Freight Forwarders Inst. v. United States, ICC, 74 C 2311.
| Decision Date | 27 February 1976 |
| Docket Number | No. 74 C 2311.,74 C 2311. |
| Citation | 409 F. Supp. 693 |
| Parties | FREIGHT FORWARDERS INSTITUTE et al., Plaintiffs, v. UNITED STATES of America, INTERSTATE COMMERCE COMMISSION, et al., Defendants. |
| Court | U.S. District Court — Northern District of Illinois |
D. Robert Thomas, Henry A. Preston, Kirk B. Johnson, Sidley & Austin, Chicago, Ill., and Giles Morrow, New York City, for plaintiffs.
Thomas E. Kauper, Asst. Atty. Gen., John H. D. Wigger, Dept. of Justice, Washington, D. C., James R. Thompson, Jr., U. S. Atty., Chicago, Ill., for defendant United States.
Fritz R. Kahn, Gen. Counsel, Hugh W. Cuthbertson, Washington, D. C., for defendant Interstate Commerce Commission.
Peter T. Beardsley, Nelson J. Cooney, Robert L. James, Washington, D. C., for intervening defendant American Trucking Associations, Inc.
R. Edwin Brady, Keith G. O'Brien, Roland Rice, Richard R. Sigmon, Washington, D. C., for intervening defendant Regular Common Carrier Conference of American Trucking Associations, Inc.
Francis W. McInerny, John Guandolo, Richard A. Mehley, Washington, D. C., for intervening defendant Local and Short Hall Carriers National Conference.
John W. Storer, McKenna, Storer, Rowe, White & Haskell, Chicago, Ill., Russell & Schureman, Los Angeles, Cal., for intervening defendants Brake Delivery Service, Meier Transfer Service, City Freight Lines, G & H Transportation, Inc., Griley Freightlines, Quickway Trucking Co., S & M Freight Lines and Smith Transportation Co.
Before PELL, Circuit Judge, and MAROVITZ and LYNCH, District Judges.
The plaintiffs have brought this suit to set aside the report and order of the Interstate Commerce Commission (hereinafter Commission) in a proceeding identified as Ex Parte No. 266 (Sub-No. 1), Investigation Into the Scope of Freight Forwarder Terminal Areas, 343 I.C.C. 565. The end result of that proceeding was that the Commission refused to expand the terminal areas of the freight forwarders (hereinafter forwarders). It is the reasoning of the Commission's decision that the forwarders take umbrage with and which they use as a base for their attempt to have the Commission's order overturned. A review of the arguments of the opposing parties indicates a strenuous disagreement not only as to the specific issue of whether the Commission has the authority to expand the terminal areas but also a disagreement as to the specific grounds by which the Commission refused to do so. A review of the background of this litigation will aid in coming to grips with the issues this Court must decide.
The plaintiffs are individual freight forwarder companies and the Freight Forwarders Institute. The Institute is a voluntary association of freight forwarders. The forwarders are common carriers subject to regulation under Part IV of the Interstate Commerce Act (hereinafter the Act). 49 U.S.C. Section 1001 et seq. The basic activities of the forwarders in conducting their business were described by the Commission in its decision as follows:
Freight forwarders assemble the shipments of many shippers or receivers and consolidate them into carload, truckload, or other volume quantities at so-called concentration points. They then ship this consolidated traffic by common carrier to the general vicinity of its ultimate destination, where the volume lots are broken down into individual shipments for delivery to the ultimate consignees. The forwarder makes its profit on the spread between the higher less-than-carload or less-than-truckload rate it charges its customers and the volume rate it pays the underlying carrier performing the actual movement of the goods. (343 I.C.C. at 566)
The forwarders see to it that the less-than-carload and less-than-truckload shipments are brought to what is referred to as a "concentration" or "collection" point. This is where these smaller shipments are consolidated and prepared for a line-haul movement. The line-haul movement is performed, of necessity, by a carrier other than a forwarder. It may be performed by carriers subject to Part I of the Act (rail carriers), Part II (motor carriers), or Part III (water carriers). The line-haul movement terminates at the forwarder terminals that are relatively proximate to the location of the ultimate consignee of the shipment. This terminal is referred to as the break-bulk point. It is here that the consolidated shipments are broken down into their original, smaller, components and then distributed to their ultimate destinations.
The significance of any definition of the size of the forwarders' terminal areas is gleaned from Section 202(c) of the Act (49 U.S.C. Section 302(c)). The import of Section 202(c) is that the forwarders may collect and deliver the smaller shipments within their own terminal areas through the use of their own equipment or by hiring a non-certificated carrier who is not regulated by the Act. However, if the consignor and/or consignee happen to be located outside the forwarders' terminal areas, the assembly and distribution services which must be performed prior and subsequent to the line-haul movement are not exempt from regulation under the Act. Consequently, the forwarders could not perform these services by themselves but must hire certificated carriers to perform them. This fact raises the possibility that the forwarders would have to purchase the services of an underlying mode of transportation not just once, for the major line-haul movements, but possibly up to three times if both the assembly and distribution services must be performed at points outside the terminal areas. The ramifications of the latter situation are readily apparent. If the forwarders are required to hire certificated carriers twice or three times rather than once, their costs will rise and their profit margins are severely reduced.
In a Notice of Proposed Rule Making filed by the Commission on May 13, 1971, it was noted that the Commission was embarking upon a proceeding to determine whether the territorial extent of the forwarders' terminal areas should be extended. The Commission noted that in a previous proceeding it had concluded that:
The time had come to alter certain traditional concepts relative to this mode of transportation . . . It was also recognized that another way in which forwarding as a mode of transportation might be revitalized would be by a general expansion of the terminal areas within which they perform transfer, collection, or delivery services. (36 F.R. 8889)
The Commission noted that an expansion of the terminal areas might result in, ". . . improved services to the public with concomitant increases in forwarders' (and through them, railroads') participation in the transportation of small shipments traffic." The Commission stated that before it took any action in this area, it would undertake to notify interested parties so that they might file statements in favor of or in opposition to, the possible expansion with the Commission.
On June 27, 1973, after considering the various arguments proffered to it on the pertinent question, the Commission ruled that the forwarders' terminal areas could not and would not be expanded by order of the Commission. A thorough review of the Commission's decision is necessary in order to grasp the issues that this Court must now decide. This point must be emphasized due to the current dichotomy of opinion among the parties as to the reasoning of the Commission in reaching its decision.
The Commission noted early in its report that a previous decision of the Commission held that the terminal areas of forwarders should be essentially the same as the commercial zones of the municipalities in which the terminal areas are located. Commercial Zones and Terminal Areas, 54 M.C.C. 21 (1952). Section 203(b)(8) of the Act, 49 U.S.C. Section 303(b)(8), provides for an exemption from regulation under the Act of ". . transportation of passengers or property in interstate or foreign commerce wholly within a municipality or between contiguous municipalities or within a zone adjacent to and commercially a part of any such municipality or municipalities . . ." The commercial zones are generally fixed by a population mileage formula.
Reference is made in the Commission's report to previous decisions of the Commission wherein the terminal areas of other types of carriers had been expanded considerably upon a finding that the service provided by the particular carrier had unique and important attributes which distinguished their services from other forms of transportation.
Having made the above observations, the Commission stated that "terminal area" is defined as that territory within which bona fide motor carrier collection, delivery, and transfer services may be performed by or for carriers otherwise subject to regulation under the Act. The Commission held that it was not the purpose of the proceeding to change this basic definition. The report stated:
Those who argue that we are without jurisdiction in this proceeding would be essentially correct if, as they contend, our action were to constitute such a redefinition of the terminal area exemption as would differ from the purpose of the statutory term as intended by the Congress. (343 I.C.C. at 578)
The report went on to indicate that the "statutory terminal area concept" was meant to refer solely to local transportation, i. e., intracommunity movement of traffic.
It contemplates the gathering or distributing of traffic within a municipality prior or subsequent to a line-haul or intercity movement. (343 I.C.C. at 579) (Emphasis added).
The Commission concluded that it lacked the authority to expand terminal areas to any location which would not be a part of a single community, the community which included the location of a particular terminal. If the Commission were to hold otherwise, transportation within the terminal area would become...
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