American Trucking Ass Ns v. United States Eastern Motor Exp v. United States Secretary of Agriculture of United States v. United States

• Citation: 73 S.Ct. 307,97 L.Ed. 337,344 U.S. 298
• Decision Date: 12 January 1953
• Docket Number: Nos. 26,35,36,s. 26
• Parties: AMERICAN TRUCKING ASS'NS, Inc. et al. v. UNITED STATES et al. EASTERN MOTOR EXP., Inc., et al. v. UNITED STATES et al. SECRETARY OF AGRICULTURE OF UNITED STATES v. UNITED STATES et al
• Court: United States Supreme Court

344 U.S. 298

73 S.Ct. 307

97 L.Ed. 337

AMERICAN TRUCKING ASS'NS, Inc. et al.

v UNITED STATES et al.

EASTERN MOTOR EXP., Inc., et al.

v. UNITED STATES et al.

SECRETARY OF AGRICULTURE OF UNITED STATES

v. UNITED STATES et al.

Nos. 26, 35, 36.

Argued Nov. 17 and 18, 1952.

Decided Jan. 12, 1953.

Rehearing Denied March 9, 1953.

See 345 U.S. 913, 73 S.Ct. 638.

[Syllabus from pages 298-299 intentionally omitted]

Mr. Harry E. Boot, Washington, D.C., and Wilber M. Brucker, Detroit, Mich., for American Trucking Associations, Inc., and others.

Mr. Howell Ellis, Indianapolis, Ind., for Eastern Motor Express, Inc., and others.

Mr. Neil Brooks, Washington, D.C., for Secretary of Agriculture of the U.S.

Mr. Ralph S. Spritzer, Washington, D.C., for the United States and I.C.C.

Mr. Burton K. Wheeler, Washington, D.C., for Teamsters Union.

Mr. Carl Helmetag, Jr., Philadelphia, Pa., for Intervening Railroads.

Mr. Justice REED delivered the opinion of the Court.

These appeals attack new Interstate Commerce Commission rules governing the use of equipment by authorized motor carriers when the equipment is not owned by the carrier but is leased from the owner or obtained by interchange with another authorized carrier. They were prescribed by the Commission and reported Ex Parte No. MC—43, Lease and Interchange of Vehicles by Motor Carriers, 52 M.C.C. 675. As will be seen from the portions we have quoted in the Appendix, they principally require carrier inspection; when the equipment is leased, control for a minimum of thirty days and a method of compensation other than division of revenues between lessor and lessee; and, in the case of use of another carrier's equipment, authorization to the exchange point and actual transfer of control. Thus the practice of using leased equipment and that obtained by interchange is brought into conformity with the regulation of carrier-owned equipment to avoid evils that had grown up in that practice.

Some six suits were instituted to test the validity of the rules in the district courts under 28 U.S.C. §§ 2321—2325, 28 U.S.C.A. §§ 2321—2325. Three were stayed by orders and one was not moved pending disposition of the instant cases.¹ These came here on direct appeal from two separate judgments denying the injunctive relief prayed for; one in the Southern District of Indiana, Eastern Motor Express, Inc. v. United States, 103 F.Supp. 694, and the other in the Northern District of Alabama, American Trucking Associations, Inc. v. United States, 101 F.Supp. 710. The issues there considered and resolved against the applicants concerned the Commission's authority under the Motor Carrier Act of 1935, Interstate Commerce Act, Part II, 49 Stat. 543, as amended, 54 Stat. 919, 49 U.S.C. § 301 et seq., 49 U.S.C.A. § 301 et seq.; the impact of the rules on agricultural trucking and on the guaranteed right of authorized carriers to augment their equipment; the application of the Administrative Procedure Act, 5 U.S.C. § 1001 et seq., 5 U.S.C.A. § 1001 et seq.; and the right of the protestants to introduce additional evidence in the district courts. Since there were only minor differences in the content of the two cases appealed, they may be treated together.

I. Introduction.—We consider at the outset the existing conditions of the motor truck industry and its regulation as developed during the Commissioner's hearings because only against such a background are the rules meaningful. Commission authorization in the form of permits or certificates of convenience and necessity is a precondition to interstate service by virtue of the Motor Carrier Act. Such authorization, except under the 'grandfather' clause, is granted only after a showing of fitness and ability to perform and a public need for the proffered service. And it specifically limits the scope and business of the permitted operations in the case of a contract carrier, and the routes and termini which may be served by a certificated common carrier. ²

The Act waives these conditions of agency authorization and service limitations for a sizable portion of the industry, however. Most important of the exempt operations are those involving equipment used in the transportation of agricultural products. By and large, the equipment in this category is owned and operated by the same person. It falls only within the Commission's jurisdiction over drivers' qualifications, hours of service and safety.³ And so there is no mandate on these exempt owner-operators to provide adequate and nondiscrimina- tory service, adhere to published rates, and comply with the strict insurance requirements imposed on carriers authorized for general carriage.⁴

Because of the limiting character of the regulatory system, authorized carriers have developed a wide practice of using non-owned equipment. They have moved in two directions. The first is interchange. This includes those arrangements whereby two or more certificated carriers provide for through travel of a load in order to merge the advantages of certification to serve different areas. In this fashion, a wholly or partially loaded trailer may be exchanged at the established interchange point, or even an entire truck travel the line without interruption, under the guise of a shift in control. The second is leasing. This relates to the use of exempt equipment in authorized operations. Carriers subject to Commission jurisdiction have increasingly turned to owner-operator truckers to satisfy their need for equipment as their service demands. By a variety of arrangements, the authorized carriers hire them to conduct operations under the former's permit or certificate. Such operators thus travel approved routes with nonexempt property, and in the great majority of instances sever connections with their lessee carrier at the end of the trip.⁵

The use of nonowned equipment by authorized carriers is not illegal, either under the Act or the rules under consideration.⁶ But evidence is overwhelming that a number of satellite practices directly affect the regulatory scheme of the Act, the public interest in necessary service and the economic stability of the industry, and it is on these that the rules focus. It appears, for instance, that while many arrangements are reduced to writing, oral leases are common; some were concluded after the trips were made and in several cases exampt operators solicited business themselves with blank authorized carrier forms or other evidence of agency. It is strongly urged that this very informality of the contractual relationship between carrier and exempt operator creates conditions in the industry inconsistent with those which the Act contemplates. Proof was proffered during the proceedings that the informal and tenuous relationships in lease and interchange permit evasions of the limitations on certificated or permitted authority. Since the driver of the exempt equipment is not an employee of the carrier, sanctions for violation of geographical restrictions are clearly difficult to impose, especially in the case of the single-trip lessor. Interchange may, as well, become a device to circumvent geographical restrictions in the certificate. The practice of authorized carriers conducting operations beyond the territory they are entitled to serve under cover of a lease from the local carrier was clearly shown in the evidence before the Commission. It appeared, in fact, that some of these operations are entirely fictional, being created ad hoc after the trip is made—and this at times in the wake of a specific denial by the Commission of an application to serve the area.

It was also alleged, and shown by evidence of some incidents, that the Commission's safety requirements were not observed by exempt lessors. Because of the fact that the great bulk of the arrangements cover only one trip, leasing carriers have little opportunity or desire to inspect the equipment used, especially in cases where the agreement is made without the operator's appearance at the carrier's terminal. Enforcement sanctions by the carriers for violations would be clearly as difficult to impose as route standards. Hence, the carrier may not extent the supervision of rest periods, doctors' certificates, brakes, lights, tires, steering equipment and loading, normally accorded his own employees and vehicles, to equipment and drivers secured through lease. And the owner-operator himself is called upon to push himself and his truck because of the economic impact of time spent off the road and investment in repairs on his slim profit margin.⁷ Further, the absence of written agreements has made the fixing of the lessee's responsibility for accidents highly difficult.

Consequences on the economic stability of the industry were also noted. The carrier engaged in leasing practice is at the mercy of the cost and supply of exempt equipment available to him. Hence, he may at times find himself unable to undertake shipping obligations because no trucks are available willing to make a relatively unprofitable trip or to assume the burdens of less-than-carload service. Certification is granted on a showing that a concern is fit and willing to provide nondiscriminatory service required by the public convenience. To sustain this obligation, the authorized integrated carrier who finds his leasing competitor only willing to undertake the more profitable ventures may be obliged to rely on miscellaneous freight without compensating economic long carload hauls to sustain estimated profit margins.

Use of exempt equipment by authorized carriers also tends to obstruct normal rate regulation. Schedules are traditionally grounded in costs. But the cost picture of a carrier who depends largely on leased equipment is far different from that of a carrier owning his own trucks. Not only is the former able to undertake operations with relatively slight investment. As well, his current overhead involved in operating leased equipment is solely...