Rock Island Motor Transit Company v. United States

• Decision Date: 11 August 1966
• Docket Number: Civ. No. 6-1776-C-1.
• Citation: 256 F. Supp. 812
• Parties: ROCK ISLAND MOTOR TRANSIT COMPANY et al., Plaintiffs, v. UNITED STATES of America and Interstate Commerce Commission, Defendants, Watson-Wilson Transportation System, Inc. (formerly Watson Bros. Transportation Company, Inc.), Intervenor.
• Court: U.S. District Court — Southern District of Iowa

256 F. Supp. 812

ROCK ISLAND MOTOR TRANSIT COMPANY et al., Plaintiffs, v. UNITED STATES of America and Interstate Commerce Commission, Defendants Watson-Wilson Transportation System, Inc. (formerly Watson Bros. Transportation Company, Inc.), Intervenor.

Civ. No. 6-1776-C-1.

United States District Court S. D. Iowa, Central Division.

August 11, 1966.

John G. Fletcher, Des Moines, Iowa, for Rock Island Motor Transit Co. and Burlington Truck Lines, Inc.

D. C. Nolan, Iowa City, Iowa, for H & W Express Co.

Thomas Bolton and Leo J. Steffen, Des Moines, Iowa, for Iowa Commerce Commission.

D. M. Statton, U. S. Atty., and Nahum Litt, I.C.C., Washington, D. C., for defendants.

Carl L. Steiner, Chicago, Ill., for Watson-Wilson, intervenor.

Before VAN OOSTERHOUT and BLACKMUN, Circuit Judges, and STEPHENSON, District Judge.

MEMORANDUM OPINION

STEPHENSON, District Judge.

This is an action for review of an order of the Interstate Commerce Commission (ICC). The Commission proceeding is entitled, The Rock Island Motor Transit Company, et al. v. Watson-Wilson Transportation System, Docket No. MC-C-2972 (99 M.C.C. 303). Plaintiffs request that we enjoin and set aside the order entered in said proceedings.

On April 11, 1960, plaintiffs, Rock Island Motor Transit Company of Des Moines, Iowa (Rock Island), Burlington Truck Lines, Inc., of Chicago, Illinois (Burlington), and H & W Motor Express Company of Dubuque, Iowa (H & W), filed a petition before the Interstate Commerce Commission (ICC) seeking a declaratory order under Section 206 of the Interstate Commerce Act, 49 U.S.C. § 306, determining the lawfulness of transportation performed by Watson Bros. Transportation, Inc., of Omaha, Nebraska (Watson) between certain points in Iowa and requesting that Watson be ordered to cease and desist from conducting such allegedly intrastate operations.¹ The operations of the defendant that were questioned by the plaintiffs were principally as follows:

1. From Bettendorf, Davenport and Riverdale, on the one hand, and on the other, Council Bluffs, Des Moines, Iowa City, Newton and Sioux City 2. Between Sioux City on the one hand, and on the other, Davenport, Bettendorf, Des Moines, Iowa City and Newton;

3. Between Council Bluffs on the one hand, and on the other, Atlantic, Bettendorf, Davenport, Des Moines, Iowa City and Newton.

While Watson had authority from the ICC to serve such Iowa towns in interstate commerce, it did not have authority from the Iowa State Commerce Commission to perform intrastate transportation between such Iowa points. Plaintiffs alleged that while Watson simulated an interstate operation between such Iowa points by transporting the shipments across the state line either at Rock Island, Illinois, or at Omaha, Nebraska and then back into Iowa for delivery, it was in fact engaged in intrastate commerce and that the above described operations were not bona fide and were conducted as a subterfuge for the purpose of evading the laws of the State of Iowa.

Watson filed a cross-petition seeking a declaratory order by the ICC under Section 204 of the Interstate Commerce Act, 49 U.S.C. § 304, to determine the lawfulness of certain operations of Rock Island and Burlington. Watson alleged that whereas Rock Island and Burlington transported certain shipments between points in Iowa and between points in Illinois by way of points outside of those states, and thus in interstate commerce, they billed these shipments as intrastate commerce. Watson seeks an order that Rock Island and Burlington cease and desist from billing such interstate commerce at the intrastate tariff.

I.

The facts in relation to plaintiffs' petition are not disputed and are derived primarily from evidence received at a 1959 Iowa Commerce Commission hearing in which Watson sought authority to operate in intrastate commerce.² As the examiner stated in his report:

"Watson's principal place of business since the formation of the company has been at Omaha, Nebr. Terminals have been maintained at Omaha since prior to `grandfather' days, at Sioux City for 15 years, and at Rock Island, Ill., for several decades. No terminals are presently maintained at either Davenport or Council Bluffs, Iowa. Terminals are still located at Omaha, Nebr., and at Sioux City and Des Moines, Iowa. The manner of handling freight originating at Sioux City, Iowa, and destined to points in Iowa, would be by hauling it across the Mississippi River to Rock Island, Ill., and thence back to Davenport on the Iowa side of the river, or on to other Iowa destinations. As another example of Watson's operations, freight which now originates at Davenport, Iowa, and is destined to Des Moines or Sioux City, Iowa, moves outside of the state into Rock Island, Ill., where it is assembled, bills cut, manifests made, and drivers dispatched. Similarly, freight originating at either Atlantic or Council Bluffs, Iowa, points in the western part of the state, that is destined to another point in Iowa, now moves over to Omaha, Nebr., and back under interstate authority."

This practice of routing all shipments through Rock Island or Omaha involves some circuity. For example, since Omaha serves as the consolidating point for traffic moving out of the western part of the state, a shipment from Atlantic, 84 miles west of Des Moines on U. S. Highway 6, will move westerly 55 miles to Omaha to be consolidated there with other shipments having a similar destination; and, if the destination is a point on U. S. Highway 6 east of Atlantic (e. g., Des Moines, Iowa City or Davenport) the shipment will double back through Atlantic en route. A shipment from the eastern part of the state such as Iowa City, 114 miles east of Des Moines on U. S. Highway 6, would be taken 64 miles east for consolidation in Rock Island, and then move to destination, which may involve hauling back through Iowa City. Shipments from Sioux City to Des Moines are routed through Omaha, a total distance of 231 miles while the direct route is only 206 miles.

On the basis of these facts, the examiner concluded that Watson's practice of circuitous routing and back hauling constituted a subterfuge and that Watson had done so in bad faith to escape the jurisdiction of the State of Iowa by converting to interstate commerce what would be, but for the circuitous routing, intrastate commerce. The examiner's conclusion was based on his opinion that the Rock Island and Omaha terminals could just as easily have been established in Davenport and Council Bluffs, that no logical reason appeared for the circuitous routing other than the fact that Watson had no intrastate authority, and that Watson's routing was neither normal nor natural in most instances. The examiner thus recommended that Watson be ordered to cease and desist from the complained of activities.

After the filing of exceptions to the examiner's recommendations, Division 1 of the ICC rejected the examiner's conclusion on this question and ordered that the plaintiff's petition be denied. The Commission's position is based upon its finding that Watson's routings were generally efficient and not contrived to attract and handle normally intrastate traffic, and upon its interpretation of the current decisions that circuity alone does not establish unlawfulness.

In finding that Watson's routings were generally efficient and not intended to attract intrastate traffic or evade the laws of Iowa by subterfuge, the Commission relied upon several factors. First, the routing used for service from points in Iowa to other points in Iowa is for the most part the same as for multistate service to these Iowa points. These routes were found by the Commission to be designed for the purpose of efficient consolidation³ and carrier convenience and not as a subterfuge. In addition, the evidence indicates that other carriers, including plaintiffs Rock Island and Burlington, find it economical and efficient from the standpoint of carrier convenience to use some of the same routing techniques. For example, Rock Island and Burlington, both possessing intrastate authority, route shipments to and from Council Bluffs through Omaha; Rock Island interlines at least part of its Davenport to Sioux City traffic at Omaha and serves Iowa points west of Atlantic circuitously through Omaha. Burlington also routes Des Moines to Davenport traffic through Moline, Illinois. The Commission concluded that "The inescapable inference is that Watson's choice of similar routings is based on like considerations"⁴ of efficiency and carrier convenience.

The Commission also cites the small percentage of Watson's operations that are questioned. In this respect, the evidence shows that the questioned all-Iowa operations through Rock Island constituted less than three percent by volume and less than two percent by weight of Watson's multistate operations serving these Iowa points through Rock Island. All-Iowa shipments through Omaha constituted less than .7% by volume and less than .2% by weight of the operations serving Iowa points through Omaha. In addition, the major portion of these questioned shipments were between points with very little circuity such as those to and from Council Bluffs and to and from the Davenport area. Traffic over the more circuitous routes is much less...