THE EVOLUTIONARY FOUNDATION SUPPORTING AND NURTURING THE DEVELOPMENT OF CONTRACT RELATIONSHIPS IN MOTOR TRANSPORTATION: THE SHORT VERSION OF A LONG HISTORY The Historical Road Leading to Congress’s Mandate to “Commercialize” Surface Transportation 1 By: William D. Taylor, Partner, Hanson Bridgett, LLP 1. INTRODUCTION Many of our colleagues can bear witness to the historical transformation from a common carrier focused practice to one based on significant contract relationships. This evolution was the product of a slow-moving interplay between statutory, administrative, social and economic forces which culminated in deregulatory initiatives to abandon restrictive common law principals in lieu of a recognition that as with any other commercial transaction, a shipper, carrier and, now, broker, should be able to mutually contract between themselves in order to establish the mutual terms and conditions that govern transportation relationships, rather than define the performance duties and obligations through statutory and regulatory mandates. This alternative business platform did not become a reality overnight. The grudging acceptance that all transportation need not be exclusively common carriage in nature was a long, but systemic process. In order to avoid confusion in terms, when used in this analysis, the word "contract" is not intended to refer to the classic, standard form of bill of lading (whether motor carrier, ocean or air) as the traditional form of contract between a shipper and carrier in a common carrier setting. Bills of lading have long been recognized as a standard form of agreement between users and providers of transportation services. 2 However, in the context of this presentation, "contract," as a defined term, means the broader and negotiated agreements wherein the parties mutually undertake to develop and perform pursuant to specific terms and conditions developed from a commercial perspective, beyond the traditional “contract” bill of lading normally associated with common carrier transportation. Instead of the traditional bill of lading, this presentation focuses on the reality of written agreements now sanctioned by law, as setting the standard commercial terms under which product is moved, arranged for shipment and, ultimately, delivered to end-users. Many of us were at the forefront of this transformation which motivated and nurtured the convergence of a statutory, regulatory, economic and practical reality that contracts should and did become the new norm in the transportation of freight through all modes, particularly, for our purposes, motor carriage. 1 The author would like to acknowledge the assistance of my partner and colleague, Paul Mello, in the preparation of this presentation. 2 See S. Rac. Transp. Co. v. Commercial Metals , 456 U.S. 336 (1982); Pomerene Bills of Lading Act , 49 U.S.C. § 80102. 1 13867715.1
1.1 In the Beginning, Contracts Between Shippers and Carriers Were Disfavored Both before and after passage of the Act to Regulate Commerce of 1887 3 (" Commerce Act "), the ability of parties to ship product under a contract and outside of the bounds of the standard bill of lading, as well as a carrier's tariff, was intentionally circumscribed by common law principles against discrimination in services by carriers between customers. 4 Instead, all carriage was viewed as common in nature, and available to the public without discrimination as to rates and/or services. Contracts were viewed as a per se form of preferential treatment to shippers. This notion was embedded in the Commerce Act . By this new law, Congress sought to curtail state action against railroads while, at the same time, creating the first federal administrative agency, the Interstate Commerce Commission (“ICC”), to govern certain operations of railroads. 5 The authority of the ICC was initially limited to governing certain business practices of U.S. railroads. This jurisdiction was enhanced through various amendments to the original Commerce Act . One of these, the Motor Carrier Act of 1935 , extended the jurisdiction of the ICC to regulate the interstate activities of trucking companies. Eventually, bus, carriers, household goods operators, and freight forwarders, 6 were swept into the regulatory ambit of the ICC. 1.2 Breaking Down the Barriers a. Motor Carrier Act of 1935 Consistent with and because of the anti-discrimination, common law aspects (basically viewed from the same perspective of public utilities) related to transportation companies, for many years it was illegal for shippers to contract with either railroads or motor carriers. 7 This prohibition was firmly established so that, and except in very rare circumstances, such contracts were voidable. 8 Congress eventually gave limited recognition to the reality of contract carriage when it created limited statutory provisions regarding such operations as part of the Motor Carrier Act of 1935 . 9 The ability to engage in contractor services was strictly proscribed 3 Act to Regulate Commerce of 1887 , ch. 104, 24 Stat. 379 (1887) (codified as amended as Interstate Commerce Act at 49 U.S.C.S. § 1, et seq . (2006)). 4 For a comprehensive historical analysis of the political, economic, social and legal conditions leading to the passage of the Commerce Act , see Paul Stephen Dempsey , Transportation: A Legal History , 30 T RANSP . L.J. 235 (2003). 5 Id. at 265-68. 6 Pub L. No. 255, 49 Stat. 543 (1935). 7 See Chesapeake and Ohio Ry. Co. v. Westinghouse, Church, Kerr & Co., Inc ., 270 U.S. 260 (1926); Feraco v. Ga. Pac ., 313 F.Supp. 660 (Del. 1970). The Commerce Act included provisions fostering access by and equal treatment of shippers, such as the "filed rate doctrine" which was intended to prevent discrimination in rates. 49 U.S.C. § 10762. See Commissions General Order of 1939 , Cancellation of Participation in Agency's Tariffs, 4 Fed. Reg. 4440 (1939) for a discussion of the "filed rate doctrine." Contracts were viewed as a form of impermissible standards in the form of the Carmack Amendment , 49 U.S.C. § 17706. In terms of the preemptive effect of Carmack , see Adams Express Co. v. Croningen , 226 U.S.C. 491 (1913). 8 Cent. R.R. Co. of N.J. v. U.S. Pipe Line , 1 F.2d 866 (3d Cir. 1942). 9 See former 49 U.S.C. 203(a)(15) 2 13867715.1
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