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Allied Delivery System, Inc. v. Commerce Com.

OPINION FILED FEBRUARY 20, 1981.

ALLIED DELIVERY SYSTEM, INC., APPELLEE,

v.

ILLINOIS COMMERCE COMMISSION, APPELLANT.



APPEAL from the Circuit Court of Cook County; the Hon. ARTHUR L. DUNNE, Judge, presiding. MR. JUSTICE LORENZ DELIVERED THE OPINION OF THE COURT:

Plaintiff, Allied Delivery System, Inc. (Allied), filed an appeal in the circuit court under section 18-900 of the Illinois Motor Carrier of Property Law (Ill. Rev. Stat. 1977, ch. 95 1/2, par. 18-900 (adopting Ill. Rev. Stat. 1977, ch. 111 2/3, par. 72)), seeking a reversal of the Illinois Commerce Commission's (the Commission) denial of Allied's application for a contract carrier permit to American Delivery System, Inc. (A.D.S.), a freight forwarder. The Commission had originally granted this application, but upon reconsideration denied it. The circuit court reversed the decision of the Commission as "against the manifest weight of the evidence" and remanded the matter with directions to reinstate its original order granting plaintiff's application.

On appeal to this court, the Commission contends that its findings in denying the application of Allied were supported by sufficient evidence. In addition, the Commission contends that the circuit court did not have the power to remand the matter with directions to the Commission to enter a specific order. In its final order denying Allied's application, the Commission concluded that the definitional requirement of section 18-100(10) of the Illinois Motor Carrier of Property Law (Ill. Rev. Stat. 1977, ch. 95 1/2, par. 18-100(10)) that a binding bilateral contract exist between the contract carrier and the shipper could not be satisfied here because there would be no mutuality of obligation where the shipper is a freight forwarder. Additionally, the Commission held that the public interest, which was commanded by the Legislature to promote (Ill. Rev. Stat. 1972, ch. 95 1/2, par. 18-302), would not be served by granting a contract carrier permit to Allied. This conclusion rests on the findings of the Commission that: (1) the protection of the public from preferences and discrimination in rates charged by motor carriers of property (Ill. Rev. Stat. 1977, ch. 95 1/2, par. 18-313) would be eviscerated; (2) the public would be exposed to financial loss because the proposed service would not be required to carry insurance for the cargo shipped intrastate; and (3) the common ownership of Allied and the prospective freight forwarder, A.D.S., violates the public interest. These findings form the basis of this appeal.

Before proceeding to a presentation of the facts, we believe a brief discussion of the terminology employed in this area of law is essential to a thorough understanding of this case.

The Illinois legislature placed in the Commission the duty to supervise and regulate the carriage of property by motor vehicle within Illinois. (Ill. Rev. Stat. 1977, ch. 95 1/2, par. 18-201.) Under the Illinois Motor Carrier of Property Law, there are two types of motor carriers of property: common carriers and contract carriers. (Ill. Rev. Stat. 1977, ch. 95 1/2, pars. 18-100(9), (10).) Operation of a motor vehicle in the intrastate transportation of property for hire as either a common carrier or a contract carrier requires a permit of authority issued by the Commission. (Ill. Rev. Stat. 1977, ch. 95 1/2, pars. 18-301, 18-302.) In essence, a common carrier serves the needs of the general public in the transportation of property in this State. (Ill. Rev. Stat. 1977, ch. 95 1/2, par. 18-100(9).) Common carriers are prohibited from unjustly discriminating or establishing undue or unreasonable preferences "to any particular person, port, gateway, locality, or description of traffic." (Ill. Rev. Stat. 1977, ch. 95 1/2, par. 18-313.) The rates charged by a common carrier for its services must be just and reasonable (Ill. Rev. Stat. 1977, ch. 95 1/2, par. 18-310), and a schedule of those rates must be filed with the Commission. (Ill. Rev. Stat. 1977, ch. 95 1/2, par. 18-501). Finally, a common carrier is required to carry insurance to protect its shippers from loss or damage to the cargo. (Ill. Rev. Stat. 1977, ch. 95 1/2, par. 18-701.) In comparison, a contract carrier is a motor carrier of property for hire that serves the needs of individual shippers "under individual written bilateral contracts." (Ill. Rev. Stat. 1977, ch. 95 1/2, par. 18-100(10).) Thus, a contract carrier serving a particular type of shipper is not required to serve the general public. Contract carriers are not bound by the prohibition against discrimination and preferences in rates and are not required to carry insurance on cargo shipped by it. In short, the relationship between a contract carrier and its shippers is determined by the individual contracts between the two.

Freight forwarders fill a different function than do common carriers and contract carriers. A freight forwarder generally serves to collect individual shipments from the public, consolidate these shipments, arrange for their shipment by motor carriers, break down the shipments at destination, and arrange for shipment distribution to the proper consignees. The Interstate Commerce Commission regulates the operation of freight forwarders in interstate commerce. (49 U.S.C. § 1003 (1976).) In intrastate commerce inside Illinois, however, a freight forwarder is not regulated by the Commission. We also note that a freight forwarder conducting operations in interstate commerce is required by the Interstate Commerce Commission to carry cargo insurance. 49 C.F.R. § 1084.

A hearing was held on Allied's application, and the following evidence was adduced. At the time of Allied's application to the Commission, A.D.S., acting under a permit issued by the Interstate Commerce Commission, was a freight forwarder of general commodities in interstate commerce through the use of common carriers. A.D.S. was then serving interstate shippers in Illinois by virtue of this permit. According to its president, Alvin Wasserman, A.D.S. specialized in the shipment of small packages on either an interstate or intrastate basis. In its operations, A.D.S. is responsible for the transportation of the property from the time it is tendered to it at the point of origin until it is tendered to the consignee at the point of destination. It also selects the motor carrier to be used in the transportation of the property. Wasserman also stated that he and his family have the controlling stock in A.D.S., and that he is sole shareholder of Allied.

Under a permit issued by the Interstate Commerce Commission, Allied acts as a common carrier for A.D.S. on an interstate basis in Illinois. George Taylor, general manager of Allied, stated that Allied seeks to become a specialist in the transportation and delivery of small shipments. To that end, Allied uses 16-foot vans which are geared to small shipments and operate efficiently in congested metropolitan areas. A financial statement offered by Allied reveals that as of July 30, 1976, it had total assets of $929,810.35 and total liabilities of $47,101.19.

A.D.S., in the view of Alvin Wasserman, hopes to become a competitor to United Parcel Service in the transportation of small shipments throughout the nation. Based on its experience, A.D.S. believes that employment of regular route common carriers will not assist it in achieving this goal. In addition, Wasserman believes that the use of the same carrier on both an intrastate and interstate basis will allow it to achieve the necessary economic efficiency to compete on a national level. A.D.S. has contacted an extremely large number of carriers, who hold both intrastate and interstate authority, to serve as their carrier, but has not met with success. In addition, Wasserman recounted the long history of problems A.D.S. has encountered with use of other carriers in Illinois. These problems apparently arose out of the inability of these carriers to handle the large volume and geographical reach of the business tendered them by A.D.S. Consequently, A.D.S. seeks the service of a carrier with the authority and ability to serve all of Illinois. Wasserman added that it would be efficient and economical if this carrier also served A.D.S. on an interstate basis. He stated: "In this way we can establish some consistency of policy and operational procedure no matter what point we are serving. It would facilitate the tracing of shipments, assuring that the carrier is stable and other matters of this nature, including offering consistent, expeditious transit times." A.D.S. is seeking the service of a contract carrier because under this relationship it can be assured that the contract carrier's vehicles are continuously available. Allied alone will fill this need, and, if granted this permit, the public will benefit by establishment of an efficient and cheap transportation system of small packages throughout Illinois and the country.

Evidence was also offered as to the volume of interstate business A.D.S. presently has in Illinois and the volume of intrastate business expected if granted this permit. Fifty-two Illinois shippers, who have previously tendered Allied interstate business, have indicated that they would also tender A.D.S. intrastate business within Illinois. Moreover, numerous shippers have contacted A.D.S. seeking its service on an intrastate basis within Illinois. In Wasserman's opinion, the need for this proposed intrastate service is present.

On April 27, 1977, the Commission entered an order granting Allied a permit to operate as a contract carrier for A.D.S. under section 18-302 of the Illinois Motor Carrier of Property Law (Ill. Rev. Stat. 1977, ch. 95 1/2, par. 18-302). The order specifically stated that Allied was "fit, willing and able to provide the proposed service." A permit, however, was never issued to Allied because on June 15, 1977, the Commission reopened this matter under section 18-900 of the Illinois Motor Carrier of Property Law (Ill. Rev. Stat. 1977, ch. 95 1/2, par. 18-900, adopting Ill. Rev. Stat. 1977, ch. 111 2/3, par. 71). A second hearing was held on July 15, 1977, and new evidence was offered by expert witnesses presented by Allied. According to these witnesses, a freight forwarder is required to carry cargo insurance for interstate shipments, but not for intrastate shipments. Where an intrastate shipment through a freight forwarder is involved, the regulated motor carrier is the only source for insurance coverage of the cargo. Also, a consignor or consignee of a shipment would be a third-party beneficiary of any contract between the motor carrier and the freight forwarder regarding insurance coverage of the property.

After receiving this evidence, the Commission on January 25, 1978, entered an order vacating its previous order of April 27, 1977, granting the permit to Allied. The order also denied Allied's application for a contract carrier permit. The Commission stated that a contract carrier and a freight forwarder could not enter a bilateral contract as required by section 18-100(10) of the Illinois Motor Carrier of Property Law (Ill. Rev. Stat. 1977, ch. 95 1/2, par. 18-100(10)), and, therefore, granting of a contract carrier permit to Allied would be neither proper nor consistent with public policy. In explaining this conclusion, the Commission stated:

"Under a grant of the sought authority, A.D.S. would be required to enter into a bilateral contract with Applicant [Allied] obligating itself to tender Applicant a specified amount of freight for transportation. However, A.D.S. cannot determine what freight it will have control over for routing with the Applicant. Only if shippers choose to use the service A.D.S. offers will it have freight to tender to Applicant. Since it has no control over the amount of freight shippers will tender it for forwarding service it is not a proper contracting party under the law. Therefore the proposed service is not in the public interest and the application should be denied."

The above reason formed the basis of this order denying Allied's application.

Allied filed on March 7, 1978, a petition for rehearing with the Commission. The petition was granted, and on July 26, 1978, the Commission entered its order on rehearing, which again denied Allied's application. In this order, the Commission confirmed its previous finding that Allied and A.D.S. could not enter into a binding bilateral agreement, and, therefore, the granting of a permit would be improper under section 18-100(10) of the Illinois Motor Carrier of Property Law (Ill. Rev. Stat. 1977, ch. 95 1/2, par. 18-100(10)) and detrimental to the Commission's duty to foster sound economic conditions under section 18-101 of the Illinois Motor Carrier of Property Law (Ill. Rev. Stat. 1977, ch. 95 1/2, par. 18-101). Moreover, the Commission found, as a matter of policy, that the public interest, which is the standard set forth in section 18-302(10) of ...


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