Northern Freight Lines, Inc. v. United States, Civ. A. No. 12699.

• Citation: 304 F. Supp. 536
• Decision Date: 08 September 1969
• Docket Number: Civ. A. No. 12699.
• Parties: NORTHERN FREIGHT LINES, INC., et al., Plaintiffs, v. UNITED STATES of America and Interstate Commerce Commission, Defendants, and Railway Express Agency, Inc., Intervenor-Defendant, and The National Small Shipments Traffic Conference, Inc.; the Drug and Toilet Preparation Traffic Conference; the Eastern Industrial Traffic League; the American Home Products Corp.; the Norwich Pharmacal Co., and Sterling Drugs, Inc., Intervenors.
• Court: U.S. District Court — Northern District of Georgia

304 F. Supp. 536

NORTHERN FREIGHT LINES, INC., et al., Plaintiffs, v. UNITED STATES of America and Interstate Commerce Commission, Defendants and Railway Express Agency, Inc., Intervenor-Defendant and The National Small Shipments Traffic Conference, Inc.; the Drug and Toilet Preparation Traffic Conference; the Eastern Industrial Traffic League; the American Home Products Corp.; the Norwich Pharmacal Co., and Sterling Drugs, Inc., Intervenors.

Civ. A. No. 12699.

United States District Court N. D. Georgia, Atlanta Division.

September 8, 1969.

Guy H. Postell, Frank D. Hall, Atlanta, Ga., Peter T. Beardsley, R. Edwin Brady, Albert B. Rosenbaum, Washington, D. C., Donald E. Cross, Bryce Rea, Jr., Washington, D. C., for plaintiffs.

Robert A. Hammond, III, Acting Asst. Atty. Gen., John D. Wigger, Atty., Dept. of Justice, Washington, D. C., John W. Stokes, U. S. Atty., Atlanta, Ga., for the United States.

Robert W. Ginnane, Gen. Counsel, Raymond M. Zimmet, Atty., ICC, Eugene T. Liipfert, William O. Turney, David A. Sutherland, Washington, D. C., David Axelrod, Chicago, Ill., Roland Rice, John S. Fessenden, Richard R. Sigmon, Washington, D. C., for ICC.

John E. Robson, Elroy H. Wolff, Leibman, Williams, Bennett, Baird & Minow, Washington, D. C., Robert C. Boozer, Sanders, Hester, Holley, Ashmore & Boozer, Atlanta, Ga., Arthur M. Wisehart, William H. Marx, New York City, of counsel, for REA.

John J. C. Martin, New York City, Robert C. Boozer, Sanders, Hester, Holley, Ashmore & Boozer, Atlanta, Ga., for remaining intervenors.

Before BELL, Circuit Judge, and EDENFIELD and HOOPER, District Judges.

EDENFIELD, District Judge:

The issue before this three-judge district court, constituted under 28 U.S.C. §§ 1336, 2284, 2321-2325, is whether the Interstate Commerce Commission acted within its discretion in concluding that Railway Express Agency should remain outside the terminal area¹ limits for motor carriers, set under Part II of the Interstate Commerce Act.

A brief chronology will help establish the posture in which we find this action. Railroads have long been charged by the courts with the duty of making their railroad facilities available to the public, although not to every express agency, for the transportation of express matter. Express Cases, 117 U.S. 1, 24, 28, 6 S.Ct. 542, 29 L.Ed. 791 (1886). Along with passage of the 1887 Act to Regulate Commerce the ICC recognized that the railroads had a primary duty to furnish express service. To relieve themselves of this duty the railroads often contracted out for their small parcel, express traffic to independent express companies. These independent companies were brought within ICC jurisdiction in 1906, when the definition of common carrier in § 1(3) (a) of the Interstate Commerce Act was amended to include express firms. In 1929, the nation's railroads established Railway Express Agency as their exclusive agent to conduct express service. They continue to this day to be its owners.² REA operated motor vehicle collection and delivery operations as part of its terminal area service and generally relied upon passenger trains for the line-haul movement of its express commodities. Improved highways and a severe attrition in railroad passenger service in recent years has led to greater reliance on motor vehicles, often its own, for the line-haul movement of express shipments. In order to engage in line-haul shipments with its own trucks, REA must obtain motor carrier certificates under Part II of the Interstate Commerce Act. But, while "greater reliance on motor vehicles for line-haul movements has reduced the amount of express traffic moving by rail, * * * this continues to be the principal mode used." Express Company Terminal Areas, 332 I.C. C. 91, 100 (Ex Parte No. 242, 1967).

Along with increased reliance on motor vehicles for line-haul movement, other significant changes have occurred in REA's modus operandi. "REA has in recent years shown great interest in obtaining, and has actively solicited, large shipments of various commodities to produce what is termed a better `mix' with the smaller shipments traditionally handled." Express Company Terminal Areas, supra, at 100-101. These large volume shipments have often thrown REA into competition with independent motor carriers and freight forwarders. REA also instituted a "key-point terminal" program designed to reduce the number of smaller offices through consolidation into large and more efficient terminals. These consolidated terminals, capable of processing large volumes of traffic, have been situated, for purposes of efficiency, in locations central to their service areas, rather than tied to specific base municipalities. REA's consolidation program has produced a "concomitant enlargement of the terminal areas served by existing offices", Ibid, at 99, thus increasing the size of the area within which REA performs its pickup and delivery services.

The increasing size of REA's terminal areas has aggravated, from the plaintiffs' viewpoint, the distinction long recognized between express terminal areas and terminal areas for motor carriers. Due to the acknowledged differences between pure express service, governed under Part I of the Interstate Commerce Act, and regular motor carrier service, regulated under Part II of the Act, REA has been permitted to employ an entirely different system for defining its terminal areas than that used by motor carriers. There is no specific statutory provision conferring terminal areas upon line-haul motor carriers under Part II. Rather, the authority of motor carriers to provide pickup and delivery service in a defined terminal areas is given incidental to their line-haul authority. Motor carrier terminal areas for transfer, pickup and delivery, are determined by Commercial Zones and Terminal Areas (Ex Parte No. MC-37), 54 M.C.C. 21 (hereinafter cited as MC-37). REA terminal areas have not, in the past, been governed by MC-37 limits, which are generally tied to specific commercial zones and base municipalities. Although REA must often secure motor carrier certificates under Part II, for line-haul movement of express shipments, just as regular motor freight carriers, it has not felt itself bound by the more restrictive terminal areas of MC-37. REA claims exemption from motor carrier terminal area limits, even as to its line-haul motor carrier operations, because of its status as an express service under Part I. Thus, the ICC has allowed REA to set its own terminal areas merely by publication of its regular tariffs, ICCA-3 and ICCA-4. On one day's notice, REA is permitted to change and expand its terminal areas, solely at the discretion of its management. Motor carriers under Part II must undergo more complex and restrictive procedures to alter their terminal areas. REA terminal areas are, however, subject to regulation by the ICC through investigation and suspension procedures, and by complaints before it under section 13 of the Act, 49 U.S.C. § 13(1).

The result of REA's consolidation program and its considerable discretion in setting pickup and delivery areas has been the extension of REA terminal areas beyond the MC-37 commercial zones at some 750 REA offices³ servicing 2771 points with a population of some 16 million people. Approximately one-half of these offices confine their terminal area services to areas extending less than ten miles beyond the MC-37 zones, "but some of the remainder serve points as far away as 50 miles. More specifically, 180 offices provide service to points ten to 20 miles distant from the MC-37 terminal area, 73 to points within 30 miles thereof, and the remaining 23 to points between 30 and 50 miles away." Express Company Terminal Areas, supra, at 100.

The ICC discussed the significant problems raised by REA's terminal areas and growing motor vehicle operations, in Railway Express Agency, Inc., Extension — Nashua, N. H., 91 M.C.C. 311 (1962) (hereinafter cited as Nashua), a case in which REA sought several applications to operate as a common carrier by motor vehicle of general commodities moving in express service. The ICC tentatively decided that express business was subject to regulation under Part II of the Act, and stated that cases such as American Highway Freight Ass'n., Inc. v. Railway Express Agency, Inc., 201 I.C.C. 755, and Railway Express Agency, Inc. Determination of Status, 21 M.C.C. 161, 187-189, demonstrated that express companies were subject to Part I regulation — and thus to different economic regulation than motor carriers — only as to those express services associated with line-haul movements by rail. Terminal areas had to be defined as for other motor carriers under Part II, when the line-haul movement was by motor vehicle. As the ICC put it:

"In other words, when REA uses the services of a certified independent motor carrier, or even when it operates over its own certified highway routes, it is bound by all limitations inherent in such operating authority, including any which limit the performance of pickup and delivery service to a specifically defined motor carrier terminal area." Nashua, supra, at 338.

While the Nashua conclusion was often reiterated, Railway Express Agency, Inc., Extension — Clinton, 92 M.C.C. 487; Railway Express Agency, Inc., Extension — Auburn, Mass., 92 M.C.C. 657, 658-659; Railway Express Agency, Inc., Extension — Bangor, Maine, 98 M.C.C. 75, 78, the ICC was clearly disturbed by the differences in terminal areas which would result solely from the mode of line-haul movement employed. This anxiety led the ICC to conclude that a rule-making procedure was necessary for purposes of uniformity:

"We do think, however, that with the fact of REA's decreasing utilization of passenger trains, and its increasing reliance on line-haul motor transportation, this state of the law different terminal area regulation depending on the mode of line-haul movement for express shipments is apt to foster

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