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SOUTHERN MOTOR CARRIERS RATE CONF. v. UNITED STATE

July 19, 1976

SOUTHERN MOTOR CARRIERS RATE CONFERENCE INC., CENTRAL & SOUTHERN MOTOR FREIGHT TARIFF ASS'N, INC., Intervening Plaintiffs,
v.
UNITED STATES OF AMERICA and INTERSTATE COMMERCE COMMISSION, Defendants. DRUG AND TOILET PREPARATION TRAFFIC CONFERENCE, ET AL., Plaintiffs, v. UNITED STATES OF AMERICA and INTERSTATE COMMERCE COMMISSION, Defendants, and MIDDLE ATLANTIC CONFERENCE, ET AL., Intervening Defendants



The opinion of the court was delivered by: LEVENTHAL

This is one of the last gasps of three-judge district court review over orders of the Interstate Commerce Commission (ICC or Commission). *fn1" It presents a consolidated suit to set aside the ICC report and order in Docket No. 34661 (Sub-No. 26), et al., Segregation of Freight, New England and Middle Atlantic States, 340 I.C.C. 306, decided November 24, 1971 (1971 Order). By that report and order, the Commission defined the obligation of motor common carriers of general commodities to perform "normal pickup and delivery service" as encompassing "any and all loading and unloading functions," including the sorting and segregating of freight. *fn2"

 Civil Action No. 74-1133, filed on July 29, 1974, was initiated by carrier groups troubled by the Commission's definition of "normal pickup and delivery service." Most of the carrier plaintiffs dropped out of the case after the filing of the Government's brief, which offered an interpretation of the 1971 Order satisfying their concerns. However, two carrier groups remain as intervening plaintiffs, *fn3" and their contention, injected into Civil Action No. 74-1133, will be discussed in part III. While the interpretation in the Government's brief satisfied most of the carrier plaintiffs, it precipitated Civil Action No. 75-0131, filed on January 29, 1975, a challenge by shipper and consignee groups, *fn4" which will be discussed in part II. By an order dated October 15, 1975, issued in explanation of a denial of a petition for clarification, the ICC formalized the interpretation in dispute here.

 Defendants are the ICC and the United States of America, as statutory defendant under 28 U.S.C. § 2322. The carrier groups, both those formerly plaintiffs in No. 74-1133 and those continuing the prosecution of that suit, have intervened as defendants in the shipper-initiated action.

 On January 8, 1976, the court ordered that the proceedings in the two actions be consolidated. Briefing schedule was set on February 13, 1976. Argument on the merits was heard on May 21, 1976.

 I. BACKGROUND AND PRIOR PROCEEDINGS

 From the inception of motor carrier regulation, pickup and delivery service has been regarded as one of the normal functions of a motor carrier. *fn5" The regulatory problem for the Commission, however, has been to define which services are included within the concept of normal pickup and delivery service. Although carrier practices have been far from uniform, a clear differentiation has emerged between motor carriers of general commodities, who generally hold themselves out to perform loading and unloading services, and motor carriers of specialized commodities, many of whom do not perform loading and unloading functions. *fn6" However, among general commodity carriers who profess to load and unload, some perform services in regard to sorting and segregating of freight, because they find such practice helpful as a means of verifying the contents of shipments delivered, while others do not.

 The prevalence of differing sorting and segregating practices among motor carriers, and the uncertainty concerning the extent of a carrier's duty to render such services, have led the Commission into varying positions. The Commission's view in the early days of motor carrier regulation was that sorting and segregating was a service not normally associated with motor freight transportation, and that provision for such service, and charges therefor, must be specifically stated in the carrier's tariff. *fn7" In 1965 the ICC conducted an investigation to determine if certain interstate motor common carriers of general commodities had been performing sorting and segregating services, under the line-haul rates without separate charge, in a manner so as to discriminate among shippers and consignees in violation of sections 217(b) and 222(c) of the Interstate Commerce Act (Act), 49 U.S.C. §§ 317(b), 322(c). In Associated Wholesale Grocers, Inc., et al. -- Investigation of Practices, 325 I.C.C. 631, 649, aff'd, 272 F. Supp. 274 (D.Kan. 1967), the Commission held (1) that concessions and privileges had been solicited, granted, extended and received in the form of "extra services" in violation of sections 217(b) and 222(c); and (2) "[that] a tariff must contain specific authority for extra services and the charges therefor, unless it clearly indicates that the line-haul rates in the tariff include the services."

 In order to effect compliance with the decision in Associated, the carriers published and filed various rules under which they held themselves out to perform the sorting and segregating of freight under various terms, conditions and charges. With some variations, the proposed rules provided that carriers would perform sorting and segregating services under the line-haul rates, without additional charge, only where the shipments were presorted by the shipper. This mode of delivery would amount to unloading the merchandise in a sequence reverse to that of the tender, a process known as "reverse sequential unloading." *fn8"

 The ICC instituted twenty-four formal investigations of the various rules under section 216(g) of the Act, 49 U.S.C. § 316(g). *fn9" These were consolidated in part, *fn10" and three separate hearings *fn11" were held before three different hearing examiners (now administrative law judges). Applying the rationale of the Associated case, the examiners rendered initial decisions finding that the carriers had not borne their burden of proving that the rules were just, reasonable and otherwise lawful, and ordering the rules cancelled. The Commission's Division 2 affirmed. 335 I.C.C. 239 (1969). It found the proposed tariff rules were unclear and ambiguous, or otherwise permitted uncertainty and discrimination in their application, and that the proponents failed to present sufficient evidence to enable the Division to determine whether the proposed rules were cost-justified. *fn12"

 Having designated the matter as one involving an issue of general transportation importance, the Commission allowed the submission of further pleadings. On November 24, 1971, the Commission, en banc, three Commissioners concurring in part, issued the report and order under challenge here. 340 I.C.C. 306. It affirmed the Division's disapproval of the proposed rules, but on different grounds. It found that because of the increasing prevalence of carrier sorting and segregating of freight in accordance with "reverse sequential unloading," and the fact that such services had been taken into account by many shippers and carriers in negotiating commodity rates, there existed a "real economic need" for the performance of such services as an incident to normal delivery service. In response to this economic need, and in order to eliminate the potential for discriminatory practices uncovered in the Associated proceeding, the Commission determined that "a change in the existing regulatory posture concerning motor carrier pickup and delivery practices," id. at 323, was needed. Its new regulatory posture was to permit the rendition of sorting and segregating services under the line-haul rates without further tariff authorization or specific charge. The Commission thus rejected the approach of the Associated case, which characterized sorting and segregating as an "extra service" requiring specific notice and charges in tariffs.

 The Commission embodied its new policy within what it termed a "new" definition of "normal pickup and delivery service," one fashioned with such breadth as to disregard the restrictions of existing carrier practices and the proposed rules. *fn13"

 
We conclude that normal pickup and delivery service encompasses any and all loading and unloading functions, including the performance of all types of related extra services without regard to the nature or type of freight involved or to which particular carrier handles same in line-haul movement, which one carrier employee (usually the driver) can perform in accordance with directions from the consignor or consignee, as the case may be, during the allotted free [loading or unloading] time. *fn14"
 
* * *
 
The preceding definition of what constitutes normal pickup and delivery service governs those situations in which the carriers are obligated by a tariff-imposed duty to load and unload. In such situations we conclude that, except where otherwise provided in a tariff, shippers and receivers of freight in truckload lots shall have free use of a carrier employee during the published free-time period, and that the applicable ...

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