Eastern Motor Express v. United States

• Citation: 103 F. Supp. 694
• Decision Date: 11 February 1952
• Docket Number: Civ. A. No. 2825.
• Parties: EASTERN MOTOR EXPRESS, Inc. et al. v. UNITED STATES et al.
• Court: United States District Courts. 7th Circuit. United States District Court (Southern District of Indiana)

103 F. Supp. 694

EASTERN MOTOR EXPRESS, Inc. et al. v. UNITED STATES et al.

Civ. A. No. 2825.

United States District Court S. D. Indiana, Indianapolis Division.

February 11, 1952.

COPYRIGHT MATERIAL OMITTED

Howell Ellis, Indianapolis, Ind., Milton E. Diehl, Washington, D. C., for Eastern Motor Express, Inc.

Walter F. Jones, Jr., Public Counsellor, Indianapolis, Ind., for Public Service Commission State of Indiana.

Charles W. Bucy, Associate Solicitor, Henry A. Cockrum, Washington, D. C., for Department of Agriculture.

Nuel D. Belnap, Robert N. Burchmore, John S. Burchmore, and Walter, Burchmore & Belnap, all of Chicago, Ill., for the National Industrial Traffic League.

John F. Baecher, John H. D. Wigger, and John E. Kilday, Sp. Assts. to the Atty. Gen., H. G. Morison, Asst. Atty. Gen., Marshall E. Hanley, U. S. Atty., Indianapolis, Ind., for the United States.

E. M. Reidy, Associate Chief Counsel, Interstate Commerce Commission, S. R. Howell, Asst. Chief Counsel, Intrastate Commerce Commission, Washington, D. C., and Daniel W. Knowlton, Chief Counsel, Interstate Commerce Commission, Washington, D. C., for Interstate Commerce Commission.

Charles Clark, Washington, D. C., Joseph F. Johnston, Birmingham, Ala., Frank W. Gwathmey, Washington, D. C., Joseph H. Hays, Chicago, Ill., James W. Nisbet, Chicago, Ill., R. T. Wilson, Jr., Richmond, Va., Carl Helmetag, Jr., Philadelphia, Pa., Clifford O. Shandy, Terre Haute, Ind., for Intervening Railroads.

Burton K. Wheeler, Edward K. Wheeler, Wheeler & Wheeler, and J. Albert Woll, all of Washington, D. C., for International Brotherhood of Teamsters, Chauffeurs, Warehousemen & Helpers of America.

Franklin R. Overmyer and Petit, Olin, Overmyer & Fazio, all of Chicago, Ill., for Intervening Truck Lines.

Before KERNER, Circuit Judge, and PLATT and STECKLER, District Judges.

KERNER, Circuit Judge.

Twenty-one motor common carriers operating under the authority of the Interstate Commerce Commission, 49 U.S. C.A. Chap. 8, § 301 et seq., brought suit to enjoin enforcement of an order of the Commission prescribing a new set of rules intended to regulate practices of motor common and contract carriers related to leasing and interchange of vehicles. A special court of three judges was convened pursuant to statute, 28 U.S.C.A. §§ 2284(1) and 2325, to hear and determine the application. The United States Secretary of Agriculture, the Public Counselor of Indiana, and the National Industrial Traffic League were granted leave to intervene in support of the complaint, and the Teamsters' Union, substantially all of the Class I railroads of the United States, and a number of certificated carriers serving points in the Chicago suburban area and in six states of the North Central area, in opposition. The matter was heard on the pleadings and record made before the Commission and the briefs and argument of counsel. Motion of plaintiffs for leave to adduce additional evidence pertaining to the value of their property and rights and the effect of the order thereon was denied. New York v. United States, 331 U.S. 284, 335, 67 S.Ct. 1207, 91 L.Ed. 1492.

The proceeding which culminated in the promulgation of the rules now challenged by plaintiffs was instituted on January 9, 1948. At that time the Commission issued the requisite notice of proposed rule making stating that an investigation would be made pursuant to the Interstate Commerce Act into the lawfulness of certain practices of authorized carriers with respect to their use of nonowned equipment in the performance of transportation. There was attached to the notice a tentative set of rules representing a composite of the views and recommendations of various parties interested in the situation. Extensive hearings were held before an examiner. These hearings were participated in by numerous associations of common and contract carriers, individual carriers and shippers, owners and operators of vehicles under lease to carriers, the Teamsters' Union, the Railway Express Agency, the railroads, the Bureau of Motor Carriers, the regulatory bodies of nine states, and others. The examiner filed his report recommending the adoption of certain rules governing leasing and interchange of vehicles; exceptions were filed; and Division 5 of the Commission, charged with the handling of motor vehicle cases, issued its report. 51 M.C.C. 461. Upon petitions for reconsideration, the proceeding was reopened and argument had before the entire Commission which thereafter issued its report and entered the order here complained of. 52 M.C.C. 675.

In its report the Commission stated that the proceeding had arisen because of a practice which antedated the Motor Carrier Act of 1935 and undoubtedly was more prevalent in the motor-carrier industry than in any other field of transportation, i. e., the use of nonowned vehicles in their operations by those holding authority as carriers. To a great extent the ownership in such cases was vested in individuals generally known as owner-operators who either drove their vehicles themselves or hired others to drive them. The Commission had initiated a study of conditions and practices prior to the war. However, as it stated in its report, "During the war, directives of the Office of Defense Transportation, and our orders, designed to require the maximum use of motor-vehicle capacity, and the conservation of fuel and tires, while not authorizing transportation by persons lacking appropriate authority, sanctioned many practices that were permissible only because of the emergency. As a result, leasing among authorized carriers became more prevalent and widespread. After the war, because of the desire of many veterans to engage in business for themselves, the ease with which they could obtain financial aid in buying equipment and the difficulty of entering a regulated industry, leasing practices, particularly the employment of owner-operators, have greatly increased."

After the emergency directives and orders were cancelled, complaints regarding leasing practices continued. The Commission found that in many cases leasing of vehicles resulted in unlawful extensions of the carriers' operating authority. Where authorized carriers leased the equipment of non-certificated carriers, many violations of the Act occurred with respect to the inspection and safety rules for drivers and equipment. The Commission found that in the case of short term leases, and more particularly the so-called "trip lease," the arrangements between the authorized carrier and the owner-operator were so informal as to make it impossible to fix responsibility to the shipper or the public. Such arrangements were frequently oral, and even made over the telephone, without inspection of the vehicle or any attempt to ascertain whether the driver was in fact qualified to operate it. They were sometimes completed after the transportation had already taken place. In the case of the single-haul trip lease, the carrier was under no obligation to the owner-operator after completion of the one-way haul, and assumed no responsibility for the return trip. Since some of the owner-operators did not carry public liability or property damage insurance or were unable to obtain it, protection for the public might be entirely lacking. And in such instances, the opportunity was presented for the owner-operator to engage in unlawful transportation. The Commission found that it was a not uncommon practice for haulers of exempt commodities (farm and other food products) to obtain traffic through direct solicitation of a shipper and then to contact some authorized carrier having appropriate authority who would pay the highest compensation, and validate the transaction through a trip lease; although such arrangements were clearly illegal, it was very difficult for the Bureau charged with supervision of the traffic to obtain evidence of them. The Commission also found that falsification of drivers' logs in order to cover up violations of safety regulations frequently occurred.

In addition to the serious dangers resulting to or likely to result to the public from the general disregard of safety and inspection rules, the Commission also pointed to unhealthy economic conditions in the industry resulting from the leasing system. It found that owner-operators in certain industrial centers were interested only in truckload traffic and had been responsible for numerous reduced rates tending to cause a deterioration in the rate structure in the territory. And the method of payment used by many authorized carriers to compensate owner-operators for use of their vehicles on a percentage of the gross revenue derived from the transportation performed led the carriers which utilized owner-operator equipment to concentrate upon the profitable traffic to the exclusion of other traffic. This fact, plus the fact of avoidance of normal operating expenses such as maintenance, fuel and others had the effect of distorting the operating statistics of carriers which depended to a large extent upon equipment leased on that basis.

The Commission further found, with respect to leasing and interchange practices, that a number of carriers conducted their operations wholly or in part in leased equipment and, with minor exceptions, contended that trip leasing was an economic necessity. Certain of the vehicles operated by the authorized carriers under short term or trip leases were vehicles which transported exempt agricultural commodities to market and were used by the carriers on the return trip to transport non-agricultural commodities from distribution centers to the agricultural sections of the nation. For example, the Commission made the following statement as to the Florida traffic: "The record indicates that the interstate common carriers serving Florida generally do not transport perishable fruits and vegetables northbound, apparently because of the lack of adequate equipment and operating...