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MIDWEST EMERY FREIGHT SYSTEM, INC. v. UNITED STATES

United States District Court, Northern District of Illinois, E.D


December 21, 1961

MIDWEST EMERY FREIGHT SYSTEM, INC.
v.
UNITED STATES OF AMERICA AND INTERSTATE COMMERCE COMMISSION.

Before Knoch, Circuit Judge, and Perry and Miner, District Judges.

The opinion of the court was delivered by: Perry, District Judge.

Plaintiff, Midwest Emery Freight System, Inc., seeks to vacate, enjoin, annul and set aside two orders, dated September 6, 1960 and February 1, 1961, respectively, of the Interstate Commerce Commission in Investigation and Suspension Docket No. M-12193 Twine and Crude Rubber — The Emery Transportation Company.*fn1

The action is brought pursuant to provisions of 28 U.S.C.A. §§ 1336, 1398, 2284, 2321, 2323, 2324, and 2325, and 5 U.S.C.A. § 1009. The United States of America is named as a defendant pursuant to 28 U.S.C.A. § 2322.

Plaintiff (a corporation organized under the laws of the State of Ohio and having its principal place of business in Chicago, Illinois) is a common carrier by motor vehicle of various commodities in interstate and foreign commerce pursuant to operating authority granted by the Interstate Commerce Commission. That operating authority, however, did not authorize plaintiff to transport crude rubber.

Common carriers by motor vehicle engaged in any interstate or foreign operation are required to have a certificate of public convenience and necessity issued by the Interstate Commerce Commission authorizing such operations. (49 U.S.C.A. §§ 306, 307) The Interstate Commerce Act provides, however, for certain exemptions, one of which is the agricultural exemption provision involved in the instant case and found in Section 203(b)(6) of the Act. (49 U.S.C.A. § 303(b)(6).)

Before it was amended by Congress in 1958, Section 203(b)(6) read as follows:

    "(b) Nothing in this part, except the provisions of
  Section 204 of this title relative to qualifications
  and maximum hours of service of employees and safety
  of operation or standards of equipment shall be
  construed to include * * *.

    "(6) motor vehicles used in carrying property
  consisting of ordinary livestock, * * *, or
  agricultural (including horticultural) commodities
  (not including manufactured products thereof), if
  such motor vehicles are not used in carrying any
  other property, or passengers, for compensation; * *
  *."

Effective August 12, 1958, Section 203(b)(6) was amended by the passage of Section 7 of the Transportation Act of 1958 (Public Law 85-625, 72 Stat. 573) which provides:

    "Sec. 7. (a) Clause (6) of subsection (b) of
  section 203 of the Interstate Commerce Act, as
  amended, is amended by striking out the semicolon at
  the end thereof and inserting in lieu thereof a colon
  and the following: `Provided, That the words
  "property consisting of ordinary livestock, fish
  (including shell fish), or agricultural (including
  horticultural), commodities (not including
  manufactured products thereof)" as used herein shall
  include property shown as "Exempt" in the "Commodity
  List" incorporated in ruling numbered 107, March 19,
  1958, Bureau of Motor Carriers, Interstate Commerce
  Commission, but shall not include property shown
  therein as "Not exempt": Provided further, however,
  That notwithstanding the preceding proviso the words
  "property consisting of ordinary livestock, fish
  (including shell fish), or agricultural (including
  horticultural) commodities (not including
  manufactured products thereof)" shall not be deemed
  to include frozen fruits, frozen berries, frozen
  vegetables, cocoa beans, coffee beans,

  tea, bananas, or hemp, and wool imported from any
  foreign country, wool tops and noils, or wool waste
  (carded, spun, woven, or knitted), and shall be
  deemed to include cooked or uncooked (including
  breaded) fish or shell fish when frozen or fresh (but
  not including fish and shell fish which have been
  treated for preserving, such as canned, smoked,
  pickled, spiced, corned or kippered products);'

    "(b) Unless otherwise specifically indicated
  therein, the holder of any certificate or permit
  heretofore issued by the Interstate Commerce
  Commission, or hereafter so issued pursuant to an
  application filed on or before the date on which this
  section takes effect, authorizing the holder thereof
  to engage as a common or contract carrier by motor
  vehicle in the transportation in interstate or
  foreign commerce of property made subject to the
  provisions of part II of the Interstate Commerce Act
  by paragraph (a) of this section, over any route or
  routes or within any territory, may without making
  application under that Act engage, to the same extent
  and subject to the same terms, conditions and
  limitations, as a common or contract carrier by motor
  vehicle, as the case may be, in the transportation of
  such property, over such route or routes or within
  such territory, in interstate or foreign commerce.

    "(c) Subject to the provisions of section 210 of
  the Interstate Commerce Act, if any person (or its
  predecessor in interest) was in bona fide operation
  on May 1, 1958, over any route or routes or within
  any territory, in the transportation of property for
  compensation by motor vehicle made subject to the
  provisions of part II of that Act by paragraph (a) of
  this section, in interstate or foreign commerce, and
  has so operated since that time (or if engaged in
  furnishing seasonal service only, was in bona fide
  operation on May 1, 1958, during the season
  ordinarily covered by its operations and has so
  operated since that time), except in either instance
  as to interruptions of service over which such
  applicant or its predecessor in interest had no
  control, the Interstate Commerce Commission shall
  without further proceedings issue a certificate or
  permit, as the type of operation may warrant,
  authorizing such operations as a common or contract
  carrier by motor vehicle if application is made to
  the said Commission as provided in part II of the
  Interstate Commerce Act and within one hundred and
  twenty days after the date on which this section
  takes effect. Pending the determination of any such
  application, the continuance of such operation
  without a certificate or permit shall be lawful. Any
  carrier which on the date this section takes effect
  is engaged in an operation of the character specified
  in the foregoing provisions of this paragraph, but
  was not engaged in such operation on May 1, 1958, may
  under such regulations as the Interstate Commerce
  Commission shall prescribe, if application for a
  certificate or permit is made to the said Commission
  within one hundred and twenty days after the date on
  which this section takes effect, continue such
  operation without a certificate or permit pending the
  determination of such application in accordance with
  the provisions of part II of the Interstate Commerce
  Act."

Under above quoted Section 7(c) of the Transportation Act of 1958, plaintiff filed with the Interstate Commerce Commission on December 10, 1958, an application for a motor-carrier "grandfather" certificate and an application for an "interim" certificate authorizing the transportation, among other commodities, of crude rubber.

Plaintiff also filed tariff schedules (to become effective February 5, 1959) by which it proposed to establish initial truckload rates on certain commodities, including crude rubber. These rates were filed in connection with its aforesaid applications for motor carrier "grandfather" certificate and application for an "interim" certificate, plaintiff's operating authority not including the transportation of crude rubber.

It appears that on the protests of certain railroads and several associations of motor common carriers, the operation of the schedules was suspended by the Board of Suspension to and including September 4, 1959. Thereafter plaintiff voluntarily postponed the effective date of the schedules to and including May 4, 1960.

It appears that after hearings held in Washington, D.C., before an Examiner of the Commission, and briefs filed, the Examiner's Report and Recommended Order, served May 10, 1960, recommended the cancellation of the schedules. Quoting from the concluding portion of said Report:

    "* * * It is abundantly clear from the prescribed
  forms of the section-7 applications, the Information
  Bulletin, and the precedent cases herein set forth
  that the Commission has determined that an article
  not included among the 11 commodities is not within
  section-7 applications. Conclusions and findings
  beyond that point are gratuitous.

    "It is not necessary, as protestants contend and as
  they set forth in their joint brief as requested
  finding No. 1, to determine whether an article was
  exempt prior to the enactment of section 7 if it is
  not included in the 11 commodities. Crude rubber is
  not included therein, and it is shown as not exempt
  in ruling No. 107. It is concluded that the rates
  here in issue are for transportation which Emery is
  without authority to perform.

    "The examiner finds that the suspended tariff
  schedules on crude rubber are not within the scope of
  the operating authority granted to The Emery
  Transportation Company or available to it under
  section 7 of the Transportation Act of 1958 and are
  therefore unlawful. The attached order requires Emery
  to cancel the suspended schedules, and discontinues
  this proceeding."

Plaintiff filed exceptions to the Examiner's Report and Recommended Order and protestants replied. Quoting from the Report (dated September 6, 1960) of the Commission, by Division 3:

    "The `grandfather' rights provided in connection
  with the amendment of section 203(b)(6) apply only
  to those commodities which were formerly exempt, but
  which by the amendment are made subject to economic
  regulation under part II of the Act. See Citrus Fruit
  Juice to Central and Midwest Territories, 308 I.C.C.
  552, Various Commodities Between Points and Places in
  U.S., supra, and Frozen Cooked Vegetables — Status,
  81 M.C.C. 649. The application forms prescribed for
  the rights reserved in section 7(c) of the
  Transportation Act of 1958, and the information
  bulletins issued subsequent to its effective date,
  both referred to in the recommended report, make it
  clear what commodities were thereby affected. The
  non-exempt status of crude rubber was not changed by
  the amendment.

    "We find that the schedules herein under
  investigation are unlawful because they would apply
  for transportation beyond the scope of the
  respondent's present authority and that potentially
  available to it under section 7 of the Transportation
  Act of 1958. An order will be entered requiring their
  cancellation and discontinuing the proceeding."

Thereafter plaintiff petitioned for reconsideration of the Report and Order of Division 3, and on February 1, 1961, an order was entered by the entire Commission.
That order denied plaintiff's petition for reconsideration and reinstated the order of September 6, 1960, modifying it so as to become effective on April 3, 1961.

Plaintiff filed its complaint herein on March 30, 1961, praying that the two orders, dated September 6, 1960 and February 1, 1961, respectively, be suspended, enjoined, annulled and set aside, and alleging that the Commission's Report of September 6, 1960, and the said two orders are "arbitrary, capricious, unlawful, an abuse of the Commission's discretion, are in excess of its statutory authority, and contravene the policy and purpose of the Transportation Act of 1958 for the following reasons:

    "(1) That crude rubber was in fact and law an
  exempt commodity prior to the passage of the
  Transportation Act of 1958.

    "(2) That Congress in amending Section 203(b)(6)
  of the Interstate Commerce Act by the Transportation
  Act of 1958 had as its sole purpose the return to
  economic regulation of certain commodities previously
  held to be exempt, and to establish the future status
  of such commodities as listed in Administrative
  Ruling No. 107, issued by the Bureau of Motor
  Carriers, dated March 19, 1958.

    "(3) That crude rubber, in the form and manner
  received by Plaintiff for transportation is a
  commodity made subject to economic regulation for the
  first time, as of August 12, 1958, the effective date
  of the amendment; and that as such, Plaintiff was
  specifically given the right to continue the
  transportation thereof under the `grandfather' and
  `interim' provisions of Section 7(c) of said Act of
  1958.

    "(4) That as Section 7 is interpreted by the
  Commission in its orders of September 6, 1960 and
  February 1, 1961, retroactive application is given to
  Administrative Ruling No. 107, with the resultant
  effect that Plaintiff is deprived of its statutory
  right to continue the transportation of crude rubber
  under the `grandfather' and `interim' provisions of
  said Section 7.

    "(5) That in fact and law Administrative Ruling No.
  107 is purely interpretative, was without any force
  and effect whatsoever prior to the time it was
  incorporated into the Transportation Act of 1958. * *
  *"

Administrative Ruling 107 of the Bureau of Motor Carriers, which relates to Section 203(b)(6), lists rubber as not exempt —

"Rubber, crude, in bales — Not exempt —
                         Bureau opinion.

    "  , latex, natural, liquid, from
            which water has been extracted
            and to which ammonia
            has been added — Not
            exempt — Case 15."

Dispositive of the instant case is Milk Transport, Inc. v. Interstate Commerce Commission et al., 190 F. Supp. 350, which was affirmed by the Supreme Court of the United States on October 9, 1961. (368 U.S. 5,
82 S.Ct. 15, 7 L.Ed. 2d 16.)

In the Milk Transport case (which involved citrus juices, also listed as not exempt by Ruling 107), many of the same issues were raised and considered by the court that have been raised in the instant case. That statutory three-judge court had before it an appeal from an order of the Interstate Commerce Commission dismissing applications filed by Milk Transport, Inc., under Section 7 of the Transportation Act of 1958 for authority to transport citrus juices in bulk under the "grandfather" and "interim" clauses. As in this case, the broad issue there was whether an interstate commerce carrier in bona fide transportation of a commodity prior to the 1958 Transportation Act has an absolute right, under the "grandfather" clause of that Act, to continue transporting that commodity without obtaining a Certificate of Public Convenience and Necessity from the Commission, or whether the "grandfather" rights under said Section 7 extend only to the transportation of the eleven commodities specified in Section 7(a) of the Act.

In a unanimous decision, the court sustained the dismissal by the Commission of Milk Transport's applications.

Quoting from the decision of the court, beginning at page 352 —

    "Plaintiff contends since there's no dispute that
  it was a bona fide hauler of citrus juices prior to
  1958, the only issue for this court is whether citrus
  juices were `exempt' commodities prior to the 1958
  Transportation Act amendment of Section 203(b)(6).
  If citrus juices were exempt, plaintiff claims the
  Commission must under the `grandfather' clause issue
  plaintiff a certificate without proof of public
  convenience and necessity. Plaintiff argues that even
  though the Commission had held citrus juices to be
  `non exempt' prior to 1958 in Watkins Motor Lines,
  Inc., Interpretation, 64 M.C.C. 455 (Div. 1, 1955),
  later U.S. Supreme Court and Federal District Court
  cases * * * make it clear that citrus juices would
  have been declared `exempt' had an appropriate
  controversy reached the courts.

    "The defendants contend the issue of whether citrus
  juices were `exempt' prior to 1958 is not relevant to
  this proceeding. They argue that `grandfather' rights
  were conferred only on the eleven commodities
  specifically listed in Section 7(a) as now being `non
  exempt.' Defendants argue that the wording of Section
  7(c) plus the Congressional intent as evidenced by
  committee reports indicates that only the eleven
  commodities listed were `made subject to' the
  certificate requirement of Part II of the Act, and
  consequently `grandfather' rights were given only to
  carriers of those specific commodities. Since citrus
  juices were not included in the commodities
  specifically listed in Section 7(a), they submit the
  question of whether citrus juices were `exempt' prior
  to 1958 is irrelevant.

    "We agree with the defendants that the first issue
  to be met is whether citrus juices were covered by
  the `grandfather' clause. If citrus juices were not
  included, we need not determine whether they were
  `exempt' prior to 1958.

    "It is axiomatic that Congress could include or
  exclude any commodities from the benefit of the
  `grandfather' clause. Congress could have refused to
  include any `grandfather' benefits in the 1958 Act.
  Consequently, assuming that a particular commodity
  had been specifically held `exempt' prior to 1958 and
  then declared `non exempt' by the 1958 Act, Congress
  could have excluded this particular commodity from
  `grandfather' rights while giving the benefit to
  other commodities. We must therefore look to the
  statute to determine whether citrus juices were
  accorded `grandfather' rights.

    "The essential provisions of Sections 7(c) and 7(a)
  have been previously quoted in this memorandum. The
  primary question in resolving this dispute is the
  determination of what the words `made subject to'
  mean in the context of the statute. Plaintiff
  contends the phrase means that all commodities in
  Section 7(a), including those in Ruling 107 in the
  first proviso are subjected to the requirements of
  Part II of the Act. Defendants argue that the only
  items `made subject to' Part II are the eleven
  specified commodities in the second proviso. No
  determination as to the status of several of these
  commodities had ever been made, but Ruling 107 listed
  most of the eleven items as having been found
  `exempt' by the courts or the Commission, and
  defendants contend that these items were being
  brought back under regulation by Section 7(a). They
  argue that Congress gave `grandfather' rights

  only to carriers which had been legitimately hauling
  these eleven commodities.

    We agree with the defendants' interpretation of
  Section 7(c). Congress did not have to make the items
  in Ruling 107 subject to the Act, with the exception
  of the eleven commodities which had either been
  declared `exempt' or on which no ruling had been
  made. It is perhaps true, as plaintiff argues, that
  Congress would have specifically afforded
  `grandfather' rights to citrus juices had they been
  declared `exempt' in any appropriate controversy
  which reached the courts. Remembering, however, that
  Congress could limit `grandfather' benefits as it
  chose, it matters only that Congress gave its
  approval to the Commission's characterization of
  citrus juices as `non exempt' commodities. Citrus
  juices had been held `non exempt' prior to 1958 by
  the Commission, Watkins Motor Lines, Inc.,
  Interpretation, 64 M.C.C. 455 (Div. 1, 1955), and
  Congress was providing `grandfather' rights only for
  carriers of those eleven commodities which had been
  `exempt' and were being specifically made `non
  exempt.'

    "Where the terms of a statute are not clear, we may
  look to the legislative history in an attempt to
  determine the intent of Congress. * *"

The court quoted in part from the committee and conference reports and concluded, "It is clear from this language that Congress intended only the eleven specified commodities, and not including citrus juices, to have `grandfather' benefits."

It is the view of this court that there was a rational basis for the Commission's decision that no prescriptive rights were conferred upon plaintiff, Midwest Emery Freight System, Inc., (under the provisions of Section 7 of the Transportation Act of 1958) because of its transportation of crude rubber prior to 1958, and for the Commission's conclusion that the schedules sought to be published on crude rubber are unlawful "because they would apply for transportation beyond the scope of the respondent's present authority and that potentially available to it under Section 7 of the Transportation Act of 1958."

The Commission's order of September 6, 1960, which discontinued the proceeding, and its order of February 1, 1961, which denied plaintiff's petition for reconsideration, were proper.

The relief prayed for by plaintiff is denied, the complaint is dismissed, and the temporary restraining order heretofore entered herein is dissolved.


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