Opposition — American Institute for Shippers' Assns. v. Interstate Commerce Commission

IN THE

Supreme Court of the

OCTOBER TERM, 1977

No. 76-1653

AMERICAN INSTITUTE FOR SHIPPERS’ ASSOCIATIONS, INC.

HARRY DEMONTMOLLIN,

FLORIDA ALL STATE CONSOLIDATORS, INC.

NEW JERSEY SHIPPERS POOLING ASSOCIATION, INC.

and

SUNSHINE STATE SHIPPERS AND

RECEIVERS ASSOCIATION, INC.

Petitioners,

V.

INTERSTATE COMMERCE COMMISSION

and

UNITED STATES OF AMERICA

BRIEF IN OPPOSITION FOR RESPONDENT

FREIGHT FORWARDERS INSTITUTE

JAMES N. JACOBI

KURRUS AND ASH

1055 Thomas Jefferson Street, N.W.

Washington, D.C. 20007

S. SIDNEY EISEN

EISEN AND MITCHELL

370 Lexington Avenue

New York, New York 10017

Attorneys for Respondent

June 23, 1977 Freight Forwarders Institute

WILSON «. Eres Printing Co.. inc. - Re 7-6002 - Wasnincron. D.C. 20001

Ee

JURISDICT Io

QUESTION PRESENTED o ——

STATUTES INVOLVED |. —

STATEMENT OF THE CASE. — —

REASONS FOR DENYING THE WRT

I. THE DEFINITIONAL ELEMENTS OF A

SHIPPERS’ ASSOCIATION PRECLUDE ITS

MEMBERSHIP IN AN “ASSOCIATION OF

— ————ů———ů—ů ů

A. If It Includes In Its Membership O her As-

sociations Of Shippers, A Shippers Associ-

ation Is Not The Requisite Holder Of The

Beneficial Interest Of Consolidated Freight.

B. The Members Of A Shippers’ Association Do

Not Exercise The Requisite Control Where

The Shippers’ Association Is The Member

Of An Association Of Shipp ers

C. Individual Shipper Members Must Assume

Operational Risks As Principals With The

Shippers’ Association Acting As Agent

II. PETITIONER’S RELIANCE ON COLUMBIA

SHIPPERS AND RECEIVERS ASSN., INC.

v. UNITED STATES IS MISPLACED...

OO ee

APPENDIX A (List of Members of the Freight For-

. = ee

E t d

CITATIONS

Cases: Page

Columbia Shippers and Receiver’s Assn., Inc. v.

United States, 301 F. Supp. 310 (D. Del. 1969) .. 9

Freight Consolidators Cooperative, Inc. v. United

States, 230 F. Supp. 692 (S.D.N.Y. 1964) 6,7,8

Pacific Coast Wholesalers’ Association v. United

States, 81 F. Supp. 991 (S.D. Cal. 1949), af d

III Sl 9

Administrative Decisions:

American Institute for Shippers’ Association, Inc.,

et al. v. Interstate Commerce Commission, 350

. W e 8

Atlanta Shippers’ Assn., Inc. Investigation, 322

1 I icctrciintriincsinietensiibinnitiitesimitaiens 8

Pacific Coast Wholesalers’ Association, Investiga-

tion of Status, 264 1.C.C. 134 (1945), aff'd Pa-

cific Coast Wholesalers’ Association v. United

States, 81 F. Supp. 991 (S.D. Cal. 1944), aff’d

338 U.S. 689 (195 „ 9

Statutes:

Judicial Code, 28 U.S.C. §§ 1, et seg. (1970)

28 U.S.C. § 1264(1) .......................... — 3

.. 3

Interstate Commerce Act, 49 U.S.C. §§ 1001, et

nee eee 1, 10

Section 402 (a) (5), 49 U.S.C. § 1002 (a) (5). 3,4

Section 402 (b), 49 U.S.C. § 1002 (b) 5, 6

Section 402 (e) (1), 49 U.S.C. § 1002 (e) (1) 8, 4, 5,

6, 7, 9, 10

Administrative Regulations:

49 C. F. R. § 1820.1 (197)))))))))): 7

IN THE

Supreme Court of the United States

OCTOBER TERM, 1977

No. 76-1653

AMERICAN INSTITUTE FOR SHIPPERS’ ASSOCIATION, INC.

HARRY DEMONTMOLLIN,

FLORIDA ALL STATE CONSOLIDATORS, INC.

NEW JERSEY SHIPPERS POOLING ASSOCIATION, INC.

and

SUNSHINE STATE SHIPPERS AND

RECEIVERS ASSOCIATION, INC.

Petitioners,

V.

INTERSTATE COMMERCE COMMISSION

and

UNITED STATES OF AMERICA

BRIEF IN OPPOSITION FOR RESPONDENT

FREIGHT FORWARDERS INSTITUTE

Freight Forwarders Institute is a voluntary non-profit

trade association of regulated freight forwarders operat-

ing under Part IV of the Interstate Commerce Act. 49

U.S.C. § 1001, et seg. Its constituent and interested mem-

bers in this matter are listed in Appendix A. ‘ts prime

purpose is to protect, promote, foster and advance the

interest of its members, and to that end it is empowered

to and does participate, on behalf of its members, in

administrative and judicial proceedings where issues im-

portant to freight forwarders are involved. Freight For-

warders Institute intervened in the Interstate Commerce

Commission (ICC) proceeding below as an interested

party and participated in the Court of Appeals Hobbs

Act review proceeding in the District of Columbia Cir-

cuit. Determination of the principal issue herein will

materially affect and influence the continued viability

and existence of regulated freight forwarding.

OPINIONS BELOW

The per curiam judgment of the United States Court

of Appeals for the District of Columbia Circuit entered

February 24, 1977, appears at Petitioner’s Appendix A,

p. la. An accompanying memorandum appears at Pe-

titioner’s Appendix B, p. 1b.

The underlying administrative agency decisions are

(a) the Initial Decision of Administrative Law Judge

William J. Gibbons of the ICC, Docket No. FF-C-50, ap-

pearing at Petitioner’s Supplemental Appendix, p. 3, (b)

the Report of the ICC, 350 I. C. C. 391-423 (1975), ap-

pearing at Petitioner's Supplemental Appendix, p. 53,

(e) the cease-and-desist order of the ICC issued July 11,

1975, appearing at Petitioner’s Supplemental Appendix,

p. 107, (d) Order of the ICC denying Petition for Re-

consideration, appearing at Petitioner’s Supplemental Ap-

pendix, p. 108, and (e) Order of the ICC denying peti-

tion requesting finding of General Transportation Im-

portance, appearing at Petitioner’s Supplemental Ap-

pendix, p. 110.

JURISDICTION

The unpublished order and judgment of the Court of

Appeals was entered February 24, 1977. The petition for

writ of certiorari was timely filed May 25, 1977. Ju-

risdiction of the Court is invoked under 28 U.S. C.

$§ 1254(1) and 2350 (a) (1970).

QUESTION PRESENTED

Whether the ICC was correct in finding that a shippers’

association is ineligible for membership in another “asso-

ciation of shippers,” because such membership subjects

the latter to regulation as a freight forwarder.

STATUTES INVOLVED

Sections 402(a)(5) and 402(c)(1) of the Interstate

Commerce Act, 49 U.S.C. §§ 1002 (a) (5) and 1002(c)

(1) (1970) appears at Petitioner’s Appendix C. Of

particular importance is Section 402 (e) (1) which ex-

empts from regulation as a freight forwarder the fol-

lowing:

(1) . . . operations of a shipper, or a group or as-

sociation of shippers, in consolidating or distribut-

ing freight for themselves or for the members there-

of, on a nonprofit basis, for the purposes of secur-

ing the benefits of a carload, truckload, or other

volume rates

STATEMENT OF THE CASE

Petitioner for certiorari American Institute of Ship-

pers’ Association (AISA) intervened before the ICC in

support of Petitioner Sunshine State Shippers and Re-

ceivers Association, Inc. (Sunshine) which was organized

under the laws of Delaware in 1971 as a nonprofit cor-

poration for the purpose of consolidating and distribut-

ing freight as an unregulated association of shippers

(“retailers, jobbers, wholesalers or manufacturers“) un-

der Section 402 (e) (1) of the Interstate Commerce Act.

1

Sunshine membership, however, consisted not only of in-

dividuals or businesses, but also of other shippers’ as-

sociations that claimed exemption under Section 402(c)

(1) of the Interstate Commerce Act. Petitioner New

Jersey Shippers Pooling Association, Inc. (New Jersey

Shippers) was typical of such shippers’ association and,

inter alia, was a member of Sunshine.

On January 29, 1973, the ICC on its own motion

undertook an investigation of Sunshine with the pur-

pose of determining whether Sunshine had been op-

erating as a freight forwarder as defined in Section

402(a)(5) and was thereby in violation of Section 402

(e) (). The Administrative Law Judge Gibbons found

that Sunshine was not operating as a bona fide ship-

pers’ association where it had allowed other shippers’

associations to be members. The ICC adopted the Initial

Decision of Judge Gibbons to find that Sunshine had

been operating as a freight forwarder and issued a

cease-and-desist order. 350 I.C.C. 391-423.

The U.S. Court of Appeals for the District of Colum-

bia Circuit affirmed per curiam the ICC decision. (Pe-

titioner’s Appendix A, p. la) In its Memorandum Opin-

ion the Court noted that Sunshine could bring itself into

compliance with the cease-and-desist order by enrolling

each member of its member associations as Sunshine

members. (Petitioner’s Appendix B, p. 1b). The Cir-

cuit Court properly found that the ICC had not acted

unreasonably in its statutory interpretation of Section

402.

REASONS FOR DENYING THE WRIT

I. THE DEFINITIONAL ELEMENTS OF A SHIP-

PERS’ ASSOCIATION PRECLUDE ITS MEMBER-

SHIP IN AN “ASSOCIATION OF SHIPPERS”

The underlying objective of Section 402(c) of the

Interstate Commerce Act has always been to preserve

to shippers the ability to secure reduced rates—truck-

5

load, carload, or volume rates—through consolidation of

their freight. Through compliance with Section 402(c)

a “shipper, or a group or association of shippers .. .”

may benefit from statutory exemption from regulation

as a freight forwarder. In order to qualify as a “group

or association of shippers” certain elements must be met.

The members of the shippers’ association as principals

must (1) have direct beneficial interest in the freight

consolidated, (2) the association must act as the agent

for the bona fide members who as principals control the

activities and affairs of the association, and (3) the

association must act as the agent for the bona fide mem-

bers of the association who as principals assume the

operational risks involved. A shippers’ association can-

not comply with these requirements if it includes in its

membership another association of shippers.

A. If It Includes In Its Membership Other Associations

Of Shippers, A Shippers’ Association Is Not The

Requisite Holder Of The Beneficial Interest Of Con-

solidated Freight.

The ICC has always considered the shipper referred to

in Section 402(c) to be the beneficial owner of the freight,

for only the beneficial owner directly benefits from the

freight consolidation. It is clear that shipper associa-

tions, per se, have no freight of their own to consolidate.

The legislative history underscoring Section 402 (e)

clearly shows the intent to have that section applied

only to shipper associations as they normally operated.

No shipper association has ever functioned as Sunshine

seeks to do—by being a group, not of shippers (beneficial

owners), but an association, group or federation of ship-

per associations.

Section 402(b) illuminates the objective of Section 402

(e). Section 402 (b) deals with agricultural cooperatives

and by its specific terminology extends exemption from

regulation to cooperative associations or to “a federation

of such cooperative associations’. Congress when it in-

tended to include federations in Section 402(b) did so

by using definite and specific language. By abstaining

from the use of such or similar language or even men-

tioning federations in Section 402(c), Congress clearly

evidenced an intention to exclude federations of shipper

associations from the scope of Section 402 (e).

The District Court in Freight Consolidators Coopera-

tive, Inc. v. United States, 230 F. Supp. 692 (S.D.N.Y.

1964) clearly set forth the basic differences between a

bona fide shipper association and a regulated freight

forwarder, as follows:

Shipper associations do not hold themselves out

to the general public, but perform services for their

dues paying members.. Members bear the bur-

dens as well as share the benefits of its operations.

.. . The operation . . must be conducted by the

association which at all times acts as agent for its

shipper members who, as its principals (1) possess

the exclusive right and ability to control the opera-

tions and (2) assume the essential risks entailed in

conducting such operations. 230 F. Supp. 692, 696.

The bona fide member of a shipper association, of

necessity, must be the principal and the association the

agent. When shipper association A becomes a member

of shipper association B, who is the principal and who

is the agent? If shipper association A is the principal

of shipper association B (here Sunshine) then do ship-

per association A’s member principals automatically be-

come principals of shipper association B? If so, they are

principals who cannot exercise “the exclusive right and

ability to control the operations” of shipper association

B, because they are not members of shipper association

B and, therefore, have no right to vote and, accordingly,

are not covered by the parameters of Section 402(c).

7

If shipper association A, the member shipper associa-

tion and the principal, is not the beneficial owner, then

the consolidation is performed for nonbeneficial owners

and, accordingly, is not a consolidation which has for its

purpose securing for the bona fide shippers the benefits of

consolidated rates. Therefore, the activity involved is

not covered by Section 402(c).

Because of a repetitive history of non-payment of

freight charges by shipper associations, the ICC promul-

gated regulations (49 C.F.R. § 1320.1 (1976)) requiring

shipper associations to disclose in their transportation

documents, issued to the underlying carriers (the rail-

roads and trucks) the names of the beneficial owners of

the property involved, for the obvious purpose of protect-

ing the underlying carriers for beneficial owners cannot

be insulated against the payment of their freight charges.

Transposing that situation to the instant case reduces

it to these simple facts. Shipper association A seeks

membership in Sunshine. Sunshine, by regulation, must

disclose the names of the beneficial owners in its trans-

portation papers when it tenders consolidations to the

underlying carriers. Sunshine cannot list shipper as-

sociations A in its transportation papers, for shipper

association A is not the beneficial owner of the property.

If Sunshine lists the individual beneficial owners, who

are members of shipper association A—but not members

of Sunshine, Sunshine would admittedly be providing

services to nonmembers and thus servicing the public at

large. Under these facts, Sunshine’s operations would

not come within the purview of Section 402(c).

B. The Members Of A Shippers’ Association Do Not

Exercise The Requisite Control Where The Shippers’

Association Is The Member Of An Association Of

Shippers.

The shipper must have the exclusive right and ability

to control the operations of Sunshine, an essential defini-

tional element of a shippers’ association. Freight Con-

solidators Cooperative, Inc. v. United States, 230 F. Supp.

692, 696 (S.D.N.Y. 1964) ; Atlanta Shippers’ Assn., Inc.

Investigation, 332 I. C. C. 273, 285 (1964); American

Institute for Shippers’ Association, Inc., et al. v. Inter-

state Commerce Commission, 350 I. C. C. 391, 399 (1975).

For example, the members of New Jersey Shippers exer-

cise their individual control only over the activities and

operations of New Jersey Shippers. New Jersey Ship-

pers is a member of Sunshine. The individua! members

of New Jersey Shippers, not being members of Sunshine,

have no voice in the formulation of policies or manage-

ment of Sunshine, and are thus unable to direct ihe

policies of Sunshine. The ICC found these individual

members, in so far as they relate to Sunshine, to be

members of the general public and “not dues-paying

members of Sunshine.” 350 I. C. C. 391, 404. Where

there is a holding out of service to the general public,

the association is acting as a freight forwarder and not

a bona fide shippers’ association.

No privity exists between shipper-members of Sun-

shine and members of its purported member associa-

tions.” 350 I.C.C. 391, 410. No control may be exercised

by the members of New Jersey Shippers unless they

join Sunshine individually as suggested by the ICC and

approved by the Court of Appeals. See Petitioner’s Ap-

pendix B, p. 1b. Thus, a shipper’s association cannot

be a member of an association of shippers.

C. Individual Shipper Members Must Assume Opera-

tional Risks As Principals With The Shippers’

Association Acting As Agent.

The bona fide member of a shipper association, of

necessity, must be the principal and the association the

agent. See Freight Consolidators Cooperative, Inc. v.

United States, 230 F. Supp. 692, 696 (S. D. N. V. 1964).

In normal operation, the individual members of a ship-

pers’ association assume the risks entailed in conducting

the operations.

member shippers’ association,

in privity with Sunshine in the

transportation of the consolidated freight. Thus, there

was in essence a public holding out of Sunshine’s services.

i

E

:

i

:

II. PETITIONER’S RELIANCE ON COLUMBIA SHIP.

PERS AND RECEIVERS ASSN., INC. v. UNITED

STATES IS MISPLACED

Petitioners rely on Columbia Shippers and Receiver’s

Assn., Inc. v. United States, 301 F. Supp. 310 (D. Del.

1969) to support the rationale that membership by one

shippers’ association in another shippers’ association

satisfies the statutory objective of furthering nonprofit

activities. Columbia is easily distinguished from the pres-

ent facts. Columbia involved the practice of co-loading

freight between nonprofit shippers’ associations. It did

not involve the issue of one shippers’ association’s mem-

bership in another shippers’ association. The practice

of co-loading substantially differs from the public holding

out of services practiced by Sunshine to non-dues-paying

members. See 350 1.C.C. 391, 406-07.

Pacific Coast Wholesalers’ Association, Investigation

of Status, 264 I. C. C. 134 (1945), affd Pacific Coast

Wholesalers’ Association v. United States, 81 F. Supp.

991 (S.D. Cal. 1949), affd per curiam 338 U.S. 689

(1950), involved one shippers’ association transporting

freight between non-members and member consignees for

a special price. As the ICC correctly found Pacific did

not address the issue of one shippers’ association’s mem-

oa in another shippers’ association. 350 J. C. C. 391,

Appellants sought an interpretation of Section 402(c)

which would permit shipper associations to so serve the

public generally would destroy regulated freight for-

10

warding and the viability of Part IV of the Interstate

Commerce Act. Obviously, regulated freight forwarders

cannot exist in the competitive arena with completely

unregulated, unrestrained and unfettered competitors,

such as Sunshine seeks to become.

Clearly, Congress in painstakenly writing a compre-

hensive set of freight forwarding regulations (Part IV

of the Interstate Commerce Act, § 401 et seg., 49 U.S.C.

§ 1001, et seg. (1970)) did not so write Section 402 (e)

to destroy and make for nought the entire legislative

11

CONCLUSION

For the reasons stated, the petition for a writ of cer-

tiorari should be denied.

Respectfully submitted,

By

JAMES N. JACOBI

KURRUS AND ASH

1055 Thomas Jefferson Street, N.W.

Washington, D.C. 20007

S. SIDNEY EISEN

EISEN AND MITCHELL

370 Lexington Avenue

New York, New York 10017

Attorneys for Respondent

Freight Forwarders Institute

la

APPENDIX A

FREIGHT FORWARDERS INSTITUTE MEMBERS

Acme Fast Freight Republic Freight System

Andrews International Sheldon Forwarding

Century Carloading Springmeier Shipping

Clipper Express Superior Fast Freight

Coast Carloading Texas Shippers

Con Tra Mar Transconex

Florida-Texas Universal Carloading

Lyons Transport Western Carloading

Merchant Shipper/Stor Dor Western Freight Assn.

New England Forwarding Westransco

Ohio Fast Freight Yellow Forwarding