Appellees are dealers in livestock and commodities in San
Antonio, Texas, who made deliveries in their own trucks to
customers in Louisiana, where they bought sugar for resale in San
Antonio. The Interstate Commerce Commission (ICC) held that the
backhaul of sugar was for-hire carriage not exempt from ICC
regulation under § 203(c) of the Interstate Commerce Act as
"transportation . . . within the scope, and in furtherance, of a
primary business enterprise. . . ." A three-judge District Court
set aside the ICC order.
Held: Section 203(c) does not prohibit all backhauling,
but codifies the primary business test, which exempts from ICC
regulation an operator whose transportation functions are only
incidental to its primary activities. Here, the evidence showed
that the backhaul furthered appellees' primary general mercantile
business, and was exempt private carriage. Pp.
377 U. S.
312-321.
219 F.
Supp. 781 affirmed.
Page 377 U. S. 312
MR. JUSTICE BRENNAN delivered the opinion of the Court.
The Interstate Commerce Act provides that it is unlawful for any
person engaged in a business other than transportation to
"transport property by motor vehicle in interstate or foreign
commerce for business purposes unless such transportation is within
the scope, and in furtherance, of a primary business enterprise
(other than transportation) of such person."
§ 203(c), 49 U.S.C. § 303(c). [
Footnote 1] Appellees deal in livestock and commodities
from a place of business in San Antonio, Texas. They make
deliveries in their own trucks to customers in Louisiana, and buy
sugar at Supreme, Louisiana, which they backhaul 525 miles for
resale to customers in San Antonio. The Interstate Commerce
Commission held that this backhaul was not exempt under § 203(c) as
"transportation . . . within the scope, and in furtherance, of a
primary
Page 377 U. S. 313
business enterprise . . ." of appellees, but was
"conducted with the purpose of profiting from the transportation
performed, and, as such, constitutes for-hire carriage for which
operating authority from this Commission is required."
81 M.C.C. 337, 347. [
Footnote
2] A three-judge court in the District Court for the Western
District of Texas set aside the ICC order.
219 F.
Supp. 781. [
Footnote 3] We
noted probable jurisdiction. 375 U.S. 901. We affirm.
Section 203(c) was designed explicitly to authorize the ICC to
eliminate transportation which, though carried on in the guise of
private carriage, was in effect for-hire carriage, and thus might
lawfully be carried on only by an authorized common or contract
carrier. Before the enactment of § 203(c), the ICC was able to
reach such abuses by interpreting § 203(a)(17), 49 U.S.C. §
303(a)(17), so as to exclude such "pseudo-private" carriage from
its definition of a "private carrier of property by motor vehicle"
as a person, not a "common" or "contract" carrier, who transports
property of which he
"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."
Many of the cases involved nonauthorized carriers in the
transportation business who resorted to transparent "buy and sell"
devices to evade ICC regulation. A typical "buy and sell"
arrangement is one under which the carrier "buys" property at a
shipping point, transports it to a delivery point and there "sells"
it to the real purchaser, the "profit" to the carrier amounting to
the price of the transportation between the
Page 377 U. S. 314
two points. [
Footnote 4]
Similar evasions through the use of spurious "buy and sell"
agreements were found in cases where property was transported in
trucks regularly used by noncarrier businesses to make pickups and
deliveries. [
Footnote 5] The
ICC was faced with the necessity of determining on the facts of
each case whether the transportation constituted private carriage
beyond the scope of ICC economic regulation, or for-hire
transportation subject to all relevant provisions of the Act. In
other words, here, as in
United States v. Drum,
368 U. S. 370,
368 U. S. 374,
in which we dealt with another aspect of the "pseudo-private"
carriage problem, the ICC has also
"had to decide whether a particular arrangement gives rise to
that 'for-hire' carriage which is subject to economic regulation in
the public interest, or whether it is, in fact, private carriage as
to which Congress determined that the [noncarrier's] interest . . .
should prevail."
In the course of discriminating between this pseudo-private
carriage and that transportation which was, in fact, in furtherance
of a noncarrier business, the ICC developed the so-called "primary
business" test. This test was first enunciated by the full
Commission in
Lenoir Chair Co., 51 M.C.C. 65,
aff'd
sub nom. Brooks Transportation Co. v. United
States, 93 F. Supp.
517,
aff'd, 340 U.S. 925. A chair manufacturer
delivered some of its products in its own trucks. Whenever
possible, it also used the vehicles to backhaul manufacturing
materials for use and processing in its own plant. The ICC
concluded, 51 M.C.C. at 76, that the delivery of goods and the
backhaul were lawful private carriage because undertaken "as a
bona fide incident to and in furtherance of
Page 377 U. S. 315
[its] primary business. . . ." The governing standard was stated
as follows,
id. at 75:
"If the facts establish that the primary business of an operator
is the supplying of transportation for compensation, then the
carrier's status is established though the operator may be the
owner at the time, of the goods transported and may be transporting
them for the purpose of sale. . . . If, on the other hand, the
primary business of an operator is found to be manufacturing or
some other noncarrier commercial enterprise, then it must be
determined whether the motor operations are in
bona fide
furtherance of the primary business, or whether they are conducted
as a related or secondary enterprise, with the purpose of profiting
from the transportation performed. In our opinion, they cannot be
both."
The ICC believed, however, that § 203(a)(17) was not
sufficiently explicit, particularly since decisions of some lower
courts after
Brooks raised doubts whether a truck operator
could be found to be an unauthorized "for-hire" carrier in the
absence of some affirmative showing that his operations brought him
within the definitions of common or contract carriage. [
Footnote 6] Consequently, the
Commission sought additional legislation. [
Footnote 7] The original ICC bill in this area would
have amended the definition of "private carrier" in § 203(a)(17) to
prohibit the "buy and sell" device employed by pseudo-private
carriers as a subterfuge to avoid regulation.
See S. 1677,
H.R. 5825, 85th Cong., 1st Sess. This was withdrawn, however, in
favor of a
Page 377 U. S. 316
more broadly phrased provision, sponsored by the Transportation
Association of America, which encompassed not only "buy and sell"
devices, but also similar subterfuges which might be employed to
engage in unauthorized for-hire transportation. [
Footnote 8] The second cause of § 203(c) is
substantially the TAA proposal.
The 1958 amendment appears on its face to codify the primary
business test as the standard for determining whether a particular
carrier is engaged in a private or for-hire operation. The
appellants argue, however, that the amendment was intended to
impose a broader limitation in the case of backhaul operations of
the kind engaged in by appellees. The United States urges in its
brief that Congress in 1958 was particularly concerned with the
diversion of traffic from regulated carriers by backhauling
operations, and that one object of the 1958 amendment was
"to make plain that the purchase and sale of goods solely to
take advantage of available backhaul capacity cannot qualify as a
'primary business enterprise (other than transportation).'"
We understand this argument to be that Congress in effect
enacted a
per se test outlawing trucking operations
limited to backhaul capacity without inquiry into whether that
operation was undertaken pursuant to a
bona fide
noncarrier business enterprise. We find no support in either the
words of the amendment or its legislative history for putting that
gloss upon the amendment. On the contrary, we are persuaded
that
Page 377 U. S. 317
Congress meant only to codify the primary business test which,
as applied by the ICC, requires an analysis of the backhaul
operation in the factual setting of each case.
The legislative history fully supports this view. The ICC
Chairman, speaking in support of the TAA amendment, expressly
stated that, in his view, its effect would be to "incorporate the
primary business test into the statute." [
Footnote 9] Similarly, the President of TAA, speaking
directly to the backhaul problem, said that
"Our proposal . . . would affect . . . the carrier who delivers
his own goods in one direction, as a legal private carrier, but
then resorts to the 'buy and sell' practice to get a return load.
[
Footnote 10]"
The Senate and House Reports, while less crystal clear,
nevertheless reveal no purpose beyond codification of the
Brooks test. Thus, the Senate Report states that the
amendment "accurately reflects the holding in the
Brooks
case." [
Footnote 11]
Although the House Report includes a discussion of the backhaul
problem in language which tracks the statement in the ICC 1953
Annual Report -- where the Commission first directed the attention
of Congress to the problem of "buy and sell" arrangements [
Footnote 12] -- the House Report
concludes:
"There is no intention
Page 377 U. S. 318
on the part of this Committee in any way to jeopardize or
interfere with
bona fide private carriage, as recognized
in the
Brooks case. [
Footnote 13]"
Moreover, the managers of the bills in both Senate and House
gave assurances that the object of the amendment was to incorporate
the primary business test into positive law. [
Footnote 14] No application of the primary
business test by the ICC or the courts gave conclusive effect to
backhauling. The critical determination made in each case was
between spurious "buy and sell" arrangements, whether or not as
part of a backhaul, and a true wholesaling operation utilizing the
operator's own trucks. Backhauls were treated as merely one aspect
of the "buy and sell" problem, since the presence of backhaul
capacity presents a special temptation to indulge in pseudo-private
carriage.
We therefore conclude that § 203(c) merely codifies the primary
business test, and embodies no outright prohibition of backhauling
practices. The statutory scheme recognizes that mere availability
and use of backhaul capacity may, in particular cases, be
completely consistent with the
bona fide conduct of a
noncarrier business. Thus, the question in this case is a narrow
one: whether, applying the standards developed under the primary
business test, appellees' backhauling of sugar was within the
scope, and in furtherance, of a primary noncarrier business.
In developing and applying the primary business standard, the
ICC has elaborated criteria characteristic of the spurious "buy and
sell" device. Among these are
Page 377 U. S. 319
the large investment of assets or payroll in transportation
operations; [
Footnote 15]
negotiating the sale of goods transported in advance of dispatching
a truck to pick them up; [
Footnote 16] direct delivery of the transported goods
from the truck to the ultimate buyer, rather than from warehoused
stocks; [
Footnote 17]
solicitation of the order by the supplier, rather than the truck
owner; [
Footnote 18] and
inclusion in the sales price of an amount to cover transportation
costs. [
Footnote 19]
We are not persuaded from our examination of the record that
there is sufficient evidence to support the ICC's conclusion that
the appellees' sugar operation was for-hire transportation, and not
transportation within the scope, and in furtherance, of appellees'
noncarrier business enterprise. The ICC found that appellees
"have long been buying and selling certain commodities. and. in
connection therewith. transporting them to purchasers, in
bona
fide furtherance of their primary business, as a dealer in
those commodities."
81 M.C.C. at 345. The ICC found further that
"The more usual arrangement under which [appellees] operate . .
. appears to be one in which the [appellees] have no preexisting
sugar order, but buy with the intention of selling later either en
route or after the transportation is accomplished. This procedure
is ordinarily coordinated with a backhaul, and the
Page 377 U. S. 320
purpose of their sugar dealings is the generation of sugar
shipments which they can transport as return lading for their
trucks which are moving in the opposite direction."
81 M.C.C. at 346. But these findings, on this record, are
consistent with an operation "within the scope, and in furtherance,
of a primary business enterprise." Appellees began their business
in 1934 as dealers in livestock. They gradually added a feed mill
and the buying and selling of corn, oats, wheat, bran, molasses,
salt and fertilizer. They added sugar in 1954. Moreover, in
addition to the absence of the element -- usually found in spurious
"buy and sell" arrangements -- of obtaining orders for a commodity
(in this case, sugar) before purchasing it, other indicia are
absent. Appellees' assets are not in large part composed of
transportation facilities, nor is transportation a major item of
expense; appellees bear the full risk of damage in transit and,
since they sell at market price, also of loss in value due to price
changes; they buy the sugar on credit with a discount for payment
in 10 days, and sell on the same terms; their sugar accounts
receivable at the date of hearing exceeded $10,000, and amounted to
$20,000 or $30,000 during the previous year. It is true that they
warehoused only a small stock of sugar, and that, generally, the
trucks delivered the sugar directly to buyers upon, or within a day
or two after, arrival in San Antonio. Appellees offered an entirely
reasonable explanation for this, however: sugar is a perishable
commodity, the preservation of which apparently requires air
conditioning facilities with which their warehouse is not equipped;
the ICC offered nothing to the contrary. And the ICC offered no
evidence that other sugar dealers in San Antonio conducted their
businesses differently from appellees. It is also true that, since
the motor carrier rate for transporting sugar from Supreme is 69
cents, and the rail rate $1.09 per hundred pounds, appellees could
not have conducted the sugar
Page 377 U. S. 321
business but for the availability of the backhaul capacity of
their trucks. This shows no more than that appellees were able to
make efficient use of their equipment; on these facts, it does not
prove, as the ICC found, that the
"transportation . . . is, with respect to their primary business
of buying and selling livestock and certain other commodities, a
related or secondary enterprise conducted with the purpose of
profiting from the transportation performed. . . ."
81 M.C.C. at 347. We agree with the District Court that, rather,
"The record clearly indicates that [appellees] are in a general
mercantile business buying and selling many items, including
sugar." 219 F. Supp. at 782. As such, on the facts shown, their
purchase of sugar at Supreme to provide a backhaul in connection
with outbound movements of livestock and other commodities from San
Antonio is within the scope, and in furtherance, of their primary
general mercantile business enterprise.
Affirmed.
* Together with No. 421,
United States et al. v. Shannon, et
al., doing business as E. & R. Shannon, also on appeal
from the same court.
[
Footnote 1]
Section 203(c), as added in 1957, 71 Stat. 411, provided in
pertinent part:
". . . no person shall engage in any for-hire transportation
business by motor vehicle, in interstate or foreign commerce . . .
unless there is in force with respect to such person a certificate
or a permit issued by the Commission authorizing such
transportation."
In 1958, 72 Stat. 574, the section was amended to add the
provision here involved providing,
"nor shall any person engaged in any other business enterprise
transport property by motor vehicle in interstate or foreign
commerce for business purposes unless such transportation is within
the scope, and in furtherance, of a primary business enterprise
(other than transportation) of such person."
[
Footnote 2]
The 1957 version of § 203(c) was enacted after the examiner
submitted his report, but, as amended in 1958, was part of the
Interstate Commerce Act when Division 1 of the Commission served
its report.
[
Footnote 3]
Appellees' action was brought pursuant to 28 U.S.C. §§ 1336,
1398. The statutory three-judge court was convened under 28 U.S.C.
§ 2325.
[
Footnote 4]
See, e.g., Lyle H. Carpenter, 2 M C.C. 85;
B. E.
Farnsworth, 4 M.C.C. 164;
Thomas Stanley Redding, 7
M.C.C. 608;
I.C.C. v. Tank Car Oil Corp., 151 F.2d 834
(C.A.5th Cir.).
[
Footnote 5]
See, e.g., T. J. McBroom, 1 M.C.C. 425;
Triangle
Motor Co., 2 M.C.C. 485.
Cf. Congoleum-Nairn, Inc., 2
M.C.C. 237.
[
Footnote 6]
See, e.g., ICC v. Woodall Food Prods. Co., 207 F.2d 517
(C.A.5th Cir.);
Taylor v. ICC, 209 F.2d 353 (C.A.9th
Cir.).
See the discussion of
Taylor in the
Commission's Sixty-eighth Annual Report (1954), p. 82.
[
Footnote 7]
The Commission pressed for amendments in its Annual Reports from
1953 through 1957: 1953 Report, p. 55; 1954 Report, p. 5; 1955
Report, p. 99; 1956 Report, p. 2; 1957 Report, pp. 137-138.
[
Footnote 8]
In amending § 203(c), rather than the definitional sections, the
TAA proposal also met the protests of private carriers who opposed
ICC's proposal on the ground that it might be construed to throw
doubt on the
Brooks test, and unduly restrict the scope of
private carriage.
See Remarks of Frazor T. Edmondson,
Private Truck Council of America, Hearings before a Subcommittee of
the Senate Committee on Interstate and Foreign Commerce on S. 1384,
85th Cong., 1st Sess., 163 (1957); Remarks of R. J. Van Liew,
Private Carrier Conference, American Trucking Associations,
id. at 275.
[
Footnote 9]
See Remarks of Chairman Clarke, Hearings before a
Subcommittee of the Senate Committee on Interstate and Foreign
Commerce on S. 1384, 85th Cong., 1st Sess., 13, 19 (1957).
[
Footnote 10]
See Statement of Mr. Baker, President, Transportation
Association of America,
id. at 244, 246.
[
Footnote 11]
S.Rep. No. 1647, 85th Cong., 2d Sess., 5 (1958).
[
Footnote 12]
In its 1953 Annual Report, the Commission said (p. 55):
"Merchandising by motor truck, whether actual or pretended, over
long distances is increasing to such an extent that it is becoming
a major factor in the transportation of freight between distant
points. Manufacturers and mercantile establishments, which deliver
in their own trucks articles which they manufacture or sell, are
increasingly purchasing merchandise at or near their point of
delivery and transporting such articles to their own terminal for
sale to others. Such transportation is performed for the purpose of
receiving compensation for the otherwise empty return of their
trucks. Sometimes the purchase and sale is a
bona fide
merchandising venture. In other cases, arrangements are made with
the consignee of such merchandise for the 'buy and sell'
arrangement in order that the consignee may receive transportation
at a reduced cost."
Compare H.R.Rep. No. 1922, 85th Cong., 2d Sess., 18
(1958).
[
Footnote 13]
See id. at 19.
[
Footnote 14]
See 104 Cong.Rec. 12535-12536 (1958) (House); 104
Cong.Rec. 10818 (1958) (Senate).
[
Footnote 15]
See Virgil P. Stutzman, 81 M.C.C. 223, 226;
Joseph
V. Hofer, 84 M.C.C. 527, 540.
[
Footnote 16]
See Lyle H. Carpenter, 2 M.C.C. 85, 86;
Thomas
Stanley Redding, 7 M.C.C. 608, 609;
Jay Cee Transport
Co., 68 M.C.C. 758, 759;
Church Point Wholesale Beverage
Co., 82 M.C.C. 457, 459,
aff'd sub nom. Church Point
Wholesale Beverage Co. v. United States, 200 F.
Supp. 508 (D.C.W.D.La.).
[
Footnote 17]
See L. A. Woitishek, 42 M.C.C. 193;
Jay Cee
Transport Co., supra; William Stewart, 89 M.C.C. 281, 286.
[
Footnote 18]
See Subler Transfer, Inc., 79 M.C.C. 561, 565;
Riggs Dairy Express, Inc., 78 M.C.C. 574, 575-576;
Donald L. Wilson, 82 M.C.C. 651, 661.
[
Footnote 19]
See Riggs Dairy Express, Inc., supra.
MR. JUSTICE GOLDBERG, with whom MR. JUSTICE HARLAN, MR. JUSTICE
STEWART and MR. JUSTICE WHITE join, dissenting.
I agree with the Court "that § 203(c) merely codifies the
primary business test,"
ante at
377 U. S. 318,
enunciated by the Commission in the
Brooks case.* I also
agree that "the primary business test . . ., as applied by the ICC,
requires an analysis of the backhaul operation in the factual
setting of each case." Ante at 317.
This is all that we need and should decide. The Court errs, in
my view, in deciding the purely factual question of
"whether, applying the standards developed under the primary
business test, appellees' backhauling of sugar
Page 377 U. S. 322
was within the scope, and in furtherance, of a primary,
noncarrier business."
Ante at
377 U. S.
318.
The primary responsibility for granting or denying enforcement
of Commission orders is in the District Courts and not in this
Court. 28 U.S.C. § 1336;
cf. Labor Board v. Pittsburgh
Steamship Co., 340 U. S. 498,
340 U. S. 502.
The District Court in enjoining enforcement of the Commission's
order in this case did not refer explicitly or implicitly to §
203(c) of the Act. It did not cite any cases enunciating the
"primary business test" as a basis for its decision. Moreover, the
District Court did not discuss the facts upon which the Commission
based its determination that appellees' backhaul transportation of
sugar was not within the scope and in furtherance of a primary
business enterprise other than transportation.
See 219 F.
Supp. 781;
compare United States v. Drum, 368 U.
S. 370,
368 U. S.
385.
Having determined, as the Court does, that § 203(c) codifies the
primary business test, I would remand the case to the District
Court for that court to decide the issue of unsubstantiality of the
evidence under the proper test. Under this disposition of the case,
the District Court would have to be mindful that this is the kind
of case which "belongs to the usual administrative routine" of the
agency,
Gray v. Powell, 314 U. S. 402,
314 U. S. 411,
and that the Commission's application of the statutory test to the
specific facts of this case "is to be accepted if it has
warrant in the record' and a reasonable basis in law."
Labor Board v. Hearst Publications, Inc., 322 U.
S. 111, 322 U. S. 131;
United States v. Drum, supra, at 368 U. S.
386.
*
Lenoir Chair Co., 51 M.C.C. 65,
aff'd, sub nom.
Brooks Transportation Co., Inc., v. United
States, 93 F. Supp.
517,
aff'd, 340 U.S. 925.
MR. JUSTICE WHITE, dissenting.
I join the dissenting opinion of my Brother GOLDBERG. I add that
the Court has failed to demonstrate how appellees' sugar business
qualifies as a "primary" business when it clears only 35 cents per
100 pounds of sugar over
Page 377 U. S. 323
and above the cost of the sugar at Supreme, Louisiana. This is
less than the normal costs of transportation from Supreme to San
Antonio. No one without backhaul capacity could make a viable
business out of selling Supreme sugar in the San Antonio market,
and appellees admit that they are "backhauling to make a profit." I
therefore cannot view the sugar business as a
bona fide
primary business to which a private transportation operation is
only an incident. It would be more appropriate to say that this
"catch as catch can" sugar business is wholly incidental to an
otherwise empty backhaul.