United States v. Drum – Oral Argument – October 12, 1961

Media for United States v. Drum

Audio Transcription for Oral Argument – October 11, 1961 in United States v. Drum

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Earl Warren:

United States, et al, Appellants, versus Henry Drum et al.

Mr. Ginnane, you may continue your argument.

Robert W. Ginnane:

May it please the Court.

On the essentially undisputed facts which I presented yesterday, the question here is whether Okalahoma Furniture Company is engaged in genuine private carriage.

Felix Frankfurter:

Before you move on, Mr. Ginnane, you pointed out one inadequacy from your point of view in the opinion of the District Court namely, that sufficient attention wasn’t made to some of the elements of control other than mere physical control.

Is that the only insufficiency of the opinion in your view —

Robert W. Ginnane:

No, we state —

Felix Frankfurter:

— after they review, not any legal deductions, but in their review of the basis on which the ICC ordered what it did.

Robert W. Ginnane:

Now we assume for the purposes of this appeal, that they sufficiently discussed the factor of Oklahoma’s control over the transportation operations.

What we think the court below failed to do was to pursue the alternative test as to whether — as to who —

Felix Frankfurter:

The alternative —

Robert W. Ginnane:

Test.

Felix Frankfurter:

Test.

Robert W. Ginnane:

As to who was assuming the financial risks and burdens of providing the transportation.

Felix Frankfurter:

Is that the only — the only inadequacy in considering the basis on which the ICC acts?

Robert W. Ginnane:

Yes, sir, that’s all we urge.

We urged yesterday that the test to be applied should be formulated in terms of the objectives of economic regulation of motor carriers.

That one of the principal objectives was to encourage the development of a sound public transportation system by restricting, with exceptions, for higher transportation to authorized carriers.

At the same time, the Act permits genuine private carriage.

In realization of the fact that in some circumstances for some shippers, a private carriage provides genuine economies or other advantages.

But normally, we think of private carriage as the situation where the shipper obtains separately the elements of transportation, the equipment, labor, fuel, and so on and by his own management and judgment puts them together into a transportation facility for the transportation of his own goods and at the same time, there are risks, inherent risks and disadvantages in genuine private carriage.

There’s the investment and equipment either by way of purchase or by lease.

There’s the problem of supervision of drivers scattered all over the country, the point at which Oklahoma encountered difficulty in its earlier operations.

And there is the problem of getting a balanced movement, inbound and outbound and above all, there’s the risk of non-utilization of equipment depending upon the fluctuations in business.

But as long as the shipper is willing to assume those risks and burdens, then his private carrier operations present no problem under the Interstate Commerce Act, because natural economic forces will limit the extent to which private carriage diverts traffic from the public transportation industry.

It’s when we get into variations from what is clearly an admittedly private carriage that we need some kind of a realistic test.

And we find that test suggested in this Court’s decision in Silk v. United States in 331 U.S., in which this Court held that owner-operators and the facts of that case were not employees for the purposes of the Social Security Act.

Now, of course that status of employee isn’t necessarily the same for statute with different purposes, but we think Your Honors did suggest what the approach should be.

John M. Harlan II:

[Inaudible]

Robert W. Ginnane:

May I answer you this way.

Robert W. Ginnane:

Under the so-called control test —

John M. Harlan II:

[Inaudible] the ICC formulated test [Inaudible]

Robert W. Ginnane:

Well, I think that’s a relative matter.

May I answer you this way?

Under the control —

Robert W. Ginnane:

Under the contest of who actually controls the various aspects of the transportation operation, you get infinite variations on those control facts, and indeed that’s why we did not present the control — the physical control aspect of the case to this Court, it’s so much a fact question, varies from some situation of situation, we didn’t think we should bring it here.

The alternative test, we think, is of more generalized applicability who — looking in the allocation of risks and costs and you can tell that by and large from un — the undisputed contractual arrangements between the parties, who is taking the risks of performing a transportation service?

Is the shipper taking those risks, or is the shipper buying transportation on a unit on a per mile basis at a predetermined cost to him?

Now there are — certainly there are going to be variations on that.

But if your — but if Your Honors sustain our contention, it will be an extremely useful generality to all concerned in the transportation business.

Felix Frankfurter:

Mr. Ginnane, I have difficulty or a greater difficulty, namely here the statute which puts contract carriers within the regulatory power of the Commission and the shipper’s transportation facilities private carriers out of it, is that right?

Robert W. Ginnane:

That’s correct, sir.

Felix Frankfurter:

Well, let me —

Robert W. Ginnane:

For economic regulations.

Felix Frankfurter:

Pardon me.

Robert W. Ginnane:

For economic regulations.

Felix Frankfurter:

Surely here, the ICC can say in this case it would hold it’s a private one, the next case we hold it it’s contract carrier, just capriciously, can it?

Robert W. Ginnane:

Of course not.

Felix Frankfurter:

In other words, with my difficulty is we’ve got a problem of judicial review here.

And if it’s really an ad hoc determination in each case, what’s the basis on which a District Court upsets the determination of the ICC?

I can see if it’s a so-called a fact question, we can draw on the general consideration, there must be some basis.

It can’t be just capricious.

It can’t be drawn out of the blue, but if it is a — or shall I say a circumstantial a matter, the variations of various diversities in the permutations and combinations of differences in items, then we’ve got a problem on businesses of the District Court to overturn.

There must be some guiding basis on which it can say the order shouldn’t stand, it can’t just say, the order shouldn’t stand because we as determiners of the fact to decide differently.

Robert W. Ginnane:

The District Court could have held it — could have decided in this case depending upon the facts that — no, the Commission was wrong in fact, that Oklahoma —

Felix Frankfurter:

(Inaudible)

Robert W. Ginnane:

That Oklahoma was assuming the burdens and risks of engaging in transportation.

Felix Frankfurter:

Well, it can do so if there’s no basis for the finding of the Commission the other way.

If there’s a contested cont — if there is a contest on what can be found then certainly the District Court must follow to the finding of the Commission and we’ve got a problem what our scope of review is.

I’m merely suggesting that it can’t be left at large to say each case is a case by itself.

Felix Frankfurter:

It must be a case by itself with reference to something.

Robert W. Ginnane:

So that we can apply a consistent and nondiscriminatory pattern.

Now, the language that Your Honors used in the Silk case which we think provides the guide here and I quote, “The Social Security agency and the courts will find that degrees of control, opportunities for profit or loss, permanency of relation, and skill required in the claimed independent operation are important for decision.

No one is controlling nor is the list complete,” in other words, if we’re to look at the total situation, including the risk undertaken and who is undertaking the risk to find the economic reality.

Now, turning to these arrangements here, under these contractual arrangements, Oklahoma — between Oklahoma and the owner-operators, each owner-operator provides a tractor which he drives himself except in unusual circumstances for both the use of his vehicle and for his services as driver.

The owner-operator is paid on a mileage basis, strictly on a mileage basis for transportation actually performed.

The owner-operator bears the cost, the investment, and the vehicle, the operating expenses and the entire risk of the non-utilization of equipment.

Now the separate leasing and collective bargaining agreements seemed to say that the owner-operators are separately selling their services and the use of their equipment, but the under like — underlying reality is brought out by two contracts in this record.

First a per mile rate, strictly a per mile rate, the owner-operators received for the use of their equipment is to be compared with the minimum or overhead charge plus mileage which characterizes all commercial renting of vehicles whether one of us goes to rent an automobile from a drive-it-yourself organization or to rent big truck tractor.

Those organizations simply will not rent on a straight per mile basis and take all the risk of the car or the truck sitting around.

Secondly the per mile rate at which the owner-operators are compensated for driving, is to be compared with the weekly salary plus mileage, which Oklahoma pays the drivers of the tractors which it owns.

The economic reality is that the owner-operators by assuming the risks of transportation are selling transportation to Oklahoma at a predetermined cost per mile for such transportation as is actually performed.

And this predetermined cost consists of the mileage payments to the owner-operators for the use of their vehicles and for their services plus the readily allocable cost of social security which is measured by the salary payment by the driver — payments made to the drivers, liability, insurance and the vacation benefits.

We think on those facts, the owner-operators are contract carriers and that Oklahoma is not engaged in private carriage.

(Inaudible)

Robert W. Ginnane:

11 contract carriers.

There is nothing in the record to suggest that they are acting in concert.

Now, I’d like to dis — to characterize briefly the various elements on which Oklahoma relies for a contrary conclusion.

Most of the factors of the —

William J. Brennan, Jr.:

The —

Robert W. Ginnane:

Certainly sir.

William J. Brennan, Jr.:

Mr. Ginnane, in — isn’t there some element of combination?

Isn’t there effective bargaining agreement involved here?

Robert W. Ginnane:

Yes.

In the collective bargaining here, the owner-operators are dealt within a separate appendix somewhat as they were in their agreement involved in the case Your Honors had last term, the Oliver case.

It’s a separate specialized treatment in this — in an appendix effected by the agreement.

It appears in the record at —

William J. Brennan, Jr.:

There’s a treat in this individual thing?

Robert W. Ginnane:

This separate appendix appears in the record at page 142 and as to how they’re characterized it says, the company has heretofore had certain truck drivers operating under separate contracts which contracts are to be abrogated in a new classification of truck driver employees is hereby created known as truck drivers and maintenance men and this agreement involves only such employees.

And then it contains specialized provisions.

Robert W. Ginnane:

For example, under the general agreement, the regular salaried employees become entitled to a vacation benefits if they work at least 1900 hours in the period.

As applied to these owner-operators, they become entitled to vacation benefits if they had driven at least 75,000 miles.

In other words, the separate appendix provides special treatment for the owner-operators.

Felix Frankfurter:

Mr. Ginnane, while we’re on that point, may I ask you, sir, if these men are not truly employees of Oklahoma, then have they any right to bargain collectively with it under the Labor Acts and would not it be a violation of the anti trust laws for a conjures of independent contractors to bargain with one as an employer?

Robert W. Ginnane:

Wasn’t that, as I recall, sir that was pretty much the problem before this Court in the Oliver case last term.

And Your Honor dissented, as I recall, on the ground that they were so clearly at least under the facts of those case, you thought they were so clearly independent employees that they just didn’t belong under the — in collective bargaining under the National Labor Relations Act.

The majority of the Court, as I recall, in effect held that the relationship of these owner-operators to the overall activities of the employer, perhaps in competition would straight salary employees was such that it was an appropriate subject for collective bargaining notwithstanding the possible application of the state antitrust law, in that case, the Ohio law.

Felix Frankfurter:

As a general proposition, isn’t it true that conjures of independent contractors do violate the antitrust laws if they seek to bargain through the force of their combined weight with some customer?

Robert W. Ginnane:

In the face of this Court’s recent decision in the Oliver case, I would be reluctant to say so.

That involved the state antitrust law, but perhaps it would carry over to the federal law.

I don’t think I can say so in the face of that opinion.

Felix Frankfurter:

Didn’t that opinion hold that those people were employees?

Robert W. Ginnane:

The majority opinion did not discuss the precise question for there — to be treat — or to be categorized as employees or independent contractors.

Rather, it’s held that the basis on which they were treated by the employer or the employers was sufficiently related at least in terms of competitive relationships to the treatment of the straight salaried employees that it would an appropriate subject for collective bargaining, but without purporting to define whether they were employees or independent contractors.

The most of the factors on which Oklahoma has relied at one time or another to indicate that this is true private carriage, our factors which are equally applicable to — and admitted even to a typical contract carrier operations.

For example that Oklahoma determines when and where the vehicles go and determines the order of loading.

That’s the characteristic of the contract carriage in which a contract carrier in terms of the statute, statutory definitions dedicates equipment to the exclusive use of a shipper.

Now, the provision that in the equipment leases that Oklahoma shall have exclusive use of the equipment is a common aspect of legal contract carriage.

The fact that Oklahoma assumes responsibility for seeing that there’s compliance with ICC safety regulations simply begs the question, because those obligations, those safety obligations are imposed upon whoever is in fact engaged in transportation either as a contract carrier or as a private carrier.

The fact that Oklahoma retains responsibility for cargo loses doesn’t prove anything because neither the Interstate Commerce Act nor the ICC regulations require a contract carrier to assume responsibility for cargo losses.

Finally, they continue to suggest that it’s significant that they retain the right to hire and fire the owner-operators as drivers.

By which I take it, they mean, that they can hire and fire them and still continue to use the tractors.

Well, that — that just doesn’t stand up because the lease agreement covering the tractors is terminable upon 30 days notice by either party.

And in addition, since under that lease agreement, Oklahoma doesn’t obligate itself to give any owner-operator as much as one pound of freight.

It may well be void to run enforceable for lack of consideration or lack of mutuality.

That agreement is worth reading carefully, we submit.

Our problem is how to draw a practical line between bona fide private carriage and transportation for a hire which is disguised in various leasing arrangements.

We think the lines should be drawn right here that there can be no such thing as bona fide private carriage where the shipper is obtaining transportation on a predetermined mileage basis from owner-operators who are assuming all the risks of the transportation business.

John M. Harlan II:

Is there any suggestion here that this arrangement was prompted by a desire to avoid jurisdiction of the ICC?

Robert W. Ginnane:

We are not suggesting improper motivation upon bad faith on the part of the appellees.

Robert W. Ginnane:

We take the case as an honest difference of opinion between them and the Government as to what refers the line between a private carriage and contract carriage.

There’s nothing in the record that suggests bad faith or improper motivation on their part.

Felix Frankfurter:

If he — is there anything in the record or arguable from the record which would explain the economic impulse to this kind of an arrangement as against a garden variety of the private carriers?

Robert W. Ginnane:

This — well, this one thing that prior to 1952, Oklahoma was engaged in obviously bona fide private carriage with vehicles which it owned and with salaried drivers.

And the record indicates that they stopped that and switched to these leasing arrangements when they discovered that they were being defrauded by their drivers particularly on the long haul trips through the improper use of company credit cards to the extent of about $27,000.

That appears in the record and that it — and it was at — it was at that point that they first went into the leasing arrangements which were held by the Supreme Court of Arkansas to be contract carriage on the part of the owner-operators, and that in turn apparently led to the draft of the second set of contracts which is involved in this case and which are still on effect.

Charles E. Whittaker:

Mr. Ginnane, as I understood your argument, you say that there can be no private carrier relations here if the known — the costs are fixed and known on the mileage basis and the lessor of the leases — the vehicles assumes all the risks.

Now, do you limit that to a situation where the vehicles are leased from the same persons as hire their services to drive them or would it make a difference?

Wouldn’t the same cost be known if the leases were from some independent truck leasing company, and then these men merely hired their services, wouldn’t the claim cost be known?

Robert W. Ginnane:

No, sir.

Charles E. Whittaker:

They would not?

Robert W. Ginnane:

Because if you or I go to one of these big truck rental companies, they will not rent to us, a big truck tractor on just so much per mile, because for all they know, we may have it sitting around our yard two-thirds of the time.

They will insist upon a certain minimum or overhead amount, plus the mileage.

Charles E. Whittaker:

That’s the common practice.

Robert W. Ginnane:

That’s right.

Charles E. Whittaker:

Not legally required it.

Robert W. Ginnane:

Oh no, not legally require it.

It’s the only way they can — it’s the only way where they can survive financially.

Charles E. Whittaker:

But if some truck leasing company deviated and did lease on a mileage basis, and then certain drivers hired their services independently, would not the same fixed mileage cost that you complain of exist?

Robert W. Ginnane:

Certainly, but do we — well, but we would have no basis for complaining there because in that situation, the shipper is getting these ingredients from separate sources and he’s putting them together himself.

Charles E. Whittaker:

Your complaint —

Robert W. Ginnane:

And if he’s able to get them on such a basis that he can end up with a known predictable mileage cost —

Charles E. Whittaker:

Your complaint then is that really because they’ve gotten both the vehicle and the driving services from the same man —

Robert W. Ginnane:

Well, that’s where — as a practical matter sir, that’s how these cases and these problems arise —

William J. Brennan, Jr.:

But your —

Robert W. Ginnane:

Case after case.

William J. Brennan, Jr.:

Your position doesn’t depend, as I understand it, on whether or not these owner drivers are employees.

Robert W. Ginnane:

No.

They might be employees for some purposes, perhaps for the Social Security Act or —

William J. Brennan, Jr.:

But as a practical matter, your point is that the combination always goes with this arrangement, that is driving services and the vehicle owned by the drivers.

Robert W. Ginnane:

That’s right.

That’s the practical thing we had again and again in enforcement.

And as here, the — with the shipper trying to — trying to get it on something like a mileage cost with the risks being taken by the owner-operators.

Now this Court can’t solve all the problems of transportation in this case, but it can solve one big one, by drawing a realistic and practical line between bona fide private carriage and by — and the for hire transportation which increasingly has been carried on under a variety of leasing arrangements suggested by (Voice Overlap) —

Felix Frankfurter:

By bona fide, you mean objectively determinable.

Robert W. Ginnane:

Yes, objectively as we can.

We do not claim to be infallible.

Felix Frankfurter:

No, but you — when you introduced the word bona fide, you’re going to make a question of motivation as you call it.

Robert W. Ginnane:

I mean, bona fide in this — in a genuine economic sense of assuming the risks of providing a transportation service and I should defer the rest of my time to Mr. Rice —

Felix Frankfurter:

I suppose —

Earl Warren:

You may.

Felix Frankfurter:

— a shipper may sue astuteness, get on this side of the line that became private and contract carriage as much so as a taxpayer can get on this side of a tax line so he may have in mind the difference in dollars and cents.

Robert W. Ginnane:

I have no allusion that in this or any other litigation, are we going to put an end to the tough borderline cases.

Felix Frankfurter:

Alright.

It’s important in view of the fact that you answered Justice Harlan earlier, there’s no suggestion on the part of the — on the part of the Government that this is a cunning device to get — to find a loophole in the law.

That isn’t — you put that out of consideration.

You’ve said that no matter how bona fide an arrangement they may be, there is a line to be drawn legally speaking between contract and private carriers and that line must be observed no matter what — high minded or economically justifying purposes there may be.

Robert W. Ginnane:

As Your Honor suggested the problems we frequently have are under the tax loss, thank you.

Earl Warren:

Mr. Peterson.

Oh, you’re with —

Roland Rice:

Mr. Rice.

Earl Warren:

You’re — Mr. Rice.

Roland Rice:

Mr. Chief Justice, may it please the Court.

The two significant elements in highway transportation are the vehicle and the driver.

And I think that in any consideration of the problem here, we must constantly keep that in mind.

The control test, so-called which the Court examined, was one way in which the Commission looked at the facts before it, but our quarrel with the Court is that it relied wholly upon the control test and did not look at the second test or the second body of facts or situations which was before the Commission, namely, what has been called the risk of doing business.

And regardless of what maybe the result of applying the control test, we think that in this particular situation, the risk of doing business test is finally the more important in determining the status of these owner-operators here.

And we think that the Commission really relied upon that evaluation and we think it is the important evaluation to be borne in mind.

John M. Harlan II:

What in practical — every practical sense was the difference between what happened before and after this arrangement except the title to these trucks was put in the driver?

What’s the essential difference between the full employee situation which you wouldn’t attack initially and what the company did for the reasons that the District Court found that they did?

Roland Rice:

Well, I think there is no difference in terms of service received by the company and the company got transportation service.

John M. Harlan II:

Is there anything more than title involved in the — in between the two arrangements where the trucks were?

Roland Rice:

Not anything basic insofar as that concept of risk of doing business is concerned, no sir.

John M. Harlan II:

Either looking at it from the stand — economic standpoint or from the control standpoint?

Roland Rice:

No.

We think that there are in this connection some significant facts that ought again to be emphasized, one, the lessee, Oklahoma Furniture had imposed upon it no promise, no obligation to use these owner-operators a particular mile, nor to give them a particular volume or tonnage of traffic.

It was absolutely none guaranteed.

A further consideration is that there was given to certain employees who drove the owned vehicles of Oklahoma Furniture Company, a guarantee of six hours pay per work — per work day, but there was no such guarantee through the owner-operators so that if the regular employees report, they get a six-hour pay compensation, but if the owner-operators report and don’t do any work, they won’t get anything at all.

That goes it seems to me, to constitute a very important fact in showing that the real risk of doing business here is upon these owner-operators.

Now, within the objectives of the National Transportation Policy, the conference which I represent has a tremendous stake in this case as was pointed out by Mr. Ginnane yesterday when he talked about the economic aspects of the case.

Those objectives in this policy are the developing, the coordinating and the preserving of a national transportation system adequate for the needs of commerce and the defense of the United States.

Our carriers, our general commodity carriers are a part of that system, and that policy indicates clearly that the Commission should seek to develop say adequate and economically sound transportation companies as parts of this system.

It is our view that the decision of the court below threatens the achievement of these objectives of the National Transportation Policy by endangering the traffic which our people normally might get.

From the very fact that whether the intervener is here, supports our view in this regard because they too have desirable traffic which if this type of arrangement is proper can be channeled away from the regulated carrier whether it’s common contract or for that matter whether it is the common carrier railroad system of the country.

This effort, we think, is merely symptomatic of a problem in several cases cited in our brief.

If you would take a look at the Stickle case which is in the Tenth Circuit Court, you will find that a lumber, an important commodity, is there involved.

In Pickard, which came from the Western District of New York, we’ll find that furniture is involved.

In the Lamb case which again came from the Tenth Circuit, we will find that wheat was moved by a somewhat similar device in one direction and groceries in the opposite direction.

In the La Tuff case, we will find that air cooling equipment was moved and also furnace fittings.

We’re really talking here about very significant and important traffic, so that what is to be preserved in promoting this national transportation system is tremendously important in terms of economics and traffic.

Felix Frankfurter:

But to get — to become more particular rather than these large considerations, I didn’t quite understand your reply to Justice Harlan.

If I did not misunderstand his question, it was, what difference was there between an arrangement which concededly was that of a private carrier — carriage and this, except but for the title in the vehicle.

You said there wasn’t any.

Roland Rice:

Well, perhaps I didn’t catch the whole import of his question.

Of course, what did happen there, Mr. Justice Frankfurter and I hasten to correct myself if I didn’t properly construe the question is this, that by this change, the company, Oklahoma Furniture Company was relieved of the risk of doing business itself and I certainly wanted to be understood that way and these risks of doing business, we believe —

Felix Frankfurter:

He asked specifically was there any other difference except the change in the title of the vehicle and you said no.

Roland Rice:

Well, I possibly misunderstood the question, Your Honor, and I want to modify and correct my answer by what I said in response to your question, Mr. Justice Frankfurter.

Insofar as the service is concerned, I don’t think there was any real difference.

John M. Harlan II:

What risks were shifted to the carrier other than those incident in the transfer of title that were not in the company’s — not at the risk of the company before in the — on arrangement?

Roland Rice:

Oh, the risks of making the transportation fail.

Roland Rice:

In the first place, the company did not have to buy the vehicles and then there was a question of whether or not it would be an economic enterprise to have the company hold these vehicles when the vehicles were not actually being used.

Now, that risk of making money on those vehicles and to be able to replace the vehicles upon their being worn out depends upon how much the vehicles are used over a period of time.

Hugo L. Black:

I suppose —

Roland Rice:

You have —

Hugo L. Black:

I suppose probably the risk that the same change would take place if a merchant had a big building, and he was bearing — paying taxes, keeping it up, keeping it in his business.

He transferred the title to somebody else who had to do those things.

Roland Rice:

Those things would have to be done by somebody.

Of course in this instance —

Hugo L. Black:

And some loss or profit is going to come out of it.

You’re saying is that, as I gather it, that Oklahoma Furniture Company gave by reason of this device to take no risk of law in cases of loss of operating — operating, it is the same, but just the risk of profit that can get a good enough contracts.

Roland Rice:

That’s right and then there are these elements to be considered.

There is maintenance of these vehicles and this —

Felix Frankfurter:

(Inaudible) —

Roland Rice:

Pardon me?

Felix Frankfurter:

I would just say upkeep.

Roland Rice:

Upkeep.

Gas and oil and the non-use and if I misunderstood the question, I do want to add that these things would have to be done if these vehicles were the vehicles of Oklahoma Furniture Company, all the maintenance and the repair, and the furnishing of gas, oil and so on, would have to be borne by Oklahoma Furniture, but as soon as they transferred over to the other people, all these costs, not just the risk of loss or gain from operation but these costs are automatically taken away from Oklahoma Furniture and put over upon the owner-operator.

Hugo L. Black:

The difference in renting — driving himself and having your own car and having the basic cost of repairs, isn’t it?

Roland Rice:

That might be very considerable —

Hugo L. Black:

(Voice Overlap) —

Roland Rice:

— very considerable difference.

Well, the real — the real question here, Your Honors, as we see it is whether the transportation conducted — as conducted is transportation for hire or private transportation and an important consideration here as is seen by the Court in the Le Tuff case mentioned in our brief pages 18 and thereafter, that is a decision of the District Court in Minnesota, is I think quite relevant.

The Court there said, where one’s object in the transportation of property on public highways is to earn compensation for the use of his equipment and his services, he cannot evade regulation by execution of the lease — of leases or other agreements.

And we think that that principle is applicable here as it’s also applicable as stated by the Court in the B & C Truck Leasing case which comes from the Tenth Circuit, it’s a 1960 decision and which we rely upon in our brief, and which says that where — well, first of all that the Act is highly remedial in nature.

And that it should be liberally construed, and that its terms are sufficiently broad to reach all those who are in substance engaged in the business of transportation and it is our assertion here that these carriers, these owner-operators by furnishing both the vehicle and the driver service are engaged in the substance of transportation and we think that the decision of the Court in that case is right in holding when those two are put together.

As they say, when the acts of all are linked together as integrated parts of procedure through which property is transported interstate commerce such acts themselves become unlawful.

Thank you very much.

Earl Warren:

Mr. Peterson.

William L. Peterson, Jr.:

Mr. Chief Justice, may it please the Court.

There are several material facts that I don’t feel have been brought out and I’d like to do so at this time.

William L. Peterson, Jr.:

First of all, Oklahoma Furniture Manufacturing Company manufactures low cost furniture.

It is the cheapest furniture that can be purchased in the industry and that type of business, that type of manufacturing is extremely competitive, the most competitive of the industry.

Now, Oklahoma charges for this furniture based on a zonal basis.

And the — the zonal base or the zonal price for the furniture is not dependent upon the distance of the place of sale from Guthrie, Oklahoma.

That’s dependent more upon the competition within the area.

Now, Oklahoma has always tried to be and we feel it has always been a private carrier.

The reasons that it has been a private carrier because this is light bulky cargo, hauling furniture and it’s undesirable from a for-hire carriage standpoint and there is only one carrier, the record reflects that there is only one carrier which hauls from Guthrie uncrated furniture and this carrier goes only west.

Now, the reason that the crating is extremely important is that this is inexpensive furniture and the cost of crating remains the same, so therefore the cost of crating furniture, if Oklahoma had the haul crated, would make it extremely high.

In 1952 when this lease arrangement was changed over, the company — and the company counsel submitted the lease agreement to the Interstate Commerce Commission representative in Oklahoma City and he made suggestions to the lease arrangements which were complied with, and then that lease arrangement was put into effect.

After Arkansas declared in the action which has been mentioned that these drivers were contract carriers within Arkansas, Oklahoma Furniture through its Vice President, Mr. Walker, and the company counsel again went to Fort Worth this time to talk with the Interstate Commerce Commission representatives there.

And the record shows that at that time, it was suggested that this arrangement was wrong because Oklahoma Furniture didn’t have control and that these people weren’t drivers or weren’t employees.

And therefore, the present lease arrangements were drawn in our effort to make these men employees of the company.

Now, under this — under this lease agreement, Oklahoma obtains the complete right to use that truck, and it has a right to hire and fire the drivers independently of the lease agreement.

Under the union contract, of course, these men aren’t treated as employees.

After this, the change in the operation was substantial really because Oklahoma provided — after that provided workmen’s compensation, social security, it gave these drivers vacation benefits and military service benefits and things of that nature.

And therefore, we feel that these men have been made employees.

If it please the Court, I’d like to now talk just a little bit about this aspect of control.

Mr. Ginnane stated that he was making no issue as to this control but you’ll find on page 17 of their brief in Footnote 8, where it states in this appeal, we do not challenge the District Court’s conclusion that the evidence did not want a finding that Oklahoma lack control of the details of the operation nor do we argue as to whether the court below gave too narrow meaning to the Commission’s control test.

We assume, for present purposes that the court below correctly apply that test as relating only to the operational aspects of the transportation.

In other words, what Mr. Ginnane is saying in his brief and before you is that he admits control, but he admits upon his terms.

The Court in this case said that Oklahoma directed, dominated, and controlled, (1) the transportation of its products, (2) the equipment concerned therewith, and (3), the personnel concerned therewith.

In other words, this is Oklahoma’s operation as a private carrier and not the operation of these people as contract carriers.

Now, we don’t feel that Mr. Ginnane has the right to assume things about the District Court’s opinion which was not there.

Now, the District Court arrived at — arrived at each conclusion and decision in this case based upon all the facts and circumstances surrounding the transaction together with the actual practices there under.

And it quoted from the Commission decision of H.B. Church Truck Service Company Common Carrier application.

The question as to who has a right to control and direct must be answered in the light of all the facts and circumstances surrounding the transaction between the carrier and shipper and of the actual practices in the conduct to the operation there under.

No element of such facts and circumstances is by itself controlling.

Well, if the Court did which I’m sure that it did and that the States did, examine all the facts and circumstances surrounding the transaction which currently includes these methods of payment then it just as much in a position to answer whether or not these men are in substance or engaged in transportation, for-hire as it is whether or not these men or whether or not the company has the right to direct control and dominate the transportation service.

In other words, all these things were considered by the District Court.

Another thing that I would like to point out is that I take it that their argument here is that these men have the essential risk of engaging in the transportation service.

William L. Peterson, Jr.:

That isn’t correct.

These men leased their tractors to Oklahoma and of course it’s payable on a cents per mile basis.

These men are not (Inaudible) truck people, and it would be — there would be more risk to these men involved in a flat rate method of payment than it would be on a cents per mile, because the gas is burned on a mileage basis.

The oil is used on mileage basis and when these men determined, what’s it is going to take to run that equipment, it’s all done on a mileage basis.

That’s the most accurate way that you could arrive at any type of expense.

Now Oklahoma pays for transportation itself.

In other words, the rent payment is made regardless of whether or not there’s anything hauled.

Anywhere these trucks go, the rental payment is due and the wages of the drivers is due.

Charles E. Whittaker:

But Oklahoma —

I think that Mr. Ginnane’s real point in that connection was that no minimums are guaranteed and no amount of mileage is stipulated – guaranteed.

William L. Peterson, Jr.:

Well I don’t — I don’t really know that that would be material if that’s the only thing.

Of course, they haven’t suggested it to us before.

Perhaps, we would have put in a minimum mileage, but I don’t think it’s a material in this case because here’s a situation where a close relationship between the company and these men.

Now, the record indicates that — well, in two instances here, that drivers were first — the drivers of the company owned vehicles and they were promoted up through the ranks.

Now, these men know how much transportation Oklahoma does.

They know that that equipment is going to be used.

They know it.

Now I know there’s no minimum in there, but we’d be happy to supply one if that’s the only objection and in this connection, if the equipment goes out loaded and comes back unloaded, it’s Oklahoma who bears that cost.

And also Oklahoma will bear the risk of efficiently or inefficiently loading that equipment when it goes out and Oklahoma directs all those movements, and Oklahoma also selects this equipment and names the driver to drive it.

Now normally, that is the owner of the vehicle because the company has found that they have a better safety record when that’s done and the equipment is better maintained when the owner drives it.

But there are instances in this record where Oklahoma assigns different drivers to different trucks.

In other words, that’s not an ironclad rule and the District Court’s opinion reflects that this is done whenever business, reasons or convenience make it necessary.

So for this reason, we feel that there is no merit to the questions presented by the Government.

John M. Harlan II:

Are the drivers free to use these trucks for third parties or something like that?

William L. Peterson, Jr.:

Absolutely not.

They have never done that and the record indicates that neither that has been done nor has the — nor have the goods of any other person been hauled with these trucks and incidentally, Oklahoma owns all of the trailers, there are 26 trailers utilizing this operation, Oklahoma owns everyone of them out front.

(Voice Overlap) —

Hugo L. Black:

(Voice Overlap) –-

Excuse me.

Hugo L. Black:

Excuse me.

Go ahead.

Hugo L. Black:

If there’s a loss from the failure to use, who bears the loss?

William L. Peterson, Jr.:

Loss from the failure to use —

Hugo L. Black:

The truck.

William L. Peterson, Jr.:

Well, that’s —

Hugo L. Black:

You answered that they do not hire anybody else, of course, they’ll lose the money, I presume that.

Who bears that loss?

William L. Peterson, Jr.:

Well, I’d have to say that the lessor does.

But it’s never happened nor has — nor was the question asked.

Hugo L. Black:

He would bear it if the owner was using his own truck.

William L. Peterson, Jr.:

Well, I don’t know necessarily that there would be any loss from the truck.

Hugo L. Black:

Let’s say, idle half of the time, say?

William L. Peterson, Jr.:

Well the overhead would be borne to Oklahoma.

I turn the balance of the time over to Mr. Iden.

Earl Warren:

Suppose you had a work stoppage in your — in Oklahoma and you were closed for several months.

The entire loss of that would be borne by the lessor?

William L. Peterson, Jr.:

Well yes, Your Honor under the present agreement, it would be but insofar as I know that’s never happened in the history of all these, nor was the question even asked by the Commission in the record.

In other words, whether or not there’s have been a profit or loss by these lessors from this lease agreement, was never even asked, and the record won’t indicate whether or not Oklahoma is making a profit or loss from engaging in this transportation as a private carriage, likewise doesn’t appear in the record.

Now, those are financial aspects that — I believe that you’re talking about in the record just isn’t broad enough to cover them.

Felix Frankfurter:

But the legal consequences are there aren’t they that you’ve just answered in the questions put to you.

William L. Peterson, Jr.:

Yes, I —

Felix Frankfurter:

Those derive from the document itself, don’t they?

William L. Peterson, Jr.:

That’s correct.

Earl Warren:

Mr. Iden.

Charles R. Iden:

Mr. Chief Justice, may it please the Court.

It’s been quite interesting to me to see that Oliver case kicked around that I don’t feel too good about it.

The last time I saw Mr. Previant, he and I were here and we argued that to the Court and I was on the wrong end of the decision.

The question was asked whether or not, in that case they were found to be employees in the lower courts.

In my efforts to prepare that case, and if this is interesting from this point of view that we felt that the Oliver was an independent contractor and the Ohio courts so found that either I feel that when this Court reversed the Ohio courts that they must have found Oliver to have been an employee or the union wouldn’t have had the right to bargain for him under the —

William O. Douglas:

What was the citation of the Oliver case?

William O. Douglas:

Do you have it ready?

Charles R. Iden:

I’m doing best to forget that case.

(Attempt to Laughter) It’s a 3rd Law Edition.

I couldn’t cite it in the —

Potter Stewart:

I think its 358 United States Report.

(Voice Overlap) —

William O. Douglas:

You’re not now — you’re not now confessing error (Inaudible)

Charles R. Iden:

Oh, I never confess error.

(Attempt to Laughter)

The interesting part is — was, in that case, I felt that he was independent contractor and I feel this Court said he was an employee.

Now here, I feel that these boys are employees and if we lose, you’re going to have to find they are independent contractors, so much for Oliver.

I think it was Mr. Justice Brennan had some question to Mr. Ginnane.

What he would suggest this Court could do about fixing a rule for this, I think that I would go further than Mr. Ginnane would and I will approach it this way.

I like to feel that sometimes you could answer these questions a little better if you get away from Washington and get out where these things are occurring.

I am from Akron, Ohio and we have a few trucking companies around there and we have a few truckers.

And I have many people come in to me and that’s why and I’m here.

I’m just an intervener.

People come in to me and they have problems with these carriers so how can we haul our own goods.

And I want to answer the question — your question the way I advise my clients and I think it’s stronger that Mr. Ginnane put it.

I tell them, “You can rent trucks just as you would rent them if you want to Hearst, as he put it.”

Now how does Hearst rent their trucks?

They will rent them by the mile.

They don’t rent them by the amount of goods that’s transported.

They rent them by the mile and Hearst will furnish insurance.

It’s common.

If you rent a car, when you drive it, the Hearst, they furnish the insurance, they furnish the car, they furnish the gas and oil and they repair the car.

They will tell you, “Now, we buy a $100 deductible insurance and if you don’t want to pay that minimum of a $100, you pay us the next $3 a day or some extra premiums if you want more coverage” and I think that’s the key to the leasing of the equipment.

It can have no basis whatsoever to the amount that’s greatly transported.

Does Hearst care how many people you put in the automobile when they rent it to you?

Of course, they don’t, so long as you don’t put them on the roof.

Charles R. Iden:

That’s the key to the running of the equipment.

Now, I will say to this Court that that’s not what clients like to hear.

They want to find a device so that they can measure the rental of that equipment by the amount of crate that’s carried.

That is wrong and I tell them further, “Who’s going to drive that truck?”

That employee and this is where I go further than Mr. Ginnane, that driver of that truck must be your employee and he must be employed by you just the same as every janitor, every production man, and every office man in your company.

If you pay profit sharing, he gets profit sharing.

If he — if your people get vacations that truck driver gets vacations, you must pay social security, workmen’s compensation.

And every benefit, every fringe benefit and everything else that you do in hiring employees, you must do for that employee.

If you require all your employees to have their picture taken and have it put in the employee’s record, you also must do that.

Now that’s where I go farther — further than Mr. Ginnane.

Now that’s the difference between these cases that they have discussed in our case.

This case is unique.

And as you read this lower court cases on this problem, you will find that to be true.

In every one of those cases, you will find something lacking, because they are trying to measure the amount of — the amount they pay upon the amount crate transported or they’re trying to avoid the benefit — the detriments of certain back haul problems.

You will find in most of those cases that the shipper, the manufacturer, the private carrier manufactures the product that he wants to move one way.

He has nothing coming back.

And in order to make private carriage work, just as you must — it’s true of common carriage or contract carriage, you have to put freight on that truck both ways.

And so that they enter into devices in order to avoid the problem of driving that — moving that truck empty one way, and that was again the trouble and I will agree with this Court, I will agree with Mr. Ginnane, that’s wrong.

William J. Brennan, Jr.:

Which side are you on here?

I —

Charles R. Iden:

I’m just an intervener.

(Attempt to Laughter)

You asked the question if Mr. — I say that I’m going to contrast what I’m talking about with this case here.

That did not occur in this case.

William J. Brennan, Jr.:

Well, I don’t quite understand, would you sustain the Commission in the Oklahoma Court.

Charles R. Iden:

Certainly not.

William J. Brennan, Jr.:

I see.

Charles R. Iden:

This case is unique.

I think in order to understand this case you must understand the problem that the Commission was faced with in the normal case.

And the method that the subterfuge in every one of these cases and I haven’t bore you with all of them, but in the Lamb case.

William J. Brennan, Jr.:

But what perhaps I should ask you is, does the pattern in the Oklahoma case fit the advice you gave your clients?

Charles R. Iden:

Certainly.

William J. Brennan, Jr.:

Yes.

Charles R. Iden:

Absolutely.

They rent this — the — my case isn’t identical.

The —

William J. Brennan, Jr.:

You haven’t (Inaudible)

Charles R. Iden:

No, mine is Weather-Seal from one of the manufacturers from Ohio and ours is very similar.

They lease this truck.

They lease — it’s not a trip lease.

Oklahoma takes the risk of whether or not they’re going to put anything into that truck coming back.

If they got some raw materials at the other end that they own, they bring it back.

You will find in these cases that they’re referring to the Lamb case, the Allen case, the Lamb and Poynor, 259 F.2d is in my brief, I don’t think.

William J. Brennan, Jr.:

Well, maybe I misunderstood you, but in Oklahoma, they do bring raw materials —

Charles R. Iden:

If they — if they —

William J. Brennan, Jr.:

And that you think is alright.

Charles R. Iden:

Well certainly.

William J. Brennan, Jr.:

What you tell your client is they can’t bring something back to somebody else.

Charles R. Iden:

That’s right if it’s not their primary business.

One way they try to get around this thing is they’ll bring back exempt commodities and this agricultural exemption causes an awful lot of problems, but you can’t solve it, Congress took care of that.

They will have to take care of that.

But they’ll bring farm products back and they’ll bill in order to make it appear that the private carrier is using that truck both ways they will fictitiously make it appear that the shipper is buying this wheat and the oranges and these farm products and then selling them, of course, as a subterfuge.

Felix Frankfurter:

But can the private carrier do exclusive carriage for a particular shipper?

Charles R. Iden:

Well, a private carrier under the definition by Congress is a manufacturer, a person engaged in a primary business.

Felix Frankfurter:

Well, I don’t — I beg your pardon, I misspoke.

Can the contract carrier hire himself exclusively to one shipper?

Charles R. Iden:

Oh!

Certainly.

Felix Frankfurter:

Well, then (Voice Overlap) —

Charles R. Iden:

He’s an independent contractor.

Charles R. Iden:

He’s an — you’re doing it independent business.

Felix Frankfurter:

So the ownership of the goods on the return isn’t very relevant, maybe relevant but isn’t very decisive, is it?

Charles R. Iden:

I would say that it is because if this –-

Felix Frankfurter:

(Inaudible)

Charles R. Iden:

Well, the contract carrier must have the authority to haul for everyone that he’s hauling for if he could make a contract but the company that has crate moving both directions, he can do it.

Felix Frankfurter:

That’s what I’m talking about.

Charles R. Iden:

Oh, certainly but if he is — if his shipper only has crate moving one way then he’s got a dead head himself.

Felix Frankfurter:

That’s true but if — but the ownership of the return goods is immaterial provided that he’s under contract to ship those goods though — for the same person for whom he hauled the original.

Charles R. Iden:

Yeah, the contract carrier (Voice Overlap) —

But he hasn’t (Inaudible) —

Charles R. Iden:

Oh, certainly, he might have half a dozen contracts that he might — depending on the breadth of his authority.

William J. Brennan, Jr.:

Well, your point if I understand it is that if one of these private carriers begins bringing stuff back for somebody else, he may get himself in the situation where he has to be certificated as a contract carrier, (Voice Overlap).

Charles R. Iden:

That’s correct.

Like I say that in those situations, these fellows are violating the law and he’s wrong because the Act says that if a private carrier is one who is controlling hauling goods which is his primary business, and if General Motors started hauling oranges back from Florida in order to put it in the supermarket, that’s not their primary business.

I presume that they could bring some oranges back to serve in their cafeteria and they own the oranges, it was legitimate, there’s nothing wrong with it.

This got to be their business, so that’s the dividing line here.

Oklahoma Furniture leases this truck, they pay a mileage rental, they pay that mileage whether they had any furniture entered or not.

Now would you get into the discussion of the cost of transportation is a little word of art here.

A manufacturer, when he’s talking about cost of transportation, he’s not talking about how much it cost to drive a truck per mile, he’s talking how much the cost made per unit of the item I’m going to sell.

And in this case, when Oklahoma Furniture pay so much a mile for the lease of that truck, they don’t know when they send that out and they take this risk whether they’re going to have that truck one-fourth full, clear full, or whether when it returns, they’re going to have any freight entered at all.

So that depending upon how much furniture they can have outbound and whether or not they had any return of raw materials determines their cost of transportation so they are taking the risk.

And it’s just as common as the sun coming up in the morning, the manufacturer paid employees by the unit of work just performed, so that the payment of a driver by the number of miles he drives is just as — it should be so common, it’s beyond any argument.

Hugo L. Black:

Did I understand you to say that Congress had some way to settle this controversy in connection with agricultural?

I recall that you had some cases in Florida.

Charles R. Iden:

I say that — I think that the agricultural exemption is probably caused one of the problems here because you don’t have to have any authority at all to handle agricultural commodities.

So these fellows who will had it — there’s a unbalance of regulated transportation into some of these agricultural areas that the — so long as Florida’s principal —

Hugo L. Black:

That’s still unregulated?

Charles R. Iden:

Agricultural commodities are certainly —

Hugo L. Black:

That’s what I asked.

Charles R. Iden:

So that you find what causes this, not at our case, but the evil that they’re talking about is that so much of the freight moving out of Florida is unregulated and most of the freight moving in is regulated so there’s a terrible temptation for these people to fix up fictitious deals to trip lease; they’ll come out unregulated from Florida then they’ll — they will — what I say is evil then, they will lease the truck to haul a material which should be regulated and then they’ll lease it — the driver for one trip, and I say that it’s wrong, I say it’s not a bona fide deal where an employer hires an employee or truck driver for one trip.

Charles E. Whittaker:

We don’t have such a case.

Charles R. Iden:

No.

Charles E. Whittaker:

As I understand it.

Charles R. Iden:

That’s right.

I only point that out so that this Court will understand what the difference between our cases.

This is unique.

This is the first time that a case has come up where the Commission says, “The employment contract is lawful.

We can’t quarrel with it.”

They have said, “Your release is proper” and they have found no subterfuge and so in desperation, they have said, “Whenever in this case, the lessor is hired to drive the truck, we’re going to find that is irrebuttable presumption that that is wrong.”

Felix Frankfurter:

But that isn’t the ground of the decision.

That isn’t — that isn’t what I read from the report of the Commission.

That last — that that’s all there is to it if you hired the driver.

Charles R. Iden:

That is the — nothing is — even Mr. Ginnane said that he would agree that has been no subterfuge here.

Felix Frankfurter:

Well but — but you may cross the line quite candidly without doing any subterfuge; subterfuge isn’t the problem.

The problem is whether you come inside or outside the particular line.

Charles R. Iden:

Your Honor, that’s (Voice Overlap) —

Felix Frankfurter:

And you make them outside and by being secure as the newborn baby.

Charles R. Iden:

The situation though is that when lawyer set this up, they make a paper deal.

They will make that — they will hire the fellow for the one way trip, and they will lease it for the one or two way trip and they release it at the end of the trip, and then they’ll take the trip — truck over and they’ll (Inaudible) — they can new lease going back and they will take the same driver and they have the new employment with that driver — that his employment shifts throughout.

I think that that’s wrong.

Maybe I shouldn’t go that far.

Felix Frankfurter:

Well, evasions maybe wrong on the concept that you have to have a palpable paper flimflam.

Charles R. Iden:

I’d like to read something.

Private carriers, of course, need not own their vehicles outright.

They may lease them from their owners.

Moreover, they may employ the owners to drive such leased vehicles without necessarily converting the operation into a contract carriage operation.

That sounds like something from my brief but that’s from the Interstate Commerce Commission’s brief.

And in answer to some of the questions here, Mr. Ginnane says that the real issue boils down to the fact that where you lease, where you hire the lessor of a truck to drive it, that is the evil because they said if you lease a truck from Hearst and pay a mileage rate and then you hire another driver, hire a driver at a mileage rate, they say that’s alright.

So that it —

Charles E. Whittaker:

Didn’t you answer to my question, answered to me that the vice in here in leasing entirely this — from the same man, leasing from a particular person and hiring that particular person to drive the truck.

Charles R. Iden:

I felt that he — I felt that he had narrowed it down to that issue.

Now —

Felix Frankfurter:

With the attendant risks.

It would be attendant incident of the risks involved in the utilization of that equipment.

Charles R. Iden:

He ignores — they ignored the fact that in this case the — and the risk is not transferred.

The lessor of that equipment is getting a — well, that’s the reason I went into these other cases.

Where they work — the lease is based among the amount of freight that’s going to be moved in that truck by one device or another then the risk is transferred to the lessor but where the shipper, the private carrier pays for the use of that truck, whether monthly, or weekly or a mileage basis irregardless of the amount of goods they ship to that truck then the risk has not been transferred because the shipper, the private carrier Oklahoma here has assumed the risk of how much business he is going to have, how much freight he’s going to be able to get on to this truck, how much he’s going to return on that truck.

And the cost of shipping his goods has gone up very tremendously as to whether or not he has a thousand pounds on the truck or whether he has 10,000 pounds in the truck or whether or not he can bring backs some goods on the return trip.

One of the problems here that I see was — I think the motive in this case is — I can’t agree with it.

They take the position that there has been a — the evil here is the divergence of freight from a common or contract carrier to a private carrier and I think that must assume that these carriers have a vested right to a certain amount of freight.

I don’t think that’s true.

I think the issue here is to whether or not these people are violating the law and not the fact that the freight is moving from carrier from common and contract carriers or private because we must bear in mind that private carriers are recognized by the Congress as regulated carriers.

And in the — and in the preamble to the Act, Congress has said, it is hereby declared to be the national transportation policy of the Congress to provide for fair and impartial regulation of all modes of transportation subject to the provisions of the Act.

So administered as to recognize and preserve the inherent advantage of each.

Now, bearing in mind that in the Act there are common carriers, there are contract carriers, there are private carriers.

And so I feel that the Commission of all parties of this case should be asking for a fair administration of the Act.

It should not be taking the position.

There’s been a divergence of freight to get in to that question and where — we get far afield.

That was the cry of the railroads in the 1930s when the trucks started.

The truckers were able to give a more vigorous attention to business and that’s how they grew.

And if you want to know the basic fact of why transport — moving the freight is being diverted if you want to use the word common and contract carrier or private carriers because the common and contract carriers are now reaching the point that the railroads were in the 1930s and they’re not as free to make — give the service that the public needs.

And when the con — when the common carriers are able to give service, they’re going to get the freight back and they can’t get the freight — I don’t think they should be getting the freight back to — by appealing to this Court to assist them in making it difficult for a private industry to transport their own commodity.

Felix Frankfurter:

But in this case we have shown and the record shows that there was an ordained garden of varieties private carriage here, (Inaudible) the company found (Inaudible) so expensive or too inconvenient then they made this arrangement.

They diverse to themselves of the very thing that you’ve just indicated, namely a private carriage is more enterprising and more effective and more desirable for one reason or another.

Now, the unquestioned private carriers that there was in this case by the Oklahoma Company, they got difficulties.

And the Oklahoma Company said it that clear cut position it had and it made a new lease, and this new lease came under the scrutiny of the Commission and that’s why we’re here.

Charles R. Iden:

They changed their method in conducting —

Felix Frankfurter:

And (Voice Overlap) —

Charles R. Iden:

— that I consider a lawful business.

Felix Frankfurter:

Well, therefore the change of method begets some legal problems.

Charles R. Iden:

That’s why we’re here.

There’s no —

Felix Frankfurter:

Yes.

Charles R. Iden:

There’s no question about that.

Felix Frankfurter:

So that — so that all you’ve said earlier before my intervention was that private carriage had shown its superiority in this case, just call into question because clear cut private carriage, they got difficulties and they have to make a different arrangement.

The question is whether it’s still within the concept of the statute of private carriage or whether it’s for contract carriage.

Charles R. Iden:

Absolutely correct.

I think — well, the problem is here and our arguing this is we are conferred with the best brief that we could write probably written and more stronger — in stronger terms that we could — would write one and that is the dissenting opinion of Commissioner Webb from the Commission.

I wouldn’t — I don’t think I would’ve had the nerve, let’s put it that way to write a strong, a brief as he did.

And if you will read — and if you’ll read that, he sat with the Commission.

I think he knew it was on their minds and that he is the one that pointed out that the only thing that the Commission could find wrong was the fact that the lessor was hired to drive the equipment.

Felix Frankfurter:

But that isn’t true if you look at the Commission’s prima facie, at least that isn’t — you may be right, I’m not now questioning because this isn’t both rolling off a lot, but it isn’t fair to bring the case — boil the case down to that fact because on page 49 of the jurisdictional statement which reads the Commission’s report, you’ll find what to me is a crucial paragraph of that — of the Commission’s Report, 49 and 50.

In which it enumerates the items of risk that remain with the shipper or rather the items of risk that are transferred from what theretofore only on the shipper when he had a private carriage and now belong to these owner-operators.

Now, you may deal with them, I’m not saying you can, all I’m saying that the case doesn’t reduce itself with the simplicity which you indicated a minute ago.

Charles R. Iden:

Let me read this, Your Honor.

Concededly, without arrangements, with respect to the common (Voice Overlap) —

Felix Frankfurter:

Where are you reading it from Mr. Iden?

What’s the — where are you reading from?

Charles R. Iden:

From the Interstate Commerce Commission’s opinion.

Felix Frankfurter:

Yes, I know but I’m — what’s the page?

Charles R. Iden:

At page 160.

Felix Frankfurter:

Page what?

Charles R. Iden:

160 of the —

Felix Frankfurter:

Record.

Charles R. Iden:

The record.

Felix Frankfurter:

Thank you.

Charles R. Iden:

Concededly, without arrangements with respect to the complimentary services neither the driver nor equipment services of the owner-operators standing alone could be found to be those of carriers’ for-hire.

I think they base their decision on that concession.

Hugo L. Black:

Well, I suppose that is true beyond the doubt that it gets the near bad rating of a car to carry on your own transportation would not make you a contract carrier.

Charles R. Iden:

(Inaudible) the point.

Charles R. Iden:

I feel that the Commission has boiled this down to this issue and I think that that’s the evil. I say that one — that’s the reason I am here because the district — the local supervisor told — we have a similar situation.

The local supervisor says in reliance upon this decision before it was appealed in Oklahoma that we were wrong because the lessor was driving the truck.

He says that’s it.

That’s what this case holds.

And I said, well, I made peace with them by saying I’ll enter that case and if the Government wins, we’ll quit and if I can change that decision, then he’s to agree that we’re right.

Felix Frankfurter:

Well, speculatively, I just wonder whether you would quit on that bare fact.

Charles R. Iden:

I think I would review my —

Felix Frankfurter:

Your advice {Attempt to Laughter].

Charles R. Iden:

— arrangements of the — in light of the decisions that would come out and I would still try to have my party obeying the law.

Felix Frankfurter:

I think that’s for granted.

Charles E. Whittaker:

In what respect, if it all if I may ask, does the Commission’s ruling set forth at pages 31 — 21 and 22 of the brief of Respondent Drum vary from the judgment we are asked to review here?

Starting out the question, “Do the regulations apply to the leasing of equipment of private carriers or shippers by a person not an authorized carrier?”

Answer of the Commission: “No.

The regulations have no application to such leasing arrangements.

For such an arrangement to be proper, the leased vehicle must be transferred to the shipper’s possession and be operated under the shipper’s complete direction and control by the shipper’s own driver.”

Is the shipper responsible to the public in case of accident and responsible to the Commission for compliance with the safety regulations, etc?

Is there a variation in the judgment below from that ruling?

Charles R. Iden:

This question was asked concerning the leasing regulations for those who were approved by this Court in MC-43 American Trucking Association case.

This question was asked as to whether those regulations applied to private carriers and the answer was no because those regulations do apply only to common contract carriers.

We say that the Oklahoma Furniture arrangement comes within the answer given by the Commission that the leased vehicle has been transferred to the shipper’s possession and it is operated under the shipper’s complete direction and control.

I think that there’s no — I don’t think that the Commission argued that point in this case.

Charles E. Whittaker:

Well, I understand Mr. Ginnane not to deny that.

Charles R. Iden:

He’s right.

Charles E. Whittaker:

Because he didn’t bring that question here.

Charles R. Iden:

I think that’s right.

Charles E. Whittaker:

So therefore, I ask you, what’s the difference between what the Commission says is the proper understanding of its regulations and the effect given them by the court below.

Is there a difference?

Charles R. Iden:

I have failed to see it.

I think that we are (Voice Overlap) —

Charles E. Whittaker:

Not this case?

Charles R. Iden:

That’s right.

I think we — I think we’re complying with what the Commission has said we had to do.

I think that the — I think that when the Commission — their opinion said that the lessors guaranteed a fixed indefinite cost for transportation, I think that that finding was in error.

I think that it was not based upon the record as a whole and I think that the District Court wisely and properly reversed them on that because — and we’re belaboring the subject on that point again because, as I say, that we have not illegally transferred the risks.

I think that as Mr. Ginnane said, we have our right to lease trucks.

We don’t have to invest our money in trucks.

But understanding the way that these things can — you can buy trucks and you can pay very little down and you make payments over four or five years.

You can — as far as a private carrier is concerned, he doesn’t have to lease them if he’s only interested in avoiding the outlay of money, that’s begging the issue.

I say to this Court that the private carrier has a right to lease trucks, then there’s nothing wrong with this lease, that if this lease in any way reflected the amount of goods that this shipper was going to put on then I say that its subterfuge.

It’s wrong.

It’s a violation of law.

And I’d say that these people that were hired were not lawfully and properly hired and that’s wrong.

And I certainly think the fact that these people were covered by union contract and there’s no evidence that that wasn’t a good faith labor contract, this union represents everybody that works there.

If there’s ever been a fact that bolstered up the situation that it’s lawful, that is it.

I’d better send the union not to organize Weather-Seal.

We don’t have that situation there.

We just hired them and we’re just paying them, but I don’t think that you can take the issue with the fact that these people are properly and lawfully hired and directed how to do their work.

The trucks are used for nothing other than the transportation of Oklahoma furniture is proper.

There’s no dispute, not a scintilla of evidence in this record as to that.

Hugo L. Black:

May I ask you this question with all of your familiarity with the business, this is the reason I’m asking you, to show you, it will be easy to answer it with your knowledge.

As I understand it that they made a contract here for so much per miles for carrying these goods to the Oklahoma Furniture carriers.

That’s right isn’t it?

Charles R. Iden:

That’s right.

Hugo L. Black:

And it’s to be carried for so much per mile, they have a company — a furnish company does not own the equipment.

Charles R. Iden:

They own the trailers.

Hugo L. Black:

They own the trailers, but not the other equipment.

Charles R. Iden:

Yes, not the power.

Hugo L. Black:

What’s the difference in that contract than one made with the contract carrier, a contract — in a frequent con — on frequently contracts made with the contract carrier as you’ve carry our goods for so much per mile, and that’s it.

Charles R. Iden:

The contract carriers may make that kind of contract.

That their ordinary contract is made on the basis of how much goods they transport and the contract carrier is generally — let’s say this, almost, I would say 100%, I think, an independent contractor, he is the one that carries the public liability insurance.

Hugo L. Black:

(Voice Overlap) — yes.

I want to get away from words of definition and labors.

What is the difference between this contract and the contract that is, permissibly made and frequently made between a person who wants his goods shipped and a contract carrier?

Charles R. Iden:

Contract carrier is an independent contractor.

Hugo L. Black:

I don’t care what he is.

What is the difference between the contract itself?

What — take this contract —

Charles R. Iden:

Well the —

Hugo L. Black:

(Voice Overlap) —

Charles R. Iden:

I can answer (Voice Overlap) —

Hugo L. Black:

— with the contract carrier.

Charles R. Iden:

The contract — the contract carrier is — is a contract, the transportation of goods.

So there’s no —

Hugo L. Black:

So much per mile.

Charles R. Iden:

I was going to keep — but make it very simple — keep away from these — very simply the contract that a shipper makes with a contract carrier is a contract for the shipment of goods.

There is no such contract here.

William J. Brennan, Jr.:

Well what you mean is that so much per piece, so much per ton, so much for something, is that it?

Charles R. Iden:

That is —

William J. Brennan, Jr.:

— and rather than as here on a mileage basis.

Charles R. Iden:

That’s right.

Now that — I’m not saying that a contract carrier cannot make a contract with a mileage basis, but that is not the normal, that’s purely a special situation.

Hugo L. Black:

It can be done, can it not, as a method of payment for the contract carriers?

Charles R. Iden:

That is truly done with a specialized deal if you’re hauling —

Hugo L. Black:

Well could it be — is it the kind of contract that can be made for the contract —

Charles R. Iden:

It’s legal.

Hugo L. Black:

Now, is there any difference except the one you’ve mentioned that in the main, the contract carrier charged so much of a contract.

Charles R. Iden:

The only way I can show that — to tell the difference is to show the different ingredients in the contract.

The contract carrier will always be responsible to the public.

In this case, Oklahoma Furniture is responsible for the — to the public.

In the contract carrier case, the contract —

Hugo L. Black:

(Voice Overlap) Oklahoma, suppose (Voice Overlap)?

Charles R. Iden:

Oklahoma is responsible to the public.

Hugo L. Black:

How is it responsible to the public?

Charles R. Iden:

The truck has a collision; they’re the ones that are responsible.

The contract carrier is always responsible in the other situation.

It’s a question of responsibility.

Hugo L. Black:

Well, I understand that’s the one difference there.

I noticed here that Arkansas has held that — now has it held that the contract of this kind of carrier that carries goods under contracts of this kind, must get a license in Arkansas as a contract carrier?

Charles R. Iden:

Apparently, the arrangement that Oklahoma had prior to the present arrangement, Arkansas held to be illegal.

This present arrangement as I understand it has never been reviewed with the Arkansas courts and I am not from Arkansas.

I have no opinion of what the law of Arkansas is.

Felix Frankfurter:

So that therefore you — therefore you wouldn’t deny from Oklahoma — only of Oklahoma law which is one of the most ambiguous branches of law that I know is involved, when they suffered from its ambiguity, but you wouldn’t deny that Oklahoma could as a matter of court law owed the lessee — the lessor as well as the lessee liable for injury resulting.

You wouldn’t deny that would you?

Charles R. Iden:

Yes, I would.

Felix Frankfurter:

You would as a matter of tort law?

Charles R. Iden:

No, I’m talking about the — you said lessor.

Felix Frankfurter:

(Voice Overlap)

Charles R. Iden:

Your Honor said lessor.

Now, I would say this in every State in the union that if I’m driving a truck, I — and I have an accident, I am primarily responsible.

My employer is always secondarily responsible.

Felix Frankfurter:

Do you mean a State couldn’t as a matter a tort law say this is so dangerous and it’s potentially dangerous instrumentality that the real owner is to be held liable as well as — as well as the particular driver?

I can’t imagine that.

Charles R. Iden:

Well, I can imagine that a normal furniture truck would be treated as a dangerous instrumentality as you’re viewing it.

I — I could imagine that if we were — if we were moving an outsized type of equipment that its — you’re the type — that you’d have to have a permit from the State to move it even on a highway, an illegal load that you’re going to permit that had outriggers on it using up the whole highway and that exceeded the capacity of the truck, I would say that possibly like a landlord who doesn’t have his — the balustrades properly built, the lessor might be liable.

Your question was, did I feel that this lessor under this situation, then I certainly would deny it.

Felix Frankfurter:

I — no.

I said, could Oklahoma, as a matter of local tort law, do what the early cases at the time 45 years ago when I didn’t know about them, make all sorts of ruling — holding the ultimate owner of a vehicle liable for injury.

Charles R. Iden:

Well, Your Honor asked the question could they and I suppose they could but I don’t think they would.

Felix Frankfurter:

I think in the early days they did as a matter of fact.

There was a writ — there was writ who wrote a — who summarized all the cases and the legal conclusion he reached is (Inaudible)

Charles R. Iden:

Well I — I would say — I think we’ve long passed the era when a Court would say that the operation of a normal automobile or normal freight vehicle would be a dangerous instrumentality.

Felix Frankfurter:

Well, I’m not suggesting it all, I’m saying is the possibility of tort liability is rather unlimited.

Charles R. Iden:

Yes.

And I would say that —

Felix Frankfurter:

(Voice Overlap) —

Charles R. Iden:

— that the lessor — not as lessor but as the driver.

And bear in mind that when this truck — this company, we’ve talked about what the powers are — here are, this Oklahoma Furniture has the power to tell this driver to drive anybody else’s truck and as Commissioner Webb points out as he views the decision of the Commission, if I drove your truck and Your Honor drove my truck, that’s lawful.

It’s only when you drive your truck and I drive mine is illegal, and I — if that’s the decision, I think it’s a terrible one because you have to view — we are trying as judges and lawyers to make law that truck drivers are all vague.

And when you — when we create law that says to Joe, you can’t drive your truck but you can drive Pete and Pete can drive yours, you’re going to bring on disrespect for the law, Webb is right.

I think that’s a terrible result.

We had a similar situation in Ohio, and our public utility laws are very similar to the ICC, the interstate — the Congress copied their laws considerably from the States and States were in effect and before in our Ohio law was passed around 1925 and the ICC in 1935.

And our Commission, I think all Commissions are jealous of their prerogatives and their authorities and they have generally followed the same rules and that the lessors couldn’t be drivers.

And that situation came up in Ohio, that there, neither case reported 165 Ohio State 391 discussed by me in my brief that commenced at page 14.

And that was appealed to the courts and the Court did exactly the same thing as the District Court did in this case.

And in commenting on where the hiring and the trucking comes together, the truck — the Court said, where however a driver is also furnished, then they maybe an engaging in such business.

Now, the difference between our Court and the Commission, the ICC here, they recognize that there is a situation, where you must look at it.

But they went on to say, however, whether there is, will depend in a particular instance upon the relationship between the driver of the truck and the one to whom the truck and driver are furnished.

So the Court went on, examined this situation and found that in that case, that the law that the driver made a legitimate lease of his truck, and that he was legitimately hired and he was told where and how to do various things.

And so, they found in that case that where the control was properly in the lessee.

If they’d overcome this presumption that might arise, where you see that the truck and the driver converging.

And I say that’s the rule here that must be made.

I would say that it just as possible to have lack of control where they leased the Hearst truck and driving outside.

I can imagine that in a desire to obtain efficiency, that they could say to this driver who can make up many arrangements, I represent a profit sharing company where they get a lot of efficiency in their plan by sharing percentage of the profits with their employees that you could go to your driver and I’ll say we own or we lease this truck.

Now, we’re willing to — so that you can make some — more money than just a truck driver, we will credit to this truck the amount of money that we would spend if we ship by common carrier and then we will charge the lease or the depreciation on the truck.

We will charge your basic salary and we will charge all of the expenses of operating the truck, gas or everything else.

And at the end of the period of time, you will see if we saved any money on this and we’ll give you part of it.

I think that it should be — actually, you could come up with an arrangement that would be further a field from control that we have in this case.

So the minds amend and make up many arrangements and if we sit down and nit-pick an arrangement, you could probably find something wrong with many of them.

I say it in a broad outline and I think the Commission did find that the Oklahoma Furniture properly controlled this operation and that the lease was proper.

You say that Mr. Ginnane said that — well, there’s no minimum.

Charles R. Iden:

But now the — which as you filed applications for contracts in the Public Utilities Commission in Ohio, they get little rules and they have a rule that there must be a minimum stated in the contract, that you must guarantee a minimum of so many tons and I’ll be frank to say that generally, you put in a hundred tons and you know if you’ve got a hundred tons a year, you’re going to go broke.

That satisfies the Public Utilities Commission.

I tested them once.

I’ve been my contract that we will — the shipper guarantees to the contract carrier all the freight that we ship a year.

I thought that was a better contract for my clients, and I would on — and I put on the evidence of the amount of business that this manufacturer normally shifted on the years he’d been in business and he expected to be in business and that he’s going to give this shipper, this carrier all of the freight that he had and there was considerable argument, but I proved my point that that was a legitimate contract.

Now, I’ve gone back to putting hundred tons a year and that makes everybody happy and my job easier.

But I say here that the fact that there’s no minimum guarantee isn’t the important thing.

The fact is that over the years as shown in this evidence, this Oklahoma Furniture has given all of their freight to these people to handle under long distance transportation.

They’ve gotten all the freight.

And the fact that they — sure they can hire a driver, they’ve got the union to overcome, the union could take a grievance if they fire the man but they — the employer obviously can fire a driver for misconduct.

But the fact of the matter is that these drivers have been there over a long number of years.

That’s the proof to pudding, what’s been the result?

These drivers have affirmed the job and the company has kept their leases.

They — if they did fire a driver today, they can’t cancel that lease for 30 days and that man is going to get his money from that truck for 30 days.

It’s true that he wouldn’t have to drive it, he wouldn’t have to assign it, I suppose, but the facts of the matter is that over the years, these people have been employed and the truck has been used.

That’s the proof of the thing.

If I can’t enlighten the Court, I will — I have completed everything I think I can say on this subject.

Earl Warren:

Thank you.

Charles R. Iden:

Thank you.

Earl Warren:

Mr. Ginnane.

Robert W. Ginnane:

We have nothing more to add unless the Court has some questions.

Earl Warren:

Well, I would like one — to ask you one question.

The counsel has rather simplified his argument in saying that the Commission says that it’s a — it can be a private operation if there is no lease of automobiles, but there are the trucks, but that if there is, it must be a contract carrier without more.

Now is that the position of the Commission?

Robert W. Ginnane:

There’s a statement in the Commission’s report which if it’s taken as a generality, it means that.

I’m sure it’s not — that then applies in the setting in the facts of this case.

We do not contend that a private — a man — that a shipper cannot be a private carrier if he uses equipment.

Many and — many private shippers lease equipment from this equipment rental firms every day.

We do not contend that a private carrier must own the equipment which he used.

It was the only difference (Voice Overlap) —

— operator as a driver also the owner of the truck is the driver?

Robert W. Ginnane:

If the owner — if the owner is the driver and the arrangements are such that he is taking the economic risks of providing transportation then we say what is involved is private carriage.

Now, of course that can be avoided as — by the shipper.

William J. Brennan, Jr.:

You mean the contract is complied with.

You said what is involved is private carrier (Inaudible)

Robert W. Ginnane:

The shipper can avoid that by doing two things, by making the truck his own, by buying and paying for exclusive possession the way he does if he goes to a rental company, and by making that driver his employee as Oklahoma does with the six drivers for the six tractors which it owns.

Felix Frankfurter:

But you have said he need not do that, therefore, you’re not suggesting the Commission to make rulings which it will exert pressure on a shipper in doing that.

Robert W. Ginnane:

No, and I say that he shouldn’t — the shipper should make the vehicle his own either by owning it or by a lease in which he pays for exclusive possession instead of a doctrine unlike this but there’s nothing more than a 30-day option.

Charles E. Whittaker:

Mr. Ginnane, are you aware of any repudiation by the Commission of its ruling quoted on page 21 and 22 of Mr. — of the respondent’s brief, the one that I referred to a while ago?

Robert W. Ginnane:

On the leasing rules, no sir, I’m not.

But again, the keyword in there is possession, effective possession of the equipment, not simply on a 30-day option on which the shipper has no real purpose.

Felix Frankfurter:

Well, is that the — is that the decisive factor in this case, the 30-day option or these other considerations?

Robert W. Ginnane:

No, to me it’s just an indication that the shipper is not paying anything for effective possession of equipment as he pays a minimum when he really rents it from an equipment rental company.

Hugo L. Black:

You do not agree as I understand it with the statement made by Commissioner Webb (Inaudible) on page a 164 which says this.

Thus, the mere status of owner-operator lessor is said automatically to defeat lessee control irrespective of the existence of convincing facts to the contrary.

I understand that you’re saying that is not correct.

Robert W. Ginnane:

That is not — it is — that’s a question that’s —

Hugo L. Black:

On top of page 164.

It merely stated the owner-operator lessor.

In other words, the driver owns it.

Robert W. Ginnane:

No, I don’t have it sir.

Hugo L. Black:

He operates it.

Robert W. Ginnane:

If we could start the preceding sentence at the bottom page 163.

It says that means plainly and simply that no owner-operator can be employed by a common carrier, a common truck carrier, or by a private carrier if he rents and drives his own equipment unless of course he has a (Inaudible).

Hugo L. Black:

You depend on other circumstances, as I understand you.

Robert W. Ginnane:

That’s right.

Hugo L. Black:

Something like it’s quoted in the next quotation by Mr. Webb that he says that the Commission did not say, was that — no one element or circumstances in (Inaudible) is that your position?

Robert W. Ginnane:

Yes, which is the approach we find in this Court’s decision in the Silk case.

Hugo L. Black:

The Silk case is a — I don’t see how you can use the Silk (Inaudible) case (Inaudible) because that’s under another Act and that’s a question of whether he was an employee, an independent contractor under that Act.

Robert W. Ginnane:

And that’s —

Hugo L. Black:

And here you say it doesn’t make any difference.

Robert W. Ginnane:

And that status could vary from one Act to another.

We say Silk gives us a valid approach and that — in that we are to look at the entire situation, all of the facts including the factor who is assuming the risk.

Felix Frankfurter:

Mr. Ginnane, before you sit down, may I ask you to turn to your jurisdictional statement on page 3 and 4, where you stated the question presented on the basis of which this Court noted probable jurisdiction.

Am I to take it that the question that you presented to this Court in this jurisdiction of statement, your conception of what the decision, what the order of the Commission was which the District Court overruled?

Robert W. Ginnane:

Yes, one of the two aspects of the Commission’s decision both of which were overruled by the District Court.

Thank you.