368 U.S. 370 (1962), 23, United States v. Drum

Docket Nº:No. 23
Citation:368 U.S. 370, 82 S.Ct. 408, 7 L.Ed.2d 360
Party Name:United States v. Drum
Case Date:January 15, 1962
Court:United States Supreme Court

Page 370

368 U.S. 370 (1962)

82 S.Ct. 408, 7 L.Ed.2d 360

United States



No. 23

United States Supreme Court

Jan. 15, 1962

Argued October 11-12, 1961




Each of the individual appellees owns a truck tractor which he operates under a leasing arrangement with a furniture manufacturer in the interstate transportation of the manufacturer's furniture and in the backhaul of raw materials used in the manufacture of its products. Appellees are compensated for the use of their tractors and for their services as drivers solely on the basis of fixed rates per mile driven. They bear all of the operating costs of the transportation and assume the financial risk of profit or loss thereon. The manufacturer has a collective bargaining agreement with the union representing appellees and grants them certain benefits of employees, including, inter alia, seniority rights, job security, death benefits, vacation pay and social security and workmen's compensation coverage. The Interstate Commerce Commission found that appellees are "contract carriers" within the meaning of § 203(a)(15) of the Interstate Commerce Act and are subject to the licensing requirements of § 209(a)(1), and it ordered them to cease and desist from operating without permits. The District Court held that the transportation was by the manufacturer as a "private carrier," within the meaning of §203(a)(17), and it set aside the Commission's order.

Held: the Commission's finding is sustained, and the judgment of the District Court is reversed. Pp. 371-386.

(a) The Commission's conclusion that the financial risks of this transportation had been shifted from the manufacturer to the owner-operators to an extent which rendered the sanctioning of the operation as private carriage by the manufacturer a departure from the statutory design was well within the range of the responsibility assigned by Congress to the Commission. Pp. 383-385.

(b) If the District Court intended to hold that the Commission was confined to the "control" test -- i.e., whether the manufacturer had any right to control, direct or dominate the transportation -- it

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was in error, since a finding of shipper control does not require a resolution of the ultimate issue in the shipper's favor. Pp. 381-383, 385-386.

(c) If the District Court meant to substitute its judgment for that of the Commission on the question of substance on this record, it indulged in an unwarranted incursion into the administrative domain. P. 386.

193 F.Supp. 275, reversed.

BRENNAN, J., lead opinion

MR. JUSTICE Brennan delivered the opinion of the Court.

In an investigation initiated by it under 49 U.S.C. § 304(c),1 the Interstate Commerce Commission held that appellees who leased their motor vehicles and hired

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their services [82 S.Ct. 409] as drivers to the appellee Oklahoma Furniture Manufacturing Company (hereinafter "Oklahoma") were contract carriers within 49 U.S.C. § 303(a)(15)2 and subject to the permit requirements of 49 U.S.C. § 309(a)(1).3 79 M.C.C. 403.

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A three-judge court in the District Court for the Western District of Oklahoma, convened under 28 U.S.C. § 2325, in a proceeding commenced by appellees pursuant to 28 U.S.C. §§ 1336 and 1398,4 set aside the cease and desist order by which the Commission required [82 S.Ct. 410] the lessors to refrain from their operations unless and until they received appropriate authority therefor from the Commission. 193 F.Supp. 275. The District Court held that Oklahoma was engaged in private carriage as defined in 49 U.S.C. § 303(a)(17).5 We noted probable jurisdiction of the appeals lodged here under 28 U.S.C. § 1253. 365 U.S. 839.

The Motor Carrier Act of 19356 subject many aspects of interstate motor carriage -- including entry of

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persons into the business of for-hire motor transportation and the oversight of motor carrier rates -- to administrative controls, on the premise that the public interest in maintaining a stable transportation industry so required.7 However, although aware that

Both [contract carriers and common carriers] . . . are continually faced with actual or potential competition from private truck operation . . . ,8

Congress took cognizance of a shipper's interest in furnishing his own transportation,9 and limited the application of the licensing requirements to those persons who provide "transportation . . . for compensation"10 or, under a 1957 Amendment, "for-hire transportation."11 The Commission, therefore, has had to decide whether a particular arrangement gives rise to that "for-hire" carriage which is subject to economic regulation in the public interest, or whether it is, in fact, private carriage as to which Congress determined that the shipper's interest in carrying his own goods should prevail. This case is a recent instance of the Commission's developing technique of decision.

From the beginning, underlying principles have been, and have remained, clear. A primary objective of the scheme of economic regulation is to assure that shippers generally will be provided a healthy system of motor carriage to which they may resort to get their goods to market. This is the goal not only of Commission surveillance

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of licensed motor carriers as to rates and services, but also of the requirement that the persons from whom shippers would purchase a transportation service designed to meet the shippers' distinctive needs must first secure Commission approval. See Contracts of Contract Carriers, 1 M.C.C. 628, 629; Keystone Transportation Co., 19 M.C.C. 475, 490-492. The statutory requirement that a certificate or permit be issued before any new for-hire carriage may be undertaken bespeaks congressional concern over diversions of traffic which may harm existing carriers upon whom the bulk of shippers must depend for access to market.12 Accordingly, the statutory definitions, while confirming that a shipper [82 S.Ct. 411] is free to transport his own goods without utilizing a regulated instrumentality at the same time deny him the use of "for compensation" or "for-hire" transportation purchased from a person not licensed by the Interstate Commerce Commission. Because the definitions must, if they are to serve their purpose, impose practical limitations upon unregulated competition in a regulated industry, they are to be interpreted in a manner which transcends the merely formal. From the outset, the Commission has correctly interpreted them as importing that a purported private carrier who hires the instrumentalities of transportation from another must -- if he is not to utilize a licensed carrier -- assume in significant measure the characteristic burdens of the transportation business. The problem is one of determining -- by reference to

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the clear but broad remedial purpose of a regulatory statute committed to agency administration -- the applicability to a narrow fact situation of imprecise definitional language which delineates the coverage of the measure. Private carriers are defined simply as transporters of property who are neither common nor contract carriers; and the statute will yield up no better verbal guide to the reach of its licensing provisions than transportation "for compensation" or "for-hire." Compare Bates & Guild Co. v. Payne, 194 U.S. 106; Rochester Tel. Corp. v. United States, 307 U.S. 125, 144-146; Gray v. Powell, 314 U.S. 402, 412-413; Labor Board v. Hearst Publications, 322 U.S. 111, 130-131. Because the Commission's resolution of the issue does not seem to us to violate the coherence of the body of administrative and judicial precedents so far developed in this area, we are of the opinion that there was no occasion for the District Court to disturb the conclusion reached by the Commission. We therefore reverse the District Court's judgment.

It was a wish to rid itself of certain burdens of its existing transportation operation which caused Oklahoma to enter into the arrangement here involved. Prior to 1952, Oklahoma, a manufacturer of low-cost furniture, had maintained a full fleet of tractors and trailers in which all its furniture was shipped. A full crew of drivers was employed. Oklahoma absorbed all the expenses, and carried all the risks, of its transportation operation. It utilized a system of delivered pricing which eliminated transportation charges as an identifiable element of the price of its furniture. Its status as a private carrier exempt from licensing requirements was never questioned under the pre-1952 arrangement. But that method of operation was found to incorporate certain burdensome disadvantages. Oklahoma discovered that its employee-drivers were embezzling its funds through the misuse of

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credit arrangements which the company had established for the purchasing of fuel and minor repairs on the road. In addition, Oklahoma became convinced that its equipment was too often involved in accidents, and too often in need of repairs and maintenance which could have been avoided by careful operation.

In an effort to eliminate these disadvantages, Oklahoma, in 1952, altered its modus operandi. It decided to terminate its investment in tractors for long hauls and, instead, to lease them from the drivers. The original lease agreements encountered difficulty when, in 1956, the [82 S.Ct. 412] Supreme Court of Arkansas held that the resultant operation constituted for-hire carriage by the owner-operators which required licensing under the applicable Arkansas statutes.13 Following this turn of events, Oklahoma revised the leases, and also entered into a collective agreement with the union representing its workers setting forth the terms under which the owner-operators were...

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