Earl Warren: Number 406 and 421, Red Ball Motor Freight, Incorporated, et al., Appellants, versus Emma Shannon et al., and the United States and Interstate Commerce Commission, Appellants, versus Emma Shannon et al. Mr. Mathews. Oh, Mr. Ginnane, you're going to (Voice Overlap) --
Robert W. Ginnane: (Voice Overlap) --
Earl Warren: Yes.
Robert W. Ginnane: (Voice Overlap) with the court. Thank you sir.
Earl Warren: Oh, yes. Yes.
Robert W. Ginnane: May it please the Court. I am sharing the appellant's time with Mr. Amos Mathews, counsel for the appellant, Motor Carriers and Rail Carriers in Number 421. These two consolidated appeals are from the judgment of a three-judge District Court which set aside an order issued by the Interstate Commerce Commission. Commission's order directed the appellee Shannon to cease and desist from engaging in for-hire transportation of sugar in interstate commerce without appropriate operating authority from the Commission. This case presents a question of importance for the entire transportation industry. That is how to draw a practical line between for-hire motor transportation whether common or contract and bona fide private carriage on the other hand. By way of background, this question is one aspect about an important aspect of what Congress, the Commission and the transportation industry had been referring to as gray area of transportation for some years. Gray area of transportation is a shorthand phrase which covers a variety of devices by which what is in substance for-hire transportation is carried on by motor carriers without a common carrier certificate and/or without a contract carrier from it, thereby eroding the traffic available to the regulated public carriers. Two years ago, we presented one important aspect of the gray area problem to this Court, In United States v. Drum in 368 U.S. In Drum, this Court upheld the Commission's view that where a shipment leased -- that where a shipper leased the services and the equipment of owner operators of trucks without assuming the real financial risks of engaging in a transportation service. Then, though the Court held with this, a shipper was not engaged in bona fide private carriage and the owner operators were engaged in for-hire transportation as contract carriers because on that record, in the Drum case, they were assuming the real risks. Now, in this case, we are dealing with a frequent type of situation and -- and for the Commission a number of times, in a number of times from the past and currently in the lower federal courts. When a person who is engaged and admittedly bona fide a private transportation in the outbound transportation of his goods, from his place of business, seeks to obtain some kind of freight for the other -- other -- for the otherwise empty return trip or backhaul movement of his trucks. Now, what do we mean by private carriage? Now, briefly, Section 203 (c) of Interstate Commerce Act, which appears at page 36 of our brief, says in effect that a private carrier is a person who has transportation of his own property is within the scope and in furtherance of a primary business enterprise other than transportation of such person. And the typical example of admittedly bona fide private transportation and this happened all over the country without a question, is for a manufacturer or distributor uses his own trucks to transport his finished product, to distributing or retail outlets. And on his return trip or backhaul, he brings back raw materials or supplies to be used in his business. Now, the basic fact of life for all carriers, either for-hire carriers or private carriers, is that empty return trip movements increase the cost of moving a given unit of freight. In its extreme form that this means that any kind of carrier, public or private, figures that it is better off, if it can obtain some freight for the return trip, if it only covers the fuel cost or part of the fuel cost. And so it is that private carriers are naturally tempted to try to get some kind of paying cargo on their otherwise empty return trip or backhaul movements. Now, turning to the facts of this case, Shannon has a partnership in San Antonio, Texas and since 1934, it engaged in buying and selling livestock. In 1951, it broadened its business to include the handling of fertilizer, grain, molasses, salt, and other items in the feed line. In 1954, Shannon began to engage in the sugar transactions which are initially here. As we see it, the crucial facts, Mr. Shannon's sugar transactions are these. First, Shannon buys and takes title to the sugar at a sugar refinery at Supreme, Louisiana. It's about 40 miles West of New Orleans and its 525 miles from San Antonio. Shannon buys sugar only when it can be carried and the return trip or backhaul movement of one of its trucks which is stated an outbound delivery in the direction of Louisiana. At no time has Shannon purchased sugar to be transported otherwise than in its own trucks. In other words, Shannon's purchases of sugar had been measured solely by the otherwise empty backhaul capacity of its trucks.
Arthur J. Goldberg: (Inaudible)
Robert W. Ginnane: Now, on this record, he takes the title. We have had other cases in which the taking of title was a sham. On this record, we do not contend that it's a sham, we assume he is taking the title in a -- in a valid section.
William J. Brennan, Jr.: Does he have orders for the sugar before he deposit it?
Robert W. Ginnane: The Commission found that, generally speaking, he did not. That he was successful in obtaining orders for either -- while the sugar was en route back from the refinery to San Antonio or very shortly after arriving in San Antonio.
Byron R. White: And he just isn't filling orders of the people he bought the sugar from.
Robert W. Ginnane: I beg your pardon?
Byron R. White: And he just isn't filling orders that the people he bought the sugar from had.
Robert W. Ginnane: So -- as far as this record shows, no. He has this -- he -- he finds his own customers. Now, most of the sugars handled in truckload lots is bought and sold in the truckload lots and is delivered from the trucks right off the tailgate at the places of business of Shannon's customers in San Antonio.
Speaker: (Inaudible) and handled by Shanon?
Robert W. Ginnane: From -- from Supreme, Louisiana, yes. Other sugar gets -- gets into San Antonio, cane sugar from the West and North but -- but Shannon is handling only this Louisiana cane sugar which he picks up at Supreme, Louisiana.
Potter Stewart: You mean beet sugar from the West and North.
Robert W. Ginnane: Yes. And his customers are candy companies, soft drink bottlers, wholesale groceries and dairies in San Antonio. I'd like to emphasize that Shannon does not make substantial sales out of a substantial warehouse inventory of sugar. And I emphasize that because the District Court found that Shannon maintained a reasonable inventory of sugar. I'm not sure what the Court meant by reasonable but in fact, it's a small one. Now, the hearing on this case took place in 1957. In December 1, 1956, Shannon had inventory of a 123 100-pound bags. On January 31, 1957, 209 bags, and so on. Now, we'll concede the following facts which the -- which the court below found and which Shannon is still urging here. We'll concede that he takes title of it at -- when he picks up the sugar at Supreme and that as the owner, he takes the risks which we say are minor, price fluctuations, and damage and transfer. We admit that he makes sales on credit, 10 days credit. We admit that he is -- does not collect any identifiable or earmarked transportation charge from his customers. He sells them at so much per 100 pounds with no earmark transportation charge. And we conceive that he usually has no orders in advance of the purchase and transportation of the sugar.
William J. Brennan, Jr.: Is there any evidence from the markup over (Inaudible) unless he sell?
Robert W. Ginnane: Yes, in Exhibit 1 at pages 117 and 118 of the record. And that shows -- that Exhibit shows what really happens here. On page 117, the first transaction, the shipment date of May 15, 1956, deals with the same shipment of sugar, the same lot of sugar that has dealt with at the -- as the first item on page 118. So following it through between the two pages, we have a transaction in which Shannon is buying sugar on May 15 at Supreme, Louisiana. Turning on the other page, he sells it in San Antonio on May 16 to Lawlor and Lawlor according to the record, is a wholesale grocer. And similarly, the second transaction which on -- on page 117, shows shipment on May 27, sale on May 29 in San Antonio to Judson. Judson is a candy manufacturer. Now, going through the -- that list of transactions, representative transactions, we find that Shannon is selling the sugar to -- to a purchaser in substantial quantities within 48 hours after he purchases and takes delivery in Supreme. And he is selling the sugar obviously just from those dates. Purchase, transportations, and sale within 24 or -- within 24 or 48 hours. It makes a perfect --
William J. Brennan, Jr.: They authorize that market.
Robert W. Ginnane: The record indicates that the -- that the -- the sales price is large in -- in san Antonio is largely determined by the competition of beet sugar from the West to North. But his markup appears --
William J. Brennan, Jr.: Yes, but I -- I was wondering how -- what he sells for sells with the going market.
Robert W. Ginnane: He sells at the going market, according to the record.
William J. Brennan, Jr.: At a going market.
Robert W. Ginnane: A going market which is largely determined --
William J. Brennan, Jr.: Yes.
Robert W. Ginnane: -- by the competitive influence of beet sugar from the West to North. But these dates, and as shown by the Exhibit 1, purchase, transportation, sale and delivery to ultimate user, all within 48 hours.
Arthur J. Goldberg: (Inaudible)
Robert W. Ginnane: The record does not show. Those dates show that he must -- be finding and must be selling the sugar while it's on route from Supreme to San Antonio or very shortly after it arrives in San Antonio. In brief, Shannon's sugar operation is measured by the available backhaul capacity of its trucks. And he never uses for-hire carriers to move sugar as it does with respect to grain and other commodities which it handles, sugar is different in the way it's handled by -- by Shannon. It's the one commodity which he never uses of any other carrier for. It's limited by his backhaul capacity. So that all he really invest in a sugar operation is the backhaul transport space of his trucks.
Potter Stewart: Mr. Ginnane, I noticed in the chart on page 118 of the record, the person, whom the sugar delivered on these dates is Lawlor, Judson, Melvin and so on are -- is indicated consignee, actually, it wasn't the cons -- those people were not consignees whether -- they were purchasers, are they not?
Robert W. Ginnane: They -- they are Shannon's customers in San Antonio.
Potter Stewart: And actual purchasers, they weren't his agents, was it?
Robert W. Ginnane: That's right.
Potter Stewart: (Inaudible)
Robert W. Ginnane: They weren't his agents. As far as this record shows, they were his customers, use -- users of sugar, buying sugar from Shannon. Significantly, the commodity most frequently involved in cases such as this is sugar. And that's because sugar, in the community of any size such as San Antonio, can be sold readily to such constant users of sugar as wholesale grocers and the canning, baking, and soft drink industries, just the kind of -- of customers that Shannon has here and we see the same pattern on other cases. In other words, the sugar is so fungible and so salable in the community of any size. It's practically the same as cash on the truck, subject only to minor price fluctuations. Now, on find -- the Commission in finding that Shannon was engaged in for-hire transportation, rather than bona fide a private carriage, took into account all of the circumstances surrounding the transaction. And it weighed those circumstances in the light of Section 203 (c) which Congress enacted in 1957 and amended in 1958 to deal with just this type of transportation practice. The three-judge court, in setting aside the Commission to order, as not supported by substantial evidence, erred, we contend, in two respects. First, it wholly failed to take into account that Shannon's sugar dealings are measured by its otherwise empty backhaul capacity and that it was not making substantial sales out of inventory. And secondly, the court below did not even mention Section 203 (c) which we believe is the crucial provision of the Act here involved.
Speaker: (Inaudible) how did it happen, I mean, why didn't --
Robert W. Ginnane: I don't know, sir. In a somewhat similar case, in which -- in which the Commission's order was sustained, the Church Point Beverage case which is referred to in our -- in all of the briefs that that Court didn't just instinctively recognize 203 (c) as controlling.
Speaker: The Government relied on it below?
Robert W. Ginnane: We -- yes, indeed sir. And we contend that Shannon's backhaul operation of sugar is exactly what Congress sought to eliminate --
Byron R. White: But isn't a private carriage that isn't engaged in bona fide private carriage? What is this? It may -- the Act may say he can't do it but he isn't a contract carrier of sugar. He isn't a common carrier of sugar.
Robert W. Ginnane: He -- he's a for-hire carrier.
Byron R. White: For whom?
Robert W. Ginnane: And the 19 --
Byron R. White: For whom?
Robert W. Ginnane: And the --
Byron R. White: For whom? Who hired him?
Robert W. Ginnane: May I -- may I answer your question this way. That question arose be -- arose in prior cases. And Commission orders were set aside on the basis of just the question you've raised. And that was what -- and -- and that was what Congress accomplished by the 1957 Amendment of that -- that the enactment of 203 (c) --
Byron R. White: The 203 (c) just says that -- it says you're not supposed to do this. It didn't say what he was, still doesn't say who hired him.
Robert W. Ginnane: In 1957, 203 (c) was added to expressly prohibit any person for engaging in any for-hire transportation business by motor vehicle in interstate commerce without a certificate or a permit authorizing such transportation.
Byron R. White: Right.
Robert W. Ginnane: And the Committee reports make it very clear that Congress regarded this new prohibition as necessary to prevent the creation of just such a no man's land.
Byron R. White: Yes, but that's still the --
Robert W. Ginnane: And -- and --
Byron R. White: -- that's still in the cases, what it's prohibiting is for-hire carriage --
Robert W. Ginnane: For-hire carriage.
Byron R. White: Now, where is the for-hire carriage in this case? Who hired him and who paid him anything?
Robert W. Ginnane: It is for-hire carriage under Section 203 (c) unless the transportation is within the scope of and in furtherance of a primary business enterprise other than transportation.
Byron R. White: Well, that isn't --
Robert W. Ginnane: And we say that you can't have -- we contend that you can't have a primary business enterprise other than transportation so that your transportation is -- is bona fide private carriage. If the only thing you contribute to your dealings in a particular commodity is transportation, the use of otherwise empty backhaul space to get something for that backhaul.
Byron R. White: Still isn't a -- you -- you must concede he is not -- he isn't -- he is not hiring -- nobody paid him anything, nobody hired him, you concede to all the facts referred to it which would eliminate -- which would -- all of things you concede to eliminate the possibility of his having been hired. You must say that -- that what Congress did is just -- it did create a no man's land, it just said, "The people can't do this."
Robert W. Ginnane: And -- and its no -- and they also said, "It's no answer to it", to what he is doing that -- be -- he can't readily be cont -- be classified as a common carrier or a contract carrier.
Byron R. White: Well, he was -- he was -- really wasn't neither, wasn't he?
Robert W. Ginnane: I think that may well be.
Byron R. White: What?
Robert W. Ginnane: I think that may well be.
Byron R. White: Yes.
Robert W. Ginnane: But it was to answer just that dichotomy which you present and which we had encountered in other cases in the lower courts that this original Section 203 (c) was added in 1957 --
William J. Brennan, Jr.: Yes, but (Voice Overlap) --
Robert W. Ginnane: -- before that no man's land in which it would be hard to say he was a common carrier because he wasn't holding himself out to the general public.
William J. Brennan, Jr.: Well Mr. Ginnane, I gather you'd had a long history of developing the primary business test in Commission decisions.
Robert W. Ginnane: That is correct sir.
William J. Brennan, Jr.: And that (Voice Overlap) --
Robert W. Ginnane: Almost (Voice Overlap) --
William J. Brennan, Jr.: -- am I correct in reading those as in effect saying that if you don't satisfy the -- in the circumstances like this, the primary business test, then that establishes that you're in for-hire transportation?
Robert W. Ginnane: And that you're in for-hire transportation.
William J. Brennan, Jr.: Yes. Without giving for-hire transportation any other special definition?
Robert W. Ginnane: Without breaking it down -- without having to break it down as between common and contract --
William J. Brennan, Jr.: Yes.
Robert W. Ginnane: -- common or contract carriage.
Byron R. White: Well, what -- excuse me Brother.
William J. Brennan, Jr.: Now as -- as I understood it, when a private carrier -- this is neither contact or common carrier of course, that when a private carrier which is what this test was, did this kind of thing and what he hold was not in his primary business. Then that automatically established it factually as a for-hire transportation, is that right?
Robert W. Ginnane: Correct, sir.
Arthur J. Goldberg: (Inaudible)
Robert W. Ginnane: Yes, sir and that's the one which we rely primarily. But that was not added until the 1958 Amendment. And I was saying to -- in reply to Mr. Justice White that the first clause, I had it in the asterisk, it was added in 1957 to answer just the difficulty which he had raised. But Congress was not satisfied to that. It came back further on the subject and with the -- with the 1958 Amendment which is the material you referred to following the asterisk.
Arthur J. Goldberg: (Inaudible)
Robert W. Ginnane: That's correct, sir.
Arthur J. Goldberg: (Inaudible)
Robert W. Ginnane: Oh, that has to be for-hire in -- in one of them -- in -- in one sense or another.
Arthur J. Goldberg: (Inaudible)
Robert W. Ginnane: For business purposes.
Arthur J. Goldberg: (Inaudible)
Robert W. Ginnane: In -- in other words, it would -- he would have to be an engagement for some business benefit of some kind. Now, whether or not that amount for for-hire transportation --
William J. Brennan, Jr.: No, I mean, would that --
Robert W. Ginnane: -- it depends upon whether it -- it is or it's not within the scope of a primary business enterprise other than transportation.
Byron R. White: Well, even if it -- under this last clauses, under the crucial clause, it doesn't make any difference whether he's in for-hire transportation or not. Congress just says, nor shall any -- other person engaged in this kind of transportation that that -- that -- (Voice Overlap) --
Robert W. Ginnane: For -- for business -- for business purposes -- for business purposes.
Byron R. White: Yes. So would that -- he may not be able to get a -- this is just the kind of transportations nobody so engaged in whether he's for-hire or not.
Hugo L. Black: (Inaudible)
Robert W. Ginnane: May I continue with it's -- whether that -- for further developments of Section 203 (c) particularly the legislative development in 1958, what Congress was directed at. I think -- I think that will be helpful because it was in the Transportation Act of 19 -- 1958 that Congress really focused on this particular problem. The language which -- which is the second clause of 203 (c) was sponsored in almost verbatim, its present form by the Transportation Association of America which is a distinguished organization of representatives of all modes of transportation, shippers, and academic world and so on. We put this forward as their approach to what they referred to as the problem for-hire transportation services performed by private carrier -- carriers through use of the so-called buy-and-sell technique. Since this TAA proposal was almost verbatim, the amendment which Congress made the Section 203 (c), we think it's significant to see what TAA told Congress, through its amendment, would accomplish. And then the Senate subcommittee hearings in 1957, TA -- TAA stated that our suggested alternative is aimed at the buy-and-sell practice employed by some pseudo-private carriers as an outright subterfuge to avoid regulation or as a means of making otherwise legal transportation service more profitable. And TAA said, "Our proposal for not affecting legitimate private carriers would affect the operations of the following types of carriers", and the third type, they listed was, "a third type would be 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." And we say that that TAA third type fits Shannon like a hat. And I think it's significant that TAA has filed a brief as amicus curiae in this Court urging reversal of the judgment below. And on the Senate and House, the Reports of the Senate and the House Committees focused with unusual specificity in this rather particularized problem. Thus, the House Committee found that the erosion of the traffic of regulated carriers has also then caused to a considerable extent by the growth of pseudo-private carriage by truck. And zeroing in on this case, the House Committee said, "Businesses which use their own trucks to deliver their own merchandize are purchasing goods at or near the final point of delivery of their own merchandize in transporting such goods to places near their own establishments for sales to others. Such transportation is usually performed solely for the purpose of receiving compensation for the otherwise empty return of the trucks." There's more but it's in our briefs. The Senate Report was in exactly the same specific (Inaudible). And so those are the reasons detailed on the Senate and House Reports as to why the last clause was added to 203 (c) in 1958. That is, "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." So the question here is whether Shannon's use of its backhaul capacity, the transportation of sugar is within the scope and in furtherance of a primary business enterprise other than transportation. Stated otherwise, how do we give a practical content to what Congress was clearly trying to accomplish. How do we give a practical content to this standard? And at the same time, respectfully, equally clear congressional purpose of continuing to exempt a bona fide private carriage from federal economic regulation. We say that as a practical and real -- in a practical and realistic sense, Shannon's transportation of sugar is not in the scope in furtherance of a non-transportation enterprise. The economic way or ideas, that is dealings in sugar are measured solely by his available backhaul capacity. He never utilizes the services of for-hire carriers. The economic reality is that his rapid resales during or immediately following the transportation of the sugar by eliminating all real market or warehousing risks or cost means that is only real investment in or contribution to a sugar enterprise is the otherwise empty backhaul capacity of these trucks. Of course, it cost him a little bit to extend credit for 10 days but that's the sort of noncontrolling indicia that this Court brushed aside in Drum. This Court in Drum said the fact that Drum paid social security for the owner operators was not enough to -- to change the -- the basic economic reality of what was going on.
Speaker: (Inaudible)
William J. Brennan, Jr.: No.
Robert W. Ginnane: The -- the Court referred to it -- the Court referred to it generally particularly as the original 203 (c) enacted in 1957.
Speaker: Not with this provision that you rely.
Robert W. Ginnane: And -- and also the Court referred to the 1958 Amendment in a footnote.
Speaker: Yes.
Robert W. Ginnane: But the Court wasn't applying the 1958 Amendment as such in Brown.
Arthur J. Goldberg: (Inaudible)
Robert W. Ginnane: Not if he were acquiring the sugar and moving it solely by utilizing the backhaul capacity of these trucks and selling off the trucks with practically no warehousing, no inventory.
Arthur J. Goldberg: I suppose however that it may have been established that a part of his general business would bring the rights to (Inaudible) rights to meet basic quotation. Well, does that make it -- include it? (Inaudible)
Robert W. Ginnane: Well, I would have to know how he acquired his beet sugar. If he -- if he's getting it in the same way that he acquires the cane sugar from Supreme and an operation measured only by the backhaul capacity of his trucks and selling it primarily in truckloads right off the tailgate and without performing an inventory service, I would say no, that is not of a --
Arthur J. Goldberg: Let's assume with the effect (Voice Overlap) --
Robert W. Ginnane: -- are non-transportation in fact.
Arthur J. Goldberg: (Inaudible)
Robert W. Ginnane: I would say only if the -- his sales were made predominantly out of a substantial inventory.
Speaker: (Inaudible)
Robert W. Ginnane: Only if his sales were made predominantly out of inventory -- out of warehousing. Because otherwise, I do not see how we can give a practical working content to the congressional standard for 1958.
Arthur J. Goldberg: Can't you have a primary business as brokerage, the (Voice Overlap) --
Robert W. Ginnane: Now, when they --
Arthur J. Goldberg: -- (Inaudible) sugar brokerage right in his own (Inaudible)
Robert W. Ginnane: He can't -- he can't do it under 203 (c).
Potter Stewart: Suppose your answer is that the offense of --
Robert W. Ginnane: If and all he's doing is -- is connecting quick purchases and sales without inventory and measured only by his backhaul capacity taking advantage of other -- otherwise backhaul capacity, either to make a money transfer and -- and transporting it or in reducing the transportation cost of his admittedly private carriage outbound movements. That's what Congress was concerned with.
Hugo L. Black: (Inaudible) I do not quite understand (Inaudible), suppose a New York fruit broker decide that he wanted to buy his fruits in Florida, he gets trucks, cars, and those in Florida buys it. He comes back to New York and sell it. What would he be? That's all that he's been, buying and selling oranges.
Robert W. Ginnane: And -- and Shannon here has a -- has a bona fide business buying and selling livestock and feedstocks and grain. But it is a -- it is not measured merely by what he can bring in to his place of business utilizing the backhaul capacity of his trucks. Shannon -- Shannon --
Hugo L. Black: Suppose that's -- suppose --
Robert W. Ginnane: -- in his non-sugar business --
Hugo L. Black: Suppose that's his whole business and he has no capacity, he just sells it, buys it, puts it in his truck, comes to Washington and New York and there sells it from his trucks, that's his business.
Robert W. Ginnane: There -- there are lots of sugar brokers who will sell without warehousing but they are not using their own trucks. They're using -- they're using the services of for-hire carriers.
Hugo L. Black: (Voice Overlap) -- didn't he use their own trucks by 203 (c)? As a man who wants to engage in a business of that kind, I -- I don't quite understand this extent of the argument. A man who wants to engage in the business of that kind, they used to do it a good deal, go from one place to another and buy stuff, take it to another place and sell it. Is he violating 203 (c)?
Robert W. Ginnane: Unless he contributes something to the business other than transportation.
Hugo L. Black: A what?
Robert W. Ginnane: A substantial contribution, a substantial investment of something other than transportation --
Hugo L. Black: (Inaudible)
Robert W. Ginnane: -- moving the stuff from one place to another.
Hugo L. Black: Well, he let -- let's say that's his own haul then, if he could make a little (Inaudible) certainly, some people do.
Robert W. Ginnane: I don't -- not -- not under 203 (c).
Hugo L. Black: He couldn't do it.
Robert W. Ginnane: Congress was dealing with a situation which hundreds, if not thousands of shippers, like the Cabana case which we had in Court for a steel shipper. The steel shipper is -- is using his backhaul capacity to transports salt available -- for almost mythical story, the piano manufacturer who was alleged to have acquired a -- a fleet of refrigerated trucks to deliver his pianos and -- and handle frozen fruits and vegetables on the backhaul. Now, that's what Congress was concerned with and to avoid that congressional prohibition, a man can't do business contributing only the backhaul capacity of -- of his trucks. He's got to make an -- make a substantial contribution of something else to it, say as by maintaining --
Hugo L. Black: What if he --
Robert W. Ginnane: -- significant inventories.
Hugo L. Black: -- he makes his living wholly out of that? That he makes his living by selling this at a profit that in order to sell it easier to get more profit, he holds it for himself, is that forbidden by 203 (c)?
Robert W. Ginnane: Unless he's contributing something other than transportation to it.
Hugo L. Black: But that -- and those are words I don't quite understand. That's what the wording is. If his whole business, he engages in the business of buying and selling oranges or something else and he utilize that a part of the business, the fact that he could make a better profit by going and getting and bring it back to somewhere. And do -- and do I understand that this 203 (c) makes that illegal?
Robert W. Ginnane: It's got to be -- it's not legal unless it's -- unless it's within the scope and in furtherance.
Hugo L. Black: And what -- unless it's what?
Robert W. Ginnane: Of a -- in furtherance of a primary business enterprise other than transportation.
Hugo L. Black: Well I'm assuming here that he makes his living by the profit he makes out of the fruit he buys himself.
Robert W. Ginnane: We say that on the facts of this case and in similar cases, what he's making a profit out of is transportation because he's taking a -- a readily salable commodity like sugar which is almost like money and he moves it from one place to another. He can dispose of it without risk and quickly upon arrival. And we say that Congress intended that that be treated as for-hire transportation which he may not engage in without getting a certificate or a permit from the Interstate Commerce Commission.
Hugo L. Black: Even though he sold and effort to sell -- selling buy and sell a commodity and -- and he make no profit out of it by buying it from one place selling -- moving it to another.
Robert W. Ginnane: Mr. Justice Black, I think it's clear from the history of 203 (c) that Congress regarded as something a bit different than buying, transporting, and selling. In an operation measured only by your backhaul capacity where the -- and where the only real investment is of that backhaul capacity, where no other real function is being performed such as the -- the inventory -- performing the inventory function of -- of a warehouse to its owner.
Hugo L. Black: Well, may -- maybe I -- maybe I have misunderstood. I -- I gather now that what -- what you're saying is that if my mythical man, although the (Inaudible) buys it, goes in and buys it, sells it. But after he sells it, he doesn't take anything back on a backhaul when he goes to buy more oranges, then that's forbidden?
Robert W. Ginnane: If I understand your question sir, that's right.
Hugo L. Black: It all depends on whether the man who's into -- been, unless he's doing in that way, carries stuff on the backhaul after he's really, legitimately and even if he's illegit -- legitimately engaged in the other business.
Robert W. Ginnane: That is what Congress was concerned with.
Hugo L. Black: And that -- that is your point, of doing it.
Robert W. Ginnane: That is what Congress was concerned with. Thank you.
Earl Warren: Mr. Ginnane, may I -- may I ask you this question referring to pages 117 and 118 in these various items that you -- that you spoke to us about a little while ago. Suppose that this man, instead of buying each one of these orders whenever he could fill it was to -- was to buy the total number of bags that represented here and have them in his warehouse and then -- and then would deliver them as -- as he got these orders. Would he then be under the Act?
Robert W. Ginnane: No, I don't think he would. That -- that because with that, he'd be doing, making predominantly -- his predominant sales would be -- be made out of inventory in a warehouse. And he would be con -- making a substantial contribution of something -- investment of something other than transportation. He'd be investing in -- in the -- in the burdens and the risks of maintaining an inventory and selling out of that inventory.
Earl Warren: Well, I'm just trying -- trying to differentiate between two men who are doing the same thing. Take one man who lives practically across the street from the -- from the sugar refiner and he always has access to their warehouses and can -- and can fill his orders each day and he goes over there to get his sugar and then transports it. He would apparently become liable under your theory but the fellow across the street who have more money and had a little -- and had a little warehouse could buy a few thousand sacks and fill each one of these small orders with what you call his inventory and he would not be covered, is that right?
Robert W. Ginnane: Well, as I -- as I understood your question, the fellow who lives -- who lives near the refinery, he's buying it for his use in his business to -- making candy or (Voice Overlap) --
Earl Warren: Well -- no, they're both -- they're both going to do exactly the same thing. Only one of them, by reason of his proximity to the refinery doesn't have to have a warehouse. He can go there and get it anytime he wants from a sugar refinery but the other fellow perhaps isn't so close to the refinery and in order to fill his -- his orders, he has to have a warehouse and has to have something of an inventory. Now, are those -- those two men in a different position under the Act?
Robert W. Ginnane: If -- if the first and the second man was maintaining an inventory as we see it. If he is doing the predominance of his business sales out of the inventory which he maintains, then he is -- then he is not engaged in for-hire transportation. He is -- he is -- his transportation is merely incident in furtherance of a -- of a primary business enterprise other than transportation that is sugar brokerage. And because he's contributed more than transportation, he's maintaining an inventory. He's taking the risks of price fluctuation and so on. But we say in a -- in a situation that Congress was concerned with and which we think is illustrated here is where the economic reality, considering that this is a readily salable commodity is what Shannon is investing -- is the transport capacity in -- in the backhaul of his trucks. Thank you very much.
Earl Warren: I see. Mr. Mathews.
Amos M. Mathews: Mr. Chief Justice, may it please the Court. In the -- in the brief time we have remaining, I'd like to touch upon a -- expand the facts a little bit discussing a -- in a little more detail as applied to this case, because -- because after all, it was the facts of this case upon which the Commission's order is based. And while numerous variations can be -- could be considered, as the Commission remarked in its report, each one of these transactions will have to be determined upon its own particular facts under the 1958 Amendment to Section 203 (c). Now, we have in our reply brief set out in convenient form --
Hugo L. Black: Which reply brief, as I think that --
Amos M. Mathews: The reply brief in 406. It this -- this colored document, on pages 4 and 5, we have set out Exhibit 1. The reason I particularly refer to that is because I believe the -- it's a little bit easier to refer to than the Exhibit as it is in the record because in the record, the parts of the Exhibit are printed on opposite sides of the same sheet and a little bit difficult to follow.
Hugo L. Black: What page is that in the brief?
Amos M. Mathews: 4 and 5.
Hugo L. Black: 4 and 5.
Amos M. Mathews: Now -- oh, I shouldn't say that we have added to the Exhibit. The only change we have made in the Exhibit is to add column 13. Column 13 is an arithmetical computation by which we derive the number of 100-pound bags of sugar on each load. So by reading column 13 on page 5, you can determine the amount of load in each of the shipments. Now, Exhibit 1, the record shows, is a representation of Shannon's, the appellees' principal sugar receivers. It is not exclusive but these are the principal receivers and this is a representative showing of the sugar -- proscribed sugar transactions over a period of three months. This shows a number of things but I think the most important is this. If you scan this Exhibit 1, it shows a very -- I think the word remarkable is a fair word, remarkable sequence in that -- in these representative transactions. Shannon knew that he could load a truck at Supreme, Louisiana, 525 miles away from San Antonio with something between 31,000 and 37,500 pounds of sugar in 100-pound sacks and carry it to San Antonio and there deliver it to the receivers of the sugar and be paid for it. That shows a complete understanding between Shannon and the receivers of the sugar that Shannon could perform a purely transportation operation on the backhaul, contribute nothing whatsoever to the sugar but as the economist would phrase it, a change of place, utility and do it regularly and smoothly, and methodically over a period of months to basically the same customers. Now, on page 6 of our reply brief, we have set out the repetition of the same customers. Lawlor seven loads and Norton (ph), five, Barks (ph), three. Now, what was Shannon contributing to that movement? Shannon --
Byron R. White: Are you suggesting that if he hadn't been in the -- engaged in the livestock business at all that he would be in trouble here for transporting property for-hire?
Amos M. Mathews: Well, if he hadn't been engaged in the livestock business at all, he wouldn't be hauling sugar back because --
Byron R. White: Oh, I'm not sure of that, he might be -- he might be hauling -- you're just saying that what -- what was -- what he was really doing was hauling for-hire for his customers.
Amos M. Mathews: That's right.
Byron R. White: But that's -- that doesn't depended at all on putting in the livestock business.
Amos M. Mathews: Oh no, no.
Byron R. White: Where you put it?
Amos M. Mathews: Well, the livestock business is incident --
Byron R. White: You don't depend on 203 (c).
Amos M. Mathews: Oh yes, indeed.
Hugo L. Black: Why do you have to if that's correct? That's what I don't understand. As I understand it, you're saying that's a sham. It's really a --
Amos M. Mathews: No.
Hugo L. Black: -- he's really a carrying goods for-hire.
Amos M. Mathews: Well --
Hugo L. Black: And if he's not really engaged in (Inaudible).
Amos M. Mathews: Well, the -- the Interstate Commerce Commission found -- the phrasing was this." Whether or not we consider the 1958 Amendment, Shannon is engaged in transportation for-hire." The -- the Commission found that either under the -- the so-called primary business test of the Lenoir Chair case or under 203 (c), under the 1958 Amendment. Shannon was engaged in transportation for-hire but our point is that you don't need to go back to the primary business test of Lenoir Chair case that preceded the 1958 Amendment. You can rely only on the 1958 Amendment because the 1958 Amendment to use a -- a shorthand phrase nailed it down. The 1958 Amendment was clearly directed at precisely this sort of thing. And so you don't need to go back --
Hugo L. Black: But was it aimed at -- before his primary -- his bona fide, what you call entrepreneur engaged in a small business, discovering that he can buy and sell sugar for profits and that he can make more profit if he carries it for himself, bona fide, no shams, would you say he's forbidden by law to do it, by 208 (c)?
Amos M. Mathews: He is forbidden by law to do it in the way it is done here. Here -- here the --
Hugo L. Black: Well, is it because it's a sham?
Amos M. Mathews: No. No, sir.
Hugo L. Black: It's not. You admit then that he's a bona fide broker?
Amos M. Mathews: No, sir.
Hugo L. Black: Well, is he a sham?
Amos M. Mathews: No, no.
Hugo L. Black: Is it a sham?
Amos M. Mathews: No, sir. I -- I think if we use -- if we use those all inclusive phrases -- phrases that whether he's a sham or whether he's a broker. Well, in the first place, he isn't a broker. Well, to clear up one thing, he could not be a broker of transportation without a permit to be a broker --
Hugo L. Black: I'm not talking about broker of sugar --
Amos M. Mathews: -- under Interstate Commerce Act. Now --
Hugo L. Black: -- of -- of sugar.
Amos M. Mathews: -- getting at -- getting at the -- getting at broker of sugar, he is not a broker of sugar because there is -- he -- he handles sugar in no other way. In other words, a broker sits in an office and sells sugar over the telephone or buy perhaps by personal calls. But here's what happens with Shannon. He sends a load of livestock or some other materials in which he needs, prepared feed or that sort of thing to Southern Louisiana. And not every time -- he doesn't do this every time but on the occasions because some other time he brings back grain and feed and things like that in his own trucks that have carried the outbound load. But when he finds himself with an empty truck more than 500 miles away from San Antonio, it is then he goes around to the refinery and buys the sugar and one or two days later, sells that in San Antonio. And we say, and the Committees of Congress said in reporting and recommending the 1958 Amendment of 203 (c) for passage said that that kind of thing is a transportation business. Now, the -- the Interstate Commerce Commission found that Shannon was in two kinds of business. He was in a warehousing business at San Antonio where he handles feed, and salt, and livestock and a -- some -- had it maintained a very small inventory of sugar that Mr. Ginnane referred to, that is one business. Then the Commission found that he was engaged in a transportation business in the backhaul, in bringing the sugar back because this sugar that is represented in Exhibit 1 does not stop at the warehouse. In fact, on the only identifiable occasion in the record, when one of the receivers of the sugar for some reason that is not revealed, refused to take it, one of the person he thought was going to take it didn't take it. Shannon did not have enough room in the warehouse to store the sugar so he had to put it in a public warehouse. In other words, his business, his -- his primary business in San Antonio is not adapted to handling truck load sugar. He had to put it in a public warehouse and his testimony is in the record that he simply couldn't make any money that way on this transaction because of the loading and unloading charges and the public warehouse cost. The -- the charges he had to pay for public warehousing. In other words, the -- the sugar transportation from -- by truck load from Louisiana to San Antonio is a pure transportation business. It's a separate business the Commission found on the facts --
Hugo L. Black: -- service though, and its one of the oldest practices I know of, I've known it yet over 50 years ago and people weren't. They were (Voice Overlap) --
Amos M. Mathews: Buy and sell (Voice Overlap) --
Hugo L. Black: -- basic in the mercantile business. Go and do something and then buy something at a profit and bring it back and sell it, buy something and make it -- sell it for profit and bring it back.
Amos M. Mathews: Well --
Hugo L. Black: Did that make him -- is that what's intended to be covered here? Maybe it is.
Amos M. Mathews: Yes, it is.
Hugo L. Black: (Voice Overlap)
Amos M. Mathews: Yes -- yes, Your Honor, it is. I might -- I might remind you of this, that 50 years ago, anybody could go out and buy a truck and engage in transportation for-hire. But that was ended in 1935.
Hugo L. Black: But the man I'm talking about wasn't engaged in transportation, he was a merchant.
Amos M. Mathews: Well --
Hugo L. Black: He had his own vehicle. He used them.
Amos M. Mathews: Alright and in the 1958 Amendment to Section 203 (c), Congress has said in the reports of the Committee make it entirely clear that that was their purpose and the language is --
Hugo L. Black: Why didn't the language be cleared, did your Association have this -- get -- urged this to be passed for that purpose.
Amos M. Mathews: The Transportation Association of America whom I do not represent urged that it'd be enacted for this purpose.
Hugo L. Black: And that's -- well, why didn't they put a language that had fit it better, so we wouldn't be troubled with it.
Amos M. Mathews: Well --
Hugo L. Black: I don't understand that.
Amos M. Mathews: Well, if you -- if you read it -- if you read the -- the -- they're the language that's in parenthesis, no person shall engage in transportation in a -- in a business other than transportation -- in -- the -- the business to be exempt, must be a business other than transportation.
William J. Brennan, Jr.: Well, may I ask Mr. Mathews, is it as simple as this, speaking only of the 1958 Amendment. Apparently, the first element is that the person involved must not be involve -- engaged in the transportation business. He must be engaged in some business but not in transportation business. That's the first one.
Amos M. Mathews: That is correct.
William J. Brennan, Jr.: The second requirement is that he can't hold on anything for a business purpose for any business purpose unless that business purpose is in furtherance of a primary business enterprise in which he's engaged, is that it?
Amos M. Mathews: Other than that --
William J. Brennan, Jr.: That doesn't make him a -- that doesn't put him in the transportation business. It merely says that as I read it, if he's in some business other than transportation and he holds something for a business purpose, that which he holds must be for a primary business purpose of his own.
Amos M. Mathews: Other than transportation.
William J. Brennan, Jr.: Well, other than trans -- that doesn't put him in the transportation business. This fellow is not in the transportation business, is he?
Amos M. Mathews: He is when he -- he is when he takes a truck under the 1958 Amendment. He is when he takes an empty truck and picks up a load of sugar.
Hugo L. Black: Well, is it intended to make it illegal? Maybe it is. It's quite a waste but maybe it is. Congress has the right to do it if he intended to make it illegal for a man who sees when he's -- has something, he's at a place where the truck doing his own business for him to go in an additional business of buying something and selling it when he gets back in order to make an additional profit, is that what you're saying then?
Hugo L. Black: Precisely, Your Honor.
Hugo L. Black: Well if that -- if that's right, then it undoubtedly, you're -- you're correct. But it seems to me like they use very inept language --
Amos M. Mathews: Well --
Hugo L. Black: -- to say that.
Byron R. White: The jury here does not --
Hugo L. Black: The Interstate Commerce Act is phrased in general language, and that it has been left to the Commission to deal case by case with situations --
Hugo L. Black: But it doesn't -- in some language they had authorized him to do something in a case.
Byron R. White: Well, we have set this out more fully. I would like to save just a few minutes for reply argument. We have set these -- our arguments out more fully in our briefs but as -- as a general position, we stated that in an answer to your last question, yes, that transfer -- that transaction is forbidden by 250, 1958 Amendment. Thank you.
Earl Warren: Mr. Wolff.
Walter C. Wolff, Jr.: Mr. Chief Justice, may it please the Court. The appellees understand the problems of the appellant carriers in this case. They are regulated and argued to protect all of their rights which is certainly what they should do. However, the appellees believe that the small businessman should not be made to sacrifice any of his rights just because or that the -- there should be any further granting of rights to the appellant carriers by taking them away from the small businessman. The appellees believe that they are in a general mercantile business and that certainly, they should be allowed and able to buy and sell their own products, transport those products in their own trucks and cannot imagine that Congress would have intended otherwise. A very important case, as far as the appellees are concerned in this particular field is the Taylor versus Interstate Commerce Commission case which is cited in our brief. In that particular case, a carrier bought some lumber, finished lumber in one state and transported it to retailers in another state. The retailers purchased an FOV of that particular state. They didn't know where the lumber came from, who owned it. The carriers actually purchased the lumber under preexisting contracts. In other words, they wouldn't go out and buy the lumber until they had a sale for it. The Court nevertheless held that the carriage was private. But the reason that I mentioned that particular case at this particular time is that the Court discussed the congressional intention of the Motor Carrier Act and the Transportation Act in that particular case. The Interstate Commerce Commission in the case argued that it was a policy of Congress to require a liberal interpretation of the Act in favor of holding Taylor to be a contract carrier as opposed to a private carrier. The Court says that the word liberal in that connection was -- and the word it used was a weasel word. That the Court then quoted from the policy of the Act that it was the national transportation policy to provide impartial regulation of all modes of transportation to protect and to serve the inherent advantages of each. And one of those modes of transportation that Congress evidently felt had inherent advantages is private carriage and that there should be no rule of interpretation more liberal for contract or common carriage on the one hand as for private carriage. The Court even mentioned that the Congress has always desired to protect the smaller businessmen and for that purpose has even set up committees to study legislation therein. So proceeding on the assumption that private carriage deserves at least as much protection by the courts as other forms of transportation, what are the particular facts in this case? The record clearly shows that as a result of the routine investigation, the hearing was held and ordered and the facts disclosed that the appellees were in the business of buying and selling many products, livestock in the feed mill business. They bought and sold corn, oats, wheat, bran, molasses, sugar, salt, fertilizers and everything in the feed line. It didn't say everything else in the feed line but everything in the feed line so that we quarrel that the attempted division of everything else in one category such as feed and sugar, separate in apart in another category because it --
Byron R. White: Well, what -- what is sugar used for in the feed line?
Walter C. Wolff, Jr.: It is not. However, there is -- under the testimony, there is no evidence to show that other of these items are necessarily used in the feed line.
Byron R. White: Well, I know but the other items didn't have to be involved in this case.
Walter C. Wolff, Jr.: No sir, however, the --
Byron R. White: But sugar was. Sugar was and it wasn't involved in the feed line.
Walter C. Wolff, Jr.: Yes, sir.
Byron R. White: You sold it -- you sold it to dealers of sugar.
Walter C. Wolff, Jr.: That is correct. However, in the argument of the appellants, they attempt to show that we have one mercantile business on the one hand which is only feed and related products and that sugar in an entirely different type of business on the other hand so that we're not really in a general mercantile business of all the products but only a general mercantile business of all but sugar which is separate and distinct.
Byron R. White: Yes, but the question was what if sugar was connected with either one of your other primary businesses and they wouldn't make any difference whether it was livestock business or the feed business, sugar wasn't related to either one of them, they have still made their point.
Walter C. Wolff, Jr.: Well, to -- proceeding along that line, actually, insofar as many other products are concerned for example salt, there is no evidence in the record that salt a -- that particular salt involved had anything to do with feed. However, the record is clear that the -- the appellees have been hauling salt exactly the same way that they were hauling sugar.
William J. Brennan, Jr.: What you're saying is that (voice overlap) feed business of the live -- livestock business, that you're in a general mercantile business and that is your primary business.
Walter C. Wolff, Jr.: Yes, sir.
William J. Brennan, Jr.: And that that happens to include among other things that sugar and salt as well as grain and so forth.
Walter C. Wolff, Jr.: Yes, sir.
William J. Brennan, Jr.: That's what you're saying.
Walter C. Wolff, Jr.: And further that the -- for example salt which is not in the record shown to -- to be the particular type of salt that's used in feed, the -- they purchased prior to pur -- purchasing sugar and at the time of the hearing in -- in the record, the salt in the same manner as a purchased sugar without any question.
William J. Brennan, Jr.: Well then you would say that within this 1958 Amendment, you don't have any primary business, you'd have only a single primary business enterprise namely a general mer -- mercantile business enterprise and if this hauling of sugar was incident to that single primary business of general mercantile, (Inaudible)?
Walter C. Wolff, Jr.: Yes, sir.
Byron R. White: Well, the trouble with that is that you have to -- the -- the Commission found against you as a matter of fact. I mean you have to upset some findings of the Commission.
Walter C. Wolff, Jr.: Yes, sir and -- but however, we believe that the evidence in the case that eventually no substantial evidence upon which to base the findings that the Commission made concerning the fact that we are not private carriers.
William J. Brennan, Jr.: And that's -- the three-judge court held, wasn't it?
Walter C. Wolff, Jr.: The -- yes, sir.
Hugo L. Black: Suppose -- suppose they had shown -- you had to agree with its own that your claiming to be in the mercantile business as a local -- local (Inaudible) but in reality, a sham and you're utilizing -- practically as running a transportation business and making your profit by altogether out of the fact that you do it in such a way that they pay you what your transportations were. What would you say if they had those facts and those were the terms?
Walter C. Wolff, Jr.: I believe that is the entire point of the whole case. The question of whether or not this is a sham or a subterfuge or whether or not we are a bona fide a -- a merchant.
Hugo L. Black: You agree that if it is a sham -- if it's a sham, if they found it and found on certain facts, then you would be covered.
Walter C. Wolff, Jr.: Yes, sir and I believe that is what the -- the congressional amendment meant and in -- at a later point, I'll discuss some of the congressional hearings that were attached to the Interstate Commerce Commission's report concerning the intention of the Act.
Hugo L. Black: Your argument is that they did intend to put a man out of business because he -- he was buying and selling different things simply because he transported them himself.
Walter C. Wolff, Jr.: No, sir but that -- it's necessary to show that there are some sort of prearranged plans, some sort of sham, prearranged plans to -- between the -- the transporter and the ultimate purchaser, so to enable that purchaser to receive transportation at a reduced cost, and that is the exact language that the committee -- the congressional committee has used when the -- they were discussing the passage in the amendment of -- of the Acts pertaining to Section 203 (c).
Hugo L. Black: You deny that the act of your -- guilt in violation of this depends on how much you bought and sold of one product and how much you bought and sold of another. As Justice Brennan said, if your primary business was to buy and sell.
Walter C. Wolff, Jr.: Yes, sir and we also believe that the evidence shows that we do a considerable sugar business in comparison with other businesses, is not a large concern but the -- if sugar operations are on a parity with their other operations.
Hugo L. Black: These -- do these figures show that you got a -- made it private on this?
Walter C. Wolff, Jr.: Yes, sir. They -- they showed -- we made a --
Hugo L. Black: Was there any efforts in the -- was there any effort to show that the profit you made was amounted in -- in the long run or any other time to the equivalent only of the -- what it cost to transport it.
Walter C. Wolff, Jr.: We showed that what the going market profit was in San Antonio at the time of the hearing for a sugar merchant which was 25 to 35 cents per 100 pounds and according to the Exhibit which is the Interstate Commerce Commission's own selection of what they consider representative sales, it shows that we made about 35.7400 cents per 100 pounds for those particular sale.
Hugo L. Black: He's not only claimed he's been a merchant, but was successful with that.
Walter C. Wolff, Jr.: Well, that we were -- we were making what the -- that on the high range of what the merchants, sugar merchants in the San Antonio area were making at that particular time.
Byron R. White: The only trouble with that is that the sugar merchant -- the other sugar merchant had already paid his -- the -- the transportation is already in it.
Walter C. Wolff, Jr.: Well, of course there's no evidence in the record as to how other --
Byron R. White: Your 35 cents -- your 35 cents -- you made 35 cents over the price -- price you paid to Louisiana, didn't you?
Walter C. Wolff, Jr.: Yes, sir.
Hugo L. Black: (Voice Overlap) --
Byron R. White: And that leaves -- is that accounted for what it cost you to bring the sugar to --
Walter C. Wolff, Jr.: Yes sir. And that's the reason we're probably on the high side but there are certainly other factors that are involved such as bookkeeping expense, administrative salaries, unloading cost, loading cost, bad debts, the risk of physical loss, the things of that nature which may bring us down to the middle or the low side but there of course, there's no specific evidence on that in the record.
Hugo L. Black: Do you agree however as I understand it that if they had shown, made findings on the facts substantial evidence that in reality, the profits you made was the equivalent only of the -- what the regular transporters got then they would have the case against you.
Walter C. Wolff, Jr.: No, sir. I -- I wouldn't go that far, I would say that would be an important factor of course along with many other factors.
Hugo L. Black: But -- but I'm talking about if they found on substantial facts that that was it, that you're really just making money out of transportation rather than buying and selling and stuff.
Walter C. Wolff, Jr.: Well, I -- I would say that if they found that our dealings were really a -- a sham and a subterfuge then there were some sort of agreements preexisting either implied or in fact that we were really permitting the purchasers to receive transportation at a reduced cost that that we would then be in violation of Section 203 (c).
Arthur J. Goldberg: (Inaudible)
Walter C. Wolff, Jr.: Yes, sir.
Arthur J. Goldberg: (Inaudible)
Walter C. Wolff, Jr.: Yes, sir.
Arthur J. Goldberg: (Inaudible)
Walter C. Wolff, Jr.: Yes sir, I have it here.
Arthur J. Goldberg: (Inaudible)
Walter C. Wolff, Jr.: The -- the statute certainly does but the -- the question is, what is a -- in furtherance of a primary business enterprise. And --
Arthur J. Goldberg: (Inaudible)
Walter C. Wolff, Jr.: No, sir. I --
Arthur J. Goldberg: (Inaudible)
Walter C. Wolff, Jr.: Well, Your Honor, I feel that --
Hugo L. Black: May I ask you this beforehand, does --
Walter C. Wolff, Jr.: Yes sir, the --
Hugo L. Black: -- and the -- and the statute says what he said.
Arthur J. Goldberg: (Inaudible)
Walter C. Wolff, Jr.: Well the --
Hugo L. Black: Have they any statute that substitutes the words he substituted. Is there any indication that Congress here desired to make it unlawful for men to engage in a general mercantile business, by saying, "Well, we're going to pick out one of them, if you engage in two -- since we're engaged in buying two or three things, then you will execute your primary business as the one we select and you'll be a criminal." (Voice Overlap) --
Walter C. Wolff, Jr.: Of course all -- all we have on it other than the literal language of the statute is the -- or the hearings before the committees prior to the amendment of the Act. And if I may quote a portion of it, it was -- it was quoted from -- by Mr. Ginnane with a statement, there is more but it's in our brief, but the -- the more part that's in the brief I feel is very, very important for a consideration of this particular fact situation in -- in the interpretation of what Congress meant by the Act. This is from the House Report and this is attached by the Interstate Commerce Commission to their opinion in the case and is found in the record. In addition, business which use their own trucks to deliver their own merchandize or purchasing goods at or near the final point of delivery of their own merchandize and transporting such goods to places near their own establishments for sale to others. Such transportation is usually performed solely for the purpose of receiving compensation for the otherwise empty return of their trucks. And that's where Mr. Ginnane stopped. Now, the next sentence is, "Sometimes, the purchase and sale is a bona fide merchandizing venture. In other instances, prearranged plans are setup in order that the real consignee may receive transportation at a reduced cost. So that I feel that -- that this whole case are -- a major portion of it is an interpretation of what Congress meant in the passage of this Act, what do this language mean and is not Shannon under the facts a -- in the primary business of buying and selling many items including sugar --
Speaker: But then you're up against even on that rational aren't you, you're up against the Commission's findings which are against you.
Walter C. Wolff, Jr.: No sir, I don't believe so because actually, there is -- there's really no evidence in the record to (Inaudible)
Speaker: But they didn't find -- they did find it against you.
Walter C. Wolff, Jr.: They did find but not based on substantial evidence. The examiner found all facts in favor of the individual.
Speaker: Yes, but when the -- when the Court -- when the lower courts set aside the Commission's findings, it did so without reference to 203 (c) finding.
Walter C. Wolff, Jr.: Yes, sir, however, I might mention this to the Court. The -- all the factors that are involved in the particular case, in an interpretation of 203 (c) are mentioned by the Court in its findings. Just the specific designation of the statute is not mentioned and the same judge that passed on this case, one of the three judges in the three-judge court, Judge Brown who was the Circuit Judge on the court, prior to that time, would be the two cases were argued at the same time but the other case was decided first which is the Church Point case, its cited in the brief, found for-hire carriage in a different fact situation with an exhaustive discussion of the primary business test. So I don't know what --
Hugo L. Black: On that issue -- on that issue, what app -- what application do you think that Universal Camera ruled last year into this -- what the courts got in here?
Walter C. Wolff, Jr.: Well, we -- may it please the Court, we -- the Universal Camera case, as I understand it, states that in a situation where there a hearing examiner has -- who has lived with the case and heard the -- the evidence has made certain findings that a Commission's finding to the contrary is really less substantial. And further, it is a -- a case where simply because there is some evidence or scintilla of evidence to support one finding that that should be weighed and considered by the Court even to a greater degree in a situation where a hearing examiner who's heard the evidence and this is a fact case based upon a factual situation, and the hearing examiner who has heard those facts and has found that the facts were believed by the witnesses that -- as they testified to them and we have a fact situation that is more or less established or at least, the Court should give considerable weight to the situation, in a situation where the question is, was there a sham or a fraud or a subterfuge insofar as the facts are concerned.
Hugo L. Black: As I recall, I'm -- I maybe -- maybe wrong, Universal Camera case indicated that we were compelled now to give more weight to the action of the -- of the judge to whom these cases had been somewhat turned over to decide. And we previously had because we had been simply saying that if there's a dispute in the evidence, that entry but as I recall it in the Universal Camera, we said that was no longer the rule because Congress had said that we should not follow such a rule.
Walter C. Wolff, Jr.: Yes, sir. I believe the Administrative Procedure Act was cited in --
Hugo L. Black: That's right.
Walter C. Wolff, Jr.: -- the language that I -- I just paraphrased it in my notes here but I believe it states that evidence supporting a conclusion maybe less substantial when an impartial experienced examiner who has observed the witnesses and lived with the case has drawn different conclusions from the boards. If I might get into the -- the particular facts insofar as -- as this --
William J. Brennan, Jr.: Mr. Wolff, may I -- may I just ask --
Walter C. Wolff, Jr.: Yes sir.
William J. Brennan, Jr.: -- a question before you do that, do I understand you to say a moment or so ago or suggest when you asked us to do -- listen to you with what followed what Mr. Ginnane had read from the legislative history. He said -- suggested something that -- about prearrangement, do you read the 1958 Amendment as proscribing only that kind of thing which, in effect, would be a prearrangement between your client and the purchasers of the sugar, in effect, by this device to act as carrier for them of this sugar with (Inaudible) consignees?
Walter C. Wolff, Jr.: Yes, sir. A -- a -- with this qualification, that possibly it's not only some specific prearranged plan but some type of sham or device used whereby it is evident --
William J. Brennan, Jr.: But -- but the essential thing has to be that in -- in actual facts, you're doing something in the way of transportation for somebody else.
Walter C. Wolff, Jr.: Yes.
Byron R. White: For-hire, for-hire.
Walter C. Wolff, Jr.: Yes.
Byron R. White: When in fact you're a for-hire carrier.
William J. Brennan, Jr.: Is that it --
Walter C. Wolff, Jr.: Sir?
William J. Brennan, Jr.: Is that --
Walter C. Wolff, Jr.: Yes, sir, I believe --
William J. Brennan, Jr.: And you say here that there isn't any evidence, sufficient evidence support any findings that in that sense, there was any prearrangement between you and the ultimate purchasers of the sugar.
Walter C. Wolff, Jr.: Yes, sir. And I believe that -- the reason I wanted to get into the facts is that I want to -- to try to show that this is not a situation where Mr. Shannon has a big driving business on one hand and then just hauls a little sugar back. That -- that's not the facts at all that the examiner in making his findings and the evidence clearly reflects that the major portion of the assets of this company are not tied up at any transportation facilities which in other cases has been held to be a very important factor in which the District Court in this particular case comments upon. The major portion of the salaries of the company are not tied up or paid to truck drivers. He has never held himself out to the general public to haul for-hire, has never been engaged in any major truck operations. All these were findings made by the examiner that were substantiated clearly in the record that there were no identifiable transportation charges made by Shannon to the purchasers of the sugar or any formula to asses those transportation charges but instead, his sales are governed solely by the market price of sugar in the San Antonio area that he purchases the sugar, taking title in his own name, bears all the losses that maybe involved on the same and attempts to sell the sugar as quickly as possible since the record clearly shows that the price on -- in sugar breaks very rapidly. The margin of profit is very, very narrow and the commodity deteriorates very quickly. As Mr. Ginnane had said it's -- it's like cash money except that the -- the dollar possibly doesn't deteriorate so fast in --
Hugo L. Black: What -- what name do they do business? I haven't seen that.
Walter C. Wolff, Jr.: E. & R. Shannon Company. It's -- actually, the reason I speak of Shannon only is that this was a company that a father and son rented, R. Shannon is -- was the son and E. Shannon was the father. And when he died, his mother -- Richard Shannon's mother inherited a portion of the company and they continued to do business under the name of E. & R. Shannon and they just substituted the name Emma (ph) Shannon.
Hugo L. Black: Where was his home place of business?
Walter C. Wolff, Jr.: San Antonio, Texas.
Hugo L. Black: San Antonio, Texas.
Walter C. Wolff, Jr.: That it was not the appellees' practice to take orders for the sugar and then to purchase it, that they sell the sugar for the going market profit in the San Antonio area. I might mention in response to a question that was asked Mr. Ginnane. It's clearly developed in the record that the word consignee that is used on Exhibit 1 that was referred to was merely the word that was selected by the representative of the Bureau of Inquiry and Compliance and the record clearly shows that it was an error and that the word that should have been used was the word purchaser. The Exhibit --
Potter Stewart: Mr. Wolff, the -- Section 203 (c) was passed long after the -- these proceedings ever started.
Walter C. Wolff, Jr.: Yes, sir.
Potter Stewart: And in fact just a few months before the Commission made its decision, do -- do you make any argument that if that that statute is not applicable with these proceedings?
Walter C. Wolff, Jr.: Yes, sir. Toward the end of our brief, I think are the last section. We referred to that that the appellants argued that the Ziffrin case is in point, insofar as this particular case is concerned but we contend that that the Ziffrin case was not in point because that involved a situation where there was an affirmative request by an individual to have a permit granted. And that in this particular case, there is a charge that has been made under a section of actual findings that were made that there was a violation of one or the other of two mutually exclusive sections without ever determining which one was involved, and that at least we should be entitled to be charged with the particular section that -- that they claim that we have violated.
Potter Stewart: Well, do you think that's the reason that the District Court didn't even mention 203 (c)?
Walter C. Wolff, Jr.: No, I -- I really don't know Your Honor.
Potter Stewart: Did your -- did -- was it argued to the District Court that 203 (c) could not be applied to this case because it was not enacted until long after these proceedings were initiated?
Walter C. Wolff, Jr.: I believe it was mentioned but I don't -- it wasn't actually argued in the oral argument and I doubt seriously if that is the basis of the opinion because the Court --
Potter Stewart: (Inaudible) if I can just say this. My -- as I read the District Court's opinion, it says that the Interstate Commerce Commission went hay -- haywire in saying that these people were either common or contract carriers. They were operating without appropriate authority in violation of 206 (a) or 209 (a). And I, myself, would -- could quite understand why the Court so held because it's difficult for me to see these people as either contract carriers or -- or public carriers. But 203 (c) doesn't require any such finding that they're contract carriers or carriers for-hire or common carriers. It simply prohibits certain -- that carriage bypass a -- by person who fill the certain description.
Walter C. Wolff, Jr.: Yes sir, except that it's not really the appellees' fault because the situation was that the -- the action was brought against us under Section 206 -- 306 (a) or in 309 (a), (Voice Overlap) --
Potter Stewart: That's what I understand, that's the reason I'm asking whether or not you -- it is your claim now or -- or has been ever drawn in these proceedings that 203 (c) is not applicable to you because it was not enacted until long after these proceedings were initiated.
Walter C. Wolff, Jr.: We have raised that -- that point but certainly that's not our -- our only contention because we believe that -- that that is a -- a technical defense, at least that's what we've called it but that from the facts, there has -- we have a primary business of buying and selling many items including sugar. And further, in the first place, there are two possible ways to interpret the Act - one a broad way, one a more narrow interpretation.
William J. Brennan, Jr.: Well, may I ask you right there Mr. Wolff?
Walter C. Wolff, Jr.: Yes sir.
William J. Brennan, Jr.: This gets back to the question I asked you before. If you interpret the 1958 Amendment as saying a private carrier can't do this. You might be in trouble but if you interpret the 1958 Amendment as saying, a private carrier, who went on a particular transaction is not in fact so -- to use my own words from -- from Drum, although I don't know where I got it, or I got it from the legislative history, not a pseudo private carrier, meaning thereby that you're not in fact a private carrier but you're really one for-hire. If it works that way then I gather you say on this record, you're free and clear. Is that right?
Walter C. Wolff, Jr.: Well --
William J. Brennan, Jr.: If -- if this -- if this is a prohibition against the bona fide private carrier doing precisely this, if that's what the 1958 Amendment is, then aren't you in trouble?
Walter C. Wolff, Jr.: Well, we believe of course that it depends upon the interpolate -- interpretation of what is --
William J. Brennan, Jr.: What was that --
Walter C. Wolff, Jr.: -- a primary business enterprise.
William J. Brennan, Jr.: Well that's -- well, that's -- that's what I'm suggesting.
Walter C. Wolff, Jr.: And --
William J. Brennan, Jr.: If this is a prohibition against a bona fide private carrier doing something, that's one thing. When there's -- there's a prohibition only when the private carrier accessed a pseudo-private carrier and is actually acting as a contract for-hire that might -- what might bring about a very different result.
Walter C. Wolff, Jr.: Yes, sir, although our position is that when the language and -- unless such transportation is within the scope and in furtherance of a primary business enterprise other than transportation of such persons (Voice Overlap) --
William J. Brennan, Jr.: Certainly, that wasn't transportation to what suggests being a fully private carrier, doesn't it?
Walter C. Wolff, Jr.: Yes, sir. And the question boils down to -- well, actually two things. First, we don't believe that -- that the -- the test of this primary business enterprise should be so narrowed and restricted so that we must show that we are a primary business only insofar as sugar is concerned but it is -- the Court should look at the record as a whole and the business as a whole and our operation as a whole. That's the first point. The second point is we feel that we have -- can show and the facts do show that we are really in the primary business of buying and selling sugar. And --
Potter Stewart: You can be a -- I'm sorry if you're still answering Justice Brennan. I don't want to interrupt you.
Walter C. Wolff, Jr.: No, sir.
Potter Stewart: I beg your pardon, you -- you think that the District Court applied the statute -- the standard which the 1958 Amendment of 203 (c) requires it to apply?
Walter C. Wolff, Jr.: Yes, sir. I definitely do because under the language of all the briefs in this case, insofar as the appellant is concerned and the Interstate Commerce Commission in their opinion specifically state that 203 (c) didn't change the law in any way but merely codified what was being interpreted by the courts and by the Interstate Commerce Commission prior to the Amendment, has made specifically a portion of the Act.
Potter Stewart: And so what did the Commission said about that?
Walter C. Wolff, Jr.: But we feel, of course, that in their opinion, the Interstate Commerce Commission reads something more into the Amendment that is really there. They see -- seem to read into the Amendment a further requirements and then really the -- the primary business test was designed to -- to prevent it.
Hugo L. Black: Do you say that the determination of whether you are -- or saying in your private or primary business does not depend on the commodities you carry measuring between them to see which one you can carry the most of, but depends on whether or not your primary business is buying and selling commodities out of which you can make a profit.
Walter C. Wolff, Jr.: Yes, sir. That at least that those are all factors going into the entire picture just like in all the cases, it's necessary to -- to scrutinize the entire operation to determine -- is this man a bona fide carrier, a private carrier of his own materials or is this a situation where there is either some implied or actual fraud or subterfuge or an intention to get around the specific provisions of the Act and to evade the principles of the Act.
Hugo L. Black: Well suppose you would carry 90% of wheat and other things that you can buy 10%. As I understand it, what you say is that you would be in the business of buying and selling for a profit and you wouldn't -- your primary business wouldn't be judged by the fact that you carried more wheat than anything else -- that you bought more wheat than anything else.
Walter C. Wolff, Jr.: No, sir. In -- specifically the Act says a primary business, not the primary business enterprise which would mean that an -- an individual can evidently have more than one primary business. And I might mention at this point that -- that --
Hugo L. Black: You've been dealing more than one commodity.
Walter C. Wolff, Jr.: Yes, sir. And I might mention that actually the Congress did not go as far as the recommended committee reports that were appended to the Interstate Commerce Commission report because the Senate Committee requested the use of the word solely in the Act that solely within the scope and in furtherance of a primary business and the Act was not passed without a word in it which would indicate to some extent, the intention of Congress when the Act was passed. Also, the Interstate Commerce Commission and this is in the record in the case, argued to change the definition of private carrier which was not done and the Committee Reports specifically state that there was no intention to unsettle the primary business test which indicates to me that there was certainly no desire to change the law in any way, shape or form that it was but to try to codify it. Now, whether it's made it clear or a more confusing of course is -- is another matter. I might mention this, may it please the Court and that is that when we're talking about volume, the evidence shows that there were 517 bags or 51,700 pounds of sugar in Shannon's inventory at the last inventory taking date immediately prior to this particular hearing which maybe considered a small amount or maybe considered a large amount but it's our position that that is a large amount of sugar considering the type of material and merchandises involved. The only other reference to any number of pounds that is found in the record that I could find was the testimony of Mr. Whitehead (ph) who was the representative of the Bureau of Inquiry and Compliance, the investigator for the Interstate Commerce Commission and it's found on page 75 of the -- of the record where he states, "From my observation I went by the warehouse one time and the gentleman in charge was not there so I did not invade the premises. However, I did look in the front door and there were several thousand pounds of feed stuffs stored in that warehouse." That's the only comparison we have as to the amount of feed stuffs that he may have had as opposed to the amount of sugar. But I don't believe that the -- the specific amount is -- it's certainly a factor but it's not important at least to the extent that the record has shown that we have a considerable amount of sugar in the inventory and the record further discloses that frequent sales and less than carload lots are made. And by examining the representative sales that are set out on Exhibit number 1 that was prepared by the Bureau of Inquiry and Compliance and introduced into evidence in this particular case from looking at the sales slips' numbers. It is obvious that less than a third of the sales that the -- Shannon made during this representative period of time were actually included in the Exhibit and even these particular sales show that Shannon was selling or obtaining approximately the market price for sugar in the San Antonio area.
Speaker: Would you be able to get a certificate from the Commission to carry on this operation?
Walter C. Wolff, Jr.: I don't know, Your Honor. I -- we have -- have assumed that we would probably not be able to but --
Speaker: I was just wondering whether you could.
Walter C. Wolff, Jr.: -- of course that's a problematic thing. I don't know if there's any necessity that we could show before that. Of course that's a matter we haven't gone into.
Speaker: Well, you are -- I thought -- there's no kind of a certificate that they could issue for this, is there?
Walter C. Wolff, Jr.: Not specifically. I'm afraid we'd have to either get a common carrier certificate or a -- or a permit common carrier (Voice Overlap) --
Speaker: Was this (Inaudible)
Walter C. Wolff, Jr.: -- contract carrier.
William J. Brennan, Jr.: Mostly, you're only permitted.
Walter C. Wolff, Jr.: Yes, sir.
Speaker: A contract carrier for yourself --
Speaker: (Inaudible)
Walter C. Wolff, Jr.: Yes, sir.
Potter Stewart: But here your whole argument I suppose --
Speaker: (Inaudible)
Potter Stewart: Your whole argument depends upon the -- the proposition that you couldn't get a certificate from the Commission because you're not on the business of carriage.
Walter C. Wolff, Jr.: Yes, sir.
Potter Stewart: Or transportation for-hire -- so then your answer or your -- your position is a resounding no, I should think.
Walter C. Wolff, Jr.: Well, of course, I -- I agree with -- with what the Court has said in that regard. If we are prohibited by this Court and are called something other than private carriers, although we believe that we are, then we approach the Interstate Commerce Commission and say, "What are we? Are we common -- are we contract carriers or common carriers?" And that is a -- a matter that we raised and what we call our technical defense to this matter. The Commission found we're either a common carrier or a contract carrier, of course, made no findings to support that -- because there's no evidence to support that and without telling us which or without giving us a chance to know in case we want to change our operations, do we cease holding ourselves out to the public which a common carrier would have to -- would do or cease the continuing contracts that we're suppose to have if we were contract carriers.
Potter Stewart: But why is the suggestion -- the question I was asking you earlier was, if 203 (c) as amended in 1958, does not require any finding that you're either a contract carrier or a common carrier and simply forbid -- prove -- forbids your transportation in Interstate Commerce of articles if you come under the -- the description in that very section.
Walter C. Wolff, Jr.: Because --
Potter Stewart: That was the change made in the -- in that 1958 Amendment as I see it.
Walter C. Wolff, Jr.: Except that the Interstate Commerce --
Potter Stewart: Not a change in the standards in primary business.
Walter C. Wolff, Jr.: Yes, correct. Correct.
Potter Stewart: But the change in the -- words that you -- you don't need anymore to be found -- to be either a contract carrier or a common carrier. It simply have come under that definition.
Walter C. Wolff, Jr.: The --
Hugo L. Black: Excuse -- excuse me. (Inaudible)
Walter C. Wolff, Jr.: No, sir. I was --
Hugo L. Black: May I ask you if -- if there have been efforts made since the very first Act was passed to require people who share their own goods to get certificates from the ICC.
Walter C. Wolff, Jr.: Not that I know of, at least insofar as I'm concerned to my clients --
Hugo L. Black: Was that discussed in the original passage of the Act?
Walter C. Wolff, Jr.: I -- I -- not in the --
Hugo L. Black: I assume they have the --
Walter C. Wolff, Jr.: The reports that I have read, it is in the record of the case that I can recall. The only question -- the only matters that were appended to the Interstate Commerce Commission's opinion were the discussions concerning what the Act -- why it is necessary to have an amendment and what should actually be included in it but I don't --
Hugo L. Black: What do you think was meant by the heading of the House Report "pseudo-private carriage"?
Walter C. Wolff, Jr.: I believe that it -- it is meant some sort of a prearrangement of plan, some plan whereby the consignee is receiving transportation at a reduced cost and if that is what the Congress had in mind --
Hugo L. Black: In other words, it can.
Walter C. Wolff, Jr.: -- when it passed the Act. The appellants in their brief and in their argument state that the Court below exceeded its permissible limits of authority in deciding the case in the court below as it did. The appellees believe that the trial -- this is not a case where the trial court improperly substituted its own judgment for the administrative judgment but instead, the facts in the case are virtually undisputed. The -- it is really a law question involved as to whether or not the primary business test as codified by Section 203 (c) is to be extended to a fact situation such as this particular case. And if the -- it is not to be so extended, there is absolutely no evidence or at least there is no substantial evidence in the record to support that conclusion and the conclusion that was reached by the Interstate Commerce Commission. The appellees have said before and have said in their brief and will say it again that they certainly do not quarrel with the fact that the Interstate Commerce Commission has done a -- an excellent job in this particular field, in the -- in the field of commerce nor that they do not always have the best of intentions in the filing of particular actions which they, under the law, are required to bring and file. But no institution or agency is of course perfect and in a situation where with the best of intentions, an agency tries or attempts to regulate an individual and interfere with the -- a bona fide business. We feel that it is a duty of the courts to scrutinize the situation and with -- that is what the trial court did in the case at bar. The appellants have cited several cases in their briefs in support of their position and the appellees have -- in their briefs have replied to those and will not go to the Court now by going into the various fact situations but there is one case, the Cahaba Steel case that was mentioned by Mr. Ginnane that was not referred to by the appellees in their brief mainly because we didn't have access to the loosely volume that it appeared in at the time that we wrote our brief. It is -- there's only a memorandum of opinion in the District Court and the only opinion that was printed in was the Interstate Commerce Commission opinion and we just obtained access to it. But that was an entirely different situation from the facts insofar as this particular case is concerned. It involved the transportation of salt and in the first place, the examiner in that case found against Cahaba. The second place, it was a situation where Cahaba had his offices in Alabama and sold steel joist products in the Texas and Louisiana area and while there, purchased salt. The invoices on the purchasers themselves showed that the seller of the salt in the Texas and Louisiana area gave a discount for the transport -- their normal transportation charge back to Alabama. And further, there was a -- an evidence, a letter from the president of Cahaba where he admits that the profits from the sale of a salt haul back enabled it to compete with steel joist fabricators at the point of delivery in the steel products and the purchase of salt and admitted that the salt sales are essential to the operation of their trucks and the delivering of their steel products. And there -- there is no evidence in the case at bar that the purchase of the sugar is essential for the appellees to make a profit from the sale of cattle or grain or their many other items. The only evidence is that they buy the sugar to make a profit which is of course is -- is just a statement of a common sense since they wouldn't be a business to -- to buy it, to make a loss or at least they wouldn't intend to do that for very long. The evidence does show that on occasion, Shannon has sent over empty trucks to Supreme, Louisiana and brought back sugar at a profit but that he -- at a particular time of the hearing, he was unable to do that because beet sugar from Canada and California was highly competitive in the area and depressing the market and he was unable to have made a profit insofar as the particular time of the hearing was concerned but that he had done it in the past. But certainly, it would not seem unreasonable for him to attempt to coordinate his transportation movements from the Texas area to the Louisiana area and back so as to obtain the maximum efficiency from the operation of his trucks. The appellees believe that it was not the intention of the Congress for individual such as in the case at bar to be unable to buy and sell products including sugar when they are and have been for many years in the general mercantile business with sugar being one of several commodities that they buy and sold nor is there any evidence whatsoever of any prearranged plans setup so that the real consignee may receive transportation at a reduced cost. One case that was -- is relied on by the appellants very strongly is the Stickle case which was decided by two of the same three judges who decided the Clayton case, both these cases being cited in all the briefs in the -- in the -- before the court. The Clayton case had held private carriage. The Stickle case held something other than private carriage. But in the Stickle case the freight rates were the same as a profit that Stickle obtained for his sale of the lumber. And lumber was the only item that was handled. So that all that Stickle was really doing was buying freight under the guise of being in the lumber business. In the case at bar, the freight rate is entirely different and the only amount that the appellees received for their purchase and sale of sugar is the going of market profit in the San Antonio area. The appellees don't raise sugar so naturally, the cost of hauling it is an important factor to determine its margin of profit since they buy and sell but also important are storage cost, bookkeeping cost, bad debt expenses, inventory losses, loading, unloading -- unloading cost, and so forth. As previously stated to the Court, it would seem to boil down to a question of whether or not the appellees' operations are really a subterfuge and there is no evidence in the record that that this is the case. All the evidence shows is legitimate purchasing and sale of sugar and the examiner's finding would certainly seem to have great weight insofar as this is concerned. If -- it would appear that unless all the evidence of the appellees is to be disbelieved that they are in the sugar business. How else could they buy and sell sugar when they don't raise it? They buy from the manufacturer, haul it to their place of business, take title in their own name, bear all the losses in connection with it, sell it on credit with bad -- with the attendant possible bad debt losses and in the interim period, they store the sugar. Must they haul by rail and pay those cost when they have their own trucks available for hauling and have had them available over the years for their complete operations starting with livestock and expanding to feedstock, grain, corn, molasses, salt, and now sugar. Nor are the appellees arguing that because they made no attempt to hide their operation that therefore there's no subterfuge. Instead that when the congressional committees speak of bona fide merchandising ventures as opposed to prearranged plans being setup to enable the real consignee to receive transportation cheaper. That more is meant than simply backhauling is not private carriage unless the particular party brings back goods with other means of transportation over and above his own trucks which is in effect what the appellants are arguing in this particular case. Instead, we submit that the entire record should be scrutinized and considered to determine if there is some prearranged plan between the real consignee and the hauler whereby the real consignee is only paying the hauler for the hauling itself. The type of plan of course can be either expressed or implied from all the facts. We submit that this is a type of pseudo carriage or subterfuge that the appellees, submit is necessary to be found for the entire record to show something other than private carriage, and there is no evidence to raise any of these questions in the case at bar. In their brief and our position to the appellees motion to dismiss the appeal or to affirm, the appellants in response to a question asked by the appellee concerning what more was necessary in order for a bona fide sugar merchant to be one. And in reply to that, the appellants listed certain things that they felt should have been done in order for the appellees to have been bona fide sugar merchants. These included employing, commission salesmen or brokers to develop an expanded territory, to make large scale purchases of sugar, to deal in futures or engage in hedging operations or to deal in beet sugar. In the first place, it would not seem necessary for a firm to do any of these particular things in order to be a bona fide sugar merchant nor is there any evidence as to what Shannon does on his other lines that he carries where there's no question but that he's a bona fide merchant. In the second place, they do deal through a broker which is shown in the record of the case and they have a number of sugar customers. Also, they purchase a considerable quantity of sugar considering the fact that it deteriorates very quickly. It has a very small margin of profit and a very flexible price market. In the third place, there is no evidence in the record that the appellees failed to have done any of these things. And even under the substantial evidence rule, when a governmental agency wants to enjoin an individual from operating a place of business, it would seem that it would have the burden of getting into the record the certain things that it believes that either the individual does or fails to do that would indicate something other than private carriage. Nor there should be a presumption that because the record is silent that that would mean that the individual has either done or failed to do something that is consistent with something other than private carriage. The record shows that the appellees are in a general mercantile business selling many items including sugar that they sell it for the going market profit to a reasonably large number of customers. There's no evidence that there are any other sugar purchasers in San Antonio other than the -- who Shannon sells to. The record is silent as to that but that there's no evidence as to whether or not other -- how other people made to sell sugar in the San Antonio area whether they bring the sugar in by trucks, by common carriage, or whatever other method maybe available to them. The -- there is evidence in the record that at the price sugar was selling in San Antonio, at the particular time of the hearing that nobody could have afforded to have brought sugar over from Supreme, Louisiana and made a profit because there's no evidence that -- that Shannon was either buying the sugar cheaper at a great discount in the Louisiana area or that he was getting a higher profit in the San Antonio area and since the average profit is only 25 cents to 35 cents and the average freight rate is 68 cents or 69 cents for one mode of transportation at over a dollar for the other, evidently no one could have made a profit in the San Antonio area at that particular time because of the market price of sugar.
Byron R. White: Well, Mr. Wolff what would have happen to your livestock business if you hadn't had this backhaul business? I suppose the livestock business would have been either less profitable or you'd had to raise your prices, you'd have less business. I mean there's a -- certainly there's an interrelationship between livestock and sugar in the sense that -- in -- in the sense that if you'd had to bring these trucks back empty, you're going to have to take less profit on your -- on your livestock business.
Walter C. Wolff, Jr.: Well, of course, there's no evidence in the record as to what the effect of returning empty would have been. The -- there is a --
Byron R. White: I wouldn't think you would argue that there was a -- and that that there's a -- there's a -- certainly, a supporting role of what -- to that hauling a sugar performs for the livestock business.
Walter C. Wolff, Jr.: Well, certainly all businesses to some extent are interrelated where the -- that is our position that hauling is just one of many items that go into the cost of a product, bookkeeping expenses, administrative salaries, salesmen's commissions or salesmen's cost and that those various factors all add together, bring out what an individual is doing. Certainly, if they return empty that -- let's assume that they do make some profit on the purchase and sale of sugar. On the other hand, assuming the other way, suppose they buy sugar at X number of dollars when they get back to San Antonio, it is worth only X-1 that they can sell it for. Then they would have been better off to probably not to have brought -- not to have bring the sugar back because they don't get paid for the transportation as such in any event. They get paid only -- if they paid extra only if they make a profit on the sale of sugar when they bring it back. The record in the case shows that the appellees' are in a general mercantile business and that they sell at the going market profit to a reasonably large number of customers. How they obtain those customers either by advertising and appointing commission salesmen or some other method is not controlling unless the appellant believes that that is material to the case in which event, it should have been developed into the record. The other differences between the Stickle case and the case at bar are -- that it was -- that there was practically no lumber in Stickle's inventory as opposed to the appellee's sugar business which has a reasonably large amount of inventory considering the nature of the product. The principle assets of the company in the Stickle case and the payrolls of the company were tied up in transportation facilities. Most of Stickles lumber purchases and sales were to fill preexisting orders which is not the case at bar. Stickle sold only one item which was lumber and he had a freight bill with his name on it and the location and the name of the consignee on it and actually the word consignee was used and the consignee had to deliver to Stickle's driver a check for the amount of transportation charge which was shown on the freight bill. In the case at bar, the appellees have a general mercantile business and sugar is only one line of the business. There's no consignee but a purchaser, no item or freight connected with the sales price in anyway. The appellants attached much importance to the fact that the appellees testified to the present market price of sugar in San Antonio, they couldn't properly at least send an empty truck for sugar and make a profit on the transaction. It's the appellees' position that such a statement is not controlling even under the substantial evidence rule. The evidence show that the cost of the beet sugar's being brought to the San Antonio area at the time of the hearing that the market was highly competitive. And that the appellees' couldn't profitably send an empty truck to Louisiana and bring back sugar, but that they had done so on other occasions. And certainly, it would be reasonable for any general mercantile business to attempt to coordinate their trucks so as to obtain maximum efficiency. The appellants contend in Mr. Mathews -- in his argument that the appellees, Mr. Ginnane, I believe it was, that the appellees contribute nothing to the sugar other than its transportation. In the first place, they store some of the sugar, they load it, they unload it, they bear all the risk of loss and damage, they bear the risk of a declining market, they sell on credit and bear the risk of a bad debt loss, what other service is a sugar merchant supposed to perform. The appellee does not argue that the primary business doctrine is so broad that anything that it does in order to make it overall business less expensive to operate would be in furtherance to that overall business. But they do argue that the doctrine goes further that the Interstate Commerce Commission found in the case at bar. As in the case of most fields of the laws, each case must be decided on its own facts and merits and those facts and by applying them to the law in the case at bar, the appellee submit that they are a private carrier of sugar under either of the -- a limited or a broader definition of primary business. They certainly haul sugar in furtherance of their general mercantile business and because of the various factors that were found by the District Court in the case at bar, such as the relationship of transportation and non-transportation products, no preexisting orders, buying on the -- on the market price, selling for the going market price, and other factors that are previously have been mentioned in the argument. They feel that they are in the primary business of buying and selling sugar under the narrow interpretation of the primary business test. Thank you.
Earl Warren: Mr. Mathews.
Amos M. Mathews: If the Court please. In the few minutes remaining, I want to catch on just three or four points. One of them is to haul particular attention to the Church Point Wholesale Beverage case that is cited in our -- all of our briefs. That case analyzes the legislative history and gives a reason for the enactment of the statute. And it points out very clear analysis that if the statute of the 1958 Amendment is not given the application that the Commission and the other appellants here contend for, that there will be a very serious breakdown in the administration and enforcement of the Motor Carrier Act. And it explains why, because of the device of buy and sell. And it also points out that it present possible breakdown in the enforcement of the Motor Carrier Act toward which the -- which the 1958 was directed. Now, I want to also mention briefly that we do not believe the Universal Camera case is applicable here because here there is no dispute in the facts. I mean the facts are -- there's no -- the -- they are just a certain set of facts that are not disputed and -- and there's no -- the only inferences are to be drawn from those facts. Now, if you will examine Exhibit 1 which as I say was reproduced in pages 4 and 5 of our reply brief and omits the last line which is a transfer -- which is a load to Laredo cases all of the rest are San Antonio and compute the average return or profits so-called for 100 pounds of sugar, it figures to 42 cents. The evidence of a -- an expert witness is that the average profit in sugar in San Antonio at that time was 25 cents to 35 cents. The carload rail rate at that time was 69 cents so the profit realized by Shannon from each -- from average profit was about midway between what wholesale dealers were making and what the freight rate was. In other words, he was rendering transportation at a reduced cost. Now, there's been some -- been some exchange of questions about whether there was an understanding between Shannon and the receivers of the sugar. It seems perfectly clear that there must have been a clear understanding that the receivers would accept the sugar when it arrived in San Antonio that is exhibit -- that is shown by Exhibit 1 because Exhibit 1 shows a very successful enterprise. Purchase of sugar, and delivery, and every transaction was a profit. So --
Potter Stewart: But that doesn't necessarily show any preexisting arrangement though, does it? It might just show a very ready market. I suppose people like soft drink manufacturers and candy manufacturer are always been -- in the market for sugar at the right price --
Amos M. Mathews: It -- it --
Potter Stewart: -- in any -- in any city.
Amos M. Mathews: It could -- it could indeed show a ready market, but it -- if -- but if -- if it does show -- it just show a -- a de facto of a very successful operation in the transportation. Now, reference was also -- some question was raised as to whether the amendment of 1958 applies. We cite the Ziffrin case, Ziffrin against United States in our briefs and it seems very clear to us that the -- under the clear holding of that case, the 1958 Amendment does apply. I also want to call your attention to the point that is readily apparent in the briefs that many of the cases that have been cited by counsel for the appellee were decided before the 1958 Amendment. Now, the legislative history or the -- or the -- the excerpts from the committee reports are -- are attached to the Commission's report. Of course, they're readily available but a scanning of those will make it evident that pseudo -- so-called "pseudo-private" carriage was not the only target of the 1958 Amendment. It is perfectly clear -- I -- I don't have -- certainly don't have time to go into that, but it is perfectly clear that there were three things at which the amendment was aimed and a straight forward buy and sell arrangement was proscribed as here. Thank you.
Byron R. White: Well, I just noticed that the House Committee's report was headed up pseudo carriage, like pseudo carriage for hire, is this (Inaudible) you submitted.
Amos M. Mathews: Well, that's just a -- an error in somebody's --
Byron R. White: You mean, pseudo, (Inaudible).
Amos M. Mathews: That's right.
Hugo L. Black: Well, that's the impression you've been exposing part of the brief of the Association here, pseudo carriers, pseudo carriers was unlawful, pseudo carriers, that's the closing paragraph as I recall it of their brief.
Amos M. Mathews: Well the -- I -- I think it's a very fair statement to say that the Amendment was aimed at buy and sells, straight forward as here. It was aimed at pseudo carriage also.
Earl Warren: Very well Mr. Mathews.