Majority — Brennan J.
p. 311RED BALL MOTOR FREIGHT, INC., et al . v .SHANNON ET AL., DOING BUSINESS AS,
E. & R. SHANNON.
APPEAL FROM THE UNITED STATES DISTRICT COURT FOR THE
WESTERN DISTRICT OF TEXAS.
No. 406. Argued April 28, 1964.—Decided June 1, 1964*
Appellees are dealers in livestock and commodities in San Antonio,
Texas, who made deliveries in their own trucks to customers in
Louisiana, where they bought sugar for resale in San Antonio.
The Interstate Commerce Commission (ICC) held that the back-
haul of sugar was for-hire carriage not exempt from ICC regula-
tion under § 203 (c) of the Interstate Commerce Act as “transpor-
tation . . . within the scope, and in furtherance, of a primary
business enterprise . . . .” A three-judge District Court set aside
the ICC order. Held: Section 203 (c) does not prohibit all back-
hauling but codifies the primary business test which exempts from
ICC regulation an operator whose transportation functions are
only incidental to its primary activities. Here the evidence showed
that the backhaul furthered appellees’ primary general mercantile
business and was exempt private carriage. Pp. 312-321.
219 F. Supp. 781, affirmed.
Amos M. Mathews argued the cause for appellants in
No. 406. With him on the briefs were Phillip Robinson,
Charles D. Mathews, Roland Rice and John S. Fessenden.
Robert W. Ginnane argued the cause for the United
States et al. in No. 421. With him on the brief were
Solicitor General Cox, Assistant Attorney General Orrick,
Lionel Kestenbaum, Elliott Moyer and Fritz R. Kahn.
Walter C. Wolff, Jr. argued the cause and filed a brief
for appellees in both cases.
*Together with No. 421, United States et al. v. Shannon et al.,
doing business as E. & R. Shannon, also on appeal from the same
court.
p. 312Briefs of amici curiae, urging reversal, were filed by
Robert E. Redding for the Transportation Association of
America, by James E. Wilson for the Common Carrier
Conference—Irregular Route of the American Trucking
Associations, Inc., and by Joseph E. Keller and William
H. Borghesani, Jr. for the Private Carrier Conference, Inc.
Mr . Justice Brennan delivered the opinion of the
Court.
The Interstate Commerce Act provides that it is unlaw-
ful for any person engaged in a business other than
transportation to “transport property by motor vehicle
in interstate or foreign commerce for business purposes
unless such transportation is within the scope, and in fur-
therance, of a primary business enterprise (other than
transportation) of such person.” § 203 (c), 49 U. S. C.
§ 303 (c).1 Appellees deal in livestock and commodities
from a place of business in San Antonio, Texas. They
make deliveries in their own trucks to customers in Lou-
isiana, and buy sugar at Supreme, Louisiana, which they
backhaul 525 miles for resale to customers in San Antonio.
The Interstate Commerce Commission held that this
backhaul was not exempt under § 203 (c) as “transporta-
tion . . . within the scope, and in furtherance, of a pri-
p. 313mary business enterprise . . of appellees, but was
“conducted with the purpose of profiting from the trans-
portation performed, and, as such, constitutes for-hire
carriage for which operating authority from this Commis-
sion is required.” 81 M. C. C. 33«, 347.2 A three-judge
court in the District Court for the Western District of
Texas set aside the ICC order. 219 F. Supp. 781.3 We
noted probable jurisdiction. 375 IT. S. 901. We affirm.
Section 203 (c) was designed explicitly to authorize the
ICC to eliminate transportation which, though carried on
in the guise of private carriage, was in effect for-hire car-
riage, and thus might lawfully be carried on only by an
authorized common or contract carrier. Before the enact-
ment of § 203 (c) the ICC was able to reach such abuses
by interpreting § 203 (a) (17), 49 U. S. C. § 303 (a) (17),
so as to exclude such “pseudo-private” carriage from its
definition of a “private carrier of property by motor
vehicle” as a person, not a “common” or “contract” car-
rier, who transports property of which he “is the owner,
lessee, or bailee, when such transportation is for the pur-
pose of sale, lease, rent, or bailment, or in furtherance of
any commercial enterprise.” Many of the cases involved
nonauthorized carriers in the transportation business who
resorted to transparent “buy-and-sell” devices to evade
ICC regulation. A typical buy-and-sell arrangement is
one under which the carrier “buys” property at a ship-
ping point, transports it to a delivery point and there
“sells” it to the real purchaser, the “profit” to the carrier
amounting to the price of the transportation between the
p. 314two points.4 Similar evasions through the use of spu-
rious buy-and-sell agreements were found in cases where
property was transported in trucks regularly used by
noncarrier businesses to make pickups and deliveries.5
The ICC was faced with the necessity of determining on
the facts of each case whether the transportation consti-
tuted private carriage beyond the scope of ICC economic
regulation, or for-hire transportation subject to all rele-
vant provisions of the Act. In other words, here, as in
United States v. Drum, 368 U. S. 370, 374, in which we
dealt with another aspect of the “pseudo-private” car-
riage problem, the ICC has also “had to decide whether a
particular arrangement gives rise to that Tor-hire’ car-
riage which is subject to economic regulation in the
public interest, or whether it is, in fact, private carriage
as to which Congress determined that the [noncarrier’s]
interest . . . should prevail.”
In the course of discriminating between this pseudo-
private carriage and that transportation which was in fact
in furtherance of a noncarrier business, the ICC devel-
oped the so-called “primary business” test. This test
was first enunciated by the full Commission in Lenoir
Chair Co., 51 M. C. C. 65, aff’d, sub nom. Brooks Trans-
portation Co. v. United States,
93 F. Supp. 517, aff’d,
340
U. S. 925. A chair manufacturer delivered some of its
products in its own trucks. Whenever possible, it also
used the vehicles to backhaul manufacturing materials
for use and processing in its own plant. The ICC con-
cluded, 51 M. C. C., at 76, that the delivery of goods and
the backhaul were lawful private carriage because under-
taken “as a bona fide incident to and in furtherance of
4 See, e. g., Lyle H. Carpenter, 2 M. C. C. 85; B. E. Farnsworth,
4 M. C. C. 164; Thomas Stanley Redding, 7 M. C. C. 608; ICC v.
Tank Car Oil Corp.,
151 F. 2d 834 (C. A. 5th Cir.).
5 See, e. g., T. J. McBroom, 1 M. C. C. 425; Triangle Motor Co.,
p. 315[its] primary business . . . The governing standard
was stated as follows, id., at 75:
“If the facts establish that the primary business of
an operator is the supplying of transportation for
compensation then the carrier’s status is established
though the operator may be the owner, at the time,
of the goods transported and may be transporting
them for the purpose of sale. ... If, on the other
hand, the primary business of an operator is found
to be manufacturing or some other noncarrier com-
mercial enterprise, then it must be determined
whether the motor operations are in bona fide fur-
therance of the primary business or whether they are
conducted as a related or secondary enterprise with
the purpose of profiting from the transportation per-
formed. In our opinion, they cannot be both.”
The ICC believed, however, that § 203 (a) (17) was not
sufficiently explicit, particularly since decisions of some
lower courts after Brooks raised doubts whether a truck
operator could be found to be an unauthorized “for-hire”
carrier in the absence of some affirmative showing that
his operations brought him within the definitions of com-
mon or contract carriage.6 Consequently the Commis-
sion sought additional legislation.7 The original ICC bill
in this area would have amended the definition of “private
carrier” in § 203 (a) (17) to prohibit the buy-and-sell de-
vice employed by pseudo-private carriers as a subterfuge
to avoid regulation. See S. 1677, H. R. 5825, 85th Cong.,
1st Sess. This was withdrawn, however, in favor of a
p. 316more broadly phrased provision, sponsored by the Trans-
portation Association of America, which encompassed not
only buy-and-sell devices, but also similar subterfuges
which might be employed to engage in unauthorized for-
hire transportation.8 The second clause of § 203 (c) is
substantially the TAA proposal.
The 1958 amendment appears on its face to codify the
primary business test as the standard for determining
whether a particular carrier is engaged in a private or for-
hire operation. The appellants argue, however, that the
amendment was intended to impose a broader limitation
in the case of backhaul operations of the kind engaged in
by appellees. The United States urges in its brief that
Congress in 1958 was particularly concerned with the
diversion of traffic from regulated carriers by backhauling
operations, and that one object of the 1958 amendment
was “to make plain that the purchase and sale of goods
solffiy to take advantage of available backhaul capacity
cannot qualify as a ‘primary business enterprise (other
than transportation).’ ” We understand this argument to
be that Congress in effect enacted a per se test outlawing
trucking operations limited to backhaul capacity without
inquiry into whether that operation was undertaken pur-
suant to a bona fide noncarrier business enterprise. We
find no support in either the words of the amendment or
its legislative history for putting that gloss upon the
amendment. On the contrary, we are persuaded that
p. 317Congress meant only to codify the primary business test
which, as applied by the ICC, requires an analysis of the
backhaul operation in the factual setting of each case.
The legislative history fully supports this view. The
ICC Chairman, speaking in support of the TAA amend-
ment, expressly stated that, in his view, its effect would
be to “incorporate the primary business test into the
statute.”9 Similarly, the President of TAA, speaking
directly to the backhaul problem, said that “Our pro-
posal . . . would affect . . . 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.”10 11 The Senate and House Reports, while less
crystal clear, nevertheless reveal no purpose beyond codi-
fication of the Brooks test. Thus the Senate Report
states that the amendment “accurately reflects the hold-
ing in the Brooks case.” 11 Although the House Report
includes a discussion of the backhaul problem in language
which tracks the statement in the ICC 1953 Annual Re-
port—where the Commission first directed the attention
of Congress to the problem of buy-and-sell arrange-
ments 12—the House Report concludes: “There is no in-
p. 318tention on the part of this Committee in any way to
jeopardize or interfere with bona fide private carriage, as
recognized in the Brooks case.” * 13 Moreover, the man-
agers of the bills in both Senate and House gave assur-
ances that the object of the amendment was to incor-
porate the primary business test into positive law.14 No
application of the primary business test by the ICC or
the courts gave conclusive effect to backhauling. The
critical determination made in each case was between
spurious buy-and-sell arrangements, whether or not as
part of a backhaul, and a true wholesaling operation
utilizing the operator’s own trucks. Backhauls were
treated as merely one aspect of the buy-and-sell problem,
since the presence of backhaul capacity presents a special
temptation to indulge in pseudo-private carriage.
We therefore conclude that § 203 (c) merely codifies
the primary business test, and embodies no outright pro-
hibition of backhauling practices. The statutory scheme
recognizes that mere availability and use of backhaul
capacity may in particular cases be completely consistent
with the bona fide conduct of a noncarrier business. Thus
the question in this case is a narrow one: whether, apply-
ing the standards developed under the primary business
test, appellees’ backhauling of sugar was within the scope,
and in furtherance, of a primary, noncarrier business.
In developing and applying the primary business
standard, the ICC has elaborated criteria characteristic
of the spurious buy-and-sell device. Among these are
purchase and sale is a bona fide merchandising venture. In other
cases, arrangements are made with the consignee of such merchan-
dise for the ‘buy-and-sell’ arrangement in order that the consignee
may receive transportation at a reduced cost.” Compare H. R.
Rep. No. 1922, 85th Cong., 2d Sess., 18 (1958).
p. 319the large investment of assets or payroll in transportation
operations; 15 negotiating the sale of goods transported in
advance of dispatching a truck to pick them up; 16 direct
delivery of the transported goods from the truck to the
ultimate buyer, rather than from warehoused stocks; 17
solicitation of the order by the supplier rather than the
truck owner; 18 and inclusion in the sales price of an
amount to cover transportation costs.19
We are not persuaded from our examination of the
record that there is sufficient evidence to support the
ICC’s conclusion that the appellees’ sugar operation was
for-hire transportation and not transportation within the
scope, and in furtherance, of appellees’ noncarrier business
enterprise. The ICC found that appellees “have long
been buying and selling certain commodities and in con-
nection therewith transporting them to purchasers, in
bona fide furtherance of their primary business, as a
dealer in those commodities.” 81 M. C. C., at 345. The
ICC found further that “The more usual arrangement
under which [appellees] operate . . . appears to be one in
which the [appellees] have no preexisting sugar order,
but buy with the intention of selling later either en route
or after the transportation is accomplished. This pro-
cedure is ordinarily coordinated with a backhaul, and the
15 See Virgil P. Stutzman, 81 M. C. C. 223, 226; Joseph V. Hofer,
84 M. C.
p. 320purpose of their sugar dealings is the generation of sugar
shipments which they can transport as return lading for
their trucks which are moving in the opposite direction.”
81 M. C. C., at 346. But these findings, on this record,
are consistent with an operation “within the scope, and in
furtherance, of a primary business enterprise.” Appel-
lees began their business in 1934 as dealers in livestock.
They gradually added a feed mill and the buying and
selling of corn, oats, wheat, bran, molasses, salt and fer-
tilizer. They added sugar in 1954. Moreover, in addi-
tion to the absence of the element—usually found in
spurious buy-and-sell arrangements—of obtaining orders
for a commodity (in this case sugar) before purchasing it,
other indicia are absent. Appellees’ assets are not in
large part composed of transportation facilities, nor is
transportation a major item of expense; appellees bear
the full risk of damage in transit and, since they sell
at market price, also of loss in value due to price
changes; they buy the sugar on credit with a discount
for payment in 10 days, and sell on the same terms; their
sugar accounts receivable at the date of hearing ex-
ceeded $10,000, and amounted to $20,000 or $30,000 dur-
ing the previous year. It is true that they warehoused
only a small stock of sugar and that generally the trucks
delivered the sugar directly to buyers upon, or within a
day or two after, arrival in San Antonio. Appellees
offered an entirely reasonable explanation for this, how-
ever : sugar is a perishable commodity, the preservation of
which apparently requires air conditioning facilities with
which their warehouse is not equipped; the ICC offered
nothing to the contrary. And the ICC offered no evidence
that other sugar dealers in San Antonio conducted their
businesses differently from appellees. It is also true that
since the motor carrier rate for transporting sugar from
Supreme is 69 cents, and the rail rate $1.09 per hundred
pounds, appellees could not have conducted the sugar
Dissent — Goldberg J.
p. 321business but for the availability of the backhaul capacity
of their trucks. This shows no more than that appellees
were able to make efficient use of their equipment; on
these facts it does not prove, as the ICC found, that the
“transportation ... is, with respect to their primary
business of buying and selling livestock and certain other
commodities, a related or secondary enterprise conducted
with the purpose of profiting from the transportation per-
formed . . . 81 M. C. C., at 347. We agree with the
District Court that, rather, “The record clearly indicates
that [appellees] are in a general mercantile business buy-
ing and selling many items, including sugar.” 219 F.
Supp., at 782. As such, on the facts shown, their pur-
chase of sugar at Supreme to provide a backhaul in con-
nection with outbound movements of livestock and other
commodities from San Antonio is within the scope, and in
furtherance, of their primary general mercantile business
enterprise.
Affirmed.
Mr . Just ice Goldberg , with whom Mr . Justice Har -
lan , Mr . Justice Stewart and Mr . Justice White join,
dissenting.
I agree with the Court “that § 203 (c) merely codifies
the primary business test,”
ante, at 318, enunciated by the
Commission in the Brooks case.* I also agree that “the
primary business test . . . , as applied by the ICC, re-
quires an analysis of the backhaul operation in the
factual setting of each case.”
Ante, at 317.
This is all that we need and should decide. The Court
errs, in my view, in deciding the purely factual question
of “whether, applying the standards developed under the
primary business test, appellees’ backhauling of sugar
*Lenoir Chair Co., 51 M. C. C. 65, aff’d, sub non. Brooks Trans-
portation Co., Inc., v. United States,
93 F. Supp. 517, aff’d,
340
U. S. 925.
Dissent — White J.
p. 322Whi te, J., dissenting. 377 U. S.
was within the scope, and in furtherance, of a primary,
noncarrier business.” Ante, at 318.
The primary responsibility for granting or denying
enforcement of Commission orders is in the District
Courts and not in this Court. 28 U. S. C. § 1336; cf.
Labor Board n . Pittsburgh Steamship Co., 340 U. S. 498,
502. The District Court in enjoining enforcement of the
Commission’s order in this case did not refer explicitly or
implicitly to § 203 (c) of the Act. It did not cite any
cases enunciating the “primary business test” as a basis
for its decision. Moreover, the District Court did not
discuss the facts upon which the Commission based its
determination that appellees’ backhaul transportation
of sugar was not within the scope and in furtherance
of a primary business enterprise other than transporta-
tion. See 219 F. Supp. 781; compare United States v.
Drum, 368 U. S. 370, 385.
Having determined, as the Court does, that § 203 (c)
codifies the primary business test, I would remand the
case to the District Court for that court to decide the
issue of unsubstantiality of the evidence under the proper
test. Under this disposition of the case, the District
Court would have to be mindful that this is the kind of
case which “belongs to the usual administrative routine”
of the agency, Gray v. Powell, 314 U. S. 402, 411, and that
the Commission’s application of the statutory test to the
specific facts of this case “is to be accepted if it has ‘war-
rant in the record’ and a reasonable basis in law.” Labor
Board v. Hearst Publications, Inc., 322 U. S. Ill, 131;
United States v. Drum, supra, at 386.
Mr . Just ice White , dissenting.
I join the dissenting opinion of my Brother Goldberg .
I add that the Court has failed to demonstrate how appel-
lees’ sugar business qualifies as a “primary” business
when it clears only 35 cents per 100 pounds of sugar over
p. 323and above the cost of the sugar at Supreme, Louisiana.
This is less than the normal costs of transportation from
Supreme to San Antonio. No one without backhaul
capacity could make a viable business out of selling
Supreme sugar in the San Antonio market and appellees
admit that they are “backhauling to make a profit.” I
therefore cannot view the sugar business as a bona fide
primary business to which a private transportation opera-
tion is only an incident. It would be more appropriate
to say that this catch-as-catch-can sugar business is
wholly incidental to an otherwise empty backhaul.
Statutes and regulations cited