MISSOURI DIVISION OF TRANSPORTATION, ET AL., PETITIONERS V.
INTERSTATE COMMERCE COMMISSION, ET AL.

   No. 89-53

   In the Supreme Court of the United States

   October Term, 1989

   On Petition For A Writ Of Certiorari To The United States Court of
Appeals For the Eighth Circuit

   Brief For The Federal Respondents In Opposition

            TABLE OF CONTENTS
   Opinions below
   Jurisdiction
   Statement
   Argument
   Conclusion
   Appendix

                            OPINIONS BELOW

   The opinion of the court of appeals (Pet. App. 1-9) is reported at
867 F.2d 458.  The decisions of the Interstate Commerce Commission
(Pet. App. 10-25, 27-40) are unreported.

                             JURISDICTION

   The judgment of the court of appeals (Pet. App. 41-42) was entered
on February 3, 1989.  A petition for rehearing was denied on April 10,
1989 (Pet. App. 26-27).  The petition for a writ of certiorari was
filed on July 10, 1989 (a Monday).  The jurisdiction of this Court is
invoked under 28 U.S.C. 1254(1) and 28 U.S.C. 2350.

                          QUESTIONS PRESENTED

   1. Whether the Interstate Commerce Commerce Commission (ICC) has
primary jurisdiction to determine whether the in-state movement of
goods, after shipment from out-of-state sources, is part of continuous
interstate transportation subject to ICC regulation under the
Interstate Commerce Act.

   2. Whether the ICC properly concluded that the described
transportation of chemicals from points outside Missorui through a
distribution point in St. Louise to other points in Missouri
constitutes continuing interstate transportation.

                               STATEMENT

   1. The Interstate Commerce Commission has regulatory jurisdiction
over interstate transportation by motor carriers.  49 U.S.C.
10521(a)(1)(A) (1982) & Supp. V 1987).  To conduct operations that are
subject to ICC jurisdiction, a carrier must obtain an appropriate
certificate from the ICC pursuant to 49 U.S.C. 10921.  States retain
authority to regulate wholly intrastate motor carrier transportation.
49 U.S.C. 10521(b).

   The ICC is entrusted with authority to interpret the motor carrier
certificates that it issues.  Service Storage & Transfer Co. v.
Virginia, 359 U.S. 171, 173 (1959);  Andrew G. Nelson, Inc. v. United
States, 355 U.S. 554, 558-559 (1958).  Like other administrative
agencies, the ICC possesses general authority to proceed by
declaratory order.  5 U.S.C. 554(e);  Service Storage, 359 U.S. at
177-178.

   2. In July, 1986, Matlack Inc. (Matlack) sought a declaratory order
by the ICC concerning the scope of its ICC certificate.  At the time,
Matlack held motor contract carrier authority to transport general
commodities between points in the United States under continuing
contracts with manufacturers., distributors, and receivers of, among
other commodities, chemicals and related products.  Pet. App. 13.
Matlack did not have any intrastate authority in the State of
Missouri.  /1/ Under contract with Chemtech Industries (Chemtech),
Matlack transported bulk chemicals, which originated from points
outside Missouri and which were brought to Chemtech's Missouri
facilities by barge, rail, and motor carrier, from a Chemtech facility
in St. Louis to ultimate destinations in Missouri and other states.
Id. at 13-14.  Matlack had received citations from Missouri officals
on the ground that the movements within Missouri were intrastate and
that Matlack did not possess intrastate operating authority.  Ibid.

   In October 1986, acting on Matlack's request, the Commission
instituted a proceeding and published notices inviting comment in the
Federal Register and the ICC Register.  Twenty-eight parties
commented.  Pet. App. 10.

   In June 1987, the ICC issued a declaratory order concluding that
the shipments which Matlack described were part of continuous
interstate transportation (Matlack I, Pet. App. 10-25).  The
Commission first denied requests for discovery and an oral hearing,
explaining that its decision would be "limited to the facts presented"
(id. at 12), and that the order did not preclude challenges to
Matlack's actual operations if Matlack's description was not accurate
or if Matlack performed other services (ibid.).  The Commission also
noted that the State of Missouri had not participated in the
proceeding.  Id. at 15.

   The Commission then addressed the merits.  It stated that "the
shipper's fixed and persisting intent at the time of shipment" is
(c)rucial to a determination of the essential character of a shipment"
(Pet. App. 16-17), and observed that the "question of whether goods
come to rest in a warehouse or other storage facility must be decided
on a case-by-case basis." Id. at 18.  The Commission concluded that
several factors supported characterizing Chemtech's shipments as
continuous interstate commerce:  the shipments moved promptly from
their out-of-state sources to their ultimate destinations;  Chemtech
usually knew, on the basis of supply contracts and sales arrangements,
the final destination from the moment a shipment left its out-of-state
origin;  no manufacturing or processing took place at the initial
in-state site;  and the initial in-state site was a temporary storage
facility that allowed Chemtech to convert large volume movements into
smaller volumes.  Id. at 17-20.

   Several petitions for reconsideration were filed, including a
petition to intervene and reopen by the Missouri Division of
Transportation (MDOT) and a petition to reopen by the Alabama Public
Service Commission.  In December 1987, the Commission issued a second
decision (Matlack II, Pet. App. 27-40).  Noting MDOT's claim that it
had not been aware of the proceedings despite the notices in the
Federal Register and the ICC Register, the Commission granted MDOT's
petition to intervene and considered its objections.  Pet. App. 28-29.
 The Commission reaffirmed that discovery was unnecessary (id. at
31-33);  responded to challenges to its jurisdiction by emphasizing
that "(i)t is settled law that we have primary jurisdiction over the
interpretation of federal motor carrier certificates" (id. at 34);
and again concluded that Chemtech's shipments "constitute continuous
movements in interstate commerce" (id. at 37).

   3. The court of appeals upheld the Commission's decision in all
respects (Pet. App. 1-9).  It first affirmed that the Commission had
jurisdiction over the issue.  The court concluded that, under the
established principles of Service Storage v. Virginia, supra, the
question whether the in-state transportation of the chemicals, after
shipment from out-of-state sources, represented part of a continuous
interstate operation was "clearly within the ICC's jurisdiction in
interpreting whether its certificate covers the transportation." Pet.
App. 5.  The court also affirmed the Commission's conclusion that the
essential character of the transportation at issue was interstate.
Id. at 6-8.  Noting the narrow standard for judicial review of this
kind of administrative determination (id. at 6), the court cited the
Commission's findings about the factors supporting characterization of
the shipments as part of interstate commerce (id. at 7-8) and
concluded that the ICC's decision was not "arbitrary, capricious, an
abuse of discretion, or unsupported by substantial evidence on the
record as a whole." Id. at 8.

                               ARGUMENT

   The decision of the court of appeals is correct and does not
conflict with any decision of this Court or any court of appeals.
Accordingly, further review is not warranted.

   1. Petitioners principally object (Pet. 10-18) to the conclusion
that the ICC had primary jurisdiction to hear and decide this case.
Contrary to petitoners' contentions, however, the Commission's
exercise of primary jurisdiction in this case was solidly grounded in
the principles of Service Storage & Transfer Co. v. Virginia, 359 U.S.
171 (1959).  In Service Storage, this Court reversed a State's
assertion of jurisdiction over what the State deemed to be intrastate
movements by a motor carrier;  the carrier possessed an ICC
certificate for interstate commerce and claimed that the movements
were authorized interstate movements.  This Court held that
"interpretations of federal certificates of this character should be
made in the first instance by the authority issuing the certificate
and upon whom Congress has placed the responsibility of action." Id.
at 177.  Service Storage thus stands for the proposition that
questions about the scope of an ICC certificate should be addressed in
the first instance to the Commission.  /2/

   Petitioners contend (Pet. 11) that Service Storage and succeeding
cases are not applicable because the transportation movements in those
cases actually crossed state boundaries;  in contrast, the present
case involves a "single-state situation." This attempt to distinguish
the Service Storage line of cases is unavailing for at least two
independent reasons.  First, petitioners' argument assumes the outcome
of the analysis:  that the disputed movement is separate from, and not
a continuation of, the first leg of the transporation (which clearly
crosses state lines).  As the United States Court of Appeals for the
Fifth Circuit has pointed out in response to the same argument, a
"judgment about the superficial merits of a claim goes to the proper
disposition of the claim, rather than to jurisdictional authority to
dispose of the claim at all." Texas v. United States, 866 F.2d 1546,
1552 (1989).

   Second, as the Fifth Circuit has also pointed out, the issue in
Service Storage (an in-state to out-of-state to in-state shipment) and
the issue in this case (an out-of-state to in-state to in-state
shipment) are "not as distinct" as petitioners contend:  "In both
cases, there is no doubt that the goods being transported have crossed
state lines * * *.  In both cases, the issue is whether the undisputed
border crossings suffice to make certain portions of the journey * * *
interstate rather than intrastate." 866 F.2d at 1552.  No court has
ever given Service Storage the reading urged by petitioners.  /3/

   Petitioners also maintain (Pet. 11-14) that the ICC's primary
jurisdiction does not extend to questions concerning its own
jurisdiction, and that, in this case, unlike Service Storage, the
Commission is determining its own jurisdiction.  It is settled,
however, that an agency's "jurisdiction to determine whether it has
jurisdiction is as essential to its effective operation as is a
court's like power." Weinberger v. Hynson, Westcott & Dunning, Inc.,
412 U.S. 609, 627 (1973).  Despite petitioners' disavowals, moreover,
their objections would apply equally to Service Storage itself and to
every application of Service Storage.  In each case, the Commission
is, in a similar sense, determining whether it has jurisdiction;  a
decision that particular movements are not within interstate commerce
is a determination that the Commission does not have jurisdiction over
the movements.  /4/ Petitioners' position thus conflicts with
established principles of administrative law, and of the Service
Storage doctrine in particular.  /5/

   Petitioners attempt to bolster their jurisdictional objections by
arguing the Commission's decision represents unauthorized preemption
of state law (Pet. 15-16).  Petitioners assert that the Commission's
decision impermissibly preempts state regulation of intrastate
transportation, and thus violates 49 U.S.C. 10521(b) and Louisiana
Pub. Serv. Comm'n v. FCC, 476 U.S. 355 (1986).  Once again, however,
petitioners improperly assume their conclusion by resting their
jurisdictional objection on the resolution of the substantive issue.
In any event, nothing in Louisiana Public Service, which concerned the
Federal Communications Commission's (FCC's) attempt to regulate the
depreciation of concededly intrastate aspects of telephone plant and
equipment, remotely suggests that the determination whether a
particular subject is interstate or intrastate is itself an
unauthorized preemption.  To the contrary, the Court repeatedly cited
the Communications Act provision that provides a process, under
federal law, for allowing the FCC to make that determination.  See id.
at 369, 375 (citing 47 U.S.C. 410(c));  Texas v. United States, 866
F.2d at 1553 (distinguishing Louisiana Public Service from the ICC's
exercise of primary jurisdiction).

   Finally, petitioners argue (Pet. 14-18) that the decisions by the
court of appeals and the Commission will interfere with state
administration of transportation systems.  However, the principle that
particular in-state shipments may be part of the continuous movement
of interstate commerce is hardly novel.  /6/ Service Storage itself,
moreover, specifically emphasizes the importance of having the
Commission, rather than the State, resolve questions about the scope
of a certificate.  359 U.S. at 177-178.  Petitioners' protests
notwithstanding, the Commission's decision in this case was squarely
within the mainstream of the Service Storage doctrine and represents
no expansion of those settled principles.  /7/

   2. Petitioners also contend (Pet. 21-22) that the ICC should have
provided MDOT with personal notice of the declaratory order
proceeding.  However, the Federal Register and ICC Register notices
were accurate and complete and constituted legally sufficient notice
to all interested persons.  Federal Crop Ins. Corp. v. Merrill, 332
U.S. 380, 384-385 (1947).  /8/ Twenty-eight parties participated in
the initial proceeding, including petitioner Alabama Public Service
Commission.  Even if the notice had been somehow inadequate, moreover,
MDOT clearly was not prejudiced in any way.  It was permitted to
intervene in Matlack II (Pet. App. 29), and the Commission fully
considered its arguments (id. at 33, 34).  In short, the State of
Missouri had an adequate opportunity to participate in this
proceeding.

   3. Petitioners maintain (Pet. 22-24) that the Commission was
required to permit depositions and to conduct an oral hearing and an
extensive factual investigation.  The Commission, however, has broad
discretion in the conduct of its proceedings.  See Vermont Yankee
Nuclear Power Corp. v. NRDC, 435 U.S. 519, 524 (1978).  To the extent
that a hearing was required at all, the Commission's use of a "paper
hearing," rather than oral testimony and argument, was entirely
appropriate.  Texas v. United States, 866 F.2d 1546, 1555 (5th Cir.
1989).  /9/ Particularly in view of the limited scope of the
Commission's order -- confined to the facts as presented, with an
explicit statement that any party could institute proceedings to prove
that the actual facts are different (Pet. App. 12, 32-33) -- the
Commission's determination not to permit extensive discovery was
entirely reasonable.  If petitioners (or any other parties) have
evidence that Matlack is conducting its operations in a manner that is
inconsistent with what has been described, they may file a complaint
directly with the ICC under 49 U.S.C. 11701 (1982 & Supp. V 1987) (or
with the appropriate federal district court under 49 U.S.C. 11708
(1982 & Supp. V 1987)).  They would then have access to the hearing
and discovery procedures that are available under the ICC's General
Rules of Practice (49 C.F.R. Pts. 1101-1114).

   4. Petitioners also challenge (Pet. 24-26) the Commission's
substantive conclusion (Pet. App. 16-22, 35-37), affirmed by the court
of appeals (id. at 6-8), that the disputed transportation is
interstate in character.  Petitioners maintain that the analysis
conflicts with two precedents from this Court concerning rail
shipments.

   First, petitioners argue that Atlantic Coast Line R.R. v. Standard
Oil Co., 275 U.S. 257 (1927), compels a contrary result.  They
maintain that, except for the use of rail carriers instead of motor
carriers, the facts in Atlantic Coast Line are "virtually identical"
to the facts of this case (Pet. 25), and that the Commission
improperly focused on Chemtech, which was the "receiver of goods,"
rather than the shipper.  Id. at 26 (emphasis in original).  Both
suggestions are incorrect.  The facts in Atlantic Coast Line were far
from identical to the facts considered by the Commission in this case.
 In Atlantic Coast Line, Standard Oil of Kentucky stockpiled large
quantities of oil at seaboard facilities, and, with no fixed
arrangements for subsequent movements, provided the oil to customers
as the demand arose (275 U.S. at 265, 269);  here, in contrast, from
the outset Chemtech had specific arrangements to ship the chemicals to
their ultimate destinations.  Pet. App. 17-19, 36-37.  Similarly, the
Commission's characterization of Chemtech as the "shipper" responsible
for the entire interstate movement was completely proper.  The record
before the Commission specifically indicates that it is Chemtech who
causes the chemicals to be shipped on both legs of the transportation
(id. at 45);  this record amply supports the Commission's finding that
there is a "continuity of the single interstate movement from the
product's origin point (which is always outside Missouri) to
Chemtech's customers." Id. at 19.  /10/ By contrast, the involvement
of two separate shippers in movements to different destinations -- the
first to the point of temporary storage, the second from the point of
temporary storage -- necessarily broke the continuity of movement in
Atlantic Coast Line.  See 275 U.S. at 267, 269.

   Second, petitioners claim (Pet. 25) that, under Pennsylvania R.R.
v. Public Utilities Comm'n, 298 U.S. 170 (1936), shipments brought
into the State by transportation not subject to ICC jurisdiction (such
as barges, see 49 U.S.C. 10542 (1982 & Supp. V 1987)) are intrastate
shipments.  However, Pennsylvania R.R. does not apply here;  in any
event, this issue is not suitable for review in this case.

   In Matlack I, the Commission concluded (Pet. App. 21-22) that,
under the principles of Pennsylvania R.R. and subsequent ICC
decisions, it could not regulate shipments that originated from exempt
transportation, and that the States also could not regulate such
shipments.  In February 1989, however, in a separate proceeding, /11/
the Commission revised its interpretation of the reach and effect of
Pennsylvania R.R., distinguishing between its jurisdiction over rail
transportation (as in Pennsylvania R.R.) and its jurisdiction over
motor transportation;  the Commission explicitly overruled ICC cases
to the contrary.  /12/ The Commission's position now is that it may
license and regulate any motor carriage that is part of interstate
commerce, even if the Commission does not regulate the transportation
at the moment it crosses state lines.  The Commission's revised
interpretation is currently under review in the court of appeals for
the Fifth Circuit.  Steere Tank Lines Inc. v. ICC, No. 89-4114.  /13/
In view of these circumstances, the instant case does not present an
appropriate occasion for this Court to consider the Commission's
revised interpretation.

                              CONCLUSION

   The petition for a writ of certiorari should be denied.

   Respectfully submitted.

   KENNETH W. STARR

      Solicitor General

   ROBERT S. BURK

      General Counsel

   ELLEN D. HANSON

      Associate General Counsel

   EVELYN G. KITAY

      Attorney Interstate Commerce Commission Washington, D.C. 20423

   SEPTEMBER 1989

   /1/ Matlack has now obtained intrastate authority from the State of
Missouri.  Pet. 4 n.1.

   /2/ See, e.g., Jones Motor Co. v. Pennsylvania Public Utility
Comm'n, 361 U.S. 11 (1959) (summarily reversing state court judgment
on the basis of Service Storage);  Gray Lines Tour Co. v. ICC, 824
F.2d 811, 815 (9th Cir. 1987);  Merchants Fast Motor Lines, Inc. v.
ICC, 528 F.2d 1042, 1044-1045 (5th Cir. 1976);  George Transfer &
Rigging Co. v. United States, 380 F.Supp. 179, 185 (D. Md.) (3-judge
court), aff'd mem., 419 U.S. 1042 (1974);  Contractors Cargo Co. v.
United States, 299 F.Supp. 287, 290 (C.D. Cal. 1969) (3-judge court),
aff'd mem., 397 U.S. 39 (1970).  See also R-C Motor Lines, Inc. v.
United States, 350 F.Supp. 1169, 1171 (M.D. Fla. 1972) (3-judge court)
("(t)he structuring and interpretation of a certificate of public
convenience and necessity is an exercise of the Commission's special
expertise"), aff'd mem., 411 U.S. 941 (1973).

   /3/ The recent opinion in Texas v. United States, 866 F.2d 1546
(5th Cir. 1989), is particularly noteworthy because of its close
similarities to this case.  Like the Eighth Circuit here, the Fifth
Circuit unanimously concluded that the ICC's exercise of primary
jurisdiction was proper.  866 F.2d at 1551-1554.  On the merits,
moreover, like the Eighth Circuit, the Fifth Circuit affirmed the
standard employed by the Commission.  Id. at 1556-1561.  Dissenting in
part, Judge Higginbotham explicitly distinguished the Eighth Circuit
opinion and noted that the "ICC's reasonable general interpretation"
was sufficient to decide this case.  Id. at 1567 (Higginbotham, J.,
concurring in part and dissenting in part).  Although the Eighth
Circuit specifically mentioned the then pending Fifth Circuit case
(Pet. App. 5 n.3), and despite its obvious relevance, petitioners fail
to address the subsequently issued Fifth Circuit decision.

   /4/ See, e.g., Service Storage, 359 U.S. at 175 (Virginia had taken
position that Service Storage's shipments were "clearly intrastate in
character").

   /5/ Petitioners rely heavily (Pet. 12-14) on Puerto Rico Maritime
Shipping Auth. v. Valley Freight Systems, Inc., 856 F.2d 546 (3d Cir.
1988).  Puerto Rico, however, is exceedingly weak authority for
petitioners' position.  First, Puerto Rico involves appellate review
of a district court decision not to dismiss an action on primary
jurisdiction grounds (a decision that, as the court of appeals noted,
id. at 549, is reviewable only for an abuse of discretion), rather
than review of an agency's exercise of primary jurisdiction, as in the
instant case.  Second, the language quoted at length by petitioners
(Pet. 13) is an alternative holding;  the party urging dismissal on
primary jurisdiction grounds had been dilatory about raising the
issue, and that tardiness itself was sufficient to validate the
district court's exercise of discretion.  856 F.2d at 549.  Third, the
court of appeals noted that primary jurisdiction had been exercised in
a closely related case, id. at 549-550, and proceeded to use the
agency's analysis in that case as the basis for its resolution of the
merits.  Id. at 552;  see also ibid.  (noting that the "rule of
deference is fully applicable to an agency's interpretation of its own
jurisdiction").  Finally, the Puerto Rico opinion simply does not
address Service Storage, or the doctrine for which it stands.

   /6/ See, e.g., Baltimore & O.S.W.R.R. v. Settle, 260 U.S. 166
(1922) (movement of goods from Oakley, Ohioj to Madisonville, Ohio is
part of continuous movement of interstate commerce);  Texas & N.O.R.R.
v. Sabine Tram Co., 227 U.S. 111 (1913) (movement of goods from
Ruliff, Texas to Sabine, Texas is not intrastate).

   /7/ Petitioners also claim that the Commission's exercise of
jurisdiction was improper for two other reasons:  it was analogous to
an impermissible federal removal (Pet. 19), and it was an abuse of
discretion (id. at 19-20) that violated principles of federalism
established in Public Serv. Comm'n v. Wycoff Co., 344 U.S. 237 (1952).
 These points are similarly unavailing.  The difficult "arising under"
federal jurisdiction analysis at issue in cases like Merrell Dow
Pharmaceuticals Inc. v. Thompson, 478 U.S. 804 (1986), and Franchise
Tax Bd. v. Construction Laborers Vacation Trust, 463 U.S. 1 (1983), is
obviously inapplicable.  The Commission's declaratory order, and the
petition for review in the court of appeals, were explicitly
authorized by federal statutes.  Far from representing an abuse of
discretion, moreover, the Commission's decision to issue a declaratory
order was perfectly consistent with the emphasis in Service Storage on
the desirability of a declaratory order by the Commission.  See
Service Storage, 359 U.S. at 177-178;  Texas v. United States, 866
F.2d at 1553-1554.

   /8/ The only case petitioners cite, Mullane v. Central Hanover Bank
& Trust Co., 339 U.S. 306 (1950), is inapposite.  That case involved
the inadequacy of an ad placed by a trust company in the back pages of
a local newspaper (giving notice of a judicial settlement affecting
numerous beneficiaries of a common trust fund) when the names and
addresses of some of the beneficiaries were known.  Mullane does not
address the adequacy of governmental notice through publication in the
Federal Register and ICC Register, and does not purport to upset or
modify the holding in Merrill.

   /9/ See also Weinberger v. Hynson, Westcott & Dunning, Inc., 412
U.S. 609, 626 (1973) (industry argument "assumes an individualized
hearing and adjudication as is common in regulatory proceedings.
Section 554(e), however, does not place administrative proceedings in
that straitjacket.").

   /10/ In North Carolina Utilities Comm'n v. United States, 253
F.Supp. 930 (E.D.N.C. 1966) (3-judge court), the court similarly
relied on the intent of a North Carolina importer of goods who caused
the shipment of goods to in-state docks and then on to ultimate
in-state destinations.  Id. at 936.  In Matlack II, the Commission
noted that the "reasoning and conclusuions of North Carolina are
equally compelling here" (Pet. App. 36), and considered the
similarities in the cases.  Id. at 36-37.

   /11/ See Victoria Terminal Enterprises, Inc. -- Transporation of
Fertilizer Within Texas -- Petition for Declaratory Order, No.
MC-C-30002, served Feb. 3, 1989, pending review sub nom. Steer Tank
Lines Inc. v. ICC, No. 89-4114 (5th Cir.).  A copy of the Commission's
decision is attached as an appendix to this brief.

   /12/ In Victoria Terminal, the Commission clarified that
Pennsylvania R.R. does not apply to motor carrier cases because the
ICC's jurisdiction over rail and motor transportation is not
coextensive.  As the Commission explained (App., infra, 3a), the
distinction in Pennsylvania R.R. between "transportation" and
"commerce" is necessary in the rail area, but is not pertinent in the
motor area.  The Commission pointed to important differences in the
governing statutes (App., infra, 3a), and to precedents acknowledging
ICC jurisdiction over motor carriage movements within a single state
when goods arrive by ship from a foreign country.  Id. at 4a.

   /13/ The Commission's opinion in Victoria Terminal was served on
the same day that the court of appeals' panel opinion was issued (Feb.
3, 1989).  In opposing petitioners' unsuccessful petition for
rehearing in the court of appeals, the Commission defended the revised
policy on the merits.  C.A. Opp. to Reh'g 8-10.

   APPENDIX