Petition — Terry Tuck, Inc. v. Consolidated Freightways Corp. of Delaware

Gupreme Court, U. i, !

FILED

APR %5 1980

MICHAEL RODAK, JR., CLERR

IN THE

Supreme Court of the United States

October Term, 1979

TERRY TUCK, INC.

Petitioner,

VS.

CONSOLIDATED FREIGHTWAYS CORPORATION OF DELA-

WARE,

Respondent.

Petition of Terry Tuck, Inc. for a Writ of Certiorari to

the Court of Appeals for the Ninth Circuit.

SLAFF, Mosk & RUDMAN,

GEORGE SLAFF,

Marc R. STEIN,

9200 Sunset Boulevard,

Suite 825,

Los Angeles, Calif. 90069,

(213) 275-5351,

Attorneys for Petitioner,

Terry Tuck, Inc.

Parker & Son, Inc., Law Printers, Los Angeles. Phone 724-6622

SUBJECT INDEX

Page

PENN OOS ho oo er SS ee ]

ET SIRES AAS SS es ede 2

ici RIES SE RS i a aan 2

een ok ou 5 wc a in.p's nono Wi 2

NN in ks 5 a au cies 0s. he bneue.s 3

Tc li it ne s 5

The Judgment of the Court Below Was Contrary to the

RN OE oa inks nw cinsip'e soe 5

The Historical Background of the ‘‘Conclusive Pre- _

I oe esis cs ase daige-o-a 8

This Court Has Held That the Policy of the Act Is Not

Contravened by Permitting the Shipper to Offset His

Damage From a Carrier’s Wrong Against the Car-

rier’s Claim for Its Charge ................... 12

MIN cha aa RUSS ik cScpcsccbacess 17

Appendix A. Memorandum and Order Re: Finding of

Fact, Conclusion of Law, Granting Partial Summary

Judgment, Dismissing Counter-Claim, Dismissing

Claim for Punitive Damages, and Dismissing Ac-

oe le CEE ee eS ey aE ee aay ee App. p. 1

ii

TABLE OF AUTHORITIES CITED

Cases Page

Aero Trucking Inc. v. Royal Tube Company, 594 F.2d

OUP LPR. SPINS eae Shs a a ee 4

Armour Packing Company v. United States, 209 U.S. 55

RRUUMINe SRL Oks os ois pak ee aces 9

Atchisos T. & S.F. R. Co. v. Robinson, 233 U.S. 173

POW ide ea Ges Mu kav ch ek 5, 6

Burkhart v. Fort Worth & D.C. Ry. Co., 149 F.2d 909

We BO oy oes co he ee 4

Chicago & N.W. Rwy. v. Lindell, 281 U.S. 14

RUE Crecee reel tt toe pe fy tae

Forster Bros. Co. v. Duluth S.S.&A.R. Co., 14 Inters.

er. Mee, Soe tise) oe ee 11

Francis v. Southern Pacific Co. , 333 U.S. 445 (1948) 15, 16

George N. Pierce Co. v. Wells Fargo & Co., 236 U.S.

ci ey SORT a RS SRO CUE Te SRT AT ek 12, 13

Great Northern R. Co. v. O’Connor, 232 U.S. 508

CEU N Se aN ei ticg ee i oe eee 5, 6

RUF fe ks eins vic eet, 5 cae +s 6, 7,11

Louisville & N.R. Co. v. Maxwell, 237 U.S. 94(1915) 11

New York Central and Hudson River Railroad Company

v. United States, 212 U.S. 481 (1909) ........... 9

New York, New Haven and Hartford R.R. Co. v. In-

terstate Commerce Commission, 200 U.S. 361 (1906) 9

Pettibone v. Richardson, 126 F.2d 969 (7th Cir. 1942) 4

Poor v. Chicago B. & Q. R. Co., 12 Inters. Com. Rep.

PMPMIIES 6 5d 05 0h Gan oboe eee ie: 11

Southern Pacific Company v. Miller Abattoir Company,

SON B20 Sor (510 Cir. 1972). 14, 15

eee

Page

Standard Oil Co. of Indiana v. United States, 164 F. 376

CFR RG RD ie aks CERRINA ck et ee cs oes 9

Texas & Pacific Rwy. Co. v. Mugg & Dryden, 202 U.S.

OS 860s oo FA RORR AN ae FAG whee bse ban 10

Trammel v. United States, 48 U.S.L.W. (Feb. 27, 1980)

pp. 4201, 4203 ......... Cia we Suc e we as 15, 16

United States v. New York Central and Hudson River

mammoes, 212 U.5. SUP (IGM 6 ovo voc en 7)

Miscellaneous

First Annual Report of the Interstate Commerce Com-

guano (IG87) OO. So? oo cos os keene: 9

Report, Senate Select Committee on Interstate Com-

merce, 49th Cong., Ist Sess. (1886) pp. 191,198,199 9

Rules

Rules of United States Supreme Court, Rule 19 ..... 7

Statutes

United States Code, Title 28, Sec. 1254(2) ......... 2

United States Code, Title 49, Sec. 317(b)........ a3

United States Code Annotated, Title 49, Sec. 41..... 13

United States Code Annotated, Title 49, Sec. 41(2) .. 10

Textbooks

Drinker, Henry S., ‘‘The Interstate Commerce Act,’’

(George T. Bisel Co., 1909) p. 55 .............. 9

Hadley, A.T., ‘‘Railroad Transportation,’’ (G. P. Put-

nam’s Sons, 1885, 1889 Ed.) p. 21 ............. )

Hillman, J.J., ‘‘Competition and Railroad Price Dis-

crimination,’’ (The Transportation Center of North-

western University, 1967) p. 148 ............... 16

The Nature of the Judicial Process, in Selected Writing of

Benjamin Nathan Cardozo (Hall Ed. 1947) p. 174 . 16

IN THE

Supreme Court of the United States

October Term, 1979

petennaerr

TERRY TUCK, INC.

Petitioner,

vs.

CONSOLIDATED FREIGHTWAYS CORPORATION OF DELA-

WARE,

Respondent.

Petition of Terry Tuck, Inc. for a Writ of Certiorari to

the Court of Appeals for the Ninth Circuit.

Terry Tuck, Inc. (‘‘Terry Tuck’’) petitions for a writ of

certiorari to review the judgment of the Court of Appeals

for the Ninth Circuit, entered in this case on January 29,

1980.

Opinion Below.

The opinions of the District Court for the Central District

of California and of the Court of Appeals for the Ninth

Circuit are set out in Appendix A and Appendix B, re-

spectively. The opinion of the Court of Appeals is reported

in 612 F.2d 465.

sisi

The judgment of the District Court was entered on No-

vember 7, 1975.

The judgment of the Court of Appeals was entered on

January 29, 1980.

Jurisdiction.

The jurisdiction of the Court is invoked pursuant to Title

28 U.S.C. §1254(1).

Question Presented.

The question presented for review may be stated as fol-

lows:

When a shipper has paid a common carrier the rate

prescribed in the carrier’s tariffs, is the shipper pre-

cluded from suing the carrier for fraudulent rate mis-

representation, made by the carrier in order to keep the

shipper from utilizing a competing carrier at a great

saving in cost to the shipper?

Statute Involved.

The only statute 1 :volved is Title 49 U.S.C. §317 (b)

which provides:

‘“No common carrier by motor vehicle shall charge or

demand or collect or receive a greaier or less or dif-

ferent compensation for transportation or for any serv-

ice in connection therewith between the points enum-

erated in such tariff than the rates, fares, and charges

specified in the tariffs in effect at the time; and no such

carrier shall refund or remit in any manner or by any

device, directly or indirectly, or through any agent or

broker or otherwise, any portion of the rates, fares, or

charges so specified, or extend to any person any priv- .

ileges or facilities for transporation in interstate or for-

eign commerce except such as are specified in its tar-

iffs: Provided, That the provisions of sections 1(7) and

pa ae

22 of this title shall apply to common carriers by motor

vehicles subject to this chapter.”’

Petitioner does not challenge the validity of the statute.

Petitioner does challenge the engrafting upon the statute by

the Circuit Court’ in a fraud case of a conclusive presump-

tion that the shipper knew the carrier’s tariffs and accord-

ingly, the carrier was free to perpetrate a wilful fraud upon

the shipper with regard to the rate.

Statement of the Case.

The facts of the case are simple and straightforward.

Respondent (hereafter ‘‘Consolidated’’) sued Petitioner

(hereafter ‘“Terry Tuck’’) for the balance due ($12,531.36)

on a number of shipments from the East Coast to Terry

Tuck’s plant in Los Angeles.

Summary judgment for that amount was granted against

Terry Tuck; was not appealed from; and indeed, was paid

in full. However, Terry Tuck had counterclaimed for dam-

ages in the amount of $10,000 (and for punitive damages)

based on Consolidated’s fraud. Terry Tuck alleged that upon

examination of early billings from Consolidated, it found

that a competing carrier (Western Carloading) by reason of

being a freight forwarder could carry its goods at a much

lower rate and indeed offered to do so. (R. 186.) On being

so advised, a Consolidated agent came to Terry Tuck’s

office and, in order to keep Terry Tuck from switching its

business to Western Carloading, advised Terry Tuck it was

being incorrectly billed and that it need only pay Consoli-

dated a lower rate than the billed rate. (R. 177-178.) On

the basis of these representations, Terry Tuck did not switch

‘We do not hesitate to point out to the Court at the outset that there

is no conflict among the Circuits in this regard. Indeed, as appears in

the per curiam opinion of the Ninth Circuit, that Circuit relied exclu-

sively upon decisions of the Seventh and Eighth Circuits.

Rae

its business to Western Carloading, (R. 178), but continued

to ship via Consolidated and to pay Consolidated the lower

rate. By not giving its business to Western and subsequently

being required to pay Consolidated the difference ($12,-

531.36) between what it had paid Consolidated and the one

of Consolidated’s thousands of filed rates which was, de-

spite its employee’s representation to the contrary, actually

applicable, Terry Tuck was damaged in the amount of

$10,000. (R. 8.)

However, on Consolidated’s motion the District Court

dismissed Terry Tuck’s counterclaim in reliance upon Pet-

tibone v. Richardson, 126 F.2d 969 (7th Cir. 1942), and

the Circuit Court in reliance on Pettibone, supra, Burkhart

v. Fort Worth & D.C. Ry. Co., 149 F.2d 909 (8th Cir.

1945) and Aero Trucking Inc. v. Royal Tube Company, 594

F.2d 619 (7th Cir. 1979), affirmed per curiam.

aii

ARGUMENT.

The Judgment of the Court Below Was Contrary to the

Decisions of This Court.

The dismissal of Terry Tuck’s counterclaim for fraud

rests entirely upon the ‘‘conclusive presumption’’ that a

shipper knows every one of the carrier’s thousands of filed

rates as well as he/she/it knows that the sun rises in the East

and therefore cannot be led astray by the fraud of the carrier.

In reaching this conclusion the Court below, like the two”

circuits on whose decisions it relied, ignored completely the

clear statements of this Court that the ‘‘conclusive pre-

sumption’’ first declared by this Court in Kansas City South-

ern Rwy. Co. v. Carl, 227 U.S. 639 (1913) did not apply

in the case of the carrier’s fraud. Great Northern R. Co.

v. O'Connor, 232 U.S. 508 (1914); Atchison T. & S.F.R.

Co. v. Robinson, 233 U.S. 173 (1914); George N. Pierce

Co. v. Wells Fargo & Co., 236 U.S. 278 (1915).

Those three cases were decided almost immediately fol-

lowing the Carl case. In Carl, a shipper, ‘‘in order to obtain

the lower of two freight rates’’’ had shipped goods at an

agreed value less than their actual value, and upon their

loss, sued for the full value. For the first time in any civil

case under the Interstate Commerce Act, the words ‘‘con-

clusively presumed’’ appeared in a decision of this Court,

but only after this Court had been careful to note that ‘“There

was no evidence tending to show any misrepresentation

made by the [railroad] company, or any deceit, or fraud

...’”* There this Court said:

‘“When there are two published rates, based upon dif-

ference in value, the legal rate automatically attaches

*227 U.S. 639, 640.

‘Id.

sn

itself to the declared or agreed value . . . The shipper’s

knowledge of the lawful rate is conclusively presumed,

and the carrier may not be required to surrender the

goods . . . until the full legal rate has been paid.’”*

But within a very short time after Carl, this Court took

pains to point out, in three separate cases, that this pre-

sumption was not to be applied in the case of fraud by the

carrier. The first of those cases was Great Northern Railway

Company v. O’Connor, 232 U.S. 508 (1914), decided less

than a year after Carl. Like Carl that was a case in which

the shipper had shipped goods at a rate which provided for

a lower valuation than the goods’ actual value and, when

the goods were lost, sought to recover their actual value.

In denying recovery of an amount over the lower valuation,

this Court said:

“If. . . there are alternative rates based on value, and

the shipper names a value to secure the lower rate, the

carrier, in the absence of something to show rebating

or false billing is entitled to collect the rate which

applies to goods of that class .. .’” [Emphasis sup-

plied. }

Six weeks later, in Atchison, T.& S.F.R. Co. v. Robin-

son, 233 U.S. 173, 180 (1914), this Court reiterated that

‘“so long as they [the filed tariff rates] are operative, they

are conclusive as to the rights of the parties, in the absence

of facts or circumstances showing an attempt at rebating

or false billing. Great Northern R. Co. y. O’Connor, su-

pra.”’ [Emphasis supplied. ]

Finally, a year later this Court made it abundantly clear

that those two cases vitiated the application of the ‘‘con-

“227 U.S. 639, 652-653.

*232 U.S. 508, 515.

a.

clusive presumption’’ where the carrier’s fraud was in-

volved. In George N. Pierce Company v. Wells Fargo &

Company, 236 U.S. 278, 286 (1915) this Court took the

occasion to point out that, while there was no element of

fraud in the case before it, nevertheless,

““In the O’Connor Case, 232 U.S. 503 and the Robin-

son Case, 233 U.S. 173, above, the doctrine of the

conclusiveness of the filed rates was said to have no

application to fraudulent acts or false billings.’ |Em-

phasis supplied. ]

These deliberate statements by this Court underscore its

determination from the outset not to permit the “‘conclusive

presumption’’ rule of Carl to be misapplied to cases in-

volving a carrier’s *‘fraudulent acts’’ in connection with its

rates. Nevertheless, the Court below, following the lead of

the Seventh and Eighth circuits, completely disregarded

what this Court pointed out in those three cases and applied

what this Court had said in Carl, where no fraud by the

carrier was involved, to a case of wilful fraud perpetrated

by a carrier upon a shipper strictly for the carrier’s monetary

benefit.

This case has certainly been decided by the Court of

Appeals for the Ninth Circuit ‘‘in a way to conflict with

applicable decisions of this court’? and that Court ‘‘has

decided an important question of federal law which has not

been but should be, settled by this court.’’ [Emphasis

added.] Rule 19, Rules of Supreme Court.

It may be reasonably (if not ‘‘conclusively’’) presumed

that unless this Court reverses the Court below, other circuits

will join the parade which holds that carriers may continue

with impunity to defraud shippers by deliberate misrepre-

sentations of rates and will thus agree with the statement

by Consolidated’s corporate counsel in his letter to Terry

Tuck that ‘‘the truth’’ of whether or not Consolidated’s

eek aN

agent perpetrated a fraud upon Terry Tuck is not ‘‘the rel-

evant question.’’ (R. 180-181.)

lf fraud—on the part of common carriers—is to be per-

manently enshrined in the pantheon of greed, certiorari

should be denied.

If, on the other hand, this Court looks to the rationale of

the rule in cases not involving the carrier's fraud and to its

own statements that such presumption was not to be invoked

to protect a carrier’s fraud, and refuses to be taken in by

the horribles usually paraded by the self-interested carrier

about *‘rebates under the guise of’’ such suits, then certiorari

should be granted.

While the particularly invidious application of this lower

court-made rule immunizing fraud by a carrier—and it is

only to this that we address ourselves—has never been spe-

cifically before this Court, this Court has, as we have

pointed out, clearly indicated its disapproval of the rule’s

applicability in the case of ‘‘fraudulent acts’ involving rates

by the carrier. We submit that this Court should take this

opportunity to strike down a rule enunciated by three circuits

which condones fraudulent conduct by a carrier and which

cannot be justified today on any ground of business neces-

sity, let alone business morality, and which flies in the face

of what this Court has said.

The Historical Background of the ‘‘Conclusive

Presumption’’ Rule.

Obviously, we do not close our eyes to the line of cases

which, after the passage of the Interstate Commerce Act in

1887, grafted on to the law the presumption, in cases nor

involving the carrier’s fraud, that shippers knew the carrier’s

tariffs. Nor should anyone’s eyes be closed to the fact that

the reason for the action of the courts was to prevent col-

i.

lusion and consequent undercutting of the Act, nor to en-

courage fraud by a carrier against a shipper.

It is not necessary to tell this Court that the basic purpose

of the Act was to lessen the stranglehold which railroads

and favored shippers—many of whom were thus able to

grow into monopolies—had upon large segments of the

American economy.° To this end, the courts fashioned the

presumption of knowledge by the shippers of a carrier’s

rates in order to counteract the likelihood of secret refunds

under the guise of claims of the carrier’s misquotation of

rates. For even after the passage of the Act, attempts at

secret and collusive rebating did not come to a halt’ and the

courts kept sharp eyes out for any practice by which a

favored shipper might be able to achieve an advantage over

his business competitor by securing, through collusion with

the carrier, a rate lower than the filed rate the competitor

was required to pay* and thus defeating one of the primary

purposes of the Act. ;

The only place in the Interstate Commerce Act where a

““conclusive presumption’’ was created by Congress was

“Report of the Senate Select Committee on Interstate Commerce,

49th Congress, Ist Session, 1886, Pgs. 191, 198 & 199; First Annual

Report of the Interstate Commerce Commission, 1887, Pgs. 5-7; ‘‘Rail-

road Transportation’, Hadley, A.T., Pg. 21 (G.P. Putnam’s Sons,

1885, 1889 Ed.); *“The Interstate Commerce Act’’, Drinker, Henry S.,

Pg. 55 (George T. Bisel Co., 1909).

"New York, New Haven and Hartford R.R. Co. v. Interstate Com-

merce Commission, 200 U.S. 361 (1906); Armour Packing Company

v. United ‘States, 209 U.S. 55 (1908): Standard Oil Co. of Indiana vy.

United States, 164 F. 376 (7th Cir. 1908); New York Central and

Hudson River Railroad Company v. United States, 212 U.S. 481 (1909):

United States v. New York Central and Hudson River Railroad 212

U.S. 509 (1909).

“This factor is not present in the case at Bar, since the lower rate

offered by the carrier other than Consolidated was open to all, including

any competitor of Terry Tuck’s.

a, a

in the Elkins Act 49 U.S.C.A. 41(2), which provided that

‘in any prosecution begun under section 41, 42 or 43”’ of

the Act, the rate filed by the carrier shall ‘‘as against such

carrier, its officers or agents’’ [emphasis supplied] ‘‘be

conclusively deemed to be the proper rate.”’

Prosecutions under those sections could be brought

against shippers, as well as against carriers. At the time of

the adoption of the Elkins Act in 1903, no decision of this

Court had established any rule of a presumption of knowl-

edge by the shipper of the carrier’s rates, let alone a con-

clusive presumption. Had Congress intended to impose such

a presumption upon the shipper, it could have done so at

the time it imposed that presumption on the carrier, but it

clearly was not minded to do so.

In 1906, this Court for the first time adopted the position

that ‘““whatever may be the rate agreed upon, the carrier’s

lien on the goods is, by force of the act of Congress [the

Interstate Commerce Act], for the amount fixed by the pub-

lished schedule of rates and charges, and this lien can be

discharged . . . only by the payment of such amount.’ This,

the Court held, was so ‘whether or not’’ the shipper ‘‘knew

that the rate he obtained was less than the scheduled rate.’’'°

It may be noted that the Court there did not speak of any

‘“presumption’’ and certainly not of any ‘‘conclusive pre-

sumption.’’ It simply asserted the rule that the published

rate was paramount. Of course, it cannot be doubted that

this court felt at that time, with other courts and with the

Interstate Commerce Commission, that ‘‘[t]o permit ship-

pers to impute negligence to carriers in quoting rates and

on that ground to enjoy the rate quoted instead of paying

ae & Pacific Rwy. Co. v. Mugg & Dryden, 202 U.S. 242, 245

( ).

Se

ae

the lawfully published rate would open a broad and ample

way for the payment of rebates and for other unlawful prac-

tices and might, in its practical results, work a repeal of the

essential feature of this legislation’’'' and that ‘‘collusion

between the carrier and a shipper, which it desired to favor

. . would be rendered too easy of accomplishment.’’'”

It was the joint action of carrier and favored shipper to

negate the Act’s prohibition of rebating which was the po-

tential evil perceived by both the Interstate Commerce Com-

mission and the courts. For despite the passage of the In-

terstate Commerce Act and the Elkins Act (1903) and the

Hepburn Act (1906), powerful shippers and railroads were

still attempting to evade the prohibition of rebates to favored

shippers.'’ It was, however, as we have noted, not until

1913 that the magic words ‘‘conclusively presumed’’ ap-

peared in a decision of this Court in a civil case involving

a misquotation of a rate.'*

Two years later when this Court, in Louisville & N.R.

Co. v. Maxwell, 237 U.S. 94 (1915), a case which, unlike

the case at Bar involved no fraud, no wilful misrepresen-

tation, quoted from Carl with approval, it pointed out that

the rule ‘embodies the policy which has been adopted by

Congress in the regulation of interstate commerce in order

to prevent unjust discrimination.’’ Id. at 97. (Emphasis

supplied. )

"Poor v. Chicago B.& Q. R. Co., 12 Inters. Com. Rep. 418, 423-

424 (1907).

"Forster Bros. Co. v. Duluth S.S.& A.R. Co., 14 Inters. Com. Rep.

232, 236 (1908).

"Note 7, supra.

"Kansas City Rwy. Co. v. Carl, supra, pg. 5, 227 U.S. 639, 653.

— 7

This Court Has Held That the Policy of the Act Is Not

Contravened by Permitting the Shipper to Offset

His Damage From a Carrier’s Wrong Against the

Carrier’s Claim for Its Charge.

This Court has not found that to permit a shipper to

recover for a carrier’s wrong would result in unjust dis-

crimination or, in any way, interfere with or vitiate the

purposes of the Interstate Commerce Act. Indeed, this Court

has found the very opposite to be true and has had no

hesitation about permitting the shipper to seek relief by way

of set-off or counterclaim when wronged by the carrier.

The alleged problem of the possibility of collusion be-

tween shipper and carrier for rebates, etc., did not impress

this Court in Chicago & N.W. Rwy. v. Lindell, 281 U.S.

14 (1930). There this Court recognized that while the shipper

was liable for the full amount of the carrier’s tariff rate, the

shipper was nevertheless entitled to set-off, or to recover,

by way of counterclaim, the damages suffered as a result

of the carrier’s negligence.

The only difference between Lindell and the case at Bar

is the imposition by the Court below of a ‘conclusive pre-

sumption”’ in a situation where this court has made clear

that that doctrine did not apply, namely, in the case of

“fraudulent acts’’.'° There is, of course, no basis in reason,

in logic and indeed, in law, as this Court has recognized,

for fastening upon an innocent party who has been subjected

to a carrier’s fraud in regard to its rates such a court-made

‘‘conclusive presumption’’ when this Court has refused to

permit any such presumption to interfere with, let alone

preclude, recovery for a carrier’s simple negligence.

“George N. Pierce v. Wells Fargo, supra. 236 U.S. 278. 286 (1915).

at, ae

The only possible argument that could be made for the

imposition upon a defrauded party of such a rule which, on

its face and in its application, is unjust to the party de-

frauded, is that to permit recovery by the injured party might

open the door to evasion of the Act and to the evils the Act

was designed to eliminate. But this Court in Lindell saw

that that presented no problem and almost summarily dis-

missed that argument.'® The question which had been cer-

tified to the Court was whether a ‘‘shipper acting in good

faith and without collusion’’ was debarred by 49 U.S.C.A.

$41 from pleading ‘‘by way of set-off, a counterclaim for

a loss suffered by him as a result of the carriers failure to

perform its obligations touching the transportation and de-

livery of the identical shipment.’’ [Emphasis supplied. ] (281

U.S. 14.)

The Court pointed out that ‘‘The purpose of the Act to

prevent discrimination has been emphasized by this Court

and is well-known.’’'’ The Court then met head-on the issue

of possible collusion between carrier and shipper and con-

sequent discrimination and said, ‘‘It is well understood that

payment by carriers to shippers under the guise of settling

claims for loss and damages may in effect constitute dis-

crimination that the act was intended to prevent,’’ and ob-

viously, on the basis that that would not be the result of

permitting such offset or counterclaim by the shipper, the

Court proceeded to answer the certified question ‘‘No.’’"*

“It is of interest—and perhaps. also, of significance—that the opinion

of the unanimous court was written by Mr. Justice Butler, who, fore

taking his seat on the Court. had been one of the country’s leading

railroad lawyers. (Proceedings in Memory of Honorable Pierce Butler

308 U.S. v (1939).)

ah...

Why permitting a counterclaim for damages due to fraud

in a Carrier’s rate quotation would have any different effect

from permitting a counterclaim for damages due to a car-

rier’s negligence, cannot be explained in any manner, except

by digging in one’s heels and proclaiming loudly ‘‘conclu-

Sive presumption, conclusive presumption’’—something

which this Court had noted was not applicable in case of

the carrier’s fraud. In Lindell this Court specifically rec-

ognized the possibility of collusion and fraud between ship-

per and carrier, ‘‘under the guise of”’ settling actions brought

by one or the other, but clearly took the position that by

1930 that possibility was much too remote or too negligible

to deny to a shipper aggrieved by a carrier the right to

recover his damages. Certainly nothing has intervened since

that time to increase that remote possibility.

The Third Circuit Court of Appeals recognized this clear

aspect of this Court’s decision when, in Southern Pacific

Company v. Miller Abattoir Company, 454 F.2d 357, 360

(3rd. Cir. 1972) (a case in which damages for breach of a

shipping contract was pleaded as a set-off against the freight

charges) it said:

‘“The Railroad argues that, even if its failure were a

breach of the shipping contract, to allow recovery of

damages for the breach would offend 49 U.S.C.A.

§6(7). That is, an unscrupulous railroad could pur-

posely neglect to give the immediate notice called for

by the contract and thus give a disguised rebate to the

customer so favored . . . This argument was rejected

by the Supreme Court, however, in Chicago & N.W.

Rwy. v. Lindell, 281 U.S. 14 (1930).’?”? [Emphasis

supplied. ]

"454 F.2d 357, 360.

»

\

| om

The Court then quoted from this Court’s opinion, and -

stated:

‘*The language quoted leaves little doubt that the Court

understood the danger of disguised rebates, but rejected

it as a reason for denying recovery to the injured shipper

. . . It would not be the fact of paying damages, but

the overpayment of damages, that would constitute

unlawful ‘rebate’. The fact that a railroad might seek

to evade laws forbidding rebates through such a sub-

terfuge is not sufficient to warrant denial of damages

to those customers of railroads who suffer through

some breach of duty by the railroad.’’”°

These words, just as the words of this Court in Lindell

are equally applicable—indeed, more so—to the situation

where a carrier actually practices fraud upon a shipper.

There simply is no basis for permitting a court-made ‘‘con-

clusive presumption’’—and in a far different context when

uttered by this Court—to give blessing and reward to a

carrier’s fraud.

Not many weeks ago, this Court pointed with approval

to Mr. Justice Black’s admonition in his dissenting opinion

in Francis v. Southern Pacific Co., 333 U.S. 445, 471

(1948), ‘‘When precedent and precedent alone is all the

argument that can be made to support a court fashioned

rule, it is time for the rule’s creator to destroy it.’’?!

It was precedent and precedent alone rather than logic or

public interest or necessity which impelled the holding of

the Court below (and of the Seventh and Eighth Circuits)

and which, unless this Court speaks, will be the basis for

454 F.2d 357, 360-361.

*'Trammel v. United States, 48 U.S. L.W., 4201, 4203. (February

27, 1980).

ee” ea

similar holdings when like cases, involving a carrier’s fraud,

arise.

To be sure, this Court was not the creator of the rule that

the ‘‘conclusive presumption’’ of knowledge of the rate

applied against a shipper in case of a carrier’s fraud in

connection with the rate. That fact, however, should not

stay this Court’s hand in destroying the rule before it is

further misapplied as it has heen by the Court below, as

well as by the Seventh and Eighth Circuits.

Perhaps in addition to what this Court said in Trammel

and what Mr. Justice Black had said in Francis, it may be

illuminating to note what Professor Hillman” said in quoting

the words of another member of this Court:

‘*In seeking to lift the heavy hand of precedent from

another field of law, Justice Cardozo, in preachment

amply justified by his steadfast practice, once urged

that ‘a spirit of realism should bring about a harmony

between present rules and present needs.’”? His ad-

monition is no less compelling when applied to a field

of economic regulation having its origins in the political

context and economic policies of another era.”’

***Competition and Railroad Price Discrimination’’, Hillman, J.J.,

pg. 148 (The Transportation Center of Northwestern University, 1967).

“The Nature of the Judicial Process, in Selected Writing of Benjamin

Nathan Cardozo, 174 (Hall ed. 1947).

ee |, 08

Conclusion.

We urge that certiorari be granted so that this Court may

consider whether the ‘‘conclusive presumption’’ doctrine

fashioned to avert fraud should be used to insulate a carrier

from liability for wilful fraud perpetrated by a carrier on a

shipper.

Respectfully submitted,

SLAFF, Mosk & RUDMAN,

GEORGE SLAFF,

Marc R. STEIN,

Attorneys for Petitioner

Terry Tuck, Inc.

April 18, 1980.

APPENDIX A.

Memorandum and Order Re: Findings of Fact, Conclu-

sions of Law, Granting Partial Summary Judgment,

Dismissing Counterclaim, Dismissing Claim for Pu-

nitive Damages, and Dismissing Action.

United States District Court, Central District of Califor-

nia. Consolidated Freightways Corporation of Delaware, a

corporation, Plaintiff, v. Terry Tuck, Inc., a corporation,

Defendant.

Terry Truck, Inc., a corporation, Cross-Complainant, v.

Consolidated Freightways Corporation of Delaware, a cor-

poration, Cross-Defendant. Civil No. 75-1911-HP.

Filed: Nov. 6, 1975.

On October 20, 1975, the above-entitled matter came on

for hearing upon plaintiff's motions for partial summary

judgment and dismissal of defendant’s counterclaim. The

court having read the affidavits, moving papers and points

and authorities submitted by the parties, and being fully

advised in the premises now makes the following findings

of fact, conclusions of law, and rulings:

I. PARTIAL SUMMARY JUDGMENT

Findings of Fact

1. Plaintiff Consolidated Freightways Corporation of

Delaware [hereafter ‘‘Consolidated’’] is a common carrier

by motor vehicle authorized by the Interstate Commerce

Commission to operate in interstate commerce.

2. It is stipulated by the parties that Consolidated is a

corporation authorized to do business in California.

3. Terry Tuck, Inc. is a corporation organized under

the laws of the State of California and is authorized to do

business in this state.

sks Mace

4. As pertinent to this action, Consolidated is authorized

to carry general commodities between Lawrence, Massa-

chusetts and Los Angeles, California.

5. Between September 24, 1974 and November 27,

1974, Malden Mills, Inc. of Lawrence, Massachusetts,

tendered to Consolidated twenty-four (24) shipments of a

commodity denominated by the said Malden Mills, Inc. as

**pile fabric NOI,’’ destined for and delivered to the de-

fendant at Los Angeles, California.

6. The aforesaid pile fabric NOI was shipped suspended

in boxes on rolls or creels.

7. At the times of the various shipments, pile fabric

NOI shipped suspended in boxes was classified in the Na-

tional Motor Freight Classification Tariff 100-A, Item

49540 sub | as ‘*Class 200 AQ”’ freight.

8. The aforesaid National Motor Freight Classification

Tariff 100-A is published on behalf of Consolidated and

filed with the Interstate Commerce Commission.

9. At the times of the various shipments, Class 200 AQ

freight moving between Lawrence, Massachusetts and Los

Angeles, California carried a rate of $41.70 per hundred

weight, pursuant to Rocky Mountain Motor Tariff Bureau

521, Section 8, eleventh and twelfth revised pages 308;

Rocky Mountain Motor Tariff Bureau Tariff 21-C, first

revised page 306; Rocky Mountain Motor Tariff Bureau

Tariff 521, fourth revised title page; Rocky Mountain Motor

Tariff Bureau Tariff 120, fifteenth revised page 167; Rocky

Mountain Motor Tariff Bureau Tariff 20-G, second revised

page 296; and Increase Supplements 40 and 41 to Rocky

Mountain Motor Tariff Bureau Tariff 521, all of which

tariffs are published on behalf of Consolidated and are on

file with the Interstate Commerce Commission.

=

10. The aggregate amount payable under the applicable

tariffs for the transportation services rendered by Consoli-

dated is $20,816.44.

11. Certain payments have been made by the defendant

for the transportation services rendered by Consolidated

aggregating $8,873.67.

12. The balance due for the transportation services ren-

dered by Consolidated is $11,942.77, which sum has not

been paid by the defendant. .

Conclusions of Law

1. This action arises under an Act of Congress regu-

lating commerce, namely, 49 U.S.C.A. § 317(b). This court

has original jurisdiction of this cause pursuant to 28

U.S.C.A. § 1337.

2. The only lawful rate which may be charged and re-

ceived. by a common carrier operating in interstate com-

merce is the rate published in the carrier’s tariffs on file

with the Interstate Commerce Commission. New York Cent.

& H.R.R. Co. v. York & Whitney, 256 U.S. 406 (1921).

3. The shipper or consignee of property shipped in in-

terstate commerce is liable as a matter of law for the dif-

ference between the freight charges erroneously claimed by

the carrier and the larger amount due’ under the applicable

tariffs. New York Cent. & H. R.R. Co., supra.

4. The carrier must, under compulsion of law, recover

undercharges regardless of contrary agreement or misquo-

tation by the carrier. Louisville & N. R. Co. v. Maxwell.

237 U.S. 94, 59 L. Ed. 853 (1915); Locust Cartage Co.

v. Transamerican Freight, 430 F. 2d 334, 343 (1st Cir.

1970).

5. The only lawful rate which the plaintiff is permitted

to charge for the transportation of pile fabric NOI suspended

in boxes, between Lawrence, Massachusetts and Los An-

a oe

geles, California, is $41.70 per hundred weight. New York

Cent. & H.R. R. Co., supra.

6. The defendant, having paid a lesser rate than $41.70

per hundred weight for the transportation pf pile fabric NOI

suspended in boxes, is liable as a matter of law for the

difference between the lesser amount, and the full tariff

charge. New York Cent. & H.R. R. Co., supra.

7. The defendant is liable for freight charges in the

amount of $11,942.77.

8. There being no genuine issue as to any material fact,

and the defendant being liable as a matter of law for the

carrier’s lawful charges, the motion for partial summary

judgment is granted.

Il. MOTION TO DISMISS DEFENDANT'S

COUNTERCLAIM

It further appearing to the court that:

1. The shipper is without remedy against the carrier for

alleged damage due to reliance upon incorrect freight

charges, Pettibone, etc., Trustees of Indianapolis and Louis-

ville Ry. Co. v. Richardson, 126 F. 2d 969 (7th Cir. 1942);

2. Defendant’s counterclaim is based on alleged dam-

ages suffered from defendant’s reliance upon Consolidated’s

incorrect freight charge quotation;

3. Defendant’s counterclaim fails to state a cause of

action; therefore, Consolidated’s motion to dismiss is

granted. F. R. Civ. P. 12(b) (6).

Ill. CONSOLIDATED’S CLAIM FOR

PUNITIVE DAMAGES

Moreover, the court finds that:

1. Consolidated has asked for punitive damages due to

alleged conscious misrepresentation by defendant of the

nature of the freight shipped by means of Consolidated’s

transportation service;

ates

2. Plaintiff Consolidated basically presents a contract

action for which punitive damages do not ordinarily lie,

Cal. Civ. Code § 3294 (West 1970);

3. The damages suffered by plaintiff are a result of

improperly low freight payments made by defendant and

are hereby remedied by the grant of partial summary judg-

ment;

4. Plaintiff's claim for punitive damages is dismissed

upon the court’s own motion because such damages are not

appropriate for the claim presented in this action.

Accordingly,

IT IS ORDERED that:

1. Consolidated’s motion for partial summary judgment

is granted;

2. Consolidated’s motion to dismiss the counterclaim

is granted;

3. Consolidated’s claim for punitive damages is dis-

missed; 7

4. The cause having been determined by motions for

partial summary judgment and dismissal for failure to state

a cause of action, this action is now dismissed;

5. Each side to bear its own costs;

6. The Clerk of the Court shall serve copies of this

Order, by United States mail, upon the parties appearing

in this cause.

Dated: November 6, 1975.

/s/ Harry Pregerson

Harry Pregerson

ssid

APPENDIX B.

Opinion.

United States Court of Appeals, for the Ninth Circuit.

Consolidated Freightways Corporation of Delaware, a cor-

poration, Plaintiff-Appellee, v. Terry Tuck, Inc., a cor-

poration, Defendant-Appellant.

Terry Tuck, Inc., a corporation, Cross-Complainant-Ap-

pellant, v. Consolidated Freightways Corporation of Del-

aware, a corporation, Cross-Defendant. C. A. No. 77-2119.

Filed: Jan. 28, 1980.

Appeal from the United States District Court for the

Southern District of California.

Before: Kennedy and Farris, Circuit Judges, and Thomp-

son,* District Judge.

PER CURIAM:

Under the Motor Carriers Act § 217(b), 49. U.S.C.

§ 317(b) (1976), Consolidated Freightways sued Terry Tuck

for an amount still owing under the applicable ICC-approved

tariff. Terry Tuck counterclaimed for fraud, alleging that

the carrier knowingly misquoted the shipping rates. The

district court granted Consolidated’s summary judgment

motion for the amount still due, and it dismissed the coun-

terclaim pursuant to Fed. R. Civ. P. 12(b) (6). The facts

are admittedly indistinguishable from those occurring in

Aero Trucking, Inc. v. Regal Tube Co., 594 F.2d 619 (7th

Cir. 1979), Pettibone v. Richardson, 126 F.2d 969 (7th Cir.

1942), and F. Burkhart Mfg. Co. v. Fort Worth & D.C.

Ry. Co., 149 F.2d 909 (8th Cir. 1945). We agree with the

Seventh and Eight Circuits that no claim for relief can be

predicated on a carrier’s alleged fraudulent misquotation of

tariffs. Accordingly, the district court’s judgment and order

are AFFIRMED.

*The Honorable Gordon Thompson, Jr. , United States District Judge,

Southern District of California. sitting by designation.