Studna v. United States
| Decision Date | 23 January 1964 |
| Docket Number | Civ. A. No. 13968-4. |
| Citation | 225 F. Supp. 973 |
| Parties | Morris STUDNA, d/b/a Jett Motors, Plaintiff, v. UNITED STATES of America and Interstate Commerce Commission, Defendants. |
| Court | U.S. District Court — Western District of Missouri |
Kretsinger, Kretsinger & Edell, by Tom B. Kretsinger and John F. Edell, Kansas City, Mo., for plaintiff.
John H. D. Wigger, Dept. of Justice, Washington, D. C., F. Russell Millin, U. S. Atty., Kansas City, Mo., for defendants.
Francis A. Silver, Assoc. Gen. Counsel, Washington, D. C., for Interstate Commerce Commission.
Before RIDGE, Circuit Judge, and OLIVER and BECKER, District Judges.
In this action under Section 1336, Title 28 U.S.C.A. plaintiff, a wholesale automobile distributor, seeks to set aside certain orders of the Interstate Commerce Commission (hereinafter referred to as the Commission) requiring the plaintiff to cease and desist from his so-called "Plan 2" operations, hereinafter described.
On March 19, 1959, the Commission (acting through its Division 1) instituted an investigation under Section 204 (c)1 of the Interstate Commerce Act (hereinafter referred to as the Act) to determine whether plaintiff, Morris Studna, doing business as Jett Motors, had been and was then engaging in the transportation of property in interstate or foreign commerce, for compensation, as a common or contract carrier by motor vehicle, in violation of Section 206(a) (1) or 209(a) (1), of the Act.2
After a hearing the examiner found that plaintiff was not violating either of said provisions of the Act, and recommended the entry of an order discontinuing the proceeding.
Thereafter exceptions to the findings were filed by the Commission's Bureau of Inquiry and Compliance. On these exceptions, the Commission, through Division 1, concluded that, although the examiner correctly determined that plaintiff's "Plan 1" operations did not require operating authority, plaintiff's Plan 2 operations constituted for-hire transportation of automobiles for which a certificate of public convenience and necessity was required under Section 206 (a) (1) or Section 209(a) (1). Thereupon, the commission issued its cease and desist order.
After the denial of his petition by Division No. 1, plaintiff then filed a petition for reconsideration, of the actions of the Commission in respect of the Plan 2 operations. This petition was denied by Division 1, acting as an Appellate Division.
Plaintiff then filed this action. An injunction was entered by this Court pending final adjudication of the issues involved. The effective date of the cease and desist order was postponed. A three judge court was convened pursuant to Title 28 U.S.C.A. § 2284.
The facts in this case are not disputed. Plaintiff is a wholesale automobile dealer whose principal place of business is in Kansas City, Missouri. He purchases both new and used automobiles from dealers, and at auctions, in the Kansas City area. These automobiles are then resold chiefly to West Coast dealers.
Plaintiff transports automobiles across country according to two distinct plans, only one of which has been found illegal by the Commission.
Under Plan 1 plaintiff transports automobiles owned by him to dealers who have contracted to purchase them from him. Deliveries are effected by what is known in the industry as the "drive-away method." The automobiles to be delivered are driven by qualified drivers who are obtained through solicitation in the personal "Want-Ad" sections of Kansas City newspapers. Drivers must be over twenty-five years of age, must have a valid driver's license and must present "good references." No drivers are used on a regular "on-call" basis, though some may be used more than once. Although some drivers, known to plaintiff, are not required to post bond, most must deposit $25.00 with plaintiff. Upon safe delivery of the automobile to the purchaser-dealer that sum is then refunded to the driver by the purchaser-dealer. Plaintiff reimburses his customer for this refund, usually by a reduction in the purchase price. The driver pays for all operating expenses of the trip (except gas and oil) and minor vehicular repairs not exceeding $25.00. Plaintiff provides all insurance, permits and license plates for the interstate movements. Upon delivery to plaintiff's customer, the driver is reimbursed for the cost of fuel and minor repairs by the purchaser-dealer and he, in turn, secures reimbursement by deducting these charges from plaintiff's selling price. Upon departure of the vehicle, plaintiff notifies the customer by telegram. Title to the vehicle is mailed to the customer with a sight draft. Title to and responsibility for the vehicle remains in plaintiff until the sight draft is honored or the vehicle otherwise disposed of. Both the examiner and the Commission found that these Plan 1 operations fell within the statutory definition of "private carriage" as set forth in Section 203 (a) (17) of the Act,3 on the ground that such operations were incidental to, and in furtherance of, plaintiff's primary business as a wholesale automobile dealer.
Plaintiff's Plan 2 operations differ from his Plan 1 operations in that under this plan plaintiff transports automobiles owned at the outset by West Coast dealers. These automobiles are purchased by the West Coast dealers from someone in Kansas City other than the plaintiff. According to plaintiff, he transports these automobiles to his actual or potential customers solely for "good will" purposes, thus aiding his primary business of selling automobiles. Plaintiff advertises this Plan 2 service by maintaining a sign at a Kansas City auction house informing interested dealers of this service, advertised as free of charge. Under Plan 2 plaintiff prepares the automobiles for transportation by checking them mechanically, lubricating them, checking and servicing the tires, taping the chrome on the front of the car, covering the front of the hood with heavy waxed paper, and by furnishing license or shipping tags. Further, plaintiff provides inside storage for the vehicles until their departure. When the vehicle leaves for its destination, plaintiff sends a telegram, at his expense, to the dealer to whom it is to be delivered.
Under Plan 2 plaintiff obtains drivers in the same manner as he does for his Plan 1 operations. However under Plan 2 plaintiff retains the $25.00 deposit given by the driver. The driver is subsequently reimbursed at the destination for expenditures and the deposit of $25.00 by the dealer-owner. Before the transportation under Plan 2 begins, plaintiff requires the driver to execute a printed form provided by him which is designated "Independent Contractor Agreement." This agreement is in a form prepared for signature by both the driver and the owner of the car although, in fact, only the signature of the driver appears on the form.
Plaintiff estimates that his Plan 2 operations constitute about one per cent of his transportation operations, and that Plan 2 operations ordinarily occur only two or three times a month, but sometimes occur five or six times a month. This testimony was not effectively contradicted by the Commission, and will be assumed to be true.
The relevant portion of Section 206(a) (1)4 of the Act, providing for operations in interstate commerce by a common carrier, is as follows:
"Except as otherwise provided in this section and in section 310a of this title pertaining to dual operations, no common carrier by motor vehicle subject to the provisions of this chapter shall engage in any interstate or foreign operations on any public highway, or within any reservation under the exclusive jurisdiction of the United States, unless there is in force with respect to such carrier a certificate of public convenience and necessity issued by the Commission authorizing such operations * * *."
Section 209(a) (1) of the Act,5 provides, in essence, the same requirement for contract carriers.
A common carrier by motor vehicle is defined by Section 203(a) (14) of the Act,6 as:
"* * * any person which holds itself out to the general public to engage in the transportation by motor vehicle in interstate or foreign commerce of passengers or property or any class or classes thereof for compensation, whether over regular or irregular routes * * *."
A contract carrier by motor vehicle is defined by Section 203(a) (15) of the Act,7 as:
"* * * any person which engages in transportation by motor vehicle of passengers or property in interstate or foreign commerce, for compensation (other than transportation referred to in paragraph (14) of this subsection and the exception therein), under continuing contracts with one person or a limited number of persons either (a) for the furnishing of transportation services through the assignment of motor vehicles for a continuing period of time to the exclusive use of each person served or (b) for the furnishing of transportation services designated to meet the distinct need of each individual customer."
Every person falling within the definition of either a common carrier or of a contract carrier must obtain operating authority from the Commission.
No such authority, however, is required of a private carrier of property by motor vehicle. A private carrier is defined by Section 203(a) (17) of the Act,8 as:
"* * * any person not included in the terms `common carrier by motor vehicle' or `contract carrier by motor vehicle', who or which transports in interstate or foreign commerce by motor vehicle property of which such person is the owner, lessee, or bailee, when such transportation is for the purpose of sale, lease, rent, or bailment, or in furtherance of any commercial enterprise."
In interpreting this definition of a private carrier the Commission and the courts early adopted and applied to the individual fact situations before them the so-called "primary...
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...Shippers Cooperative, Inc., et al. v. Interstate Commerce Commission, 308 F.2d 888, 892 (9th Cir., 1962); Studna v. United States, 225 F.Supp. 973, 983-984 (W.D.Mo.1964). These cases make plain that had plaintiffs established a separate and distinct legal entity to perform their transportat......
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