Tri-D Truck Lines, Inc. v. ICC

• Citation: 303 F. Supp. 631
• Decision Date: 25 June 1969
• Docket Number: No. KC-2820.,KC-2820.
• Parties: TRI-D TRUCK LINES, INC., Plaintiff, v. INTERSTATE COMMERCE COMMISSION and the United States of America, Defendants, and Missouri Public Service Commission, Intervening Defendant.
• Court: U.S. District Court — District of Kansas

303 F. Supp. 631

TRI-D TRUCK LINES, INC., Plaintiff, v. INTERSTATE COMMERCE COMMISSION and the United States of America, Defendants and Missouri Public Service Commission, Intervening Defendant.

No. KC-2820.

United States District Court D. Kansas.

June 25, 1969.

Tom B. Kretsinger and Warren H. Sapp, of Kretsinger & Kretsinger, Kansas

City, Mo., and Donald A. Hardy, of Williamson, Cubbison, Hardy & Crossette, Kansas City, Kan., for plaintiff.

Robert W. Ginnane, General Counsel, and Philip W. Getts, Duluth, Minn., for defendant Interstate Commerce Commission.

Edwin M. Zimmerman, Asst. Atty. Gen., Benjamin E. Franklin, U. S. Atty., and John H. D. Wigger, Justice Department, for defendant United States of America.

Errol D. Taylor, Asst. General Counsel, for intervening defendant Missouri Public Service Commission.

Before BREITENSTEIN, Circuit Judge, and STANLEY and THEIS, District Judges.

OPINION

THEIS, District Judge.

This case is an action under 28 U.S.C. § 1336 to set aside, vacate and annul an order of the Interstate Commerce Commission (ICC) and to enjoin enforcement of its order. The plaintiff carrier, Tri-D, properly invokes a three-judge court under 28 U.S.C. § 2284. The parties concede and the Court finds it has jurisdiction of the parties and subject matter of the cause.

The Interstate Commerce Commission's order resulted from a complaint filed by the Missouri Public Service Commission¹ alleging that Tri-D was using its interstate operating authority as a subterfuge to haul intrastate traffic in Missouri free from regulation by complainant, Missouri Public Service Commission. Plaintiff's complaint alleges the ICC's findings to be (a) arbitrary and capricious; (b) not based on substantial evidence upon the whole record; and (c) based on an erroneous concept of § 303(a) (10) of the Interstate Commerce Act.

The facts are really uncontested, and the controversy exists over the implications and conclusions to be derived from them. These facts show that plaintiff carrier holds ICC authorities to transport general commodities between Kansas City, Missouri and Easton, Kansas, and between Easton and St. Joseph, Missouri, serving the small Kansas towns of Easton, Nortonville, Potter and Winchester. By combining, or "tacking" these authorities, plaintiff is able to provide service between Kansas City, Missouri and St. Joseph, Missouri. Plaintiff has no authority from the Missouri Public Service Commission for intrastate operation in Missouri. Other pertinent facts and the conclusion of the ICC hearing examiner are set forth in the quoted portions of his order, as follows:

"* * * that transportation of 48 shipments during the period May 2 through June 10, 1966, originating and terminating at points in Missouri over defendant's Tri-D's authorized routes in Kansas was unlawful and a mere subterfuge to evade the regulation of intrastate traffic by Mo. P.S. C.; that Tri-D should confine its transportation of traffic between St. Joseph and Kansas City, Mo., to traffic having origin or destination at points in States other than Missouri and which movement has not been interrupted by storage or comingling with other traffic; and that an order should be entered requiring defendant to cease and desist and hereafter refrain from transporting in interstate commerce any traffic which has both its origin and destination in Missouri."

Report & Order of Hearing Examiner, pp. 5-6.)

The hearing examiner also made this conclusion in finding the traffic in question was "unlawful and a mere subterfuge":

"* * * The interstate route used by Tri-D is 81.3 miles as compared with 51 over the intrastate route or 65 percent circuitous. The only reason for use of the interstate route is to provide the traffic with an interstate character and for Tri-D to avoid the jurisdiction of the Missouri regulatory body.

* * * * * *

"While there is no definite showing of bad faith herein, it appears that the longer interstate routing was not used for any logical economic or operational reason. Consequently, it must be concluded that the interstate routing was merely a subterfuge to convert Missouri intrastate traffic to interstate traffic for Tri-D's purpose."

(Report & Order of Hearing Examiner, pp. 4-5.)

In making an administrative order, the procedural and evidentiary requisites for a hearing and order by an administrative body are set forth in 5 U. S.C. § 556(d).² In a suit to set aside and to enjoin enforcement of an administrative order, here specifically an ICC order, a three-judge court is governed by the scope-of-review provisions of the Administrative Procedure Act, 5 U.S.C. § 706.³

It is to be noted that both § 556 (d) and § 706 refer to the phrase "substantial evidence," and § 556(d) even uses the additional adjectives of "reliable" and "probative" in advance of the word "substantial." "Substantial evidence" has been defined on numerous occasions in similar vein. "Evidence is `substantial' if it is the kind of evidence a reasonable mind might accept as adequate to support a conclusion." McGrath Corp. v. Hughes, 264 F.2d 314, 316 (2d Cir. 1959), cert. den. 360 U.S. 931, 79 S.Ct. 1451, 3 L.Ed.2d 1545.

In Illinois Central R. Co. v. Norfolk & Western Railway Co., 385 U.S. 57, 87 S. Ct. 255, 17 L.Ed.2d 162 (1966), the Supreme Court said:

"`Substantial evidence' is enough to justify, if trial were to jury, refusal to direct verdict when conclusion sought to be drawn from it is one of fact for jury."

There being no serious contention the ICC order was the result of arbitrary or capricious action, it is conceded by counsel, and the Court is in full accord, that the validity of the Commission's order depends upon whether it is sustained by substantial evidence.

Plaintiff contends the ICC erred in concluding from the evidence (1) that the movements of freight destined from Kansas City to St. Joseph may be presumed to be a subterfuge to evade regulation by the State of Missouri solely upon the existence of the stipulated fact that the interstate routing is 81.3 miles as against 51 miles by the most direct intrastate routing — and therefore deemed "circuitous;" (2) in concluding from all the evidence that plaintiff's longer interstate routing was without any logical economic or operational reason; and (3) in concluding the questioned shipments were "intrastate commerce."

At the outset it must be noted that the Constitution makes interstate commerce a federal domain, and that Congress, in the Motor Carrier Act, 49 U.S.C. § 303(a) (10)⁴, specifically defines "interstate commerce" to include commerce "between places in the same State through another State." The exception to the rule stated by the congressional definition as established by case law is that where the controlling purpose of the movement through the second state is to evade regulation by the original state, there exists subterfuge in the use of interstate authority. The judicial term "subterfuge" has been used to define such bad faith operation to avoid reasonable or legitimate regulatory interests of the state involved. See Service Trucking Co., Inc. v. United States, D.C., 269 F.Supp. 519, aff'd. 382 U.S. 43, 86 S.Ct. 183, 15 L.Ed.2d 36 (1965); Hudson Transportation Co. v. United States, D.C., 219 F.Supp. 43, aff'd. Arrow Carrier Corp. v. United States, 375 U.S. 452, 84 S.Ct. 524, 11 L. Ed.2d 477 (1964); Jones Motor Company v. United States, D.C., 218 F.Supp. 133, aff'd. Highway Express Lines, Inc. v. Jones, 377 U.S. 217, 84 S.Ct. 1224, 12 L.Ed.2d 292 (1964); Rock Island Motor Transit Co. v. United States, 256 F.Supp. 812 (D.C.1966).

ICC argues that the showing of circuity alone, without a contra showing by plaintiff carrier of logical, practical and feasible reasons from the standpoint of operating efficiency and economy, creates a presumption of bad faith and subterfuge. The intervening defendant, Missouri Public Service Commission, goes even further, and says on page 5 of its brief:

"Herein, a subterfuge of state jurisdiction is implied merely by the act of operation. The implication is rebuttable, but in this instance it was not rebutted."

These assertions and the difference of opinion between counsel as to who has the burden of proof in this case, prompt this Court to focus its attention on this aspect as a basis for decision.

Referring again to 5 U.S.C. § 556(d), it is clearly stated that "the proponent of a rule or order has the burden of proof." Both the ICC and Missouri Public Service Commission are the proponents of the ICC order and decision, and as...