Ryder Truck Lines, Inc. v. U.S.

• Citation: 716 F.2d 1369
• Decision Date: 11 October 1983
• Docket Number: Nos. 82-5247,82-8133,s. 82-5247
• Parties: RYDER TRUCK LINES, INC., Petitioner, v. UNITED STATES of America and Interstate Commerce Commission, Respondents. BOWMAN TRANSPORTATION, INC., et al., Petitioners, v. UNITED STATES of America, and The Interstate Commerce Commission, Respondents.
• Court: United States Courts of Appeals. United States Court of Appeals (11th Circuit)

Page 1369

716 F.2d 1369

RYDER TRUCK LINES, INC., Petitioner, v. UNITED STATES of America and Interstate Commerce Commission,

Respondents.

BOWMAN TRANSPORTATION, INC., et al., Petitioners, v. UNITED STATES of America, and The Interstate Commerce

Commission, Respondents.

Nos. 82-5247, 82-8133.

United States Court of Appeals,

Eleventh Circuit.

Oct. 11, 1983.

Rice, Carpenter & Carraway, John Bradley, Robert C. Bamford, Arlington, Va., for petitioner.

William H. Borghesani, Jr., Keller & Heckman, Michael F. Marrone, Jonathan P. Levine, Washington, D.C., for intervenors F/Nat. Amer. Wheels Grocers Ass'n.

Robert B. Nicholson, Kenneth P. Kolson, Dept. of Justice, Washington, D.C., for Private Truck Council of America, Inc.

Charles Ephraim, Washington, D.C., for Bowman Transp. Inc.

Rea, Cross, Auchincloss, Donald E. Cross, Washington, D.C., for intervenor Steel Carriers' Tariff Assoc., Inc.

Lawrence H. Richmond, U.S. Dept. of Justice, Chief Appellate Section, Kenneth P. Kolson, Dept. of Justice, Robert B. Nicholson, Washington, D.C., for I.C.C.

Steptoe & Johnson, Robert J. Corber, Washington, D.C., for intervenor The American Movers Conference.

Doherty & Munson, James M. Doherty, Austin, Tex., for intervenor J.H. Rose Truck Line, Inc., and Frank Bros. Trucking Co.

Donelan, Cleary, Wood & Maser, John F. Donelan, Frederic L. Wood, John F. Donelan, Jr., Washington, D.C., for intervenor The Nat. Indus. Traffic League.

Charles D. Gray, Asst. Gen. Counsel, Washington, D.C., for intervenor Nat. Assoc. of Regulatory Utility Com'rs.

William P. Jackson, Jr., Arlington, Va., for intervenor Charter Exp., Inc., et al.

Bregman, Abell & Kay, David Simon, Washington, D.C., for intervenor Truck Renting & Leasing Assoc.

Wheeler & Wheeler, Keith G. O'Brien, Washington, D.C., for intervenor Intern. Broth. of Teamsters, Chauffeurs, Warehousemen & Helpers of America.

Billig, Sher & Jones, Jacob P. Billig, Terrence D. Jones, Jeffrey F. Lawrence, Washington, D.C., for intervenor The Private Truck Council of America, Inc.

Keller & Heckman, William H. Borghesani, Jr., Michael F. Morrone, Jonathan P. Levine, Washington, D.C., for intervenor The Nat. American Wholesale Grocers' Ass'n and The Private Carrier Conference, Inc.

Petitions for Review of Orders of the Interstate Commerce Commission.

Before KRAVITCH, HENDERSON and ANDERSON, Circuit Judges.

R. LANIER ANDERSON, Circuit Judge:

Petitioners ¹ request that we set aside a policy statement issued by the Interstate Commerce Commission (ICC or Commission) in a proceeding formally entitled Ex Parte No. MC-122 (Sub-No. 2), Lease of Equipment and Drivers to Private Carriers (February 9, 1982). In essence, the ICC has announced a new formula for determining whether a particular transportation leasing arrangement constitutes "for-hire carriage," subject to ICC regulation, or "private carriage" exempt from such regulation. Because we conclude that a rational basis exists for the new formula proposed by the ICC, we deny the petitions.

I. The Regulation of "For-Hire" Carriage.

The Motor Carrier Act of 1935, 49 Stat. 543-67, 49 U.S.C.A. Sec. 10101, et seq. (West 1982 Pamphlet), subjects the provision of for-hire motor transportation to regulation by the ICC. The aim of the act generally is "to assure that shippers ... will be provided a healthy system of motor carriage to which they may resort to get their goods to market." United States v. Drum, 368 U.S.

                370, 374, 82 S.Ct. 408, 410, 7 L.Ed.2d 360 (1962);  see S.Doc. No. 152, 73rd Cong., 2d Sess.  (1934);  H.R.Doc. No. 89, 74th Cong., 1st Sess.  (1935);  H.R.Rep. No. 1645, 74th Cong., 1st Sess.  (1935).  In order to achieve this goal of a stable transportation industry, the Act provides for collective rate-making and erects stringent barriers to entry into the transportation industry to ensure the need for, and reliability of, those carriers authorized to engage in for-hire transportation.  The Act also recognizes the need to allow a merchant to continue to transport its own goods "in furtherance of its non-transportation business."   Mercury Motor Express, Inc. v. United States, 648 F.2d 315, 317 (5th Cir. June 18, 1981); 2  see S.Rep. No. 482, 74th Cong., 1st Sess.  (1935);  H.R.Rep. No. 1645, supra.    The Act therefore regulates only "common" or "contract" carriers that engage in transportation for compensation or "for-hire carriage."    See 49 U.S.C.A. Secs. 10102(11) & 10102(12).  The Act specifically exempts from regulation private carriage.  49 U.S.C.A. Sec. 10102(13)
                

The original Motor Carrier Act, however, did not provide a substantive definition of private carriage, but rather defined private carriers as transporters of property who are neither common nor contract carriers. Thus, from the outset the ICC was entrusted with the responsibility of determining when the provision of transportation services constitutes exempt private carriage. Moreover, the ICC was required to define this exemption in a manner consistent with Congress' desire to protect shippers from the diversions of traffic that would result from an overly competitive transportation industry. See United States v. Drum, 368 U.S. at 374-76, 82 S.Ct. at 410-11. This policy of protecting the motor carrier industry, requiring stringent barriers to entry into the industry, led the ICC at an early date to scrutinize closely nominally private transportation arrangements. Of particular concern to the ICC was a practice known as "single-source leasing," in which the shipper leases both vehicle and driver from the same source. For example, when a shipper leases the vehicle and driving services of an owner/operator, the ICC must determine whether that owner/operator is engaging in transportation for compensation (for-hire carriage) or whether the shipper is legitimately engaged in procuring equipment and service necessary to engage in private carriage, incidental to its primary non-transportation business. A single-source arrangement potentially can be used to evade the ICC's regulatory authority.

In H.B. Church Truck Service Co. Common Carrier Application, 27 M.C.C. 191 (1940), overruled, 132 M.C.C. 758 (1982), the ICC recognized the possibility of subterfuge in single-source leasing and attempted to lay down a test to be used when determining whether such arrangements constitute private carriage. The Commission stated that "[e]ssentially the issue is as to who has the right to control, direct, and dominate the performance of the service." Id. at 195. If that right of control remained with the lessor, then the lessor would be engaged in for-hire carriage, and subject to ICC regulation. On the other hand, if the right to control, direct and dominate remained with the lessee (i.e., shipper), then the shipper would be engaged in exempt private carriage. Equally important, however, the Commission announced that a presumption of for-hire carriage would arise when the shipper leases both vehicle and driver from a single source, such as an owner/operator or a leasing agency. This presumption would yield "to a showing that the shipper has the exclusive right and privilege of directing and controlling the transportation service, as, for example, if the equipment were operated by the shipper's employee." Id. at 196. Finally, the determination necessary to rebut the presumption of for-hire carriage would be made in light of all facts and circumstances, none of which would be conclusive by itself. ³ Thus, the Church case In 1958, Congress, seeing the need to reinforce the Commission's efforts at preventing subterfuge and evasion of its authority, amended the Motor Carrier Act to clarify somewhat the definition of private carriage. This amendment provided that in order to constitute exempt private carriage it is necessary that:

formulated the "control" test for distinguishing private carriage from for-hire carriage, and created a rebuttable presumption of for-hire carriage when the shipper engages in single-source leasing.

(1) the property is transported by a person engaged in a business other than transportation; and

(2) the transportation is within the scope of, and furthers a primary business (other than transportation) of the person.

Pub.L. 85-626, 72 Stat. 574 (1958), codified at 49 U.S.C.A. Sec. 10524 (West 1982 pamphlet) (emphasis added); see H.R.Rep. No. 1922, 85th Cong., 2d Sess. (1958); S.Rep. No. 1647, 85th Cong., 2d Sess. (1958). ⁴

Contemporaneously with the 1958 amendments, the Commission itself began to reformulate the control test it had announced in Church. Thus, in Pacific Diesel Rental Co.--Investigation of Operations, 78 M.C.C. 161 (1958), the Commission held that the control test required an answer to the following question: "Are any persons ... in substance engaged in the business of interstate or foreign transportation ... fore hire?" Id. at 172 (using both new formulation and older "control" test). This reformulation signaled a more searching inquiry that was to focus not only on the physical aspects of control and direction, but also on the financial arrangements existing between the lessor and the shipper. ⁵ This refinement reached its culmination in Oklahoma Furniture Manufacturing Co.--Investigation, Operations, 79 M.C.C. 403, 409-10 (1959), overruled, 132 M.C.C. 758 (1982), in which the Commission announced that the control test was a separate inquiry from that required in Pacific Diesel, and that Pacific Diesel in essence created a supplementary test of "substance." Under the Commission's new two-pronged test, in order to find that a particular arrangement constitutes private carriage, it would be necessary that no person other than the shipper had "any right to control, direct, and dominate" the transportation service and that no person was "in substance, engaged in the business of ... transportation This new formulation by the Commission was expressly upheld by the United States Supreme Court in United States v. Drum, 368 U.S. 370, 82...