice William J. Brennan: It's not ordinarily, wasn't it?

Mr. William L. Patton: Well, there are cases where this Court has made some determination and, for example, the Illinois Railroad case which is at 385 United States Reports or cases gone on a long time where it's clear from the opinion and from the things in the appendix, that the decision is supported by substantial evidence.

There's no need to send it back.

Justice William J. Brennan: Well, I know but, I mean -- Here, as I get it, what you're saying is that the issue isn't even in the case, about substantial evidence.

Mr. William L. Patton: That's correct.

That is our --

Justice William J. Brennan: But, if you say --

Mr. William L. Patton: We don't --

Justice William J. Brennan: -- the District Court is wrong on the standard it used, what you are in effect are saying is that the fact that their substantial evidence is accepted by the other side.

Mr. William L. Patton: Well, I --

Justice William J. Brennan: They didn't raise it.

Mr. William L. Patton: They did not raise it, but --

Justice William J. Brennan: If that isn't your position, then we, ourselves, you're suggesting, would have to look at the record and decide about substantial evidence.

Mr. William L. Patton: Yes, sir, that's right.

Justice William H. Rehnquist: But, don't you also say that the District Court, in effect, conceded there was substantial evidence, but said there is something more needed?

Mr. William L. Patton: That's correct because its finding, it says a mere review of the sufficiency of the evidence is not enough.

Now, to be perfectly candid about it, Mr. Justice Rehnquist, there are some conclusions in the District Court opinion which are ambiguous, so that I don't want to press my position too far, but substantial evidence was not alleged.

Justice Byron R. White: Well, technically, you think then it would be -- it is not --it wouldn't be acceptable just to say the issue of substantial evidence isn't in the case.

Mr. William L. Patton: Well, I think --

Justice Byron R. White: And then -- and that we either have to remand to determine it or determine it ourselves.

Mr. William L. Patton: I believe that's correct, Mr. Justice White.

Now, there isn't any doubt that the District Court weighed the evidence in this case and you don't have to look any further than, again, page 1310 of the appendix, to look at Conclusion 12 where the District Court says the division acted arbitrarily in not giving weight to protestants' transit time studies.

Now, transit time studies are simply studies designed to show the time required to transport goods between two points.

14 protestants submitted transit time studies.

200 shippers submitted transit time studies.

All but two of the protestants transit time studies were done after the date of the notice in this case, and the Commission said, because they relate to service periods after the day of the notice, when the carriers knew there was going to be a determination about adequacy of service, they're not as prohibitive.

They don't present as valid a picture.

Now, many of the 200 shippers' transit time study suffered from the same defect, but if you look through the record, you'll find that 75 of those transit time studies related to periods before the date of the notice.

But, in any event, this is the kind of evidentiary question that we think is for the Commission and the District Court should not have substituted its judgment.

Nothing in Overton Park supports the District Court's decision.

We think Overton Park makes clear that the substantial evidence test is a more stringent test than the arbitrary capricious test and that even out of the arbitrary and capricious test, standard review is quite narrow and that review in Court may not substitute its judgment.

In effect, the District Court recognized that it could not weigh the evidence under the substantial evidence test, but it's held that it may avoid that limitation simply by invoking the arbitrary and capricious test.

And, we think its decision must be reversed for that reason.

Surely, Congress did not intend to prohibit and weigh the evidence under one provision of the Administrative Procedure Act and permitted under another.

Unless the Court has any questions, I believe --

Chief Justice Warren E. Burger: Very well, Mr. Patton.

Mr. Rhyne.

Argument of Charles S. Rhyne

Mr. Charles S. Rhyne: Mr. Chief Justice and may it please the Court.

I would like, first, to address myself directly to the question raised by Mr. Justice White.

I have here the complaint that was filed by the appellees in the Court below, and when they come to the point of telling what was wrong, they speak of the Commission giving substantial evidence to -- the wrong evidence, they think, and they go to the next paragraph, substantial evidence, no weight.

Going down, substantial evidence on over, substantial evidence, substantial evidence.

Now, they started out, never once do they -- I mean, they say substantial weight, I'm sorry.

This is -- they say they gave substantial weight, substantial weight, substantial weight, never once mentioning substantial evidence.

So that, actually, their complaint doesn't state a valid legal reason to set aside the Commission's decision and so, I would certainly urge and I will come back to that in a moment that the proper action for this Court is to send it back with instruction to dismiss because they have raised no legal objection to the Interstate Commerce Commission's decision.

Now, I come into this case representing shippers and in this particular form, I'm also representing the three carriers who were authorized to carry out the service which the Interstate Commerce Commission authorized and which court below took away.

These shippers first came into this case after the hearing examiners had handed in their report and turned down all service to everyone.

And, from the very outset, the shippers then who came in as parties to fight for the service then have focused on the monopoly, the competitive situation.

Now, this is, in brief, the way I see the motor carrier picture that they are talking about.

The southeastern carriers come down through North Carolina and South Carolina, all these burgeoning area of the United States.

They go over to Birmingham, to Memphis, and New Orleans and they have to unload there.

And then, the southwestern carriers who come in from points, West, Dallas, Houston, they come in and pick up the packages and take them on to the southwest.

And, what these -- and this was kind of, I think it was kind of grandfathered-in in 1946 and of course the services have increased a lot since then, but the biggest thing that these shippers.

And, there's never been a case where there were so many shippers came out to testify, 993 shippers testified orally in this case, out of 1,009 witnesses who testified.

So, you can see how enormously important it is to the shippers and they're coming in here as parties, I think, demonstrates that as much as anything else.

And so, they wanted to breakthrough these gateways.

That's their big argument.

They want single-lines service.

There's very little breakthrough in those gateways now, but -- and most of these major carriers that come down to the southeast and go into Birmingham, Memphis, Atlanta, and New Orleans, they just stop there.

They can't go on, and what these shippers wanted was a breakthrough and a breakdown of this whole monopoly situation and so, we asked the Commission to face up to this and we took exception to the examiners who said “well, we see monopolistic tendencies” but they didn't do anything about it.

And, we urge the Commission to do something about it.

So, what did the Commission do?

The Commission spent about a year regrouping the evidence in this case.

It's set forth in Exhibit E to the -- it's an appendix to the opinion.

I'm sorry, it's 130-something pages, you need a microscope to read it, but it's because the evidence is so massive of the shippers but the hearing examiners had assembled this evidence according to commodities and kind of broke it up, someone said, atomized the whole thing.

And so, that didn't show the picture, but when the Commission itself regrouped the evidence according to points where the shippers were demanding more service, I was quite clear where their points were and what the service was, and it also helped the Commission in deciding which of the carriers could furnish that service.

So, I said the shippers came in here pushing hard on monopoly.

Now, the Court below said this is politics, not judicial.

Well, I say it's policy and that the policy agency in this whole case is the Interstate Commerce Commission and not the Court.

I think if there's anyone thing that epitomizes what the Court did below, it's what happened to the Walter-Logan Bill as compared to the Administrative Procedure Act.

The President vetoed the Walter-Logan Bill because, above everything, it wiped out the expertise of administrative agencies.

It had in there the clearly erroneous rule, and so the President vetoed it on the ground that all of the expertise, specialized knowledge and at least in the agency's case, the uniqueness was being wiped out and all the agencies would be, would be simply fact assemblers for the Courts and all the Courts would have to re-weigh the evidence under the clearly erroneous route, by picking and doing a bench trial.

And, that's what this Court did here.

It never mentioned or considered expertise of the Interstate Commerce Commission in focusing upon the competitive situation in allowing the breakthrough in these gateways.

That's the big thing that the Interstate Commerce Commission did.

Now, in the Court below, to me, there are major errors.

Not only was re-weighing the evidence, and I agree with Mr. Patton, that's what they did, but they treated this case as a battle between carriers forgetting that in every administrative agency hearing of this kind, the public interest is a party and the public interest is the biggest interest, and that's the interest to which the Interstate Commerce Commission responded here.

They would've been derelict in their duty not to have responded to this tremendous out poring of shippers saying what is wrong with the service they have now.

They pointed out that it took, sometimes, anywhere from 2 to 15 days to get their goods through these gateways.

They wanted to break down the barriers and have single-line service between these great growing areas of the United States, the southeast and the southwest.

And so, when the Court treated this as a battle between carriers and focused only on the evidence that was favorable to the appellees, they didn't get a fair view of what the case is all about.

They never once looked at the findings of the Interstate Commerce Commission as to need, and I submit that they're so overwhelming that no one can say that substantial evidence doesn't exist and that's why they talk about the weight.

That's why, in their complaint, they talk about the substantial weight.

They talked about substantial weight there and then, in the findings in opinion of the Court itself, they talk about weight in theory or evidence, superior evidence, all that kind of thing.

And now, here, they talk about treatment of the evidence, but I sincerely urge upon this Court that unless you want to wipe out the expertise of administrative agencies, unless you want the Courts of this land to weigh the evidence of every administrative proceeding, this case must be reversed.

I'll give one illustration of the type of thing that you're faced with and looking what the court below did, the very first thing they talk about here is the Court said that the Commission didn't give proper weight to a summary of shipper evidence prepared by one of the parties, one of the -- it's not an appellee here, but one of the parties below, east Texas, made a summary of the shipper evidence which they said was favorable to them.

And, they say it's applying a double standard because, in this case, the Commission looked at all of the shipper evidence and found some of it favorable to the appellants, but didn't say anything about this exhibit.

Well, for heaven sakes, that's Exhibit number 1,839 according to the complaint.

Now, no Court, no agency has to mention every parties and brief that is presented to them, and I think the Commission certainly didn't apply a double standard when it went to all the trouble to regroup all of the evidence and to state it according to geographic points which there just can't be any doubt that when you do that the need point stand out and, I say, also the carriers who could supply the service stand out.

The interesting thing to me is that the court below never even considered the need.

They just wiped out the service that these people had come in here to fight for.

They never even considered the Commission's findings as to these carriers and why it was that they chose them.

So, I urge --

Justice Byron R. White: Mr. Rhyne, doesn't it -- the District Court does have to make up its own mind as to whether there's substantial evidence, I suppose.

Mr. Charles S. Rhyne: Well --

Justice Byron R. White: And, just some evidence isn't enough, is it?

Mr. Charles S. Rhyne: What the District Court did was, it focused only on the appellee's evidence and it didn't talk about substantial evidence ever.

They would say this little bit of the appellee's evidence, this little summary exhibit, was presented and the Commission doesn't mention it in its opinion so, therefore, it didn't consider it.

And, that's applying a double standard because you looked at the shipper's evidence that applied to appellants and you didn't look at the shipper's evidence that we pointed out to you.

Justice Byron R. White: Well, I know, but there's some suggestion in your argument that it's wrong for the District Court to weigh the evidence.

Mr. Charles S. Rhyne: Yes, I think it is wrong.

I think that --

Justice Byron R. White: Well, they've got to decide whether it's substantial.

Mr. Charles S. Rhyne: Well, I think that they don't have to weigh it to look at the record and find out whether it's substantial.

Now, if there's no evidence at all, that's kind of easy for them.

Justice Byron R. White: I know, but it is --

Mr. Charles S. Rhyne: But, in this case, they --

Justice Byron R. White: Just any evidence isn't enough either, is it?

Mr. Charles S. Rhyne: No, it has to be substantial evidence.

Now, in this case, they conceded that portions of the record, they don't say which portions, support the Commission's findings.

Now, they don't say whether those are substantial or not and our distinguished adversaries here say the court below didn't say whether there was substantial evidence.

They didn't say whether it was there or not.

Now, we urge upon you that the only consideration before that Court is to take a look and see whether there's substantial evidence.

Now, the --

Chief Justice Warren E. Burger: Well --

Mr. Charles S. Rhyne: The big point --

Chief Justice Warren E. Burger: If you make that argument in contradistinction to the idea that the Court should weigh and re-weigh the evidence and see whether the Commission weighed it correctly.

You say the function of the Court is limited to determining whether there is substantial evidence that supports the result it reached.

Is that correct?

Mr. Charles S. Rhyne: Yes, and if there is, the Court's function is over.

Chief Justice Warren E. Burger: And that's not a re-weighing function, is it?

Mr. Charles S. Rhyne: No, it's looking at the evidence to see whether there is substantial evidence.

I suppose you have to weigh it a little bit to see whether it's substantial, but you have --

Chief Justice Warren E. Burger: It is not the same kind of a function as the primary trier engages in.

Mr. Charles S. Rhyne: No, and that's what they did here, you see.

Chief Justice Warren E. Burger: Isn't that your --

Mr. Charles S. Rhyne: They conducted themselves as a primary trier here.

So, the peculiarity about this case is that they don't even mention the substantial evidence.

The Court doesn't.

The complaint doesn't.

And, I'd come back to the fact that since they didn't initially complain that substantial evidence doesn't exist, they admit that it does and the proper action for this Court is to send it back with instructions to dismiss the complaint because it's not a proper complaint.

It doesn't raise a legal basis for a Court review.

They asked the Court to weigh all the evidence and, over and over again, they talk about substantial weight, not giving substantial weight or giving substantial weight.

Now, that is not a proper legal appeal from an order of the Interstate Commerce Commission.

Now, above all on this remand, let me say this.

From the view point of the shippers, this case has been underway since 1965.

If this case is sent back to the Court or sent back to the Interstate Commerce Commission and you start that process all over again, that means that these shippers have to wait maybe 20 years because if there's any one thing that's demonstrated in this record, that is that people who don't want a particular service can stymie things within the administrative process of the administrative -- of the Interstate Commerce Commission for a long, long time.

And, we feel that this Court in its administrative capacity, looking at justice in this country, I would say there ought to be an end sometime and that the time has come when the public interest should be paramount rather than the interest of these people who are disturbed simply because they didn't get -- they were not chosen to render the new service or because it might interfere a little bit competitively with them, and we say to you that these people, four times, argued all of their points before the Commission.

Their biggest point, I suppose, is that there'd been a lot of changes in service.

It's increased during the pendency of this case, but the Commission considered all of that, specifically in Exhibit G it listed the -- increases in footnotes and in their summary of the pleadings, it listed it.

So, the Commission considered all of that.

And -- so then, when you come to their claim that you don't need it because of these mini services that have come along since then, well, the Commission said it considered all of that.

They talk about taking business away from existing carriers.

That's bad diversion.

Well, the Commission considered that and rejected it, and it ought to know what it's talking about.

It said that demand for this service is so great that a little bit of diversion is not going to matter and that these people would do their job and furnish the service.

They're not going to lose out in competition with other carriers and after all, competition is a light blood of this nation.

So, I don't apologize for having raised the issue of monopoly and competition before the Interstate Commerce Commission and fought it on through to this Court because this Court has in a number of cases, said that antitrust competitive monopoly principles do apply in motor carrier cases.

And so, I would urge upon this Court that you not simply reverse, but that you reverse with instructions to dismiss because there's got to be an end to litigation sometime, and 10 years is enough.

To make these people wait even another year is too much after waiting 10 years.

There has never been so many shippers come out to demand service in the history of the Interstate Commerce Commission.

I again say they would've been derelict in their duty if they hadn't found that the paramount public interest, not the interest of these various carriers who were fighting among themselves but the paramount public interest, demands this service and that this Court should, really in the public interest, order that that service be put into effect as quickly as possible.

Chief Justice Warren E. Burger: Thank you, Mr. Rhyne.

Mr. Stevens.

Argument of Phineas Stevens

Mr. Phineas Stevens: Mr. Chief Justice and may it please the Court.

At the outset, I believe it appropriate to put straight two things that have been raised in oral argument.

First is the, what I would term demurrer, that my distinguished brother has just filed to our complaint.

That's the first time we have ever heard that our complaint was, in any way, inadequate.

Our complaint was never challenged below.

Our complaint raised the identical issues that were ruled on by the Court, specifically --

Justice Byron R. White: Where is it in the appendix?

Mr. Phineas Stevens: It is not in the appendix.

It is in the record and no question had ever been raised before oral argument here concerning the adequacy of the complaint.

I have a copy here, Your Honor, and over and over again the allegation of error was that the division's order constitutes an abuse of its discretion, constitutes arbitrary and capricious action and is without rational basis.

It is true, we regard the substantial evidence rule as being a rule uniquely designed to testing the propriety of a finding of fact, the sufficiency of that finding of fact.

The findings of fact are not in issue.

They had never been in issue.

So, we did not allege that any finding of fact itself was not supported by substantial evidence.

We allege that the treatment of these findings the conclusions drawn from the findings lacked a rational basis.

They were arbitrary.

They were capricious.

They constituted an abuse of discretion.

Now, what are the findings of fact?

Distinguished counsel for the Government has said for the first time that the appendices do not constitute findings of fact.

That quite frankly, may it please the Court, comes as a surprise.

They are the findings of fact.

They were the findings of fact in the examiner's report and in the division report, and what are they?

He says “they are summaries of evidence, but I do not know what a summary of the evidence is, unless it is a finding of fact.”

Justice William H. Rehnquist: Well, isn't there some difference, Mr. Stevens, between deciding whether a particular witness may have spoken truthfully and then going on from that to make, what you would call, findings of ultimate fact that would be the basis of the Commission's decision?

Mr. Phineas Stevens: That -- the latter, Your Honor, is what I would call a conclusion drawn from the facts.

What the witness said is not in dispute.

Justice William H. Rehnquist: But what Rule 50 of Federal Rule of Civil Procedure would call findings of fact that you would call ultimate conclusion?

Mr. Phineas Stevens: No, I do not know that, Your Honor.

I think that I would call findings of fact these statements as to what the witnesses said, what the exhibits established as set forth in the appendices to the report, and there is no difference as to what the witnesses said and what the exhibits said.

Justice William H. Rehnquist: Well, that's really no more than a concession that none of them lied, isn't it?

Mr. Phineas Stevens: No, it's not just a question of testing their credibility, but what is it?

What did they say?

What did they establish?

What did they prove in their testimony?

Our complaint, Your Honor, lies with the treatment of that evidence.

What conclusions can be drawn from those facts?

Justice Byron R. White: Do you mean that -- you don't think the substantial evidence is sufficient or adequate or intended to test out the conclusion there's a need for more service?

Mr. Phineas Stevens: Mr. Justice White, I think as the court below thought that the arbitrary or capricious standard -- arbitrary, capricious, and abuse of discretion is a test, a standard that more suitably describes that particular type of error.

Justice Byron R. White: So your answer is no?

Mr. Phineas Stevens: No, I won't go so far as to say that I believe that the Court could have reached every conclusion that it reached in terms of the substantial evidence rule.

When the Court said --

Justice Byron R. White: Well, we -- so, if we disagree with the District Court in terms of arbitration, either disagree with it that it's applicable at all arbitrary and capricious, or that even if it is, there was nothing arbitrary and capricious about this order.

The case is over, as far as you're concerned.

Mr. Phineas Stevens: Not at all, Your Honor.

I would say that every finding or conclusion of the lower court could have been expressed in terms of lack of substantial evidence.

Justice Thurgood Marshall: Is there substantial evidence of need in this record?

Mr. Phineas Stevens: No, Your Honor.

Justice Thurgood Marshall: Why not?

Mr. Phineas Stevens: Because, when you consider the entire record, there is so much evidence that shows to the contrary.

Justice Thurgood Marshall: I didn't ask you if there were other evidence.

I ask was there any evidence in this record of need.

Mr. Phineas Stevens: Phrased in that manner, Your Honor, yes, there is some evidence.

Is there substantial evidence?

Mr. Phineas Stevens: Term -- in terms of substantial evidence, no, Your Honor.

Justice Thurgood Marshall: Why wasn't it substantial?

Mr. Phineas Stevens: Because, Your Honor, you would have to consider only, for example, the direct testimony of the witness.

If you looked at his cross-examination and if you looked at the evidence submitted in protestants and weighed it all together, the substantiality would disappear.

Justice Thurgood Marshall: You just disagree with their finding.

Mr. Phineas Stevens: The Court disagreed with it.

Justice Thurgood Marshall: That's all it was.

Are you substituting your judgment for that?

Mr. Phineas Stevens: Not at all, Your Honor.

Justice Thurgood Marshall: You sound like it.

Mr. Phineas Stevens: No, what I'm trying to explain is that the way the Commission looked at this was to consider only bits and pieces of the record, and they said “we will not consider the rest of the evidence.”

Justice Thurgood Marshall: Well, what statement do you have that says that, that that's what the Court did -- that's what the Commission did?

Mr. Phineas Stevens: The principal statement, I think, is summarized very succinctly in the reply brief that the appellants filed just a few days ago.

They say that the treatment of the evidence by the Commission is fully supported by reasonings set forth in its report.

And, these reasonings are illustrative of the Commission's “careful weighing of the evidence.”

Justice Thurgood Marshall: Pardon me.

Mr. Phineas Stevens: That's on page 6 of the reply brief.

Justice Thurgood Marshall: I don't understand one word of that.

Mr. Phineas Stevens: I beg your pardon?

Justice Thurgood Marshall: I don't understand one word of that, in answer to my question.

Aren't you really putting your judgment over the Commission?

If you were on the Commission, you would've found otherwise, right?

Mr. Phineas Stevens: Not -- I would've found otherwise, yes, Your Honor.

Justice Thurgood Marshall: Yes, right.

Mr. Phineas Stevens: Because --

Justice Thurgood Marshall: Isn't that what the District Court did in this case?

Mr. Phineas Stevens: No, I do not think that it is because when you look at what I was coming to, when they cite why did the Commission not give consideration to the evidence.

They say that that it constitutes a valid reason for not giving consideration to this evidence.

We say it's no reason at all.

It's a completely arbitrary, unreasonable rejection of tremendous portions of the record.

Now, if you do away with all of the evidence that was not submitted by these applicants and have it as an ex parte proceeding, you could find substantial --

Justice Thurgood Marshall: If you disregard all of the evidence, then you fall a thought of the rule of substantial, and they didn't ignore all of the evidence, right?

Mr. Phineas Stevens: They did not --

Justice Thurgood Marshall: Ignore all of the evidence.

Mr. Phineas Stevens: They did not ignore all of the evidence.

They did ignore the most important part of the evidence presented by one group of the parties, and they gave a reason why they were disregarding it.

The reason they gave was no reason at all.

It was completely arbitrary reason.

The same reason they say “we will not accord weight to this body of evidence,” would have required them to accord no weight to the body of evidence they did accord weight to.

What was the reason?

The reason they said was that most of these studies relate to short periods of time.

These were the same periods of time that they gave great weight to, to the other evidence.

They said “or they cover traffic handled for specific shippers.

We will not accord weight to this body of evidence because it was directed to traffic handled for specific shippers.”

That is the reason they wouldn't accord it any weight.

Of course it was directed to specific shippers.

It was designed to rebut specific evidence given by witnesses.

A witness would come in and say “I am having some problems.

Here, I would give you some freight bills to demonstrate service that I do not think is satisfactory.

This carrier did such and such and such,” and he would give a few examples which he considered to be poor.

Then, when the protestants, the existing carriers came in, they spent months searching their records.

They brought in original documents of 120,000 shipments.

They analyzed those.

They brought in specific exhibits saying “-- this witness said this service isn't satisfactory.

Look, here are all of our records that we handle for that shipper during a period of time.

He isn't correct.

Justice Thurgood Marshall: Did you make all those arguments in your exceptions?

Mr. Phineas Stevens: We made all of those arguments in our briefs before the Commission.

We have made --

Justice Thurgood Marshall: And the Commission considered them?

Mr. Phineas Stevens: The Commission did not consider them, Your Honor.

Justice Thurgood Marshall: They didn't consider them?

Mr. Phineas Stevens: No, sir.

They did not consider them.

They rejected our petition summarily, 12 working days after the briefs were in, with no opinion whatever.

This -- this reason--

Justice Thurgood Marshall: Well, what did they do that rejected them?

Mr. Phineas Stevens: They overruled it.

I beg your pardon.

I used the wrong term, Your Honor.

They overruled our petitions without an opinion.

Justice Thurgood Marshall: So, you gave all that argument there.

Mr. Phineas Stevens: Yes sir, and they did not give any consideration to our argument.

This reason for rejecting this evidence was not a reason assigned by any of the parties.

These parties were represented by the most able counsel at the Commission's Bar.

They did not suggest that this was a reason because it isn't a valid reason.

It lacks any logic, any justification, whatever.

It is of no more reason than if the Commission had said “I reject this evidence because the witness that presented it was red-headed.”

It would be no more sense to what they say “we reject this evidence because it relates to specific shippers.”

Of course it related to specific shippers.

That was the entire purpose of it, to rebut specific evidence.

One carrier alone brought in an exhibit showing service rendered for 150 shippers.

With one stroke of the pen, all of that evidence went out of the window.

That's the most important evidence that we presented in the case.

Chief Justice Warren E. Burger: I take it you would agree, Mr. Stevens, that at least a considerable part of this case involved evaluation of the credibility of the witnesses and the weight to be given to particular documentary evidence.

Mr. Phineas Stevens: Your Honor, no sir, Mr. Chief Justice, not to the credibility of the witnesses.

That is not in issue.

What the witnesses said was recorded by the examiners, no dispute as to that.

Chief Justice Warren E. Burger: How do you square that back with the statement that I thought you just made that the Commission paid undue attention to the direct testimony but ignored the cross-examination?

Now, isn't that a credibility, in part, an evaluation of the credibility of witnesses?

Mr. Phineas Stevens: I use that as an illustration because the Commission did in fact consider only that portion of the witness' testimony, for example, that it come out on direct.

Everything that came out on cross, although that was recorded in the examiner's findings to which no exception was taken, no weight was given to it.

It was disregarded.

That portion of the evidence was disregarded but, more significantly, the rebuttal evidence, all of the evidence in opposition was, in effect, thrown out of the window by this statement that “we will not give -- consider this evidence as entitled to any weight for these reasons.”

Now, what the Court said was “those reasons are not valid.

We are not ourselves weighing the evidence, but we are saying that the Commission did not weigh the evidence.”

The Commission looked at only one side of the case and when it came to the other side of the case, it said “we won't give consideration to it for these reasons,” and they're no reasons at all.

They are not justifications.

The Court said this is an arbitrary, capricious, it lacks a rational basis.

That is why we couched our complaint more in terms of the first subparagraph of Section 706 of the Administrative Procedure Act rather than in subparagraph (d) relating to substantial evidence.

It's because that paragraph uniquely describes the type of error that was done in this case.

The lower court said this, Your Honor.

The lower court said that the Commission did not apply the basic rudiments of fairness, that the Commission's report indicates a predilection to grant these particular applications followed by a strained attempt to marshal facts to support such findings.

The strain was too much for the Court to bear, and it said, viewed in its entirety, the report sounds more in advocacy than an impartial adjudication.

But, if I may venture to say so, it just isn't good advocacy, may it please the Court, to say we will not give consideration to this evidence because it relates to specific shippers.

None of the advocates would make such a statement.

The Commission did that of its own motion and if that is grounds to disregard or not give weight to testimony, that ground automatically applies to every shipper that testified in the case, because he testified only about his particular traffic.

Now, if that is an invalid reason for considering his evidence, it applies to all of it.

The Court said that the Commission applied a prejudicial and discriminatory double standard.

It applied one standard to evidence presented by certain parties.

When it came to other parties, it applied a different standard.

Let me illustrate one of those instances.

In the early part of its report, the Commission was dealing with certain exhibits showing what a particular applicant had been doing.

He says “you can test what I propose to do by what I am now doing,” and presented statistical data showing that, for example, during a one-week test period in early 1966 this particular applicant was operating from Richmond to Memphis an average of two-and-a half days in transit.

Well, we came in and said “what does two-and-a half day in transit really mean?”

It's almost a meaningless figure.

So, we took those identical statistics, their figures, and we analyzed them in accordance with their proposal and we said “look here.”

What does it mean?

It means that they are performing their service.

They are getting the freight on time 55% of the time.

Whereas, all of the witnesses who testified had said “that's not the type of service we want.”

Yet, that is the type of service that the applicant was performing.

That is the type of service the applicant says “you can test what I propose to do by what I am now doing.”

Now, on page 116 of the report, the Commission made a finding of fact that the applicant can do this because it's -- now operating two-and-a half days from Richmond to Memphis.

Over in a subsequent part of the report, dealing with our contention that the applicant's own exhibits showed that they were not performing and could not perform in the manner in which they had represented to the witnesses they would perform, what did the Commission do there?

The Commission says proof of past performance cannot be used to test what an applicant proposes to do.

They took the same exhibit, the same sheet of paper and in the early part of its report we make certain findings based upon this exhibit.

Later on, without apparently realizing they were talking about the same sheet of paper, they said this type of evidence is entitled to no prohibitive value.

That is exactly what is in this report and the Court says that that shows a predilection to grant these particular applications followed by a strained attempt to marshal facts to support it.

Now, in the court below, this applicant was still urging “test what we propose to do by what we showed we have been doing.”

The Commission had said “we won't look at that test except insofar as it's favorable.

As to its unfavorable, we will not look at it.”

Justice William H. Rehnquist: Mr. Stevens.

Mr. Phineas Stevens: Yes, sir?

Justice William H. Rehnquist: Did Judge Miller adopt your proposed findings of fact and conclusions pretty much verbatim?

Mr. Phineas Stevens: Pretty much verbatim, he did, Your Honor.

What he did was, during the oral arguments on the case, counsel asked for permission to file proposed findings of fact and conclusions of law as required by a local courtroom.

The Court said “yes, you may do so but get him in early because we're going to work on our decision.”

All parties then filed proposed findings of fact and conclusions of law.

The appellants filed them in the form of a proposed opinion with just signature lines for the Court.

We filed them in the more standard form.

We request the Court to find this and conclude this.

And, the Court said “we have considered all of the proposed findings.

We find those of the plaintiff's correct and we adopt them as follows.”

Yes, it was an affirmative adoption of most of the findings and conclusions.

However, in its opinion, the Court added other things on its own.

Other cases encoded from them wrote an appendix that we hadn't even suggested.

As to the proper scope of review, the appellants say that substantial evidence rule is the only rule that can be applied in an adjudicatory proceeding, a case that comes before the Court after an adjudicatory proceeding.

We submit that that is not a correct statement.

It is an oversimplification.

The substantial evidence rule, of course does apply only to adjudicatory proceedings, but it is by no means the only rule or test that applies to adjudicatory proceedings.

Adjudicatory proceedings must meet the standard of constitutional requirements, statutory requirements, procedural due process, as well as the rule that was elaborated on in the Overton Park case, arbitrary, capricious, and abuse of discretion or otherwise not in accordance with law as stated in the Overton Park case.

In all cases, this rule applies.

Chief Justice Warren E. Burger: We'll resume there at 1 o'clock.

[Luncheon Break]

Justice William O. Douglas: You may proceed.

I think you have about 23 minutes left.

Mr. Phineas Stevens: Thank you, Your Honor.

Mr. Douglas and may it please the Court, sir.

Justice William O. Douglas: The Chief Justice is necessarily absent.

Mr. Phineas Stevens: Yes, sir.

I think it may be helpful to the Court, sir, if I may go back and review briefly a few of the facts that I neglected to mention at the outset.

Mr. Rhyne has stated that the chief problem discussed by these shippers was that freight came out of the east down to certain points then it had to change to another carrier and go forward.

That is an oversimplification.

On certain lines between certain points, that is correct.

Between other points, there was one-line service all the way through, but the shippers would say “we would like to have another one-line, single-line service is the proper term, from A to B.”

There is not enough service from that standpoint.

First, it must be borne in mind there isn't a single point proposed to be served that did not have multiple service at the time of the applications.

Also, it must be borne in mind that they proposed on a very highly limited selective type of service to go through the small communities and serve only the major communities and leave to the existing carriers the obligation to handle the less profitable freight to the smaller communities.

The examiners found that the approval of any 1 of these 10 applications would result in a deterioration of service primarily to the smaller communities, but also to the larger communities, that the public interest would be damaged by the approval of any one of those.

The facts upon which those findings were -- conclusions were based were adopted verbatim by the division, but they reached a different conclusion from those facts.

I think it might be also helpful to note that this was not a general influx of citizens asking for service.

This was not a general investigation by the Commission, which they could have done.

These are individual applicants that had sought a particular service.

They were consolidated for hearing and we had here the most unusual situation of having ten major applications heard on one record.

One of the things it resulted in, each time an applicant would call a witness to the stand he would be criticizing other applicants.

So, we saw that there was no difference really between the applicants and the protestants.

Also, it should be noted that these shippers were not parties.

They were witnesses, 41 of them were permitted to intervene as parties represented by Mr. Rhyne after the initial decision had been made.

It was only then that any suggestion had been made of any antitrust issue.

Up to then, the consideration by the examiners was just the opposite.

There is so much service that it is really destructive competition at the present time.

Also, mention has been made of the fact that the affirmance of this case would result in denying service to a large number of shippers.

With deference, may it please the Court, I submit that just the contrary would be true.

In the first place, the most unusual aspect of this case is that while it was pending in the Commission, there was a massive increase in single-line service that took place with Commission approval.

Bearing in mind that the whole theory of the case was not that there is not sufficient service, but there is not sufficient single-line service.

The Commission found, and all of the witnesses, all of the parties acknowledged, that there is a direct correlation between the number of times a shipment changes hands and the expeditiousness of the shipment.

So, single-line service per se is of utmost importance.

The entire theory of the case was predicated upon that.

So, what took place was that, while these cases were pending before the Commission, there were a series of mergers, consolidations with Commission approval, and a few new grants of authority.

The examiners took note of that.

For example, they pointed out that at the time of the hearing between the focal points of the application, Atlanta and Dallas, there were three single-line carriers.

But, at the time of their decision in 1969, there were seven such carriers.

The examiners said, given effect to the present service available, bearing in mind the statutory criteria to determine the present and future public convenience and necessity, we find that there is a multiplicity of service available.

When it went before the -- a division composed of 3 of the 11 Commissioners, we petition to reopen to present proof of the changed conditions.

The Commission says “no, that will not be necessary.

Under our decision, citing primarily the West Brothers case, we will give effect to this increase in service.”

Now, incidentally, the West Brothers case is particularly unique because it involved two of the points involved and the carriers involved.

Briefly stated, the Commission had granted West authority to operate from Alabama to Louisiana which included authority to operate from Birmingham to Baton Rouge.

After that grant had been approved, certain protestants petitioned the Commission for reconsideration, as we did in this case, pointing out that in another case, while it was -- the West Brothers case was pending and the Mercury case, the Commission had granted Mercury authority to operate between Birmingham and Baton Rouge.

The Commission says “that's right”.

We must give effect to our grants and other proceedings.

We re-opened the West Brothers case.

We modified that so as to eliminate from the grant to West Brothers to authority to operate between Birmingham and Baton Rouge we've given Mercury.”

Now, Mercury wasn't even a party to the West Brothers case, but they properly gave effect to their other decisions.

In other words, letting the right hand know what the left hand was doing.

In our case, they cited West Brothers as authority for the proposition “we must give effect,” but what did they do?

They granted two more carriers, Red Ball and Bowman authority from Birmingham to Baton Rouge that they had just said in West “we can't do,” and three more from Atlanta to Baton Rouge, all three of these applicants.

So, at the time of the Commission decision, they went back and looked at an exhibit that had been introduced by Johnson at the outset of the hearing summarizing all of the available single-line service.

And, they said “based on that exhibit, we conclude there is a paucity of single-line service available and, in that respect, we take note of the fact that in 1970 census, compared to 1960 census, there has been an increase in population.”

So they judged, and the only comprehensive analysis they made of the quantity of service available was based upon the condition in early 1966.

They concluded there is a paucity of single-line service available, ignoring the examiner's conclusion that, given effect to the changes, there is now a multiplicity of service.

But, what had taken place?

Two more years had transpired between the examiner's decision and the division decision and, by then the 7 between Atlanta and Dallas had grown to 13.

At the time of the hearing, there was one single-line carrier between Baton Rouge and Atlanta.

At the time of the division's decision, there were 7.

So, the witnesses had been saying “we would like to have another carrier available.”

Without exception, they all had multiple other carriers available.

The Commission, in certain respects, said this case is moot as to certain aspects of it that are not important here.

We submit, they could just as well have said the entire case is moot because the issue is the -- a contention there is a need for addition of single-line service and there has been a massive influx of single-line service occurred while these cases are pending.

Instead of doing that, saying “we must give effect to these recent grants,” they did not give effect to the recent grants.

Instead, they continued on, what the Court termed, “a prejudicial and discriminatory double standard.”

I would like to illustrate that a little bit further.

I have mentioned these transit term studies.

They were the most important part of our evidence.

That's true, but they did other things.

What about the transit time studies that the shippers themselves introduced?

They were fragmentary, individual shippers showing different things.

So, after the applicants had all rested, there was a several-month recess.

We took every single transit time study presented by every witness and made it into a composite analysis where you could look at it together and not fragmentary.

What did it show?

It showed that the protestant service reflected by those exhibits between the points that we studied was superior to the applicant service but more significantly, that, overall, the service was reasonably satisfactory even bearing in mind that the shippers had set about to, in most instances, to give the horrible examples of poor service.

The Commission would not give effect to our analysis, the composite analysis, but looked on it to the fragmentary exhibits as they were introduced.

The Commission said this.

Certain protestants have restrictions in their tariffs and engage in certain restrictive practices.

Well, in the first place, we don't think that's important.

The Commission has plenary power to require a carrier to do away with any restrictive practice or eliminate from its tariff any restrictive provision.

We heard argument to that effect this morning in connection with a different section of the Act, but what did they do?

They said “one of the reasons we want to grant this is because the protestants have restrictions,” ignoring the fact that the applicants had the identical restrictions and, while the case was pending, published additional ones.

We pointed that out.

They paid no attention whatever to that, but just hung their findings on the fact that the protestants had certain restrictions.

They went out of the record and out of their way, if it may please the Court, to take official notice of an industry publication that said that one of the protestants had closed one terminal, subsequent to the hearing, in one town in Mississippi.

We had been arguing that the applicant's proposals were not realistic because, among other things, there was Bowman proposing to establish a whole series of new terminals, whereas, it served vast areas in the East where it had no terminals at all, over 100 cities of comparable size where it had no terminals.

We were pressing that point.

They ignored that argument but went outside of the record to take official notice of the fact that one protestant had closed a terminal in one point.

When they did that, we petitioned them but, look here.

The same publication will show that Red Ball, one of the applicants, has closed 35 of its terminals.

Yet, the Commission said “one of the reasons we are going to grant authority to Red Ball is because it has 92 terminals.”

That fact was not correct.

It was correct at the time of the hearing, but it was not correct at the time, it appeared in the Commission's report.

We pointed that out.

They have closed 35 of their terminals.

The appellants still cite that in their reply brief to this Court, filed a few days ago, justifying the Commission's grant, the finding that there were 92 terminals pointing out that, really, the closing of the terminal of Red Balls was not reflected in the same edition of that American Motor Carrier directory but in another edition.

They could have pointed it out to the Commission if they had seen it fit to do so.

This is a changed condition.

We bring it to your attention.

Again, one standard was applied to the applicants.

A different standard was applied to the protestants.

In every instance where there was a criticism, as pointed out by the examiners, those criticisms applied to the applicants as well as to the protestants.

They did not give effect to any of those.

So, we filed a petition.

It was overruled by a 2:1 vote of the Commission without an opinion.

We asked for the entire Commission to review it.

Again, without an opinion, it was denied.

So, it went to Court on the basis of two of the Commissioners finally voting to grant and we submit on the conditions that violated the basic rules of fairness.

Now, we submit, may it please the Court, that the proper standard of review is found in examining Section 706 of the Administrative Procedure Act in its entirety.

It's not necessary to decide whether the arbitrary and capricious standard is more strict as alleged than a substantial evidence test.

Some text writers will say just the opposite, but it's not involved in this proceeding.

It's not necessary for this Court to make that decision.

It's also not necessary for any Court to compartmentalize its findings that this is a subsection (a) decision or a subsection (b) decision.

I make reference to the Acheson case in which there was a recital by the lower Court and by one of the opinions, there was no majority opinion here, that there was substantial evidence but the Court went on to set it aside, affirming the setting aside by the lower Court, not for lack of substantial evidence or not for any of the other grounds and without specifying exactly what it was.

But, obviously, it was because it was arbitrary, capricious, and abuse of discretion or not otherwise in accordance with law. The applicants state, time and again, “look at this evidence, by themselves, these facts provide a substantial evidence for the Commission's findings of inadequate service.”

But, as stated in Universal Camera by Mr. Justice Frankfurter, the Administrative Procedure Act put that to rest.

You cannot look at evidence by itself.

You must look at the entire evidence.

The Court quoted from Professor Jeffrey an excellent statement on this point.

To abstract out of a case, that part of the evidence which can be made to support a conclusion is to imagine an abstract case, a case that was never tried.

A conclusion based on such abstracted evidence may be “rational,” but it is not a rational decision of the case which was in fact tried.

Evidence which may be logically substantial in isolation may lose its logical relevance, even its claim to credibility in context with other evidence.

We say that the division, the three-man division, should have given effect to the entire evidence instead of saying “we will not give effect to this evidence.

We will give effect to the identical evidence if it helps the applicants.

We won't give effect to it if it's detrimental to the applicants.”

And, assigning a reason, that is to say like the evidence relates to specific shippers, which was equally applicable to all of the evidence that they did give effect to.

All in the world, the Court here was talking about is fairness.

The division did not treat these parties with fairness and, as a result, the public -- it would be damaged under this decision.

Instead of saying “we are going to grant three more carriers from Atlanta to Dallas,” as I really believe the division thought that they were doing.

What they would be doing was increasing to 16 to 19.

Instead of putting an additional carrier to an operation from Atlanta to Baton Rouge, they would increase to 7 to 10.

Nowhere in there did they recognize what the present service was, although they said “we must give effect to it.”

Now, the lower Court entered an order setting aside, holding invalid, and enjoining the implementation of the Commission's order in the statutory language.

That's as far as the lower Court went.

The government, but not the private parties, then filed a motion saying “that order is beyond your power, your jurisdiction.

You must supplement it or amend it to provide for remand.”

The Court says “no, remand isn't, by statute or case law, obligatory.

It's discretionary.”

No one has ever suggested a remand would serve a useful purpose and, here, I believe it's been admitted that remand will not serve a useful purpose to the Commission.

This record is old.

The Court didn't set it aside because it was old, but if it went back to the Commission with instructions to give effect to this record, this record deals with that Baton Rouge shipper talking about “I need a second single-line carrier,” whereas, in fact, today, there are seven.

It deals with apples.

The issue is oranges.

There's no need in the world to use that and, as the Court said, it would impede rather than facilitate further proceedings that the Commission is free at any time to conduct.

We do not go into the field of ultimate decision of the issue of public convenience and necessity.

Justice Byron R. White: Can I ask you, would there -- would the District Court have remanded had it thought the record was not stale but was current?

Mr. Phineas Stevens: Your Honor, that is pure speculation because it was never argued.

Justice Byron R. White: Well, then I'll ask you the other way.

Why didn't he remand?

Mr. Phineas Stevens: In the first place, the only suggestion was the man had to do with jurisdiction.

That was all that was suggested.

You do not have jurisdiction to enter your order.

It was never suggested that you ought to remand, that it would be helpful to remand, only that you must remand it.

Justice Byron R. White: What reason did the District Court give though in response to the motion to amend the judgment?

Mr. Phineas Stevens: First, it says that we have the power to enter the judgment.

So, that disposed off the technical question raised by the motion.

Then, they went further in a very detailed opinion and gave the reasons why the Court thought that a remand would impede rather than facilitate --

Justice Byron R. White: One of the reasons was that --

Mr. Phineas Stevens: What other reasons?

Justice Byron R. White: One of the reasons was that they thought the record was very stale.

Mr. Phineas Stevens: That was one of the reasons, yes, but, Your Honor, I might suggest this.

It wasn't simply because it was old.

It was because the conditions after the close of the record had changed to such an extent.

Justice Byron R. White: Well, I understand that.

So, I'll go on.

Do you suppose that the District Court, in view of the reason it gave in denying that motion, was saying that whether there's -- whether there was substantial evidence or not at one time, the record is just so old and irrelevant to the current situation that the order can't stand?

Mr. Phineas Stevens: No, I do not think that they were saying that the order cannot stand.

That decision had nothing to do with the age of the record, as I read the Court's opinion, sir.

It reached its decision without any reference at all to the age of the record.

It considered the age of the record only as to what -- where shall we go from here.

Justice Byron R. White: Well, when it put its final -- when it finally said that, dismiss and enjoin permanently the issuance of these certificates, it must have had a reason for doing it.

Mr. Phineas Stevens: The reason it assigned is because the order was arbitrary and capricious, not because of the age of the record.

The age of the record question came up after that order was entered, and we permanently enjoined enforcement of this particular order, that is, implementing the order that was before the Court.

Then, it addressed itself to the question, shall we amend that order and make it obligatory that the Commission have further proceedings on the present record or shall we just leave it up to the Commission as to what they are going to do?

And, it said that “we think that the Commission would be better off starting over, citing the cases that it cited there, which the Commission has been free to do at any time.

But, no one has yet suggested that it would be helpful in the further proceedings to test the issue of present and future public convenience and necessity.

Obviously, the present situation must be considered.

No one has suggested that, in making that determination, use of the old record would facilitate the determination of the issue.

We submit that basically, here, the Court has cited in the J-T Transport case that it was cited.

We must give deference to the Commission.

The issue of public convenience and necessity is for the Commission, but we do not have to accept the Commission's determination where we are convinced, as here, the Commission has loaded one of the scales.

That statement fully applies to this.

Also, the statements in Burlington Truck Lines, cited by the Court, that expert discretion is the life and blood of the administrative process, but unless we will make the requirements for administrative action strict and demanding expertise, the strength of modern government can become a monster which rules with no practical limits on its discretion.

Thank you.

Justice William O. Douglas: Mr. Rhyne and Mr. Patton, I -- as I'm advised, you -- the two of you have 15 minutes left.

Rebuttal of Charles S. Rhyne

Mr. Charles S. Rhyne: Thank you, Mr. Justice Douglas, and may it please the Court.

Frankly, in view of the concession by counsel that the findings of fact of the Interstate Commerce Commission were not in issue here or in the Court below or in the complaint, I really see no useful purpose that I could perform by re-arguing the evidence to this Court.

So, everything that my distinguished adversary has said, he argued over and over again to the Commission.

Everything has been updated several times.

So, unless some member of the Court has questions that they would like me to answer, I don't see -- I say, what useful purpose I could perform by talking about findings that are not an issue.

That's -- the whole case, as far as I'm concerned, is over.

And, I would simply urge that, under the circumstances, the Court send it back to the District Court with instructions to dismiss.

I don't see how there's any other alternative.

Justice Potter Stewart: Mr. Rhyne, how about, for example, the Commission, one of its order was partly based on the fact that Red Ball had 94 terminals and now we're told that it's closed 35 of those of the commission.

Any mentions of that, you don't mention it.

In fact, you're talking about 94 in your reply brief.

Mr. Charles S. Rhyne: Well, in our reply brief we point out that the Commission, at the time of its decision based its official notice on one document that was a 1971 document and what they're talking about on the closing is a 1972 document but, Mr. Justice Stewart, what they're really talking about is agency discontinuances and consolidations done by Red Ball.

That isn't a major thing in this case at all.

And so --

Justice Potter Stewart: And if they went out of their way to, as I understand it, to point out that one of the protestants had closed a single terminal, one terminal?

Mr. Charles S. Rhyne: Well, again, they did that, yes.

But, they were talking about-- they took official notice of this and they took official notice of that.

So, they took official notice of the facts as they were as of the time of their decision.

I really don't think that is a major part of their decision because, as I said before, the Commission regrouped the testimony of the witnesses, these 933 witnesses, according to geographic points which made the service stand out that was needed.

That was a big issue here and, after that was done, they take a look at the points that needed service and that's how they selected the three carriers.

They just fitted into that picture.

They could best serve those points.

Justice Potter Stewart: Well, at the time of the hearing I think there was one direct line from Atlanta to Baton Rouge and the Commission's order was based on that.

And now, it turns out, there's seven, aren't there?

Mr. Charles S. Rhyne: Your Honor, the Commission's order is not based on one line.

If Your Honor will look at Exhibit G, every increase in service is listed there and if Your Honor will look at Exhibit D, every increase in service is mentioned there.

And, the Commission said “sure, all of these arguments about increased service were argued all the way through,” and they say “in spite of all of this, we find that the public interest requires this new service.”

And so, I think that since the Commission, the great expert in this whole area has held that additional service and particularly breakthrough service through the gateway, sure, there was one or two before this started that went through the gateway and there was probably one or two more that had increased, but getting through those gateways was an enormous breakthrough for the shippers that are involved here.

So, I say, I don't really want to re-argue my evidence but I think, Mr. Justice Stewart, that every point that was raised here the Commission considered and it was the one to consider it.

It did.

They don't challenge their findings.

I really don't know what else I could say.

So, thank you very much.

Justice William O. Douglas: The case is submitted.

Featured:

United States v. International Min'ls Corp. - Oral Argument

Thu, 23 Aug 2012 18:15:41 +0000

Case:

United States v. International Min'ls Corp.

Media File:

557_19710426-argument.mp3

Related Transcript:

557_19710426-argument

Transcript:

Argument of John F. Dienelt

Chief Justice Warren E. Burger: We will hear argument next in number 557, United States against International Minerals and Chemicals Corporation.

Mr. Dienelt, you may proceed whenever you’re ready.

Mr. John F. Dienelt: Mr. Chief Justice and may it please the Court.

This case is here on direct appeal from the District Court for the Southern District of Ohio.

The District Court dismissed the five-count information alleging violations of Section 834 of Title 18 which deals with the transportation of explosives and other dangerous substances.

Section 834 which we have set forth in part on page 3 of our brief provides that “whoever knowingly violates regulations formulated for the safe transportation of hazardous materials shall be fined up to $1,000.00 or imprisoned not more than a year.”

The information in this case charge the appellee which is a corporation engaged primarily in the manufacturing and shipping of chemicals and fertilizers with violations of a regulation, which we’ve also set forth on page 3, dealing with the contents of shipping papers.

The regulation requires that the shipper state on a shipping paper designated names and classifications of substances which he is shipping.

In this case, for example the shipper was shipping sulfuric acid and the regulations required him to state sulfuric acid on the shipping paper which is the name and corrosive liquid, which is the classification.

And this safety requirement serves essentially two purposes.

First, it indicates to the carrier what kind of labels he should put on the packages and what kind of placards he should put on his truck.

And secondly, the shipping paper itself which is kept in cab of the truck with the driver enables the driver or anybody else who might be involved in an emergency such as an accident or a fire to quickly identify what the substance is and to take whatever appropriate steps such clearing an area might be necessary.

The five counts in this information each alleged similar conduct.

Three of them alleged a knowing failure to state the required classification and as corrosive liquid on the shipping papers.

And two, alleged knowing failure to state both the required classification and the required name of the substance being shipped.

The District Court granted the appellee’s motion to dismiss this information on the ground that it did not state an essential element of the offense and that essential element in the Court’s language was knowledge of violating the regulation.

As we read that ruling, the District Court held that the Government has to allege and prove not only that the appellee knew it was shipping a dangerous article without stating its proper name and classification on the shipping papers, which we alleged in the information but also that it knew the terms of the regulation forbidding that conduct and specifically intended to violate that regulation or as the District Court put it, an added ingredient of consciousness that it’s illegal not to do the act.

So, the question in this case --

Justice Potter Stewart: Mr. Dienelt, who was the District Judge in this case?

There's no such Judge name Pate, as appears on page 8 in the transcript --

Mr. John F. Dienelt: Well, --

Justice Potter Stewart: Is that Judge Porter?

Mr. John F. Dienelt: Yes, he was Your Honor.

Justice Potter Stewart: Well, I thought --

Mr. John F. Dienelt: I gather it was, I didn’t know.

The question in the case then is the simple one and it’s whether a defendant can be convicted under this statute for intentionally engaging in conduct that is prohibited even though he doesn’t know that the law prohibits it.

We believe that a shipper or carrier can be convicted under these circumstances.

Our position is simply that proof of knowledge of pertinent the facts is what is essential and proof of knowledge of law is not that the defendant is presumed to know the regulations governing transportation of dangerous articles.

Now, he's charge with that knowledge under the fundamental principle that ignorance of the law does not excuse its violations by one who intentionally engages in conduct which the law forbids.

Charging shippers and carriers of dangerous substances with knowledge of regulations regarding their transport seems to be a perfectly reasonable thing to do.

In the first place, the substances are dangerous and that alone ought to signal, the possibility of existence of a regulatory scheme regarding the transportation.

So this case in that sense is similar to United States against Freed which this Court decided this month.

And in that case, the Court ruled that specific intent for knowledge that gun were unregistered was an essential element of the crime of possession of an unregistered firearm.

In effect, that the rule that the individual could be presumed to know or charged with knowledge of the registration requirement.

In this case and in numerous regulatory areas, there's another factor which makes it particularly appropriate to charge the people engaged in forbidden conduct with knowledge of the regulations and that is that this appellee and most of the people who are brought under a prosecution under this statute are in the business of shipping dangerous substances.

So, our fundamental position is that there is no basis in this case for making an exception to the principle that ignorance of the law is no excuse.

We’d like to emphasize three points in that connection.

I would like to discuss the language of the statute, the effect of this Court’s decision in Boyce Motor Lines against the United States, some 20 years ago in 342 U.S., and the history of the statute.

The first point deals with the language, the statute says, “knowingly violates regulations.”

This is a typical regulatory pattern in numerous areas where Congress simply can’t fill out the details of the statute.

It sets forth the general prohibition and leaves to the administrative agency the responsibility for filling in the details and designating the specific conduct that’s forbidden.

And this language “knowingly violates regulations” is standard terminology.

It’s used in numerous statutes we've cited, some of them in Footnote 7 of our brief at page 13.

We submit that if Congress in these various regulatory areas had set forth the prohibited conduct in the statute itself, there wouldn’t be any question but that the Government’s only obligation would be to prove knowledge of the facts and not knowledge of the law.

For example, in this case, the Congress had written a statute that says, “Whoever knowingly ships sulfuric acid without stating on the shipping papers that it is sulfuric acid and that it is a corrosive liquid shall be punished.”

We submit in that situation there wouldn’t be any question that our burden of proof would be what we've alleged in the information here, knowing conduct.

Similarly, if Congress had written as is it would have had to in a regulatory statute or as it likely would and as it has in cases where it has set forth conduct that is prohibited in the statute itself, set forth a number of different kinds of conduct and then had one provision that says, “whoever knowingly violates the statute or the statutory provisions shall be punished.”

We submit the same result would obtain that we would have to prove knowledge of the facts and not knowledge of the law.

We don’t think the results shall be any different because Congress has adopted a convenient shorthand in this case as a means of delegating responsibility to the administrative agency.

In this case, the Department of Transportation and for incorporating all the various prohibitions that are involved.

We realize it’s possible to read the language “knowingly violate regulations” to suggest that you have to know what the regulation is.

But we think that the position which evidently is the appellee’s position and which was the position stated in a concurring opinion by Judge Magruder in the St. Johnsbury Trucking case which was a leading early Court of Appeals decision on this matter, that the use of that language justifies a distinction

.We don’t believe that that’s a proper reading.

It places too much emphasis in the abstract or the semantics.

It ignores the practical reality which we feel make it perfectly clear that the use of the phrase “knowingly violates regulations” in this case is simply a shorthand.

In fact, there are some cases in which Congress has on a rare occasion indicated that an ignorance of a regulation or a lack of knowledge of a regulation will be an excuse.

It will be an affirmative defense and it stated that quite plainly in the statute in language quite different from the language here which decided two similar cases in footnote 11 of our brief on page 16.

Now, turning specifically to the judicial and legislative consideration of the statute, our second point is that this Court’s decision in the Boyce case should involve the same statute.

It does not require the Government to prove knowledge of the regulations.

The Boyce decision didn’t hold that, it really didn’t reach that issue.

It didn’t specifically address itself to it.

The Court there assumed as did the parties that the shipper, it was a carrier on that case, knew the regulations and proceeded to examine factual circumstances not the question of knowledge of the law.

The issue in Boyce was whether a regulation was vague and the regulation involved dealt with the routing of trucks through congested areas and it required that the trucks be routed this so far as practicable, that was the key language in that case as far as the vagueness is concerned, as far as practicable to avoid congested areas such as towns and the defendant in that case had routed its trucks to the Holland Town in New York.

The District Court dismissed the case with rather three counts of an indictment there, on ground that it was unconstitutionally vague.

The Court of Appeals reversed and this Court affirmed.

And in affirming the decision, this Court indicated that the fact that the defendant was required “knowingly” to violate the regulations was crucial and it stated what it meant by that requirement, in a passage that we’ve set forth on page 10 of our brief.

It said the Government must prove not only that there was in fact a preferable route but also that the defendant knew of such route and nevertheless took a more dangerous one.

Or alternatively that the defendant willfully neglected to inquire whether there was such a route.

The comparable requirement to that proof in this case, we submit is that not only did the defendant shipped a dangerous commodity without stating its nature on the shipping papers but also that it knew what he was doing or alternatively that he willfully neglected to ascertain what the facts were.

There was nothing in Boyce and we submit there's nothing here to suggest that knowledge of the law was also an element of the Government’s proof and regulation in Boyce was more complex.

As a result of that, the defendant as the Court suggested in Boyce might very well, by showing a good faith compliance with the regulations, by showing that he chose a route and he tried to choose the safest route that that might provide a defense and that that the jury in that case might equip on such a basis. But still the point was that it was factual circumstances that the regulation made pertinent and not the knowledge of the regulation itself that was critical.

And we don’t suggest here that a showing by the defendant at a trial that he didn’t know what he was shipping or that he made some other inadvertent conduct would not be a defense.

This was dismissal of an information.

We don’t have a record.

We don’t know what the defense of the appellee would be.

We submit that there are genuine issues which in some cases may arise and that those should properly be determined at a trial.

Finally, we’d like briefly to turn to the legislative history of this section.

Chief Justice Warren E. Burger: Let me ask you this.

Mr. John F. Dienelt: Yes sir.

Chief Justice Warren E. Burger: A hypothetical question. Suppose by some coincidence the man engaged in a manufacturing and handling of sulfuric acid also had a division that handled olive oil and by sheer inadvertence of employees got the sulfuric acid in the olive oil tanks and tank cars --

Mr. John F. Dienelt: Mixed out.

Chief Justice Warren E. Burger: What impact would that have on a criminal charge for failing to label the sulfuric acid accurately?

Would it be a defense from another --

Mr. John F. Dienelt: I think it would be defense, Your Honor, that that would be a claim that I didn’t know what I'm was shipping and I think that it would be a question for the jury as to whether to believe that.

These cases usually are based on largely on documentary evidence, so you’d have the shipping paper and you, be able to see what he put on the shipping paper and you’ll be able to see what he put on the shipping paper.

And he’d have a very strong case if he had olive oil written on the shipping paper that’s what he thought it was.

It would be a hard case for us to prove, we might very well not indict in such a situation.

I was advised that very recently there was a case where the Government decided not to prosecute and which an employee had gotten the wrong number on the truck.

He’d hitched his cab up to 1191 instead of 1157 something like that the Government decided that it wouldn’t be indicted.

Situations like that might very well provide offenses of trial.

But we don’t believe that that has anything to bear on the nature of the elements that the Government must allege in the indictment.

There isn’t any legislative history of the very early provisions stating back to around 1908 regarding what Congress meant by using “knowingly” in the statute.

In 1960, however, when Congress made other changes in the statute, it did consider changing the “knowingly” requirement.

The Interstate Commerce Commission wanted to make this a statute imposing absolute liability.

In other words, that defense of “I thought I was shipping olive oil” would not be of the defense that the shipper would be absolutely liable for what was in that truck regardless of what he thought it was.

This was suggested to both the Senate and the House.

They both rejected that position.

What the Senate did a bill was introduced in the Senate which would have taken “knowingly” out of the statute and substituted for a phrase, “Whoever being aware that the ICC had formulated regulations for safe transportation of explosives and other dangerous articles.”

The House then deleted that phrase and put “knowingly” back in and it said in its report that it intended to retain the present law.

It made reference to judicial pronouncements as to the standards of conduct under the law.

It didn’t say, what cases it was referring to and it didn’t say what its interpretation of those judicial pronouncements was.

Justice Potter Stewart: There was a reference somewhere in the legislative history however to the concurring opinion in the First Circuit.

Mr. John F. Dienelt: That’s true.

Justice Potter Stewart: The St. Johnsbury case, was there not?

Mr. John F. Dienelt: There was.

The justification, which the ICC had submitted, and which was used by the Senate in its proposal had made reference to that that was a source of concern as we believe from reading the cases, Boyce as well as St. Johnsbury which was really the other leading case.

Judge Magruder’s opinion was the only one which really addressed itself to the point that I referred to earlier whether “knowing violation of the regulations” meant you had known the regulation.

Justice Potter Stewart: Had the Boyce case been decided?

Mr. John F. Dienelt: The Boyce case had been decided and so had St. Johnsbury and as we've argued that we don’t believe the Boyce case reached the point of the deciding whether knowledge of the law was an excuse.

We believe the most consistent reading of that case, the best reading of that case is that it assumed and it presumed that the shipper would have that knowledge and that lack of that knowledge would not be a defense.

The St. Johnsbury case in the concurring opinion as I've said, Judge Magruder did indicate that knowledge of the regulations would be a -- lack of knowledge with the regulations would be a defense or that the regulations would have to be proved.

But the majority opinion in that case, even though in the legislative history in some statements by interested agencies.

It was interpreted to hold that knowledge of the law had to be alleged by the Government.

The opinion is not that clear, the facts in the case.

It was a case very similar to this one.

It involved the shipping paper requirement which at that time required the shipper to attach or designate a label which would be then put on the dangerous commodity on the shipping paper and the proof at trial according to the Court of Appeals’ opinion was that the rating clerk who is the only person in the operation responsible for this either negligently failed to do it or else clipped it on with a paper clip and the paper clip fell off and the papers got separated as a result of that, the shipping papers didn’t show the classification and the truck wasn’t properly placarded.

The Court discussed the Boyce opinion and it made some general references with respect to the knowledge of the law but the critical holding in which it sort of paraphrased Boyce was that the Government must prove that the defendant, I'm quoting from the case now, “aware of the dangerous nature of the commodity deliberately chose to transport it without placarding its trucks or labeling it shipping papers or that the defendant willfully neglected to take proper precautions.”

Now, that’s what we feel we've alleged here.

That’s what we believe we can prove at trial.

Our point about the legislative history of the revision of the 1960 Act as we stated essentially in our reply brief is basically that it’s neutral.

It just doesn’t tell us enough one way or another as to what Congress intended and in that context, we feel that it would not be appropriate to impute the Congress and intent to bring about an exemption to the fundamental principle which at least by extension would apply to make any statute which says, “knowingly violates regulations.”

One in which the Government must prove that people who are engaging in the forbidding conduct, often people in the business, know the regulations.

Justice Potter Stewart: We don’t deal here however with a regulated industry as such, do we John?

Mr. John F. Dienelt: Not as such -- its carrier and ships --

Justice Potter Stewart: The carriers are regulated but the shipper might be anybody.

Mr. John F. Dienelt: That’s --

Justice Potter Stewart: You or I might be a shipper, a casual shipper, any member of the public --

Mr. John F. Dienelt: That that’s correct.

As far as -- so we've -- in that sense we would have to rely as far as justifying the presumption of knowledge of the law on general principles and on the fact that these are dangerous commodities which ought to signal to somebody the fact that they maybe regulated and would justify the Government imposing upon a requirement of charging them with --

Chief Justice Warren E. Burger: What you're saying is that anybody in sulfuric acid business is bound to know that it’s a dangerous substance?

Mr. John F. Dienelt: Precisely and is bound to know the regulations regarding transport of a dangerous substance so that if it fails to follow those regulations knowingly, it can be convicted under the statute and for that reason, we think this Court should find that the information did sufficiently alleged all the essential elements of the crime in this case and that the case should be remanded for a trial.

I like to reserve the rest of my time.

Chief Justice Warren E. Burger: Very well.

Mr. Spencer.

Argument of Harold E. Spencer

Mr. Harold E. Spencer: Mr. Chief Justice, may it please the Court.

The sole issue in this case is the sufficiency of the information to state an offense against the United States under Section 834 (f) of Title 18.

Our position with respect to that issue can be very briefly stated in three propositions.

First, the involved statute punishes only one who knowingly violates the regulation; Second, to state an offense under the statute, the defendant must be charged with knowingly violating the regulations; and third, the information here does not charge the defendant with knowingly violating the regulation.

Therefore, the Court properly dismissed the information.

That was the sole reasoning of the Court and I submit that its reasoning was correct.

The Court didn’t go any further than that.

There's been no trial, no evidence submitted.

The Court simply dismissed the information.

The first proposition as I submit self evident from the wording of the statute.

The statute does not punish an unknowing violation whether or not the defendant intended to do the act that he did.

It only punishes a knowing violation.

The second proposition naturally follows from the first one and I don’t believe there can be any argument about that under the well-known rule that the information must charge all the essential elements of defense.

It must charge the defendant with the knowing violation.

So, we come to the crucial question which is, “Did the information charge the defendant with a knowing violation.”

Well, it didn’t do so in expressed terms.

The charge is a knowing act which happens to be in violation of the regulation.

But that is not the offense which is punishable by the statute.

The Government doesn’t really --

Justice Potter Stewart: Are we at page 4, Mr. Spencer of the Government’s brief contains one of the accounts to the information as representative. I suppose you would concede that this is accurate--

Mr. Harold E. Spencer: Yes, it is Your Honor.

Justice Potter Stewart: An accurate introduction of its representative.

And it does alleged that the defendant did knowingly failed to show on the shipping papers, the proper names sulfuric acids and so on, in violation of 49 CFR 173.427?

Mr. Harold E. Spencer: That’s correct.

The charges that the defendant knowingly did enact which happens to be in violation of the regulation --

Justice Potter Stewart: Which was in violation?

Mr. Harold E. Spencer: Which was in violation of the regulation.

But our position is that the statutory offense and the only offense is a knowing violation of the regulation.

Justice Potter Stewart: And what would you -- what do you say that should have been included or added to this count of the information to make it valid.

Mr. Harold E. Spencer: They should have been charged that the defendant knowingly violated the regulation by doing whatever acts they alleged.

Justice Potter Stewart: So if had said, in knowing violation of 49 CFR, it would have been --

Mr. Harold E. Spencer: Yes.

Justice Potter Stewart: Valid and sufficient.

Mr. Harold E. Spencer: That makes it a very vital difference, Your Honor.

The reasons which I will state --

Justice Byron R. White: What does the statute says though?

Mr. Harold E. Spencer: The statute says, “Whoever knowingly violates --

Justice Byron R. White: Whoever knowingly violates?

Mr. Harold E. Spencer: Yes, Your Honor.

“Whoever knowingly violates them --

Justice Byron R. White: Well, you say that argument is -- you first have to know about the regulations before he can knowingly violate.

Mr. Harold E. Spencer: I say -- I say he must be charged with a “knowing violation”.

Now, I don’t come to the question of proof.

I don’t come to the question yet, of what proof would be sufficient to show a knowing violation.

My only point here and the only point involved here is the sufficiency of the information that’s our contention that he must be charged with a “knowing violation of the regulation.”

Now, the Government argument deals with the meaning of the term knowingly.

They have a long argument in their brief about the scienter requirements of the word “knowingly.”

Justice Byron R. White: What if their rights in the indictment is --

Mr. Harold E. Spencer: If there, I'm sorry Your Honor.

I don’t understand your question.

If their right that the --

Justice Byron R. White: If a knowing violation means if knowing and doing an act which happens to be a violation of the statute they would indict this.

Mr. Harold E. Spencer: Yes, that’s correct.

If that’s all the statute punishes but that isn’t what the statute punishes.

Justice Byron R. White: Well, that’s what the argument is about?

Mr. Harold E. Spencer: That’s what the argument about, yes.

Now, the District Court didn’t ever consider any of the questions, as I say.

There was no evidence submitted and I would agree that what constitutes knowing violations should only be decided upon a trial of the issues.

Chief Justice Warren E. Burger: Your arguments of necessity assumes that you have to be in the sulfuric acid business and not know that it’s a such dangerous substance that it’s regulated by a lot of statutes and rules about having, doesn’t it?

Mr. Harold E. Spencer: Not necessarily, it --

Chief Justice Warren E. Burger: Well, take that first part.

Isn’t anybody in the sulfuric acid business, bound to know its chemical properties?

Mr. Harold E. Spencer: Yes, but that has -- that doesn’t have anything to do with the violation of this particular regulation.

Chief Justice Warren E. Burger: Let’s take this one step at a time.

What's the answer to that question?

Mr. Harold E. Spencer: I don’t think necessarily that he is bound to know --

Chief Justice Warren E. Burger: Doesn’t he provide in his own handling of it, a lot of very special kinds of containers?

Mr. Harold E. Spencer: I think if you got to a question of proof that that would certainly be an issue as to whether or not he negligently failed to be aware of the regulations.

Chief Justice Warren E. Burger: That’s what the Government is complaining about here.

That they never had the chance to get into the proof, even though the charge follows, tracks the statute.

Mr. Harold E. Spencer: Well, no the charge does not track the statute, Mr. Chief Justice.

That is not correct.

Chief Justice Warren E. Burger: I thought Justice White’s observation made that pretty clear?

Mr. Harold E. Spencer: I don’t believe so Your Honor.

And certainly the decision in the St. Johnsbury case makes it clear.

The necessary implication of the Boyce case makes it clear, Mr. Justice Brennan’s concurring opinion in the Freed case, I believe it was, makes it clear that there's a distinction between the terms.

Chief Justice Warren E. Burger: What about what Justice Holmes and Judge Magruder and Justice Jackson had to say on the same subject?

Mr. Harold E. Spencer: They didn’t address themselves to that subject.

Chief Justice Warren E. Burger: I thought they did?

Mr. Harold E. Spencer: No.

No, Your Honor they did not.

They -- the question -- the Government’s argument necessarily comes down to this proposition that there is no difference between the statute which says, “Whosoever knowingly does an act in violation of a regulation is guilty of an offense.”

And the statute which says, “Whosoever knowingly violates a regulation is guilty of an offense.”

The Government says, “This is typical language, that it’s standard language.

It isn’t typical standard at all.”

The language in 834 is different from what Congress used in 832 and 833 of the same statute.

That is the language that the Government wants and that Congress knew what it was doing when it made that distinction.

It wrote that scienter requirements are different in Section 834 from the requirements in 832 and 833.

And it certainly knew exactly what it was doing when it did that.

The question that the Government wants to do is that they want to take the word knowingly out of a place in the statute where Congress put it and put it somewhere else which completely changes the meaning of the statute.

The Government -- it isn’t the question of proving it -- I think the Government is well aware of the fact that if the statute means what it says and they have to charge it “knowing violation”, they probable can’t prove it in this case.

Now, with respect to the -- I also have the three points that Mr. Dienelt had with respect to the argument.

The meaning of the words, the judicial interpretations and the legislative intent, as I have pointed out that this is not a typical statute.

It is not standard terminology, Congress itself drew the distinction between the meaning of the word, “knowingly” as they used it Section 834 and as they used it in Sections 832 and 833.

In the Boyce Motor Line case, this Court said that that statute --

Chief Justice Warren E. Burger: I think we’ll suspend for lunch--

Mr. Harold E. Spencer: Thank you.

Chief Justice Warren E. Burger: Mr. Spencer, you may continue.

Mr. Harold E. Spencer: Mr. Chief Justice, may it please the Court.

I had just finished discussing the wording of the statute.

Before getting to the legislative history, I would like to spend just a few minutes with respect to the Boyce case and the St. Johnsbury case.

In the Boyce Motor Lines case, this Court held that the statute in question punishes only those who “knowingly violate the regulation.”

The Court said that the presence of a culpable intent is a necessary element of the offense.

The Government says that the Court did not discuss the question of knowledge which is true because that question was not involved in the case.

However, the presence of the culpable intent cannot be squared with the wording of the information which the Government wants to use in this case.

Now, --

Chief Justice Warren E. Burger: When you take that position Mr. Spencer, you're now getting into the merits of what the jury might do with it, are you not?

Mr. Harold E. Spencer: Only to the --

Chief Justice Warren E. Burger: Intent?

Can’t the jury find intent from conduct and circumstances?

Mr. Harold E. Spencer: I think -- oh -- yes, Your Honor.

Chief Justice Warren E. Burger: Take the jury for example, specifically conclude that the man that’s engaged or a company that’s engaged in the manufacturing and processing of sulfuric acid knows that it’s an inherently dangerous substance and infer from that, all the necessary elements of the criminal act?

Mr. Harold E. Spencer: That is correct, that could.

That is a question for the trial but that does not mean that the Government does not have to charge the offense set forth in the statute and confine its proof to the offense set forth in the statute.

Now in the St. Johnsbury case, the Court of Appeals for First Circuit reversed the District Court’s finding of guilty under this statute and said that the Court had erred because it found that there was no element of culpable intent necessary.

And in Chief Judge Magruder’s concurring opinion in that case, he took up this very point and he explained the difference between an act knowingly done and which happened to be in violation of the regulation and a knowing violation of the regulation.

And he made that very clear and he says, “It depends upon how the offense is defined by Congress.”

He says, “That this makes the hard for the Government to prosecute the cases.

It’s up to Congress to fix it because they can define the offense.”

Now, I think if those cases are not the answer to this.

The legislative history for the 1960 amendments is conclusive because the commission which at that time had jurisdiction over these regulations, they’ve since been transferred to the Department of Transportation.

But at that time, the Interstate Commerce Commission had jurisdiction and they took Judge Magruder’s suggestion.

And they requested in the 85th Congress, they requested the passage of a bill making various amendments to this Act and among that was an amendment to delete the word “knowingly” from what was then Section 835.

It’s the same Section which is now 834.

The Senate and the 85th Congress noted that the deletion of the word “knowingly” would create an absolute liability for violation of the Section and the Senate said, “We don’t want to go that far.”

So, they substituted the language reading as follows, “Any person who being aware that the Interstate Commerce Commission has formulated regulations for the safe transportation of explosives and other dangerous articles, now I'm paraphrasing, would be guilty of an offense if there was a noncompliance with the regulations.”

That bill passed the Senate, I believe, but failed to pass the House.

In the 86th Congress, the Commission resubmitted the draft bill and in this case they took the Senate’s language.

They submitted the statement of justification in favor of the proposed amendment, a portion of which we have printed in the appendix.

That position -- the position of the Commission was that the word, “knowingly” should be simply deleted from the statute.

But in view of the amendments which a Senate language had made in the 85th Congress, the Commission now took the Senate language and said, “This is preferable to what we have.”

Now, in the statement of justification, the principle reason that they used was the fact that the decisions in the Boyce Motor Lines and the St. Johnsbury cases had made prosecutions under the statute very difficult.

That’s set forth in the memorandum.

The Senate passed the bill and it went to the House.

The House Committee on the judiciary considered it and a portion of its report is printed on page 10 of our brief.

The House Committee on the judiciary noted that the Senate's language created an almost absolute liability.

The House Committee said, “There are judicial pronouncements as to what constitutes a knowing violation under the present Act and that could not possibly have been anything, except a reference to the Boyce and the St. Johnsbury cases.”

The House Committee also said, that under the Senate language, little more than proof that the violation had occurred would be needed.

The House said, “In view of the various substantial penalties which are provided under the statute, it is our considered judgment that such a substantial departure from the existing law is not warranted.”

They said, “It is our purpose to retain the present law by providing that a person must knowingly violate the regulations.”

Now, the Government says in oral argument and in its brief, “that Congress only wanted to preserve traditional scienter requirements of the word “knowingly”, that is not correct.

Both the Senate and the House Committees in their reports which are referred to in our brief specifically referred to the fact that under Section 835, the defendant must have knowledge of violating the regulation under that Section of the statute.

Now, it is clear that the Senate did not want the absolute liability of the Interstate Commerce Commission version.

Chief Justice Warren E. Burger: Are you telling us Mr. Spencer that 834 (f) has no impact on this case.

Mr. Harold E. Spencer: No.

I'm saying that at that time, the provision which now appears in 834 (f) appeared in 835 and when Congress passed these amendments in 1960, they re-codified those two Sections which were then 834 and 835, and that specific provision which was then an 835 is now 834 (f).

Chief Justice Warren E. Burger: Mr. Spencer, then in -- this charge is under 834 (f)?

Mr. Harold E. Spencer: This charge is under 834 (f) --

Chief Justice Warren E. Burger: That languages is whoever uses knowingly violates, is it not correct?

Mr. Harold E. Spencer: That is correct.

That is correct.

Now, the Government’s position here would impose a more stringent liability than the Senate language and as I say, the Senate did not want the absolute liability of the Commission version and the House did not want the almost absolute liability of the Senate version.

And I think an illustration would make that clear.

Suppose that a shipper who had never heard of these regulations brought a shipment of sulfuric acid to the carrier and said, “Ship this for me”, and he perhaps abbreviated the names sulfuric acid or perhaps didn’t put on the proper shipping classification.

Under the Senate version, he could not be prosecuted because he who had no knowledge of the regulations.

But under this version that the Government now supposes, he could be prosecuted because that would be all that would be required and I think the same thing is true of the Chief Justice’s illustration on the olive oil.

I think if you look at the wording of the information that if that there was a mistake, if they actually shipped sulfuric acid, and that they knowingly failed to show on the shipping papers that it was sulfuric acid.

Chief Justice Warren E. Burger: But I come back to my original question on that.

Why isn’t tat a matter for a jury?

You have a statute here which --

Mr. Harold E. Spencer: Because --

Chief Justice Warren E. Burger: -- these languages whoever knowingly violates and an indictment that says that this defendant did knowingly failed to show on the shipping papers, the proper names sulfuric acid?

Mr. Harold E. Spencer: Because Your Honor, when they get to a jury, they’re going to argue that this particular violation and the wording of the information that carriers no element of a culpable intent as this Court has said in Boyce and as they said in St. Johnsbury, and --

Chief Justice Warren E. Burger: Well, is that something for us to try to worry about now?

Mr. Harold E. Spencer: I should say it is.

I see no reason why we should be subjected to a trial on an information that properly doesn’t charge an offense under the statute and it seems to me that one of the things, I don’t really quite understand what so wrong about requiring the Government to charge an offense under the language of the statute.

Why is the Government --

Chief Justice Warren E. Burger: What language, Mr. Spencer.

Mr. Harold E. Spencer: -- so reluctant to do that in this case.

Chief Justice Warren E. Burger: What language before the indictment would satisfy the position you take?

Mr. Harold E. Spencer: The --

Chief Justice Warren E. Burger: What should this indictment have said?

Mr. Harold E. Spencer: It should have said that the defendant did knowingly violate the regulation.

Knowingly violate the regulation, not knowingly do an act in violation of the regulation.

Justice John M. Harlan: Yes, Mr. Spencer, the information ends up with “in violation of the regulation.”

Mr. Harold E. Spencer: Yes, but it’s our contention that the defendant did not knowingly violate the regulation.

This was a little -- this had happened to be a little phrase that got slipped into the regulations about when the Department of Transportation took over these things from the Commission and they added this requirement of the showing of a classification on the shipping papers.

Now, I grant that that is something that can be shown at the trial.

But I think that if the issue on the trial is whether we knowingly violated the regulation then I see no reason at all, why the Government should not be required to allege that we knowingly violated the regulation and to prove that violation.

Justice John M. Harlan: And you’re not claiming of course any or have you been misled to any prejudice to all of this point?

Mr. Harold E. Spencer: No.

At this point, we are not Your Honor.

Now, in throughout all of these cases and a lot of them have been decided here they run the gamut from the common law crimes which been taken over by the statute, the public welfare offenses in which this Court have said that, no such element is required.

But there is one thing that goes through all of these cases and that is that the intent of Congress must govern.

Now, Congress has wide latitude in defining this offense.

As I have pointed out previously, they defined the offense differently in Section 834 and the way they defined it in 832 and 833, and I submit that the intent of Congress must govern.

It’s very clear that Congress did not intend to subject to these heavy penalties of a $1,000.00 for each offense and a year in the federal penitentiary for an inadvertent violation of these regulations.

I submit, if the Court please, that the District Court was quite correct in its reasoning, that the information here does not charge an offense under Section 834 and that if the judgment of the District Court should be affirmed.

Chief Justice Warren E. Burger: Thank you, Mr. Spencer.

You have about eight minutes left Counsel.

Rebuttal of John F. Dienelt

Mr. John F. Dienelt: I only have about two brief points.

First with respect to this language, the point is that it’s a standard terminology which is used in numerous statutes.

We've cited the statutes at footnote 7 of our brief which deal with the Federal Power Commission and Federal Communications Commission, the Secretary of the Interior, his jurisdiction over conservation and there are numerous other areas.

And although we are willing to agree that there maybe a certain ambiguity by use of the phrase “knowingly violates regulations.”

If you read it in the abstract, the fact that it’s used so frequently means to us, that it is merely a means by which Congress has adopted a shorthand to incorporate regulations that are validly promulgated by an administrative agency with respect to Sections 822 and 823 of this Act, that those are situations in which Congress was able or apparently felt itself able to put in part of the conduct in the statute itself rather than delegating full responsibility.

Justice Hugo L. Black: (Inaudible) --?

Mr. John F. Dienelt: Well, that was the second point, Your Honor. Our position is that it just isn’t clear enough as to what Congress meant when it revised the statute that we can’t get enough guidance with respect to what the Congress intended to impute to them and intent to override what we consider to be a fundamental proposition that that ignorance of the law doesn’t excuse its violation.

The Interstate Commerce Commission’s justification which Mr. Spencer referred to, which is quoted in the appendix to his brief, referred to the Commission’s view that reference to culpable intent had been relied upon by defense attorneys and to some extent by Courts as requiring establishment of some minimal element or affirmative intention to evade the law in addition to the knowledge of the facts.

This we think emphasizes that even the Interstate Commerce Commission wasn’t absolutely clear on that.

It felt that there was difficulty and it wanted to create absolute liability.

I submit that the absolute liability would have been much more helpful to it in terms of eliminating knowledge of the facts.

In other words, eliminating the requirement that the defendant had to know he was shipping sulfuric acid for example, and we think that by the same token, it’s possible to read the language that the Senate substituted.

Whoever is being aware that regulations had been formulated as referring somewhat ironically perhaps to knowledge of the law but not knowledge of the facts.

In other words, you’d have a situation where the Government would at trial have to prove a general awareness by the shipper or carrier of knowledge of the regulations but no knowledge at all, absolute liability with respect to the facts.

And that brings me to the third point and that is we don’t intend to say here that there isn’t a defense of a mistake of fact.

I think that’s for the jury, however, proof necessarily in these cases depends to a large extent on inferring from conduct, knowledge of a failure to comply with regulations.

For example in this case, we've alleged five counts in the indictment.

We would proffer a trial, 33 other counts and we would ask the jury to infer from that knowledge of the facts.

And in that sense, an intent, a culpable intent if you will, to violate the regulations and no further questions.

Chief Justice Warren E. Burger: Thank you, Mr. Dienelt.

Thank you, Mr. Spencer.

The case is submitted.

Featured:

American Farm Lines v. Black Ball Freight Service - Oral Argument

Thu, 23 Aug 2012 18:13:14 +0000

Case:

American Farm Lines v. Black Ball Freight Service

Media File:

369_19700225-argument.mp3

Related Transcript:

369_19700225-argument

Transcript:

Argument of Joseph A. Califano, Jr.

Chief Justice Warren E. Burger: Number 369, American Farm Lines against Black Ball Freight Service, Interstate Commerce Commission against Black Ball.

Mr. Califano for American Farm Lines, --

Mr. Joseph A. Califano, Jr.: Yes, Mr. Chief Justice.

Chief Justice Warren E. Burger: -- you may proceed whenever you're ready.

Mr. Joseph A. Califano, Jr.: Thank you, sir.

Mr. Chief Justice and may it please the Court.

These consolidated appeals are taken from a decision of the United States District Court for the Western District of Washington.

That decision nullified a grant of temporary motor carrier authority to my client, American Farm Lines.

The appeals present two questions concerning Interstate Commerce Commission's award of temporary motor carrier authority.

One relates to the adequacy of the evidence to support the grant under the Interstate Commerce Act and ICC rules.

The other relates to the jurisdiction of the ICC to reopen a proceeding handing before it at a time when some of the parties had obtained preliminary judicial relief against the Commission and others have asked the Commission to reconsider its opinion.

Appellants have divided the allotted time for argument.

I will state the facts and deal with the first issue.

Mr. Cerra on behalf of the United States Government will discuss the second issue.

We would like to reserve a few minutes for rebuttal.

The conflict before this Court arises because of the determination of the Defense Department to reduce the time during which defense material is in transit and does achieve substantial savings, increased deficiency and with respect to explosives and other dangerous cargo, increase safety.

Until 1966, virtually all defense motor carrier shipments were on a joint line basis by regulated carriers with routing specified in detail and their certificates of operating authority.

The routings were generally circuitous.

They required several carriers to transport the same load of defense material.

In 1966, the Department began to use exempt farm cooperatives including American Farm Lines to provide a fast, direct, point-to-point service.

The Department use farm cooperatives because a legislative exemption freed them from the certificate restrictions of regulated carriers and thus enable them to provide the direct single-line service.

Under this exemption, American Farm Lines has hold substantial amounts of defense material.

Its operations promptly demonstrated three advantages to the Department of direct service.

The direct savings from lower direct transportation costs, the indirect savings from lower inventories enhanced fewer pipe line costs, and increase safety in the movement of explosives and dangerous materials because of a shorter period, a population exposure.

In 1968 after two years, roughly two years of operation by American Farm Lines, two actions sharply restricted its ability to provide this service.

The first was an injunction obtained by the Munitions Carriers Conference, and the second was a change in the legislative exemption for farm cooperatives.

As a result of the eminent curtailment of American Farm Line service, American Farm Lines supported by the Defense Department applied to the ICC for temporary authority to continue its direct single-line service as a regulated carrier.

Protests were filed by 125 proposing carriers.

The application of American Farm Lines was made under Section 210a of the Interstate Commerce Act.

That Section authorizes the Commission in its discretion and without hearings or other proceedings to grant such authority and I quote, “to enable a provision of service for which there is an immediate and urgent need to a point who appoints within a territory having no service capable of needing that need.”

Justice Byron R. White: What's the duration of that authority?

Mr. Joseph A. Califano, Jr.: The duration of that authority was 180 days has been extended the permanent authority proceedings with the Defense Department support.

The hearings have been completed and the case now being briefed before the ICC.

ICC regulations --

Justice Potter Stewart: As the -- once having granted temporary authority, does the Commission have unlimited power to keep granting extensions?

Mr. Joseph A. Califano, Jr.: Under decisions of this Court until the permanent authority case --

Justice Potter Stewart: It didn't matter --

Mr. Joseph A. Califano, Jr.: -- is granted.

The ICC as I indicated granted American Farm Lines the authority requested.

60 protestants of that point file petitions for reconsideration.

Some of them moved that the ICC stay its grant of temporary authority pending resolution of the petitions for reconsideration.

The ICC denied that motion and several of the protestants then went to the Western District Court and ask for a temporary restraining order.

That temporary restraining order was granted.

No further action was taken by the court.

The ICC then reopened its proceedings to receive additional evidence from the Defense Department, American Farm Lines, and the protestants.

The ICC promptly notified the court of its action and move for a stay of the courts full review of the proceedings.

The court, the Western District Court took no action on the Commission's motion.

In the reopen proceeding, the Defense Department filed a 22-page detailed statement supporting American Farm Lines.

The statement was filed by the Director of Transportation Policy for the Defense Department, the highest ranking transportation official in the Department.

Protestants filed hundreds of pages of detailed replies to the defense statement and upon reviewing all the additional evidence, the ICC again granted temporary authority to American Farm Lines.

The Commission concluded that the Defense Department had an immediate and urgent need for American Farm Line services to discharge its responsibilities for the national defense.

Specifically, the ICC found among the other things that the Defense Department “imperatively requires service over the most direct routes in a minimum transit time.”

The Department knows of no carriers in a position to meet its needs and “there is nothing in this record to establish that the protesting carriers provide a service to meet its need.”

The protestants returned to the District Court and obtain to stay of the ICC Order.

On final review, the three-judge court vacated the grant of temporary authority by the ICC.

It based its decision on two grounds essentially that the Department of Defense statement did not meet two requirements of an ICC rule with respect to supporting shipper statements, and secondly that the ICC was without jurisdiction to reopen its proceedings and accept additional evidence.

On --

Justice John M. Harlan: (Inaudible) what that case was in court?

Mr. Joseph A. Califano, Jr.: The fact that the appellees here had gone to the court to obtain what we considered to be an essentially interlocutory relief.

The -- on August 21, 1969, Mr. Justice Douglas granted a stay of the three-judge court decision to avoid irreparable injury to American Farm Lines, pending the resolution of this case before this Court.

The first issue is whether the evidence adduced by the Defense Department as the supporting shipper reasonably complied with the procedural rules of the ICC.

The ICC rules call upon shippers to provide 11 categories of information and the court below raised no question about nine categories of the information provided by the Defense Department.

It questioned the Department's responds to two of these categories.

One was and I quote “whether efforts have been made to obtain the service from existing motor rail or water carriers, and the dates and results of such efforts.”

And the other is “names and addresses of existing carriers who have either failed or refused to provide the service and the reasons given for any such failure or refusal.”

Without considering the record as a whole, route considering whether the record as a whole contained evidence to support the ICC as grant of temporary authority, the District Court nullified the Commission's order on the ground that the Defense Department did not comply literarily with the requirements of these two categories.

Chief Justice Warren E. Burger: What if their answers have been negative on the first that they haven't made any inquiry and perhaps negative on the second, I'm not sure I have with the question in mind but indicating that no one had refused to furnish the service?

Mr. Joseph A. Califano, Jr.: If under a case that we believe to be almost directly in point, Estes v.the United States which this Court decided recently, if the answer had been no to the first question, there would been no requirement, you know, where efforts made, no efforts were made.

There would have been no requirement to fulfill any of the other requirements, and that also an effect of being fairly say conceded in the appellees' brief.

In the Estes case, the Railway Express Agency applied for temporary authority after a railroad had announced that is was canceling service between Washington and Richmond.

The Railway Express Agency indicated that it had not tried to get that service from anyone else because it was simply not available.

When the protesting shippers came in, none of them held themselves out publicly as capable of providing a direct service from Richmond to Washington, the Conroe (ph) Express, and the lower court and this Court, the lower court held that Railway Express was entitled to the temporary authority and this Court affirmed that decision per curium.

We believe that a careful reading of the defense statement against the categories I've mentioned shows that the direct single-line service of American Farm Lines was unique, that the protesting certificated carriers were incapable legally of furnishing this service.

And that the Defense Department aware of this was not required to make efforts in a conventional sense to obtain single-line service from protesting carriers who had no authority to furnish it.

Both of those categories you will note are concerned only with one of the salutatory standards whether the existing carriers are capable of providing the service involved.

The other standard, the immediacy and urgency of the shippers need for that service is not involved in these two categories.

Moreover, it's important to note that the ICC rules in of temporary authority proceeding require only one thing from the protesting carrier that he give a specific statement “as to the service which such protestant can and will offer.”

In evaluating the shipper's response to these categories, the first question is what the service was?

The service in this case was direct single lines service covering a 14-state area.

In its verified statement, the Defense Department concluded that this service was substantially faster than joint line regular route service and many cases three times as fast.

The Department believed that this service was materially different from joint line regular route service because of the direct savings in transportation costs and because of the enormous impact in indirect savings on its inventory pipe line.

The next question in terms of these categories is whether this certificate of carriers were capable of providing this service over the territories covered by American Farm Lines, and there's ample evidence in the record on this point.

First, the Defense Department verified statement which among other things specifies some 65 point-to-point routings and says that there is no known carrier who can provide direct service over those routings.

And I think in this connection, it's important to realize that the Defense Department is probably the most experienced shipper in the western world moving 64 billion pounds of freight every year.

Second, from American Farm Lines own analysis and uncontested analysis of the authorities of the seven largest carriers operating in this area.

Of some 2,030 routes involved in those authorities, those carriers were capable of providing direct point-to-point service over only 93 of those routes, less than 5%.

Third, the evidence provided by protestants.

The protesting carriers introduced their certificates in this proceeding and those certificate shows on their face that these carriers have no authority to provide direct single-line service.

Moreover as we point out in the reply brief, these very protestants are standing now before the ICC with applications for precisely the same kind of authority supported by the Defense Department that American Farm Lines was granted on a temporary basis by the ICC.

Chief Justice Warren E. Burger: What would be the consequences if that's granted?

That's just an economic consequence?

Mr. Joseph A. Califano, Jr.: The consequence would be I think substantial Mr. Chief Justice, economically in direct savings costs if comparable reductions resulted the record indicates American Farm Lines in effect to reduced direct cost by about 10%.

The Defense Department spends 500 -- last year, they spend $599 million for transportation.

That alone would be a $59 million saving.

There'd be savings in the indirect cost because you have to carry less inventory and your pipe line if your transit times are shorter, and third there'd be increase safety because explosives and dangerous materials would be on the road for shorter periods of time.

Chief Justice Warren E. Burger: Is that --

Mr. Joseph A. Califano, Jr.: -- across the board.

Chief Justice Warren E. Burger: Is that expenditure figure you mentioned the surface transportation within the continental limits to the United States or all their transport?

Mr. Joseph A. Califano, Jr.: No, that is transportation by the Defense Department excluding contract carrier transportation and contract air transportations.

So, it's virtually grand transportation within the United States, all there is some air transportation in there.

Justice Byron R. White: That's by railroad all over the country and all over the (Inaudible)?

Mr. Joseph A. Califano, Jr.: Most of the -- it -- most of the figure, you might discount it by 5 or 10% to take out transportation outside the United States.

It does not include contract transportation and a good portion if not all of the defense transporters abroad are operating on a contract basis and --

Justice Byron R. White: Does it include air transportation, rail transportation, truck transportation?

Mr. Joseph A. Califano, Jr.: No, no, sir, it does not include air service -- contract air service which is most of the air transportation.

Some air transportation is in there.

Unknown Speaker: Commercial?

Mr. Joseph A. Califano, Jr.: Yes, sir.

Unknown Speaker: But in --

Mr. Joseph A. Califano, Jr.: No -- yes Mr. Justice.

Rail is in there and railroads are protesting in this case.

The array of briefs before this Court present a wide spectrum of views on the question whether “efforts have been made to obtain” the single-line service for motor carriers.

Some appellees including those represented by my colleague, Mr. Dempsey, say that the Defense Department made such efforts, but did not disclose the dates and results.

The court below and other appellees say that the Defense Department made no such efforts.

One appellee attempts to argue that the Government brief claims the Defense Department made such efforts and that our brief for American Farm Lines indicates that the Department made no such efforts.

I think that the -- all of these papers fail to recognize the unique status of the Defense Department as a unique shipper.

It is the most experienced shipper in the western world as I indicated thoroughly familiar with the legal restrictions on the operating authorities of the shippers that has been using for years.

If the point is that when faced with eminent curtailment of American Farm Line service, someone in the Defense Department did not pick up a telephone and asked the protestants whether they could provide service under certificates that did not give them legal authority to do so.

Obviously, no such phone calls were made.

They would resubmit in a Feudal Act and not required by the law.

If the question is whether the Department reviewed its existing authorities, the existing authorities of existing carriers which were serving it on a joint line basis over irregular routes, I think the answer is equally obvious.

There are scores of transportation officials in the Department thoroughly familiar with the service these carriers were capable of providing.

Chief Justice Warren E. Burger: What is the purpose, what's your hypothesis as to the purpose of that question in the ICC form?

Mr. Joseph A. Califano, Jr.: I think Mr. Chief Justice for the ordinary shipper, the question -- the ICC does not grant the new authority just because there's a preference for it.

The concept is whether or not there's an immediate and urgent need and whether other carriers can provide the same service.

The idea of having to make efforts I think was to help the ICC as the ICC itself has said in the statement explaining the regulations make quick adjudications in cases like this, did you try and check other carriers to see if they can do the same thing.

Chief Justice Warren E. Burger: If its down to the necessity, doesn't it?

Isn't that one of the factors?

Mr. Joseph A. Califano, Jr.: I think Mr. Chief Justice that it really -- it goes more to the question of whether or not carriers are capable of providing the service, and that of course does relate to necessity.

I would make one further point in terms of appellees arguments that they were prejudiced because they were not fairly informed of the charges against them.

Appellees like every other party in this case knew exactly that the issue here is whether single line served whether the Defense Department could obtain direct single-line service which it viewed as materially different from circuitous joint line service.

Every defense statement presented in this case is abundantly clear on that point.

When the American Trucking Association try to get the Defense Department to withdraw its support of American Farm Lines, the assistant secretary of defense for instillations and logistics wrote to the president of the organization expressing precisely the point that department was trying to get direct single-line service.

The protesting carriers, we submit fully understood this and thus were not in any way prejudiced in preparing any of their responses.

To the extent, I might note that they were -- could show that they could provide this service was peculiarly also within their own ability.

They were the best people to show that because they had their own certificates of authority.

I would make one point in closing with respect to this case Mr. Chief Justice.

The -- this is a summary proceeding before the ICC and which the standard of review is whether there is any evidence in the record to support the Commission's decision.

Commission handles a 5,000 temporary authority cases a year and we think there was ample evidence in this one of them to support its decision.

Chief Justice Warren E. Burger: Mr. Cerra.

Argument of Arthur J. Cerra

Mr. Arthur J. Cerra: Mr. Chief Justice, if it please the Court.

In the remaining time, allotted to appellants except for the few minutes we hoped to say for rebuttal, my argument will be addressed to the second question presented by these consolidated appeals.

The question concerns the Commissioner's jurisdiction to reopen its administrative proceedings after protesting carriers have sought judicial review before a three-judge court and a single-judge of the court had issued a restraining order.

Now, the pertinent facts concerning this question are not in dispute, but I think they are important and we would highlight them to bring focus on the issue.

After the Commission issued its first order, many protesting carriers filed petitions for reconsideration and some sought that the Commission stay the effect of its grant until the petitions could be determined.

The Commission denied the stay and the grant became effective immediately.

Shortly thereafter, some of the protesting carriers went to court and they obtain from the judge, a single district judge a temporary restraining order against the operation of the Commission's grant of authority.

Upon issuance of the restraining order, the Commission exceeded to it and itself postponed the operation of its initial order.

Now in reply to the petitions that arrive in pending before the Commission, the Department of Defense and AFL made specific request that these petitions should be looked at because number one, the Department of Defense had add it in its reply of the petition, some additional reasons supporting a grant.

AFL meanwhile had also asked that the petition be reopened in order to receive this evidence.

Our commission of course had a problem.

This addition -- evidence had not been a part of the original record, nor had the existing carriers been offered enough and extended an opportunity to reply to that evidence.

So on the 5th of November, it decided to reopen the matter and it reopened it for the purpose of receiving the additional evidence to be submitted by the Department of Defense, as well as any evidence of reply by the existing carriers.

We immediately notified -- the Government immediately notified the court of this reopening, and we move for a stay.

Pending final completion of the administrative process, we specifically stated in the motion that it was our intent that upon completion of the administrative process, the parties have the opportunity, the plaintiffs that is, protesting carriers, have the opportunity if they so desire to renew their request for relief from the court.

Unfortunately, the motion to reply has never came on for hearing under local rules of the court.

But after receiving the additional evidence, the Commission considered the record anew, both as previously made and as supplemented by the additional evidence and they granted the temporary authority for the second time.

The protesting carriers immediately file a complaint in court, a supplemental complaint attacking the second grant and the obtained from the same district judge a temporary restraining order against that grant's operation.

On final review, after briefs and oral argument, the three-judge court held that without prior leave of court, the Interstate Commerce Commission lack jurisdiction to reopen its administrative proceedings after the court have assumed jurisdiction and issued the first temporary restraining relief.

In this connection, the court also held that there was nothing validly pending before the Commission.

They said that the Commission that the protesting carrier's petitions for reconsideration were not authorized by temporary authority Rule 6 or by general rule of practice 101 (a) (2).

With this holding, the court concluded that there was nothing properly before the Interstate Commerce Commission when it reopened the proceedings leading to its second order.

Now taking these holdings in reverse order, we submit first that the court simply misconstrued the Commission's rules of practice, and indeed and more importantly, they overlooked the controlling rule of practice which is Rule 101 (g).

Now generally speaking, the Commission's General Rules of Practice prescribe limitations on the rights of parties to petition for reconsideration.

For example, Rule 101 (a) (2) and (3) specified that all orders of a division of the Commission shall be considered administratively final except in two instances one not pertinent here.

But in the instance that is pertinent here except wherein a division reverses, changes, or modifies a prior decision of a hearing officer.

The court below had held that temporary authority board that would not a hearing officer, yet the very rules provide that the term officer is defined as including a board of employees.

So properly construe, we would submit that Rule 101 (a) (2) of the Commissions General Rule of Practice authorize petitions for reconsideration in the circumstances of this case, where an appellate division had reversed the temporary authorities board, but we need not however to rely on it.

Justice William O. Douglas: Where is that printed?

I don't find it in your brief.

Mr. Arthur J. Cerra: 101 (a) (2) is printed in -- at page -- I'm sorry Your Honor, it is not in our brief.

It is in the -- I regret, Your Honor I don't know where it's printed.

We're relying on Rule 101 (g) which appears at page 33 of our brief.

Now, I was getting to that point.

Even considering for the cause indulgence, I do have a copy of the General Rules of Practice where it is printed, if Your Honor would like to look at it Mr. Justice Douglas.

I'd be glad to send it in to the clerk to hand up to you.

The railroads do have it in their brief that footnote 13 on page 18 but here's the text -- the entire rule in the General Rules of Practice.

As I was saying, we need not to rely on Rule 101 (a) (2) however because the construction that we would give from a definition of the term hearings, isn't necessary.

Rule 101 (g) specifically authorizes the filing of petitions for reconsideration where the appellate division reverses, changes, or modifies a previous decision by a board of employees.

Faced with the plain language of this Rule 101 (g), three of the four brief of the appellees don't even mention it.

In the remaining brief filed by Consolidated Freightways, et al., the temporary thought they contend only that temporary authority Rule 6 is later in time and therefore supersedes or restricts the vested right to petition for reconsideration which is granted by General Rule 101 (g).

But we submit that no such content is expressed in the Rule 6, nor can one be so implied.

Indeed, the language of temporary authority Rule 6 which basically says that petitions for reconsideration of the determination by the board or an initial determination by the division without it prior determination by a board are sudden to reconsideration is merely a repetition of the General Rules of Practice.

Rule 6 itself does not grant the right to petition for reconsider or rather it specifies that such right exist and I quote “pursuant to and in accordance with the Commission's General Rules of Practice, the rules of practice of the governing matter.”

It would seem to us that the court's construction of the Commissioner's temporary rule and general rules just simply inaccurate and incorrect.

They were validly pending before the Commission, petitions for reconsideration under Rule 101 (g) and the administrative proceeding had not been completed.

Well, this will lead me to the discussion of the remainder of the court's ruling.

That is that simply because judicial review had been commenced the ICC lack jurisdiction to reopen or hear additional evidence.

I want to point out first that contrary to the decision below, the Government did not concede that the Commission's initial grant of authority was administratively final, rather, we urged first that the Commission proceeding was not administratively final because the petitions for reconsideration were pending.

Secondly, we urged that this lack of administrative finality however did not deprived the court of jurisdiction to issue temporary injunctive relief to prevent irreparably injury pending final agency action where as in this case, the order have already been become effective and the Commission had to disclaim -- to stay its operation.

Now, we've cited those cases in our brief and they include among others, Oklahoma Natural Gas, Pacific Inland Tariff Bureau and Cantley and (Inaudible), they are on pages 24 and 45, 44 and 45 respectively of both of appellants brief.

We want to point out here that appellees briefs either acknowledge, refer to, or attempt to explain away this particular rule.

Now, we know that the basic tend in this that nobody is entitled to judicial review until the agency all administrator remedies have been exhausted and the agency's action is final.

The one that we attempted to use here was an exemption which was stated in these cases we've cite.

Plaintiffs don't -- excuse me, I referred them as plaintiffs because of my experience below, the appellees here don't even attempt to explain them away, rather they urged this three thing that once a court asserts jurisdiction, the Commission is simply without anymore authority that simply does not posses any more authority to proceed further.

The court's jurisdiction is inclusive -- exclusive and then they urge that there's no statute that authorizes the Commission to act concurrently with the reviewing court.

And finally the third matter they urge is that, permitting an agency to reopen after court review has been commenced disrupts the judicial procedures and creates the danger that the agency may not be acting as an impartial or judicatory tribunal, but rather as a litigant, merely trying to paper all the defects in an attempt to win a lawsuit.

Now, we would submit that these arguments have no foundation in fact or in law simply because a court may have jurisdiction to preserve a status quo pending completion of agency action.

It does not mean that the Commission loses all jurisdictions to complete the administrative process.

In such circumstances we would submit the proper procedure is for the reviewing court to hold the judicial action in advance pending completion of the administrative process.

The caution had experienced over the past 18 years as we pointed out to the court below and then our jurisdictions statement here.

With this very situation, most of the cases did not involve -- were temporary restraining order have been initially issued by the judge but some of them did.

And no court has ever taken issue with this on this procedure except in the foot -- except in the cases such as Atchison, Topeka which is cited by appellees at the -- the statutory foundation that we believe for the ability for the Commission to reopen while a judicial review proceeding is pending is Section 17 (7) of the Act.

This grants the Commission continuing jurisdiction over its orders and empowers it to rehear, reconsider, resend, change, or modify them anytime for the purpose of correcting errors; any error or any injustice that is.

That statute has been in existence since 1906 and it hasn't been changed, and where Congress has sought to impose a limitation on the rights of review, for other agencies, it has specifically done so.

It is said that once the reviewing action is filed, the only time an agency can reopen is up until the point whether the administrator record is filed.

Once that record is filed, the Court of Appeals and the citations we give in our brief, Court of Appeals jurisdiction becomes exclusive.

Now, Congress was aware the Interstate Commerce Commission's practice under 17 (6), 17 (7), although they expressly limited, the reopening powers of other agencies such as the Federal Trade Commission.

So, we simply say that were Congress was aware of this situation, it was careful to provide some limitation against reopening where it considered appropriate.

But the review provisions of the Interstate Commerce Act and the Urgent Deficiency Act which applies here, which both of which apply here, I submit there is no such limitation and the absence of such provisions is therefore meaningful.

But more importantly, we need not even rely on Section 17 (7).

As we have shown, the case was validly before the Commission because the petitions for reconsideration were pending.

And we would submit that there is simply no inconsistency between the Commission's reopening and issuing a second order on new evidence on the one hand, and on the other hand, the court's action in supplying temporary relief from operation of initial grant pending completion of the administrative process.

We informed the District Court of the reopening.

There was no attempted evasion or any evasion at all of the court's stay of the first order.

The District Court had an opportunity to stay operation of the second order and in fact that did so.

We failed to see how the prejudice -- how the appellees could have been prejudice in that situation.

Certainly, they have ample opportunity before the Commissioner to present all the evidence that they needed to present to rebut, but the Department of Defense had submitted.

They did so.

They also have ample opportunity to go back before the reviewing court and seek relief, and they did so and they obtained it.

Justice Byron R. White: Could I just ask you, do the Commission's rules prescribe a standard, a substantive standard for when temporary authorities to be granted more specifically, do the rule say whether or not the absence of single-line service as compared with joint interline service is a basis for temporary authority?

Mr. Arthur J. Cerra: Yes, Your Honor, they do.

Justice Byron R. White: What did they say?

Mr. Arthur J. Cerra: That is the rule, point four.

Justice Byron R. White: What did they say?

Mr. Arthur J. Cerra: Generally --

Justice Byron R. White: They say generally that single-line -- the desire for single-line service --

Mr. Arthur J. Cerra: Is not enough.

Justice Byron R. White: -- isn't enough?

Mr. Arthur J. Cerra: No, no.

They say this.

The desire of a shipper for single-line service in lieu of existing interchange or connecting carrier service will not warrant a grant of temporary authority.

Justice Byron R. White: Well now did the Defense Department say what need it had over and beyond the single-line service?

Mr. Arthur J. Cerra: The Defense Department's need over and above beyond single-line service --

Justice Byron R. White: But that's was --

Mr. Arthur J. Cerra: They had -- they expressed so.

In their -- in Mr. Caputo's affidavit, he said that the single-line service was needed to complement rather than replace the existing joint lines.

Justice Byron R. White: I know but the single-line service isn't a reason for getting temporary authority?

Mr. Arthur J. Cerra: It is here Your Honor --

Justice Byron R. White: Under your rules?

Mr. Arthur J. Cerra: It is here Your Honor because this rule further provides that a grant of temporary authority to effect single-line service will be authorized only when it is clearly established, and there are two test that the carrier providing -- the carriers providing multiple line service are not capable of or have failed in meeting the reasonable and immediate transportation needs of the shippers.

Justice Byron R. White: Oh, I know --

Mr. Arthur J. Cerra: Mr. --

Justice Byron R. White: -- but the -- I gather the Defense Department; one of its big reasons from wanting this single-line service is just because of the single-line service?

Mr. Arthur J. Cerra: That is not correct, Your Honor.

They wanted a single-line service for the various savings that could be experience in both time, time-wise and money-wise.

Justice Byron R. White: I know but that wouldn't be enough under the rules to want a temporary authority, would it?

Mr. Arthur J. Cerra: It would be warrant.

It would be enough under the rule --

Justice Byron R. White: You mean under that rule if I commence and say well the only reason I want this temporary authority is to provide the single-line service and the only reason of what single-line service, it saves time and money.

Mr. Arthur J. Cerra: Your Honor, we would say that you would have to show what the deficiencies were.

Justice Byron R. White: Well, the only deficiency is that the other carriers are interlined.

They haven't got single-line service.

Mr. Arthur J. Cerra: But the question of only interlining is that were talking about here, Your Honor, vast geographical areas and commodities and for the -- for an applicant to come before the Commission and say he simply desired single-line service would not be sufficient.

But if he showed that there was an immediate and an emergent need for it and that there were no carrier service capable of meeting those immediate and urgent needs, then the Commission would be authorized on the rule, balancing the equities of the situation and the evidence of determining.

Justice Byron R. White: Single-line -- this rule is the need -- the desire for single-line services sometimes -- they perfectly added at places for granting a --

Mr. Arthur J. Cerra: It could be very much so as in this case, Your Honor.

Justice Byron R. White: In spite of this rule?

Mr. Arthur J. Cerra: But it's not in spite of the rule, it's because of the rule, Your Honor.

I think that the basic reason I'm talking here about the jurisdiction of the Commission to reopen while this Court case is pending is that it's a basic tentative administrative law that no party has the vested right to have an agencies error preserved pending review.

If the agency wishes to correct that error without the necessity of reviewing court, remanding the matter to the Commission for this purpose, and as here where there would be an effective judicial review of the corrective action.

Now, they've talked, the appellees have talked about the point of perhaps this would not create an impartial quasi-judicial body in rendering a decision, but rather that the Commission would be attempting to win a case as a litigant.

We submit that there's absolutely no fact in that suggestion.

The Commission's primary and never ending role is to administer the transportation policy.

Even if a reviewing court had remanded the Commission -- to the Commission an order which had put out, it's still would be responsible as this Court has said on many occasions to administering the transportation policy by either reopening the matter to reconsider it on the existing record, reopening to receive new evidence or otherwise disposing of it.

The court has clearly spelled that out in the Idaho Power case in 344 U.S.

There's another reason though we think that this procedure should be sustained here.

In avoiding the delays, inherent the court reversals in remands, the Commission's action is consistent with the broad purpose of the temporary authority provision to the act themselves.

That is the question of immediacy.

It's also consistent with the mandate of Section 17 (3) which instructs the Commission to conduct its proceedings in such manner as best full conduce to the ends of justice and the proper dispatch of business.

Absent any statutory prohibition against reopening prejudice to the parties or an attempted evasion of the court order, the Commission was free to do so.

And finally, we submit that such procedure would be in the both and the best interest of judicial economy and the agency responsibility.

We'd like very much to save our remaining time for rebuttal.

Chief Justice Warren E. Burger: Very well, Mr. Cerra.

Mr. Dempsey.

Argument of William H. Dempsey, Jr.

Mr. William H. Dempsey, Jr.: Mr. Chief Justice and may it please the Court.

In responding to the arguments advanced by Mr. Califano and Mr. Cerra, I should like to begin with the issue respecting the Commission's regulations and then move on to a discussion of the second issue regarding the real thing of the record by the Commission.

Now as to the first question, I would like to if the outsets spend a few moments discussing the statutory framework in which these issues arise.

This has nothing to do I may note with the tension between the exemption provisions of the act relating the cooperatives and the other provisions of the act because as Mr. Califano has noted that Congress settle that problem with the enactment of legislation in 1968, so that no question respecting that legislation is before the Court.

The relationship that seems to us to be significant is the relationship between the temporary authority's statute and those provisions of the statute and the regulations that bear upon the issuance of permanent of operating authority.

As this Court of course is well aware, this industry of interstate transportation since the time the Congress first in an important way move in its regulation in 1887 has not been characterized by unlimited competition.

The Congress from the beginning of its legislative program or a variety of reasons having to do with the protection of shippers and the maintenance of economic stability and the key industry that does that common carrier obligations has decided that the public interest would be best served in and by enlarged by the application of the principle of regulated competition.

And it's carried forward that judgment in each time that it brought a new mode of transportation within the jurisdiction of the Commission.

So that today, we have regulation in rates and in service and most pertinently here in terms of entry into the market.

So that in the case of any application for permanent operating authority of any consequence, there are extended and the extensive proceedings; evidence, cross-examination of witnesses, or hearing examiner -- report of the hearing examiner, briefs and the appeal within the Commission, perhaps to the full commission often litigation.

All of these were denied toward insuring that if an application for permanent authority is granted, it will be upon the basis of a careful consideration and evaluation of all of the facts that bear upon the need for the service, the competitive impact of a grant and the ability and willingness of existing carriers to perform that service.

Justice John M. Harlan: How is this transportation being held -- carried out now?

Mr. William H. Dempsey, Jr.: The Government transportation, Mr. Justice Harlan by motor carriers and rail and as the Department said to a small extent by air.

By sort of -- by certificated carriers for the most part by cooperatives to the extent that under the new legislation --

Justice John M. Harlan: Did that arise; did it expand its course on that?

Mr. William H. Dempsey, Jr.: This temporary authority?

Oh no, Your Honor, no.

Under this Courts decision in Pan-Atlantic Steamship Company, as I believe Mr. Califano indicated a grant of temporary authority despite the attack, 180-day limitation of the statute is continued now until the termination of the permanent authority proceeding.

Now, in its jurisdictional statement, AFL estimated that and I think that was filed on July of last year.

AFL estimated that it would take another three years for completion of the permanent authority proceeding and I would consider that to be a pretty good guess, so that we face a long period of time of the life of this temperate authority.

Justice John M. Harlan: Or you prevail below?

Mr. William H. Dempsey, Jr.: Yes, Your Honor but --

Justice John M. Harlan: Is there a stay?

Mr. William H. Dempsey, Jr.: There is a stay, there is a stay.

Now, the temporary authority statute which was enacted in 1938 and it has to the Interstate Commerce Commission shortly after passing 35 Motor Carrier Act, of course, cut sharply across the grain of this general statutory scheme because it permits the Commission without hearings at its discretion to permit this kind of authority to be exercised.

And what the Commission said to the Congress quite sensibly it seems to me was that there might very well be occasions in which a shipper's need was so imperative, so immediate that its satisfaction should not await the conclusion of the often prolonged permanent application proceedings.

Now what the Congress had in mind when it enact the statue was that it would be limited to emergencies.

This is what the Senate Report said, such temporary grants would be limited to situations in which there was an emergency, and that accorded with the kind of things that the Commission was talking about to the Congress because it was speaking in terms of new oil wells coming in and the havoc that's brought by floods and what it referred to in short as calamities visitations.

And the Commission did represent to the Congress that it recognized that need would be -- would have to be -- care would have to be exercised to protect the interest of the existing carriers.

And the language that the Congress chose was well suited to limit the application of this statute.

The Congress spoke as the Court is aware in terms of an immediate and urgent need for service that no existing carrier could provide.

Now, it was that statutory framework against which the Commission was called upon to evaluate AFL's application for authority.

It may be that in the annals of the Commission, there are applications that have been granted that are sweeping in scope as this one, but if there are, we do not know them and the Commission is not preferred to them.

These applications sought authority and authority was granted to transport for all branches of the United States Government, all commodities from all points of origin to all points of destination in a 14-state geographical area without restriction as to roots.

Justice Byron R. White: And -- without restriction as to roots and it require -- it will all be continuous single service -- single-line service?

Mr. William H. Dempsey, Jr.: Well it would be single-line service because it will be performed by AFL.

I believe there is --

Justice Byron R. White: I suppose they are in line with other carriers?

Mr. William H. Dempsey, Jr.: I believe Mr. Justice White that there is a provision in the regulations that would prohibit interlining, but I'm not absolutely certain about this.

Certainly what is contemplated was single-line AFL service.

The application was --

Justice William J. Brennan: What sort of fact is given to you?

Mr. William H. Dempsey, Jr.: I'm sorry Mr. Justice Brennan, I don't know.

Justice William J. Brennan: What fact has been -- has there been any --

Mr. William H. Dempsey, Jr.: Any interlining?

Justice William J. Brennan: Yes.

Mr. William H. Dempsey, Jr.: I don't believe so, but I'm, I'm -- it is in the record and I'm an absolutely confident about it, but my impression would be that there is no.

The application was supported as the court has been advised by statement by a single branch of the Government, the Defense Department.

In that statement, the Department did not state that in the absence of AFL's service, the existing service would be inadequate and that is not surprising because in two letters that were written by the Defense Department, one to AFL and one to another motor carrier within two weeks of the filing of this support statement.

The Department said this and I quote that “the Department is not in a position to state that there would be insufficient or inadequate service without American Farm Lines.”

And then shortly after the filing of the statement in another letter that it sent to American Trucking Associations, it said that its support of AFL was, “an expression of the desire of the Department who have available to it the type and quality of service which AFL has provided regardless of the carriers which might provide the same.”

So that in our view, it was not particularly astonishing when the temporary authorities Board of the Commission denied this application, but as the court has been advised division, one of the Commission on appeal reversed that determination, the authority was granted, the protesting carriers went to courts, secured the temporary restraining order, the Commission bear upon on its own motion reopened the record and finally the last deal, the statement the so-called Caputo statement was put into the record.

Justice Byron R. White: What do we have in the way of the ICC statement about this, is it only their orders that are in the record?

Mr. William H. Dempsey, Jr.: Only their orders that are --

Justice Byron R. White: You don't have a findings or anything of that kind in this case?

Mr. William H. Dempsey, Jr.: Well --

Justice Byron R. White: There just be the order of the Division I, it's order 143 (a) and 146?

Mr. William H. Dempsey, Jr.: December 29, 1968 on page 367 on the record.

Justice Byron R. White: That's it?

Mr. William H. Dempsey, Jr.: That's it, that's it.

All application were referred to it I think there is a finding of sorts there.

Justice Byron R. White: But no opinion, no opinion or any?

Mr. William H. Dempsey, Jr.: No.

Now, that brings me to the question that's involved on this first branch of the case and that is what the Caputo statement measured up to the requirements of the regulation.

So I -- I turn now to the regulations which are set forth in -- I think, it is appendix B to the brief of certain motor carrier appellees beginning on page 32 of that brief.

Now what the regulations say at the outset is that they're designed to implement the temporary authority statute, and I think the first thing perhaps to notice that they divide temporary authority in the two categories.

One is called the Emergency Temporary Authority and the other for -- better word, I'll call Ordinary Temporary Authority.

Emergency Temperate Authority according to the regulations is to be granted only whether is an enough time to provide notice to interested parties, and then it's restrictive.

It's restricted to 30 days and then it can be continued only until Ordinary Temporary Authority can be either granted or denied.

Now, this case of course is one of Ordinary Temporary Authority, and the regulations that begin on page 37 I think clearly make this an adversary proceeding before the Commission because they require the basic elements of an adversary proceeding, they require that notice be given to interested persons in the Federal Register and they provide interested persons who are willing and able or say they are, to provide the service have a right to reply.

They have a right to file a protest.

Justice Potter Stewart: Page 37 of what?

Mr. William H. Dempsey, Jr.: Page 37 of -- Mr. Justice Stewart of the brief of certain motor carrier appellees.

Justice Potter Stewart: Thank you.

Mr. William H. Dempsey, Jr.: Now, it's a truncated proceeding to be sure, there is no cross-examination of witnesses, the timetable is telescope, but it is nonetheless and adversary proceedings.

Now, what the protestants are able to put in their rebuttals of course depends in large measure on what the applicant is required to put in his application, and associated papers and that brings me to the regulation that is most directly involved and that begins on page 34, subparagraph C supporting statements.

That regulation refers to the supporting statements of shippers and it says this it says that each application or temporary authority must be accompanied by a supporting statement or statements designed to established an immediate and urgent need for service which cannot be met by existing carriers, the statutory standards.

And then, it goes on say that any self-supporting statement must contain at least the following information and it sets forth 11 categories as much Mr. Califano has indicated and of those were concerned here basically with subparagraphs 7 and 8.

And the basic question is whether the Caputo statement compiled with the requirements of 7 and 8, and if it didn't, what the consequence is ought to be?

7 and 8 go to what a shipper is suppose to say is to whether or not he has made efforts to get this service from existing carriers, and if it has made all those efforts, he is then suppose to give the names and the dates of the allegedly defaulting carriers and the reasons they assigned for not being able to perform, and that sort of thing.

Now, analysis at this point in our view is impaired somewhat by the fact that we believe that the appellants have taken rather markedly diverging views of what the Department of Defense said in response to the threshold question of subparagraph 8.

Now, that question is whether efforts have been made to obtain the service from existing carriers.

American Farm Lines says clearly in its brief and I did not understand Mr. Califano to retreat from it that DOD's response to that question was negative, that it did not make any such efforts.

The argument is spelled forth at some length on pages 20, I think 20 to 23 of their opening brief and their conclusion is this on page 22.

In short, the Department's response to the requirements of subparagraphs 8 and 9 was that it had not requested the proposed service from other carriers, and then it goes on to explain why in its view that shouldn't be fatal, and I'll take that up in a moment.

But now let me turn -- well, and then its analysis proceeds this way and says that as DOD said it did not may be his efforts then course the other requirements of 8 and 9 never came into play because the Department couldn't be required to supply details as to efforts that it never made.

Now, the Solicitor General on the other hand, I understand not to advance that argument but rather the argument that indeed DOD said -- now, this isn't the question I should make clear as to what DOD actually did.

This is a question as to what DOD said in its statement, no one knows really what DOD actually did.

We can only go on the basis of what it said.

The Solicitor General as I read its brief, of course, the Government has not argued this aspect of the case so we have to rely on that brief I think.

As I understand their brief, they say that the Solicitor General did make these efforts and that he did provide -- I mean, DOD and that the DOD did provide most of the information are required and really all that ought to be required.

This is what he says on page 16 and 17 of his brief.

In fact the statement of DOD that is did provide much of the information there specified, thus DOD did state whether it made efforts to obtain the service from existing carriers and graphically describe the results of its efforts as subsection 8 dictates, and it explained in detail the reasons whey existing carriers were only able to provide the service needed as subsection 9 contemplates.

We acknowledge the statement did not give the dates of DOD's efforts to secure service as 8 further asks, or the names and addresses of the carriers who do not provide service as 9 specifies.

But these are the only deficiencies, and then it goes on to explain why he doesn't consider those fatal and I'll move on to that in due course.

Now, the good deal in terms of how one approaches this case depends upon which of these views to the DOD statement is correct.

In our view the Government is the only one that is open, and that is because the Commission, Mr. Justice White, does have what I consider to be a finding of sorts here in its order, and it bears directly on this problem.

Unknown Speaker: What page is that?

Mr. William H. Dempsey, Jr.: Page 368 (a) of the appendix.

Now this -- and I am referring particularly the subparagraph 3, but I'll incorporate when I read it the -- it further appearing language at the top of the page.

The Commission says this in its order, yet further appearing that by its verified statement field November 20, 1968, the Department of Defense has established that it has attempted but has been unable to obtain the required and necessary type of service.

Not that it has not attempted as AFL indicated and that quotation that I read from it brief.

So the number well established doctrine emerging from decisions of this Court such as that in the Chenery case and the Burlington Truck Lines case, we suggest that the order of the Commission has to be defended upon the grounds that it put it on.

And therefore that this argument that AFL advances here newly devised, advance here I think for the first time in this litigation is simply not open.But I would like to say that there are additional infirmities in it.

I'd like to touch on those for a moment.

Because of course normally if the shipper says that he hasn't made any efforts to get the service that he wants from existing carriers, that would be fatal.

Not because of noncompliance with the regulations, but because of noncompliance with the statute.

He simply would not have made this sufficient showing.

Now, AFL says that that shouldn't be the case here because as Mr. Califano said what DOD wanted was single-line direct route service and it knew that wasn't available from existing carriers between many of the points, and therefore it would have been bootless for them as for it.

And they add that single-line direct route service is obviously superior to joint line service.

Well, I think they summarize your position quite succinctly in the reply brief back on page 13.

This is what AFL says, the Department made clear that it support for AFL way premise not upon service failures but upon the Department's desire to upgrade the quality and to reduce the cost of the motor transportation service available to it through the certification of direct single-line service.

Now, have that been the argument made by DOD and explicitly to the Commission, we suggest that the Commission surely would have concluded or surely should have conclude at least that for the reasons I've already indicated, the temporary authority statue was simply not designed to permit the short circuiting of all of the other procedures of the act simply in order to upgrade the quality and reduce the cost of the service available.

Justice William J. Brennan: Is that because it's not urgent or what?

Mr. William H. Dempsey, Jr.: That's because it's not urgent and immediate.

That's correct Mr. Justice Brennan.

Now so far as cost is concerned, the Commission has never --

Justice William J. Brennan: (Voice Overlap) --

You don't think that cost savings and we're not dealing with pennies in this case --

Mr. William H. Dempsey, Jr.: Well --

Justice William J. Brennan: -- at least enormous cost savings would not be an emergent to?

Mr. William H. Dempsey, Jr.: No, no I don't Mr. Justice Brennan.

Certainly in the order, the Commission never suggested that it was considering cost savings from the Government, and indeed, I can provide the court citations in which the Commission has said that even in permanent authority cases, a rate question is not irrelevant factor.

Now of course, we're talking about this enormous savings.

We're not talking about this particular case either in the American Farm Lines having single-line direct writ authority.

It's not going to save the Government this money, monumental sum of money.

But if every carrier, if the entire certification scheme under the act is to be abandoned now and every carrier, west of the Mississippi is to have direct single-line authority, well I don't doubt that there would be very considerable savings.

I don't doubt that al lot of carriers would go on to business.

I don't doubt that the Commission would regard this all as a very complicated and difficult question.

Justice William J. Brennan: What about the pipe line and safety factors?

Mr. William H. Dempsey, Jr.: Excuse me?

Justice William J. Brennan: Pipe line and safety factors?

Mr. William H. Dempsey, Jr.: (Voice Overlap) you mean the pipe line?

Justice William J. Brennan: Do you consider those as part of the expense argument?

Mr. William H. Dempsey, Jr.: Well, I don't know.

I -- it's a -- perhaps, I can respond this way.

If the Defense Department had said that what we're talking about here ammunitions destined for Vietnam and here the points of origin, and here are the points of destination nor or aircraft parts or something that sort, and to be sure we're only talking in terms of saving a day or saving 12 hours from east to west or something of that sort but that's very important because fighting men are depending on this material.

Well I mean, I would never suggest that that would be irrelevant consideration in a highly persuasive consideration under the temporary authority.

Justice Byron R. White: In the ICC, no one else has ever suggested before that it was illegal or somehow improper to interline explosives.

Mr. William H. Dempsey, Jr.: No sir, Mr. Justice White and I refer here to the regulation.

The regulation that you discussed with Mr. Califano -- Mr. Cerra, I believe was, is a regulation that we set forth quoted in full in at pages 50 and 51 of our opening brief.

Now, it's never been mentioned by the appellants until your colloquy with Mr. Cerra.

It seems to us that that regulation says pretty clear that whatever theoretical advantages may be thought to be associated with single-line service --

Justice Byron R. White: Or practical --

Mr. William H. Dempsey, Jr.: Or practical, if you can that way, will not be enough in a temporary authority proceeding.

One have must show some sort of unusual and significant actual default in the part of the existing joint line carriers.

Chief Justice Warren E. Burger: Mr. Dempsey, while you're --

Mr. William H. Dempsey, Jr.: Mr. Chief Justice.

Chief Justice Warren E. Burger: -- stopped as you are, am I interrupting you now?

Mr. William H. Dempsey, Jr.: Not at all.

Chief Justice Warren E. Burger: I'm trying to reconcile the findings of 368 (a) of the appendix, the three and four, I think you referred to sometime ago in relation to the question that Mr. Califano about the failure to answer questions 8 and 9.

Is there anywhere in this record that indicates that would shed some light on the gap that failure to answer those questions in the original application for the temporary authority and ultimately, a finding by the Commission that is right on target on those two points.

Mr. William H. Dempsey, Jr.: There is nothing in the record to shed light on it, but I think what there is in the record only makes it more surprising if I may say because the Caputo statement after all was not written in the dark.

It was submitted to the Commission some roughly a month after Judge Boldt in the hearing on the temporary restraining order identified noncompliance with subparagraphs 8 and 9 as a serious problem in his mind.

So that what one would reasonably expect would be that the Defense Department in putting in another statement would have been particularly careful to comply with subparagraphs 8 and 9.

I can only -- well, I shouldn't assume anything.

I should simply answer and the answer to the question I think is that there is nothing in the record to indicate.

Chief Justice Warren E. Burger: What's the time laps?

I see that these findings 3 and 4 on 368 (a) are based on verified statements of November 1968.

What was the date of the --

Mr. William H. Dempsey, Jr.: That is the date of the Caputo statement, the final DOD statement.

The hearing on the temporary restraining order, I believe was in October.

Chief Justice Warren E. Burger: What's the date of the document that was filed the application or petition which they fail to answer questions 8 and 9?

Mr. William H. Dempsey, Jr.: Well, the November 20, this statement that's being referred to here is the only DOD statement that is being spoken up in any respect now.

Chief Justice Warren E. Burger: Well then, I'm even more confused.

Mr. William H. Dempsey, Jr.: Yes.

Chief Justice Warren E. Burger: Maybe you can clear that up or someone can.

I thought they had fail to answer on this two points 8 and 9 that the findings says that by the verified statement, the following things have been established and two of the following items down on 3 and 4 are precisely the answers to the question 8 and 9.

Where did the Defense -- where did the Commission get the data for --

Mr. William H. Dempsey, Jr.: Well as to finding 3 or in subparagraph 3, I assume that the Commission thought that a fair inference from what the Defense Department's statements said, and I am not prepared to say it was not a fair inference.

Now our complaint of course is that having said that they did attempt to get the service they wanted, they were then required to comply with the other parts of subparagraphs 8 and 9 and provide the details.

So, --

Chief Justice Warren E. Burger: Well now, I take it that you are concerned about the lack of underlying factual basis --

Mr. William H. Dempsey, Jr.: Yes.

Chief Justice Warren E. Burger: -- for those two --

Mr. William H. Dempsey, Jr.: Yes.

Chief Justice Warren E. Burger: -- findings in a very important way.

Mr. William H. Dempsey, Jr.: Yes, that's right and let me move directly to that.

I just -- on the single-line authority problem, I just like to make sure I made one final point on it, and then -- let me move directly into that.

I think that really conclusive evidence that the Commission did not issue this authority on the premise advance now by AFL; that is the desirability of single-line services, the fact that they didn't limit, they did not limit it to those points between which various exist no single-line direct service.

It's simply a broad 14-state geographical ground.

So far as the extra record material that cited in AFL's reply brief is concerned with respect to the statements made by some appellees about the desirability of single-line service, those statements were made in the context of applications for permanent authority and for reasons that I've already indicated that's much different than an application for temporary authority.

But I would cite to the Court since we didn't have an opportunity to reply, to ICC examiner's decisions in this chain of litigation going on before the Commission.

Ashworth Transfer, Inc., M.C.1872 sub number 71 and served January 7, 1970 and Derrick Freight Lines Inc. M.C. 263 sub number 185 November 20, 1969.

In both of these cases, the examiner in permanent authority cases denied single-line authority direct routes sought by the Defense Department upon substantially the same grounds as they sought this authority criticizing the Defense Department for not establishing sufficiently the asserted deficiencies in multiple line service.

Now, I don't say that this is terribly important, but I do say that's -- it is indicative of the kind of evidence that has to be introduced when one realize on the single-line authority concept even in a permanent authority case.

Now, Mr. Chief Justice, let me go into this question of what it is that we complain about in terms of the Government side which I understand to be that there where depots.

The Solicitor General says that yes, the Caputo statement did not give names, dates, particulars about the service deficiencies about which it was complained, but he says that shouldn't matter and -- so I guess really, the basic question is whether it should matter or not.

There isn't any question I think that he's right in making the concession that does in this entire DOD statement, not a single, not a single existing allegedly defaulting carrier is named.

No dates, no names and no particulars.

We suggest that the standard to be used in measuring whether or not this is -- if I may for a lack of a better word say prejudicial error ought to be the traditional one and ought to be whether have the error and not been committed might the outcome have been changed.

The Government says that it would not have been.

They say on their brief that the provision of these details could not be affected the outcome and I understand them to say that on the notion that the evidence of record was compelled.

Now, that's kind of a harmless error doctrine.

It seems to us it has no place unless the evidence that's being relied upon is compelling is independent of the error; that is to say that correction of the error would not have affected that evidence.

Now if you got 20 eyewitnesses to a crime and they all identified the defendant in a trial and the trial judge improperly circumscribes cross-examination going to the eyesight and one of them, well maybe that's harmless error.

But that situation does not resemble the one at bar at all because the provision of the details by DOD might radically have undercut the force of its submission.

Now, I don't have the time in oral argument for the kind of detailed textual analysis of this statement that we do have in the briefs, but let me illustrate to the Court what kind of thing I have in mind.

The most important parts of the statement are generalities.

They're always qualified in what we regard as suggestive way.

Now for example, page 368 of the Caputo statement, the statement -- no, that‘s not a statement, that's the order.

The statement begins on 194, I think, yes.

Page 198 contains what is sort the topics sentence of the statement.

There, Mr. Caputo says this defense need for speed has not been met in many, many instances by the current certified motor carriers.

Now, no place in this statement does he indicate anything about those many, many instances.

I suppose arithmetically, that could 50 or 100 or a 150 or almost any figure, but surely it would make a difference if it were only a 50 in this broad geographical area among these dozens of carriers, and I don't really see how it reasonably could be suggested otherwise.

In the next sentence he says -- and let me just string some of these together because they're all really the same.

In the next paragraph, he says we must in some cases allow no less than 24 hours for each 300 miles of joint line service, some cases.

The next sentence he said, prescribe routes are often circuitous.

In the next paragraph he says, some regular route carriers utilize single drivers instead of two-men driving teams and this sometimes results in delays.

The next page he says, some shipments of explosives between McAllister and Vanguard Transit for lengthy periods of time.

And it's that way throughout.

In many instances, it is necessary to closely coordinate the arrival of inbound shipments with production schedules.

He gives one example, how many are many in addition to one?

In the next page he says DOD has experience situations where shipments routed the currently certificated carriers failed to arrive at destination in time for transshipments and it gives one example there.

How many more times beyond one did DOD actually experienced these situations?

Now, he does provide in his statements some what he calls examples.

We've analyzed them one by one in our brief and I won't detain the Court with the flaws that we see in the examples other than to note that again that they did not comply with the regulations.

The allegedly defaulting carriers were not identified.

They had no opportunity of rebuttal.

But beyond that, I suggest that the fact that DOD did provide some examples cuts in our favor and not against us because in the first place, it shows they can provide examples.

And in the second place, one cannot put aside the possibility Mr. Chief Justice that this is about all they could come up with.

Because as I said before, they grafted the statement in the face of the temporary restraining order which pointed to noncompliance with subparagraphs 8 and 9 as a problem.

They went back and they drafted it and I think it is at least reasonable, it is reasonably possible to assume that this was about as good as they could do.

But if that's a possibility, then surely compliance with the regulations, compelling the Department to deploy with the regulations might entirely have change the outcome of this case because if this handful of examples is all that the Department could come up with.

I would find it very difficult to believe that the Commission would have granted this temporary authority.

And I have not spoken of the possibility of rebuttal, but that possibility could not be put aside either as this record demonstrates, the Department is not always infallible in what it says.

I would refer the Court to the statement of the munitions carrier's conference which is here some place.

What the -- let me just summarize what it says, what it says -- here it is, it's on page 308 and 309 and what it says basically is that, that DOD in one of its statements gave before this Caputo statement gave three examples of what are deserted and were deficiencies.

And those -- two of them could be verified in terms of the carriers that were involved and those carriers put in rebuttals.

One of them indeed as the statement says submitted photo static copies of documents which established of the charge was false, and DOD did not repeat any of those in the Caputo statement.

So that the opportunity to rebut specific data, when that's specific data is given by the DOD is important to the appellees.

I should mention Estes briefly but I think Mr. Califano really has given me my basis for distinguishing Estes it's the one that I rely on, there are several but the shippers in Estes as Mr. Califano said stated very explicitly that they have not made any efforts to get the service that they were interested in from other carriers.

So --

Justice Byron R. White: Do you think if all shippers who supported temporary application come forward and say that we are not in the position to say that there is insufficient or inadequate service without this temporary authority.

If all the shippers say we don't think there is anything wrong with the present, that the present services inadequate, but we just want better service.

Would you think a temporary authority would ever be justified?

Mr. William H. Dempsey, Jr.: No, I think it would be never justified in those circumstances.

Justice Byron R. White: Apparently the -- but do you think the ICC thinks it would be?

I don't suppose the Department of Defense ever repudiated these statements that it filed certainly the Assistant Secretary when he wrote didn't repudiate that statement.

He said just to be satisfied, however with present, the capabilities is not to say we shouldn't have better service.

Mr. William H. Dempsey, Jr.: Oh, right, yes, I found that interesting passage in this letter and Mr. Justice White, I think you will not find in the Caputo statement a repudiation of the three letters that DOD wrote and which the --

Justice Byron R. White: But the -- but the Commission found -- seems to found that there had been shown an urgent and immediate need.

Mr. William H. Dempsey, Jr.: Yes.

Justice Byron R. White: Well, they apparently construe a desire for better service as urgent and immediate need.

That's certainly not in, that's not illogical, I don't suppose it is?

Mr. William H. Dempsey, Jr.: That they -- well, I -- it's not illogical?

Justice Byron R. White: No, it isn't, it isn't, I mean --

Mr. William H. Dempsey, Jr.: It's not internally inconsistent.

Justice Byron R. White: You just say you have an urgent need for better service.

Mr. William H. Dempsey, Jr.: Yes, yes, well you might as a matter of fact.

I mean it's possible.

All that I can say is that when you can -- I think you can visualize a company in extreme financial client or something like that might really need better service.

But it's hard for me to believe that the Commission having set forth in its single-line service regulations pretty clearly an indication of this isn't the case, and the Commission after all does know what the statute says and what the history of the statute was.

I think that what the Commission must have done here was to accept the general statements made by DOD in the Caputo statement in terms of what it said where its actual service failures that in many, many instances they haven't gotten goods on time for transshipment and that sort of thing and based their decision base on the order on that and not upon a mere statement by DOD of a preference for better service.

Now if in this order, I certainly don't suggest that this order is a model of clarity far from it, but if in this order the Commission had said which you just suggested Mr. Justice White, then the litigation that seems to me would have taken an entirely different path.

What we would have been arguing in lower court was that the order did not comply with the statute and with that kind of a fine thing by the Commission we would have tested this on a different basis.

Let me spend what remaining time I have on the second issue in the case, the question respecting the Commission's reopening of the record.

I regret that I do not have more time for this because it is an important issue bearing as it does upon the Commission's relation to the federal judiciary.

But we have set forth our arguments in our briefs in detail and of course, we rely upon them.

Let me try simply to touch upon the highlights over the central factors of these issues.

Chief Justice Warren E. Burger: Before you to get on that --

Mr. William H. Dempsey, Jr.: Yes, Mr. Chief Justice.

Chief Justice Warren E. Burger: Let me go to that number 4 again which -- of the 3 and 4 that troubles me on 368.

Mr. William H. Dempsey, Jr.: Yes.

Chief Justice Warren E. Burger: Four has the finding that there's nothing in this record to establish that any of the protesting carriers provide a service to meet its needs.

What if the regulations or the case is hold about where the burden lies in establishing that?

Who had the burden there?

Mr. William H. Dempsey, Jr.: Oh, well, I think clearly the applicant has the burden under the regulation say and particularly if they're talking about single-line service because that requires in terms of the regulations are clearly showing that the existing carriers have defaulted.

I don't think really that commission counsel would disagree that the burden here is on the applicant especially in terms of the concern of the Congress expressed in the committee reports that this temporary authority statute be utilized only in a emergencies as it is an exception to the general statutory scheme.

Chief Justice Warren E. Burger: I suppose you'd agreed that it might be very sensible to have the Government carriage exempt from these provisions that Congress hasn't done that as a --

Mr. William H. Dempsey, Jr.: Exempt from the -- from which provision --

Chief Justice Warren E. Burger: From these, the -- from the 8 and 9 question requirements from --

Mr. William H. Dempsey, Jr.: No.

Chief Justice Warren E. Burger: -- making the showing --

Mr. William H. Dempsey, Jr.: No, I would not -- if I understand the question right --

Chief Justice Warren E. Burger: You wouldn't think that would be a sensible thing to do?

Mr. William H. Dempsey, Jr.: I don't --

Chief Justice Warren E. Burger: But in any event they have in coming --

Mr. William H. Dempsey, Jr.: And certainly they done it.

They have exempted the Government from the rate discrimination provisions of the legislations so that they can and effect that the rate discrimination in favor of the Government.

They've done that, but they haven't done anything with respect to the routings that are to be used during that sort.

But I should say that the importance of Government traffic to the regulated motor carrier industry in particularly to some elements of it is very, very great.

And the Commission will one way or another in the many, many proceedings that are pending before it now seeking modification of routes and that sort of thing will have to decide how this problem can be worked out so as to provide the best service to the Department without working, undo damage on the existing motor and rail carriers.

I think that's a complex problem, and so I would much prefer to see that worked out in permanent authority applications with full hearings than by way of this kind of summary proceeding.

Now, I would gather from Mr. Cerra's argument that perhaps erroneously but let me just state what I seem to feel about it, and that is that if these petitions for reconsideration have not been pending at that time that the Commission reopened the record, there would not be a very strenuous argument from the other side that the Commission was free to do what it did.

But if I incorrectly surmise that in any event, I think that's what the appellants ought to be conceding because Inland Steel in the -- this Court in establishing that the Commission cannot act in a way inconsistent with the Commission's jurisdiction taking together with the other cases that we have cited which in other context indicated what that sort of thing means.

It seems to me lead to the conclusion that where the Commission in effect wipes out the raise of the litigation, they're acting inconsistently with the court's jurisdiction, and that's what the Commission did here.

In effect, it wiped out the order that was under view.

It reopened the record in effect that a new trial and entered in effect a new judgment which was then subject to further appeal.

So that it seems to me that the turning question here is the effect of the pending petitions for reconsideration.

Our first position on that is that those petitions for reconsideration could not have extended the authority of the Commission because they were not authorized.

The regulation respecting petitions for reconsiderations in temporary authority proceedings is set forth on page 47 of the brief of certain motor carrier appellees.

Now, it identifies two kinds of orders from which such petitions can be taken and this case does not involved either one of them that I think is conceivable.

But what Mr. Cerra says is that the general rules of practice of the Commission do authorize a petition for reconsideration in these circumstances.

And that that rule should be ready into the temporary authority rule because the temporary authority rule starts out pursuant to and in accordance with the Commission's general and special rules of practice.

Now, we think that the a more normal reading of that phrase pursuant to and in accordance with would be to refer to procedural questions such as a number of copies and that sort of thing.

But more important than that, if the general rules and the special rules are read into this rule, then this rule is robbed of any independent significance because the petitions for reconsideration that are authorize by this rule are also authorize by the general and special rules.

So that to give it any meaning, one must read it restrictively.

One must conclude that this rule establishes the only circumstances under which petitions for reconsideration are to be permitted in temporary authority proceedings.

If I may add that there is no support here to the court and no help to the court by way of the construction of these regulations by the Commission.

The Commission in no order construed these regulations to permit these petitions for reconsideration.

It reopened the proceeding on its own motion.

There is a reference in a footnote and AFL's brief to the effect that that is not so and that the Commission indicated that it believed the petitions were authorized but I refer the Court to the record citation.

It is to a brief by commission counsel and the court below.

But beyond that, we say that even if the petitions were not authorized that the results should be the same.

And we say that fundamentally because we think if the result is different, that an important policy consideration underlying the principle restricting agency freedom in the context of judicial review would be undercut.

And that policy we think arises from the dual role of the agency.

It is of course first and foremost the neutral arbiter, but then when its orders are attacked it becomes a litigant.

Now, so long as the litigation is simply conducted by the general counsel's office, there's no possibility of conflict of interest.

But where the Commission reopens the procedure after judicial review has commenced and particularly where the court has identified would it seize as a possible difficulty in the Commission's position.

Then we suggest that there is a risk that the agency will add it more as a litigator than as an arbiter.

Now, the counsel for the Commission says yes, but -- well, he doesn't say yes to that, but he says in connection with this point that one must allow the Commission the right to correct errors and certainly that's true, and that's an important policy consideration.

But first of all, the rule that we're arguing for it doesn't deny the agency the right to do that.

It simply requires that the agency get the authority of the court to do whatever it wishes to do.

And in the second place, the facts of this case, well certainly not conclusive one way or the other, do not fit very neatly we suggest into the notion that what the Commission is doing here was correcting error in that alone.

The Government in a footnote to its brief indicates that the Commission had in mind when it reopened the record, this problem respecting subparagraphs 8 and 9 of the regulations.

But if that is so, you didn't do anything about that problem at least directly.

It did not suggest to the Department if they comply with subparagraphs 8 and 9.

It did not direct the attention of the Department to subparagraphs 8 and 9.

What it did was to reopen the record and take additional evidence from the Department and then its counsel returned to court below as they do here and conceive that there were defaults with respect to the compliance with these regulations as Judge Boldt indicated in that very first hearing, but argued that the additional evidence that was taken was so compelling as to outweigh these problems with respect to the regulation.

As I say, I don't suggest that these facts are conclusive with respect to this risk that I'm talking about, but they're not inconsistent at least with the theory that I advance.

And so what we argue for and I may say it seems to me that what's needed here is a rule.

There ought to be a clear cut rule.

I don't suggest that this is a -- that the policy consideration is either way here are so strong as to establish that we're right or we're wrong.

What I do say is that we think that the burden on the Commission in complying with the rule that we're talking about would be very, very slight indeed.

Whereas, the risk of danger on the other side is reasonably significant and so what we urge is a rule that would require the Commission when should this review is commence or at the very least, after the court has taken a significant step in the case.

And that here was the grant of the temporary restraining order after a full hearing.

But at that point, the Commission then be required to go to the court, seek authorization if it wishes to reopen the record and enter a new order.

We think that as I say, that's a slight burden on the Commission.

It prevents any hazards with respect to the legitimate interest of the parties before the Commission.

That I think summarizes our case if it please the Court.

Chief Justice Warren E. Burger: Thank you Mr. Dempsey.

Mr. Califano.

Rebuttal of Joseph A. Califano, Jr.

Mr. Joseph A. Califano, Jr.: Mr. Chief Justice, if I -- may I just make a couple of points.

One, with respect to the regulation Mr. Justice White on the granting of temporary authority were single-line services involved that regulation does go on to provide that a grant of temporary authority to effectuate single-line service will be authorized only when it is clearly established that the carriers providing multiple line service are not capable of or fail to meet needs.

The same regulations subsection 2 of it, specifically list as one of the occasions on which an immediate and urgent need exists in occasion whether it's “a discontinuance of existing service.”

And I do you think it's important to note that the Department of Defense had the service of American Farm Lines for some two and half years, and it was --

Justice Byron R. White: On an exempt basis.

Mr. Joseph A. Califano, Jr.: On an exempt basis, and that service was being discontinued.

Secondly, Mr. Chief Justice, with respect to the burden of proof, I just would like to point out quoting from the regulation, that's in the brief filed by Mr. Adams in the American Trucking Association that with respect to the filing of protest it says, “such protest must be specific as to the service which such protestant can and will offer and must consists of a signed original etcetera, etcetera.”

I think it's at best it's fuzzy as to where the burden of proof lies when you read this regulation which follows immediately upon the regulation listing the 11 points.

Chief Justice Warren E. Burger: But if this a default in the first place, failure to answer the questions like 8 and 9, doesn't that perhaps altered the situation somewhat?

Mr. Joseph A. Califano, Jr.: I think Mr. Chief Justice that as I've indicated in this many the appellees have considered, there's no -- if you say no efforts have been made, that's an answer to -- that's an answer to 8 and 9.

If you say efforts have been made, then the question is what kinds of efforts were made and what came out of them.

The problem -- this is a procedural rule of the ICC designed to help them I believe and I think the problem is that we have just a unique shipper.

It's not like any other shipper in the country and the question is whether or not his statement measures up under either of those alternatives.

And we believe that what he was asking for was clear here and I clearly couldn't provide it.

Finally on the point of need, I would indicate as, I think Mr. Justice Brennan asked that in this day and age, if there's not a need for sharply reducing defense cost as this would do and for safety in moving dangerous materials, I don't like you know, it's hard to think to put more urge and needs we could have than that.

Thank you Mr. Chief Justice.

Chief Justice Warren E. Burger: Thank you Mr. Califano.

Thank you Mr. Dempsey.

The case is submitted.

Featured:

Red Ball Motor Freight v. Shannon - Oral Argument

Wed, 16 Jan 2013 22:48:37 +0000

Case:

Red Ball Motor Freight v. Shannon

Media File:

406_19640428-argument

Related Transcript:

406_19640428-argument

Transcript:

Argument of Robert W. Ginnane

Chief Justice Earl Warren: Number 406 and 421, Red Ball Motor Freight, Incorporated, et al., Appellants, versus Emma Shannon et al., and the United States and Interstate Commerce Commission, Appellants, versus Emma Shannon et al.

Mr. Mathews.

Oh, Mr. Ginnane, you're going to (Voice Overlap) --

Mr. Robert W. Ginnane: (Voice Overlap) --

Chief Justice Earl Warren: Yes.

Mr. Robert W. Ginnane: (Voice Overlap) with the court.

Thank you sir.

Chief Justice Earl Warren: Oh, yes.

Yes.

Mr. Robert W. Ginnane: May it please the Court.

I am sharing the appellant's time with Mr. Amos Mathews, counsel for the appellant, Motor Carriers and Rail Carriers in Number 421.

These two consolidated appeals are from the judgment of a three-judge District Court which set aside an order issued by the Interstate Commerce Commission.

Commission's order directed the appellee Shannon to cease and desist from engaging in for-hire transportation of sugar in interstate commerce without appropriate operating authority from the Commission.

This case presents a question of importance for the entire transportation industry.

That is how to draw a practical line between for-hire motor transportation whether common or contract and bona fide private carriage on the other hand.

By way of background, this question is one aspect about an important aspect of what Congress, the Commission and the transportation industry had been referring to as gray area of transportation for some years.

Gray area of transportation is a shorthand phrase which covers a variety of devices by which what is in substance for-hire transportation is carried on by motor carriers without a common carrier certificate and/or without a contract carrier from it, thereby eroding the traffic available to the regulated public carriers.

Two years ago, we presented one important aspect of the gray area problem to this Court, In United States v. Drum in 368 U.S.

In Drum, this Court upheld the Commission's view that where a shipment leased -- that where a shipper leased the services and the equipment of owner operators of trucks without assuming the real financial risks of engaging in a transportation service.

Then, though the Court held with this, a shipper was not engaged in bona fide private carriage and the owner operators were engaged in for-hire transportation as contract carriers because on that record, in the Drum case, they were assuming the real risks.

Now, in this case, we are dealing with a frequent type of situation and -- and for the Commission a number of times, in a number of times from the past and currently in the lower federal courts.

When a person who is engaged and admittedly bona fide a private transportation in the outbound transportation of his goods, from his place of business, seeks to obtain some kind of freight for the other -- other -- for the otherwise empty return trip or backhaul movement of his trucks.

Now, what do we mean by private carriage?

Now, briefly, Section 203 (c) of Interstate Commerce Act, which appears at page 36 of our brief, says in effect that a private carrier is a person who has transportation of his own property is within the scope and in furtherance of a primary business enterprise other than transportation of such person.

And the typical example of admittedly bona fide private transportation and this happened all over the country without a question, is for a manufacturer or distributor uses his own trucks to transport his finished product, to distributing or retail outlets.

And on his return trip or backhaul, he brings back raw materials or supplies to be used in his business.

Now, the basic fact of life for all carriers, either for-hire carriers or private carriers, is that empty return trip movements increase the cost of moving a given unit of freight.

In its extreme form that this means that any kind of carrier, public or private, figures that it is better off, if it can obtain some freight for the return trip, if it only covers the fuel cost or part of the fuel cost.

And so it is that private carriers are naturally tempted to try to get some kind of paying cargo on their otherwise empty return trip or backhaul movements.

Now, turning to the facts of this case, Shannon has a partnership in San Antonio, Texas and since 1934, it engaged in buying and selling livestock.

In 1951, it broadened its business to include the handling of fertilizer, grain, molasses, salt, and other items in the feed line.

In 1954, Shannon began to engage in the sugar transactions which are initially here.

As we see it, the crucial facts, Mr. Shannon's sugar transactions are these.

First, Shannon buys and takes title to the sugar at a sugar refinery at Supreme, Louisiana.

It's about 40 miles West of New Orleans and its 525 miles from San Antonio.

Shannon buys sugar only when it can be carried and the return trip or backhaul movement of one of its trucks which is stated an outbound delivery in the direction of Louisiana.

At no time has Shannon purchased sugar to be transported otherwise than in its own trucks.

In other words, Shannon's purchases of sugar had been measured solely by the otherwise empty backhaul capacity of its trucks.

Justice Arthur J. Goldberg: (Inaudible)

Mr. Robert W. Ginnane: Now, on this record, he takes the title.

We have had other cases in which the taking of title was a sham.

On this record, we do not contend that it's a sham, we assume he is taking the title in a -- in a valid section.

Justice William J. Brennan: Does he have orders for the sugar before he deposit it?

Mr. Robert W. Ginnane: The Commission found that, generally speaking, he did not.

That he was successful in obtaining orders for either -- while the sugar was en route back from the refinery to San Antonio or very shortly after arriving in San Antonio.

Justice Byron R. White: And he just isn't filling orders of the people he bought the sugar from.

Mr. Robert W. Ginnane: I beg your pardon?

Justice Byron R. White: And he just isn't filling orders that the people he bought the sugar from had.

Mr. Robert W. Ginnane: So -- as far as this record shows, no.

He has this -- he -- he finds his own customers.

Now, most of the sugars handled in truckload lots is bought and sold in the truckload lots and is delivered from the trucks right off the tailgate at the places of business of Shannon's customers in San Antonio.

Justice John M. Harlan: (Inaudible) and handled by Shanon?

Mr. Robert W. Ginnane: From -- from Supreme, Louisiana, yes.

Other sugar gets -- gets into San Antonio, cane sugar from the West and North but -- but Shannon is handling only this Louisiana cane sugar which he picks up at Supreme, Louisiana.

Justice Potter Stewart: You mean beet sugar from the West and North.

Mr. Robert W. Ginnane: Yes.

And his customers are candy companies, soft drink bottlers, wholesale groceries and dairies in San Antonio.

I'd like to emphasize that Shannon does not make substantial sales out of a substantial warehouse inventory of sugar.

And I emphasize that because the District Court found that Shannon maintained a reasonable inventory of sugar.

I'm not sure what the Court meant by reasonable but in fact, it's a small one.

Now, the hearing on this case took place in 1957.

In December 1, 1956, Shannon had inventory of a 123 100-pound bags.

On January 31, 1957, 209 bags, and so on.

Now, we'll concede the following facts which the -- which the court below found and which Shannon is still urging here.

We'll concede that he takes title of it at -- when he picks up the sugar at Supreme and that as the owner, he takes the risks which we say are minor, price fluctuations, and damage and transfer.

We admit that he makes sales on credit, 10 days credit.

We admit that he is -- does not collect any identifiable or earmarked transportation charge from his customers.

He sells them at so much per 100 pounds with no earmark transportation charge.

And we conceive that he usually has no orders in advance of the purchase and transportation of the sugar.

Justice William J. Brennan: Is there any evidence from the markup over (Inaudible) unless he sell?

Mr. Robert W. Ginnane: Yes, in Exhibit 1 at pages 117 and 118 of the record.

And that shows -- that Exhibit shows what really happens here.

On page 117, the first transaction, the shipment date of May 15, 1956, deals with the same shipment of sugar, the same lot of sugar that has dealt with at the -- as the first item on page 118.

So following it through between the two pages, we have a transaction in which Shannon is buying sugar on May 15 at Supreme, Louisiana.

Turning on the other page, he sells it in San Antonio on May 16 to Lawlor and Lawlor according to the record, is a wholesale grocer.

And similarly, the second transaction which on -- on page 117, shows shipment on May 27, sale on May 29 in San Antonio to Judson.

Judson is a candy manufacturer.

Now, going through the -- that list of transactions, representative transactions, we find that Shannon is selling the sugar to -- to a purchaser in substantial quantities within 48 hours after he purchases and takes delivery in Supreme.

And he is selling the sugar obviously just from those dates.

Purchase, transportations, and sale within 24 or -- within 24 or 48 hours.

It makes a perfect --

Justice William J. Brennan: They authorize that market.

Mr. Robert W. Ginnane: The record indicates that the -- that the -- the sales price is large in -- in san Antonio is largely determined by the competition of beet sugar from the West to North.

But his markup appears --

Justice William J. Brennan: Yes, but I -- I was wondering how -- what he sells for sells with the going market.

Mr. Robert W. Ginnane: He sells at the going market, according to the record.

Justice William J. Brennan: At a going market.

Mr. Robert W. Ginnane: A going market which is largely determined --

Justice William J. Brennan: Yes.

Mr. Robert W. Ginnane: -- by the competitive influence of beet sugar from the West to North.

But these dates, and as shown by the Exhibit 1, purchase, transportation, sale and delivery to ultimate user, all within 48 hours.

Justice Arthur J. Goldberg: (Inaudible)

Mr. Robert W. Ginnane: The record does not show.

Those dates show that he must -- be finding and must be selling the sugar while it's on route from Supreme to San Antonio or very shortly after it arrives in San Antonio.

In brief, Shannon's sugar operation is measured by the available backhaul capacity of its trucks.

And he never uses for-hire carriers to move sugar as it does with respect to grain and other commodities which it handles, sugar is different in the way it's handled by -- by Shannon.

It's the one commodity which he never uses of any other carrier for.

It's limited by his backhaul capacity.

So that all he really invest in a sugar operation is the backhaul transport space of his trucks.

Justice Potter Stewart: Mr. Ginnane, I noticed in the chart on page 118 of the record, the person, whom the sugar delivered on these dates is Lawlor, Judson, Melvin and so on are -- is indicated consignee, actually, it wasn't the cons -- those people were not consignees whether -- they were purchasers, are they not?

Mr. Robert W. Ginnane: They -- they are Shannon's customers in San Antonio.

Justice Potter Stewart: And actual purchasers, they weren't his agents, was it?

Mr. Robert W. Ginnane: That's right.

Justice Potter Stewart: (Inaudible)

Mr. Robert W. Ginnane: They weren't his agents.

As far as this record shows, they were his customers, use -- users of sugar, buying sugar from Shannon.

Significantly, the commodity most frequently involved in cases such as this is sugar.

And that's because sugar, in the community of any size such as San Antonio, can be sold readily to such constant users of sugar as wholesale grocers and the canning, baking, and soft drink industries, just the kind of -- of customers that Shannon has here and we see the same pattern on other cases.

In other words, the sugar is so fungible and so salable in the community of any size.

It's practically the same as cash on the truck, subject only to minor price fluctuations.

Now, on find -- the Commission in finding that Shannon was engaged in for-hire transportation, rather than bona fide a private carriage, took into account all of the circumstances surrounding the transaction.

And it weighed those circumstances in the light of Section 203 (c) which Congress enacted in 1957 and amended in 1958 to deal with just this type of transportation practice.

The three-judge court, in setting aside the Commission to order, as not supported by substantial evidence, erred, we contend, in two respects.

First, it wholly failed to take into account that Shannon's sugar dealings are measured by its otherwise empty backhaul capacity and that it was not making substantial sales out of inventory.

And secondly, the court below did not even mention Section 203 (c) which we believe is the crucial provision of the Act here involved.

Justice John M. Harlan: (Inaudible) how did it happen, I mean, why didn't --

Mr. Robert W. Ginnane: I don't know, sir.

In a somewhat similar case, in which -- in which the Commission's order was sustained, the Church Point Beverage case which is referred to in our -- in all of the briefs that that Court didn't just instinctively recognize 203 (c) as controlling.

Justice John M. Harlan: The Government relied on it below?

Mr. Robert W. Ginnane: We -- yes, indeed sir.

And we contend that Shannon's backhaul operation of sugar is exactly what Congress sought to eliminate --

Justice Byron R. White: But isn't a private carriage that isn't engaged in bona fide private carriage?

What is this?

It may -- the Act may say he can't do it but he isn't a contract carrier of sugar.

He isn't a common carrier of sugar.

Mr. Robert W. Ginnane: He -- he's a for-hire carrier.

Justice Byron R. White: For whom?

Mr. Robert W. Ginnane: And the 19 --

Justice Byron R. White: For whom?

Mr. Robert W. Ginnane: And the --

Justice Byron R. White: For whom?

Who hired him?

Mr. Robert W. Ginnane: May I -- may I answer your question this way.

That question arose be -- arose in prior cases.

And Commission orders were set aside on the basis of just the question you've raised.

And that was what -- and -- and that was what Congress accomplished by the 1957 Amendment of that -- that the enactment of 203 (c) --

Justice Byron R. White: The 203 (c) just says that -- it says you're not supposed to do this.

It didn't say what he was, still doesn't say who hired him.

Mr. Robert W. Ginnane: In 1957, 203 (c) was added to expressly prohibit any person for engaging in any for-hire transportation business by motor vehicle in interstate commerce without a certificate or a permit authorizing such transportation.

Justice Byron R. White: Right.

Mr. Robert W. Ginnane: And the Committee reports make it very clear that Congress regarded this new prohibition as necessary to prevent the creation of just such a no man's land.

Justice Byron R. White: Yes, but that's still the --

Mr. Robert W. Ginnane: And -- and --

Justice Byron R. White: -- that's still in the cases, what it's prohibiting is for-hire carriage --

Mr. Robert W. Ginnane: For-hire carriage.

Justice Byron R. White: Now, where is the for-hire carriage in this case?

Who hired him and who paid him anything?

Mr. Robert W. Ginnane: It is for-hire carriage under Section 203 (c) unless the transportation is within the scope of and in furtherance of a primary business enterprise other than transportation.

Justice Byron R. White: Well, that isn't --

Mr. Robert W. Ginnane: And we say that you can't have -- we contend that you can't have a primary business enterprise other than transportation so that your transportation is -- is bona fide private carriage.

If the only thing you contribute to your dealings in a particular commodity is transportation, the use of otherwise empty backhaul space to get something for that backhaul.

Justice Byron R. White: Still isn't a -- you -- you must concede he is not -- he isn't -- he is not hiring -- nobody paid him anything, nobody hired him, you concede to all the facts referred to it which would eliminate -- which would -- all of things you concede to eliminate the possibility of his having been hired.

You must say that -- that what Congress did is just -- it did create a no man's land, it just said, "The people can't do this."

Mr. Robert W. Ginnane: And -- and its no -- and they also said, "It's no answer to it", to what he is doing that -- be -- he can't readily be cont -- be classified as a common carrier or a contract carrier.

Justice Byron R. White: Well, he was -- he was -- really wasn't neither, wasn't he?

Mr. Robert W. Ginnane: I think that may well be.

Justice Byron R. White: What?

Mr. Robert W. Ginnane: I think that may well be.

Justice Byron R. White: Yes.

Mr. Robert W. Ginnane: But it was to answer just that dichotomy which you present and which we had encountered in other cases in the lower courts that this original Section 203 (c) was added in 1957 --

Justice William J. Brennan: Yes, but (Voice Overlap) --

Mr. Robert W. Ginnane: -- before that no man's land in which it would be hard to say he was a common carrier because he wasn't holding himself out to the general public.

Justice William J. Brennan: Well Mr. Ginnane, I gather you'd had a long history of developing the primary business test in Commission decisions.

Mr. Robert W. Ginnane: That is correct sir.

Justice William J. Brennan: And that (Voice Overlap) --

Mr. Robert W. Ginnane: Almost (Voice Overlap) --

Justice William J. Brennan: -- am I correct in reading those as in effect saying that if you don't satisfy the -- in the circumstances like this, the primary business test, then that establishes that you're in for-hire transportation?

Mr. Robert W. Ginnane: And that you're in for-hire transportation.

Justice William J. Brennan: Yes.

Without giving for-hire transportation any other special definition?

Mr. Robert W. Ginnane: Without breaking it down -- without having to break it down as between common and contract --

Justice William J. Brennan: Yes.

Mr. Robert W. Ginnane: -- common or contract carriage.

Justice Byron R. White: Well, what -- excuse me Brother.

Justice William J. Brennan: Now as -- as I understood it, when a private carrier -- this is neither contact or common carrier of course, that when a private carrier which is what this test was, did this kind of thing and what he hold was not in his primary business.

Then that automatically established it factually as a for-hire transportation, is that right?

Mr. Robert W. Ginnane: Correct, sir.

Justice Arthur J. Goldberg: (Inaudible)

Mr. Robert W. Ginnane: Yes, sir and that's the one which we rely primarily.

But that was not added until the 1958 Amendment.

And I was saying to -- in reply to Mr. Justice White that the first clause, I had it in the asterisk, it was added in 1957 to answer just the difficulty which he had raised.

But Congress was not satisfied to that.

It came back further on the subject and with the -- with the 1958 Amendment which is the material you referred to following the asterisk.

Justice Arthur J. Goldberg: (Inaudible)

Mr. Robert W. Ginnane: That's correct, sir.

Justice Arthur J. Goldberg: (Inaudible)

Mr. Robert W. Ginnane: Oh, that has to be for-hire in -- in one of them -- in -- in one sense or another.

Justice Arthur J. Goldberg: (Inaudible)

Mr. Robert W. Ginnane: For business purposes.

Justice Arthur J. Goldberg: (Inaudible)

Mr. Robert W. Ginnane: In -- in other words, it would -- he would have to be an engagement for some business benefit of some kind.

Now, whether or not that amount for for-hire transportation --

Justice William J. Brennan: No, I mean, would that --

Mr. Robert W. Ginnane: -- it depends upon whether it -- it is or it's not within the scope of a primary business enterprise other than transportation.

Justice Byron R. White: Well, even if it -- under this last clauses, under the crucial clause, it doesn't make any difference whether he's in for-hire transportation or not.

Congress just says, nor shall any -- other person engaged in this kind of transportation that that -- that -- (Voice Overlap) --

Mr. Robert W. Ginnane: For -- for business -- for business purposes -- for business purposes.

Justice Byron R. White: Yes.

So would that -- he may not be able to get a -- this is just the kind of transportations nobody so engaged in whether he's for-hire or not.

Justice Hugo L. Black: (Inaudible)

Mr. Robert W. Ginnane: May I continue with it's -- whether that -- for further developments of Section 203 (c) particularly the legislative development in 1958, what Congress was directed at.

I think -- I think that will be helpful because it was in the Transportation Act of 19 -- 1958 that Congress really focused on this particular problem.

The language which -- which is the second clause of 203 (c) was sponsored in almost verbatim, its present form by the Transportation Association of America which is a distinguished organization of representatives of all modes of transportation, shippers, and academic world and so on.

We put this forward as their approach to what they referred to as the problem for-hire transportation services performed by private carrier -- carriers through use of the so-called buy-and-sell technique.

Since this TAA proposal was almost verbatim, the amendment which Congress made the Section 203 (c), we think it's significant to see what TAA told Congress, through its amendment, would accomplish.

And then the Senate subcommittee hearings in 1957, TA -- TAA stated that our suggested alternative is aimed at the buy-and-sell practice employed by some pseudo-private carriers as an outright subterfuge to avoid regulation or as a means of making otherwise legal transportation service more profitable.

And TAA said, "Our proposal for not affecting legitimate private carriers would affect the operations of the following types of carriers", and the third type, they listed was, "a third type would be the carrier who delivers his own goods in one direction as a legal private carrier but then resorts to the buy-and-sell practice to get a return load."

And we say that that TAA third type fits Shannon like a hat.

And I think it's significant that TAA has filed a brief as amicus curiae in this Court urging reversal of the judgment below.

And on the Senate and House, the Reports of the Senate and the House Committees focused with unusual specificity in this rather particularized problem.

Thus, the House Committee found that the erosion of the traffic of regulated carriers has also then caused to a considerable extent by the growth of pseudo-private carriage by truck.

And zeroing in on this case, the House Committee said, "Businesses which use their own trucks to deliver their own merchandize are purchasing goods at or near the final point of delivery of their own merchandize in transporting such goods to places near their own establishments for sales to others.

Such transportation is usually performed solely for the purpose of receiving compensation for the otherwise empty return of the trucks."

There's more but it's in our briefs.

The Senate Report was in exactly the same specific (Inaudible).

And so those are the reasons detailed on the Senate and House Reports as to why the last clause was added to 203 (c) in 1958.

That is, "Nor shall any person engaged in any other business enterprise transport property by motor vehicle in interstate or foreign commerce for business purposes unless such transportation is within the scope and in furtherance of a primary business enterprise other than transportation of such person."

So the question here is whether Shannon's use of its backhaul capacity, the transportation of sugar is within the scope and in furtherance of a primary business enterprise other than transportation.

Stated otherwise, how do we give a practical content to what Congress was clearly trying to accomplish.

How do we give a practical content to this standard?

And at the same time, respectfully, equally clear congressional purpose of continuing to exempt a bona fide private carriage from federal economic regulation.

We say that as a practical and real -- in a practical and realistic sense, Shannon's transportation of sugar is not in the scope in furtherance of a non-transportation enterprise.

The economic way or ideas, that is dealings in sugar are measured solely by his available backhaul capacity.

He never utilizes the services of for-hire carriers.

The economic reality is that his rapid resales during or immediately following the transportation of the sugar by eliminating all real market or warehousing risks or cost means that is only real investment in or contribution to a sugar enterprise is the otherwise empty backhaul capacity of these trucks.

Of course, it cost him a little bit to extend credit for 10 days but that's the sort of noncontrolling indicia that this Court brushed aside in Drum.

This Court in Drum said the fact that Drum paid social security for the owner operators was not enough to -- to change the -- the basic economic reality of what was going on.

Justice John M. Harlan: (Inaudible)

Justice William J. Brennan: No.

Mr. Robert W. Ginnane: The -- the Court referred to it -- the Court referred to it generally particularly as the original 203 (c) enacted in 1957.

Justice John M. Harlan: Not with this provision that you rely.

Mr. Robert W. Ginnane: And -- and also the Court referred to the 1958 Amendment in a footnote.

Justice John M. Harlan: Yes.

Mr. Robert W. Ginnane: But the Court wasn't applying the 1958 Amendment as such in Brown.

Justice Arthur J. Goldberg: (Inaudible)

Mr. Robert W. Ginnane: Not if he were acquiring the sugar and moving it solely by utilizing the backhaul capacity of these trucks and selling off the trucks with practically no warehousing, no inventory.

Justice Arthur J. Goldberg: I suppose however that it may have been established that a part of his general business would bring the rights to (Inaudible) rights to meet basic quotation.

Well, does that make it -- include it?

(Inaudible)

Mr. Robert W. Ginnane: Well, I would have to know how he acquired his beet sugar.

If he -- if he's getting it in the same way that he acquires the cane sugar from Supreme and an operation measured only by the backhaul capacity of his trucks and selling it primarily in truckloads right off the tailgate and without performing an inventory service, I would say no, that is not of a --

Justice Arthur J. Goldberg: Let's assume with the effect (Voice Overlap) --

Mr. Robert W. Ginnane: -- are non-transportation in fact.

Justice Arthur J. Goldberg: (Inaudible)

Mr. Robert W. Ginnane: I would say only if the -- his sales were made predominantly out of a substantial inventory.

Unknown Speaker: (Inaudible)

Mr. Robert W. Ginnane: Only if his sales were made predominantly out of inventory -- out of warehousing.

Because otherwise, I do not see how we can give a practical working content to the congressional standard for 1958.

Justice Arthur J. Goldberg: Can't you have a primary business as brokerage, the (Voice Overlap) --

Mr. Robert W. Ginnane: Now, when they --

Justice Arthur J. Goldberg: -- (Inaudible) sugar brokerage right in his own (Inaudible)

Mr. Robert W. Ginnane: He can't -- he can't do it under 203 (c).

Justice Potter Stewart: Suppose your answer is that the offense of --

Mr. Robert W. Ginnane: If and all he's doing is -- is connecting quick purchases and sales without inventory and measured only by his backhaul capacity taking advantage of other -- otherwise backhaul capacity, either to make a money transfer and -- and transporting it or in reducing the transportation cost of his admittedly private carriage outbound movements.

That's what Congress was concerned with.

Justice Hugo L. Black: (Inaudible) I do not quite understand (Inaudible), suppose a New York fruit broker decide that he wanted to buy his fruits in Florida, he gets trucks, cars, and those in Florida buys it.

He comes back to New York and sell it.

What would he be?

That's all that he's been, buying and selling oranges.

Mr. Robert W. Ginnane: And -- and Shannon here has a -- has a bona fide business buying and selling livestock and feedstocks and grain.

But it is a -- it is not measured merely by what he can bring in to his place of business utilizing the backhaul capacity of his trucks.

Shannon -- Shannon --

Justice Hugo L. Black: Suppose that's -- suppose --

Mr. Robert W. Ginnane: -- in his non-sugar business --

Justice Hugo L. Black: Suppose that's his whole business and he has no capacity, he just sells it, buys it, puts it in his truck, comes to Washington and New York and there sells it from his trucks, that's his business.

Mr. Robert W. Ginnane: There -- there are lots of sugar brokers who will sell without warehousing but they are not using their own trucks.

They're using -- they're using the services of for-hire carriers.

Justice Hugo L. Black: (Voice Overlap) -- didn't he use their own trucks by 203 (c)?

As a man who wants to engage in a business of that kind, I -- I don't quite understand this extent of the argument.

A man who wants to engage in the business of that kind, they used to do it a good deal, go from one place to another and buy stuff, take it to another place and sell it.

Is he violating 203 (c)?

Mr. Robert W. Ginnane: Unless he contributes something to the business other than transportation.

Justice Hugo L. Black: A what?

Mr. Robert W. Ginnane: A substantial contribution, a substantial investment of something other than transportation --

Justice Hugo L. Black: (Inaudible)

Mr. Robert W. Ginnane: -- moving the stuff from one place to another.

Justice Hugo L. Black: Well, he let -- let's say that's his own haul then, if he could make a little (Inaudible) certainly, some people do.

Mr. Robert W. Ginnane: I don't -- not -- not under 203 (c).

Justice Hugo L. Black: He couldn't do it.

Mr. Robert W. Ginnane: Congress was dealing with a situation which hundreds, if not thousands of shippers, like the Cabana case which we had in Court for a steel shipper.

The steel shipper is -- is using his backhaul capacity to transports salt available -- for almost mythical story, the piano manufacturer who was alleged to have acquired a -- a fleet of refrigerated trucks to deliver his pianos and -- and handle frozen fruits and vegetables on the backhaul.

Now, that's what Congress was concerned with and to avoid that congressional prohibition, a man can't do business contributing only the backhaul capacity of -- of his trucks.

He's got to make an -- make a substantial contribution of something else to it, say as by maintaining --

Justice Hugo L. Black: What if he --

Mr. Robert W. Ginnane: -- significant inventories.

Justice Hugo L. Black: -- he makes his living wholly out of that?

That he makes his living by selling this at a profit that in order to sell it easier to get more profit, he holds it for himself, is that forbidden by 203 (c)?

Mr. Robert W. Ginnane: Unless he's contributing something other than transportation to it.

Justice Hugo L. Black: But that -- and those are words I don't quite understand.

That's what the wording is.

If his whole business, he engages in the business of buying and selling oranges or something else and he utilize that a part of the business, the fact that he could make a better profit by going and getting and bring it back to somewhere.

And do -- and do I understand that this 203 (c) makes that illegal?

Mr. Robert W. Ginnane: It's got to be -- it's not legal unless it's -- unless it's within the scope and in furtherance.

Justice Hugo L. Black: And what -- unless it's what?

Mr. Robert W. Ginnane: Of a -- in furtherance of a primary business enterprise other than transportation.

Justice Hugo L. Black: Well I'm assuming here that he makes his living by the profit he makes out of the fruit he buys himself.

Mr. Robert W. Ginnane: We say that on the facts of this case and in similar cases, what he's making a profit out of is transportation because he's taking a -- a readily salable commodity like sugar which is almost like money and he moves it from one place to another.

He can dispose of it without risk and quickly upon arrival.

And we say that Congress intended that that be treated as for-hire transportation which he may not engage in without getting a certificate or a permit from the Interstate Commerce Commission.

Justice Hugo L. Black: Even though he sold and effort to sell -- selling buy and sell a commodity and -- and he make no profit out of it by buying it from one place selling -- moving it to another.

Mr. Robert W. Ginnane: Mr. Justice Black, I think it's clear from the history of 203 (c) that Congress regarded as something a bit different than buying, transporting, and selling.

In an operation measured only by your backhaul capacity where the -- and where the only real investment is of that backhaul capacity, where no other real function is being performed such as the -- the inventory -- performing the inventory function of -- of a warehouse to its owner.

Justice Hugo L. Black: Well, may -- maybe I -- maybe I have misunderstood.

I -- I gather now that what -- what you're saying is that if my mythical man, although the (Inaudible) buys it, goes in and buys it, sells it.

But after he sells it, he doesn't take anything back on a backhaul when he goes to buy more oranges, then that's forbidden?

Mr. Robert W. Ginnane: If I understand your question sir, that's right.

Justice Hugo L. Black: It all depends on whether the man who's into -- been, unless he's doing in that way, carries stuff on the backhaul after he's really, legitimately and even if he's illegit -- legitimately engaged in the other business.

Mr. Robert W. Ginnane: That is what Congress was concerned with.

Justice Hugo L. Black: And that -- that is your point, of doing it.

Mr. Robert W. Ginnane: That is what Congress was concerned with.

Thank you.

Chief Justice Earl Warren: Mr. Ginnane, may I -- may I ask you this question referring to pages 117 and 118 in these various items that you -- that you spoke to us about a little while ago.

Suppose that this man, instead of buying each one of these orders whenever he could fill it was to -- was to buy the total number of bags that represented here and have them in his warehouse and then -- and then would deliver them as -- as he got these orders.

Would he then be under the Act?

Mr. Robert W. Ginnane: No, I don't think he would.

That -- that because with that, he'd be doing, making predominantly -- his predominant sales would be -- be made out of inventory in a warehouse.

And he would be con -- making a substantial contribution of something -- investment of something other than transportation.

He'd be investing in -- in the -- in the burdens and the risks of maintaining an inventory and selling out of that inventory.

Chief Justice Earl Warren: Well, I'm just trying -- trying to differentiate between two men who are doing the same thing.

Take one man who lives practically across the street from the -- from the sugar refiner and he always has access to their warehouses and can -- and can fill his orders each day and he goes over there to get his sugar and then transports it.

He would apparently become liable under your theory but the fellow across the street who have more money and had a little -- and had a little warehouse could buy a few thousand sacks and fill each one of these small orders with what you call his inventory and he would not be covered, is that right?

Mr. Robert W. Ginnane: Well, as I -- as I understood your question, the fellow who lives -- who lives near the refinery, he's buying it for his use in his business to -- making candy or (Voice Overlap) --

Chief Justice Earl Warren: Well -- no, they're both -- they're both going to do exactly the same thing.

Only one of them, by reason of his proximity to the refinery doesn't have to have a warehouse.

He can go there and get it anytime he wants from a sugar refinery but the other fellow perhaps isn't so close to the refinery and in order to fill his -- his orders, he has to have a warehouse and has to have something of an inventory.

Now, are those -- those two men in a different position under the Act?

Mr. Robert W. Ginnane: If -- if the first and the second man was maintaining an inventory as we see it.

If he is doing the predominance of his business sales out of the inventory which he maintains, then he is -- then he is not engaged in for-hire transportation.

He is -- he is -- his transportation is merely incident in furtherance of a -- of a primary business enterprise other than transportation that is sugar brokerage.

And because he's contributed more than transportation, he's maintaining an inventory.

He's taking the risks of price fluctuation and so on.

But we say in a -- in a situation that Congress was concerned with and which we think is illustrated here is where the economic reality, considering that this is a readily salable commodity is what Shannon is investing -- is the transport capacity in -- in the backhaul of his trucks.

Thank you very much.

Chief Justice Earl Warren: I see.

Mr. Mathews.

Argument of Amos M. Mathews

Mr. Amos M. Mathews: Mr. Chief Justice, may it please the Court.

In the -- in the brief time we have remaining, I'd like to touch upon a -- expand the facts a little bit discussing a -- in a little more detail as applied to this case, because -- because after all, it was the facts of this case upon which the Commission's order is based.

And while numerous variations can be -- could be considered, as the Commission remarked in its report, each one of these transactions will have to be determined upon its own particular facts under the 1958 Amendment to Section 203 (c).

Now, we have in our reply brief set out in convenient form --

Justice Hugo L. Black: Which reply brief, as I think that --

Mr. Amos M. Mathews: The reply brief in 406.

It this -- this colored document, on pages 4 and 5, we have set out Exhibit 1.

The reason I particularly refer to that is because I believe the -- it's a little bit easier to refer to than the Exhibit as it is in the record because in the record, the parts of the Exhibit are printed on opposite sides of the same sheet and a little bit difficult to follow.

Justice Hugo L. Black: What page is that in the brief?

Mr. Amos M. Mathews: 4 and 5.

Justice Hugo L. Black: 4 and 5.

Mr. Amos M. Mathews: Now -- oh, I shouldn't say that we have added to the Exhibit.

The only change we have made in the Exhibit is to add column 13.

Column 13 is an arithmetical computation by which we derive the number of 100-pound bags of sugar on each load.

So by reading column 13 on page 5, you can determine the amount of load in each of the shipments.

Now, Exhibit 1, the record shows, is a representation of Shannon's, the appellees' principal sugar receivers.

It is not exclusive but these are the principal receivers and this is a representative showing of the sugar -- proscribed sugar transactions over a period of three months.

This shows a number of things but I think the most important is this.

If you scan this Exhibit 1, it shows a very -- I think the word remarkable is a fair word, remarkable sequence in that -- in these representative transactions.

Shannon knew that he could load a truck at Supreme, Louisiana, 525 miles away from San Antonio with something between 31,000 and 37,500 pounds of sugar in 100-pound sacks and carry it to San Antonio and there deliver it to the receivers of the sugar and be paid for it.

That shows a complete understanding between Shannon and the receivers of the sugar that Shannon could perform a purely transportation operation on the backhaul, contribute nothing whatsoever to the sugar but as the economist would phrase it, a change of place, utility and do it regularly and smoothly, and methodically over a period of months to basically the same customers.

Now, on page 6 of our reply brief, we have set out the repetition of the same customers.

Lawlor seven loads and Norton (ph), five, Barks (ph), three.

Now, what was Shannon contributing to that movement?

Shannon --

Justice Byron R. White: Are you suggesting that if he hadn't been in the -- engaged in the livestock business at all that he would be in trouble here for transporting property for-hire?

Mr. Amos M. Mathews: Well, if he hadn't been engaged in the livestock business at all, he wouldn't be hauling sugar back because --

Justice Byron R. White: Oh, I'm not sure of that, he might be -- he might be hauling -- you're just saying that what -- what was -- what he was really doing was hauling for-hire for his customers.

Mr. Amos M. Mathews: That's right.

Justice Byron R. White: But that's -- that doesn't depended at all on putting in the livestock business.

Mr. Amos M. Mathews: Oh no, no.

Justice Byron R. White: Where you put it?

Mr. Amos M. Mathews: Well, the livestock business is incident --

Justice Byron R. White: You don't depend on 203 (c).

Mr. Amos M. Mathews: Oh yes, indeed.

Justice Hugo L. Black: Why do you have to if that's correct?

That's what I don't understand.

As I understand it, you're saying that's a sham.

It's really a --

Mr. Amos M. Mathews: No.

Justice Hugo L. Black: -- he's really a carrying goods for-hire.

Mr. Amos M. Mathews: Well --

Justice Hugo L. Black: And if he's not really engaged in (Inaudible).

Mr. Amos M. Mathews: Well, the -- the Interstate Commerce Commission found -- the phrasing was this."

Whether or not we consider the 1958 Amendment, Shannon is engaged in transportation for-hire."

The -- the Commission found that either under the -- the so-called primary business test of the Lenoir Chair case or under 203 (c), under the 1958 Amendment.

Shannon was engaged in transportation for-hire but our point is that you don't need to go back to the primary business test of Lenoir Chair case that preceded the 1958 Amendment.

You can rely only on the 1958 Amendment because the 1958 Amendment to use a -- a shorthand phrase nailed it down.

The 1958 Amendment was clearly directed at precisely this sort of thing.

And so you don't need to go back --

Justice Hugo L. Black: But was it aimed at -- before his primary -- his bona fide, what you call entrepreneur engaged in a small business, discovering that he can buy and sell sugar for profits and that he can make more profit if he carries it for himself, bona fide, no shams, would you say he's forbidden by law to do it, by 208 (c)?

Mr. Amos M. Mathews: He is forbidden by law to do it in the way it is done here.

Here -- here the --

Justice Hugo L. Black: Well, is it because it's a sham?

Mr. Amos M. Mathews: No.

No, sir.

Justice Hugo L. Black: It's not.

You admit then that he's a bona fide broker?

Mr. Amos M. Mathews: No, sir.

No, sir.

Justice Hugo L. Black: Well, is he a sham?

Mr. Amos M. Mathews: No, no.

Justice Hugo L. Black: Is it a sham?

Mr. Amos M. Mathews: No, sir.

I -- I think if we use -- if we use those all inclusive phrases -- phrases that whether he's a sham or whether he's a broker.

Well, in the first place, he isn't a broker.

Well, to clear up one thing, he could not be a broker of transportation without a permit to be a broker --

Justice Hugo L. Black: I'm not talking about broker of sugar --

Mr. Amos M. Mathews: -- under Interstate Commerce Act.

Now --

Justice Hugo L. Black: -- of -- of sugar.

Mr. Amos M. Mathews: -- getting at -- getting at the -- getting at broker of sugar, he is not a broker of sugar because there is -- he -- he handles sugar in no other way.

In other words, a broker sits in an office and sells sugar over the telephone or buy perhaps by personal calls.

But here's what happens with Shannon.

He sends a load of livestock or some other materials in which he needs, prepared feed or that sort of thing to Southern Louisiana.

And not every time -- he doesn't do this every time but on the occasions because some other time he brings back grain and feed and things like that in his own trucks that have carried the outbound load.

But when he finds himself with an empty truck more than 500 miles away from San Antonio, it is then he goes around to the refinery and buys the sugar and one or two days later, sells that in San Antonio.

And we say, and the Committees of Congress said in reporting and recommending the 1958 Amendment of 203 (c) for passage said that that kind of thing is a transportation business.

Now, the -- the Interstate Commerce Commission found that Shannon was in two kinds of business.

He was in a warehousing business at San Antonio where he handles feed, and salt, and livestock and a -- some -- had it maintained a very small inventory of sugar that Mr. Ginnane referred to, that is one business.

Then the Commission found that he was engaged in a transportation business in the backhaul, in bringing the sugar back because this sugar that is represented in Exhibit 1 does not stop at the warehouse.

In fact, on the only identifiable occasion in the record, when one of the receivers of the sugar for some reason that is not revealed, refused to take it, one of the person he thought was going to take it didn't take it.

Shannon did not have enough room in the warehouse to store the sugar so he had to put it in a public warehouse.

In other words, his business, his -- his primary business in San Antonio is not adapted to handling truck load sugar.

He had to put it in a public warehouse and his testimony is in the record that he simply couldn't make any money that way on this transaction because of the loading and unloading charges and the public warehouse cost.

The -- the charges he had to pay for public warehousing.

In other words, the -- the sugar transportation from -- by truck load from Louisiana to San Antonio is a pure transportation business.

It's a separate business the Commission found on the facts --

Justice Hugo L. Black: -- service though, and its one of the oldest practices I know of, I've known it yet over 50 years ago and people weren't.

They were (Voice Overlap) --

Mr. Amos M. Mathews: Buy and sell (Voice Overlap) --

Justice Hugo L. Black: -- basic in the mercantile business.

Go and do something and then buy something at a profit and bring it back and sell it, buy something and make it -- sell it for profit and bring it back.

Mr. Amos M. Mathews: Well --

Justice Hugo L. Black: Did that make him -- is that what's intended to be covered here?

Maybe it is.

Mr. Amos M. Mathews: Yes, it is.

Justice Hugo L. Black: (Voice Overlap)

Mr. Amos M. Mathews: Yes -- yes, Your Honor, it is.

I might -- I might remind you of this, that 50 years ago, anybody could go out and buy a truck and engage in transportation for-hire.

But that was ended in 1935.

Justice Hugo L. Black: But the man I'm talking about wasn't engaged in transportation, he was a merchant.

Mr. Amos M. Mathews: Well --

Justice Hugo L. Black: He had his own vehicle.

He used them.

Mr. Amos M. Mathews: Alright and in the 1958 Amendment to Section 203 (c), Congress has said in the reports of the Committee make it entirely clear that that was their purpose and the language is --

Justice Hugo L. Black: Why didn't the language be cleared, did your Association have this -- get -- urged this to be passed for that purpose.

Mr. Amos M. Mathews: The Transportation Association of America whom I do not represent urged that it'd be enacted for this purpose.

Justice Hugo L. Black: And that's -- well, why didn't they put a language that had fit it better, so we wouldn't be troubled with it.

Mr. Amos M. Mathews: Well --

Justice Hugo L. Black: I don't understand that.

Mr. Amos M. Mathews: Well, if you -- if you read it -- if you read the -- the -- they're the language that's in parenthesis, no person shall engage in transportation in a -- in a business other than transportation -- in -- the -- the business to be exempt, must be a business other than transportation.

Justice William J. Brennan: Well, may I ask Mr. Mathews, is it as simple as this, speaking only of the 1958 Amendment.

Apparently, the first element is that the person involved must not be involve -- engaged in the transportation business.

He must be engaged in some business but not in transportation business.

That's the first one.

Mr. Amos M. Mathews: That is correct.

Justice William J. Brennan: The second requirement is that he can't hold on anything for a business purpose for any business purpose unless that business purpose is in furtherance of a primary business enterprise in which he's engaged, is that it?

Mr. Amos M. Mathews: Other than that --

Justice William J. Brennan: That doesn't make him a -- that doesn't put him in the transportation business.

It merely says that as I read it, if he's in some business other than transportation and he holds something for a business purpose, that which he holds must be for a primary business purpose of his own.

Mr. Amos M. Mathews: Other than transportation.

Justice William J. Brennan: Well, other than trans -- that doesn't put him in the transportation business.

This fellow is not in the transportation business, is he?

Mr. Amos M. Mathews: He is when he -- he is when he takes a truck under the 1958 Amendment.

He is when he takes an empty truck and picks up a load of sugar.

Justice Hugo L. Black: Well, is it intended to make it illegal?

Maybe it is.

It's quite a waste but maybe it is.

Congress has the right to do it if he intended to make it illegal for a man who sees when he's -- has something, he's at a place where the truck doing his own business for him to go in an additional business of buying something and selling it when he gets back in order to make an additional profit, is that what you're saying then?

Justice Hugo L. Black: Precisely, Your Honor.

Justice Hugo L. Black: Well if that -- if that's right, then it undoubtedly, you're -- you're correct.

But it seems to me like they use very inept language --

Mr. Amos M. Mathews: Well --

Justice Hugo L. Black: -- to say that.

Justice Byron R. White: The jury here does not --

Justice Hugo L. Black: The Interstate Commerce Act is phrased in general language, and that it has been left to the Commission to deal case by case with situations --

Justice Hugo L. Black: But it doesn't -- in some language they had authorized him to do something in a case.

Justice Byron R. White: Well, we have set this out more fully.

I would like to save just a few minutes for reply argument.

We have set these -- our arguments out more fully in our briefs but as -- as a general position, we stated that in an answer to your last question, yes, that transfer -- that transaction is forbidden by 250, 1958 Amendment.

Thank you.

Chief Justice Earl Warren: Mr. Wolff.

Argument of Walter C. Wolff, Jr.

Mr. Walter C. Wolff, Jr.: Mr. Chief Justice, may it please the Court.

The appellees understand the problems of the appellant carriers in this case.

They are regulated and argued to protect all of their rights which is certainly what they should do.

However, the appellees believe that the small businessman should not be made to sacrifice any of his rights just because or that the -- there should be any further granting of rights to the appellant carriers by taking them away from the small businessman.

The appellees believe that they are in a general mercantile business and that certainly, they should be allowed and able to buy and sell their own products, transport those products in their own trucks and cannot imagine that Congress would have intended otherwise.

A very important case, as far as the appellees are concerned in this particular field is the Taylor versus Interstate Commerce Commission case which is cited in our brief.

In that particular case, a carrier bought some lumber, finished lumber in one state and transported it to retailers in another state.

The retailers purchased an FOV of that particular state.

They didn't know where the lumber came from, who owned it.

The carriers actually purchased the lumber under preexisting contracts.

In other words, they wouldn't go out and buy the lumber until they had a sale for it.

The Court nevertheless held that the carriage was private.

But the reason that I mentioned that particular case at this particular time is that the Court discussed the congressional intention of the Motor Carrier Act and the Transportation Act in that particular case.

The Interstate Commerce Commission in the case argued that it was a policy of Congress to require a liberal interpretation of the Act in favor of holding Taylor to be a contract carrier as opposed to a private carrier.

The Court says that the word liberal in that connection was -- and the word it used was a weasel word.

That the Court then quoted from the policy of the Act that it was the national transportation policy to provide impartial regulation of all modes of transportation to protect and to serve the inherent advantages of each.

And one of those modes of transportation that Congress evidently felt had inherent advantages is private carriage and that there should be no rule of interpretation more liberal for contract or common carriage on the one hand as for private carriage.

The Court even mentioned that the Congress has always desired to protect the smaller businessmen and for that purpose has even set up committees to study legislation therein.

So proceeding on the assumption that private carriage deserves at least as much protection by the courts as other forms of transportation, what are the particular facts in this case?

The record clearly shows that as a result of the routine investigation, the hearing was held and ordered and the facts disclosed that the appellees were in the business of buying and selling many products, livestock in the feed mill business.

They bought and sold corn, oats, wheat, bran, molasses, sugar, salt, fertilizers and everything in the feed line.

It didn't say everything else in the feed line but everything in the feed line so that we quarrel that the attempted division of everything else in one category such as feed and sugar, separate in apart in another category because it --

Justice Byron R. White: Well, what -- what is sugar used for in the feed line?

Mr. Walter C. Wolff, Jr.: It is not.

However, there is -- under the testimony, there is no evidence to show that other of these items are necessarily used in the feed line.

Justice Byron R. White: Well, I know but the other items didn't have to be involved in this case.

Mr. Walter C. Wolff, Jr.: No sir, however, the --

Justice Byron R. White: But sugar was.

Sugar was and it wasn't involved in the feed line.

Mr. Walter C. Wolff, Jr.: Yes, sir.

Justice Byron R. White: You sold it -- you sold it to dealers of sugar.

Mr. Walter C. Wolff, Jr.: That is correct.

However, in the argument of the appellants, they attempt to show that we have one mercantile business on the one hand which is only feed and related products and that sugar in an entirely different type of business on the other hand so that we're not really in a general mercantile business of all the products but only a general mercantile business of all but sugar which is separate and distinct.

Justice Byron R. White: Yes, but the question was what if sugar was connected with either one of your other primary businesses and they wouldn't make any difference whether it was livestock business or the feed business, sugar wasn't related to either one of them, they have still made their point.

Mr. Walter C. Wolff, Jr.: Well, to -- proceeding along that line, actually, insofar as many other products are concerned for example salt, there is no evidence in the record that salt a -- that particular salt involved had anything to do with feed.

However, the record is clear that the -- the appellees have been hauling salt exactly the same way that they were hauling sugar.

Justice William J. Brennan: What you're saying is that (voice overlap) feed business of the live -- livestock business, that you're in a general mercantile business and that is your primary business.

Mr. Walter C. Wolff, Jr.: Yes, sir.

Justice William J. Brennan: And that that happens to include among other things that sugar and salt as well as grain and so forth.

Mr. Walter C. Wolff, Jr.: Yes, sir.

Justice William J. Brennan: That's what you're saying.

Mr. Walter C. Wolff, Jr.: And further that the -- for example salt which is not in the record shown to -- to be the particular type of salt that's used in feed, the -- they purchased prior to pur -- purchasing sugar and at the time of the hearing in -- in the record, the salt in the same manner as a purchased sugar without any question.

Justice William J. Brennan: Well then you would say that within this 1958 Amendment, you don't have any primary business, you'd have only a single primary business enterprise namely a general mer -- mercantile business enterprise and if this hauling of sugar was incident to that single primary business of general mercantile, (Inaudible)?

Mr. Walter C. Wolff, Jr.: Yes, sir.

Justice Byron R. White: Well, the trouble with that is that you have to -- the -- the Commission found against you as a matter of fact.

I mean you have to upset some findings of the Commission.

Mr. Walter C. Wolff, Jr.: Yes, sir and -- but however, we believe that the evidence in the case that eventually no substantial evidence upon which to base the findings that the Commission made concerning the fact that we are not private carriers.

Justice William J. Brennan: And that's -- the three-judge court held, wasn't it?

Mr. Walter C. Wolff, Jr.: The -- yes, sir.

Justice Hugo L. Black: Suppose -- suppose they had shown -- you had to agree with its own that your claiming to be in the mercantile business as a local -- local (Inaudible) but in reality, a sham and you're utilizing -- practically as running a transportation business and making your profit by altogether out of the fact that you do it in such a way that they pay you what your transportations were.

What would you say if they had those facts and those were the terms?

Mr. Walter C. Wolff, Jr.: I believe that is the entire point of the whole case.

The question of whether or not this is a sham or a subterfuge or whether or not we are a bona fide a -- a merchant.

Justice Hugo L. Black: You agree that if it is a sham -- if it's a sham, if they found it and found on certain facts, then you would be covered.

Mr. Walter C. Wolff, Jr.: Yes, sir and I believe that is what the -- the congressional amendment meant and in -- at a later point, I'll discuss some of the congressional hearings that were attached to the Interstate Commerce Commission's report concerning the intention of the Act.

Justice Hugo L. Black: Your argument is that they did intend to put a man out of business because he -- he was buying and selling different things simply because he transported them himself.

Mr. Walter C. Wolff, Jr.: No, sir but that -- it's necessary to show that there are some sort of prearranged plans, some sort of sham, prearranged plans to -- between the -- the transporter and the ultimate purchaser, so to enable that purchaser to receive transportation at a reduced cost, and that is the exact language that the committee -- the congressional committee has used when the -- they were discussing the passage in the amendment of -- of the Acts pertaining to Section 203 (c).

Justice Hugo L. Black: You deny that the act of your -- guilt in violation of this depends on how much you bought and sold of one product and how much you bought and sold of another.

As Justice Brennan said, if your primary business was to buy and sell.

Mr. Walter C. Wolff, Jr.: Yes, sir and we also believe that the evidence shows that we do a considerable sugar business in comparison with other businesses, is not a large concern but the -- if sugar operations are on a parity with their other operations.

Justice Hugo L. Black: These -- do these figures show that you got a -- made it private on this?

Mr. Walter C. Wolff, Jr.: Yes, sir.

They -- they showed -- we made a --

Justice Hugo L. Black: Was there any efforts in the -- was there any effort to show that the profit you made was amounted in -- in the long run or any other time to the equivalent only of the -- what it cost to transport it.

Mr. Walter C. Wolff, Jr.: We showed that what the going market profit was in San Antonio at the time of the hearing for a sugar merchant which was 25 to 35 cents per 100 pounds and according to the Exhibit which is the Interstate Commerce Commission's own selection of what they consider representative sales, it shows that we made about 35.7400 cents per 100 pounds for those particular sale.

Justice Hugo L. Black: He's not only claimed he's been a merchant, but was successful with that.

Mr. Walter C. Wolff, Jr.: Well, that we were -- we were making what the -- that on the high range of what the merchants, sugar merchants in the San Antonio area were making at that particular time.

Justice Byron R. White: The only trouble with that is that the sugar merchant -- the other sugar merchant had already paid his -- the -- the transportation is already in it.

Mr. Walter C. Wolff, Jr.: Well, of course there's no evidence in the record as to how other --

Justice Byron R. White: Your 35 cents -- your 35 cents -- you made 35 cents over the price -- price you paid to Louisiana, didn't you?

Mr. Walter C. Wolff, Jr.: Yes, sir.

Justice Hugo L. Black: (Voice Overlap) --

Justice Byron R. White: And that leaves -- is that accounted for what it cost you to bring the sugar to --

Mr. Walter C. Wolff, Jr.: Yes sir.

And that's the reason we're probably on the high side but there are certainly other factors that are involved such as bookkeeping expense, administrative salaries, unloading cost, loading cost, bad debts, the risk of physical loss, the things of that nature which may bring us down to the middle or the low side but there of course, there's no specific evidence on that in the record.

Justice Hugo L. Black: Do you agree however as I understand it that if they had shown, made findings on the facts substantial evidence that in reality, the profits you made was the equivalent only of the -- what the regular transporters got then they would have the case against you.

Mr. Walter C. Wolff, Jr.: No, sir.

I -- I wouldn't go that far, I would say that would be an important factor of course along with many other factors.

Justice Hugo L. Black: But -- but I'm talking about if they found on substantial facts that that was it, that you're really just making money out of transportation rather than buying and selling and stuff.

Mr. Walter C. Wolff, Jr.: Well, I -- I would say that if they found that our dealings were really a -- a sham and a subterfuge then there were some sort of agreements preexisting either implied or in fact that we were really permitting the purchasers to receive transportation at a reduced cost that that we would then be in violation of Section 203 (c).

Justice Arthur J. Goldberg: (Inaudible)

Mr. Walter C. Wolff, Jr.: Yes, sir.

Justice Arthur J. Goldberg: (Inaudible)

Mr. Walter C. Wolff, Jr.: Yes, sir.

Justice Arthur J. Goldberg: (Inaudible)

Mr. Walter C. Wolff, Jr.: Yes sir, I have it here.

Justice Arthur J. Goldberg: (Inaudible)

Mr. Walter C. Wolff, Jr.: The -- the statute certainly does but the -- the question is, what is a -- in furtherance of a primary business enterprise.

And --

Justice Arthur J. Goldberg: (Inaudible)

Mr. Walter C. Wolff, Jr.: No, sir.

I --

Justice Arthur J. Goldberg: (Inaudible)

Mr. Walter C. Wolff, Jr.: Well, Your Honor, I feel that --

Justice Hugo L. Black: May I ask you this beforehand, does --

Mr. Walter C. Wolff, Jr.: Yes sir, the --

Justice Hugo L. Black: -- and the -- and the statute says what he said.

Justice Arthur J. Goldberg: (Inaudible)

Mr. Walter C. Wolff, Jr.: Well the --

Justice Hugo L. Black: Have they any statute that substitutes the words he substituted.

Is there any indication that Congress here desired to make it unlawful for men to engage in a general mercantile business, by saying, "Well, we're going to pick out one of them, if you engage in two -- since we're engaged in buying two or three things, then you will execute your primary business as the one we select and you'll be a criminal."

(Voice Overlap) --

Mr. Walter C. Wolff, Jr.: Of course all -- all we have on it other than the literal language of the statute is the -- or the hearings before the committees prior to the amendment of the Act.

And if I may quote a portion of it, it was -- it was quoted from -- by Mr. Ginnane with a statement, there is more but it's in our brief, but the -- the more part that's in the brief I feel is very, very important for a consideration of this particular fact situation in -- in the interpretation of what Congress meant by the Act.

This is from the House Report and this is attached by the Interstate Commerce Commission to their opinion in the case and is found in the record.

In addition, business which use their own trucks to deliver their own merchandize or purchasing goods at or near the final point of delivery of their own merchandize and transporting such goods to places near their own establishments for sale to others.

Such transportation is usually performed solely for the purpose of receiving compensation for the otherwise empty return of their trucks.

And that's where Mr. Ginnane stopped.

Now, the next sentence is, "Sometimes, the purchase and sale is a bona fide merchandizing venture.

In other instances, prearranged plans are setup in order that the real consignee may receive transportation at a reduced cost.

So that I feel that -- that this whole case are -- a major portion of it is an interpretation of what Congress meant in the passage of this Act, what do this language mean and is not Shannon under the facts a -- in the primary business of buying and selling many items including sugar --

Justice John M. Harlan: But then you're up against even on that rational aren't you, you're up against the Commission's findings which are against you.

Mr. Walter C. Wolff, Jr.: No sir, I don't believe so because actually, there is -- there's really no evidence in the record to (Inaudible)

Justice John M. Harlan: But they didn't find -- they did find it against you.

Mr. Walter C. Wolff, Jr.: They did find but not based on substantial evidence.

The examiner found all facts in favor of the individual.

Justice John M. Harlan: Yes, but when the -- when the Court -- when the lower courts set aside the Commission's findings, it did so without reference to 203 (c) finding.

Mr. Walter C. Wolff, Jr.: Yes, sir, however, I might mention this to the Court.

The -- all the factors that are involved in the particular case, in an interpretation of 203 (c) are mentioned by the Court in its findings.

Just the specific designation of the statute is not mentioned and the same judge that passed on this case, one of the three judges in the three-judge court, Judge Brown who was the Circuit Judge on the court, prior to that time, would be the two cases were argued at the same time but the other case was decided first which is the Church Point case, its cited in the brief, found for-hire carriage in a different fact situation with an exhaustive discussion of the primary business test.

So I don't know what --

Justice Hugo L. Black: On that issue -- on that issue, what app -- what application do you think that Universal Camera ruled last year into this -- what the courts got in here?

Mr. Walter C. Wolff, Jr.: Well, we -- may it please the Court, we -- the Universal Camera case, as I understand it, states that in a situation where there a hearing examiner has -- who has lived with the case and heard the -- the evidence has made certain findings that a Commission's finding to the contrary is really less substantial.

And further, it is a -- a case where simply because there is some evidence or scintilla of evidence to support one finding that that should be weighed and considered by the Court even to a greater degree in a situation where a hearing examiner who's heard the evidence and this is a fact case based upon a factual situation, and the hearing examiner who has heard those facts and has found that the facts were believed by the witnesses that -- as they testified to them and we have a fact situation that is more or less established or at least, the Court should give considerable weight to the situation, in a situation where the question is, was there a sham or a fraud or a subterfuge insofar as the facts are concerned.

Justice Hugo L. Black: As I recall, I'm -- I maybe -- maybe wrong, Universal Camera case indicated that we were compelled now to give more weight to the action of the -- of the judge to whom these cases had been somewhat turned over to decide.

And we previously had because we had been simply saying that if there's a dispute in the evidence, that entry but as I recall it in the Universal Camera, we said that was no longer the rule because Congress had said that we should not follow such a rule.

Mr. Walter C. Wolff, Jr.: Yes, sir.

I believe the Administrative Procedure Act was cited in --

Justice Hugo L. Black: That's right.

Mr. Walter C. Wolff, Jr.: -- the language that I -- I just paraphrased it in my notes here but I believe it states that evidence supporting a conclusion maybe less substantial when an impartial experienced examiner who has observed the witnesses and lived with the case has drawn different conclusions from the boards.

If I might get into the -- the particular facts insofar as -- as this --

Justice William J. Brennan: Mr. Wolff, may I -- may I just ask --

Mr. Walter C. Wolff, Jr.: Yes sir.

Justice William J. Brennan: -- a question before you do that, do I understand you to say a moment or so ago or suggest when you asked us to do -- listen to you with what followed what Mr. Ginnane had read from the legislative history.

He said -- suggested something that -- about prearrangement, do you read the 1958 Amendment as proscribing only that kind of thing which, in effect, would be a prearrangement between your client and the purchasers of the sugar, in effect, by this device to act as carrier for them of this sugar with (Inaudible) consignees?

Mr. Walter C. Wolff, Jr.: Yes, sir.

A -- a -- with this qualification, that possibly it's not only some specific prearranged plan but some type of sham or device used whereby it is evident --

Justice William J. Brennan: But -- but the essential thing has to be that in -- in actual facts, you're doing something in the way of transportation for somebody else.

Mr. Walter C. Wolff, Jr.: Yes.

Justice Byron R. White: For-hire, for-hire.

Mr. Walter C. Wolff, Jr.: Yes.

Justice Byron R. White: When in fact you're a for-hire carrier.

Justice William J. Brennan: Is that it --

Mr. Walter C. Wolff, Jr.: Sir?

Justice William J. Brennan: Is that --

Mr. Walter C. Wolff, Jr.: Yes, sir, I believe --

Justice William J. Brennan: And you say here that there isn't any evidence, sufficient evidence support any findings that in that sense, there was any prearrangement between you and the ultimate purchasers of the sugar.

Mr. Walter C. Wolff, Jr.: Yes, sir.

And I believe that -- the reason I wanted to get into the facts is that I want to -- to try to show that this is not a situation where Mr. Shannon has a big driving business on one hand and then just hauls a little sugar back.

That -- that's not the facts at all that the examiner in making his findings and the evidence clearly reflects that the major portion of the assets of this company are not tied up at any transportation facilities which in other cases has been held to be a very important factor in which the District Court in this particular case comments upon.

The major portion of the salaries of the company are not tied up or paid to truck drivers.

He has never held himself out to the general public to haul for-hire, has never been engaged in any major truck operations.

All these were findings made by the examiner that were substantiated clearly in the record that there were no identifiable transportation charges made by Shannon to the purchasers of the sugar or any formula to asses those transportation charges but instead, his sales are governed solely by the market price of sugar in the San Antonio area that he purchases the sugar, taking title in his own name, bears all the losses that maybe involved on the same and attempts to sell the sugar as quickly as possible since the record clearly shows that the price on -- in sugar breaks very rapidly.

The margin of profit is very, very narrow and the commodity deteriorates very quickly.

As Mr. Ginnane had said it's -- it's like cash money except that the -- the dollar possibly doesn't deteriorate so fast in --

Justice Hugo L. Black: What -- what name do they do business? I haven't seen that.

Mr. Walter C. Wolff, Jr.: E. & R. Shannon Company.

It's -- actually, the reason I speak of Shannon only is that this was a company that a father and son rented, R. Shannon is -- was the son and E. Shannon was the father.

And when he died, his mother -- Richard Shannon's mother inherited a portion of the company and they continued to do business under the name of E. & R. Shannon and they just substituted the name Emma (ph) Shannon.

Justice Hugo L. Black: Where was his home place of business?

Mr. Walter C. Wolff, Jr.: San Antonio, Texas.

Justice Hugo L. Black: San Antonio, Texas.

Mr. Walter C. Wolff, Jr.: That it was not the appellees' practice to take orders for the sugar and then to purchase it, that they sell the sugar for the going market profit in the San Antonio area.

I might mention in response to a question that was asked Mr. Ginnane.

It's clearly developed in the record that the word consignee that is used on Exhibit 1 that was referred to was merely the word that was selected by the representative of the Bureau of Inquiry and Compliance and the record clearly shows that it was an error and that the word that should have been used was the word purchaser.

The Exhibit --

Justice Potter Stewart: Mr. Wolff, the -- Section 203 (c) was passed long after the -- these proceedings ever started.

Mr. Walter C. Wolff, Jr.: Yes, sir.

Justice Potter Stewart: And in fact just a few months before the Commission made its decision, do -- do you make any argument that if that that statute is not applicable with these proceedings?

Mr. Walter C. Wolff, Jr.: Yes, sir.

Toward the end of our brief, I think are the last section.

We referred to that that the appellants argued that the Ziffrin case is in point, insofar as this particular case is concerned but we contend that that the Ziffrin case was not in point because that involved a situation where there was an affirmative request by an individual to have a permit granted.

And that in this particular case, there is a charge that has been made under a section of actual findings that were made that there was a violation of one or the other of two mutually exclusive sections without ever determining which one was involved, and that at least we should be entitled to be charged with the particular section that -- that they claim that we have violated.

Justice Potter Stewart: Well, do you think that's the reason that the District Court didn't even mention 203 (c)?

Mr. Walter C. Wolff, Jr.: No, I -- I really don't know Your Honor.

Justice Potter Stewart: Did your -- did -- was it argued to the District Court that 203 (c) could not be applied to this case because it was not enacted until long after these proceedings were initiated?

Mr. Walter C. Wolff, Jr.: I believe it was mentioned but I don't -- it wasn't actually argued in the oral argument and I doubt seriously if that is the basis of the opinion because the Court --

Justice Potter Stewart: (Inaudible) if I can just say this.

My -- as I read the District Court's opinion, it says that the Interstate Commerce Commission went hay -- haywire in saying that these people were either common or contract carriers.

They were operating without appropriate authority in violation of 206 (a) or 209 (a).

And I, myself, would -- could quite understand why the Court so held because it's difficult for me to see these people as either contract carriers or -- or public carriers.

But 203 (c) doesn't require any such finding that they're contract carriers or carriers for-hire or common carriers.

It simply prohibits certain -- that carriage bypass a -- by person who fill the certain description.

Mr. Walter C. Wolff, Jr.: Yes sir, except that it's not really the appellees' fault because the situation was that the -- the action was brought against us under Section 206 -- 306 (a) or in 309 (a), (Voice Overlap) --

Justice Potter Stewart: That's what I understand, that's the reason I'm asking whether or not you -- it is your claim now or -- or has been ever drawn in these proceedings that 203 (c) is not applicable to you because it was not enacted until long after these proceedings were initiated.

Mr. Walter C. Wolff, Jr.: We have raised that -- that point but certainly that's not our -- our only contention because we believe that -- that that is a -- a technical defense, at least that's what we've called it but that from the facts, there has -- we have a primary business of buying and selling many items including sugar.

And further, in the first place, there are two possible ways to interpret the Act - one a broad way, one a more narrow interpretation.

Justice William J. Brennan: Well, may I ask you right there Mr. Wolff?

Mr. Walter C. Wolff, Jr.: Yes sir.

Justice William J. Brennan: This gets back to the question I asked you before.

If you interpret the 1958 Amendment as saying a private carrier can't do this.

You might be in trouble but if you interpret the 1958 Amendment as saying, a private carrier, who went on a particular transaction is not in fact so -- to use my own words from -- from Drum, although I don't know where I got it, or I got it from the legislative history, not a pseudo private carrier, meaning thereby that you're not in fact a private carrier but you're really one for-hire.

If it works that way then I gather you say on this record, you're free and clear.

Is that right?

Mr. Walter C. Wolff, Jr.: Well --

Justice William J. Brennan: If -- if this -- if this is a prohibition against the bona fide private carrier doing precisely this, if that's what the 1958 Amendment is, then aren't you in trouble?

Mr. Walter C. Wolff, Jr.: Well, we believe of course that it depends upon the interpolate -- interpretation of what is --

Justice William J. Brennan: What was that --

Mr. Walter C. Wolff, Jr.: -- a primary business enterprise.

Justice William J. Brennan: Well that's -- well, that's -- that's what I'm suggesting.

Mr. Walter C. Wolff, Jr.: And --

Justice William J. Brennan: If this is a prohibition against a bona fide private carrier doing something, that's one thing.

When there's -- there's a prohibition only when the private carrier accessed a pseudo-private carrier and is actually acting as a contract for-hire that might -- what might bring about a very different result.

Mr. Walter C. Wolff, Jr.: Yes, sir, although our position is that when the language and -- unless such transportation is within the scope and in furtherance of a primary business enterprise other than transportation of such persons (Voice Overlap) --

Justice William J. Brennan: Certainly, that wasn't transportation to what suggests being a fully private carrier, doesn't it?

Mr. Walter C. Wolff, Jr.: Yes, sir.

And the question boils down to -- well, actually two things.

First, we don't believe that -- that the -- the test of this primary business enterprise should be so narrowed and restricted so that we must show that we are a primary business only insofar as sugar is concerned but it is -- the Court should look at the record as a whole and the business as a whole and our operation as a whole.

That's the first point.

The second point is we feel that we have -- can show and the facts do show that we are really in the primary business of buying and selling sugar.

And --

Justice Potter Stewart: You can be a -- I'm sorry if you're still answering Justice Brennan.

I don't want to interrupt you.

Mr. Walter C. Wolff, Jr.: No, sir.

Justice Potter Stewart: I beg your pardon, you -- you think that the District Court applied the statute -- the standard which the 1958 Amendment of 203 (c) requires it to apply?

Mr. Walter C. Wolff, Jr.: Yes, sir.

I definitely do because under the language of all the briefs in this case, insofar as the appellant is concerned and the Interstate Commerce Commission in their opinion specifically state that 203 (c) didn't change the law in any way but merely codified what was being interpreted by the courts and by the Interstate Commerce Commission prior to the Amendment, has made specifically a portion of the Act.

Justice Potter Stewart: And so what did the Commission said about that?

Mr. Walter C. Wolff, Jr.: But we feel, of course, that in their opinion, the Interstate Commerce Commission reads something more into the Amendment that is really there.

They see -- seem to read into the Amendment a further requirements and then really the -- the primary business test was designed to -- to prevent it.

Justice Hugo L. Black: Do you say that the determination of whether you are -- or saying in your private or primary business does not depend on the commodities you carry measuring between them to see which one you can carry the most of, but depends on whether or not your primary business is buying and selling commodities out of which you can make a profit.

Mr. Walter C. Wolff, Jr.: Yes, sir.

That at least that those are all factors going into the entire picture just like in all the cases, it's necessary to -- to scrutinize the entire operation to determine -- is this man a bona fide carrier, a private carrier of his own materials or is this a situation where there is either some implied or actual fraud or subterfuge or an intention to get around the specific provisions of the Act and to evade the principles of the Act.

Justice Hugo L. Black: Well suppose you would carry 90% of wheat and other things that you can buy 10%.

As I understand it, what you say is that you would be in the business of buying and selling for a profit and you wouldn't -- your primary business wouldn't be judged by the fact that you carried more wheat than anything else -- that you bought more wheat than anything else.

Mr. Walter C. Wolff, Jr.: No, sir.

In -- specifically the Act says a primary business, not the primary business enterprise which would mean that an -- an individual can evidently have more than one primary business.

And I might mention at this point that -- that --

Justice Hugo L. Black: You've been dealing more than one commodity.

Mr. Walter C. Wolff, Jr.: Yes, sir.

And I might mention that actually the Congress did not go as far as the recommended committee reports that were appended to the Interstate Commerce Commission report because the Senate Committee requested the use of the word solely in the Act that solely within the scope and in furtherance of a primary business and the Act was not passed without a word in it which would indicate to some extent, the intention of Congress when the Act was passed.

Also, the Interstate Commerce Commission and this is in the record in the case, argued to change the definition of private carrier which was not done and the Committee Reports specifically state that there was no intention to unsettle the primary business test which indicates to me that there was certainly no desire to change the law in any way, shape or form that it was but to try to codify it.

Now, whether it's made it clear or a more confusing of course is -- is another matter.

I might mention this, may it please the Court and that is that when we're talking about volume, the evidence shows that there were 517 bags or 51,700 pounds of sugar in Shannon's inventory at the last inventory taking date immediately prior to this particular hearing which maybe considered a small amount or maybe considered a large amount but it's our position that that is a large amount of sugar considering the type of material and merchandises involved.

The only other reference to any number of pounds that is found in the record that I could find was the testimony of Mr. Whitehead (ph) who was the representative of the Bureau of Inquiry and Compliance, the investigator for the Interstate Commerce Commission and it's found on page 75 of the -- of the record where he states, "From my observation I went by the warehouse one time and the gentleman in charge was not there so I did not invade the premises.

However, I did look in the front door and there were several thousand pounds of feed stuffs stored in that warehouse."

That's the only comparison we have as to the amount of feed stuffs that he may have had as opposed to the amount of sugar.

But I don't believe that the -- the specific amount is -- it's certainly a factor but it's not important at least to the extent that the record has shown that we have a considerable amount of sugar in the inventory and the record further discloses that frequent sales and less than carload lots are made.

And by examining the representative sales that are set out on Exhibit number 1 that was prepared by the Bureau of Inquiry and Compliance and introduced into evidence in this particular case from looking at the sales slips' numbers.

It is obvious that less than a third of the sales that the -- Shannon made during this representative period of time were actually included in the Exhibit and even these particular sales show that Shannon was selling or obtaining approximately the market price for sugar in the San Antonio area.

Justice John M. Harlan: Would you be able to get a certificate from the Commission to carry on this operation?

Mr. Walter C. Wolff, Jr.: I don't know, Your Honor.

I -- we have -- have assumed that we would probably not be able to but --

Justice John M. Harlan: I was just wondering whether you could.

Mr. Walter C. Wolff, Jr.: -- of course that's a problematic thing.

I don't know if there's any necessity that we could show before that.

Of course that's a matter we haven't gone into.

Justice John M. Harlan: Well, you are -- I thought -- there's no kind of a certificate that they could issue for this, is there?

Mr. Walter C. Wolff, Jr.: Not specifically.

I'm afraid we'd have to either get a common carrier certificate or a -- or a permit common carrier (Voice Overlap) --

Justice John M. Harlan: Was this (Inaudible)

Mr. Walter C. Wolff, Jr.: -- contract carrier.

Justice William J. Brennan: Mostly, you're only permitted.

Mr. Walter C. Wolff, Jr.: Yes, sir.

Justice John M. Harlan: A contract carrier for yourself --

Unknown Speaker: (Inaudible)

Mr. Walter C. Wolff, Jr.: Yes, sir.

Justice Potter Stewart: But here your whole argument I suppose --

Unknown Speaker: (Inaudible)

Justice Potter Stewart: Your whole argument depends upon the -- the proposition that you couldn't get a certificate from the Commission because you're not on the business of carriage.

Mr. Walter C. Wolff, Jr.: Yes, sir.

Justice Potter Stewart: Or transportation for-hire -- so then your answer or your -- your position is a resounding no, I should think.

Mr. Walter C. Wolff, Jr.: Well, of course, I -- I agree with -- with what the Court has said in that regard.

If we are prohibited by this Court and are called something other than private carriers, although we believe that we are, then we approach the Interstate Commerce Commission and say, "What are we?

Are we common -- are we contract carriers or common carriers?"

And that is a -- a matter that we raised and what we call our technical defense to this matter.

The Commission found we're either a common carrier or a contract carrier, of course, made no findings to support that -- because there's no evidence to support that and without telling us which or without giving us a chance to know in case we want to change our operations, do we cease holding ourselves out to the public which a common carrier would have to -- would do or cease the continuing contracts that we're suppose to have if we were contract carriers.

Justice Potter Stewart: But why is the suggestion -- the question I was asking you earlier was, if 203 (c) as amended in 1958, does not require any finding that you're either a contract carrier or a common carrier and simply forbid -- prove -- forbids your transportation in Interstate Commerce of articles if you come under the -- the description in that very section.

Mr. Walter C. Wolff, Jr.: Because --

Justice Potter Stewart: That was the change made in the -- in that 1958 Amendment as I see it.

Mr. Walter C. Wolff, Jr.: Except that the Interstate Commerce --

Justice Potter Stewart: Not a change in the standards in primary business.

Mr. Walter C. Wolff, Jr.: Yes, correct.

Correct.

Justice Potter Stewart: But the change in the -- words that you -- you don't need anymore to be found -- to be either a contract carrier or a common carrier.

It simply have come under that definition.

Mr. Walter C. Wolff, Jr.: The --

Justice Hugo L. Black: Excuse -- excuse me.

(Inaudible)

Mr. Walter C. Wolff, Jr.: No, sir.

I was --

Justice Hugo L. Black: May I ask you if -- if there have been efforts made since the very first Act was passed to require people who share their own goods to get certificates from the ICC.

Mr. Walter C. Wolff, Jr.: Not that I know of, at least insofar as I'm concerned to my clients --

Justice Hugo L. Black: Was that discussed in the original passage of the Act?

Mr. Walter C. Wolff, Jr.: I -- I -- not in the --

Justice Hugo L. Black: I assume they have the --

Mr. Walter C. Wolff, Jr.: The reports that I have read, it is in the record of the case that I can recall.

The only question -- the only matters that were appended to the Interstate Commerce Commission's opinion were the discussions concerning what the Act -- why it is necessary to have an amendment and what should actually be included in it but I don't --

Justice Hugo L. Black: What do you think was meant by the heading of the House Report "pseudo-private carriage"?

Mr. Walter C. Wolff, Jr.: I believe that it -- it is meant some sort of a prearrangement of plan, some plan whereby the consignee is receiving transportation at a reduced cost and if that is what the Congress had in mind --

Justice Hugo L. Black: In other words, it can.

Mr. Walter C. Wolff, Jr.: -- when it passed the Act.

The appellants in their brief and in their argument state that the Court below exceeded its permissible limits of authority in deciding the case in the court below as it did.

The appellees believe that the trial -- this is not a case where the trial court improperly substituted its own judgment for the administrative judgment but instead, the facts in the case are virtually undisputed.

The -- it is really a law question involved as to whether or not the primary business test as codified by Section 203 (c) is to be extended to a fact situation such as this particular case.

And if the -- it is not to be so extended, there is absolutely no evidence or at least there is no substantial evidence in the record to support that conclusion and the conclusion that was reached by the Interstate Commerce Commission.

The appellees have said before and have said in their brief and will say it again that they certainly do not quarrel with the fact that the Interstate Commerce Commission has done a -- an excellent job in this particular field, in the -- in the field of commerce nor that they do not always have the best of intentions in the filing of particular actions which they, under the law, are required to bring and file.

But no institution or agency is of course perfect and in a situation where with the best of intentions, an agency tries or attempts to regulate an individual and interfere with the -- a bona fide business.

We feel that it is a duty of the courts to scrutinize the situation and with -- that is what the trial court did in the case at bar.

The appellants have cited several cases in their briefs in support of their position and the appellees have -- in their briefs have replied to those and will not go to the Court now by going into the various fact situations but there is one case, the Cahaba Steel case that was mentioned by Mr. Ginnane that was not referred to by the appellees in their brief mainly because we didn't have access to the loosely volume that it appeared in at the time that we wrote our brief.

It is -- there's only a memorandum of opinion in the District Court and the only opinion that was printed in was the Interstate Commerce Commission opinion and we just obtained access to it.

But that was an entirely different situation from the facts insofar as this particular case is concerned.

It involved the transportation of salt and in the first place, the examiner in that case found against Cahaba.

The second place, it was a situation where Cahaba had his offices in Alabama and sold steel joist products in the Texas and Louisiana area and while there, purchased salt.

The invoices on the purchasers themselves showed that the seller of the salt in the Texas and Louisiana area gave a discount for the transport -- their normal transportation charge back to Alabama.

And further, there was a -- an evidence, a letter from the president of Cahaba where he admits that the profits from the sale of a salt haul back enabled it to compete with steel joist fabricators at the point of delivery in the steel products and the purchase of salt and admitted that the salt sales are essential to the operation of their trucks and the delivering of their steel products.

And there -- there is no evidence in the case at bar that the purchase of the sugar is essential for the appellees to make a profit from the sale of cattle or grain or their many other items.

The only evidence is that they buy the sugar to make a profit which is of course is -- is just a statement of a common sense since they wouldn't be a business to -- to buy it, to make a loss or at least they wouldn't intend to do that for very long.

The evidence does show that on occasion, Shannon has sent over empty trucks to Supreme, Louisiana and brought back sugar at a profit but that he -- at a particular time of the hearing, he was unable to do that because beet sugar from Canada and California was highly competitive in the area and depressing the market and he was unable to have made a profit insofar as the particular time of the hearing was concerned but that he had done it in the past.

But certainly, it would not seem unreasonable for him to attempt to coordinate his transportation movements from the Texas area to the Louisiana area and back so as to obtain the maximum efficiency from the operation of his trucks.

The appellees believe that it was not the intention of the Congress for individual such as in the case at bar to be unable to buy and sell products including sugar when they are and have been for many years in the general mercantile business with sugar being one of several commodities that they buy and sold nor is there any evidence whatsoever of any prearranged plans setup so that the real consignee may receive transportation at a reduced cost.

One case that was -- is relied on by the appellants very strongly is the Stickle case which was decided by two of the same three judges who decided the Clayton case, both these cases being cited in all the briefs in the -- in the -- before the court.

The Clayton case had held private carriage.

The Stickle case held something other than private carriage.

But in the Stickle case the freight rates were the same as a profit that Stickle obtained for his sale of the lumber.

And lumber was the only item that was handled.

So that all that Stickle was really doing was buying freight under the guise of being in the lumber business.

In the case at bar, the freight rate is entirely different and the only amount that the appellees received for their purchase and sale of sugar is the going of market profit in the San Antonio area.

The appellees don't raise sugar so naturally, the cost of hauling it is an important factor to determine its margin of profit since they buy and sell but also important are storage cost, bookkeeping cost, bad debt expenses, inventory losses, loading, unloading -- unloading cost, and so forth.

As previously stated to the Court, it would seem to boil down to a question of whether or not the appellees' operations are really a subterfuge and there is no evidence in the record that that this is the case.

All the evidence shows is legitimate purchasing and sale of sugar and the examiner's finding would certainly seem to have great weight insofar as this is concerned.

If -- it would appear that unless all the evidence of the appellees is to be disbelieved that they are in the sugar business.

How else could they buy and sell sugar when they don't raise it?

They buy from the manufacturer, haul it to their place of business, take title in their own name, bear all the losses in connection with it, sell it on credit with bad -- with the attendant possible bad debt losses and in the interim period, they store the sugar.

Must they haul by rail and pay those cost when they have their own trucks available for hauling and have had them available over the years for their complete operations starting with livestock and expanding to feedstock, grain, corn, molasses, salt, and now sugar.

Nor are the appellees arguing that because they made no attempt to hide their operation that therefore there's no subterfuge.

Instead that when the congressional committees speak of bona fide merchandising ventures as opposed to prearranged plans being setup to enable the real consignee to receive transportation cheaper.

That more is meant than simply backhauling is not private carriage unless the particular party brings back goods with other means of transportation over and above his own trucks which is in effect what the appellants are arguing in this particular case.

Instead, we submit that the entire record should be scrutinized and considered to determine if there is some prearranged plan between the real consignee and the hauler whereby the real consignee is only paying the hauler for the hauling itself.

The type of plan of course can be either expressed or implied from all the facts.

We submit that this is a type of pseudo carriage or subterfuge that the appellees, submit is necessary to be found for the entire record to show something other than private carriage, and there is no evidence to raise any of these questions in the case at bar.

In their brief and our position to the appellees motion to dismiss the appeal or to affirm, the appellants in response to a question asked by the appellee concerning what more was necessary in order for a bona fide sugar merchant to be one.

And in reply to that, the appellants listed certain things that they felt should have been done in order for the appellees to have been bona fide sugar merchants.

These included employing, commission salesmen or brokers to develop an expanded territory, to make large scale purchases of sugar, to deal in futures or engage in hedging operations or to deal in beet sugar.

In the first place, it would not seem necessary for a firm to do any of these particular things in order to be a bona fide sugar merchant nor is there any evidence as to what Shannon does on his other lines that he carries where there's no question but that he's a bona fide merchant.

In the second place, they do deal through a broker which is shown in the record of the case and they have a number of sugar customers.

Also, they purchase a considerable quantity of sugar considering the fact that it deteriorates very quickly.

It has a very small margin of profit and a very flexible price market.

In the third place, there is no evidence in the record that the appellees failed to have done any of these things.

And even under the substantial evidence rule, when a governmental agency wants to enjoin an individual from operating a place of business, it would seem that it would have the burden of getting into the record the certain things that it believes that either the individual does or fails to do that would indicate something other than private carriage.

Nor there should be a presumption that because the record is silent that that would mean that the individual has either done or failed to do something that is consistent with something other than private carriage.

The record shows that the appellees are in a general mercantile business selling many items including sugar that they sell it for the going market profit to a reasonably large number of customers.

There's no evidence that there are any other sugar purchasers in San Antonio other than the -- who Shannon sells to.

The record is silent as to that but that there's no evidence as to whether or not other -- how other people made to sell sugar in the San Antonio area whether they bring the sugar in by trucks, by common carriage, or whatever other method maybe available to them.

The -- there is evidence in the record that at the price sugar was selling in San Antonio, at the particular time of the hearing that nobody could have afforded to have brought sugar over from Supreme, Louisiana and made a profit because there's no evidence that -- that Shannon was either buying the sugar cheaper at a great discount in the Louisiana area or that he was getting a higher profit in the San Antonio area and since the average profit is only 25 cents to 35 cents and the average freight rate is 68 cents or 69 cents for one mode of transportation at over a dollar for the other, evidently no one could have made a profit in the San Antonio area at that particular time because of the market price of sugar.

Justice Byron R. White: Well, Mr. Wolff what would have happen to your livestock business if you hadn't had this backhaul business?

I suppose the livestock business would have been either less profitable or you'd had to raise your prices, you'd have less business.

I mean there's a -- certainly there's an interrelationship between livestock and sugar in the sense that -- in -- in the sense that if you'd had to bring these trucks back empty, you're going to have to take less profit on your -- on your livestock business.

Mr. Walter C. Wolff, Jr.: Well, of course, there's no evidence in the record as to what the effect of returning empty would have been.

The -- there is a --

Justice Byron R. White: I wouldn't think you would argue that there was a -- and that that there's a -- there's a -- certainly, a supporting role of what -- to that hauling a sugar performs for the livestock business.

Mr. Walter C. Wolff, Jr.: Well, certainly all businesses to some extent are interrelated where the -- that is our position that hauling is just one of many items that go into the cost of a product, bookkeeping expenses, administrative salaries, salesmen's commissions or salesmen's cost and that those various factors all add together, bring out what an individual is doing.

Certainly, if they return empty that -- let's assume that they do make some profit on the purchase and sale of sugar.

On the other hand, assuming the other way, suppose they buy sugar at X number of dollars when they get back to San Antonio, it is worth only X-1 that they can sell it for.

Then they would have been better off to probably not to have brought -- not to have bring the sugar back because they don't get paid for the transportation as such in any event.

They get paid only -- if they paid extra only if they make a profit on the sale of sugar when they bring it back.

The record in the case shows that the appellees' are in a general mercantile business and that they sell at the going market profit to a reasonably large number of customers.

How they obtain those customers either by advertising and appointing commission salesmen or some other method is not controlling unless the appellant believes that that is material to the case in which event, it should have been developed into the record.

The other differences between the Stickle case and the case at bar are -- that it was -- that there was practically no lumber in Stickle's inventory as opposed to the appellee's sugar business which has a reasonably large amount of inventory considering the nature of the product.

The principle assets of the company in the Stickle case and the payrolls of the company were tied up in transportation facilities.

Most of Stickles lumber purchases and sales were to fill preexisting orders which is not the case at bar.

Stickle sold only one item which was lumber and he had a freight bill with his name on it and the location and the name of the consignee on it and actually the word consignee was used and the consignee had to deliver to Stickle's driver a check for the amount of transportation charge which was shown on the freight bill.

In the case at bar, the appellees have a general mercantile business and sugar is only one line of the business.

There's no consignee but a purchaser, no item or freight connected with the sales price in anyway.

The appellants attached much importance to the fact that the appellees testified to the present market price of sugar in San Antonio, they couldn't properly at least send an empty truck for sugar and make a profit on the transaction.

It's the appellees' position that such a statement is not controlling even under the substantial evidence rule.

The evidence show that the cost of the beet sugar's being brought to the San Antonio area at the time of the hearing that the market was highly competitive.

And that the appellees' couldn't profitably send an empty truck to Louisiana and bring back sugar, but that they had done so on other occasions.

And certainly, it would be reasonable for any general mercantile business to attempt to coordinate their trucks so as to obtain maximum efficiency.

The appellants contend in Mr. Mathews -- in his argument that the appellees, Mr. Ginnane, I believe it was, that the appellees contribute nothing to the sugar other than its transportation.

In the first place, they store some of the sugar, they load it, they unload it, they bear all the risk of loss and damage, they bear the risk of a declining market, they sell on credit and bear the risk of a bad debt loss, what other service is a sugar merchant supposed to perform.

The appellee does not argue that the primary business doctrine is so broad that anything that it does in order to make it overall business less expensive to operate would be in furtherance to that overall business.

But they do argue that the doctrine goes further that the Interstate Commerce Commission found in the case at bar.

As in the case of most fields of the laws, each case must be decided on its own facts and merits and those facts and by applying them to the law in the case at bar, the appellee submit that they are a private carrier of sugar under either of the -- a limited or a broader definition of primary business.

They certainly haul sugar in furtherance of their general mercantile business and because of the various factors that were found by the District Court in the case at bar, such as the relationship of transportation and non-transportation products, no preexisting orders, buying on the -- on the market price, selling for the going market price, and other factors that are previously have been mentioned in the argument.

They feel that they are in the primary business of buying and selling sugar under the narrow interpretation of the primary business test.

Thank you.

Chief Justice Earl Warren: Mr. Mathews.

Rebuttal of Amos M. Mathews

Mr. Amos M. Mathews: If the Court please.

In the few minutes remaining, I want to catch on just three or four points.

One of them is to haul particular attention to the Church Point Wholesale Beverage case that is cited in our -- all of our briefs.

That case analyzes the legislative history and gives a reason for the enactment of the statute.

And it points out very clear analysis that if the statute of the 1958 Amendment is not given the application that the Commission and the other appellants here contend for, that there will be a very serious breakdown in the administration and enforcement of the Motor Carrier Act.

And it explains why, because of the device of buy and sell.

And it also points out that it present possible breakdown in the enforcement of the Motor Carrier Act toward which the -- which the 1958 was directed.

Now, I want to also mention briefly that we do not believe the Universal Camera case is applicable here because here there is no dispute in the facts.

I mean the facts are -- there's no -- the -- they are just a certain set of facts that are not disputed and -- and there's no -- the only inferences are to be drawn from those facts.

Now, if you will examine Exhibit 1 which as I say was reproduced in pages 4 and 5 of our reply brief and omits the last line which is a transfer -- which is a load to Laredo cases all of the rest are San Antonio and compute the average return or profits so-called for 100 pounds of sugar, it figures to 42 cents.

The evidence of a -- an expert witness is that the average profit in sugar in San Antonio at that time was 25 cents to 35 cents.

The carload rail rate at that time was 69 cents so the profit realized by Shannon from each -- from average profit was about midway between what wholesale dealers were making and what the freight rate was.

In other words, he was rendering transportation at a reduced cost.

Now, there's been some -- been some exchange of questions about whether there was an understanding between Shannon and the receivers of the sugar.

It seems perfectly clear that there must have been a clear understanding that the receivers would accept the sugar when it arrived in San Antonio that is exhibit -- that is shown by Exhibit 1 because Exhibit 1 shows a very successful enterprise.

Purchase of sugar, and delivery, and every transaction was a profit.

So --

Justice Potter Stewart: But that doesn't necessarily show any preexisting arrangement though, does it?

It might just show a very ready market.

I suppose people like soft drink manufacturers and candy manufacturer are always been -- in the market for sugar at the right price --

Mr. Amos M. Mathews: It -- it --

Justice Potter Stewart: -- in any -- in any city.

Mr. Amos M. Mathews: It could -- it could indeed show a ready market, but it -- if -- but if -- if it does show -- it just show a -- a de facto of a very successful operation in the transportation.

Now, reference was also -- some question was raised as to whether the amendment of 1958 applies.

We cite the Ziffrin case, Ziffrin against United States in our briefs and it seems very clear to us that the -- under the clear holding of that case, the 1958 Amendment does apply.

I also want to call your attention to the point that is readily apparent in the briefs that many of the cases that have been cited by counsel for the appellee were decided before the 1958 Amendment.

Now, the legislative history or the -- or the -- the excerpts from the committee reports are -- are attached to the Commission's report.

Of course, they're readily available but a scanning of those will make it evident that pseudo -- so-called "pseudo-private" carriage was not the only target of the 1958 Amendment.

It is perfectly clear -- I -- I don't have -- certainly don't have time to go into that, but it is perfectly clear that there were three things at which the amendment was aimed and a straight forward buy and sell arrangement was proscribed as here.

Thank you.

Justice Byron R. White: Well, I just noticed that the House Committee's report was headed up pseudo carriage, like pseudo carriage for hire, is this (Inaudible) you submitted.

Mr. Amos M. Mathews: Well, that's just a -- an error in somebody's --

Justice Byron R. White: You mean, pseudo, (Inaudible).

Mr. Amos M. Mathews: That's right.

Justice Hugo L. Black: Well, that's the impression you've been exposing part of the brief of the Association here, pseudo carriers, pseudo carriers was unlawful, pseudo carriers, that's the closing paragraph as I recall it of their brief.

Mr. Amos M. Mathews: Well the -- I -- I think it's a very fair statement to say that the Amendment was aimed at buy and sells, straight forward as here.

It was aimed at pseudo carriage also.

Chief Justice Earl Warren: Very well Mr. Mathews.

Featured:

Willis Shaw Exp. v. United States - Oral Argument, Part 1

Wed, 16 Jan 2013 22:48:10 +0000

Case:

Willis Shaw Exp. v. United States

Media File:

201_19640423-argument-1

Related Transcript:

201_19640423-argument-1

Transcript:

Argument of A. Alvis Layne

Chief Justice Earl Warren: Number 201, Willie -- Willis Shaw Frozen Express, Incorporated, Appellant, versus United States.

Mr. Layne.

Mr. A. Alvis Layne: Mr. Chief Justice, may it please the Court.

This is an appeal from a judgment of a statutory three-judge District Court of the Western District of Arkansas, affirming as wholly proper and lawful an order of the Interstate Commerce Commission.

The order involved denied in part and granted in part, the application of Willis Shaw Frozen Express for operating rights as a common carrier by motor vehicle on the so-called grandfather provisions of the 1958 Transportation Act, Section 7 (c).

This appeal presents questions as to the proper statutory interpretation and the administrative application of the grandfather section of the 1958 Act as it applies to Shaw and to other common carriers of the formerly exempt agricultural commodity.

Just a moment as to the background of the 1958 Transportation Act and the provision which this Court is asked to determine as to its interpretation and appropriate administrative application.

First, the 1958 Transportation Act fixed the limit and the scope of the agricultural exemption from the economic regulation of the Interstate Commerce Commission.

It did so by saying that it -- certain commodities, the interpretation that had been placed by the courts and the Commission with respect to certain commodities was to be it.

This is the limit.

These are the commodities that are to be agricultural commodities.

These are the commodities that can be transported, free of the certificate and rate regulation requirements of the Interstate Commerce Commission applicable to motor carriers of general commodity.

Also, and the source of the controversy in this case, the 1958 statute specifically provided that certain items which had been determined to be exempt agricultural commodities were no longer to be exempt and were to be subjected to economic, that is to say rate and certificate and permit requirements, operating authority requirements of the Interstate Commerce Act.

This fell into -- and I don't want to get into an argument about the -- whether it’s a group or a class, but this fell into roughly two groups.

One group was a group of frozen commodities.

That is commodity -- agricultural commodities that had been subjected to freezing and therefore were transported in a frozen state.

These were the frozen fruits, berries and vegetable.

These were subjected for the first time to economic regulation by the Interstate Commerce Commission.

The second group, in general, were commod -- agricultural commodities not produced in this country but imported.

They were agricultural commodities not grown, harvested and marketed by our farmers.

They were cocoa beans, coffee beans, tea, bananas or hemp, and wool imported from any foreign country, wool tops and noils, and wool waste.

That is imported wool.

The same 1958 statute provided specifically that cooked or uncooked frozen fish was to continue to be exempt.

And as a matter of fact, in that aspect, the statute broaden somewhat the exemption from economic regulation by the Interstate Commerce Commission transportation of fish and the shellfish product.

Now, as to the commodities, frozen fruits, frozen berries and frozen vegetable, the cocoa beans, the coffee, tea, the bananas and the wool, imported wool, the statute in Section 7 (c) created grandfather rights.

And they used exactly the same language in the 1958 statute that they used in the 1935 statute when interstate cooking was first made subject to economic regulation, rate, certificate and operating authority regulation by the Interstate Commerce Commission.

It provided in exact language and this is the language of the 1958 statute.

It says that operating rights are to be issued without further proceedings to those making application who have been in bona fide operation, and the statute uses the term "bona fide operation" on May 1, 1958 over any route or routes or with any -- within any territory of the commodities made subject to regulation and has so operated since that time except as to seasonal variations or interruptions in control over which the carrier had no control.

Now, as I have said, this language was precisely the same language used in the 1935 statute and that language was considered at length by two case -- in two cases in this Court which I considered dispositive of the issues now placed before the Court.

Those cases read and applied to the situation, to the statute, both as to its interpretation and application will result in a reversal of the judgment below and it remanded this case for an appropriate consideration under the statute, and the two cases are, Alton Railroad versus the United States in 315 U.S. 15 and United States versus Carolina Freight Carriers, 315 U.S. 475, both written by Mr. Justice Douglas.

Now, if you apply what the Court said in those cases, this order cannot stand.

In order to demonstrate that, it's necessary for me to tell you something about as briefly as I can, the Shaw -- Willis Shaw Frozen Express and its predecessor, Willie Shaw, it's president and present owner.

It began a trucking business in 1938.

He transported primarily fresh vegetables, berries and live poultry.

When these products began to be frozen or marketed in a different fashion, eviscerated poultry, frozen poultry, when they began to freeze the vegetables, the berries and the fruits, his operations changed or his come -- his equipment changed so that he was able to transport them in this new form or in this changed form.

And he purchased refrigerated equipment and substantial quantities for a trucker considering that he was limited to only transporting those things exempt from the Commission's economic regulation.

As a matter of fact, he advertised widely prior to the grandfather date, as a specialist in performing this kind of transportation.

And on May 1st, 1958, the grandfather day, he was a very substantial trucker of this exempt agricultural commodity.

He was operating some 34 tractor trailer units.

That is the combination, 34 of them specially equipped with refrigeration capable of transporting the frozen fruit.

Now, he was holding out a service and he's advertising.

He was holding out a service in his actual performance where his trucks were over a very broad area.

He filed an application with the Commission when this -- under the grandfather statute.

There was a hearing at which a number of railroads and existing regulated truck lines intervened and protested it.

There was an examiner's report in which a substantial grant beyond that which is now before this Court in the form of the order of the Commission was given by the hearing examiner.

The matter was then presented to the Commission and that it is the Commission's decision that is here and has been affirmed below.

Now, the Commission's decision and the interpretation upon which we -- which this case rest and the Commission errors on which we ask this Court's determination, are those in which the Commission sharply limited the prior operations by Shaw and did so by -- by a process which this Court and Carolina Freight Carriers called a pulverization of the prior operation.

And the result if you'll look at the record is to distort what was in fact a unitary and integrated operation by Shaw transporting an extremely limited number of commodities over a very broad territory.

Commodities which moreover as the examiner found but which the Commission never mentioned were affected by climatic crop conditions and by variations which necessity of the type of commodity that you have were affected by growing seasons.

They were affected by a whole variety of events over which certainly the carrier had no control and a whole series of factors involving the marketing over which the carrier had no control and which were in the record.

Now, what precisely did this pulverization or atomization as the Court in Carolina said happened to Shaw?

What did they do?

They held that although Willis Shaw was a common carrier and a common carrier by motor vehicle within a substantial territory of all of the frozen agricultural commodities, fruits, berries and vegetables, yet they took certain specific points in certain specific areas and they sharply restricted that to saying only take fruit from this point to that point.

You can take vegetables from this point to that point.

And they didn't do it with respect to different points.

They did it with respect to the same points.

Let me -- they're the same origin areas.

It wasn't a question of what was grown there.

Let me give you a specific example which I think highlights exactly the kind of commodity treatment to which Willis Shaw was accorded by the Commission below.

The Interstate Commerce Commission found that Willis Shaw was entitled to transport frozen fruits, frozen berries and frozen vegetable from the points in the Lower Peninsula of Michigan to Kansas City, Missouri.

That's all of the frozen commodities.

That's the whole scope of those made subject to regulation.

But, from the same origin area of the Lower Peninsula of Michigan to St. Joseph, Missouri, he was authorized only to transport frozen fruit.

Now, how did they get that way?

Why would Willis Shaw transport or as a common carrier restrict his holding out to the public in the Lower Peninsula of Michigan, the shippers there, to transport only frozen fruit to St. Joseph, Missouri, a few miles up the road from Kansas City or as they also said, you can only transport frozen fruit to points in Kansas right across the Missouri River from Kansas City, Missouri.

The only excuse or the only justification given in the Commission's report is that they tabulated the commodities that he transported in what they considered the relevant period and he hadn't transported during that relevant period anything but frozen fruit from the Lower Peninsula of Michigan to St. Joseph, Missouri or the points in Kansas but had transported a shipment or more from the Lower Peninsula of Michigan to Kansas City.

There was no consideration given to his status as a common carrier as this Court held the Act required in 19 -- in the Carolina case.

There was no consideration given to whether the -- that he --

Justice Byron R. White: What was the -- what was the common carrier of?

Mr. A. Alvis Layne: He was a common carrier of all of those commodities.

Justice Byron R. White: All exempt commodities.

Mr. A. Alvis Layne: All -- all of the refrigerated --

Justice Byron R. White: But he was --

Mr. A. Alvis Layne: -- exempt commodity --

Justice Byron R. White: But he was not a certificated carrier --

Mr. A. Alvis Layne: Of course --

Justice Byron R. White: -- prior at the time.

Mr. A. Alvis Layne: Well, he was -- no sir.

He had been -- that's the way he was created.

He has had subs -- obtained certificate subsequently.

But at the time we're talking about, the grandfather period, Shaw was nothing but a transporter of the exempt agricultural commodities which required refrigeration, commodities which he and his equipment --

Justice Byron R. White: The equipment -- he was a special kind of common carrier you say and the problem is what were the scope of his common (Voice Overlap) --

Mr. A. Alvis Layne: That's right.

And if his scope was from the Lower Peninsula of Michigan, the Kansas City frozen fruits, berries and vegetables were all that they sub -- all the refrigerated commodities that were made subject to regulate.

How did he get to be such a limited common carrier for the purpose of going to St. Joseph, Missouri?

The fact is that he did not, and the Commission didn't make any finding that he was at all limited in he's holding out to the public or that Shaw took the slightest difference.

The fact is that he was holding out.

The fact is that he was available for service.

Chief Justice Earl Warren: We'll recess now Mr. Layne.

Featured:

Willis Shaw Exp. v. United States - Oral Argument, Part 2

Wed, 16 Jan 2013 22:48:10 +0000

Case:

Willis Shaw Exp. v. United States

Media File:

201_19640427-argument-2

Related Transcript:

201_19640427-argument-2

Transcript:

Argument of A. Alvis Layne

Chief Justice Earl Warren: Versus United States et al.

Mr. A. Alvis Layne: Mr. Chief Justice.

Chief Justice Earl Warren: Mr. Layne.

Mr. A. Alvis Layne: May it please the Court.

On Thursday, I pointed out that this appeal involves a construction and application of the Transportation Act of 1958 which imposed on truck transportation of certain agricultural commodities, economic regulation, rate and operating authority regulation of the Interstate Commerce Commission.

But which directed the Commission to issue operating authority to truckers in bona fide operation on May 1, 1958 over any route or routes or within any territory, transporting this agricultural commodity.

This provision, directing the issue on some operating rights, was designed to assure that these previously unregulated truckers could continue in business.

I also pointed out that the Interstate Commerce Commission had interpreted and applied this statute to Shaw, the appellant here, a substantial common carrier of refrigerated and frozen agricultural commodities so as to limit sharply Shaw's future operations as compared with his prior bona fide operation.

The Commission did this by ignoring the transportation characteristics of the frozen fruits, frozen vegetables and frozen berries involved.

And the Commission wholly ignored the scope of service, actually held out by Shaw.

The Commission in fact refused to receive or consider evidence of Shaw's ability to perform on the ground that such evidence was irrelevant to its determination under the statute as it was being applied.

The Commission fragmented Shaw's prior operations into a series of disconnected and unrelated shipments.

The result is completely unrelated to operating reality for any trucker.

The Commission for example, would permit only frozen fruit to be carried to some points, frozen vegetables to others, frozen berries to still others.

Unknown Speaker: (Inaudible)

Mr. A. Alvis Layne: Yes, they --

Unknown Speaker: (Inaudible)

Mr. A. Alvis Layne: That's right, the Commission --

Unknown Speaker: (Inaudible)

Mr. A. Alvis Layne: Yes it is, Your Honor, because Shaw was transporting, for example, from the Lower Peninsula of Michigan.

The Commission held that they could transport frozen fruits, vegetables and berries as I said on Thursday, to a point such as Kansas City, but from precisely the same origin point, only frozen berries to say Saint Joseph, Missouri.

Now, this is entirely unrealistic to any trucker.

They --

Justice Arthur J. Goldberg: (Inaudible)

Mr. A. Alvis Layne: Oh, yes.

It was based on that mere fact and this fact alone that Shaw had not in fact during the period of the Commission considered relevant, transported a shipment of frozen Vegetables from the Lower Peninsula of Michigan to Saint Joseph, Missouri.

In the Carolina Freight Carriers case, this Court said that that kind of treatment as applied to a common carrier was a misapplication of the statutory standards.

Chief Justice Earl Warren: Mr. Layne, what territorial limits, if any, would you suggest the Commission could restrict it to under (Inaudible)?

Mr. A. Alvis Layne: I think they -- they could restrict into the areas in which it was demonstrated that he had in fact served geographically.

That is -- we'll take another example Mr. Chief Justice.

Take it -- take the point that he's home based in lower -- in Fort Smith, Arkansas.

Now, the Interstate Commerce Commission said that this -- this common carrier was entitled to transport frozen vegetable from Fort Smith, Arkansas to Miami and Jacksonville, Florida, to San Francisco, California frozen -- frozen berries to Chicago, Illinois and frozen vegetables to Detroit, Michigan.

Now, it would be impossible to have a more fragmented theory of any common carrier's operation to have points so far separated within the United States and never consider the intermediate points in areas to which a carrier must necessarily transport these products in order to get to Jacksonville or Miami, Florida.

For example, as we point out in the brief, the Commission wholly ignored the fact that on the very shipment that they went to Miami, they took a shipment to Atlanta.

No authority was given to transport any shipment to Atlanta, why not?

No trucker would ever transport failed to serve intermediate points such as that, intermediate areas such as that.

The -- the point -- entire theory along which the Commission proceeded was as Mr. Justice Goldberg said.

They took a list of what he did in 1957 and they fragmented its future operations directly to that list.

That, as I suggested to the Court on Thursday, is a flatly a violation of the statutory interpretation of the -- and of the application that this Court directed a similar language in 1935 in the Carolina case.

Chief Justice Earl Warren: May I ask just one -- one more hypothetical question.

Suppose this entire experience had been transporting frozen fruits from Florida to Kansas City.

It made no intermediate stops, would you say that the order must permit him to stop any place he wanted?

Mr. A. Alvis Layne: No, I wouldn't say that Mr. Chief Justice --

Chief Justice Earl Warren: Well, I do --

Mr. A. Alvis Layne: -- because obviously, any -- the -- the Commission has the -- has the right and the authority to -- and the duty --

Chief Justice Earl Warren: Yes.

Mr. A. Alvis Layne: -- to look at what the -- what the carrier was in act -- fact holding out to serve the public.

Chief Justice Earl Warren: Holding out or actually doing it.

Mr. A. Alvis Layne: Both.

Chief Justice Earl Warren: (Voice Overlap)

Mr. A. Alvis Layne: Because they're both involved.

Mr. Chief Justice, nobody's business is solely determined on how many sales you made today.

Its how many sales were you offering to make today.

And this is also true of a common carrier by motor vehicle.

A common carrier doesn't only serve solely in the shipments that he transports today or in any period.

He also serves by holding out his service.

The availability of his service to the public is as important to him and to the public as any other aspect of his service.

He may not be used today, he may not be used in any month in considering the seasonal nature and the variables of the frozen vegetables here involved that would be -- that would be expected.

Look what this -- look what the counsel, trying this case, attempted to do in which the Commission would not permit.

The appellant before the Commission showed not only that he had his equipment.

He showed not only what he was operating during the particular period of time in terms of equipment.

In terms of his advertising to the public of where he said, I will handle it for you if you will give it to me.

He not only put in the evidence what he actually had transported.

He put into evidence this exhibit or attempted to put in evidence this exhibit but the Commission wouldn't receive it.

Only two pages of this exhibit are repeated or are -- are printed in the transcript of record because it wasn't received in evidence.

Now, what was the exhibit?

The exhibit was an attempt on his part to show that he had empty trucks available in these areas for which he solicited the business of transporting frozen fruits, frozen berries and frozen vegetables.

How else would he able to show that he had been holding out this service?

How else would he show as this Court suggested he should show in (Inaudible) that he was in fact able to perform and that any hiatus in his service was not an occasion where he had limited his service or in which his service had been withheld from the public because he decided to transport only from here to there.

But because of factors over which no common carrier can control, that is whether the public decide to use his service today, tomorrow or next month.

And -- and you will not find, if you read the order of the Commission, one finding, so far as I can determine, nothing in this order suggest that the Commission gave any such consideration to this carrier's operation.

It was a mechanistic production by which they attempted to give him on arithmetical majority for the future of the precise shipments, fragmented as they were that he had transported during 1957.

Now, the -- this order, Mr. Chief Justice denies to Shaw, operating rights for the future to which he is entitled.

But he does more than deny rights to Willis Shaw.

He also denies to the public the competing operations which Shaw held out.

And as I have told you, at -- had in fact available in the form of empty vehicles, moved from that point because at that time, there was no such traffic to another point where there was traffic, considering the variations involved, and it denies to them the kinds of common carrier service which Shaw had in fact available.

And it was able to prove in the form of this refrigerated truck to shippers and receivers of these agricultural products.

In some, it denies not only to Shaw the rights to which the statute entitles him but it also denies to the shipping public in a form of competing operations which Shaw had available in fact to the public for the transportation of this agricultural commodity.

I'd like to reserve the balance of my time.

Chief Justice Earl Warren: You may, Mr. Layne.

Mr. Pollak.

Argument of Stephen J. Pollak

Mr. Stephen J. Pollak: Mr. Chief Justice, may it please the Court.

A carrier of commodities made non-exempt by the Transportation Act of 1958, frozen fruits, frozen berries, frozen vegetables, ham, coffee beans or others of the 11, may obtain authority to carry those commodities in two ways.

He may apply under Section 207 of the Interstate Commerce Act, showing a need for the service and the fitness to carry the commodities.

He may also apply for grandfather rights, provided he may show that as a carrier, he was in bona fide operation carrying the particular commodities on the grandfather date and thereafter.

This case arose on applicant Shaw's application for grandfather rights to carry frozen fruits, frozen berries and frozen vegetables and fish and mixed loads with those commodities to and from 35 states.

This Court, in the cases interpreting the grandfather clause in the 1935 Motor Carrier Act, which first imposed economic regulation of motor carriers, this Court stated that it did not sit to weigh the evidence to determine the scope of the bona fide operations of the carrier.

That is a function which had been assigned by Congress, this Court recognized to this Commerce Commission.

The questions, the Court said there for the Commission, are whether the service within a territory is sufficiently representative to warrant the calling of it bona fide operations and whether the coverage of particular commodities is sufficiently represented to constitute such operations.

The answer this Court made clear as to these questions is for the Commission, and the Court sets to determine whether the Commission in reviewing the mass of evidence is applying the correct legal standards and that, there are two legal standards which are taken by this Court in this case for review.

First, the question whether in determining the extent of Shaw's bona fide operations on and after the grandfather date, the Commission and the Court properly treated frozen fruits, frozen berries and frozen vegetables as separate commodity classifications.

So that a prescriptive right to carry or to continue operations in a particular commodity class, frozen vegetables for example, would be obtained by showing prior carriage of frozen vegetables.

The second issue, second legal issue is whether in determining the extent of bona fide operations on May 1, 1958, the Commission properly refused to consider evidence of operations prior to January 1, 1957.

Considering such evidence is too remote to bear on the scope of bona fide operations 16 months later.

The --

Justice Arthur J. Goldberg: (Inaudible)

Mr. Stephen J. Pollak: I -- I don't believe that there is Your Honor.

I believe that if the Court -- the Court rev -- the Court wishes to review the treatment of the evidence by the Commission.

And if we have made such a review in our appendices, I think it will find that within the rules of law they were applying, the carrier here received a -- indeed a liberal treatment of its prior operations.

After all, the --

Justice Byron R. White: (Inaudible) that the rule of law, the Commission was bound to allow the trucker or these applicants to carry berries only to the point that it has previously carried them.

Mr. Stephen J. Pollak: Well, no, I think that that would be a too limited --

Justice Byron R. White: That isn't a matter of evidence, is it?

And that's a -- re -- really a question of law.

Mr. Stephen J. Pollak: That's right.

But I think that --

Justice Byron R. White: Well, is there an issue here about that or not?

Mr. Stephen J. Pollak: I think that their -- had the Commission failed to give proper effect to the evidence and where there were a representative, as the Court said in Carolina Carriers, where there was a representative carrying commodities to a number of points where it pointed out that the -- those points should authorize the carrier in the future to give statewide authority and the Commission had not reflected that in its order, I think the Court might have an issue but I -- I believe --

Justice Byron R. White: Well, they carried berries to Chicago and Saint Louis and Saint Joseph, those are the only points to which this carrier was entitled the authority to carry barriers --

Mr. Stephen J. Pollak: No I --

Justice Byron R. White: -- carry berries?

Mr. Stephen J. Pollak: I would say no.

If the carrying as sufficiently frequent and representative, then it would be entitled to a statewide authority for example, to area authority and that is what the Commission has done.

In its -- the scope of the grant made by the Commission is written out at page 7 of our brief.

And it indicates there that the grant was to carry all three commodities from several states to several other states.

Now, the evidence did not show that the carrier transported those three commodities to every town in those states but the Commission said and it -- if the record in page 339, it indicated the rule that it applied.

It said, "For example, there is recorded a total of about 15 shipments from several California origins to several Nebraska origins, including Omaha, which sufficiently establishes a pattern of statewide operations in transporting these commodities."

And you would see that the Commission there granted statewide --

Justice Byron R. White: If you're going to carry the berries to San Francisco, do you think it's -- that it's quite enough that the Commission to say from Michigan to California, but not to any point in between Michigan and San Francisco.

Mr. Stephen J. Pollak: Well, I think that that is inherent in the concept of the grandfather operations.

What Congress provided was that the scope of future authority would be tailored to substantial parity with prior operations.

Now, the point was made in the course of argument that the -- of this transportation from Arkansas to Florida of vegetables and there's no reflection.

I -- I might say in interrupting that, I think this is not an issue here for the Court but if you look at the evidence, the point was made that the transportation was from Flor -- Arkansas to Florida of vegetables and that -- and the intermediate point in Georgia was not granted to -- the evidence shows that there was no carriage to an intermediate point from Arkansas to Georgia, the intermediate point, after the grandfather date.

Now, the Congress has said that the carriage must be on the grandfather date and thereafter.

And the Congress, I think in the cases of the Court, indicate that the Commission is charged with looking at the evidence in determining what that carriage was.

And here, I think within the rules of law that we've recognized are before the Court, the Commission properly weighed the evidence.

Justice Byron R. White: What rule do you suppose -- do you think the Commission followed in deciding routes or areas?

Mr. Stephen J. Pollak: What rule?

Justice Byron R. White: Yes.

Mr. Stephen J. Pollak: I think the rule that it applied was to review where the trips were and with which products.

And if there were a representative, number of trips to an area, an area-wide authority was granted.

If there were representative trips with commodities, then commodity authority was granted.

And indeed, I read its opinion to say that where it granted -- one where it found evidence of shipment of one commodity class, frozen vegetables, that it would look rather closely to see if it could not find shipments of the other classes.

Justice Byron R. White: (Inaudible)

Mr. Stephen J. Pollak: And if it did not --

Justice Byron R. White: (Inaudible)

Mr. Stephen J. Pollak: Yes, sir.

Yes, sir.

It primary -- it did it by states and indeed --

Justice Byron R. White: (Inaudible)

Mr. Stephen J. Pollak: No, although it did state that it would grant originating authority form California, Oregon and Washington because commodities appeared to flow from those three producing states, fruits, berries, vegetables, frozen.

Two, and it named for other sates, so it may have looked at those as a group of states.

Justice Byron R. White: Is it (Inaudible)

Mr. Stephen J. Pollak: Yes it -- oh, yes.

I don't mean to be unders --

Justice Byron R. White: (Inaudible)

Mr. Stephen J. Pollak: The --

Justice Byron R. White: (Inaudible)

Mr. Stephen J. Pollak: Well, the justification for that is I think a review of the evidence if before the grandfather date or on the grandfather date, there is a transportation from Little Rock to Saint Joseph, Missouri.

And there are no other transportations before and maybe one after between the same points, I think the Commission, consistent with the decisions of this Court, may grant authority between those two points.

After all, the carriers may apply under 207 for authority showing need.

And this is only to let them continue prior operations, prior bona fide operations.

Indeed, in the Carolina Carriers case -- I -- I'm sorry, I think it's the Howard Hall case, in the Volume 315.

I think it's significant to note that there; there was a claim in that case.

The Commission granted authority from Birmingham, Alabama to certain points.

And it limited the authority from Birmingham to a radius of 10 miles around Birmingham.

The contention was made that it should've granted an originating authority from a radius of a hundred miles around Birmingham.

And this Court, in its opinion, that 498 reviewed that evidence and said that there were only 55 shipments from the area beyond 10 miles and within the hundred-mile radius whereas there were a larger number, 875 within the area.

Then it said, "After the grandfather date, there were 270 shipments from the area between 10 miles and a hundred-mile radius."

The Commission -- the Court said that it was for the Commission to weigh that evidence and although it was granting no authority to reflect 55 shipments from the area between 10 miles and a hundred miles, granting no authority to reflect 270 shipments after the grandfather date.

That was a decision for the Commission and this Court was approving there a point-to-point authority.

I think that -- that is a -- responsive to your question.

In --

Justice Arthur J. Goldberg: (Inaudible)

Mr. Stephen J. Pollak: Yes, sir.

Justice Arthur J. Goldberg: (Inaudible)

Mr. Stephen J. Pollak: Yes, sir.

Justice Arthur J. Goldberg: (Inaudible)

Mr. Stephen J. Pollak: I don't think I would Your Honor.

I think --

Justice Arthur J. Goldberg: (Inaudible)

Mr. Stephen J. Pollak: We do, Your Honor.

And in fact, we find right in the words chosen by commerce later on, wool tops and noils.

They didn't say "wool tops, wool noils."

What they said, "wool tops and noils."

And we would assume that if you transported a load of wool tops, you'd get authority for wool noils.

But here, where the Commission took the seriatim listing, frozen fruits, frozen berries and frozen vegetables, we read that to mean that each of those is a separate commodity class.

And indeed, let's not -- it should be recognized that frozen vegetables is a commodity class.

If the carrier transports black-eyed peas, Georgia to Wyoming, the carrier will obtain authority for frozen vegetables.

There's no question here that the Commission denied him authority to carry frozen cauliflower, collards or Brussels sprouts or something like that.

He got full commodity class authority.

We don't see that in his argument that this is a -- a single class, why or how he can make a distinction that if you carry frozen fruits, you shouldn't also get authority to carry him for wool tops.

Indeed, reading the legislative history, there's no suggestion that the three are part of a single class.

The Congress in its -- in the conference report and each of the reports of the Senate and House Committees, carries a paragraph describing the grandfather rights, and I'm quoting, "Any person engaged on May 1, 1958, in trucking the aforementioned commodities which are returned to regulation by this amendment, would be permitted upon application to a certificate or permit allowing him under regulation to continue transportation of the same commodities within the same areas for the same points.

Now, the only reasonable reading that we can see of that is that this is a class-to-class relationship.

There are 11 classes listed.

If you transported one commodities in one class within an area or from point-to-to point and you show it, then you'll get authority for that commodity.

We don't believe that the Carolina Carriers case at all is contrary to the decision reached by the Commission and the Court below.

In that case, the Court, this Court set aside a Commission decision, saying it had itemized prior transportation.

But the facts and the wording of the 1935 statute are very different and importantly so.

There, the common carrier was a carrier of general commodities.

General commodities is a class, was recognized by a class.

What the Commission did in weighing the evidence there, it found that there had been representative transportation of particular commodities within the general commodity class and it granted authority limited to those commodities within the class.

It's again as if there had been transportation of the black-eyed peas and the grant here had been limited to black-eyed peas.

And the Commission said, "There shall not be itemization."

It meant that if you -- that the -- pardon me.

When the Court said, "There shall not be itemization", it meant that where you find representative shipments of commodities within a class, the grant shall be -- for the entire class.

Justice Byron R. White: Has this --

Mr. Stephen J. Pollak: Both --

Justice Byron R. White: -- been a -- has this been characteristic in -- in giving grandfather further rights in this area or is this the first case in which it has arisen.

Mr. Stephen J. Pollak: No, no.

If I understand you there, the question of -- of whether that these are separate classes, these three frozen fruits, frozen berries and frozen vegetables.

They have been consistently interpreted as separate classes by the Commission.

But it has been tested in the Courts and the Commission has been affirmed except in the Winter Garden case and in that case, as we pointed out in our brief, the shipments were from the -- Court found on the facts that the shipments originated fruits, berries and vegetables all from the same location, same warehouse.

And therefore, the question that the separate commodity has really been derived, although the Court had statements in its opinion saying it -- which would be read as indicating these are separate classes.

Justice Byron R. White: You know Mr. Pollak, if -- if a carrier isn't applying for authority in the 207, ever asked for just authority to transport frozen vegetables for example, compared with the frozen fruits?

Mr. Stephen J. Pollak: I -- I can't answer.

I would assume they probably asked for more authority than that.

Although, Mr. Justice White, there are many areas of the country where only frozen vegetables maybe grown and I would assume that from that particular area, or a processing area, they probably would ask for a limited authority.

After -- after all, the -- a review of the evidence here shows that in those -- in the example of the Arkansas authority which was here granted.

In the -- a complaint is made that it wasn't for three commodities.

But a review of the evidence showed that there were -- in the period before and after the grandfather right which the statute required, they didn't transport the three commodities.

Justice Byron R. White: Well, there's a -- that will result of a -- of the restrictions here or in the limited nature of the authority, necessarily resulted empty back hauls for this carrier, do you know?

Mr. Stephen J. Pollak: Well, I don't -- I really don't know.

I don't know.

He has been operating and the -- the counsel has suggested a substantial operation since 1938.

And I think the Commission has taken into consideration in this vast exhibit which starts at 205 and runs to 323 listing 5000 shipments.

The Commission has taken all those into consideration and we reviewed the evidence.

There's a question here whether prior to 1957 should've been taken into consideration.

We've reviewed that evidence and it doesn't show that it would've enlarged the authority.

The Commission has taken all those shipments into consideration where the carrier who has been successful, its financial status seems to be improving, its number of trucks and trailers is growing, the record shows.

And I would say that since it's taken all shipments into consideration, it's not going to suffer empty back hauls.

Either -- either it did -- it had empty back hauls in the years passed and they weren't reflected in the shipments or it didn't have them.

But to the extent that the back hauls were not empty, they've been taken into consideration to the extent they were empty.

This was a problem that they had in the past and has been very economically successful carrier.

I -- I would say that on the basis of the record, I don't know.

Now, the -- the point -- when the argument was made that a holding out should be sufficient, I think that the statements of the Court in the Carolina Carriers case are quite specific that a holding out is not sufficient.

The Court there said that it makes clear that a holding out to serve a specified area is not alone sufficient.

It's actual rather potential or simulated service which is required.

The point later it said, "It is plain that a carrier's holding out an actual performance maybe limited to a few articles only."

I might mention, I said that the 1935 statute differed -- it -- from the 1958 grandfather statute in this material way.

The 1935 statute which is quoted at page 20 of our brief required only that the carrier be in bona fide operation as a common carrier over roots and within the territory.

The statute which this Court is asked to interpret in this case, the 1958 statute makes -- which is quoted at page 38 of the brief says, "In bona fide operation, and I'm skipping some of the words, in the transportation of property over roots and within territories."

So this grandfather clause makes specific reference to the transportation of property.

Indeed it might be suggested that under the 35 law, the -- a common carrier could have gotten authority to transport any commodity because the statute, at least the grandfather provision didn't refer to the property being carried.

It only required being in operation as a common carrier.

The Court found the necessity for limitations on the property carried in the definition of what a common carrier was, which was in the statute.

We think it is equally plain Your Honors, that the Commission properly drew a line on January 1, 1957 to exclude evidence prior to that time.

This is precisely the type of reasonable, administrative ruling that the Congress left to the Commission.

The Congress said that the carrier must be in bona fide operation on May 1, 1958.

And since that time, it left to the Commission the period of operations prior to May 1 to consider is relevant.

Consider the problem -- the administrative problem, there were some 900 applications for grandfather authority.

Shaw was one of those applicants.

Shaw submitted to the Commission in its table, Exhibit 22, 5000 shipments running from May 1954 to October 1957, asked the Commission to consider all of these shipments and to tailor its grandfather authority accordingly.

If every one of the other 900 carriers submitted a similar number of shipments over a similar length of time, we're talking about 5 million shipments from various points to various subjects.

The Commission in its rule of law in this case said only that we will look at your evidence back to January 1, 1957, and we will consider that evidence relevant of the scope of your operations on May 1, 1958.

If you wish us to consider evidence prior to May 1, 1957, you must show by substantial evidence that it is relevant.

In a review of the record indicates that although there was a -- there is statements by Shaw that locations of food processing or frozen fruit processing stations vary and moved around.

There was no indication that we found in looking at the prior evidence that the Commission in considering evidence from January 1, 1957 to May 1, 1958, didn't get a fully representative picture of what this carriers operations were.

We reviewed in Appendix C of our brief this prior evidence which the Commission did not take into consideration, and it shows that review that a representative picture was presented.

Indeed, the statute says that in operations after the grandfather date, there must be uninterrupted operations.

And the Commission has, I think, reasonably looked to a certain period of time prior to the grandfather date and said, "If your operations do not come through loud and clear in that 16 month period, well then your -- your operations have a gap and you will either got to explain to us why they're not shown in the 16 month period prior to the date or we won't consider them."

And indeed the Commission has considered in the cases operations more remote in 16 months, one case, Albert Getty, which was cited.

The president of the carrier had been in an -- in an accident and had -- and had to terminate some of its operations on -- on recovery and also on getting financially rearranged.

And where that was shown, the Commission looked at a -- at more ancient history.

But where such a substantial showing isn't made and we don't believe that it's made here, why 16 months is enough.

Indeed, in the Alton case before this Court, that was a 17 month period.

The Alton case was involving the 1935 statute.

Mentioning just briefly the question which is raised here on frozen fish and mixed clothes, the complaint, as we understand the brief, is that the Commissions tailoring of the authority would preclude this type of operation picking up the fish at a seaport, moving it inland and mixing -- mixing the fish with the frozen foods or berries at an inland point.

I'm authorized to say by the Commission that the authority granted, which was set out at page 7 of the brief, that the authority granted and the Commission's judgment does not preclude that type of operation.

And if the -- of course if the carrier is in doubt as to whether the operation of mixing it an inland point under this authority is precluded, why it may still ask the Commission to reopen the grandfather proceeding.

I'm advised that the grandfather proceedings back under the 1935 statute are still being reopened so that --

Justice Byron R. White: (Inaudible)

Mr. Stephen J. Pollak: No, it is not.

We -- we think, I might say Mr. Justice that we believe that the tailoring of the authority that the Commission made here is inline with the prior operations of frozen fish and mixed loads that were shown.

There is no evidence as we find it in the record and I've looked rather hard.

There's no evidence that this mixing occurred at the inland point.

So the Commission gave authority from the seaport on the Kansas City and we think it properly waived the evidence.

We respectfully ask the Court to affirm the judgment below.

Chief Justice Earl Warren: Mr. Layne.

Rebuttal of A. Alvis Layne

Mr. A. Alvis Layne: There's only one or two points that I'd like to make, Your Honor.

First, I'm rather surprised by the argument that there's something different about the 1958 statute than the 1935 statutes because it mentioned the word "property".

I want to point out to the Court that in 1935, Congress was dealing with -- in placing regulation on all motor carrier transportations including the transportation of passengers as well as property, and therefore, there was no occasion to do -- to say anything about property, passengers, or otherwise.

In the statute in 1958, Congress was solely concerned, was returning to regulation as the -- as the Committee put it, the transportation of certain property and therefore, it appropriately used as a -- the word property, nothing.

It's -- it's the only way in which Congress could have written the statute in the same terms as the 1935 statute.

Also, there seems to be some suggestion that because Congress used the words frozen fruits, frozen berries, frozen vegetables, and on that this -- this enables the Commission to create what is called three classifications.

There's not one single word by anybody that testified before Congress suggesting that anyone in the industry either those who produce this, those who ship these products, those who receive them, or those who transported them considered them as three separate kinds of classifications.

And the -- and the argument about wool, noils and hemp goes a little too far.

If the -- if the Court would just look at the statute, you'll see the all sale -- said wool waste.

I suppose that now we'll have a classification of wool, noils, and tops, but wool waste is a separate classification.

The fact of the matter is that the transportation of these frozen items had precisely the same transportation characteristic.

They were -- and that is the controlling matter in transportation, we're transported in the same kinds of vehicle.

They had to be equipped with the -- for the same kinds of transportation.

That's what makes these commodities different than wool or coco beans, or bananas, and the other items.

Now, finally, it is said that because somehow there is these limited commodities that that justifies the Commission in being more restricted in its treatment of an applicant than they were in 1935.

They've forgotten that the Court in Carolina pointed out very properly of basic economic fact to the transportation industry particularly for a trucker.

When you have a limited number of commodity, you must have a broad territory upon which to base an economically viable operation.

And the Court said there is in Carolina no statutory sanction for limiting point-to-point where you have a limited group of commodity.

Now, as to whether they can survive, as to whether or not this is an economically viable operation, it's true, he became a substantial operator, but he didn't become a substantial operator by rever -- running his trucks in the reversed direction in going west bound in order to make east bound movements.

No one could survive in the transportation industry doing that kind of thing.

And I gather that at last before this Court, the Commission has prepared as they did an argument apparently.

They suggested that it's not what they really intended, but that is what they did, and that is what they did with respect to the fragmenting of the commodities too.

There is no justification for saying that a man can go to Chicago with frozen berries and he can go to Detroit with frozen vegetables from precisely the same origin.

No one would operate a truck line that way and no one would survive, they could.

This judgment should be reversed.

Thank you.

Featured:

United States v. Montgomery, Inc. - Oral Argument

Wed, 16 Jan 2013 22:49:01 +0000

Case:

United States v. Montgomery, Inc.

Media File:

66_19640108-argument

Related Transcript:

66_19640108-argument

Transcript:

Argument of Morton Hollander

Chief Justice Earl Warren: Number 66 United States et al., Appellants, versus J.B. Montgomery, Incorporated.

Mr. Hollander.

Mr. Morton Hollander: May it please the Court, I would like to move the admission of Mr. Frank I. Goodman, a member of the Bar, the District of Columbia as well as California for the purpose of arguing this case only.

Chief Justice Earl Warren: The motion is granted.

Mr. Goodman.

Argument of Frank I. Goodman

Mr. Frank I. Goodman: Mr. Chief Justice, may it please the Court.

These case is here on direct appeal by the United States and the Interstate Commerce Commission from a decision of the United States District Court for the District of Colorado.

The case arises under Section 212 (c) of the Interstate Commerce Act and involves the validity of certain restrictions which the Commission placed in the certificate of a motor carrier upon converting it from contract carrier status to common carrier status.

I think that a brief description of the legal context of which the case arises might be helpful to an understanding of the facts.

Prior to 1957, the Motor Carrier Act defined contract carriers as any carriers other than common carriers who engaged in transportation under individual contracts or agreements.

In 1957 however, at the request of the Commission, Congress tightened that definition so as to restrict the term 'contract carrier' to those who engaged in transportation under continuing contracts with one or limited number of shippers and who either allocated vehicles for a continuing period for the exclusive use of each individual customer or who performed the service designed to meet a distinctive need of each individual customer.

In addition and also at the urging of the Commission, Congress enacted Section 212 (c) a 'grandfather clause' providing for the conversion to common carrier status of those contract carriers whose operations were so extensive or so generalized that they did not fit the new amended definition of contract carrier.

Section 212 (c) provided that the Commission might revoke the permit of any such contract carrier and issue it instead a common carrier certificate authorizing transportation of the same commodities between the same points or within the same territories as is authorized by the permit.

It's against that legal background that this case arises.

Prior to 1957, J.B. Montgomery Incorporated was operating as a contract carrier under a permit issued to its predecessor in 1943 under the grandfather clause of the Motor Carrier Act.

Montgomery's permit authorized it to serve designated points within abroad mid-western area, and the carry commodities which were described by reference to the particular kinds of businesses which customarily dealt in or used those commodities.

Justice Arthur J. Goldberg: (Inaudible)

Mr. Frank I. Goodman: Well --

Justice Arthur J. Goldberg: (Inaudible)

Mr. Frank I. Goodman: -- in -- well, point were in terms of cities.

Justice Arthur J. Goldberg: City?

Mr. Frank I. Goodman: Yes.

In general, it was from Denver to Chicago and various points in between.

Justice Arthur J. Goldberg: (Inaudible)

Mr. Frank I. Goodman: No, no.

Justice Arthur J. Goldberg: (Inaudible)

Mr. Frank I. Goodman: That's right Mr. Justice Goldberg.

Justice Arthur J. Goldberg: (Inaudible)

Mr. Frank I. Goodman: No, I -- I don't conceived at all.

In this particular case, the -- described the points happened to be cities but in many instances, common carriers or contract carriers are limited to shipping points which are not cities but which maybe identified as plant sites for example of particular businesses or particular classes of businesses and in those instances, I would suppose --

Justice Arthur J. Goldberg: (Inaudible)

Mr. Frank I. Goodman: Well --

Justice Arthur J. Goldberg: (Inaudible)

Mr. Frank I. Goodman: Well --

Justice Arthur J. Goldberg: (Inaudible)

Mr. Frank I. Goodman: No, that is that our contentions Mr. Justice Goldberg.

I might anticipate for a moment by saying that our contention is that under the permit as a practical matter by virtue of restrictions other than the explicit point-to-point restrictions, this carrier was confined in fact, to movements, to from and between the particular kinds of businesses that will later describe in the certificate restriction.

That limitation was not explicit in the permit but it was implicit there.

Now, the commodities which Montgomery was authorized to carry were the following, such commodities as are usually dealt in or used by wholesale and retail department stores.

Secondly, such commodities as are usually dealt in or used by meat, fruit and vegetable packing houses.

And thirdly, such commodities as are usually dealt in by wholesale of retail hardware and automobile accessory business houses.

In addition, in connection with each of these three commodity categories, the permit contained a so-called keystone restriction.

This was a restriction limiting Montgomery to performing services under contract with persons engaged in the particular kind of business associated with the commodities.

In other words, with wholesale and retail department stores, wholesale and retail sellers of packing house products and wholesale and retail auto bill -- automobile accessory in hardware dealers.

Justice Byron R. White: But as long as he was hauling that kind of a commodity or that kind of a customer, you can haul at any place with any of the geographical areas.

Mr. Frank I. Goodman: Yes, to anybody.

That's right.

He was authorized to haul it to anybody so long as it was under contract --

Justice Byron R. White: -- from a particular person --

Mr. Frank I. Goodman: Yes, Mr. Justice White.

Justice Arthur J. Goldberg: (Inaudible)

Mr. Frank I. Goodman: The statute doesn't say anything about customers.

Justice Arthur J. Goldberg: (Inaudible)

Mr. Frank I. Goodman: No, no that is not -- that's not our argument Mr. Justice Goldberg.

Justice Arthur J. Goldberg: Are you saying that (Inaudible)

Mr. Frank I. Goodman: Well --

Justice Arthur J. Goldberg: (Inaudible)

Mr. Frank I. Goodman: Section 212 (c) in terms, does not say anything about customers and therefore would not limit the -- would not preclude the Commission from including in the common carrier certificate.

The keystone restrictions involved here verbatim, in other words had the Commission -- had the Commission carried over the keystone restrictions into the certificate verbatim.

I see nothing in Section 212 (c) which would have precluded that.

It would not -- it would not authorize the carriage of commodities between diff -- any different points or the carriage of any different commodities or within any different territories, then have been authorized in the permit.

In other words, I -- I take it that the objection to carrying over keystone restrictions from the permit to the certificate does not arise from Section 212 (c).

The objection rather is the keystone restrictions in their traditional form, namely as limitations upon the classic persons whom the carrier may serve, are in inconsistent with the status of a common carrier.

Justice Arthur J. Goldberg: Why do you (Inaudible)

Mr. Frank I. Goodman: Well, we don't read that as --

Justice Arthur J. Goldberg: (Inaudible)

Mr. Frank I. Goodman: We don't read that as a -- as a prohibition upon including in the certificate any other provisions that might be contained in the permit and which are not in any way inconsistent with that statutory mandate.

In other words, we think that if the Commission had carried over to the certificate every restriction contained in the permit, so that the certificate was our trainee's copy of the permit.

There could be no objection under Section 212 (c).

The objection would lie rather in the other circumstance that I mentioned a moment ago, namely that it simply wouldn't be appropriate to put keystone restrictions as such in a common carrier certificate.

I think that the principal objection -- I maybe wrong with the principal objection that Mr. Singer makes to -- well I -- let me withdraw that.

I -- I'm exactly sure what the principal objection is but the only objection that might have some substance against carrying over a keystone restriction verbatim would be that a contract -- a common carrier is a carrier which holds itself out to the general public and the --

Justice Arthur J. Goldberg: (Inaudible)

Mr. Frank I. Goodman: That's -- well, if you interpret the language as a common carrier to mean that, then that might be the source of the objection and I will address myself to that objection too.

After the 1957 Amendments to the statute, the Commission instituted a proceeding to determine whether Montgomery's operations were such as to require its conversion to common carrier status.

Montgomery itself later filed an application for conversion to, and various common carriers intervened in opposition.

The Commission concluded that Montgomery's operations did not conform to the amended definition of the contract carrier.

It revoked its permit and issued it in lieu thereof, a common carrier certificate.

The common carrier certificate carried over without significant change, the explicit commodity in territorial descriptions contained in the permit.

It did not carry over, however, in explicit form, the case on restrictions.

The Commission considering it inappropriate to put in a common carrier certificate limitations which explicitly defined the persons with whom the carrier might deal.

The Commission did state, however, that there should be contained in the certificate, provisions which continued to whatever extent was possible.

The substance of the limitations contained in the keystone restrictions.

And accordingly, it placed in the certificate that limitations confining the carrier to move shipments moving to, from and between the designated types of business establishment.

The purpose of this restriction, in the Commission's words, was to enable the carrier to furnish the same service which it had been authorized to provide as a contract carrier thereby ensuring substantial parity between the permanent authority and the certificate authority.

Montgomery filed suit in the District Court to set aside the Commission's order insofar as it contained these particular restrictions.

The District Court held the Commission had no statutory authority to impose such restrictions and it reversed and remanded the case of the Commission.

Justice Byron R. White: (Inaudible)

Mr. Frank I. Goodman: No, Mr. Justice White, it did not.

And I think that's a significant point.

I'd like to say first that there are really two questions involved here under Section 212 (c) and they need to be sharply kept -- sharply distinguished.

The first and the only important question is whether or not, the Commission has authority to transfer to the certificate in any appropriate form whatever, the commodity and territorial limitations which are implicit in the keystone restrictions.

That was the only issue which was decided by the District Court and under the terms of its remand, the Commission would have no alternative but to delete these provisions altogether.

Justice Byron R. White: (Inaudible)

Mr. Frank I. Goodman: Exactly and that is the question --

Justice Byron R. White: (Inaudible)

Mr. Frank I. Goodman: Yes, that's right.

But the Court did not -- did not decide whether the Commission would have -- whether -- did not decide whether these particular restrictions were broad enough to achieve their stated purpose of giving substantial term --

Justice Byron R. White: More important law does decide it here, what happened to the (Inaudible) remand or?

Mr. Frank I. Goodman: Well, let me say this, first, that question wasn't even presented to the Commission in the first place.

The Commission was never advised by Montgomery that there were certain kinds of movements which it could've made under the permit but cannot make under the certificate restrictions.

Had it done so, the Commission would have been of had an opportunity perhaps to modify the language in such a way as to accommodate that objection.

And under the decisions of this Court of course, you can't raise for the first time in Court, an objection you might have raised but didn't before the Commission.

Now, if the Court is prepared to overlook that procedure or obstacle, there might be two possible dispositions to this case.

Justice Byron R. White: But the -- certainly the Commission decided that -- and that is giving a certificate of substantial parity.

Mr. Frank I. Goodman: Yes, the Commission --

Justice Byron R. White: It thought it was.

Mr. Frank I. Goodman: It thought it was and it was never advised differently.

Justice Byron R. White: It might be wrong.

Mr. Frank I. Goodman: It might well be wrong.

Now on that point, our position would be this, apart from the fact that the question wasn't raised before the Commission, our first point would be that the statute requires only substantial parity.

It doesn't require absolute parity.

And the fact that there maybe certain marginal types of shipment which once in a blue moon, the carrier might have occasion to make, should not invalidate the restriction.

We think that most of the examples given by Montgomery in its brief of shipments which it can't make now but could've made then would in fact be authorized under a liberal construction of the Commission's certificate restriction.

For example, every one of the examples that involve public warehouses and that makes up about half of them, would probably be authorized under a liberal construction of the types of businesses referred to in the certificate restriction.

But if the Court disagrees with this, if the Court thinks that the statute requires absolute parity and not merely substantial parity, we think the proper disposition might be one of two things.

First, to remand the case to the District Court for considerations to whether in fact absolute parity is provided by these restrictions.

Secondly, a remand to the Commission with instructions to modify the language in such a way as to achieve complete parity, in other words, to permit every kind of movement which the shipper -- which the carrier might have made under its contract carrier permit.

Justice Byron R. White: But you -- you seemed to -- you seemed to agree that they're some regard of to who's responsible, there are some facts the Commission hasn't considered.

Mr. Frank I. Goodman: Yes, that's right.

The Commission has not considered the objection that there are these certain types of movements which is no longer may make but could've made before--

Justice Byron R. White: Was this certificate somewhat broader than in -- in one way broader than the old one?

Mr. Frank I. Goodman: Is it broader?

Justice Byron R. White: Does it give more?

Mr. Frank I. Goodman: Oh yes, yes, it certainly does in one relatively minor respect and in one very major respect.

In a minor respect, the carrier is now authorized to interchange with other common carriers that is to say to deliver points to a trans -- deliver goods to a transfer point from which other common carriers may then transport it.

This is an incident of common carrier status the Commission held and that therefore permitted it to that even though the carrier couldn't have done that as a contract carrier.

But there's a much more important respect in which the certificate broadens the authority of -- of the carrier.

Our contention would be that the -- whatever -- that the limitations of the certificate are inherent in the keystone restrictions.

Anything that the carrier would be barred from doing under the certificate limitations, it would also be barred from doing under the keystone restrictions, perhaps if there were appropriate modifications that is in the certificate restriction.

But the converse is not true.

The certificate restriction does not confine the shipper to serving only those persons whom it was authorized to contract with by the keystone restriction.

Because for example, they -- the shipper need not -- while it can only carry goods to and from department stores, it need not do that under contract with department stores.

It may also do that on behalf of persons whose -- whose make shipments to department stores or who receives shipments from department stores.

For example, manufacturers or wholesale jobbers or other kinds of suppliers who sell to department stores or retail specialty shops who purchase from department store wholesalers or various kinds of food procedures who sell to packing houses and they're number of other examples.

Now to that extent, our conception of the statute does permit in expansion of the carrier's operating rights, but it's only as much of an expansion as is an unavoidable consequence of its acquisition of common carriers status.

Justice Arthur J. Goldberg: (Inaudible)

Mr. Frank I. Goodman: Yes, it does Mr. Justice Goldberg.

Justice Arthur J. Goldberg: (Inaudible)

Mr. Frank I. Goodman: Yes.

Justice Arthur J. Goldberg: (Inaudible)

Mr. Frank I. Goodman: Well --

Justice Arthur J. Goldberg: (Inaudible)

Mr. Frank I. Goodman: Putting aside the question of substantial as opposed to complete parity, putting that question aside --

Justice Arthur J. Goldberg: (Inaudible) get from the statute?

Mr. Frank I. Goodman: Well first of all, from the language of the statute itself, it says, "Same commodities, same points, same territories."

Now, that means parity of commodities, parity of points and parity of territories.

Now --

Justice Arthur J. Goldberg: (Inaudible)

Mr. Frank I. Goodman: Well our --

Justice Arthur J. Goldberg: (Inaudible)

Mr. Frank I. Goodman: We don't derive it from any place other than that but our position is that the restrictions which we have imposed here comply with the letter of the statutory mandate --

Justice Arthur J. Goldberg: (Voice Overlap)

Mr. Frank I. Goodman: -- because --

Justice Arthur J. Goldberg: (Inaudible)

Mr. Frank I. Goodman: No, but that isn't what we've done here Mr. Justice Goldberg and that I think is a crucial point.

The Commission has always been reluctant to place in common carrier certificates, provisions which explicitly limit the classes of customers with who may carry or may deal and it didn't do that here.

But if the restrictions that did carry over into this certificate, are in effect territorial restrictions.

They were called that by the District Court and they're called that by Mr. Singer.

Justice Arthur J. Goldberg: You mean between retail and wholesale staff.

Mr. Frank I. Goodman: Between retail and wholesale esta -- between outlets of retail and wholesale establishments.

Now, there's ample authority for the imposition of highly specialized service restrictions of this kind upon common carriers.

One example as I noted before, was the so-called plant site restriction which authorizes carriage between to or from the plant site of a particular business or class of businesses.

In effect, that's what this is.

But another closely analogous and even more widely used type of limitation is the so-called intended use restriction.

Now, this is a commodity description which limits the carrier to carrying commodities which are identified -- with what -- well, to carrying commodities which have actually been produced or distributed by a particular kind of business or which are intended for -- for future use or distribution by a particular kind of business.

Now, an example of that came before this Court few years ago in the Andrew Nelson case in 355 U.S. and that case involved a contract carrier whose permit contained a commodity description referring to department stores stock in trade.

The Commission held in this Court and an opinion by Mr. Justice Clark, agreed that that phrase, department store stock in trade limited the carrier to carrying goods which were actually intended for a department -- for drugstore rather, drugstore stock in trade.

Not merely goods which are the general type that drugstores usually deal in.

Well that case involved the contract carrier and therefore is not authority in itself.

The Commission has imposed similar restrictions and literally hundreds of cases since the very earliest days of motor carrier regulation upon common carriers.

And they've never been taught inconsistent with common carrier status.

And in fact, in one instance, they were upheld by a District Court against precisely that contention in a decision later affirmed per curiam by this Court.

I refer to the Morehouse case which is cited at page 32 of our brief.

Now with this intended use, commodity descriptions are consistent with common carrier status and not contrary to any statutory injunction, so are the point-to-point or territorial limitations which the Commission imposed in this case.

Even though they do have the indirect effect of limiting somewhat, though not to the same degree as the keystone restrictions, the classes of persons with whom the carrier may deal.

Now essentially, turning to the Section 212 (c) issue, essentially, what the Commission has done is simply to make explicit in the common carrier certificate, the territorial limitations, the point-to-point or movement limitations, which are implicit in the keystone restriction.

Obviously, Section 212 (c) contemplates the parity of some sort between the prior and future operating authorities, and the only question is whether that's a parity of substance or parity of mere form or language.

And in our view, it's a parity of substance.

The substance of the operating rights contained in the contract carrier permit, are to be found not only in those provisions which explicitly refer to shipping points territories and commodities but also in the keystone restrictions which implicitly impose similar restrictions.

For example, any carrier which is subject to a keystone restriction limiting it to dealing with department stores or operating under contract to department stores will in practical effect be limited to carrying commodities which have been used or sold or which are intended for future sale or use by a department store.

So that the keystone restriction limits the carrier to precisely the same extent as would a commodity -- commodity description of the intended use variety.

By the same token of the keystone restriction also limits the contract carrier to the same degree as -- as to its movements, as due the restrictions which were imposed by the Commission in the certificate here.

Now, if those restrictions had been explicit in the contract carrier permit, there would be no question that they have to be carried over.

The letter of the statute would clearly require that explicit commodity or territorial descriptions in the contract carrier permit be carried over.

And we think they should be no less transferable merely because they're only implicit in the keystone restrictions rather than explicit.

Now, the consequence of rejecting our view and accepting the -- the appellee's view would be an enormous expansion of the operating rights of this contract carrier.

Standing alone, the commodity and -- the commodity descriptions are certainly broad enough to authorize the transportation of almost every con -- consumer commodity so that this carrier will in effect become a general common carrier of general commodities for all commerce.

It will thereby acquire rights which are greater than those which most common carriers have, and it will have acquired them without ever having made a showing of public convenience and necessity such as this required of common carriers.

There's no evidence we think that Cong -- Congress intended any such expansion or windfall.

Two considerations I think bear -- bear that out.

In the first place, the whole purpose of the 1957 Amendments was to prevent crippling encroachment upon the business of common carriers by contract carriers.

Under the original statutory definition, many contract carriers had so expanded their operations that some of them had 100 or even more contracts and were really competing very substantially with common carriers and draining off traffic from them.

The original intent at least as the Commission had believed it was that these contract carriers were to be relatively free of regulation because they didn't really compete on any broad scale with common carriers or threatened their economic viability.

This Court held in 1956 that Commission had no statutory authority to place a ceiling upon the number of contracts into which a contract carrier might enter or to prevent the common contract carrier from searching aggressively for a new business within the limits of its permit.

It was for that reason that the Commission went to Congress and secured new legislation which would limit the class of contract carriers and prevent this encroachment.

Senator Smathers in prevent -- presenting the bill of -- to the -- the Senate, explicitly pointed out that the unlimited diversion of traffic from common to contract carriers might well endanger the ability of the common carriers to render adequate service.

Now, we think it would be completely at odds with that statutory progress to construe this grandfather clause as tolerating and even promoting the very evil which Congress sought to cure.

And well it's true that the converted contract carrier is no longer free of regulation as he was before, he now is subject to the same regulation as any other common carrier.

The fact remains that he has never been required to make a showing of public convenience and necessity.

And for that reason alone, we don't think that Congress could've intended to permit this tremendous augmentation of his operating authority at the expense of existing common carriers who had made such a showing.

And the second reason why we don't think Congress could possibly have intended this tremendous expansion of operating rights is the fact that this is a grandfather clause repeatedly referred to as such by the people who described it or discussed it in the legislative history.

The other grandfather clauses of the Motor Carrier Act had been construed by this Court as expressing a congressional purpose to maintain substantial parity between the prior and subsequent operations of the carrier or in this case, operating rights.

We see no reason why this grandfather provision should be construed in accordance with any other principle.

Justice Byron R. White: (Inaudible)

Mr. Frank I. Goodman: There is a difference in the --

Justice Byron R. White: -- grand or the other grandfather clauses (Inaudible)?

Mr. Frank I. Goodman: There is a difference in the language but I think it relevant to point out that this very Congress in the very next session, the very next year in 1958, would've enacted another grandfather clause using exactly the same language that it used in the original grandfather clauses of the Motor Carrier Act, described that grandfather clause.

That is to say the Committee reports described the grandfather clause and precisely the language that was used in the statute, namely, it was said that it authorized the carrier to make this -- to transport the same commodities between the same points and within the same territories as it had before.

So we think these shows that Congress simply -- that the language Congress used in Section 212 (c) was just its way of saying, this is a grandfather clause which is to be construed in -- in light of concept of substantial parity.

Thank you.

Chief Justice Earl Warren: Mr. Singer.

Argument of Charles W. Singer

Mr. Charles W. Singer: The basic issue before this Court is whether or not Montgomery as a converted carrier, precede a certificate which authorized the transportation of the same commodities between the same points or within the same territory as contained in its permit of the contract carrier.

It is our basic position that the imposition of restrictions limiting shipments to those moving from to or between particular types of businesses is a territorial restriction which detracts or takes away from the authority held by Montgomery as a contract carrier.

It is our further basic position that the Commission was wholly without the statutory authority and right to impose such restriction.

The attorney for the Government indicates that the whole basis for their position is that they were -- the Commission was attempting to establish substantial parity between the authority held by Montgomery as a contract carrier and that to be received by it as a common carrier.

The Commission and the Government virtually admit both in their brief and in this oral presentation that something has been taken away from Montgomery as converted carrier.

In their brief, they say that this would be a small price to pay for the mischief of a grant of unlimited authority.

We submit that so far as Montgomery is concerned, it is a very great price and something very real and substantial is being taken away from this carrier.

Now, I know that -- that my opponent did not intentionally misstate Montgomery's authority but Montgomery's authority is not a point-to-point authority.

It is a broad territorial grant of authority.

It authorizes service between Chicago and Denver on the one hand and on the other, all points in Northern Illinois, all points in Iowa, Nebraska, Kansas and that portion of Colorado East to the continental divide.

This is an extremely broad territorial authority and permits Montgomery or permitted them as a contract carrier to originate at or deliver shipments at any point within this territory.

In response to Mr. Justice White's question, the Commission properly stated the law that as a contract carrier under contract with certain types of shipper, shipments could be originated at or destined to any point within the authorized scope of Montgomery's authority.

As a converted carrier, Montgomery is limited to movements from, to or between certain points within that territory.

Basically, in the transportation of meat for example, meat packing houses --

Justice Byron R. White: (Inaudible) covered two points now, haven't you?

You've said, they had no authority to impose any restrictions beyond a commodity and a territory restriction --

Mr. Charles W. Singer: That's correct.

Justice Byron R. White: -- you've made that point.

Mr. Charles W. Singer: That's correct.

Justice Byron R. White: Now, you're saying that -- that they've also -- even if they had that -- even if they had authority to impose some restrictions that they couldn't impose the ones you're now talking about.

Mr. Charles W. Singer: That's right.

They have -- even assuming and we don't conceive this and we submit it's wholly contract, the legislative history in the Act that -- that this case should have been decided on the basis of substantial parity.

The authority that was granted to Montgomery as a common carrier did not fulfill the test of substantial parity.

Justice Byron R. White: Now, is that -- is that point here now?

Mr. Charles W. Singer: Yes.

Justice Byron R. White: Your opponent suggests that this was never raised before the Commission or in the District Court and that couldn't be here.

Mr. Charles W. Singer: That isn't correct.

The -- the questions -- the four questions of the -- the keystone type of restrictions were raised before the Commission in our case, I'm talking about the Montgomery case, was decided in the Commission on the basis of the T.T. Brooks case, a -- a precedent case on this field --

Justice Byron R. White: But did you bring up the fact that you -- you suggested you did not bring up the fact that there were many of -- many of the -- many runs that you were making before you could not make in this --

Mr. Charles W. Singer: Well, we did this Mr. Justice White.

We pointed out in our evidence the operations that we were performing, and we pointed out that the examiner in the case granted us an unrestricted authority.

We brought before the District Court the same examples and the Court --

Justice Byron R. White: Well, how about the Commission?

Mr. Charles W. Singer: Yes, this was brought before the Commission --

Justice Byron R. White: It's the same -- the same runs if you list in your brief?

Mr. Charles W. Singer: No, not the same examples.

We told the Commission that we were not receiving an authority that permitted the transportation of the same commodity between the same points.

No, we didn't give all of the examples.

Justice Byron R. White: Did you give some of those?

Mr. Charles W. Singer: We gave some of them, yes.

Now, in the -- in the case before the District Court, the District Court as I read the opinion, assumed that there were territorial limitations.

We brought up before the District Court and in our brief, substantially the same examples that are before this Court and the Court specifically indicated.

I see if I can find the -- the Montgomery contends that the last paragraph, sentence of Section 212 was mandatory and allows the Commission no discretion to -- or power to impose territorial restrictions not contained in the permit.

And while the lower court did not specifically point out these examples, they -- they assumed that these were territorial restrictions and then dealt with the question of whether the Commission had the statutory power to impose these restrictions.

So going back to your question, we submit that these are territorial restrictions and that any similar restrictions which could be imposed by the Commission, would be territorial restrictions and would be beyond the statutory power.

Now, we've given numerous examples in our brief as to the territorial taper restrictions but just so that it would be clear, let we give several pertinent examples.

For example, under the contract with a department store which was within the authority of Montgomery, it could perform service from or to any point that was designated by that department store contracting shipper.

It could go from a supplier of a department store, a manufacturing concern and make delivery directly to a customer.

It could perform a service in handling small packages for example, where the shipment instead of originating at the department store, originated either at a public warehouse or consolidation point or supplier in --

Justice Byron R. White: (Inaudible) to show that the Commission understood this?

Mr. Charles W. Singer: Well --

Justice Byron R. White: (Voice Overlap)

Mr. Charles W. Singer: -- Mr. Justice White --

Justice Byron R. White: Or that -- or -- or should have understood it?

Mr. Charles W. Singer: They should've understood it because they -- they were purportedly the expertise --

Justice Byron R. White: Experts.

Mr. Charles W. Singer: -- in the matter and the only thing that we did in our presentation before the Commission was to show as required by the statute that the operations of Montgomery as of the statutory date, did not fall within the new definition of contract carry were those of the common carrier and were otherwise lawful.

And this question came up at the hearing.

The -- the argument was raised at the hearing, well maybe Montgomery's rights are dormant and certainly --

Justice Byron R. White: -- here it sounds like you're turning the question around that saying that, the issue that's really here is the validity of the precise restrictions that they imposed on Montgomery, if they might've -- if they could've put less restrictions on that question isn't here.

Mr. Charles W. Singer: Well, the -- the question -- there're two questions before this Court as I see it.

One, of whether or not the Montgomery did in fact receive a certificate authorizing the transportation of the same commodities within the same point.

Unknown Speaker: Of the two?

Mr. Charles W. Singer: Between the same point.

And two, whether the Commission had any statutory power at all to impose a restriction of this nature because if the restriction had read -- restricted to movements from, to and between warehouses, suppliers, ports, farms and -- and wholesale and retail department store, that would still be a -- a territorial restriction.

It would be like the Commission flipping a coin to try to determine that the restriction they impose would allow Montgomery to perform the same operations that they were authorized as a contract carrier.

The simple fact is that as a contract carrier under contract for the department store or under contract for the wholesale or retail, meat, fruit and vegetable packing house, they could go from or to any point within their territory.

If the -- if the -- a meat packing house told him to go out and -- and pick up some hides, they're out on the farm, they would have the authority to do it.

If the meat packing company told him to go to a port, Chicago is becoming a great port through the St. Lawrence Seaway, and make a delivery to a customer of Armour or Swift, they could do it.

But, as a -- as a common carrier, every movement that they have must go from, to or between a wholesale or retail department store or from, to or between a meat, fruit and vegetable packing house.

And if the Commission then -- if this was remanded that the Commission for the purpose of an -- of lessening that, they would have to think of some other points where they thought the carrier might have gone as a contract carrier and I -- I think that -- that even in the infinite wisdom of the Interstate Commerce Commission, they could not conceive of the operations which for the future might be formed by Montgomery.

The legislative history of this Act is so clear that nothing would be taken away from the converted carrier.

We have quoted on pages 21 and 22 of our brief, what I considered to be the controlling legislative history in this case.

The question was presented to the then Chairman of the Interstate Commerce Commission, Mr. Clarke.

Is there any constitutional question involved in this conversion?

And I think he meant was any property being taken away from these converted carriers without due processes of law and Mr. Chairman Clarke says, "No, I can see none.

It isn't taking away from them anything that they have."

And -- and it's clear here and it's admitted by the Government that something is being taken away from them in any restriction that is imposed would take something away from them.

And Mr. Clarke then goes on to point out that they are given greater opportunities.

They have the opportunity to serve the public.

This Court would go back and review its decision in the Noble case which was the decision wherein in this Court affirmed in 1943, the right of the Commission to oppose the original keystone restrictions.

It would find that the Court said that if they should remove the keystone restrictions, it would result in a conversion of the carrier to common carriage.

For all we're asking this Court to do is to say that -- that since this Conversion Act was enacted by the Commission as a result of -- of your decision in the Contract Steel Carriers case that let's give Montgomery an authority that's a common carrier authority.

The imposition of the keystone restrictions were for the specific purpose of preventing it from serving the general public and now the Commission comes along and they say, it's inappropriate for us to impose the keystone type of restriction because of the obligation of the -- of the common carrier -- of a common carrier, but they tried to reward the thing so that Montgomery can't even do as much for its former contracting shippers as it could before.

And I say that this --

Justice Byron R. White: Assuming that the -- that's a little different point than you just -- just had -- just made, you say that it didn't have any right to put on a keystone restriction at all.

Mr. Charles W. Singer: That's right.

Justice Byron R. White: And --

Mr. Charles W. Singer: And -- and --

Justice Byron R. White: -- they --

Mr. Charles W. Singer: And I'll say the reason why they had the right to put on a keystone restriction originally was the specific language of Section 209.

Now, there is nothing that ties in Section 212 (c) with Section 208 or there's nothing whereby the Commission could have implied that they had the power to try to take the keystone restriction and work it around into what they term something manageable and impose it on the carrier.

The Commission went the great length in imposing the keystone restriction to -- to show that they have the power to the specific statutory language of Section 209.

This Court in affirming the Interstate Commerce Commission said they -- they derive their power from Section 209, in 209 and in -- in essence said that the Commission had the right to specify the business of the contract carrier and to impose such conditions for limitations as were consistent with the contract carrier's status.

So when you -- when you have one Act or one Section of the Act, where the Commission has the specific statutory power, when you have Section 208 of the Interstate Commerce Act which was the basis for deciding the grandfather applications of -- of common carriers in 1935 where they are specifically given the power to impose restrictions or limitation, how can you say that -- that Congress did not intend -- or that Congress intended to give them the power under Section 212 when they don't even mention it?

If --

Justice Byron R. White: (Inaudible) I didn't hear that the Commission did have the power to uphold the restrictions which would affect substantial parity.

What would -- if the Court gets that far and then what do you suggest?

Mr. Charles W. Singer: Well, then they -- if they would get that far and I'd hope they wouldn't, they'd have to remand this case back to the Interstate Commerce Commission.

Justice Byron R. White: Why?

Mr. Charles W. Singer: Because -- because it is clear and it's admitted by the Government that the certificate issued to Montgomery does not maintain substantial parity.

Justice Byron R. White: Well, the Commission thought it did.

Mr. Charles W. Singer: Well, they were --

Justice Byron R. White: The Commission thought it did but it was maybe not parity --

Mr. Charles W. Singer: Well, they did it.

Justice Byron R. White: -- substantial parity.

Mr. Charles W. Singer: They did.

Justice Byron R. White: How do we differ with it and how can we be differ with the Commission of what -- of what substantial --

Mr. Charles W. Singer: Well, you don't have to differ with the Commission, you just remanded -- if you reach that point --

Justice Byron R. White: Didn't the Commission think to be substantial parity?

Mr. Charles W. Singer: What?

Justice Byron R. White: Didn't the Commission think this was -- this certificate effected substantial parity?

Mr. Charles W. Singer: Well, I don't think that they -- they dwell on it.

They had decided in the Brooks case, they were going to impose these types of restrictions.

Our case came along a year later and every other case, like it and they said the Brooks case controls.

Justice Byron R. White: Yes, but this is -- their aim is that the Brooks case into this one is to affect substantial parity.

Mr. Charles W. Singer: Yes, but it's -- it's clear to -- to me as it's admitted by the Government then -- the bench seems to have the same view that -- that there was not substantial parity affected.

Justice Byron R. White: Well, the District Court didn't even get to this issue.

Mr. Charles W. Singer: Well, I'm -- I think they did.

Really, the first question that was asked by the Circuit Court Judge Brandenstein to the Commission's attorney, isn't this a case where something that being taken away from the converted carrier?

Now, they didn't -- they didn't spell it out in their opinion.

They gave my contention that there was a territory restriction and their whole decision was on the basis -- was there statutory power?

Justice Byron R. White: (Inaudible)-- there some authority that he remanded the Commission and say what?

Mr. Charles W. Singer: Say, review this matter --

Justice Byron R. White: Decide --

Mr. Charles W. Singer: -- in the light of our --

Justice Byron R. White: Decide whether their substantial parity?

Mr. Charles W. Singer: No.

No, you review this in this light of our opinion.

You say that -- that from the arguments it presented, it appears that -- that there is not substantial parity affected between the permit granted to Montgomery as a contract carrier.

I mean, the certificate granted to him as a common carrier and they affirmed it as a contract carrier.

So you don't -- you don't decide to what extent it should be modified but it -- it's obvious from a reading of the certificate that they cannot do for their former contracting shippers what they could've as a contract carrier.

So, that's plain from the -- from the certificate itself, from the examples that I gave so it is -- you don't have to go beyond that or you don't have to say to the Commission, "You should impose this type of restriction."

But if you felt that they have the statutory power to impose the restriction, then at a minimum, it should be remanded to them to give consideration to what type of restrictions should be imposed that would create substantial parity.

Justice Byron R. White: I know, but it sounds as though we're saying to them, you have the power to affect substantial parity with these restrictions.

We could guess that you do your job over.

Mr. Charles W. Singer: No, they don't --

Justice Byron R. White: You've already --

Mr. Charles W. Singer: -- you're not telling to --

Justice Byron R. White: -- found substantial parity that we think you were wrong so --

Mr. Charles W. Singer: No.

Justice Byron R. White: -- you do it again.

Mr. Charles W. Singer: You just ask them to -- to look at it.

If they come up with the same result, then the matter can be -- re-litic -- re-litigated.

But if -- if you are merely telling that -- that this question was not considered by you, in your report, take the case back and reconsider it.

I hate to think that that -- that's going to be the result of this case because I -- I feel so strongly that -- that the Commission just push without any statutory power that they -- they usurped the legislative function or maybe the legislature was remised in not enacting the statute that was clear.

But I'll -- I'd like to point out that -- that in this whole field of contract carriers, the Commission appears that it had a mental block.

You have before you the Contract Steel Carrier's case, where the Commission said that we could -- that they would have the power to limit the number of contracts that the contract carrier would enter into.

You said that that was wholly beyond their statutory power.

They were reading into then Section 209, a power they didn't have.

You had before you the J-T case which involved the -- the criteria for granting contract carrier authority and the Commission read into that a fifth or sixth test for determining the application, the adequacy of existing common carrier service.

I think Mr. Justice Douglas wrote that opinion and -- and you said they -- they tried to legislate in that case.

Well, I submit that they tried to legislate here.

Unknown Speaker: (Inaudible)

Mr. Charles W. Singer: The first -- the original affirmative on page 7, 8 and 9 --

Unknown Speaker: (Inaudible)

Mr. Charles W. Singer: 56 --

Unknown Speaker: (Inaudible)

Mr. Charles W. Singer: Yes, I think that --

Unknown Speaker: (Inaudible)

Mr. Charles W. Singer: That's right, yes.

Unknown Speaker: (Inaudible)

Mr. Charles W. Singer: Yes.

Unknown Speaker: (Inaudible)

Mr. Charles W. Singer: That's -- that's correct.

Unknown Speaker: (Inaudible)

Mr. Charles W. Singer: That's right.

That was also the keystone restriction that we're referring to.

Unknown Speaker: (Inaudible)

Mr. Charles W. Singer: That's right.

Unknown Speaker: (Inaudible)

Mr. Charles W. Singer: That's right.

Unknown Speaker: (Inaudible)

Mr. Charles W. Singer: That's right.

Unknown Speaker: (Inaudible)

Mr. Charles W. Singer: That's right.

Unknown Speaker: (Inaudible)

Mr. Charles W. Singer: Points in territory -- points in territory.

Unknown Speaker: (Inaudible)

Mr. Charles W. Singer: That's right.

Unknown Speaker: (Inaudible)

Mr. Charles W. Singer: That's right.

I'm saying that that is -- is the territorial restriction that in effect the Commission purports to grant the same territory but then takes away from it by the -- by saying that all of the movements have to be from, to or between specified types of businesses.

And that's where I say that the --

Unknown Speaker: (Inaudible)

Mr. Charles W. Singer: They --

Unknown Speaker: (Inaudible)

Mr. Charles W. Singer: Yes.

Unknown Speaker: (Inaudible)

Mr. Charles W. Singer: That's correct.

Unknown Speaker: (Inaudible)

Mr. Charles W. Singer: That's right but I'd like to point out --

Unknown Speaker: (Inaudible)

Mr. Charles W. Singer: That's right, and I'd --

Unknown Speaker: (Inaudible)

Mr. Charles W. Singer: I'd like to point out that the plant site restrictions, the Commission imposes, derive -- or the Commission derives the power to impose that specifically from Section 208 of the Act.

That's one of the powers that they have in granting certificates under Section 208 but Section 208 is limited to application under Section 206 or 207.

Now, if -- if the Congress had put the same statute under 206 or 207, then the Commission might have had a power to impose restrictions under 208.

But this is sitting off by itself.

It stands by itself.

It refers to nothing else from the Act and just seems that it -- that Congress had intend that nothing would be taken away from the converted carrier and it would be given this very opportunity to serve the public because under the restrictions from, to or between departments stores, it can't serve the public.

It can't -- it can't serve anybody other than who -- the person who's serving for and it can't do as completed job for them as it could before.

Thank you very much.

Featured:

Hewitt-Robins v. Freight-Ways - Oral Argument

Tue, 25 Sep 2012 22:35:02 +0000

Case:

Hewitt-Robins v. Freight-Ways

Media File:

37_19621011-argument

Related Transcript:

37_19621011-argument

Transcript:

Argument of Harry Teichner

Chief Justice Earl Warren: Number 37, Hewitt-Robins Incorporated, Petitioner, versus Eastern Freight-Ways, Incorporated.

Mr. Teichner.

Mr. Harry Teichner: Mr. Chief Justice, may it please the Court.

This case presents the question whether the common law action for damages sustained by a shipper by reason of motor carrier misrouting of a shipment of goods has survived the passage of the Motor Carrier Act of 1935, which is part 2 of the Interstate Commerce Act.

The general situation is not one of novel impression with this Court because this Court had occasion to go into the Motor Carrier Act to 1959 in a case entitled T.I.M.E. Incorporated against United States.

This is an action brought by a shipper of goods against a common carrier by motor vehicle to recover damages for a misrouting of its goods.

During the years 1952 -- 1953 and 1954, the plaintiff in the action, the petitioner here delivered some goods, 350 shipments to the defendant, the respondent here, for transportation between Buffalo, New York and New York City, New York.

These goods consisted of foam rubber pads.

The respondent motor carrier was certificated and had operating rights both interstate and intrastate between those two points.

It had filed tariffs with the Interstate Commerce Commission for its intrastate route between Buffalo and New York and it had also filed tariffs with the Public Service Commission of the State of New York similarly for the transportation of that commodity wholly intrastate.

Now, the rates that were filed for the interstate movement were higher than those for the intrastate movement.

These shipments were tended unrouted to the carrier.

The carrier chose to move these shipments via its higher rated interstate route instead of the cheaper intrastate route and the effect of that was that the petitioner had to pay $10,000 more for the movement.

Thereupon, the petitioner instituted a suit in the United States District Court for the Southern District of New York seeking to recover the sum of $10,000 as damages for the misrouting of its shipments claiming that it had a right to have the carrier move the shipments via the cheapest route.

In its complaint, the petitioner requested that the determination of the action be held in abeyance pending the filing of a complaint with the Interstate Commerce Commission to have a determination as to whether or not the practice of the carrier was a reasonable one and to have a determination as to what were the reasonable rates.

The respondent filed an answer and in its answer, set up as one of its defenses that it could not transport these shipments over the lower rated intrastate route because of certain difficulties.

Thereupon, I filed the complaint with the Interstate Commerce Commission and I set forth the facts and I asked for a determination as to what were the reasonable rates and what would a reasonable practice under the circumstances.

In other words, I sought from the Commission, a determination as to whether or not the intrastate route was a reasonable one or whether it was an unreasonable one.

The action of the District Court was held in abeyance and a full hearing was had before the Interstate Commerce Commission on that administrative issue.

The Interstate Commerce Commission made a decision and held that the intrastate route was a wholly feasible route and that the carrier should have moved these shipments over the intrastate route so that the shipper could have had the benefit of the lower rate.

Now, when that decision came down, the carrier felt aggrieved and thereupon instituted a suit in the District Court of New Jersey against the United States of America and against the Interstate Commerce Commission and asked for an annulment of the Commission's decision on the ground that it was not supported by the evidence or record.

That suit was tried in the District Court of New Jersey, but before the court made a decision and while the action was still pending in the District Court of New York, this Court decided the T.I.M.E. case.

Now in the T.I.M.E. case, this Court decided that a shipper of goods by a certificated motor carrier cannot challenge in post-shipment litigation, the reasonableness of the carrier's charges which were made in accordance with the tariff governing the shipment.

Thereupon, the carrier made a motion in the District Court of New York in this action for summary judgment on the theory that the T.I.M.E. case was authority for a dismissal of the complaint on the ground that a justiciable issue was not presented upon which relief could be granted.

That motion was granted and Judge Bicks, District Court Judge Bicks who wrote the opinion in the matter, stated that in view of the fact that a referral to the Commission was necessary on the administrative issue as to the reasonableness of the intrastate route, therefore, the Interstate Commerce Commission had no jurisdiction in the matter and the District Court had no jurisdiction of the matter.

An appeal was taken to the United States Court of Appeals for the Second Circuit.

That court affirmed, Judge Moore dissented.

The majority of the Court likewise felt that T.I.M.E. compelled a dismissal of the complaint.

It is our position that T.I.M.E. does not authorize a dismissal of the complaint in this case.

We contend that T.I.M.E. merely went to the question as to whether or not intrinsic reasonableness has an issue on the case would prevent the Interstate Commerce Commission from taking jurisdiction as well as the courts.

A case involving simpleness routing does not involve intrinsic unreasonableness of rates.

The reason that it is conceded for the purposes of the suit that each one of the rates, the interstate as well as the intrastate rate is a applicable rate to each one of those movements and that it is a reasonable rate.

The only complaint is that the carrier committed wrong in transporting these shipments over a higher rated route when a lower rated route was available --excuse me.

Justice William O. Douglas: And the Commission held that that was an unreasonable practice?

Mr. Harry Teichner: Yes, Your Honor.

Justice William O. Douglas: What happened to that rule?

Where is that in the litigation now?

Mr. Harry Teichner: Well, that ruling remains at this time and we have intended to --

Justice William O. Douglas: Is it before a judge of the District Court?

Mr. Harry Teichner: Well, it is before the District Court of New Jersey with respect to whether or not that ruling is supported by evidence or record before the Commission.

Justice William O. Douglas: Yes, but -- I mean, has the District Court decided that case?

Mr. Harry Teichner: Not yet Your Honor.

The District Court of New Jersey is awaiting the decision on this matter.

So that, we have a situation where a motor carrier has committed a common law wrong in exacting a charge for a transportation of shipments of goods when the shipments were tendered unrouted to them and they have the obligation of giving the shipper the cheapest route.

That is a traditional misrouting case in the common law.

The question here is whether or not the Motor Carrier Act abolished such action.

We contend that it did not.

We see nothing in the legislative history for the Motor Carrier Act.

We see nothing in the act itself that proscribes an action for motor carrier misrouting.

It is a simple wrong that was committed by the motor carrier for which it should respond in damages to the shipper.

Justice Arthur J. Goldberg: Did you happen to file an action in the District Court in resolving the complaint in New Jersey, held that the Commission wrongful [Inaudible]

Mr. Harry Teichner: In this case, we would not have an action Your Honor.

However, there are actions for misrouting where it is not necessary to resort to the Interstate Commerce Commission for an administrative finding at all and where it is within the competence of the court to decide all the issues on the case and such would be such action.

Justice Arthur J. Goldberg: But your case was not something new?

Mr. Harry Teichner: That is true sir.

Justice John M. Harlan: You have to go before the Commission in the first instance since you recognize the first (Voice Overlap) --

Mr. Harry Teichner: Under the doctrine of primary jurisdiction Your Honor, I had to go to the Commission for the reason that the carrier was contending that the route over the intrastate line was an unreasonable one and that of course presented a question for administrative adjudication for the sake of uniformity and the expertise of the Commission to decide whether or not that route was an unreasonable one.

However, there are numerous misroute (Voice Overlap) --

Justice William J. Brennan: [Inaudible] if you shouldn’t prevail here, what happens to that New Jersey one, a suit pending in New Jersey District Court, it doesn’t have to be decided then?

Mr. Harry Teichner: That will be decided Your Honor.

Justice William J. Brennan: That’s to be decided anyway.

Mr. Harry Teichner: It will be decided Your Honor.

Justice William J. Brennan: Well, what's the New Jersey Court to gain by holding it up until they hear from us?

Mr. Harry Teichner: Well, the Jersey Court was asked to hold in abeyance its decision until this Court decides this matter because there too, the question arises as to whether or not the Interstate Commerce Commission has any jurisdiction on the matter.

And of course, if it should be found that the Interstate Commerce Commission does not have jurisdiction then the United States and Interstate Commerce Commission will fail in that case and the order of the Commission will be annulled.

Now, there are cases of misrouting where it is not at all necessary to go to the Commission for an administrative finding and this would be a case of that kind.

Let us assume that a carrier has two routes between the same points, one is a higher rated route than the other one and the motor carrier thereupon, transports the shipment over the higher rated route, and a suit is instituted to recover damages.

If there is no question at all about the reasonableness of the intrastate route or the lower rated route, then of course there is no question at all to present to the Interstate Commerce Commission and under those circumstances, the court in which the action is brought may determine all the issues on the case, and we then have a simple common law case.

That is one the differences between a case of a misrouting and a case where rates are attacked as being intrinsically unreasonable.

In the latter case, it is necessary at all times to refer the matter of reasonableness to the Interstate Commerce Commission.

However, in a case of motor carrier misrouting or rail carrier misrouting, there is no necessity of referring the matter to the Interstate Commerce Commission in case no issue is raised with respect to the reasonableness of the lower rated route.

Now, one of the factors for example that may be involved in determining whether or not a lower rated route is reasonable would be road conditions, whether the route conditions are such, that we cannot reasonably expect a carrier to transport the shipment over such route.

Absent such question, the Interstate Commerce Commission would not be resorted to at all.

That is one of the differences between misrouting and the T.I.M.E. case which involved merely intrinsic unreasonableness of rates.

Now, there is another distinction and it is this.

In the T.I.M.E. case, this Court held that a shipper has a built-in protection granted it by the Motor Carrier Act with respect to the reasonableness of rates.

It is incumbent upon an interstate motor carrier to file a tariff of its rates with the Interstate Commerce Commission.

As soon as the carrier does so, any member of the shipping public can come in and attack those rates and say that they are unreasonable and they prove that they are unreasonable.

In other words, the shipper is not precluded from attacking the rates.

He has a right to do so immediately upon their filing.

What the T.I.M.E. says is that the Motor Carrier Act told the shipper, if you have any question with respect to reasonableness of rates, don’t come in, post shipment, come in at once as soon as that rate is filed and contest its validity and its reasonableness --

Justice John M. Harlan: Of course T.I.M.E. involved that kind of the situation, but what do you find in T.I.M.E. to suggest that the reason of the decision, the reason of the opinion was limited to a so-called inherently unreasonable rates?

Mr. Harry Teichner: Well --

Justice John M. Harlan: Do you think that -- do you think that was the rationale of the case?

Mr. Harry Teichner: Well, I believe Your Honor that that was the set -- the only question involved in the case, the reasonableness of rates.

Justice John M. Harlan: That’s what put the issue.

Certainly, that was the issue.

Mr. Harry Teichner: Yes sir and we feel that the decision should be confined to its own facts.

With respect to misrouting, a shipper is at the mercy of a carrier because he never knows whether or not when he delivers a shipment of goods to a carrier whether the carrier is going to misroute or not.

He never gets advance notice of it.

So that he is really at the mercy of the motor carrier.

He doesn’t have an opportunity to attack the practice before the practice is put into effect as a shipper has in a case the rates.

In the case of rates, he comes in immediately and says, “This rate is unreasonable,” but with respect to misrouting, he knows whether or not there's going to be any misrouting.

Justice William J. Brennan: But may the shipper direct the route?

Mr. Harry Teichner: I beg your pardon?

Justice William J. Brennan: May the shipper direct the carrier to take a particular route or not?

Mr. Harry Teichner: No, not in motor carrier practice, sir.

Justice William J. Brennan: I wouldn’t suppose it was a practice, I just wondered whether a shipper might say, "I want you to go by the intrastate rather than the interstate."

Mr. Harry Teichner: He has no right at all to route a motor carrier shipment.

That differs from rail shipments Your Honor.

In rail shipments, a shipper has a right to say, "I want this shipment to move via this line, this line, and this line over such and such route."

Justice Byron R. White: Do you say he has no right to specify a route, but you do say he's got a right to pick this certain route with the --

Mr. Harry Teichner: Yes sir.

Justice Byron R. White: -- and he has got a right to inspect the carrier that [Inaudible]

Mr. Harry Teichner: Oh, the cheapest route, that is --

Justice Byron R. White: So, he doesn’t have a right to direct a route -- the cheapest -- it’s just automatically the shortest route, you say?

Mr. Harry Teichner: Well, under common law he is entitled to have the cheapest route, but he has no right to say to the carrier, "I want you to ship via this route."

He cannot do that as in the case of rail carriers.

Justice Arthur J. Goldberg: And there's no way the Commission could make him hold that he’s going to put it in this route?

Mr. Harry Teichner: No, sir.

There's no way at all that the Commission has of awarding damages for unreasonable rates, misrouting or anyway at all.

It is incumbent upon the one that is injured to bring a suit in a District Court or the state court having jurisdiction and if it is one of those cases of misrouting where the administrative question of reasonableness comes into play, the reasonableness of the route, then under the doctrine of primary jurisdiction, the court will hold in abeyance its decision and refer to the Commission the issue that must be determined by the Commission as an aid to the court in finally deciding whether or not the plaintiff is entitled judgment.

Chief Justice Earl Warren: We'll recess now.

Mr. Harry Teichner: -- Your Honor I have concluded my argument.

Thank you sir.

Chief Justice Earl Warren: Very well. Mr. Caron.

Argument of Wilfred R. Caron

Mr. Wilfred R. Caron: May it please the Court.

The petitioner's brief and to some extent petitioner’s argument has created by either inadvertence or intention, the impression that there was deliberate misconduct on the part of the carrier, respondent.

And so in view of that, I would like to clarify the facts insofar as they help to narrow the conduct involved and what has been done here which is assailed as improper.

First of all, the complaint merely refers to the routing practice as unreasonable.

It does not allege that it was willfully done.

It does not allege that it was deliberate or that it was discriminatory at all.

We simply charged a rate that was in accordance with the filed tariff and which applied to the route that was actually used.

Now, a reference might be made for a moment to the report of the Commission, Division III which decided that the routing practice in question was not reasonable.

First of all, the examiner that made his report to the Division recommended that the charge of unreasonableness was unsound and should be rejected.

However, the Division did not agree with that and by a 2 to 1 decision found that it was unreasonable under the Act.

Now, what was unreasonable?

Well, first of all, let’s consider the routes.

The interstate route was 385 miles long or 12 miles shorter than the intrastate route.

There is a quote in my adversary's brief about routing shipments around Robin Hood's barn but that really didn’t happen at all.

Actually, the intrastate route was 3.1% longer, although it did involve a lower rate.

Now, the selection of the route again as disclosed and discussed in the ICC report, was based on matters so far as the carrier was concerned of practicability and economy.

It was the feeling of the company that the shipment could not be practicably handled intrastate and there were reasons given for that, the size of the vehicles, the fact that there were less than truck load shipments which had to be broken down in a terminal and so it used the interstate route.

One of the Commissioners dissented on the ground and by the way this is before T.I.M.E. on the ground that it had no jurisdiction to decide the issue of reasonableness of past routing practices.

Justice John M. Harlan: [Inaudible]

Mr. Wilfred R. Caron: 302 ICC page 173 Your Honor.

So that -- it’s been a closed question all along and it’s been a question of reasonableness and I might say that the argument of the petitioner has time and again called this a question of reasonableness referable to the Commission in the first instance and to no one else.

There is no doubt whether the Commission had primary jurisdiction subject to a right of review in a court.

Unknown Speaker: Well, I suppose, there is [Inaudible]

Mr. Wilfred R. Caron: Only to the extent that there was a difference between rates and routes.

Unknown Speaker: [Inaudible]

Mr. Wilfred R. Caron: But essentially, the question of reasonableness involved the -- or similar administrative judgment, it involves similar technical problems and it does result in the application of a rate, certainly.

Now, a lot of stress has been put on the word intrinsic.

Frankly, I don’t understand why that’s important or whether the word has any significance, whatever.

Now, I would like first to correct the few matters that were brought out in the course of the argument properly petitioned.

I believe my colleague stated that the shipper had no right whatever to designate a route.

I confirmed my contrary belief by telephone during the recess and was advised by the Traffic Manager of Eastern Freight-Ways that any shipper may designate a route on the Bill of Lading and if that route is practicable and possible to follow, it will be done.

If it is not reasonable or practicable, then of course the carrier cannot do it.

So far as I understand the law, there is no right on the part of the carrier arbitrarily to refuse, to pursue a designated route specified by the shipper.

Justice Potter Stewart: Well, in this case however, so much you’ve told us, your client, the carrier thought that the intrastate route was not practicable was it, or reasonable?

So, it’s certainly --

Mr. Wilfred R. Caron: Sir --

Justice Potter Stewart: -- would not have conformed with the shipper's request, isn’t that right?

Mr. Wilfred R. Caron: If it had been made, it may well be that it would not have but I don’t find that that’s one the facts in the case Your Honor.

Justice William J. Brennan: [Inaudible]

Mr. Wilfred R. Caron: That is my understanding, exactly Your Honor.

And I might add, this point does come up so far as I'm concerned for the first time today.

If the Court so inclined, I'd be happy --

Justice William J. Brennan: Well, it might have those --

Mr. Wilfred R. Caron: -- to furnish a brief, should it have significance.

Justice Tom C. Clark: If it don't designate [Inaudible] --

Mr. Wilfred R. Caron: Then there is of course that basic obligation to select a cheaper route provided all circumstances are equal.

And that's the very question that came in for the Commission where all circumstances equal, was it practicable?

Chief Justice Earl Warren: I think some of the members of the Court might be interested in knowing that as a fact, perhaps both of you within the next day or so can give us a memorandum on it, can you?

Not necessarily (Voice Overlap) --

Mr. Wilfred R. Caron: We'll be glad to.

Chief Justice Earl Warren: Not necessary to print it, you may have it typed.

Mr. Wilfred R. Caron: What you have in mind is a question of practicability involved to be (Voice Overlap) --

Chief Justice Earl Warren: No, no the question -- the question as to whether or not the shipper --

Mr. Wilfred R. Caron: I see.

Chief Justice Earl Warren: -- has a right to designate the route that he is to -- his commodities should be shipped on?

Mr. Wilfred R. Caron: Yes, Your Honor.

Now, on the question of the law, if it please the Court, frankly, I don’t believe that the petitioner has -- is in a position to argue a common law remedy here.

One looks at the complaint, and one looks at the proceedings taken by the petitioner until the T.I.M.E. case and one finds a clear reliance upon a statutory duty upon a purported statutory cause of action.

That is the way the case was framed.

That is the way it was brought into court and that is the way it went before the Commission.

Things changed a little when we made our motion.

I respectfully submit that the only question before this Court is whether or not there is a statutory cause of action created by Part II of the Act, in favor of the shipper in the circumstances presented in this case.

And I submit that the first holding of T.I.M.E. requires that that be answered in the negative.

Certainly, there is not specific grant of a remedy in the Act.

And there is none by implication either.

In T.I.M.E. when this Court considered the effect of the statutory duty in Section 216 (b), it held that it was only a criterion for administrative application and that it did not create any legal rights, any enforceable legal rights.

Now, in saying that, the court was not limiting itself to the question of intrinsic reasonableness of race.

It was addressing itself to a broad construction of Section 216 (b) and I respectfully submit that there is no statutory cause of action whatsoever under the circumstances here and that is where is believe the case should end.

Now --

Chief Justice Earl Warren: Does it follow from what you have said that the carrier may select any route that he wants --

Mr. Wilfred R. Caron: Not at all, Your Honor.

Chief Justice Earl Warren: -- regardless of whether it’s cheaper or not?

Mr. Wilfred R. Caron: Not at all.

The obligation is there so was the right on the part of the shipper and the opportunity to enforce it, much as was done here by a complaint properly filed with the Commission, and I might add that 350 shippers do not have to go by it before that’s done.

There may be explanations why that happened, but the point of the matter is that the no shipper is unaware or has to be unaware as to what route will be followed or was -- as to what the applicable tariff is or as to what are the possible routes available, certainly not, they are billed or they pay in advance, they can apprise themselves, they can seek counsel and they can file a complaint.

Justice William J. Brennan: The provision would be --

Mr. Wilfred R. Caron: But --

Justice William J. Brennan: [Inaudible]

Mr. Wilfred R. Caron: There is no authority so far as I understand the law.

In the ICC, it’s a little more reparations.

Justice William J. Brennan: [Inaudible] $10,000, as you know, on a different rate.

If that is so, this means then that you can file a complaint to the get $10,000 --

Mr. Wilfred R. Caron: Well, first of all, $10,000 is his estimate.

Justice William J. Brennan: [Inaudible]

Mr. Wilfred R. Caron: Secondly, that is the result of a -- an accumulation and I might say I will go a step --

Justice William J. Brennan: [Inaudible] on your position, you do not have any way to tell us the difference of the route rates?

Mr. Wilfred R. Caron: But I don’t think that he can acquire rights for himself by waiting, by failing to act.

Justice William J. Brennan: Well, whatever -- whatever it’ll be?

Mr. Wilfred R. Caron: Surely, the result is that if that amount does spell out the difference between the two rates over this period of time and that he can otherwise establish a right to recovery in light of the T.I.M.E. case then or rather -- cannot establish a right, he is out of that $10,000.

By the same token, I say to the Court that he is not out because he's passed that along to every shipper for whom he has taken a shipment of goods.

There is no doubt in my mind about that.

That’s the way these charges are setup and I say that if at this time, he recoups $10,000 as his windfall, 50% of which may go to a solicitor.

Unknown Speaker: [Inaudible]

Mr. Wilfred R. Caron: Sir?

Justice Byron R. White: [Inaudible]

Mr. Wilfred R. Caron: Well, then he have a breach of express contract situation which happens to be true in one of cases cited by the petitioner.

It was a Jersey case and I frankly don’t recall the name right now but there, there was an express contract of carriage over a given route and the carrier unilaterally decides to go another way and charge more.

And there on the theory of express contract, the carrier was held to respond for the difference.

Chief Justice Earl Warren: Was that an -- was that a trucking affair or was that railroads, in that case?

Mr. Wilfred R. Caron: I think it might have been railroad, even frankly Your Honor, I would have to look at my brief to see --

Chief Justice Earl Warren: Is there no difference between the statutes as -- between the two types of carriers?

Mr. Wilfred R. Caron: Well, there is a substantial difference --

Chief Justice Earl Warren: On that --

Mr. Wilfred R. Caron: -- principally, --

Chief Justice Earl Warren: On that score -- I mean on that score -- particular score.

Mr. Wilfred R. Caron: On the score of being -- being what Your Honor?

I'm sorry.

Chief Justice Earl Warren: What you’ve just been talking about?

Mr. Wilfred R. Caron: Well, I've said a lot.

Chief Justice Earl Warren: Well, alright.

Let’s skip it.

I’m sorry, yes.

Mr. Wilfred R. Caron: And now, we've got -- as I read the T.I.M.E. case and the principles upon which its based and the scope of the principles as they were expressed, I frankly can find no way to distinguish nor any need to distinguish the result there in order to reach a different result here.

I might add that the legislature since the T.I.M.E. case has been exposed to a proposed amendment to the Act which would engraft a remedy under circumstances like this, there’s much had been done prior to T.I.M.E. and that attempt was unsuccessful as well.

I think the legislative history as it has built up before and after T.I.M.E. indicates a clear acquiescence, if we can say no more, acquiescence by the legislature in the construction placed on the Act by this Court.

Justice John M. Harlan: You had referred to in your brief?

Mr. Wilfred R. Caron: It is sir.

It's referred -- I would have to get the page.

It's referred to on page 6 and I refer to it as House Rule 8031, they've adjunct 3059 and the language of that proposal was substantially or identical to the language of the prior proposed amendments which would create a right of recovery for any violation of the duties imposed by the Act.

Now, that was never passed, as had not been in the prior proposed amendments.

To point the fact, I think that the relevant considerations on the question of whether or not there is a statutory remedy are about the same on the question of whether or not there was a surviving common law remedy.

As I say, I don’t believe the petitioner has the right to argue that he has a common law remedy under the pleadings of this case.

But even if he did, I say again the rationale of T.I.M.E. and -- or to its opinion, would compel precisely the same result.

Here, you would have as in that case the situation where the court would have absolutely no authority to determine in the first instance, the primary question in issue.

And it would in effect give the Commission the indirect ability to make a reparations award which Congress has by default or however you want to describe it, refused or failed to give it.

Justice William J. Brennan: [Inaudible]

Mr. Wilfred R. Caron: Exactly so, and there is specific provisions to that effect, that is brought out.

I didn't want to dwell too much on the comparisons between Parts I, II, and III, they are so fully set out in the opinion in T.I.M.E. But that is one of the great distinction between Part II of the motor carrier part and Parts I to III.

That were as they spell out specific remedies that is very noticeably lacking in Part II and that is what compelled this Court certainly to a great extent to reach the result it did.

And those considerations are no different, no different at all between the questions there and the one here, precisely the same considerations as far as I understand the rationale.

Now, I go one step further, this Court in writing its T.I.M.E. opinion, broken down to two parts considering separately (a) statutory remedy, and (b) a surviving common law right.

I would like to advance this position which is mentioned in brief.

I believe that once you decide or once it is decided rather that the statute by imposing a duty does not by imposing that duty create legal rights that are enforceable, then certainly there is no other standard, no other criteria, no other right which can be violated and give rise to a remedy if the violation of that standard, of that statutory obligation was not intended to give rise to a remedy and I don’t know of any other standard that could -- I don't know from what jurisdiction it comes and I really believe that the decision in part one of T.I.M.E. require the result in part two.

Justice Arthur J. Goldberg: Mr. Caron.

Mr. Wilfred R. Caron: Yes sir.

Justice Arthur J. Goldberg: What would you say in the [Inaudible]?

Mr. Wilfred R. Caron: Oh, certainly, there's a right to recovery.

Some [Inaudible] to pay all the obligation.

Justice Arthur J. Goldberg: As to the --

Mr. Wilfred R. Caron: I think --

Justice Arthur J. Goldberg: What about the -- what about the [Inaudible]?

Can you proceed before the Commission in other words on the [Inaudible]?

Mr. Wilfred R. Caron: To recover for damage to merchandise?

Justice Arthur J. Goldberg: No, this is the [Inaudible] of the carrier.

Suppose the carrier had a policy on mishandling [Inaudible]?

Mr. Wilfred R. Caron: Well, if I understand the use of the word mishandling correctly, as meaning that there is some deliberate practice whereby they are routed willy-nilly at -- without regard to cost to the shipper and of course there is recourse not only before the Commission but as I tried to point out in the latter portion of the brief, when you reach the point where you find a deliberate tort, when you have reached the point where you may even get involved in a criminal conspiracy to defraud, then, not only is there recourse in the Commission, there probably is recourse under the criminal statutes.

Justice Arthur J. Goldberg: It's a common law offense?

Mr. Wilfred R. Caron: Common law criminal remedy and very likely a common law -- in other words, I am not saying and I don't mean to create the impression that there is no wrong that cannot be remedied under the Act.

Sure, an action for overcharges is subject to a remedy and is specifically recognized in the Act, Section 204, where a statute of limitation is specifically spelled out for an overcharge claim.

There is a clear wrong and there is clear debt not involving an administrative determination.

Justice Byron R. White: Does that carry the fact that the [Inaudible]?

Mr. Wilfred R. Caron: Absolutely and if I fail to make it clear that that’s my feeling, I apologize.

Justice William J. Brennan: [Inaudible]

Mr. Wilfred R. Caron: The thought --

Justice William J. Brennan: [Inaudible]

Mr. Wilfred R. Caron: Well, I would say that it wasn’t all my idea.

I had really nothing to do with the T.I.M.E. case but the fact of the matter is, that is the result, it's not an unfair result.

I do believe the T.I.M.E. case is correctly decided if my opinion makes any difference.

Justice William J. Brennan: [Inaudible]

Mr. Wilfred R. Caron: No, it's not.

To tell you why its not --

Justice William J. Brennan: [Inaudible]

Mr. Wilfred R. Caron: Because there are problems on each side of the --

Justice William J. Brennan: [Inaudible]

Mr. Wilfred R. Caron: Certainly and very quickly and by the way, by doing an inquiry, can avoid.

Justice William J. Brennan: [Inaudible]

Mr. Wilfred R. Caron: Well --

Justice William J. Brennan: [Inaudible]

Mr. Wilfred R. Caron: I had difficulty --

Justice Byron R. White: [Inaudible]

Mr. Wilfred R. Caron: I'm sorry Your Honor.

Justice Byron R. White: Do you say this [Inaudible]? They did have [Inaudible]?

Mr. Wilfred R. Caron: "Based on many shipments over the same route after long experience and certainly predictable and by the way known in advanced."

Justice Byron R. White: [Inaudible]

Mr. Wilfred R. Caron: Well, if you make reference to the answer --

Justice Byron R. White: [Inaudible]

Mr. Wilfred R. Caron: There is --

Justice Byron R. White: [Inaudible]

Mr. Wilfred R. Caron: That may be.

That may be but I do say this that, so far as the Act goes, it is clear under T.I.M.E. that the -- if there is to be reparation, if there is to be recovery, there is a Congress that will take care of that if it so chooses and that is the only point I'm making.

I don’t argue that there is complete equity in denying recovery of something that might have been an excess of a proper rate, but I do say that it cannot come from anywhere else but a specific legislative amendment to the Act as construed by this Court in T.I.M.E. That is my feeling Your Honor.

Unknown Speaker: [Inaudible]

Mr. Wilfred R. Caron: I really don’t believe I have to take any more time except I would reserve if I may --

Justice Byron R. White: [Inaudible]

Mr. Wilfred R. Caron: Well, they were certainly doing that but I don’t know as I read the opinion that that was made the ground of the decision or even played any part.

In fact, I think it was a footnote but the broad rationale certainly didn’t hinge on the fact that there was that machinery or procedure available for review in advance.

Chief Justice Earl Warren: Very well Mr. Caron.

Mr. Teichner.

Rebuttal of Harry Teichner

Mr. Harry Teichner: Mr. Chief Justice, I think it was the concluding paragraph of the majority opinion in T.I.M.E. which adverted to the malice we have just discussed whether or not the shipper would have a right to attack the rate as being unreasonable anti shipment and at the time when the rate was first proposed to be put into effect.

With respect to this matter as to whether or not, a shipper by motor carrier has a right to designate the route.

I would invite the attention of the Court to Section 15, subdivision 8 of part one of the Interstate Commerce Act.

Justice Hugo L. Black: Is that mentioned your brief?

Mr. Harry Teichner: No sir it is not.

That is an answer to the Chief Justice's inquiries to whether or not there's any authority for this proposition.

Justice Hugo L. Black: [Inaudible]

Mr. Harry Teichner: Its Section 15, subdivision 8 of part one of the Interstate Commerce Act which provides that with respect rail carriers, a shipper may designate the route and that it would unlawful for the rail carriers to deviate from such route.

Now, there is no such -- no counterpart of that provision in part two with respect to motor carriers.

And the Interstate Commerce Commission in its decision in the case that we have at bar stated the following, “Misrouting is an unreasonable practice violative of the provisions of Section 216 (b) of the Act.

And while a motor carrier must under Section 217 (b) of the Act observe its tariff rates over the route of movement, it also must observe just and reasonable routing practices.”

This duty is not affected by the absence from part two of the Act of any specific grant to shippers of the right to designate routes by which their property shall be transported.

When no routing instructions are given, a motor carrier has a duty to select the least expensive route unless it is an unreasonable one, citing the North Pacific Railway Company case against Solum in 247 U.S.”

In other words, --

Justice Hugo L. Black: What were you reading from?

Mr. Harry Teichner: I was reading from the decision of the Interstate Commerce Commission in this case.

Justice Hugo L. Black: In this particular case?

Mr. Harry Teichner: Yes sir.

In our review of Robins' case, 302 ICC, 173.

In other words, we have in part two a specific grant to a shipper of a right to route his own shipments and to that direction must be observed and obeyed by the rail carrier.

And as the ICC points out, part two of the Act does not give such specific grant to a shipper by motor carrier, the inference being that under those circumstances, a shipper by motor carrier would not have a right to specifically route a shipment with respect to movements by motor vehicle.

Rebuttal of Wilfred R. Caron

Mr. Wilfred R. Caron: Mr. Chief Justice, under these circumstances, do you still require an additional brief with respect to that point?

Chief Justice Earl Warren: Did you want to --

Rebuttal of Harry Teichner

Mr. Harry Teichner: I would like to submit something Your Honor.

Chief Justice Earl Warren: You may if you wish if you don't --

Mr. Harry Teichner: And to clarify --

Chief Justice Earl Warren: -- care to submit anything more, it's not necessary.

Mr. Harry Teichner: Thank you.

Featured:

I. C. C. v. J-T Transport Co. - Oral Argument, Part 2

Tue, 25 Sep 2012 22:33:34 +0000

Case:

I. C. C. v. J-T Transport Co.

Media File:

17_19611018-argument-2

Related Transcript:

17_19611018-argument-2

Transcript:

Argument of B. Franklin Taylor

Chief Justice Earl Warren: The Interstate Commerce Commission appellant versus J-T Transport Company Incorporated et al.

And number 18 U.S.A.C. Transport Incorporated versus J-T Transport Company Incorporated.

Mr. Taylor, you may continue your argument.

Justice Felix Frankfurter: Mr. Taylor, before you begin so I shouldn't be breaking in on you.

Mr. B. Franklin Taylor: Yes sir.

Justice Felix Frankfurter: Did I understand you to say that the practice or the orders of the Commission, or whatever the basis for your statement, that it has been said in the law prior the 1957 amendment, taking into account what the District Court here said couldn't be taken into account?

Mr. B. Franklin Taylor: I said that it has been the general practice of the Commission actually since virtually the inception of the Motor Carrier Regulation in 1935, to give due consideration to the adequacy of service that could be rendered by protesting existing carriers.

Justice Felix Frankfurter: That's what this is about, isn't it?

Mr. B. Franklin Taylor: Yes, Your Honor.

In part, it's whether they may consider that and then (Voice Overlap).

Justice Felix Frankfurter: Are you -- am I right to infer that if this decision stands, there would be a break in that practice or a denial of something that has been enforced by the Commission from 1935 to 1957?

Mr. B. Franklin Taylor: Well, we would certainly say --

Justice Felix Frankfurter: And I'm not (Voice Overlap) and I just want to know what the --

Mr. B. Franklin Taylor: Yes.

Justice Felix Frankfurter: -- what the material showed?

Mr. B. Franklin Taylor: If the extreme position of appellees here and what the court below may have found --

Justice Felix Frankfurter: Well now, certainly --

Mr. B. Franklin Taylor: -- it should be the law that the Commission may not consider this sort of showing at all.

Justice Felix Frankfurter: But now the Government doesn't stand on that, does it?

Mr. B. Franklin Taylor: United States, no.

Justice Felix Frankfurter: Alright.

Mr. B. Franklin Taylor: They agree with the (Voice Overlap).

Justice Felix Frankfurter: Well, now assume -- assume the decision below is not to be read to the extreme extent, to which some of the appellees at all had been would put it, assume that they say that on the record here while it may take into account what happens to the common carriers addressed on that almost exclusively or with insufficient basis either in facts or in finding --

Mr. B. Franklin Taylor: Well that -- that is --

Justice Felix Frankfurter: -- with that point of view.

Mr. B. Franklin Taylor: -- that is really the second phase, which would be embraced by the second and third questions whether --

Justice Felix Frankfurter: What I want to know is whether there was a -- whether -- what was decided in this case, forget the talk, what was decided in your view, the Commission's view is the departure from what had been the Commission's practice under to the Motor Carrier Act for 20 years?

Mr. B. Franklin Taylor: We are afraid that that is -- that is the case and it might be a rather abrupt and extreme departure.

For example, the appellees have argued in their brief, as I understand their ultimate position, that if a contract carrier meets the definition of contract carriage in terms of the number of shippers and the nature of the service proposed, that it virtually follows that the certificate or that the permit should issue.

As I read their briefs, there are a number of statements, which it seems to me, definitely lead to that conclusion.

Justice Felix Frankfurter: Well, we are here not reviewing their brief, but the decision below.

Mr. B. Franklin Taylor: Well, they -- frankly, we would hope at the very least to secure from this Court an opinion, which would be much more clear to both the industry and to the Commission itself with respect to what the Commission may or may not do under these amendments --

Justice Felix Frankfurter: Well now, I suppose --

Mr. B. Franklin Taylor: -- and we find the opinion below.

Justice Felix Frankfurter: Suppose -- suppose I have read the opinion as wholly, not that the Commission is precluded, but that in this case on the record, the evidence before the Commission and the requisite findings to be made thereon.

One, there was an insufficient, that there was a want of evidence, or two, or and two, that there weren't findings such as a court is entitled to have from the Commission in order to know what it is that it is reviewing, suppose I -- we'll get the -- the opinion below that way and therefore, the decision to carry out that kind of an opinion, what do you say then about the decision below?

Mr. B. Franklin Taylor: We say that decision below is still in error and as I will argue to Your Honors, the Commission's findings are adequate and what it did is supported by the record and is within the ambit of its discretion and judgment as the expert agency in this field.

The United States will agree -- will agree with me I think on one of the points, that is, what the Commission did with respect to the record and its findings concerning the adequacy of the existing service, the effect on the supporting shipper.

Justice Felix Frankfurter: Alright, right, right.

Mr. B. Franklin Taylor: The United States will disagree with us on what -- and a ship -- the Commission's treatment of the criterion of the effect of a grant on the protesting existing common carriers.

Justice John M. Harlan: As I -- as I read your brief, I understood your ultimate point would be that however you'll read the District Court's opinion, that what the District Court did here exceeded its proper function as the reviewing court of the administrative agency.

Mr. B. Franklin Taylor: We think it clearly --

Justice John M. Harlan: And that the findings that it -- so far as findings were concerned, you say the findings are adequate.

Mr. B. Franklin Taylor: That (Voice Overlap) Justice Harlan --

Justice John M. Harlan: Isn't that the (Voice Overlap)?

Mr. B. Franklin Taylor: -- and I think -- especially apparent, at least it is to us, in the District Court's criticism of what the Commission did with respect to this effect on the supporting shipper.

Justice Felix Frankfurter: May I suggest, instead of worrying about what the United States argued and what the appellees, the other appellees argued, and bothering about my questions, you address yourself to what is involved in Justice Harlan's question what you had said before you intervene, namely that taking not the extreme interpretation that may be placed upon the District Court, but taking the view that it does not disallow the Commission from taking into account the effect or consequence to the uncommon carriers, (a) there is basis in the record for the fact -- for the conclusion that it did not unduly give weight to that factor, and (b), that there are findings carrying out that sufficiency of evidence.

I think then, one will be a little clearer rather than having to consider all of these cross kinds of differences.

Mr. B. Franklin Taylor: Yes.

Well, that would bring me actually to my argument at first on what the District Court said about the Commission's findings and conclusions with respect to the effect on the supporting shipper of the denial and what the Commission in fact did.

The District Court said, as we read this opinion, that the Commission had ignored the affirmative evidence of the supporting shipper, Boeing, specific needs that no consideration were given to special services, which the District Court said in fact could not be supplied by the common carriers here.

And that the Commission had not made adequate findings respecting the distinct transportation needs of the shipper.

I think from the rather full statement of facts I gave yesterday and others facts from the record and which the Commission has found and we set them out rather fully in our brief, that it's just not true that the Commission did not consider the evidence of the shipper, Boeing's needs, and that it did not consider the ability of the protesting common carrier to meet those special needs.

It summarized the needs in great detail and it found specifically that the protesting common carrier could provide exactly the same sort of service as was proposed by J-T, the appellant, and it recited in detail the things that the protesting common carrier was accustomed to do and would do in this case.

And as a result, the Commission concluded that the protesting common carrier was fully able to meet the needs of Boeing.

So, I think it's just patent from the Commission's report, in any fair reading of it, that it is just not the case that the Commission ignored affirmative evidence of Boeing's needs and that it made findings that didn't reflect or touch those needs, that -- that the report is the full answer to that.

The court also --

Justice John M. Harlan: Can you --

Mr. B. Franklin Taylor: -- suggests --

Justice John M. Harlan: Can you pinpoint the particular passages in the report?

If you can do it quickly.

Mr. B. Franklin Taylor: Yes sir.

In the Commission's brief, pages 46 to 52, we address ourselves to this point, to recite initially what the court said about the Commission's treatment of this and then we point out what the Commission itself said.

Justice John M. Harlan: 47?

Mr. B. Franklin Taylor: On page 50, for example, we set out from the Commission report what it said about the needs of Boeing and what the applicant is proposing to do for Boeing, what it's been doing under its temporary authority.

It goes on to set out what U.S.A.C. can do and is offering to do here and then at -- to go back to page 47, it again summarizes in some detail what U.S.A.C. is in a position to do and is offering to do.

And I think it's apparent from this sort of treatment in the report that it has fully considered what the shippers has testified what its needs are and has fully considered what U.S.A.C. has affirmatively shown that it could and would do, and has concluded that -- and I'm quoting, “U.S.A.C. is fully able to meet the shippers' needs.”

And that, “In view of the adequacy of existing common carrier service, the supporting shipper would not be materially affected by denial of the applications.”

I think that's all the Commission needs to find on this, especially after this rather full discussion.

So, we're satisfied to rely on these few pages in our brief and the -- and the court's reading of the Commission report to --

Chief Justice Earl Warren: Might there not be a difference between the Commission saying that U.S.A.C. can supply all of the needs of the shipper from saying that it can do all of the things for the shipper that the private or the contract carrier could do?

Mr. B. Franklin Taylor: Well --

Chief Justice Earl Warren: Isn't there a difference?

Are they not there deciding what they think the shipper needs rather than to say that they can do just as much for him as the contract carrier?

Mr. B. Franklin Taylor: I think the answer to your question Mr. Chief Justice is no.

The Commission has not said here.

The shipper says it needs this, but we really don't think it needs that that the common carrier can do something else, which is close enough.

They're not substituting their judgment for the shipper here with respect to its needs.

Although, I don't want to be understood as conceding that the Commission has got to accept uncritically, everything a shipper says about its needs.

But in this case, on this record, that the Commission recites the testimony of Boeing as to what it needs and what has been done for it on the temporary authority by J-T.

And then the Commission points out that the U.S.A.C. can do the same things.

It's a specialized carrier.

It's a common carrier but specializes, and that's what 85% of his business in serving the aircraft industry.

It's accustomed to modifying equipment, dedicating special equipment, meeting production schedules, all these things, Boeing says it needs.

It has --

Chief Justice Earl Warren: Was there --

Mr. B. Franklin Taylor: -- the terminal right at the origin point of the shipment so it can pick them up on a phone call.

Justice Charles E. Whittaker: But do they have one at the point of destination?

Mr. B. Franklin Taylor: No sir.

Justice Charles E. Whittaker: That the other on is (Inaudible)

Mr. B. Franklin Taylor: The J-T has the terminal in Wichita, which is where Boeing is.

It does not have a terminal in Indianapolis.

The reverse is true of U.S.A.C.

Justice Charles E. Whittaker: Do you contend that the service rendered -- supposedly rendered by J-T would be precisely that which has been rendered by the other company?

Mr. B. Franklin Taylor: Mr. Justice Whittaker, I think it's fair to say from this record that the protesting common carrier U.S.A.C has indicated, has shown, that it can provide service, which would be as close to being precisely what J-T is now rendering as you could get it.

Justice Felix Frankfurter: But, if it's merely a question of whether it is -- where it would be rendering the same service from the point of view of the shipper, considerations of convenience, time, cost, everything -- you say cost is out of this case.

Mr. B. Franklin Taylor: That's right.

Justice Felix Frankfurter: Where all of the other considerations had make a difference to the shipper, it says a contest on the ingredient of factors that add up to satisfy or meeting the shippers' need, if there's a difference of opinion and there's a basis for taking one view rather than another, it's not a business of a court to say, “We think we disagree with the Commission.”

Mr. B. Franklin Taylor: Well, the Commissioners -- the Commission is the finding of the fact.

I don't have to tell this Court that.

Justice Felix Frankfurter: Well, I know.

But that's a loose phrase “a finding of fact” and I'm trying to penetrate in finding out what -- what is the finding of fact in the sense that if there is a conflict, the Commission's resolution of the conflict is determinative, rather than what are the standards by which the so-called fact to judge.

Those are two very different things.

Mr. B. Franklin Taylor: Well --

Justice Felix Frankfurter: Then, we better agree on what are the standards that may be taken into account once you assume the common carriers' interest as viewed from the shipper's need is a relevant factor for the ultimate determination.

Mr. B. Franklin Taylor: I would say that the Commission's report reflects that it fully set forth and considered the shippers' needs, that it fully set forth and considered the service that is proposed to be provided and could be provided by the protesting common carrier, and that it made completely adequate findings that the service proposed is fully able to meet the shippers' needs.

I'll go further to say that those findings are overwhelmingly supported by this record and that certainly, when this Court gets into the record, it could not conclude that such findings, which I submit are adequate, are arbitrary and without support in the record.

I think that they're more than substantially supported.

I think it's fair to say that they're rather overwhelmingly supported in this record.

I don't see that this phase of the Commission decision is a problem frankly.

I -- again, maybe I'm deferring too much to our friends in the United States, but the point at which they are in disagreement with the Commission's decision is the most troublesome point.

And if it meets the pleasure of the Court, since my time is rapidly running out, I'd like to --

Chief Justice Earl Warren: Right.

Mr. B. Franklin Taylor: -- address myself to that final point.

Chief Justice Earl Warren: Go ahead.

Mr. B. Franklin Taylor: Now, as we read the District Court's opinion, it's its view that the Commission based this determination of the effect of granting the permit on the services of the protesting carriers, on the basis of: one, an improper presumption; and two, its conclusion with respect to this affect was without record support.

That is the District Court seemed to feel that, for example, if the protesting common carrier were presently enjoying the track, such that a grant of the permit would result in the traffic being withdrawn from the protesting common carrier, that then it might be the sort of a diversion of traffic which could constitute a sufficient adverse effect that the Commission could consider.

But that something short of that, it just wouldn't satisfy the criterion and that the Commission on something short of that would probably not be justified in finding an adverse effect.

Well, the protesting common carrier is not enjoying that track so we do not have a case where the grant of the permit is going to withdraw on the protesting common carrier, traffic, which is now transported.

I think the United States generally agrees with the District Court.

It too feels that the Commission has based its finding in this area on an unsupported presumption.

Now, the basis --

Justice Hugo L. Black: Would you mind stating again the sentence -- what the presumption is?

Mr. B. Franklin Taylor: Yes sir.

Justice Hugo L. Black: As you understand it.

Mr. B. Franklin Taylor: Yes.

Justice Hugo L. Black: On an unsupported presumption, you say.

Mr. B. Franklin Taylor: I will read you the language in the Commission's report in which what is presumption lang -- at this presumption word is used.

Justice Hugo L. Black: What page?

Mr. B. Franklin Taylor: In our brief, it's a language quoted from the Commission's report at pages 57 to 58 of our brief.

In the record, it's page 42.

The Commission has been discussing generally the background and what it has done in the past and towards the bottom of this quotation on page 57 of our brief, we find the language, “However, we believe that our past holdings that existing carriers are entitled to transport all the traffic which they can economically and efficiently handle before additional authority is granted are equally valid today as they were prior to the 1957 amendments to the Act.

There is, in effect, a presumption that the services of existing carriers will be adversely affected by a loss of 'potential' traffic, even if they may not have handled it before.”

Now, that is a sole place in the Commission's report where it uses this presumption language and the court will note, they said, “There is, in effect, a presumption,” in effect in setting -- to set off the commerce.

Now, what the Commission is saying, and I think when this report is carefully read at two or three -- it becomes almost redundant on this point.

At a couple of places, they've discussed the National Transportation Policy and relate this sort of thinking to it.

And what the Commission is saying, it seems to me, is that generally speaking, authorizing a service for which there is no need, that is that the existing carriers can meet, but authorize a new unneeded competitive service.

Generally speaking, it is viewed as adversely effecting the existing carriers because it takes out of circulation, potential traffic, which might become available to them and that this sort of thing if it were to occur as a regular matter authorizing an unneeded competitive service would be inconsistent with preserving sound economic conditions in the motor transportation industry.

And I think that sort of thinking is entirely consistent with -- if we go back to 1935, when motor carriers are put on to regulation, with the -- the reasons that they were put under regulations as set forth so succinctly by this Court in the A.T.A. case at 345 U.S., where they pointed out it was the over competition, the instability in the industry which it caused to be put on the regulation.

Justice Hugo L. Black: May I ask you --

Mr. B. Franklin Taylor: So the Commission in general is of the belief, that it is -- will not advance the preservation of sound economic conditions in the motor carrier industry to authorize a new service to compete with carriers already in the field where the new service is not meeting a need that the existing carriers cannot adequately take care of.

Justice Hugo L. Black: May I ask you to go (Inaudible), I've had a rather -- it's rather (Inaudible) for me to get precisely the issue.

Does that meet the court's reference to meeting the distinct or specific need of the deporting supporting shipper or is that statement, based on the ideas, it meets the needs of shippers in general (Inaudible)

Mr. B. Franklin Taylor: As I try to indicate a few moments ago, in this case, the Commission has found, I think completely ample evidence that the existing common carriers here, who were protesting this application can meet the distinct needs of these shippers.

Justice Hugo L. Black: For services to Boeing?

Mr. B. Franklin Taylor: Well, the existence of a terminal in Wichita has nothing to do with whether you can deliver to Boeing's plant.

Frankly, and I may be challenged (Voice Overlap).

Justice Hugo L. Black: I asked that because -- I asked that because of Justice Whittaker.

Mr. B. Franklin Taylor: Yes.

I think this terminal at Wichita thing, in a transportation sense, is kind of a phony, because the delivery is to the plant of Boeing, it's not to a carrier's terminal in Wichita -- it's still a plant of Boeing.

The only convenience to a shipper and the carrier having a terminal in the same town where his industry is would be that he could walk over there and talk things over, but you've got a telephone for that.

Justice Hugo L. Black: But your argument is based on the assumption, and as I understand it what I'm trying to say on my mind, that the service would be adequate, must be the kind of service that the Commission can find on evidence, meets the distinct needs of this particular shipper who has supported the application of the other route.

Mr. B. Franklin Taylor: I'd say in this case that there is no issue as there may be in Reddish, on whether the Commission has found that it's the reasonable needs that are met, but not the distinct needs, because here the Commission has said, as I read a few moments ago, the protesting carrier is fully able to meet the needs and it has recited the needs and recited what the carrier can do.

I don't think there's any question on this record that the distinct precise special needs can't be met the protesting carrier.

Justice Hugo L. Black: (Voice Overlap) something that is hard back to the railroad days, trailer and trucking business where the trucking business began to meet the special needs of the carriers of the goods right to the warehouse.

Now, that would be -- now, that would be something I would think of as in the nature of a distinctive service that that shipper needed.

In your statement, you are arguing on the assumption that this case has fully met, the commission has fully met its burden, or not its burden but a duty to decide this on the basis of the actual services rendered by each one and that it shown as decided on evidence, that the distinctive needs of this shipper can be met.

Mr. B. Franklin Taylor: Mr. Justice Black, yes, that's our position and we're entirely content to leave the Commission's report to speak for itself in the record.

We think that the findings are there on the records supported.

Chief Justice Earl Warren: Does this Act contemplate competition between public carriers and private carriers in this field?

Mr. B. Franklin Taylor: Well, private carriers --

Chief Justice Earl Warren: Well I'm -- I'm speaking with contractors, or is it just between rail and water and trucks or does it break it down farther and does it contemplate the competition in this field between public truckers and contractors?

Mr. B. Franklin Taylor: Well, I think, Mr. Chief Justice, at first, the Act contemplates limited competition in the first place, because we are dealing with a regulated industry and regulated rates.

I would like to think it more in terms of service.

I think the function of a contract carrier is to provide some specialized and tailored service to a shipper, which is akin to what it might provide for itself, where that service is not otherwise available.

It's an alternative to going into private carriage.

And today, other contract carriers might be under the scene, providing the same service, and that might be a barrier to a new one being authorized or specialized common carriers may be fully able to provide it.

I'd like to save a few minutes for rebuttal, and on the other hand, I would like to say something, and I'm afraid I've cut my friend Mr. Rice out completely here.

Justice Felix Frankfurter: But before you go beyond the immediate discussion, let me rather conclude, forgive me.

209 (b) sets forth five factors in determining whether he can affirm and be consistent to the public interest et cetera, the Commission shall consider the five factors, which you enumerated just -- I want to know this.

I want to know the Commission's specific attitude on this question.

Must the Commission take all five factors into account?

Mr. B. Franklin Taylor: Mr. Justice Frankfurter, I would say that they must take all of the factors into account that are relevant and pertinent to a particular set of facts.

For example, the fifth factor, the changing character of the shippers' requirements.

The Commission pointed out was not pertinent here.

Justice Felix Frankfurter: Was it then --

Mr. B. Franklin Taylor: It took it into account.

He --

Justice Felix Frankfurter: Well, I knew you must --

Mr. B. Franklin Taylor: -- was aware of it.

Justice Felix Frankfurter: -- must in determining whether a delicate issue canvassed those five considerations.

I'm not now asking whether the considerations have any relevance in a particular case, and therefore, they do take them into account, namely zero.

I'm not asking the weight to be attached, I'm asking, must they in their conclusion give evidence that they have considered the five ingredients which determines the ultimate conclusion of rejection or grant?

Mr. B. Franklin Taylor: Oh, the statute says, “In determining whether a grant would be consistent with the public interest and national transportation policy, the Commission shall consider.”

Now, I would say that that's pretty mandatory upon the Commission --

Justice Felix Frankfurter: Alright.

Mr. B. Franklin Taylor: -- to consider those things.

Now, what weight they attach --

Justice Felix Frankfurter: They are not --

Mr. B. Franklin Taylor: -- to these is not spelled out.

Justice Felix Frankfurter: That would be my question.

I answer those -- I put a very specific question with very specific purposes in mind, with very specific decisions of this Court in mind.

Namely, when any administrative agency, whether the Commission or the Secretary of Agriculture in the Sugar case we had, is told to act on the basis of the following consideration, he cannot delete from the statutorily enumerated consideration anyone and say, “Well, I don't -- I'm not going to pay attention to this.”

He may find that there's no part in the equation.

It has no weight.

It has no value.

It has the irrelevance.

But there must be some evidence that the Commission wasn't unmindful of the limitation of its mandate.

Do you agree with that?

Mr. B. Franklin Taylor: I would have to agree with that --

Justice Felix Frankfurter: Now.

Mr. B. Franklin Taylor: -- Mr. Frankfurter, yes.

Justice Felix Frankfurter: Then you can you -- can this -- the report of the Commission, from the point of view of the Commission arguing before this Court, that the report of the Commission indicate explicitly that it did something about each one of those five?

Mr. B. Franklin Taylor: It certainly does.

I would like to save whatever time we have left for rebuttal.

Chief Justice Earl Warren: You may Mr. Taylor.

Argument of Roland Rice

Mr. Roland Rice: May it please the court.

Chief Justice Earl Warren: (Inaudible)

Mr. Roland Rice: Let me say that it is the view of the specialty common carrier, which I represent in the two groups of common carriers holding general commodities, which I represent that the Commission is required to consider all of the elements enumerated by Congress in Section 209 (b).

Let me also emphasize that this specialty common carrier which I represent hauled a limited group of commodities, namely U.S.A.C. Transport Company.

These are commodities, airplane parts, engines and so on, and we are obligated to offer our services to all people who ship and who wished to receive those commodities.

Now, with respect to the general commodity carriers which I represent, the two groups, the two conferences of American Trucking Associations, we hold out our services to all the public insofar as we are capable of doing so and in many, many cases, we are actually serving thousands and thousands of shippers and we haul many thousands of individual commodities.

Now, at the same time, there are common carriers that transport a very few commodities and U.S.A.C. Transport is one of those.

J-T Transport, a contract carrier also hauls a very few commodities, certainly as compared with the general commodity carriers.

And as a matter of fact, those two are competitive because J-T is now seeking and has been granted temporary authority by this Commission to do something, which very clearly, U.S.A.C. Transport has the right to do and the Commission found that U.S.A.C. Transport could perform this service.

Not only that, there are automobile carriers who handled nothing but automobiles and who are common carriers and who served whatever portion of the public is available to them and there aren't many automobile manufacturers in this country.

At the same time, there are contract carriers of automobiles holding permits granted by this Commission, which perform service which is almost identical, if not physically identical, with that served by the common carriers.

In addition, there are many other types of common carriers of -- specialty commodities.

For example, you have the household goods carriers who haul for anybody but they don't haul general commodities.

They haul that group of commodities falling in the area of the household goods service.

You should find the same thing with tank truck carriers.

You have common carriers by tank truck and you have contract carriers by tank trunk and they will be both be hauling the same or a limited number of commodities, and these carriers therefore, in a very real sense are competitive the one with the other.

The question was asked here a bit earlier, whether or not if what the lower court does should become law, there will have been established a sharp departure from practice in the past with respect to what this Commission has done in considering cases when a new application is before it.

It's my view and very emphatically so that this would amount to a sharp departure in practice, going all the way back to the beginning of regulation in 1935 and continuing to cases that are being decided week after week and month after month by this Commission in which it shows that it does consider the adequacy of service of existing carriers.

That is something which in my opinion is specifically brought out by the amendments of -- in 209 (b) in 1957, and furthermore, that language, the word “adequate” itself appears in the National Transportation Policy, the concluding sentence of which imposes upon the Commission the obligation to administer all the sections of Act with due regard to the total policy expressed by Congress there, which includes adequacy and which includes sound economic conditions.

We think the Commission was fully within its rights and bound by law as a matter of fact to give consideration to every element that it did and to come to the conclusion that it reached in this case.

And furthermore, if anyone wants to know what adverse effect there might be upon U.S.A.C. Transport, the common carrier of limited commodities, which I here represent along with the others, let me say, just look at the 219 empty vehicles which we moved in a two and half month period, and this in the record from Indianapolis out and on which we had no break and with which by modification which we offer to do have record, we could have used, for transporting the commodities, that are here before the Commission and before this Court.

Justice Felix Frankfurter: Well, the Commission doesn't have to take your -- the Commission doesn't have to determine the demand for a permit, either by your willingness to do, that it isn't foreclosed to say, despite that fact, we think some of these other factors outweigh any more than it has to give the shipper a free choice, neither the shippers' wish nor the common carriers' readiness and determinative as I read the statute and as I read its history.

Mr. Roland Rice: I agree with you, Your Honor.

And I think that this Court said so in 364 U.S.1, the Pacific Motor Trucking case.

Thank you.

Chief Justice Earl Warren: Mr. Solomon.

Argument of Richard A. Solomon

Mr. Richard A. Solomon: Mr. Chief Justice, members of the Court.

In a very brief period that I have in this argument, I don't think I'll have time to do more than outline our position.

But the issues presented in this case are also presented in the Reddish case is to follow and I may be able to elaborate there.

Now, with due respect to my friends on the appellee side, I'm not going to take any time here to argue the question of whether the Commission can't consider adequacy of service or consider the service that the common carriers and other protesters here provide.

I think the lower court's decision in both this case and the Reddish case are very ambiguous on this point.

And I agree strongly with the Commission that they should be clarified in this Court's opinion.

But I don't really think that there's any serious problem.

If the court was saying, if they can't consider, it was clearly wrong, they have to consider the existing services.

You can't make a determination that makes any sense without knowing what you're starting.

The problem we have is not whether you consider existing services, but how you consider existing services in evaluating the two primary questions which normally are going to be decisive in this type of case.

Now, as Justice Frankfurter said, there are five factors which the Commission is required to consider and there are additional factors because I agree with the Commission that these are not exclusive factors.

There may be other factors, which the record will require them to consider.

But in most cases, in most cases, the problem really comes down to whether the interest of the shipper in securing new service are more important to the National Transportation Policy or less important to the National Transportation Policy than the interest of the existing carriers in protecting their services, the choice is between the effect, in other words, if I may cite, use statutory language between the effect of a denial of the application upon the shippers for whom it is being put forward because contract carrier applications are always put forward by a proposed contract shipper, a transporter for specific shippers.

The shipper's interest as contrasted with the interest of the existing carriers.

Now, as we see it, and as the court below saw it too, in passing upon these two basic factors, there are three problems which have risen over the years and which are exemplified in both the J-T and the Reddish cases, which are very important.

The first of which, to which I'll only advert very briefly here is burden of proof.

The Commission has used very loose language in the past.

It uses very loose language here with respect to whether the shipper or the applicant must show that the protesting carriers are unwilling and unable to do what they intend to do.

And to the extent that the Commission puts the burden upon the shipper and the applicant to show what somebody else can do, not only is that illogical but it's clearly contrary to the legislative history of 1957 amendments because the Commission at that time tried to put through an amendment which would've put the burden on the applicants and that was expressly rejected.

Justice Felix Frankfurter: But that isn't quite -- unless you have a different legislative history in mind than I have, what the Commission tried to originally propose is that that such -- such a permit can be granted only if the existing common carriers are unwilling or unable to provide.

Mr. Richard A. Solomon: Showing that they're unwilling or unable to provide.

Justice Felix Frankfurter: But it has nothing to do with burden of proof.

Mr. Richard A. Solomon: I think it does, sir.

Justice Felix Frankfurter: Well, Mr. Solomon, please tell me why the Commission -- why the Commission, having been authorized to take into account five factors cannot say as a result of a great deal of experience over more than two decades, our experience lead us to conclude that in evaluating these five factors, it seems to us desirable from a point of view or proof to start off in saying that in most instances, the factors have been shown to be such that we can now formulate a general rule that on the hold, this one (Inaudible) the burden of proof.

So long as they don't make it conclusive, please tell me why that may not be drawn from their experience.

Mr. Richard A. Solomon: Well, I think a lot of things can be drawn from their experience and I think even they can -- from their experience say, generally speaking we are going to look with great disfavor upon contract carrier applications unless there is a real unmeetable need, because we know generally speaking that this will effect the existing common carriers.

But the problems as Your Honor pointed out, the 1957 Act, in part because that contract carriers' complaint that they were doing this too generally and not looking at the specific facts, it requires them to look at the specific facts and apply their general test to the specific facts of the case.

Now, as putting --

Justice Felix Frankfurter: And on putting that completely, that means that they cannot make their generalization or conclusion.

Mr. Richard A. Solomon: Right.

Justice Felix Frankfurter: But it doesn't mean that they can draw on a generalization as one of the elements in reaching a conclusion?

Mr. Richard A. Solomon: I think that's right.

I think that's right.

I think the real problem here is whether they do make their generalizations conclusive.

Justice Felix Frankfurter: Alright.

Mr. Richard A. Solomon: And the generalizations are perfectly well tools to help you in reaching in a decision but they are not a substitute for a decision.

Justice Felix Frankfurter: I agree with you, but a great deal of leeway will be given as to the different weight they attach and I'm rather surprised that -- surprised to look at the brief, neither side have cited a case in which we dealt with this problem rather extensively, namely Secretary of Agriculture against Central Roig Company in 338 U.S.

Mr. Richard A. Solomon: Well, from my point, I must confess completed wherein -- that's why we didn't decide that.

Justice Felix Frankfurter: Because that case dealt with a similar problem relating to the functions of Secretary of Agriculture and gave him the broadest leeway as to how you weigh the different factors.

Mr. Richard A. Solomon: Mr. Justice Frankfurter, the United States, despite what it may seem like because we sometimes do come up here opposing the Commission does not like to and --

Justice Felix Frankfurter: Do we have a separate statutory standing or duty --

Mr. Richard A. Solomon: We --

Justice Felix Frankfurter: -- as an independent position?

Mr. Richard A. Solomon: -- recognizing exactly what you were saying, we have, although we think there is some basis for the lower court's opinion here, we have leaned over backwards to say that in our opinion, on the basis of the record of the J-T case, we don't have to say this in Reddish, we're in the basis of the J-T case, we do think that the Commission can be said to have found that J-T can fully and completely meet the distinct needs of the shipper here.

Now, this is debatable, but we think that, as we look at the record here that this is a conclusion that they not only could've drawn, but that the language would seem to say they drew it outweighs the language, which seems to indicate they didn't.

This isn't a clear problem even in the J-T case Your Honor, because not only does the Commission in its general discussion at pages 38 of the record, talk in terms of shipper needs being merely met by reasonably adequate service of the common carriers, exactly the type of showing, which this Court and the Schaffer found was no -- not sufficient.

But on page 49 of the record, it again talks in terms of, whereas here it appears that a motor common carrier is able to furnish a service substantially similar to that proposed by a motor carrier -- by a motor common carrier applicant.

So there is this problem in the J-T case as well as the Reddish case.

But we agree with Mr. Taylor that when you look at this decision on the whole here, there is enough in here to find that the Commission filed that the existing carrier could fully meet the needs of the shipper and that they're sufficient on the record so that in the very broad leeway that the Commission must necessarily have, this is supportive.

Justice Hugo L. Black: Do you mean by needs -- distinctive needs again?

Mr. Richard A. Solomon: I mean by distinctive needs, sir --

Justice Potter Stewart: Using the --

Mr. Richard A. Solomon: The Commission seems to think it means that too because the Commission does use the words “distinctive needs” in the J-T case.

Justice Felix Frankfurter: Distinctive needs within the statute, is it?

Mr. Richard A. Solomon: Yes sir, the 203 (a) (15), in defining common carrier uses --

Justice Potter Stewart: What?

Mr. Richard A. Solomon: I mean contract carrier, uses the term distinct needs of the shipper and it is that -- for that reason, that the lower courts picked up this term.

Justice Felix Frankfurter: I mean on 209, is there any difference between needs and distinctive need?

I don't --

Mr. Richard A. Solomon: I think there's a -- all the difference in the word.

Justice Felix Frankfurter: There is.

Mr. Richard A. Solomon: Yes.

Justice Felix Frankfurter: Could you tell me?

Mr. Richard A. Solomon: The problem in all too many cases, the problem in the Reddish case is that in evaluating the needs of the shipper, one of the statutory things that they must evaluate all too often, the Commission says --

Justice Felix Frankfurter: Why is it they must evaluate?

Mr. Richard A. Solomon: The needs of the shippers --

Justice Felix Frankfurter: In 209, there is no “distinctive needs.”

Mr. Richard A. Solomon: No.

But what 209 says is, “You must evaluate the effect of a denial upon the shipper.”

Justice Felix Frankfurter: Yes.

Mr. Richard A. Solomon: Which means, I believe and I think must necessarily mean, that what will a shipper lose in the way of transportation if this application is denied, which necessarily means what does he need, because what if -- you'll now determine what he loses.

Justice Felix Frankfurter: Yes.

Mr. Richard A. Solomon: Well now, all too often --

Justice Felix Frankfurter: An automobile shipper had different needs than a banana shipper.

Mr. Richard A. Solomon: Yes, sure.

But it's not only that, it's a question of what are the specific needs, because all too frequently Justice Frankfurter, what the Commission does is it looks at the common carriers and says, “They can perform the general type of service that is asked for here.”

If it's -- well, they say here, these are both specialized carriers.

They can both perform the same general type of service.

Now, if they stop there, as we think they did in Reddish, we think that would be clearly wrong.

It would be exactly what the Commission did in the Schaffer Transportation case, at 355, where they said the railroads can get these granite blocks from Vermont to the Midwest, they can provide a reasonably adequate service and they didn't look to see that -- a reasonably adequate service may not meet the full needs of the shippers.

Justice Felix Frankfurter: Therefore, from my --

Mr. Richard A. Solomon: This is a very real problem --

Justice Felix Frankfurter: Therefore, from my point of view, it isn't reasonably adequate.

Mr. Richard A. Solomon: Well --

Justice Felix Frankfurter: This is “words.”

Mr. Richard A. Solomon: This is “words.”

Justice Felix Frankfurter: "Words, words, words,” then, aren't they?

Mr. Richard A. Solomon: This is “words” --

Justice Hugo L. Black: Would you say this is --

Mr. Richard A. Solomon: -- but it's more than that.

Justice Hugo L. Black: I gather, you are saying, I'm trying to get the distinction, reasonably adequate for this shipper.

Mr. Richard A. Solomon: Yes, that's what -- that's what --

Justice Hugo L. Black: That's what you would say, reasonably adequate or distinct to meet his -- you say, distinctive needs, isn't it?

Mr. Justice Frankfurter was simply, as I gather, say, for the shipper?

Justice Felix Frankfurter: That's what I do mean with -- because the statute talks not about an abstract platonic shipper, it means a fellow is engaged in business as some goods to ship from A to B and his needs must be satisfied.

Mr. Richard A. Solomon: I don't disagree.

What I am saying is that all too frequently, the Commission has used this phrase “reasonably adequate,” as this Court found in the Schaffer case, has used this convenient term “reasonably adequate” to say that the protesting carriers are doing something equivalent generally to what the shipper needs and that's good enough, and we won't consider the shipper needs anymore.

Justice Felix Frankfurter: Many of the carriers who ships bulk goods, that isn't good enough that the particular bulk requires a particular treatment, a particular acceptance and a particular delivery.

Mr. Richard A. Solomon: Well, I'll give you a more specific case because it's the case I'm going to argue next.

In the Reddish case, both the protestants and the applicant can provide multiple pickup and delivery service of small orders and that's true.

And to that extent, they are -- the protestants can provide reasonably adequate service, but that's not the issue.

The issue in Reddish is whether the protestants can provide this type of service as fast and as efficiently, and that the Commission doesn't pay any attention to.

Justice Felix Frankfurter: Once you spell it out, I don't disagree with you at all, but I don't get any (Inaudible) significance between specific needs and needs.

Needs --

Mr. Richard A. Solomon: Well --

Justice Felix Frankfurter: -- that don't satisfy the particular shipper on satisfaction of his needs.

It's as simple as that to me.

Mr. Richard A. Solomon: Well, I think on the same wavelength.

What I am saying is that the problem here and in all these Commission cases is that in all too many of them, they have used a formula rather than looking at the facts to see distinct needs.

Justice Felix Frankfurter: You know, they have loosened their language unlike what courts there were engaging.

Mr. Richard A. Solomon: No, they have used lose language to avoid doing their job.

Justice Felix Frankfurter: Alright.

If you can penetrate that in their result, they have left out irrelevant factors and I understand you thoroughly, if you'd go and looked at their words through a microscope, then I don't think why -- I don't see any reason why they should be judged more harshly than you would judge me, I hope.

Mr. Richard A. Solomon: I agree sir that we have to look at what is behind the words and not merely at the work.

And that -- let me turn in connection with to this problem.

Unknown Speaker: The Commission said that there is no evidence of distinct needs.Can you tell us (Inaudible)

Mr. Richard A. Solomon: I have no doubt that the burden of showing the distinct needs of the shipper are upon the shipper or the applicant who wishes to serve it.

The burden of showing whether they can be met by the protestant carriers is on the protesting carriers.

Now, I would like to get, if I have any time at all, to the question of presumption, which is the place which in the specific facts of the J-T case, we part company with the Commission.

Now, as I say in most cases and in the J-T case, the problem is evaluating shipper needs against the needs of the -- against the interest of the existing carriers.

And the statute, the 1957 amendment next express what we think was implied previously and that is that the Commission must consider the effect of a grant upon the services -- upon the services of the existing protesting carriers.

Our problem with the Commission is that it doesn't make any effort in any case or at least in these two cases, maybe it makes some effort in some cases Mr. Todd may mention.

But in these two cases, it makes no effort to look and see what the real effect of this grant is going to be upon the protesting shippers.

It doesn't look to the problems that Mr. Rice mentioned about the empty trucks of U.S.A.C.

It doesn't look to what U.S.A.C.'s financial position is.

It doesn't look to whether this grant would really affect U.S.A.C.'s ability to continue its services for its public just as efficiently as if it didn't make the grant.

All it does is apply this presumption.

Now, Mr. Taylor read you the general language that the Commission had in its decision with respect to this presumption.

I'm not going to reread it.

But what I would like to read from the Commission's decision is what it said in this case when reach the factor that it has to reach under 209 with respect to the impact upon the protesting carriers.

And I am reading from the bottom of page 45 of the record and what it says is, “The requirement of Section 209 (b) that we consider the effect which are grant of authority would have upon the services of protesting carriers has we believe been adequately discussed,” where on page 42 the language that Mr. Taylor read you.

It is sufficient at this point to say that in view of our finding herein, that U.S.A.C. is in a position to provide any service that is needed.

We conclude that a grant of authority to the applicant would have an adverse affect upon the protestant.

In other words, without any attempt to analyze what the real impact will be, they say, “It is sufficient that they can provide the service, therefore, if they don't get it, it will have an adverse effect upon it.”

Justice Felix Frankfurter: Was there any evidence -- what -- your proceedings are before the Commission --

Mr. Richard A. Solomon: Yes sir.

Justice Felix Frankfurter: Was there oral testimony or --

Mr. Richard A. Solomon: Yes.

Justice Felix Frankfurter: Extensive?

Mr. Richard A. Solomon: Not very extensive, this is the entire record.

Justice Felix Frankfurter: You mean, all the witnesses?

Mr. Richard A. Solomon: All the witnesses.

Justice Felix Frankfurter: Well, is there nothing in the oral testimony bearing on this subject?

Mr. Richard A. Solomon: Mr. Rice suggests that there was something bearing on the subject that wasn't evaluated?

Justice Felix Frankfurter: But if this is the record -- if this is the record, then you know the record, was there anything?

Why do you have to refer to him?

Mr. Richard A. Solomon: I think there was very little if anything which you can make an appropriate analysis on.

But if the Commission were to disagree with me and say that we think that this and this in the record is sufficient, I might have more difficulty in arguing that the --

Justice Felix Frankfurter: Must they repeat in their order, in their report, the evidence that's in the record.

Mr. Richard A. Solomon: They must consider the problem in the light of the evidence and not consider in the light of a pure generalization.

Justice Felix Frankfurter: Well, I don't understand this.

Mr. Richard A. Solomon: Let me --

Justice Felix Frankfurter: Must be -- I don't follow.

If in fact, the issue was canvassed.

I can understand if you say the issue wasn't canvassed, but if the issue was canvassed testimonially before the Commission, must they summarize the evidence?

Again and again, courts don't do that.

Mr. Richard A. Solomon: Well, but Your Honor, it's not a question of whether the issue was canvassed, it's a question of what such evidence as there is in the record means and they must evaluate.

Justice Felix Frankfurter: But they evaluate it by (Voice Overlap).

Mr. Richard A. Solomon: No sir.

They did not evaluate.

They simply said, “We don't have to discuss this matter because we've already said that we are applying a general presumption.”

Justice Felix Frankfurter: But they go on to the next sentence.

Maybe they were -- they were repeating however than indeed (Inaudible) could go on.

Mr. Richard A. Solomon: There is one statement -- no, that's just general again.

Justice Felix Frankfurter: Well, I know generally, but that's why I asked you whether there's an underlying basis for it in the testimony.

If you say, “No,” that would be an end of the matter.

But you don't say, “No,” you said there was some.

Mr. Richard A. Solomon: I say that --

Justice Felix Frankfurter: Can I ask you?

Must they repeat it in the body of their report?

Mr. Richard A. Solomon: I would think the answer to your question would be no.

But if the Commission were to disagree with me and pick on some bit of evidence and say, “This is sufficient,” I am not in a position now to say that I would say that that was unreasonable, so unreasonable that it would have to be removed

Justice Felix Frankfurter: And I think you must be in that position, if you say they didn't adequately, take into account a requirement of the statute.

Mr. Richard A. Solomon: I don't think so, Your Honor.

I think that it's up to the Commission to come to this Court having evaluated the evidence and not to say to this Court, “We didn't evaluate the evidence.

We just played on a general presumption but you look at the record and see whether there's sufficient evidence to support this generalization.”

I think that's a fairly shocking point of view, not a one that this Court would normally want to hear to.

I think it's up to the Commission as the body here that's got the statutory responsibility to evaluate the evidence.

And your job is to review whether that's a reasonable evaluation.

Justice Hugo L. Black: May I ask you if there's any concrete challenge in the record to the sufficiency of evidence to show that the needs would not be met in a concrete way with reference to this particular company.

Mr. Richard A. Solomon: Yes, sir.

It's a challenge.

This is a debatable question --

Justice Hugo L. Black: Why?

What is concretely -- what is the distinction?

What is the argument that there is some reason why the services here --

Mr. Richard A. Solomon: Are inadequate?

Justice Hugo L. Black: -- are inadequate to meet the needs of this particular shipper?

Mr. Richard A. Solomon: The argument is one, they had previous experience with the protesting carrier and it was found to be unsatisfactory.

Two --

Justice Hugo L. Black: You mean, protesting common carrier?

Mr. Richard A. Solomon: Yes.

Justice Hugo L. Black: Unsatisfactory in what way and for what reason?

Mr. Richard A. Solomon: The record is very weak on this because when they started to testify on this unsatisfactory past history, the examiner cut them off and said that's 1952.

That's too --

Justice Hugo L. Black: Was that --

Mr. Richard A. Solomon: -- long ago.

Justice Hugo L. Black: Is that -- where is that in the record?

Did they cut them off from showing that they had tried them before and the service is unsatisfactory for particular reasons?

Mr. Richard A. Solomon: It's -- I can't give you the exact page.

It's in the testimony of a namesake of mine, but no relative by the name of Ernest Solomon which appears in the record roughly between pages 83 and 109, but I am sure his counsel will know better than I do.

Justice Hugo L. Black: What other challenges, concrete challenges?

Mr. Richard A. Solomon: It was argued --

Justice Hugo L. Black: -- (Voice Overlap) the adequacy of the service --

Mr. Richard A. Solomon: It was --

Justice Hugo L. Black: -- of that particular carrier?

Mr. Richard A. Solomon: It was argued that the common carrier protested, had a provision in his tariff which gave him permission to keep control at all times of the vehicles and that this would make it more difficult for him to dedicate vehicles to the particular shipper.

Justice Potter Stewart: This was another argument?

Mr. Richard A. Solomon: These were all discussed by the Commission and reject --

Justice Hugo L. Black: Was there any evidence on that?

Mr. Richard A. Solomon: Yes, there are some evidence on that.

Chief Justice Earl Warren: To support either way or both ways?

Mr. Richard A. Solomon: There is very little evidence in this record to support anything but there is some evidence on this.

It's mostly opinion evidence.

Justice Felix Frankfurter: But there was -- if you can look at the examination, direct and cross-examination, wasn't it, on these points?

Mr. Richard A. Solomon: There is not very much evide --

Justice Felix Frankfurter: Well, I didn't ask you whether very much.

There were some.

Mr. Richard A. Solomon: Some.

Justice Felix Frankfurter: Alright.

Mr. Richard A. Solomon: Yes.

Justice Felix Frankfurter: You don't say it's barring your testimony, do you?

Mr. Richard A. Solomon: We are supporting the Commission on this point, Your Honor.

I am just answering Justice Black's question, sir.

We think that these --

Justice Hugo L. Black: In both cases?

Mr. Richard A. Solomon: No, sir.

Justice Hugo L. Black: (Voice Overlap)

Mr. Richard A. Solomon: I'm talking about the J-T case.

I will talk about the Reddish case later, it's at -- no.

But in the --

Justice Hugo L. Black: Well, if the -- if the record shows in the case, while you're supporting the Commission, there were concrete challenges.

Mr. Richard A. Solomon: Which the Commission considered and evaluated.

Justice Hugo L. Black: Considered, evaluated and resolved.

Mr. Richard A. Solomon: We think so.

Justice Hugo L. Black: Why wouldn't that settle it without regard to what language they used as to that general rule in connection with that consideration --

Mr. Richard A. Solomon: Well --

Justice Hugo L. Black: -- in that particular case?

Mr. Richard A. Solomon: Yes, I --

Justice Hugo L. Black: Why would you not then be in support of the Commission?

Maybe my question --

Mr. Richard A. Solomon: No, no, your question is the heart --

Justice Hugo L. Black: I just don't quite understand you.

Mr. Richard A. Solomon: No, no, no, your question is the heart of the problem.

What Your Honor is asking me is if the protesting carriers can arguendo, provide fully and completely for the shippers, why do you have to go beyond that?

Why doesn't that end the case?

Justice Hugo L. Black: This particular shipper and the Commission have decided on the evidence that both sides present it --

Mr. Richard A. Solomon: Why doesn't that end the case?

Justice Hugo L. Black: -- which is satisfactory, why wouldn't it end there, in that case?

Mr. Richard A. Solomon: Yes.

This so, I think, gets into the basic problem of the relationship between common carriers and contract carriers and the basic difference in standards for passing upon the two.

Unfortunately, our brief does not contain the standards for common carrier applications but I've handed it up to you, 207 of the Act provides that common carriers are to be passed, common carrier applications are to be passed upon in the normal way that a utility application is to be passed upon, i.e. a common carrier must show that the service he wishes to provide is or will be required by present or future public interest and necessity, and that is the standard language for applicant for common carrier facilities and railroads, telephones, telegraph, public utilities.

Contract carriages are different animal.

The standard of Section 209 does not require him to show that there is a public need for the service.

Instead, the provisions of Section 209 are that the Commission shall grant a contract carrier application if it is consistent with the public interest and the national transportation policy.

Now, this distinction which the lower courts mentioned reflects I think a real distinction that Congress was making.

We agree completely with the Commission that the basic reason for regulating contract carriage was to ensure that contract carriers didn't skim the cream off the market and hurt the common carriers upon which the small people in the country necessarily depend.

But the Commission felt, I mean the Congress felt that that was the primary reason for regulating contract carriers and unless there was a demonstrable effect upon the common carriers, there wasn't any need to prevent the small man from buying a truck and going into business providing for the special services of a shipper.

And therefore, they had this distinction in the standards.

Now, prior to 1957 --

Justice Felix Frankfurter: In the standards for issuing contract carriers as against common carriers certificate?

Mr. Richard A. Solomon: Yes sir.

Justice Felix Frankfurter: But 209 isn't that, 209 --

Mr. Richard A. Solomon: I'm getting to 209.

Justice Felix Frankfurter: -- gets the relationship.

Mr. Richard A. Solomon: I'm getting to 209, sir, because 209 gets to the relationship as a result of the 1957 amendments.

Now, prior to 1957, despite the statutory scheme, the Commission had a very real problem and that was -- I am really taking much too much time, but let me try at least answer it.

The problem they have was that prior to 1957, when they were passing upon an application for a contract carrier applicant, they didn't know what they were passing on and the reason for that was that prior to 1957, a contract carrier application was a hunting license.

Justice Hugo L. Black: Was a what?

Mr. Richard A. Solomon: A hunting license.

It was a -- maybe a limited hunting license but it didn't limit the person when he got his permit to serving the particular shippers whose needs he had applied to serve.

He could go out and get additional shippers and in this Court's decision in the Contract Steel case, which Mr. Taylor mentioned yesterday, the Court made that perfectly clear.

It said, “As long as he keeps within the general specialization field that he had been licensed for, he is perfectly able and willing to go out and get as many new contracts as he wants.”

Now, that meant -- that meant that despite this difference in standard, the Commission had a real problem because it never could really tell when it made a grant for a contract carrier what its impact was going to be.

It could not say, “This fellow is going to serve shipper A and B and we can tell what the impact of his serving shipper A and B is because as soon as it got the permit, he could turn around and serve shippers D, E, F and G as well.

And therefore, the Commission over the years did evolve a policy of changing the Act and turning around completely.

And applying to contract carrier applications the same public interest, convenience, and necessity showing standard that the Act provided for common carriers and it thought that was necessary because of this problem I mentioned.

But this problem has been resolved.

The 1957 amendments do for the first time give the Commission the authority when J-T comes here and says, I want to serve Boeing.

They say, “Okay.

We will give you a grant to serve Boeing and if you want to serve some other air companies, you come in and amend your certificate before you do it.

There are certain minor exceptions to this.

This isn't may be quite as definite as I might be implying.

There are certain substitution rights but barring that, the Commission now has control, it can determine.

It can go back to where it should have been in the first place.

I'm very belated in coming to answer your question Justice Black.

It can now allow a man to go into the contract carrier field even though there isn't any showing of unmeetable need if that man can go in without demonstrable harm to the existing carrier.

Justice Felix Frankfurter: You're not suggesting --

Mr. Richard A. Solomon: And let me -- let me backtrack on demonstrable.

Justice Felix Frankfurter: You're not suggesting that the 1957 Act was an enlargement of opportunities to what you call a little carrier, that contract carrier.

It was a contraction.

Mr. Richard A. Solomon: I am suggesting that the 1957 amendments were both an enlargement and a contraction, yes, sir.

Justice Felix Frankfurter: So the origin of the statute was precisely to cut down the freedom that theretofore existed.

Mr. Richard A. Solomon: That is correct.

The origin of the statute was a proposal by the Interstate Commerce Commission to cut down on contract carriers.

But like many other things, what starts out as one thing ends up as another, and the contract carrier people, the legislative history makes perfectly clear, got their quid pro quo in this compromised legislation.

As the Congress made perfectly clear in its report, everybody was happy with this at the end.

Justice John M. Harlan: Was the statute eventually enacted -- enacted over the protest to the Commission?

Mr. Richard A. Solomon: The statute as it eventually enacted was enacted with the hosannas of everybody.

It was a compromised legislation and everybody was satisfied.

The Commission was satisfied.

The contract carrier people were satisfied.

The common carrier people were satisfied.

Everybody was satisfied as the reports make clear this was compromised legislation.

The main thing the common carriers and the main thing the Commission were worried about as the legislative history makes clear and as the common carrier people said when they withdrew their objections to certain other changes, the main thing they were afraid of was this Court's decision in the contract dealings, the hunting license problem to which I referred previously.

To get that plug, they were willing to add these five factors to Section 209.

Justice Felix Frankfurter: Well, they were in, in the original proposal.

Mr. Richard A. Solomon: They were not in, in the original pro --

Justice Felix Frankfurter: They were --

Mr. Richard A. Solomon: No, sir.

Justice Felix Frankfurter: There were some an -- another one in there, which would have been more restrictive.

But the Commission was -- didn't ask for a free charter to deny a grant without more, were they?

Mr. Richard A. Solomon: The original Commission proposal to Section 209 (b) did not contain any of this language of evaluating these five factors.

That was suggested originally by my friend Mr. Todd representing the contract carrier group.

The Commission's original suggestion for 209 (b), on the contrary, would have put the burden upon the contract carriers to show that the common carriers were unwilling and unable to provide --

Justice Felix Frankfurter: Not only --

Mr. Richard A. Solomon: -- adequacy.

Justice Felix Frankfurter: -- burden, it would have been an absolute prohibitory provision.

Mr. Richard A. Solomon: In effect, yes.

Justice Charles E. Whittaker: Now, is not that the very basis upon which the Commission had acted prior to those amendments?

What is the basis that they had to these showing of unwillingness or inability on the part of the common carriers upon the service, before a contract carrier (Inaudible)

Mr. Richard A. Solomon: I think in a lot of cases, that was the basis upon which the Commission was acting that had never been approved by the courts and I suggest, to Your Honor, that that's why they originally attempted in 1957 to get language into the Act to nail down the policy which they had been applying.

But they weren't successful.

Justice Charles E. Whittaker: Well, they could not get it done, but they finally withdrew it, didn't they?

Mr. Richard A. Solomon: They withdrew it.

Justice Charles E. Whittaker: Yes.

Mr. Richard A. Solomon: No.

Chief Justice Earl Warren: Or was it -- excuse me --

Justice Charles E. Whittaker: One more thing.

Isn't that the same policy which Judge Smith found, they view in this case, despite that change in amendments?

I'll refer you to page 176 of the record, where it says, “We conclude that if these decisions turning solely on the adequacy, willingness, and ability to pass, it cannot be justified and were clearly erroneous.

Mr. Richard A. Solomon: I think you're -- I think so, yes, sir.

Justice Charles E. Whittaker: Now, he said, now here comes the crux of the matter, there can be no doubt that this case was decided by the Commission on that basis.

That's the fact of -- crux of his holding, isn't it?

Mr. Richard A. Solomon: I think the answer to your question is yes, because I read this language to be really getting at this problem of saying that you have to show a need or you don't get your grant irrespective of what the real impact is on common carriers.

Justice Felix Frankfurter: But Mr. Solomon, if -- your answer to Justice Whittaker's question in the position of the Government, the case is a very simple one, namely, that Congress has laid down five requirements to be considered by the Commission and as I understand the question to which you responded, your answer means the Commission disregarded four out of the five and paid attention only to one.

Is that the position of the Government?

Mr. Richard A. Solomon: No, sir.

That is not the position of the Government.

Justice Felix Frankfurter: Alright, if that is what -- that is what Justice Whittaker read from the judge below.

Mr. Richard A. Solomon: I don't -- with all due respect to both myself and Justice Whittaker, I do not think we quite meant that.

Justice Felix Frankfurter: But I -- but the portion of what he just read from Judge Smith's opinion says that that, the Commission paid exclusive attention, getting the exact words, to one factor, not in fact so that we do not have to have pre-arguments.

Mr. Richard A. Solomon: That's why I -- that's why I hedged my answer to Judge --

Justice Felix Frankfurter: Well, I know, but hedging means that it isn't so, or hedging means nothing.

What do you mean you hedged?

You mean you didn't agree with it.

Mr. Richard A. Solomon: Well, I think I've made my position clear.

If I misstated in my answer to Justice Whittaker, I really think that it is better that I let my colleagues make their position clear than trying to resolve.

If I misstated myself Justice Frankfurter, I am sorry.

Justice Felix Frankfurter: Well, I am trying to understand this case and if Judge Smith is right, it is a very simple matter, namely, the Commission is on the duty to consider five factors in reaching the conclusion.

It considered only one and therefore, there is no need of long arguments or long opinions or long anything.

It disregarded an Act of Congress.

Mr. Richard A. Solomon: I wouldn't have put it the way Judge Smith did it because he implies that they were considering only a six-factor?

Now, I don't think that is what he meant.

Justice Felix Frankfurter: How do I know what he meant unless by what he said?

Mr. Richard A. Solomon: Well, Your Honor, and I suggest that the decision can be -- go on not on what Judge Smith said, but what the law is.

Chief Justice Earl Warren: Mr. Wrape.

Argument of James W. Wrape

Mr. James W. Wrape: Chief Justice, and the Court pleases.

There's is one preliminary matter that I'd like to take up with the Court.

On October the 9th, the Interstate Commerce Commission, in docket MC 108, 453 Sub 22, the application of G & A Truck Lines served an order, this was only a week or so ago and after the briefs were printed.

In that order, we believe that the Court correctly stated the law and applied the principles of Section 209 as we believe they should be applied.

We furnished copies of that report to all parties.

We furnished copies to the clerk and we asked leave to have it distributed to the Court as this report is one of the many that are not printed in the permanent found reports of the Commission and we believe that it will be very helpful to you in the disposition of this case.

Justice Hugo L. Black: Your report, did you say?

Late report, did you say?

Mr. James W. Wrape: Yes, just -- October the 9th.

Justice Hugo L. Black: On the same point.

Mr. James W. Wrape: On the same point and it applies the five criteria in Section 209 as we believe and say they should have been applied in this case.

If the Court pleases, I represent J-T Transport Company and have represented them throughout this proceeding along with Mr. Todd who represents the Contract Carrier Conference, we'll attempt to divide our time and we have attempted to divide our argument.

I intend to address myself to the record as made in the case, the reports of the Commission, the decision of the fine court in Kansas City.

Mr. Todd will be happy to discuss and to answer any questions with respect to the legislative history out of which the 1957 amendments evolved.

In the first place, I should state and I want to state it as shortly as I can.

We can't quite figure the position of the attorney general in this case.

He was our foremost antagonist in the lower court below.

He did not appeal.

He comes here and I believe he now confesses error on the part of the Commission and to some extent, he supports us.

Into some extent, he supports the Commission.

But in the end, he asked that the matter be remanded and the case decided by the Commission in the light of his brief.

Justice Felix Frankfurter: You're generously --

Mr. James W. Wrape: As I say, I believe he is an appellee only because he is not an appellant.

Justice Felix Frankfurter: He's generously suggesting you'll clear up all the difficulties.

Mr. James W. Wrape: I'll be very happy to, sir.

Now, with respect to the argument and the briefs advanced and filed by the Commission, I have a more quarrel -- more of a quarrel with Mr. Taylor in what he didn't say than in what he did say.

This -- the J-T Transport Company is a contract carrier who has devoted its 20 years of existence to the transportation exclusively of aircraft components.

We don't talk about aircraft parts.

These are great, big components or assemblies that are subcontracted and manufactured at a place apart from the place of final assembly.

And then, they have to be transported to the production line and they are put into the big air freight.

The particular aircraft assemblies, or components as we sometime call them, that are here involved are parts of the B-52 which is the -- it is a big jet transport fighter plane.

It's one of the type that met with the disastrous accident this past weekend.

It has been manufactured since 1952 and is it -- it is still a part of the Air Force's production of fighter planes.

The particular commodity here is called the landing gear bulkhead.

That is a great, big 12-foot by 16-foot component that fits up into the airframe from which the wheels, the landing gears are suspended.

It is made of magnesium, titanium, and aluminum.

Yet, the core, the aft bulkhead is 122 x 181 x 24 inches.

That is 11 x 15 x 2 feet wide.

The other one is slightly smaller.

They weigh practically nothing considering their bulk, their weight in each instance is under 1400 pounds.

They are very expensive.

Each one way cost about $25,000.

Now, in order to transport a component of this size over the highway, in a vehicle within the legal limits, is a problem and it is not like the Commission would have you think that it is something you throw on the back end of a flatbed truck and take across the country because you can.

It --

Unknown Speaker: (Inaudible)

Mr. James W. Wrape: Sir?

Justice William J. Brennan: That's the picture of it?

Mr. James W. Wrape: Yes sir.

There are some fine pictures of the components in the record, pages 144 to 140 -- or pages 141 to 144 in (Inaudible).

The picture at page 144 is the component in a shipping fixture.

The shipping fixture goes into the trailer and the component is shipped within those big frames.

Now, the -- as I say, the job of moving this over the highway is a tremendous one, the J-T Transport Company in their long experience designed a trailer which was a highly specialized trailer.

It had to be because one of these components which was 11 feet high had to be carried upright because of strain or stress.

So we had to get a component that is 11 feet high into a trailer that is only 12.5 feet at its highest point from the roadway.

So they developed what they called an underslung trailer.

That means one part of the trailer drops down to about eight inches off the highway and the floor, the rest of the trailer is higher.

In order to load the components in the shipping fixture, into the trailer, they push them in on tracks.

When they would get this component over the underslung portion which the floor which had been raised, they had an electric elevator that they installed in each one of these trailers.

And that elevator would move the roof and the -- and the floor up at the same time so that the sunken floor was leveled with the rest of the floor so that the component could be pushed in.

Once it got there, the elevator lowers the top and the floor down to the point where this big component could ride safely over the highway.

Now, in addition to the trailer that they have, they also designed and they owned and they furnished these shipping fixtures, copies of which you can see in the record beginning at pages 141 and 144.

These fixtures were designed so that the components were attached to them in a way to simulate the attachment of these same components when they go into the airframe, so that you avoid strains and stresses in transit.

These components are highly susceptible to damage because of strain or stress.

If they are jarred, or if they are dropped or if anything lose them, so as to cause the strain.

Justice Hugo L. Black: What material?

Mr. James W. Wrape: Sir?

Justice Hugo L. Black: Of what material are they composed?

Mr. James W. Wrape: These were composed of a light -- a very light metal.

Now, my time is short.

I could tell you some more about the highly specialized nature of the tractor -- I mean, of the trailer and of the shipping fixtures, but I believe that along with the pictures will demonstrate what I mean.

This was no simple kind of an operation.

It was a highly complex operation.

Now, according to the record here, the shipment moved from the empty trailer or the trailer with the shipping fixtures in it, moved from Wichita to Indianapolis overnight, from Indianapolis after it was loaded back to Wichita overnight as against a rail movement of some three or seven -- up to seven days transit time.

Now, the trailer after it was designed and built, the fixtures after they were designed were submitted to the engineering department of Boeing, who under our contract had the absolute right to reject either the trailer or of the shipping fixtures if they believe that any damage would accrue or if they didn't believe that they were entirely proper.

In other words, we simply acted as the agent and we did for Boeing what Boeing would have done by -- for itself if it had engaged in private carriage.

Now --

Chief Justice Earl Warren: Did the testing carrier have comparable equipment?

Mr. James W. Wrape: No, sir.

This equipment had to be built.

Chief Justice Earl Warren: Yes.

Mr. James W. Wrape: The existing carrier offered to build one.

Now --

Justice Hugo L. Black: It offered to build one, was one had been enough?

Mr. James W. Wrape: Yes, sir.

There are four ships a month in each direction and with overnight service it would just about to make it.

Now sir, the pictures which began in the record at page 141 show the trailer empty with the electric elevator in the front of the trailer.

You'll notice a hole, or a well up in the front, that is the underslung portion, the floor which is raised by the elevator.

Now, on page 142, you see the fixtures loaded with the components and in the trailer.

That is the way that it moved from Indianapolis to Wichita.

Now, at page 143, you see one component loaded in a fixture and one empty fixture.

And of course anyone -- anyone can see that the return trip with the empty fixtures is not what we ordinarily call deadhead.

That is the movement of an empty unit over the highway.

And for the Commission to insinuate or to suggest that U.S.A.C. could have eliminated deadhead miles, in this operation, it is impossible because it requires the absolute use of the trailer in each direction one with the empty fixtures, one with the loaded fixtures in the other direction.

It is a two-way movement, although the components are only handled in one way, in one direction.

Justice Hugo L. Black: Why?

Mr. James W. Wrape: Sir?

Justice Hugo L. Black: Why?

Mr. James W. Wrape: Well, if you'll look at page 143 sir, you will see --

Justice Hugo L. Black: I just flipped there -- I just flipped there.

Mr. James W. Wrape: Alright, so you'll see that the fixture, the empty fixture, completely fills up one half of the trailer.

The other fixture has a component in and if you took the component out, the fixture would likewise occupy the other half.

In other words, coming back with the empty fixtures, you'll require a full trailer.

Justice Felix Frankfurter: You make those fixtures (Inaudible)

Mr. James W. Wrape: Yes sir.

That is right, sir.

Justice Felix Frankfurter: (Inaudible)

Mr. James W. Wrape: No, sir.

That is right, sir.

These are -- these are prominent fixtures and the record shows there were two sets where there were -- there were four trailers, four fixtures owned by J-T Transport Co. and furnished for transportation and Boeing had four more units for their own use or storage in their plan.

Justice William J. Brennan: (Inaudible)

Mr. James W. Wrape: Yes sir.

It -- I will touch on that in a few minutes, Mr. Justice Brennan.

Now, in light of that point, I might bring it out here.

The record shows that each of these B-52's is an individual airplane.

It has a serial number and every component bears that particular serial number.

Each component is manufactured for a particular airframe.

So, when the production line begins to move, these components move in to Wichita on a schedule so that at the proper time when the landing gear bulkheads are to be inserted into the airframe, they must be there at that time.

If for any reason they are not there, then you have either to stop the production line and wait for them or you take that airframe completely out of the line and then put an out of sequence installation into the airplane when the component finally arrives.

You have a tremendous delay in production and you will have the tremendous expense of taking that big airframe, that big plane, a big Jet 52 out of the line and over -- and set it aside until the component gets there.

Justice Felix Frankfurter: I take it that all these details were developed before the Commission?

Mr. James W. Wrape: Yes sir.

That's -- it's all in the record sir.

The record, and a practitioner before the Commission is a very complete one.

It isn't very long.

There were two witnesses for the applicant and two or three carrier witnesses for the protesters.

Justice Felix Frankfurter: These (Inaudible) were all written?

Mr. James W. Wrape: Yes sir, it is fully developed there.

Justice John M. Harlan: Are you arguing the sufficiency of the evidence?

Mr. James W. Wrape: Yes sir, I will get to that, yes.

Justice John M. Harlan: I mean, that's where all this is directed to.

Mr. James W. Wrape: That sir and with respect to the distinct need of the shipper as we part as the statute mentions, and particularly because the Commission, in their argument, just overlooked it.

I'm going to stop right here on the account of my time, sir.

Now, with respect to the record, the traffic director for Boeing testified, Mr. Solomon.

And I think it would be quicker for me to read to you two or three excerpt from his testimony, and to even summarize it.

At Page 89 in the record, the question was asked, “Did that mean anything to you in determining to bring about the filing of the application and your support of the application?”

That is whether it's a contract carrier or not.

His answer was, “Yes, it did, because we recognized that the contact carrier can dedicate equipment to our service.

The type of equipment that we want and we feel that on this type of transportation, it is the best thing to have the equipment solely dedicated to our use.”

On Page 90, in response to the question, “Do you have contact with them --” that's J-T, “--daily with respect to their operations?”

“Yes.”

“Does the maintenance of a terminal by J-T at Wichita mean anything to you?”

Mr. Solomon's answer, “It means very much to us, in as much as the type of operation that they conduct in hauling these various components for us.

We find the daily cooperation that we're able to have with J-T employees at Wichita is very helpful to us and is I would say necessary to the successful operation of this type of service.”

In response to the question -- is this time of transit ability important to you?”

He said, “Normally, in manufacturing airplane parts, there are many, many engineering change that must go into each unit.

As these engineering changes are incorporated, they have to lock them out so far down the line, and if you have a longer transit time, it takes you that much longer to get to these changes in the picture.

In other words, these changes mean an improvement in the airplane and if we have a longer transit time, it takes us that much longer to get these changes into our aircraft that we are rolling off the production line.”

And in response to the question, “How do you regard the J-T Transport Company in your scheme of operations?”

His answer, “Well, we feel they are just merely a part of our production line in that we can schedule the parts right from our manufacturer and the shipments are moved right into our receiving area and through the inspection and right on into our production.

So they are actually just an extension of our production line.”

And in response to the question, “Will you tell the examiner whether or not Boeing believes that it needs the surface here proposed in order to successfully complete its contract?”

His answer, “We feel we definitely need this type of service to furnish or build the best type of aircraft that we can for the United States Air Force.

Justice John M. Harlan: Could I ask you a question, but, I don't want to interrupt you too much.Did the Commission exclude the evidence that you thought was relevant to the issues in this case?

Mr. James W. Wrape: No sir.

I think it was sufficiently stated, it's only with respect to their past unsatisfactory service and I believe that Mr. Solomon stated his position, he would intend to go into other remedy.

Justice John M. Harlan: You have got before the Commission everything that you thought was germane.

Mr. James W. Wrape: Oh, certainly sir.

As I stated, I believe we have a full and complete record here from a practitioner standpoint.

Now --

Chief Justice Earl Warren: Is there any evidence to counteract what you have just read to us?

Mr. James W. Wrape: Oh, no sir.

No, there couldn't be sir.

Chief Justice Earl Warren: It stands uncontradicted?

Mr. James W. Wrape: That is uncontradicted.

The only thing that the protestants put in, they were carrier witnesses, was their availability and their willingness and their declarations of adequate -- adequacy in their service.

That's the only -- that's the only other side of the case.

Justice Hugo L. Black: Their willingness to do what?

Mr. James W. Wrape: The only thing that the protestants put into the record was their willingness, their ability, and the establishment of their service.

Justice Hugo L. Black: You mean their willingness to establish a kind of service that you were giving and to spend the money necessary to do it, is that what you mean?

Mr. James W. Wrape: Well, their willingness to handle the traffic.

I was going to get to that Mr. Justice, and it might be a good place here.

Justice Hugo L. Black: But I -- I didn't mean to interrupt, but I didn't understand the “willingness” that (Voice Overlap).

Mr. James W. Wrape: Well, they are willing -- able and the willingness, ability and willingness of course was the old test that was --

Justice Hugo L. Black: Service, in general --

Mr. James W. Wrape: Yes.

Justice Hugo L. Black: -- but I'm talking about this special (Inaudible)

Mr. James W. Wrape: They are talking about service, in general, yes sir.

Justice William J. Brennan: They could -- they -- it was on the evidence that they could dedicate equipment to this --

Mr. James W. Wrape: I have challenged the Commission in each step of this proceeding to point out one fact of record upon which they based their conclusion that U.S.A.C. said they would dedicate equipment to the use of Boeing.

Justice William J. Brennan: Well, could they -- that the common carrier --

Mr. James W. Wrape: The Commission says yes.

If they will dedicate equipment to every other shipper in the United States who also asks for it, they could do it.

I have no quarrel with that.

I do not think it is important to a settlement of this case.

But as I say, I challenge that statement of the Commission and there is no basis in the record, there is no testimony except Mr. Decker's on behalf of U.S.A.C and the only thing he says in response to -- he has an affirmative answer in response to a question of counsel, “Would you station a modified trailer in Indianapolis?”

And he said, “Yes.”

He does not say, “I will dedicate this to the exclusion of some six or seven other shippers” he bragged about having in Indianapolis and saying he was serving in order to prove his ability to perform this kind of service.

He never does say in this record that, “I will dedicate a piece of equipment to the use of Boeing,” in the same way that J-T says, “Here it is.

You use it.

You dispatch it.

You operate it.

You just tell us what to do and we'll do it for you as the same as you do it yourself.

And that is what it amounts to.

Now --

Justice Felix Frankfurter: (Voice Overlap)

Mr. James W. Wrape: -- counsel for the Commission -- sir?

Justice Felix Frankfurter: Refresh my recollection, did the District Court sustain you in saying that there was --

Mr. James W. Wrape: Yes, sir.

Justice Felix Frankfurter: That there was no evidence that the protestants could perform this very service --

Mr. James W. Wrape: Yes, sir.

Justice Felix Frankfurter: That was bringing to be facilities to give the service --

Mr. James W. Wrape: That's the only interest that you can take from -- I don't think they setup networks.

They set the data and didn't agree to dedicate.

They caught it the same as we did because we argued it before the court.

Justice Felix Frankfurter: In other words, the word “dedicate” is any kind of final label that gets (Inaudible).

The District Court say, there was no theory that the protestant common carriers could furnish, willing, and able to furnish the very service which the shippers needed.

Mr. James W. Wrape: When you say service, I heartily agree with you, sir.

Justice Felix Frankfurter: Pardon me?

Mr. James W. Wrape: When you say service, I heartily agree with you.

Justice Felix Frankfurter: Just because that they couldn't furnish the service.

Mr. James W. Wrape: The service, yes sir.

Justice Felix Frankfurter: And that there is no evidence in the record that they could put themselves in the situation to give the service that Boeing needed.

Mr. James W. Wrape: They said that -- the court said that the record didn't support a statement that U.S.A.C could meet the distinct needs of Boeing or the needs of Boeing or as disclosed by the record.

I think you'll find that sir at page 177 in the record which contains the court's decision.

It is right -- about the first five lines, sir.

Let me get back sir to my argument.

I do not have very much time.

The -- there's only one protestant here and that's U.S.A.C.

I'm figuring we have the railroads and we had three or four heavy haulers who wanted to give a multiple line service.

After the recommended report which recommended the granting of the application, these so-called heavy haulers were satisfied with it, realized they couldn't meet the needs and filed no exemptions.

The railroad objected to the recommended report because they said the commodity description was too great, it was for airplane parts, and they wanted -- restricted the landing gear bulkheads to which we agreed, and from that point on, we only have one protestant and that is U.S.A.C. Transport Company.

Now, the U.S.A.C. Transport Company were fortunate enough to secure an early certificate from the Commission.

They can transport aircraft parts, untraded and traded, between all points in the United States east to the Mississippi River, and between all points in that vast area on the one hand, and all points west of the river on the other.

So if their mere existence is to be taken as a basis for a denial of a contract carrier application, you can see it is impossible that there ever would be any extension of any contract carrier aircraft service.

Now, I think I have touched and I think I hope I have demonstrated that we have no question here about deadheading of equipment.

That is, if U.S.A.C. was able to get this business, they could utilize some empty miles because they can't.

You have to have the same number of miles in the use of the unit in each direction because one way, you haul a complete trailer load of fixtures and the other, you'll haul the fixtures with the components in it.

Now, Mr. Solomon in his testimony said that there were two reasons why he didn't go to U.S.A.C. One was this general dissatisfaction with prior service and he specifically gauged specific instances.

And the second was a tariff provision.

That tariff provision reads and I quote, “The determination of the equipment to be used to transport any shipment efficiently and safely shall rest exclusively with the carrier.”

In a most unusual statement, the Commission says, “That does not mean anything.”

The representative at the hearing says, “We will provide a piece of equipment and dedicate them.

Well, of course, the record does not show that he said they dedicate it.

And anyway, no matter what he says at the hearing, as this Court has always held and as the Commission has maintained, it's the rules in the tariff that count, that's the contract of the common carrier with his customer, and he can't bury that by anytime of an oral agreement under oath in a hearing or otherwise.

Now --

Justice Potter Stewart: Wasn't there a third reason advanced by the shipper for not wanting to utilize as they see and that -- that was the lack of a terminal --

Mr. James W. Wrape: Location for the terminal, yes, sir.

Justice Potter Stewart: And those were the three regions (Voice Overlap).

Mr. James W. Wrape: Yes sir.

Now as I stated, the examiner, immediately after the hearing, served his recommended report, recommending the granting of the application.

Before the report, before that report came out, in fact, before the hearing, the Commission had granted to the applicant a temporary authority to engage in the very operation that's here involved.

That authority was granted under Section 210 (a) which required a proof of an urgent and immediate need and a showing that there was no carrier service capable of meeting that need.

The Commission granted that temporary authority over the violent objection of U.S.A.C.

It's still effective by reason of the Administrative Procedure Act.

Now, here is something that you haven't heard and something that I believe is most important in this case.

In the first Commission report which was served on January 31, 1958, the Commission, the record shows that the Commission took six printed pages in which to adopt the recommended report of the examiner to restate the facts and then to proceed to deny the application stating and I read the one paragraph, “Here is the basis for the denial of this application in the first report.”

Justice Hugo L. Black: What page?

On page, what?

Mr. James W. Wrape: Page 26, sir.

And this is the real reason why the application was denied in the second report.

The Commission says, “The burden is upon the applicant seeking contract carrier authority as well as one seeking common carrier authority to establish among other things that there is a need for the service proposed which existing carriers cannot or will not need.

A service not needed, cannot be found consistent with the public interest, or the National Transportation Policy.”

Now, following that decision, we filed a petition for reconsideration on what the full Commission was denied.

Then we went to Court.

We filed a suit in the same District Court at Kansas City where there was a final adjudication.

That was on August of 1959.

After we got the suit filed and before the answer date, the Commission came up with a decision in the so-called Leary case that is cited at Mr. Todd's brief.

They there applied somewhat the criteria in Section 209 as we thought it should be and we thought perhaps they had finally agreed that there had been an amendment.

And incidentally in the first report, there is not one mention of the amendments of 1957, although they have been effective for three months when that order issued.

They simply ignored and decided it on the same basis that they always have.

Well, after the Leary case came out and then -- it appeared that perhaps they were going to apply these standards setup in 209, we filed a successive petition.

That is one that is not ordinarily allowed under the rules and we filed it while the case was still in Court, much to our surprise and we were very happy.

The Commission promptly issued an order setting aside and reopening the -- or issued an order reopening the proceedings for further disposition on the same record.

So, we by agreement with the Interstate Commerce Commission and the other parties, we took a nonsuit without prejudice in the District Court.

Then along came the second order which is the one that has been discussed here.

We found out of course that when we filed that successive petition, we made our first mistake, because it gave the Interstate Commerce Commission its opportunity in the second order to prepare and file its first brief in this litigation.

We say that the second order is simply -- well, first, in the second order, in the head note, which the Commission prepares, it starts out and it says, “We affirm our decision in the first order.”

In the second order, they specifically provide in the order itself that the first order is still valid.

Now, in the second order, they are trying to explain what was so clear and cogently stated on -- in the first order that the reason why the application was denied was because there was an existing carrier.

Now --

Justice Felix Frankfurter: That was the whole Commission on the reconsideration, wasn't it?

Mr. James W. Wrape: Yes, sir.

Now sir, you say the whole Commission, it wasn't --

Justice Felix Frankfurter: I agree, I remember what he said but it was before the Commission as an entirety.

Mr. James W. Wrape: Yes, sir.

Well, the first one that's done before the Commission entirely, do they denied our petition for reconsideration.

Justice Felix Frankfurter: I thought it was before Division 1.

Mr. James W. Wrape: The -- Division 1 wrote the order but the full Commission denied our petition to reconsider that order, so it was their order.

Now, the second order is only the order of four Commissioners.

The other 11 Commissioners either didn't participate or they concurred with -- separating --

Justice Felix Frankfurter: We didn't sit, Commissioner MacPherson dissented, Commissioner Webb concurred, Commissioner Freas concurred and result Commissioner (Inaudible)

Mr. James W. Wrape: (Inaudible) Freas and Commissioners --

Justice Felix Frankfurter: There were eight -- three didn't participate, so I suppose there were eight left, aren't there?

Mr. James W. Wrape: There were seven, sir.

Justice Felix Frankfurter: Seven.

Mr. James W. Wrape: And four of the seven, it is their report and not the report of the others.

Now sir, I do not think that, in view of the time, that it would do anything for me to discuss the findings of the Division.

It's there before you.

I think, as the Court said, it's apparent that they were simply giving reasons in lawyer's language, not administrative language as to why their first decision was valid.

Now, we filed a second suit and we presented it to Circuit Judges Johnson and Mathes and District Judge Smith.

And their decision is like, what is the decision that is now before you?

That decision -- I have no apologies to make for.

I believe it is a fine decision and it stands on its own feet and needs no defense from me.

Justice Felix Frankfurter: Well, there is a difference between saying the Court rule because there was a lack of evidence and saying thereby the wrong standards, isn't it?

Mr. James W. Wrape: Yes, sir.

And the --

Justice Felix Frankfurter: Now what -- what does the Court decide in your rule?

Mr. James W. Wrape: The Court says, “With respect to the Commission's findings on criteria 4 that they applied the improper standard.

Now, the gist of that Court decision, I think I can state very briefly, I've been living with it for a long time.

It does not hold that the Commission cannot or shall not consider the existing -- the existence of protesting carriers, the willingness and ability of protesting carriers or the adequacy of the service of the protesting carriers but it simply says that those factors cannot be considered in lieu or instead of the five additional standards prescribed by 209 (b).

Now, I can well understand that the Commission in beginning to consider criteria three, that is the effect of the granting of the application upon the services and that's an important word, of protesting carrier.

They first have to determine that there was a carrier.

Then that that carrier was willing and able to perform a reasonably adequate service.

All right, now having found that, they proceed to the real question.

What is the -- what rule granting of the effect?

What effect will a granting of the application have on the services in view of the fact that the first three factors were answered in the affirmative.

It does not -- if it's not adverse, we stop right there.

If it is adverse, then they weigh that along with the other four.

Justice John M. Harlan: Do you say they don't -- you say they stop and didn't consider 4 as well as 3?

Mr. James W. Wrape: No sir, no, they've got the 4.

But when, they've got to 4, they answered four by saying that the service of U.S.A.C was adequate.

But that's not -- that's not the question.

Justice John M. Harlan: Or it's just one side of the coin, isn't it?

Mr. James W. Wrape: No sir, no, it is the effect -- a denial would have on the shipper.

Now, this case that we gave you today is a perfect example of what is meant by criteria 4.

In the G & A case, the shipper had three plants.

They were all served by common carriers.

The applicant served two and he wanted to serve the third because they wanted to mix the loads and have split loads, split pickups, and split deliveries.

So, and the reason why the shipper wanted that was because of economic reasons and his distribution reasons.

So a denial of that application would have severely and adversely affected the shipper because he would not be able to practice the most economical operation are the best distribution plans.

I have taken up way more than my time.

Justice Felix Frankfurter: Mr. Wrape, if you are right that the protesting carrier couldn't have furnished, didn't make either case showing his ability to furnish the service that Boeing needs, then we don't get to the question of standards at all, do we?

Mr. James W. Wrape: Oh, but let's still get to the question of --

Justice Felix Frankfurter: Well, I --

Mr. James W. Wrape: -- standards, and let's settle it.

Justice Felix Frankfurter: I know.

Mr. James W. Wrape: I think certainly, if it's a -- it is a very simple case to --

Justice Felix Frankfurter: But if --

Mr. James W. Wrape: -- decide by the application of those standards.

Justice Felix Frankfurter: But you say there is no evidence that the -- that the protestants could do what the contract carrier did in what they needed, if that is so, it doesn't answer the case.

Mr. James W. Wrape: No, Mr. Justice.

I know that they could take one of these components and lay it in their truck and haul it from one place to another.

But that's not the dis -- that will meet the distinct need.

Justice Felix Frankfurter: Alright, therefore, if they don't meet the distinct needs, that's the end of the case.

Chief Justice Earl Warren: We'll recess now.

Featured: