Western Transportation Company, Plaintiff-appellant, v. Couzens Warehouse & Distributors, Inc., Defendant-appellee, 695 F.2d 1033 (7th Cir. 1982)

Plaintiff Western Transportation Company brought this action under Section 217(b) of the Interstate Commerce Act, 49 U.S.C. § 10761 (1980), claiming that pallets belonging to Defendant Couzens Warehouse & Distributors, Inc. were transported by Western across state lines and that, therefore, Couzens must pay tariff charges. Couzens moved to dismiss the complaint pursuant to Federal Rule of Civil Procedure 12(b) (1). The district court ruled that it did not have subject matter jurisdiction over the controversy and granted the motion to dismiss. We affirm.

* Plaintiff Western carried shipments of various goods from Defendant Couzens' warehouse in Hodgkins, Illinois to points in Illinois, Iowa, and Michigan. The goods stored in the warehouse were owned by merchants who rented space from Couzens. Western shipped the goods to those merchants' customers. At the time that Western began transporting the goods, Western picked up the freight at Couzens' warehouse in Hodgkins and loaded it directly onto Western trucks.

Shortly after the shipping operations began, Western and Couzens orally agreed that Couzens would load the goods onto pallets before Western came to pick them up, in order to reduce the time it took Western drivers to load their trucks. Western then loaded the pallets onto its trucks. Western agreed to give Couzens an equal number of pallets in exchange, or to return Couzens' pallets whenever its drivers returned for another pick-up. Western orally agreed to take the pallets loaded with goods to its terminal in Chicago, Illinois, where Western would transfer the goods to its own pallets for shipment to the customers. The oral agreement was made in late 1975 or early 1976. The parties acted under this agreement until February 1979, when the shipping relationship ended. Significantly, Western does not challenge either the existence or the terms of the oral agreement.¹ 

Western claims that beginning sometime in 1977, it began to transport the goods loaded on Couzens' pallets directly from the warehouse to customers in Iowa and elsewhere without transferring the goods to Western's own pallets at its Chicago terminal. Couzens denies any knowledge of Western's deviation from the oral accord. In an affidavit filed in support of the motion to dismiss, Couzens' former vice-president of traffic distribution detailed the oral agreement and averred that if Western used Couzens' pallets beyond the terms of the oral agreement, i.e. in interstate commerce, that use was unauthorized. On the other hand, Western argues that Couzens knew that the pallets were being handled in violation of the oral agreement, and that in any event the oral agreement was an illegal circumvention of the requirements of the commerce act that interstate pallet movements be covered by a published tariff. 49 U.S.C. § 10761(a) (1980).

II

The district court found that because the oral agreement between the parties did not authorize interstate transportation of Defendant Couzens' pallets, that court did not have jurisdiction to adjudicate the suit.²  Plaintiff Western argues that the oral agreement is invalid and therefore cannot defeat jurisdiction. Western claims that the Supreme Court's ruling in United States v. United States Smelting Co., 339 U.S. 186, 70 S. Ct. 537, 94 L. Ed. 750 (1950), supports its proposition. United States Smelting, however, only notes that preferential carrier services performed for shippers by rendering services beyond those which the carrier is obligated to perform under a filed tariff violate the Interstate Commerce Act.³  The Supreme Court did not consider whether the services at issue there fell within the Act's parameters; that they did was not at issue. Here the question is not whether preferential services were performed in violation of an existing tariff, but rather whether the movements of the pallets themselves fall within the jurisdiction of the commerce act. Any further analysis would take us into the merits of Western's claim--the very step that dismissal for want of subject matter jurisdiction is designed to avoid. See infra section IIB.

The pallet exchange program at issue in Legality of Pallet Exchange Agreement, Kraft Foods Division of National Dairy Products Corp., 322 I.C.C. 439 (1964), does raise issues similar to those before us, but also is very different from the Western-Couzens relationship. In Kraft Foods, an association of motor common carriers petitioned the Interstate Commerce Commission seeking a declaration that a pallet exchange agreement between thirty of its members and Kraft Foods violated the Interstate Commerce Act. Kraft had a written agreement with the carriers giving the carriers the option to exchange pallets on any shipment rather than unloading goods from the pallets and reloading the goods onto other pallets. The goods were packaged food products processed and shipped by Kraft to its plants and warehouses in seven states and non-Kraft locations in additional states. The commission ruled that the movement of pallets was a "service in connection" with interstate transportation, and that the arrangement violated section 217 of the commerce act because it was not published in the appropriate tariff. Kraft Foods, 322 I.C.C. at 441-44.⁴  Although both the Kraft Foods relationships and the Western-Couzens relationship contemplated exchange of pallets in the transportation of freight, the similarity ends there. The key difference is that the Kraft Foods pallet exchange agreements authorized interstate deliveries of the pallets in conjunction with the interstate movement of Kraft products.

Here, Couzens did not desire or authorize interstate movement of its pallets. The freight loaded on the pallets was not owned by Couzens, so the arrangement between Couzens and Western dealt only with the fourteen-mile haul from Hodgkins to Western's Chicago terminal. There is no basis for application of the Interstate Commerce Act. Western was bound by its agreement to move Couzens' pallets only to Chicago. Western cannot perform acts to its own advantage in violation of its contract and then claim a right to reimbursement under a statute that would not apply but for the unauthorized acts.

We conclude that the agreement to exchange Couzens' pallets was separate and apart from the movement of freight. The pallet exchange agreement was envisioned to entail only purely intrastate activity and, therefore, was perfectly valid despite the fact that it was not incorporated into a filed tariff, because the Interstate Commerce Act tariff requirements do not apply.

As stated above, the district court dismissed this lawsuit for want of subject matter jurisdiction. Fed. R. Civ. P. 12(b) (1) (1966). Plaintiff Western argues that this was error because the court actually ruled on the merits when it held that the oral agreement was valid, thereby defeating jurisdiction. Western argues that under Bell v. Hood, 327 U.S. 678, 66 S. Ct. 773, 90 L. Ed. 939 (1945), the district court was required to exercise jurisdiction because the pallets in fact moved across state lines. This characterization misconstrues the basis upon which a court exercises jurisdiction.

The Supreme Court in Bell v. Hood explained that jurisdiction is not defeated

by the possibility that the averments might fail to state a cause of action on which petitioners could actually recover. For it is well settled that the failure to state a proper cause of action calls for a judgment on the merits and not for a dismissal for want of jurisdiction. Whether a complaint states a cause of action on which relief could be granted is a question of law and just as issues of fact it must be decided after and not before the court has assumed jurisdiction over the controversy. If the court does later exercise its jurisdiction to determine that the allegations in the complaint do not state a ground for relief, then dismissal of the case would be on the merits, not for want of jurisdiction. [citations omitted.] The previously carved out exceptions are that a suit may sometimes be dismissed for want of jurisdiction where the alleged claim under the Constitution or federal statutes clearly appears to be immaterial and made solely for the purpose of obtaining jurisdiction or where such a claim is wholly insubstantial and frivolous.

327 U.S. at 682-83, 66 S. Ct. at 776.⁵  Here, federal jurisdiction is proper only if the activities at issue involved interstate transportation of freight. To make that determination, the district court had to recognize the oral pallet exchange agreement. The oral agreement rendered the federal statute immaterial to the case.

The Supreme Court, in a series of decisions, has outlined the standards to apply when determining if a court has jurisdiction. In Oneida Indian Nation v. County of Oneida, 414 U.S. 661, 666, 94 S. Ct. 772, 776, 39 L. Ed. 2d 73 (1974), a suit brought under the general federal question statute, 28 U.S.C. § 1331(a) (1976), the Court set the standard for dismissal as when a claim is "so insubstantial, implausible, foreclosed by prior decisions of this Court, or otherwise completely devoid of merit as not to involve a federal controversy within the jurisdiction of the District Court...." Accord, Duke Power Co. v. Carolina Environmental Study Group, Inc., 438 U.S. 59, 70-71, 98 S. Ct. 2620, 2628-2629, 57 L. Ed. 2d 595 (1978) (dismissal under Sec. 1331(a) proper only if cause of action is "patently without merit"); Hagans v. Lavine, 415 U.S. 528, 542-43, 94 S. Ct. 1372, 1381-1382, 39 L. Ed. 2d 577 (1974) ("so patently without merit" test applied to action under 28 U.S.C. § 1343(3) (1979) general constitutional claims jurisdiction). The cause of action before us arose not under a general federal jurisdictional grant, but rather under 28 U.S.C. § 1337 (1980) vesting original jurisdiction in the district courts for claims arising under federal statutes regulating commerce. The alleged wrong was based upon a statute regulating commerce that is, in fact, immaterial to the claim, Bell v. Hood, supra, 327 U.S. at 682, 66 S. Ct. at 776, therefore the action was properly dismissed.

The affidavit of Couzens' vice-president established that Western was not authorized to move Couzens' pallets across state lines. As discussed in footnote 1, supra, estern does not challenge the existence of the oral agreement between it and Couzens. The Interstate Commerce Act neither forbids motor carrier agreements regarding purely intrastate transportation, 49 U.S.C. § 10521(b), nor requires that the service rendered by Western under the oral agreement be included in a filed tariff, 49 U.S.C. §§ 10521(b) (2), 10762(a) (1).

We note that the district court may review any evidence submitted on the issue to determine if subject matter jurisdiction in fact exists. Nuclear Engineering Co. v. Scott, 660 F.2d 241, 252 (7th Cir. 1981); Grafon Corp. v. Hausermann, 602 F.2d 781, 783 (7th Cir. 1979). Moreover, the party alleging jurisdiction must support its allegation with competent proof of jurisdictional facts. Nuclear Engineering, 660 F.2d at 251; Grafon, 602 F.2d at 783. Western's complaint contains only the bare statement that jurisdiction exists under the Interstate Commerce Act. Western did not respond to Couzens' affidavit with competent proof that jurisdiction existed. That affidavit stands, therefore, as proof that the district court did not have jurisdiction over the dispute.

Western argues that the mere fact that the pallets moved between states, a fact recognized by the trial court, supports jurisdiction. In response to this, we simply state that we see no reason to allow this plaintiff in effect to create jurisdiction under the Interstate Commerce Act by hauling these pallets to Iowa and back without authorization. The district court is not precluded from considering conflicting evidence which weighs on the jurisdictional determination. The Third Circuit has explained that establishing jurisdiction on a Rule 12(b) (1) motion entails more than mere acceptance of the plaintiff's factual allegations:

Because at issue in a factual 12(b) (1) motion is the trial court's jurisdiction--its very power to hear the case--there is substantial authority that the trial court is free to weigh the evidence and satisfy itself as to the existence of its power to hear the case. In short, no presumptive truthfulness attaches to plaintiff's allegations, and the existence of disputed material facts will not preclude the trial court from evaluating for itself the merits of jurisdictional claims. Moreover, the plaintiff will have the burden of proof that jurisdiction does in fact exist.

Mortensen v. First Federal Savings and Loan Ass'n, 549 F.2d 884, 891 (3d Cir. 1977) [footnote omitted]. This court recognizes that procedure. Grafon, 602 F.2d at 783.

The plaintiff did not contest the existence of an oral agreement for purely intrastate movement of pallets during the district court's deliberations on the defendant's Rule 12(b) (1) motion to dismiss. Therefore, the district court's recognition of the existence of that agreement will not be disturbed. See, e.g., Williamson v. Tucker, 454 U.S. 897, 102 S. Ct. 396, 70 L. Ed. 2d 212 (1981) (factual determinations by the district court reviewed under "clearly erroneous" standard).

III

The Interstate Commerce Act does not forbid agreements between carriers and shippers for intrastate exchange of pallets. Western Transportation Company does not have a claim within the jurisdictional powers of the district court.

AFFIRMED.