Silvey Refrigerated Carriers, Inc., Application of

• Decision Date: 23 October 1987
• Docket Number: No. 85-928,85-928
• Citation: 226 Neb. 668,414 N.W.2d 248
• Parties: In re Application of SILVEY REFRIGERATED CARRIERS, INC. SILVEY REFRIGERATED CARRIERS, INC., Appellant, v. BEE LINE MOTOR FREIGHT, INC., et al., Appellees.
• Court: Nebraska Supreme Court

Page 248

414 N.W.2d 248

226 Neb. 668

In re Application of SILVEY REFRIGERATED CARRIERS, INC. SILVEY REFRIGERATED CARRIERS, INC., Appellant, v. BEE LINE MOTOR FREIGHT, INC., et al., Appellees.

No. 85-928.

Supreme Court of Nebraska.

Oct. 23, 1987.

Syllabus by the Court

1. Public Service Commission: Appeal and Error. In an appeal from an order of the Nebraska Public Service Commission, the Supreme Court examines the record to determine whether the commission acted within the scope of its authority and whether the evidence shows that the order in question was unreasonable or arbitrary.

2. Motor Carriers. In determining whether a carrier's operation in hauling goods between points in one state through another state is a subterfuge, courts should look to the reasonableness of the carrier's modus operandi, as evidenced by (1) the degree of circuity involved in the interstate route when compared with the "local" route normally employed by intrastate carriers, (2) the presence or absence of economic or operational justification for such routing apart from the carrier's lack of intrastate authority, and (3) the incidental or dominant character of the intrastate traffic as a portion of the carrier's overall operation. No single factor is controlling as to the outcome.

3. Motor Carriers. A logical and normal operation through the carrier's headquarters or base of operations is a prime justification for an interstate routing, and does not indicate subterfuge to avoid state regulation.

4. Public Service Commission: Motor Carriers: Proof. The burden is upon an applicant for authority to operate as a contract carrier intrastate to show that the proposed service is specialized and is designed to meet the distinct needs of the contracting shippers; that applicant is fit, willing, and able to perform the service; and that the proposed service will be consistent with the public interest.

5. Public Service Commission: Motor Carriers: Proof. If the evidence shows that the proposed transportation by the contract carrier can be performed as well by common carriers as by contract carriers, the application should be denied.

6. Public Service Commission: Motor Carriers: Proof. Where the transportation of specified commodities can be performed as well by common carriers as by contract carriers, a need for contract carriers is not established.

Marshall D. Becker and Robert M. Cimino, Omaha, for appellant.

James E. Ryan of Ryan & Williams, P.C., Lincoln, for appellees.

BOSLAUGH, C.J., Pro Tem., WHITE, HASTINGS, CAPORALE, SHANAHAN, and GRANT, JJ., and COLWELL, District Judge, Retired.

BOSLAUGH, Chief Justice., Pro Tem.

Silvey Refrigerated Carriers, Inc., has appealed from the order of the Nebraska Public Service Commission which denied its application for authority to operate as a contract carrier in Nebraska intrastate commerce.

Silvey is currently authorized to operate in interstate commerce from its terminal in Council Bluffs, Iowa. Beginning in February 1985, and continuing for 2 to 3 months, Silvey began furnishing service to Packaging Corporation of America, located in Omaha. Silvey's operations consisted of leaving an empty trailer at Packaging Corporation's loading dock, returning later for the loaded trailer, and leaving another empty trailer for loading. Silvey would then take the loaded trailer to its Council Bluffs terminal overnight and deliver the load to its Nebraska destination the following day. Packaging Corporation stopped shipping with Silvey when it learned that Silvey had no intrastate authority.

On April 24, 1985, Silvey applied for intrastate authority to operate as a contract carrier. Protests were filed by Bee Line Motor Freight, Inc., and Brown Transfer Co. After a hearing on August 14, 1985, the commission entered its order denying Silvey's application.

The commission found that Silvey was fit, willing, and able to properly perform the service; that it had not shown its service was such that it would serve any distinct need of the shippers which was not already being served by common carriers; that the entry of Silvey into the field before obtaining intrastate authority was significantly detrimental to the protestants Bee Line and Brown; and that Silvey's preapplication routine of leaving truckloads overnight in Council Bluffs before delivery to their Nebraska destinations was a subterfuge to evade the Nebraska motor carriers act.

Silvey's numerous assignments of errors can be consolidated into three.

Silvey contends that the finding by the commission that its operations prior to the filing of the application were a subterfuge is not supported by the evidence and was erroneous. It is Silvey's position that its business practice of picking up a loaded trailer in Omaha and taking the load to its Council Bluffs terminal, and then transporting the load to its Nebraska destination the next day, falls within its interstate authority, and therefore Silvey is not subject to the jurisdiction of the commission.

Silvey relies on the decision in Maudlin, Oregon Public Utility Commissioner v. Southwest Delivery Co., Inc., 1985 Fed.Carr.Cas. (CCH) p 37,198. In that case, the Oregon public utility commissioner sought to prevent Southwest's activities on the basis that it was involved in Oregon intrastate commerce without proper authority.

Southwest Delivery operated in interstate commerce from its terminal in Vancouver, Washington. As a part of its business, Southwest would handle shipments between Portland, Oregon (located just across the river from Vancouver), and other Oregon destinations. Appellate division 2 of the Interstate Commerce Commission held that Southwest Delivery Co.'s practice of picking up less-than-load (LTL) shipments in Portland, Oregon, then taking them back to its Vancouver, Washington, headquarters for consolidation with other LTL shipments having prior interstate movement, and delivering the entire load to Oregon destinations, was interstate commerce and not a subterfuge.

The ICC noted that transportation of property by motor vehicle between points in the same state through another state is transportation in interstate commerce regardless of how small the distance traveled in the other state. The ICC also noted that a carrier may not use its interstate operating authority to evade legitimate state regulation of intrastate commerce. Such transportation through another state is beyond the carrier's interstate authority if done in bad faith or as a subterfuge to evade intrastate regulation.

To determine whether bad faith or subterfuge was involved, the ICC looked to the test set out in Pennsylvania P.U.C. v. Arrow Carrier Corp., 113 M.C.C. 213 (1971). The test provides that the ICC and the courts should look to the reasonableness of the carrier's modus operandi, as evidenced by (1) the degree of circuity involved in the interstate route when compared with the "local" route normally employed by intrastate carriers, (2) the presence or absence of economic or operational justification for such routing apart from the carrier's lack of intrastate authority, and (3) the incidental or dominant character of the intrastate traffic as a portion of the carrier's overall operation. The Arrow decision also stated that no single factor is controlling as to the outcome.

As to the first issue, of circuity, the ICC found circuity occurred by picking up traffic within the Portland commercial zone, moving it north to the Vancouver terminal, and then moving it southward again to Oregon destinations. However, the ICC concluded that because the Portland-to-Vancouver hauls were within the boundaries of the Portland commercial zone, any circuity was merely an ordinary and routine facet of the business of transporting LTL shipments.

The commercial zone defines the territory which is "adjacent to, and commercially a part of" a municipality; the commercial zone exemption of 49 U.S.C. 10526(b)(1), and the territorially coextensive terminal area exemptions of 49 U.S.C. 10523 and implied operating authority under 49 CFR 1041.20, which allowes [sic] carriers to serve points beyond the legal boundaries of specifically authorized municipalities, all exist to enable carriers to serve, in a simple and convenient matter, industries which may be located in suburban areas. Likewise, they permit carriers to establish operating terminals in suburban areas, as they may find to be expedient and convenient.

1985 Fed.Carr.Cas. at p 37,198.03.

The facts in this case are similar to those in Southwest. Silvey's main terminal is located just across the river from its Omaha clients, and thus could be considered to be within the Omaha commercial zone.

The second prong of the test involves operational justification for movement outside the state. The ICC in Maudlin, Oregon Public Utility Commissioner v. Southwest Delivery Co., Inc., 1985 Fed.Carr.Cas. (CCH) p 37,198, stated that it has repeatedly recognized that operations through an operating terminal are a reasonable manner of transporting LTL traffic, even when they involve moving single-state traffic through an out-of-state terminal. The opinion cites Pennsylvania Public Utility Comm. v. Leonard Exp., 107 M.C.C. 451 (1968), for the "fundamental statement of the relevant legal principal [sic] that a logical and normal operation through the carrier's headquarters or base of operations is a prime justification for an interstate routing, and counterindicatory of subterfuge to avoid State regulation." 1985...