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reparation on a rate where at least the maximum had been fixed by the Commission.
However, it is not important here.
Mr. Morrow, I wish you would do this: Mr. Lawrence, I think, rests a good deal of his objections to reparations, not entirely, but in considerable part, on the fact that the trucking industry contains—what percentage was it, Mr. Lawrence, of men who operate only one truck?
Mr. LAWRENCE. About 26 percent, one truck. Ninety-two percent of them operate 10 or less.
Senator REED. Now, Mr. Morrow, that factor is not applicable to the freight forwarders. They are limited in number. Some of them are very large size. Most of them, not all of them—there are some small ones—but even the small freight forwarders never get into the class of Mr. Lawrence's single-truck common carrier. So, it occurs to the chairman, at least, that your freight forwarders are in quite a different situation with regard to the practical application.
Mr. McRRow. You are quite correct, Senator.
Speaking as a general proposition, we certainly cannot make any claim that the industry is composed of such small units that it would not be in position to withstand reparations claims.
However, I want to point out that the freight forwarding industry in number is divided about equally as to size. There are about 50 so-called class 1 forwarders, with annual gross operating revenues of more than $100,000, and there are about 50 with gross annual operating revenues less than that.
Senator MYERS. 50 percent? Mr. MORROW. 50 percent in number of operators. Of course, the 50 who are class 1 forwarders perhaps make up 95 percent of the industry by volume of business done. Perhaps this would be as burdensome on that smaller group of 50 forwarders as it would in the case of small motor carriers, and the same reasons given by Mr. Lawrence possibly would apply in their case.
I do not make that as my principal argument.
I do want to point out one thing, however; that to the extenet that the doctrine in the Arizona Grocery case should operate, we might find it has this effect: The freight forwarder bases his rates on the railroad rates. Very generally, they are the same. The freight pays out 80 cents of every dollar he takes in for transportation purchased. He pays the published tariff rates of the railroads and of some motor carriers. If it should occur that the forwarders were subjected to a reparations claim, it seems reasonable to assume that one of the causes for the unreasonableness of the forwarder rate might be the unreasonableness of the rate of the underlying carrier.
Senator REED. That might easily be, but in that case, the freight forwarding company has a cause of action against the carrier for charging it a higher rate.
Mr. MORROW. To the extent that the underlying carrier's rate might not be protected by the doctrine of the Arizona case. I am not a railroad lawyer, and I am not prepared to say the precise extent to which that affords protection. I know the Commission for many years has discussed the subject, and I have quotations in my statement which I hope you will seriously study, because we do view this as a serious problem.
Senator REED. I am able to see the practical side of Mr. Lawrence's suggestion, especially as applied to the various small motor carriers, but that does not follow with me at all in the case of the freight forwarders. I cannot see any controlling reason-nor even a persuasive reason—why, if you are going to establish the right of the shipper to collect reparations on past shipments where he has been charged an unreasonable rate by a railroad, it should not apply equally to a freight forwarder.
If you know of any reason, I would like to hear it.
Mr. MORROW. If you are persuaded by Mr. Lawrence's statement about the size of his motor carriers, perhaps I should point out that while the forwarders are large, while they will take in a great many dollars, they do not have very much net left, as you know, and their operating ratio is, generally speaking, above 99 percent. Senator REED. It was not this last
year. Mr. MORROW. It was not the last year. Senator REED. You are doing pretty well now.
Mr. MORROW. We are doing all right now, yes. It has been the general trend of the industry through the years that they have very little money left after they pay all their operating expenses. In the first place, only 20 percent of the forwarders' dollar is available to pay operating expenses, because 80 percent of it goes to the underlying carriers immediately.
Senator REED. Why should that exempt you from responsibility to a shipper for charging him an unreasonable rate, if you have done so ?
Mr. MORROW. Only to the extent that—and here I want to get into another doctrine-reparation based on alleged unreasonableness that it would place a financial burden on the forwarders, and you may be giving money to a shipper who has suffered no loss.
If you predicate your question on the proposition that a shipper has suffered financial loss and has not passed that on to his customer, then it is equitable that he should get his money. But if under the doctrine that applies universally in the case of reparation awards based on unreasonableness, you are simply going to take it away from the forwarder and give it to a shipper because the shipper paid the freight bill, I do not think there is any justice in that.
Senator REED. It may be the forwarders are correcting their ways over the practice they used to follow. Maybe they do not any longer discriminate as between shippers, as they used to do.
In an action in court in former years against forwarders, I would say it would be more likely on the question of discrimination than the reasonableness of the rates.
Even if you are now representing forwarders, there was a time when forwarders picked and chose and made different rates to shippers under the same conditions, and so forth.
Mr. MORROW. Admitting some of the bad practices in the past, Senator, the rates are all on file now. The shippers have an opportunity to request suspension of the new rates. They can complain against the old ones the same as they can against the rates of any other carrier.
The forwarder tariffs are necessarily complex tariffs. One forwarder will operate in every State in the Union. He has a tremendous tariff file. To that extent he is very vulnerable to claims being filed in every State in the Union.
So, it would be subjecting the forwarders to a great burden if the conditions which prevailed at one time in the railroad industry returned to the forwarding industry.
In 1930—I am sure you are familiar with the conditions that prevailed in those days, Senator Reed—the Commission was so burdened that in its report for that year the Interstate Commerce Commission said that the number and complexity of the reparations cases, and I quote: have so encroached upon our time and energies as to deprive us of adequate time for the thorough consideration of the many larger and more important problems continually coming before us. They had been making recommendations about this reparations
provision since 1916, and this was as late as 1930 that they said they had so much of their time taken up with these complaints that they could not give their attention to more important problems. There
may be some significance in the fact that in 1931, the Arizona Grocery Co. case was decided and the Commission has never since, so far as I know, come to Congress and recommended that the reparations provisions be eliminated.
Now, for reasons of uniformity, they suggest that the freight forwarder be subjected to reparations. I think we should seriously consider whether it is necessary.
I want to point out that "reparations” is really a misnomer. The term used in the law is "damages." The authority to award damages in actions to recover such damages rests on a tort, or public wrong, and not on a contract.
The original theory was that damages for a public wrong could be recovered where private injury was shown to result. In Parsons v. Chicago and Northwestern Railroad (167 U. S. 447), decided in 1897, the Supreme Court held that before any aggrieved person could recover damages under the Interstate Commerce Act:
He must show not merely a wrong of the carrier, but that the wrong has in fact operated to his injury.
With the passage of time the courts and the Commission made a distinction between damages claimed where a rate is found to be unreasonable and damages claimed where a rate is found unjustly discriminatory. The original theory of requiring the showing of actual loss was maintained in cases where the basis of the claim is unjust discrimination.
That was the doctrine laid down in the International Coal case (230 U.S. 184). However, in cases where the claim is based on the allegation of unreasonableness the aggrieved party has been held to be entitled to the difference between the reasonable and the unreasonable rate as the measure of his damages, without proof of any actual damage.
That was the decision of the Supreme Court in the Darnell-Taenzer Lumber Company case (215 U. S. 531) and it has been followed in other cases consistently since that time.
Senator REED. The Darnell-Taenzer case doctrine has been followed consistently since that time.
Mr. MORROW. It has.
Senator REED. Justice Brandeis wrote that decision, as I recall.
I merely want to point out the concern which that decision gave the Interstate Commerce Commission. I think the views of the Commission and its concern over that problem were sound when expressed and I think they are sound now as applied to us, sir.
The Commission in its report in 1916 shortly after the decision in the Darnell-Taenzer case, after pointing out the facts I have stated here about the decision, said, and I quote:
There are many who argue that this policy is erroneous and that with regard to proof of damages there is and should be no distinction between the discrimination case and the case of an unreasonable rate.
Counsel for the carriers argue that if the shipper has paid a rate that is later found to have been unreasonable, but has conditioned his commercial transaction in the light of and on the basis of the rate paid, he has passed along to his vendees any damage that he might have sustained, and is therefore not entitled to reparation.
Senator REED. Mr. Morrow, I do not think it is profitable to pursue that particular line of reasoning. The Supreme Court has laid down the doctrine that has been consistently followed ever since.
Mr. MORROW. That is perfectly true.
Senator REED. I do not see that it is any profit to anybody in discussing that here.
Mr. MORROW. I hope you will understand my point, however, which is this: That those decisions, as you say, were laid down by the Supreme Court in the early days of this century. They were followed. For a period of 20 years they caused grave concern.
The Commission came back year after year and pointed out the inequities, the hardships, that this doctrine was working.
The Commission pointed to the rate bureaus that had sprung up for filing claims. This caused grave concern up until the early thirties.
Now, since the question is apparently no longer of significance in the railroad industry, at least they are not making any claims about its significance, the Congress is asked to make these provisions applicable to freight forwarders when nobody, so far as I know, makes any claim of any real need for it other than uniformity.
Ì maintain that the reasoning of the Commission was sound at that time, and that it is sound at this time as to freight forwarders and motor carriers.
I will desist from dealing any further with these recommendations of the Commission, but they are very informative. They are in my statement. I certainly hope that the committee will seriously study them before reporting any bill providing reparations for freight forwarders.
Senator REED. Thank you, Mr. Morrow.
STATEMENT IN BEHALF OF FREIGHT FORWARDERS INSTITUTE BEFORE THE SUBCOM
MITTEE OF THE SENATE COMMITTEE ON INTERSTATE AND FOREIGN COMMERCE HOLDING HEARINGS ON BILLS S. 571, S. 935, S. 1194 AND H. R. 2759
My name is Giles Morrow. I am executive secretary and general counsel of the Freight Forwarders Institute, and I appear in behalf of the members of that organization. The institute is the national organization of freight forwarders subject to part IV of the Interstate Commerce Act. The offices of the institute are located in the Colorado Building, Washington, D. C.
The freight-forwarding industry fully endorses bill H. R. 2759. To the extent that bills S. 571, S. 935, and S. 1191 differ from or conflict with the provisions of H. R. 2759, the industry is opposed to such bills.
Insofar as they concern freight forwarders, the provisions of bills S. 571 and S. 935 are substantially the same as H. R. 2759, except that in the Senate bills the period of limitations for suits to recover overcharges and undercharges is 3 years whereas the House bill provides for a 2-year period. We favor the 2-year provision, for reasons which I will later enumerate. S. 1194, while it provides for a 2-year period of limitations on actions for overcharges or undercharges, which we favor, also contains provisions for an award of damages or reparations against motor carriers and freight forwarders. The forwarding industry is vigorously opposed to any provision for reparations in part IV of the act.
I will first state briefly our reasons for supporting bill H. R. 2759 and then discuss the grounds on which we oppose the 3-year statutory limitation period provided by bills S. 571 and s. 935, and the reparations provisions included in S. 1194.
The need for a uniform statutory period of limitation on the bringing of suits for overcharges and undercharges is probably too well recognized to require extended discussion. So far as I know, there is no opposition to such a provision. Such a statute of limitations is advocated by the Interstate Commerce Commission, by the carriers involved, and by the shippers generally.
The House committee report, No. 208, filed on March 31, 1947, to accompany H. R. 2759, correctly summarizes the reasons for the enactment of a uniform Federal statute, to limit actions for overcharges and undercharges. At the present time, in the case of motor carriers and freight forwarders, the laws of the various States govern such actions. The State laws vary widely. This leads to uncertainty and confusion. Because of the widespread nature of forwarder operations, this is particularly true as respects freight forwarders and their shippers. A number of the larger forwarders conduct operations in every State in the Union, and have offices located throughout the country. Even the very small freight forwarders generally do business in a number of States. It is not only difficult for the industry to keep itself fully informed as to all of the State laws, but it is practically impossible to determine how long records must be kept.
There appears to be no reason whatsoever why a uniforın statutory period of limitations should not be provided. On the other hand, there is every reason why the existing confusion and uncertainty should be eliminated by the enactment of a uniform Federal statute. Experience under part I of the act has demonstrated that a 2-year period is adequate and satisfactory.
Turning now to the Senate bills, I will discuss first bills S. 571 and S. 935, which provide a 3-year period of limitation on overcharges and undercharges. We see no reason why it should require 3 years on the part of either the carriers or the shippers to determine whether an action should be brought in the case of overcharges or undercharges. The period provided in part I of the act was 3 years up until 1940 when it was reduced to 2 years. This change was evidently made as the result of many years of experience and it has proved satisfactory and apparently has not worked any substantial hardship on anyone. On the other hand, it would work a distinct hardship on the carriers, and perhaps on the shipping public, to be required to maintain records for a 3-year period against the possibility of a suit for overcharges or undercharges. An undue financial burden might also be involved, particularly in the case of the smaller forwarders.
As to bill S. 1194, I have already indicated that the forwarders are strongly opposed to the reparations provisions contained therein. This bill is similar to bill H. R. 2324 on which hearings were held by the House Committee on Interstate and Foreign Commerce in March 1947. As the result of those hearings, bill H. R. 2759 was introduced by Chairman Wolverton of the House committee. The latter bill, which is now before your committee, was unanimously reported by the House committee and was passed by the House of Representatives without a dissenting vote. In reporting the bill the House committee stated, at page 3 of Report No. 208 :
“This committee held hearings on H. R. 2324, and, on the basis of the testimony given at the hearings, decided that it did not favor, at this time, legislation making reparation provisions applicable to common carriers by motor vehicle and to freight forwarders. The committee felt, however, that the provisions of the