Mr. WASHER. They have restricted that so that any procedure must be filed by the Commission, the Attorney General, or if it is a violation of a Commission order, by any injured party.

But you see, they made it very restrictive, and I think Congress was very forethoughtful in adding that provision.

Senator LAUSCHE. That is section 417 (b) allows the bringing of an action to restrain further wrongs but limits the right to bring the action to the Attorney General, the Commission, and in case of an order having been issued and disobeyed, then by one of the interested parties?

Mr. WASHER. That is correct.

Senator LAUSCHE. And you feel that that is adequate and does serve justice in treating the transporters in our country?

Mr. WASHER. I feel that this is a proper provision in that even in the case of a freight forwarder who is violating part 4, an injured party must still go before the Commission first and obtain his order before he brings to the courts; and I think, as was mentioned by the farm people, here is a case of clear discrimination. If it is a person who is not even within the scope of part IV, you allow him to go to the court immediately, but if he is a violating or an unlawful forwarder you make him go to the Commission first and then to the court.

The issue is still a complex one. We believe that the proper procedure is for a Commission determination.

On page 4 I do mention some of the background of H.R. 5401. We did not appear in H.R. 5401 before the House solely on the reparations portion because it did not include any part IV section, and although some individual have a feeling that the application of the injunctive process against part II and part IV both should be stricken, we do not object or have any statement as to injunctive relief for part II violation.

Senator LAUSCHE. And part II violations are what?
Mr. WASHER. Motor carriers.

On page 5 I try to point out, and I do not know whether it has been mentioned yet, that whether this shipping association is a lawful one, an unlawful one, a flagrant violation, or what, it still transports its merchandise by the common carriers of this country. If it does not, relief can be obtained under part II for violation of motor carriers, or if it is conducting any waterway or rail operation which is unlawful you have relief under those parts. But as a shipping association, just as a forwarder, there is no traffic being diverted from the common carriers of this country. So that the situation may be different from a practical economic standpoint from the violations of part II. Now our concluding section is on the provisions of reparations, and we do favor, and have for many years, the establishment of reparations for part II and part IV motor carriers and freight forwarders.

There was a recent case before the Commission in which the motor carriers had published a surcharge. The period of suspension expired, the surcharge was applied for-I think it was some 6 to 9 months before the final Commission decision found that that was unlawful. There is no way for shipers to recover those excess charges.

We prefer the provisions of S. 1732 which permit a Commission award of reparations. We do not object to the other provision in S. 1727 which allows it only upon court application. In either case,

it would be a deterrent to the rather unwise publication of freight

rates.

I do not find from retailers any way that they file any numerous small suits under the existing reparations provisions for parts I and III. There are some that are filed in so-called voluntary reparations cases in which both the railroad and the shipper might agree it was improper and the Commission in a quick manner can award reparations. That would not be possible under S. 1727, and that is one reason for our pereference of the one as against the other.

Senator LAUSCHE. To what extent, if at all, do you give support to the vesting of an allegedly injured person with the right to bring private suits? Do you feel that that should be completely omitted from the bill, or are there some parts of it which you favor?

Mr. WASHER. I would prefer that it be completely eliminated. Senator LAUSCHE. Did you attach some qualifications to your opinion expressed earlier that there are some parts of it that you do subscribe to?

Mr. WASHER. Well, I am only speaking as to part IV, freight forwarder application. We have no real position on the provision of S. 1727 as it now stands as to motor carrier operations.

Senator LAUSCHE. Except as to this purpose to give the power to an individual to bring suit, would you tabulate in what other respects you feel the bill S. 1727 should be corrected.

Mr. WASHER. In what other respects?

Senator LAUSCHE. Yes.

Mr. WASHER. Well, I should say S. 1727 should not be amended in the same way that H.R. 5401 was amended. As it now stands, I have no objection to that section.

Senator LAUSCHE. Any other way?

Mr. WASHER. No.

Senator LAUSCHE. Well, will you summarize just how you stand on S. 1727? I am not clear on the basis of what you said. You are for S. 1727 ?

Mr. WASHER. As it now reads.

Senator LAUSCHE. As it now reads?

Mr. WASHER. Right.

Senator LAUSCHE. No changes at all?

Mr. WASHER. The one possible exception would be to adopt the Commission recommendation on reparations.

Senator LAUSCHE. And what is that Commission recommendation? Others will read this record, and so let's get it clear.

Mr. WASHER. The Commission recommendations on reparations are contained in S. 1732.

Senator LAUSCHE. What are they?

Mr. WASHER. They provide in essence in addition to a court procedure for the award of reparations a possibility that empowers the Commission to award reparations. We think that is preferable as between the two.

Mr. SENDER. On that last point, if the Commission awarded reparations would the shipper still not have to go to court to collect? Mr. WASHER. Under part I that is not true. You have this case

of a voluntary reparations settlement which is a very simpleMr. SENDER. If the carrier refused to settle you would still have to go to court to collect, would you not?

Mr. WASHER. Yes; that is true. I just cannot envision that that would be required in many cases.

Senator LAUSCHE. All right, anything further you desire to say? Mr. WASHER. No, sir.

Senator LAUSCHE. All right; thank you very much.

I will put it this way: as to H.R. 5401, in what respects do you complain against it? Put them down, one, two, three, tabulate it. Mr. WASHER. I can make it very simple.

Senator LAUSCHE. Yes.

Mr. WASHER. Our objection to H.R. 5401 was in the expansion of section 5 thereof to include section 5 (b) which provided for an amendment to section 417 of the act.

Senator LAUSCHE. What does that mean?

Mr. WASHER. That means that they took the civil injunctive procedure that was contained in the original H.R. 5401 and by amendment expanded its application to violations of the freight forwarder section of the bill.

Senator LAUSCHE. Thanks very much.

(Prepared statement of Mr. Washer appears in the appendix.) Senator LAUSCHE. Mr. Morrow, general counsel of the Freight Forwarders Institute.

Mr. Morrow, if you will proceed.

Mr. MORROW. Mr. Chairman, I have a very condensed statement of four pages, and I believe it will be preferable if I read it and then make a few comments, omitting the first paragraph.

STATEMENT OF GILES MORROW, GENERAL COUNSEL, FREIGHT FORWARDERS INSTITUTE

Mr. MORROW. My name is Giles Morrow. I appear on behalf of the Freight Forwarders Institute, of which I am general counsel. The institute is the national trade association representing freight forwarders subject to regulation under part IV of the Interstate Commerce Act. Its offices are at 1012 14th Street NW., Washington, D.C. My testimony will be limited to S. 1727 and S. 1732, the only bills scheduled for hearing which have a direct bearing on freight forwarders.

Section 6 of S. 1727 is the same as section 5 except that the latter applies to motor carriers and section 6 applies to freight forwarders. Those sections provide a statutory basis for the recovery of reparations from motor carriers and freight forwarders under procedures which were followed prior to the Supreme Court's decision in 1959 in T.I.M.E., Inc. v. United States, 359 U.S. 464.

That decision held that shippers have no right to challenge the reasonableness of a motor carrier's charges on past shipments, made in accordance with tariffs filed with the Commission.

Since the applicable provisions of part IV, which regulates freight forwarders, are similar to the motor carrier provisions of the act, it is assumed that the same doctrine applies in the case of freight forwarders.

The effect of sections 5 and 6 of S. 1727 is to reestablish, by statutory enactment, the procedures for recovery of reparations from motor carriers and freight forwarders which applied prior to the Court's decision in 1959.

While freight forwarders have opposed, and still oppose, provisions for reparations such as those which would be established by S. 1732, we do not oppose the procedure established by section 6 of S. 1727.

We cooperated with the transportation and shipper interests represented by the Transportation Association of America in working out the alternative method represented by S. 1727, and we hope such method will be acceptable to your committee.

Section 4 of S. 1727 amends section 222 (b) of the Interstate Commerce Act which relates to violations of part II of the act (motor carriers). Among other things, section 4 adds a new paragraph (2) to such section 222 (b).

That new paragraph provides that any person injured as the result of clear and patent violation of the operating authority provisions of part II, may apply directly to a U.S. district court for an injunction to restrain such violation.

Section 417 (b) (applicable to freight forwarders) is the same, in substance, as section 222 (b). Under section 417 (b) only the Commission or the Attorney General may seek an injunction for violation of the permits section of part IV.

There is the same need to afford injured parties a measure of selfprotection against freight forwarder operations which are clearly unlawful as there has been demonstrated to be in the case of unlawful motor carrier operations.

In recent years the Commission, both in proceedings instituted on its own motion and on complaint, has conducted numerous investigations of alleged unlawful freight forwarder operations.

The Commission has issued cease-and-desist orders against a number of persons and organizations found to be unlawfully operating as freight forwarders. In some cases we have reason to believe the unlawful activity is continuing despite the cease-and-desist orders.

Unlawful freight forwarder activity is a matter of concern not only to freight forwarders, but to motor carriers. We believe that if injured persons are given the right to seek injunctive relief against such activity in their own right it will be helpful to the regulated transportation industry generally.

Accordingly, we recommend that section 417 (b) of the act be amended in the same manner in which section 4 proposes to amend section 222 (b).

When the House Committee on Interstate and Foreign Commerce was considering H.R. 5401 last month we made the same recommendation with respect to the amendment of section 417 (b) of the act, and the committee accepted our recommendation. That amendment appears as section 5 (b) of H.R. 5401, as that bill was passed by the House on May 6.

This is not the first time your committee has had occasion to consider an amendment to part IV which would give injured persons a right to sue for violations. Bill S. 2560, of the 87th Congress, which was passed by the Senate on June 29, 1962 (but not acted on in the House), contained in section 4(g), an amendment to section 417 (b) which is the same, in substance as the amendment which we now urge your committee to insert in the pending bill S. 1727.

Our proposed amendment to section 4 of the bill not only makes for uniformity of regulation, as applied to motor carrier and freight forwarder operations, but it would be of material assistance in carrying out the objectives of regulation.

And so with that one amendment, Mr. Chairman, we support S. 1727. Mr. SENDER. Do you have a further statement?

Mr. MORROW. I would like to comment briefly on the remarks of the two previous witnesses, if I may.

It seems that Mr. Culpepper and Mr. Washer are apprehensive about this provision giving injured persons a right to sue. As I listened to them I think they are not so much afraid that the guilty will be enjoined, but that the innocent would be sued and harassed. I do not think that will occur under this bill.

As the House committee report explained, the words "clear and patent" were intended to be jurisdictional and not standard approval. In other words, the court is not to accept. a suit unless it first determines that there is a clear and patent violation. And now the court could issue a temporary restraining order in a case of such a suit, but the provision of section IV of the bill would require that the person suing post a bond or some other security-it probably would be a bond-to reimburse persons who would be sued without good reason; and of course, the courts generally do that now in their own discretion, but this would make it mandatory that any plaintiff post a bond in the amount the court might deem necessary to reimburse the defendant if he is wrong. Of course, if he is operating unlawfully then nobody could complain about harassment. Also the plaintiff would have to pay attorney's fees if he lost the suit.

Now there are a good many complaints pending before the Interstate Commerce Commission now. Some of them have been pending for 5 years. It is true we have that process to go to the Commission. We have had very few decisions. We have some cease-and-desist orders against unlawful operations. Only one of them has reached a court so far. I will tell you the reason for that in a little while.

But a decision of a few months ago-I don't see the date on it-of the U.S. circuit court in New York-that is a district court, the Southern District of New York-however, the three Judges were Circuit Judge Marshall and District Judges Edelstein and Croak. It was one of these three-judge panel courts, and in the case of Freight Consolidated Forwarders, Inc., et al, v. the United States in Interstate Commerce Commission 63 Civil 55, the court upheld an order of the Commission ordering this shipper association to cease and desist, and the court said, and which I think is pertinent to the testimony that has been given here:

In view of the strictures imposed upon freight forwarders as distinguished from shippers associations, it becomes perfectly clear that great competitive advantages would accrue to an organization if it could free itself of the burdens of compliance with the applicable regulations whether by the self-styled title of shippers associations or otherwise for the purpose of engaging in the business of freight forwarding. To state the proposition serves to provide the ready answer, for to tolerate such a situation would be repugnant to the congressional intent and would indeed create a fertile field for the unscrupulous entrepreneurs. It would be a retelling once again of the old story of the wolf in sheep's clothing, but in a more modern setting. Yet these plaintiffs would have these people believe they are bona fide shippers associations simply because they say they are, when the substantial evidence before the court points to a contrary conclu