Freight Forwarders Institute v. United States

263 F. Supp. 460, 1967 U.S. Dist. LEXIS 9254
CourtDistrict Court, S.D. New York
DecidedJanuary 26, 1967
Docket65 Civ. 3939
StatusPublished
Cited by13 cases

This text of 263 F. Supp. 460 (Freight Forwarders Institute v. United States) is published on Counsel Stack Legal Research, covering District Court, S.D. New York primary law. Counsel Stack provides free access to over 12 million legal documents including statutes, case law, regulations, and constitutions.

Bluebook
Freight Forwarders Institute v. United States, 263 F. Supp. 460, 1967 U.S. Dist. LEXIS 9254 (S.D.N.Y. 1967).

Opinion

FEINBERG, Circuit Judge:

This is an action to review two orders of the Interstate Commerce Commission which allowed Piggy-Back Shippers Association of Florida (“Piggy-Back”) to continue operation. 1 Therefore, once again 2 the cumbersome, inefficient machinery of a statutory three-judge court must be invoked to review the Commission’s action. 3 For reasons set forth below, we sustain the Commission insofar as it ruled, but remand for reconsideration of the issue it failed to decide.

Piggy-Back is one of a growing number of unlicensed shipper associations 4 whose activities pose a threat to Commission-regulated freight forwarders such as the five plaintiffs and two intervening plaintiffs in this case. 5 Freight

*463 forwarders offer a transportation service to the public for profit; they specialize in the handling of less than carload or truckload freight and supply fast transportation including pickup and delivery. Shipper associations are also organized to obtain the benefit of volume freight rates; they are composed of groups of independent shippers of freight who have banded together for this purpose. However, they do not hold themselves out to the public but perform services on a nonprofit basis only for their dues-paying members. 6 Thus, these business entities are similar but nonetheless distinct, and the difference between them has been recognized by Congress. A freight forwarder is subject to the provisions of Part IV of the Interstate Commerce Act (the “Act”), 49 U.S.C. §§ 1001-1022, and is defined in relevant part in 49 U.S.C. § 1002(a) (5), as

any person which * * * holds itself out to the general public as a common carrier to transport or provide transportation of property * * * for compensation, in interstate commerce, and which, in the ordinary and usual course of its undertaking, (A) assembles and consolidates * * * shipments of such property, and performs * * * break-bulk and distributing operations with respect to such consolidated shipments, and (B) assumes responsibility for the transportation of such property from point of receipt to point of destination, and (C) utilizes, for the whole or any part of the transportation of such shipments, the services of a carrier or carriers subject to chapters 1, 8, or 12 of this title [i. e., rail, pipe line, motor or water carriers].

Freight forwarders are required to obtain operating permits from the Commission and are subject to regulation in various other ways. On the other hand, the Act also takes note of shipper associations; thus, 49 U.S.C. § 1002(c) specifically precludes from regulation

the operations of * * * a group or association of shippers, in consolidating or distributing freight for * * members thereof, on a nonprofit basis, for the purpose of securing the benefits of carload, truckload, or other volume rates * * *.

Although the Act recognizes and defines both types of organizations, whether a particular entity is one or the other — the issue presented here — may be a troublesome question. 7 This case began in October 1963, when the Commission on its own motion 8 commenced an investigation of Piggy-Back’s activities to determine, among other things, whether it had been operating as a freight forwarder without a permit. There ensued a hearing before an examiner, a decision by Division 1 of the Commission, and denial of reconsideration by the full Commission. The Commission discontinued the proceedings against Piggy-Back, finding that although it had operated unlawfully in the past, Piggy-Back had sufficiently reformed to become a bona fide shipper association. Plaintiffs argue here that (1) the Commission’s conclusion is not supported by substantial evidence and should be set aside; and (2) the Commission committed legal error in refusing to rule upon plaintiffs’ claim that Piggy-Back is improperly participating in joint loading operations.

I

Our discussion of plaintiffs’ first point requires a close examination of the facts. Piggy-Back was organized in 1962 as an *464 unincorporated association under Florida law. Theodore Helin, the moving party in its formation, conceived the idea of forming a shipper association to combine highway trailers on railroad flatcars, so-called “piggyback” service. Because of cost considerations, this service is used only when there are two trailers to ship; moreover, the rail tariffs provide that there must be a mixture of commodities. 9 Therefore, as a practical matter, many shippers, who have only one trailerload or one commodity to ship, could not use piggyback service unless they banded together. Helin contacted the initial group of shipper members, drew up the association’s articles and by-laws, called the organizational meeting, actually appointed the “elected” members of the board of directors, and obtained a contract as general manager with compensation at the rate of 10 cents per hundred pounds of freight handled. Thereafter, Helin exercised a free hand, unencumbered by effective control by the board of directors, whose principal decisions at meetings amounted to approval of new membership applications secured by Helin. By August 1963, Helin had run the association into about $20,000 debt. All of these findings by the examiner and Division 1 are undisputed, as is the legal conclusion reached from these facts — that up to this time, because Helin and not the members exercised full control over operations, Piggy-Back was not a bona fide shipper association entitled to non-regulated status. 10

At this point, the positions of the parties diverge. The following additional findings are under particular attack: Beginning in August 1963, the theretofore passive directors became alarmed by the financial condition into which Helin had led their association and took an active interest in its management; a new general manager was appointed, this time on a straight salary basis; the new manager was not permitted to sign checks independently; he was required to submit weekly financial reports to the board and reports to the members as well; indeed, the board exercised complete supervision and control over him; efforts were being made, and had been modestly successful, to pay off the association’s debts; and no freight other than that of shipper members was being handled by the association. Thus, the examiner and Division 1 found generally that PiggyBack was no longer “a ‘paper’ creature” of the general manager’s own conception or a cloak under which an independent entrepreneur was acting. 11

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Bluebook (online)
263 F. Supp. 460, 1967 U.S. Dist. LEXIS 9254, Counsel Stack Legal Research, https://law.counselstack.com/opinion/freight-forwarders-institute-v-united-states-nysd-1967.