Lloyd Fry Roofing Company v. Wood/Opinion of the Court

delivered the opinion of the Court.

The petitioner, Lloyd A. Fry Roofing Company, manufactures asphalt roofing products in Memphis, Tennessee, and sends them in trucks to customers in nearby states. Some of these trucks are driven by their owners who have allegedly leased them to the petitioner. Five of these driver-owners while carrying Fry's interstate shipments on Arkansas highways were arrested for having failed to obtain a permit as required of all contract carriers by § 11 of the Arkansas Motor Act. Petitioner brought this action in an Arkansas state court to enjoin the state's Public Service Commission from further molestation for prosecution of the drivers. The bill asserted both state and federal grounds for denying that the state law could be applied to require a permit. The state grounds alleged were: Neither petitioner Fry Roofing Company nor the truck drivers could be required to get a state permit, because the state law exempted "private" carriers from that duty, and petitioner was such a "private carrier"—that is, a commercial enterprise, carrying its own products exclusively in its own leased trucks operated by its own bona fide driveremployees. Since, petitioner claimed, the drivers were its bona fide employees, it necessarily followed that they need not get [p159] state permits as "contract carriers' because they were not in the business of transporting goods for hire. The federal ground asserted by petitioner to prevent application of the state statute was that requiring either Fry or the drivers to get state permits would unduly burden interstate commerce in violation of the United States Constitution and would invade a field of regulation preempted by the Federal Motor Carrier Act.

Answering the bill, the State Commission asked the court to dismiss it, strongly urging that petitioner's alleged lease of trucks and operation of them by its own employees were mere pretenses, a subterfuge to enable petitioner and others to evade and escape the regulatory provisions of the Arkansas Motor Act. After lengthy hearings the trial court found that the arrested drivers were in fact bona fide employees of petitioner, that the truck leases were also bona fide, and that petitioner was therefore transporting its own goods as a private carrier exempt from the state Act. For this reason the court held that the Act did not require either petitioner or its drivers to get a permit. Accordingly the Commission was enjoined as prayed. Reviewing the facts for itself the State Supreme Court found that the arrested truck [p160] drivers were not petitioner's employees, that the truck lease arrangements were shams, and that petitioner was therefore a shipper—not a carrier of any kind. In this situation the court found that the driver-owners were in reality transporting petitioner's goods as "contract carriers" for hire, engaged in the very kind of business for which § 11 of the state Act required a permit. The court then dismissed the bill and denied a rehearing, thereby rejecting the federal questions raised. 219 Ark. 553, 244 S.W.2d 147.

Certiorari was granted because of the Commerce Clause and Federal Motor Carrier Act questions. 343 U.S. 962.

We are urged to set aside the findings of the State Supreme Court before passing upon the constitutional questions presented. Petitioner contends that these findings are without evidential support and that the subsidiary findings do not support the ultimate conclusion that the leases were shams. Whether rejection of these findings would place petitioner's Commerce Clause contentions in a more favorable position, we need not consider. For there is much record evidence, both oral and written, some of which tends to support petitioner's contention of good-faith arrangements and some the contrary. Some details of petitioner's conduct resemble and some details differ from patterns of conduct found by courts in other cases to have been contrived to avoid legal regulation. See, e.g., United States v. La Tuff Transfer Service, 95 F. Supp. 375, and cases there cited. There are no exceptional circumstances of any kind that would justify us in rejecting the Supreme Court's findings; they are not without factual foundation, and we accept them.

The finding that the arrested drivers own and operate the trucks for hire makes them contract carriers as defined in the state Act. Section 11 of that Act requires contract carriers to get a permit and outlines certain considerations [p161] the state commission may weign in granting or refusing the permit. Among these matters is the adequacy of transportation services already being performed by "any railroad, street railway or motor carrier." Refusal of a state certificate based on such grounds was held to be an unconstitutional obstruction of interstate commerce in Buck v. Kuykendall, 267 U.S. 307. To deny these interstate carriers an Arkansas permit for such reasons would conflict with the Buck holding.

Unlike the situation in the Buck case, Arkansas has not refused to grant a permit for interstate carriage of goods on state highways. It has asked these driver-owners to do nothing except apply for a permit as contract carriers are required to do by the State Act. And the State Commission here expressly disclaims any "discretionary right to refuse to grant a permit for contract carriage where that carriage is in interstate commerce." The state asserts no power or purpose to require the drivers to do more than register with the appropriate agency. Such an identification is necessary, the Commission urges, in order that it may properly apply the state's valid police, welfare, and safety regulations to motor carriers using its highways. Nor is there any showing whatever that the Commission has attempted or will attempt to attach any burdensome conditions to the grant of a permit, or conditions that would in any manner [p162] conflict with the National Motor Carrier Act or any Interstate Commerce Commission regulations issued thereunder. Moreover, the Arkansas Act imposes upon its Commission the duty of reconciling state regulation with that of the Interstate Commerce Commission, just as the Interstate Commerce Act requires federal officials to cooperate with the states and their duly authorized state officials. Here neither petitioner nor the drivers have obtained any kind of authority from the Interstate Commerce Commission. Indeed, petitioner's whole case has been built on the premise that neither it nor the drivers must get a permit from the state or the national regulatory agency. In this situation our prior cases make clear that a state can regulate so long as no undue burden is imposed on interstate commerce, and that a mere requirement for a permit is not such a burden. It will be time enough to consider apprehended burdensome conditions when and if the state attempts to impose and [p163] enforce them. At present we hold only that Arkansas is not powerless to require interstate motor carriers to identify themselves as users of that state's highways.

Affirmed.