Amicus Curiae Brief — Reiter v. Cooper

No. 91-1496 cr Sete

i 4 1997?

In The | orrict OF THE CLERK }

Supreme Court of the Unitéd-States

October Term, 1992

o

IN RE: CAROLINA MOTOR EXPRESS, INC.,

Debtor.

®

PETER C. REITER and

CALIFORNIA CONSOLIDATED ENTERPRISES, INC.,

Petitioners,

LANGDON M. COOPER, TRUSTEE

FOR CAROLINA MOTOR EXPRESS INC.,

MARK & ASSOCIATES OF NORTH CAROLINA, INC.,

Respondents.

¢

On Writ Of Certiorari

To The United States Court Of Appeals

For The Fourth Circuit

+

BRIEF OF LEONARD L. GUMPORT, TRUSTEE

OF THE BANKRUPTCY ESTATE OF

TRANSCON LINES, AS AMICUS CURIAE

IN SUPPORT OF THE RESPONDENTS

@

Leonarp L. Gumport, Esq.*

355 South Grand Avenue,

nis 39th Floor

Los Angeles, California 90071

(213) 617-7070

*Trustee of the Bankruptcy

Estate of Transcon Lines

COKER CALL COURT i) 322881

QUESTION PRESENTED

Amicus curiae will address the following question:

In a civil action by an insolvent common carrier to

enforce and collect its unambiguous filed tariff rate (the

“filed rate”) from a private shipper, must the trial court

delay enforcement of that rate merely because the shipper

alleges that the rate is unreasonable, even though:

1. the shipper may protect its right to recover repa-

rations for payment of an unreasonable filed rate by

depositing it with the court under Rule 67 of the Federai

Rules of Civil Procedure as amended in 1983;

2. enforcement of the filed rate is “utterly central”

to the Interstate Commerce Act (Maislin, 111 L.Ed.2d at

112);

3. a filed rate is binding unless and until suspended

by the ICC; _

4. the. plain meaning of the Interstate Commerce Act

conflicts with a shipper’s purported implied right to

withhold payment, and the legislative history of the repa-

rations provisions does not show a clear intent to over-

rule Crancer v. Lowden, 315 U.S. 631 (1942); ~

5. Congress in 31 U.S.C. § 3726 only granted the

United States, not private shippers, a right to withhold

payment; and

6. permitting the shipper to withhold payment of

the filed rate will prejudice both solvent and insolvent

carriers?

TABLE OF CONTENTS

Page

QUESTION PRESENTED ..........:seseeecwce: eee

INTEREST OF AMICUS CURIAE ...............4-. 1

SUMMARY OF ARGUMENT.................00000: 4

ARGUMENT:

I.

E. The Plain Meaning

FED.R.CIV.P 67 PROVIDES A REMEDY FOR

PETITIONERS’ FALSE DILEMMA, SO THAT

THERE IS NO REASON TO OVERRULE

CRANCER v. LOWDEN OR TO UNDERMINE

THE “UTTERLY CENTRAL” PURPOSE AND

PLAIN MEANING OF THE INTERSTATE COM-

MERCE AGT ....ccccovcesscnssseunneneeneee

A. Petitioners’ False Dilemma................

B. Fed.R.Civ.P. 67 Makes Crancer v. Lowden

Equally Applicable To Filed Rate Claims Of

inseivent Cassteg®. ...+cccscessaseenee

C.. The Primary Jurisdiction Doctrine Does Not

Permit Referral To The ICC Of A Filed Rate

Claim When The Meaning Of The Tost Is

Not In Dispute.............6600 cece eeeeee

D. The Filed Rate Doctrine Is “Utterly Central”

To The Interstate Commerce Act And

Would Be Undermined By qt | heme Os

mits A Shipper To With

The Filed Rate Pending A Hearing On Rate

Reasonableness..... - . «~~. 6-66 ees w we nnne

tent With An

IL.

“es”

TABLE OF CONTENTS - Continued

Page

1. The Plain Meaning Of The Act Conflicts

With An ange a To Withhold

Pi Ciiceeeasescesscececccces:

2. The Plain Meanin Also Conflicts With

3. The Plain Meaning Also Conflicts With

The Proposed ——— aes Of

Recoupment. .. =e e228 *@ SSB eR € SF SFeeSTSESEHeSSEZS

> Referral Based On Unsubstantiated

Of Filed Rate Unreasonableness Will

Undermine The Filed Rate Doctrine And

ED wncccccscceccccccceccecs

G. Stas Mined Gy Petttenen Weate be

Highly Prejudicial To Both Solvent And

I

ACT SO AS TO REFER FILED RATE CLAIMS

TO AN AGENCY THAT HAS PUBLICLY

ANNOUNCED THAT IT: (A) WANTS TO

ABOLISH THE FILED RATE DOCTRINE AND

(B) WILL NOT SAFEGUARD THE

BIN, CHAIRMAN, INTERSTATE

COMMERCE COMMISSION, TO THE

RARITAN TRAFFIC CLUB, INC. ON

TUESDAY, MARCH 10, 1992, AT

PINES MANOR RESTAURANT, EDi-

14

15

18

21

iv

TABLE OF AUTHORITIES

Page

Cases

Crancer v Lowden, 315 U.S. 631 (1942) ........ 6, 8, 12

Great Northern Railway Co. v. Merchants Ele

| 2 § | ae

Griffin v. Oceanic Contractors, Inc., 458 US. 546

Gulf States Utilities Co. v Alabama Power Co.,

824 F.2d 1465 (Sth Cir 1987) modified 831 F2d

ICC v. Transcon Lines, _ F2d __ (9th Cir., t Sams

In re Oneida Motor Freight v. peannneeniineninns

BF RE Te eee 15

v. & Northwestern R. sheen 260 US.

EN SARA eae SET eS 4

Maislin Industries, US., Inc. v. Primary Steel, Inc.,

497 US. __, 111 LEd2d 94, 110 S.Ct. 2759

GED oh ccsccccccescessesesenccnaseseccocessss passim

Milne Truck Lines, Inc. v. Makita US.A, Inc, __

FED ce, GU Gin PUY Uy CEP ccccccscccccccepees

Montana-Dakota Utilities Co. v. Northwestern

Public Service Co., 341 U.S. 246 (1950).............8

ates, 793 F.2d 376 (D.C. Cir 1986)................9

v

TABLE OF AUTHORITIES - Continued

Page

United States v. aoe ae See oe

United § Sistes «. Western Pacific Railroad Co., 352

STATUTES

11 USC. § SO20K2).......... pdetdesendsnevdsineda 19

Oe SED sitnunscescccedsocedcnbkenuenseaien 13

Wy oo c5icsscatecseceennee

Oe Ge Ea cesescescccccocescccocesescesth Un OE

ee EE ncsccccscesscccsstcsscedeer tl

Fe eB EI cccccccccescscoscccsocucee

49 USC. § 10101(aK1KD)....................... 17, R

BD Ta © Be occ cccccccccccccccccess 17, 22

49 USC. § 10701fe) ...... pesesucseonesoosesedcusias 17

Rabo ckccedcesevéecécesecs mdéintenn an

Gr ie OF Pe cnccnccseccccececces Decceecess 9, 15

Se ee EL oc cncsccecsstucccesssdvessseo me

rteccreccecesessessoess 4, 5, 6, 14, 20, 23

ot otnnescenceessssedsetdexcunsaiensel 22

vi No. 91-1496

°

In The

Supreme Court of the United States

October Term, 1992

TABLE OF AUTHORITIES - Continued

Page

Lecest ative Marexiais

S.Rep.No. 46, 49%h Cong, Ist Sess. (1886)... . 10, 21, 22

+ _

| IN RE: CAROLINA MOTOR EXPRESS, INC,

4 + Collier on + Bankruptcy —— at 553-38 (15th | .

DE. DINED... . 22-00 -ceveveverceesscccereresorerrs: 3 PETER C. REITER and

Informal Procedure For Determining Motor Car- CALIFORNIA CONSOLIDATED ENTERPRISES, INC,

rier And Freight Forwarder Reparation, Ex Petitioners,

Parte No. 249 Gub-No. 1), 335 LCC. 403 (1969)... 12 e

Petitions for Issuance of Rate Reasonableness and

Unreasonable Practices eaand Statement, 8 LANGDON M. COOPER, TRUSTEE

LCC26 68 (1991) .........------ coserececsrecs By WD FOR CAROLINA MOTOR EXPRESS INC,

Settens fer Payment of Rates and Charges - MARK & ASSOCIATES OF NORTH CAROLINA, INC,

- for Nonpayment (49 CFR Respondents

Part sot 1S20). F "C. Ex Parte No. MC-1 bvtnaed e : -

i ED ccecccesccccscceasetucbawessbevessooscoce WO On Writ Of Certiorari

To The United States Court Of Appeals

For The Fourth Circuit

°

BRIEF OF LEONARD L. GUMPORT, TRUSTEE

TRANSCON LINES, AS AMICUS CURIAE

IN SUPPORT OF THE RESPONDENTS

o-

Amicus curiae is Leonard L. Cumport, the chapter 7

bankruptcy trustee of the estate of Transcon Lines. Trans-

con Lines was a major motor common carrier with annual

revenues in excess of $200 million.

2

Transcon Lines collapsed during the period of illegal

rate destabilization promoted by the ICC under its Nego-

tiated Rates policy. In May 1990, health, welfare and pen-

sion plans of Transcon Lines filed an involuntary

bankruptcy petition against it. In June 1990, less than 30

days before this Court invalidated the ICC’s Negotiated

Rates policy in Maislin industries, US., Inc. v. Primary

Steel, inc, 497 US. __ (1990), the Bankruptcy Court for

the Central District of California appointed Mr. Gumport

as trustee of Transcon Lines.

During the Negotiated Rates regime, Transcon Lines

operated at a deficit while granting secret discounts to

attract and hold the trade of shippers. Among other

things, Transcon Lines funded the deficits caused by its

rate discounts by: (1) wage concessions from its

employees, (2) defaults on payments to their health, wel-

fare and pension plans, and (3) neglect of its legal duty to

conduct environmental clean up of the underground fuel

storage tanks at its truck terminals throughout the coun-

try.

Once a source of jobs for more than 3,000 employees

throughout the United States, Transcon Lines now has

only two employees. It has no business operations. It has

thousands of creditors, including former employees, their

benefit funds, equipment lessors, and landlords. Its pri-

mary activities consist of efforts to recover illegal dis-

counts and to remediate 2nd sell its polluted truck

senantndl

ough Transcon Lines went bankrupt while grant-

maa Zemsunts to Gene, the recipients of these

illegal discounts now contend that any payment by them

3

should be delayed while they litigate the reasonableness

of Transcon Lines’ filed tariff rates. The shippers’ evi-

dence that Transcon Lines’ filed rates are unreasonable

include Transcon Lines’ illegal, unfiled rates (which

count rates of other carriers (who may have offered non-

compensatory rates to solicit or hold business while the

ICC abdicated its duty to enforce the tariff system).

Beginning in 1990, the ICC sought to halt the filed

rate collection effort of the Transcon Lines trustee. See

ICC v. Transcon Lines, __ F2d __ (9th Cir, June 17,

1992)(petitions for rehearing pending). On March 10,

1992, the Chairman of the ICC publicly condemned the

filed rate doctrine as a “dinosaur.” See Appendix A. The

ICC has indicated that it may revive its illegal Negotiated

Rates policy through the subterfuge of making unfiled

rates evidence that filed tariff rates are unreasonable and

therefore unenforceable. See Petitions for Issuance of Rate

Reasonableness and Unreasonable Practices Policy Statement,

8 LC-C.2d 61, 74 (1991).

Perceiving that the ICC will adhere to its view that

unfiled rates should be enforced, shippers now seek

wholesale referral of filed rate litigation to the ICC for

rate reasonableness hearings. In the meantime, the former

employees of Transcon Lines remain unpaid, the polluted

truck terminals remain unremediated, the ICC publicly

scorns as a “dinosaur” the statutory tariff system man-

dated by Congress, and money that shippers should

disgorge or pay into court under Fed.R.Civ.P. 67 is con-

sumed instead in legal fees.!

«

SUMMARY OF ARGUMENT

Petitioners should pay the filed rate, and the ICC

should enforce the tariff system as urged by Respondents.

Petitioners and their amici create a false dilemma by

failing to mention the provisional remedy provided by”.*

Fed.R.Civ.P. 67. As amended in 1983, Rule 67 permits

Petitioners to preserve their right to reparations by pay-

ing the filed tariff rate into the registry of the trial court.

To allow Petitioners to delay payment of the filed

rate during protracted ICC hearings on rate reasonable-

ness would undermine the “utterly central” policy of

enforcement of the filed rate. Withholding payment of the

filed rate prejudices both solvent and insolvent carriers.

The plain meaning of the Interstate Commerce Act is

inconsistent with an implied right to withhold payment

of the filed rate. An unsubstantiated claim of rate unrea-

sonableness never justifies agency referral. Illegal,

unfiled rates are not competent evidence of the unrea-

sonableness of filed rates.

This case does not involve the admittedly “unique”

right of set-off that Congress did give to the United States

in 31 U.S.C. § 3726. See brief of amicus ICC at 13 n.7.

e

' Pursuant to Rule 37.3 of the Rules of this Court, the par-

ties have consented to the filing of this brief. The parties’ letters

of consent will be filed with the Clerk of this Court.

ARGUMENT

I. FED.R.CIV.P 67 PROVIDES A REMEDY FOR PETI-

TIONERS’ FALSE DILEMMA, SO THAT THERE IS

NO REASON TO OVERRULE CRANCER v. LOW-

DEN OR TO UNDERMINE THE “UTTERLY CEN-

TRAL” PURPOSE AND PLAIN MEANING OF THE

INTERSTATE COMMERCE ACT

A. Petitioners’ False Dilemma

Petitioners have no valid excuse to withhold pay-

ment of the filed rate. They can and must pay it — either

to the carrier or the court registry

In their statement of issue and throughout their

briefs, Petitioners and their amici emphasize that this

case involves an insolvent carrier. Petitioners argue that

their ‘right to recover reparations is meaningless unless

Petitioners have an implied statutory right to withhold

payment of the filed rate pending final ICC adjudication

of rate reasonableness claims.

Respondents refute those arguments. Further, as

described below, Petitioners’ purported dilemma does

not in fact exist. Private shippers sued by an insolvent

carrier can preserve the right to recover reparations by

paying the filed rate into the registry of the court. This

remedy is consistent with the statutory language and the

policy of strict enforcement of the filed rate doctrine. The

remedy proposed by Petitioners - judicial creation of a

right to withhold payment until the ICC conducts pro-

tracted rate review proceedings — is not.

B. Fed.R.Civ.P. 67 Makes Crancer v. Lowden

Equally Applicable To Filed Rate Claims Of

Insolvent Carriers

More than five decades ago, this Court held that a

trial court has discretion to enforce a carrier’s filed rate

claim against a shipper without waiting for the ICC to

decide the shipper’s rate reasonableness claims against

the carrier. Crancer v. Lowden, 315 U.S. 631 (1942). In

holding that the trial court correctly proceeded to enforce

the carrier’s’ fifed rate claim, the Court noted that it was

“important to aid the efforts of a carrier in collecting

published cRarges in full.” Id. at 635.

Petitioners and their amici do not ask this Court to

overrule Crancer. Instead, they attempt to distinguish it

on the ground that it involved a solvent carrier who

could make the shipper whole if the ICC awarded a

reparations claim. In fact, the Court in Crancer did not

state that the carrier was solvent, and stated only that a

reparations claim was a “complete remedy. ...” Id., 315

U.S. at 635.

After Crancer was decided, Fed.R.Civ.P. 67 was

amended to provide a provisional remedy to a defendant

that owes money to a plaintiff but claims an interest in

that money. Under Rule 67, when an insolvent carrier

sues to recover a filed rate from a shipper, the shipper can

fully preserve its ability to recover reparations by paying

the filed rate into the registry of the court. Rule 67 pro-

vides:

In any action in which any part of the relief

sought is a judgment for a sum of money or the

disposition of a sum of money or the disposition

2

of any other thing capable of delivery, a party,

upon notice to every other party, and by leave of

court, may deposit with the court all or any part

of such sum or thing, whether or not that party

claims all or any part of the sum or thing.

The 1983 amendment to Rule 67 broadened it to

permit a party who claims an interest in the deposited

funds to make the deposit. See Gulf States Utilities Co. v.

Alabama Power Co., 824 F.2d 1465, 1474-75 (5th Cir. 1987),

modified 831 F.2d 557 (1987)(in dispute between public

utilities, the district court properly utilized Rule 67 to

permit one utility to deposit disputed payments into

court registry).

Petitioners should have utilized Rule 67 if they

wanted to preserve their right to recover reparations.

Petitioners do not even mention Rule 67, because Peti-

tioners do not want reparations. They want to withhold

payment. If the Court condones this, failed carriers will

suffer the kind of protracted bankruptcy proceedings that

are a national disgrace. Other marginally solvent carriers

will fail when their filed rate claims are met with spu-

rious rate reasonableness defenses. Petitioners must obey

the law and pay the filed rate.’

C. The Primary Jurisdiction Doctrine Does Not

Permit Referral To The ICC Of A Filed Rate

Claim When The Meaning Of The Tariff Is Not

In Dispute

When an issue is not within the primary jurisdiction

of an agency, then a trial court has no power to refer that

2 The defects in the proposed remedies of set-off and

recoupment are discussed in Sections I.E.2 and I.E.3 of this brief.

issue to the agency. See Montana-Dakota Utilities Co. v.

Northwestern Public Service Co., 341 U.S. 246, 254 (1950). In

Montana-Dakota, the Court stated:

If the court is presented with a case it can

decide[,] but some issue is within the competence

of an administrative body, in an independent

proceeding, to decide, comity and avoidance of

conflict as well as other considerations make it

proper to refer that issue. But we know of no

case where the court has ordered reference of an

issue which the administrative body would not

itself have jurisdiction to determine in a pro-

ceeding for that purpose. 341 U.S. at 254

(emphasis added).

This principle compels the conclusion that enforce-

ment of an unambiguous filed rate should not be referred

to the ICC under the primary jurisdiction doctrine.

Unless a tariff is ambiguous, a court should not refer the

issue of tariff interpretation to the ICC. See United States v.

Western Pacific Railroad Co., 352 U.S. 59, 69 (1956), citing

Great Northern Railway Co. v. Merchants Elevator Co., 259

U.S. 285 (1922) and Crancer v. Lowden, 315 U.S. 631 (1942).

Further, after determining the applicable filed rate, the

trial court has discretion to proceed to enforce the car-

rier’s filed rate claim, regardless of the pendency of

administrative reparations proceedings. Crancer, 315 U.S.

at 635.

D. The Filed Rate Doctrine Is “Utterly Central” To

The Interstate Commerce Act And Would Be

Undermined By A Rule That Permits A Shipper

To Withhold Payment Of The Filed Rate Pend-

ing A Hearing On Rate Reasonableness

The filed rate doctrine is “utterly central” to the

administration of the Interstate Commerce Act. Maislin

Industries, U.S., Inc. v. Primary Steel, Inc., 497 U.S. ___, 111

L.Ed.2d at 112, quoting Regular Common Carrier Conference

v. United States, 793 F.2d 376, 379 (D.C. Cir. 1986)(Scalia,

J.). This policy precludes imposing a judicial gloss on the

Act that would undermine this statutory purpose, espe-

cially when a more plausible interpretation would further

this purpose. See Maislin, 111 L.Ed.2d at 110-11 (ICC

could not utilize its agency expertise to justify adopting a

rule that would undermine the statutory filed rate doc-

trine).

Petitioners and their amici overlook Maislin’s ruling

that compliance with the statutory filed rate doctrine in

49 U.S.C. §§ 10761 and 10762 is “utterly central” to the

administration of the Act. Maislin, 111 L.Ed.2d at 112.

Instead, they incorrectly assert that rate reasonableness -

not the filed rate doctrine - is the “bedrock,” the “core,”

the “cornerstone,” and the “central requirement” of the

Act. See brief of amicus National Industrial Transporta-

tion League et al., (“NITL”) at 3, 9, 10 and 11. NITL cites

no authority for these assertions, which contradict Maislin.

Petitioners and their amici similarly overlook incon-

venient language from Maislin when they quote out of

context Maislin’s assertion that “the filed rate is not enfor-

ceable if the ICC finds the rate to be unreasonable.”

Maislin, 111 L.Ed.2d at 109; see brief of amicus NITL at 13.

In the very same paragraph of text, the Court in Maislin

explained: “Unless and until suspended or set aside, [the

filed rate] is made, for all purpose, the legal rate... . ”

Maislin, 111 L.Ed.2d at 109, quoting Keogh v. Chicago &

Northwestern R. Co., 260 U.S. 156, 163 (1922)(emphasis in

original). This overlooked language contradicts the posi-

tion of Petitioners and their amici that a shipper has a

10

right to withhold payment of the filed rate before the ICC

suspends or sets aside the rate. On the contrary, this

language compels the conclusion that a shipper must pay

the filed rate, and is excused from that legal duty only in

the event that the ICC actually does suspend or set aside

the filed rate.

Petitioners and their amici want the filed rate doc-

trine transformed into a “filed opening bid” doctrine.

Under the “filed opening bid” doctrine, the filed tariff

rate would merely signify what the carrier proposed to

receive as payment; the shipper would remain free at all

times to object to the filed opening bid as unreasonable.

Under this system, neither the shipping public nor the

ICC would know from the carrier’s filed tariffs what rates

were actually in effect. Discrimination would be facili-

tated and unfiled, secret rates would proliferate.?

3 In recommending enactment of the filed rate doctrine in

the landmark Interstate Commerce Act, the Senate Select Com-

mittee on Interstate Commerce emphasized that rigid adherence

to the published rate was necessary:

The posting or publication of railroad rates would be

of no advantage to the public unless the law contem-

plates and requires that the schedules established and

posted are strictly adhered to. If variations from the

published rates are to be permitted, it would be use-

less to have them posted. So far as that is concerned,

information as to the ostensible rates is now suffi-

ciently accessible to the public, and posting them

would only impose a needless annoyance and useless

expense upon the corporations.

S.Rep.No. 46, 49th Cong., 1st Sess. 200 (1886)(emphasis in the

original).

11

E. The Plain Meaning Of The Act Is Inconsistent

With An Implied Statutory Right To Withhold

Payment Of The Filed Rate Pending ICC Deter-

mination Of The “Reasonable” Rate

1. The Plain Meaning Of The Act Conflicts

With An Implied Right To Withhold Pay-

ment

“The plain meaning of legislation should be conclu-

sive, except in the ‘rare cases [in which] the literal appli-

cation of a statute will produce a result demonstrably at

odds with the intentions of its drafters.’” United States v.

Ron Pair.Enterprises, 489 U.S. 235, 242 (1989), quoting

Griffin v. Oceanic Contractors, Inc., 458 U.S. 546, 571 (1982).

The Interstate Commerce Act does not contain any

provision that expressly states that rate unreasonableness

is a defense to enforcement of the filed rate, or that a

private shipper has a right to withhold payment of the

filed rate pending agency referral. Consistent with the

“utterly central” policy of requiring payment of the filed

rate (Maislin, 111 L.Ed.2d at 112), the statutory language

provides only that the shipper may recover “for damages

resulting from the imposition of rates for transportation

or service the Commission finds to be in violation of this

subtitle.” 49 U.S.C. § 11705(b)(3). If Congress meant this

provision to create a new statutory defense to the duty to

pay the filed rate, Congress certainly forgot to say so.

Instead, it appears that Congress sensibly balanced

the “utterly central” policy of strict enforcement of the

filed rate against the shipper’s interest in paying only

reasonable rates. Instead of creating a defense to the

12

“utterly central” filed rate doctrine, Congress did what it

said and said what it meant: it gave the shipper a limited

right to assert a claim for damages if the filed rate proved

to be excessive. But that claim did not constitute a defense

to the carrier’s statutory filed rate claim. Congress cre-

ated only a limited, express exception to this rule for the

United States as a shipper. See 31 U.S.C. § 3726.

The Court should not override the plain meaning of

the Act when: (1) that plain meaning furthers the “utterly

central” policy of the Act of strict enforcement of the filed

rate (Maislin, 111 L.Ed. at 112), and (2) that plain meaning

is not “demonstrably at odds” with the legislative history

of the Act (United States v. Ron Pair Enterprises, supra, 489

U.S. at 242). Petitioners and their amici fail to identify

any legislative history that “demonstrably” shows the

unequivocal intent of Congress to create a new statutory

defense to filed rate claims.

Elsewhere, the ICC has admitted that Congress in

fact declined to give the ICC the broad reparations

powers for which it lobbied. See Informal Procedure For

Determining Motor Carrier And Freight Forwarder Repara-

tion, Ex Parte No. 249 (Sub-No. 1), 335 LC.C. 403, 408

(1969)(“Shippers were thus not given the option, as rec-

ommended by the Commission, of proceeding initially

before either the Commission or the Court in seek-

ing . . . redress”). If rate reasonableness was “utterly

central” to the Act, Congress presumably would have

given shippers the express right to withhold payment

while they went to the ICC for protection. Further, if

Congress had intended to overrule Crancer v. Lowden, 315

U.S. 631 (1942), then the legislative history and statutory

13

language presumably would contain express statements

to that effect.

2. The Plain Meaning Also Conflicts With A

Right Of Set-Off

The plain meaning of the statute also conflicts with an

interpretation that would permit the shipper to exercise a

right of set-off. A shipper cannot have a right of set-off if its

right to assert the unreasonableness of a filed rate arises only

after making payment. If Congress meant to create an unrea-

sonableness defense or a right of set-off, it should have s@id

so. Congress did not say so, except for the United States in

31 U.S.C. § 3726. This Court should not rewrite the Act so as

to undermine its “utterly central” policy of strict enforce-

ment of the filed rate. See Maislin, 111 L.Ed.2d at 112. Rewrit-

ing the statute in this fashion would be the equivalent of

demoting the importance of the filed rate.* The carrier must

collect and the shipper must pay the filed rate.

The ICC has elsewhere admitted that permitting a right

of set-off undermines the Act. See Regulations for Payment of

Rates and Charges — Penalty Charges — for Nonpayment (49 CFR

Part 1320), ICC Ex Parte No. MC-1 (February 17, 1988).

There, the ICC explained why it would not promulgate a rule

to permit shippers to exercise a right of set-off:

4 The bankruptcy filing of a carrier does not create a right

of set-off. Bankruptcy law preserves a right of set-off that arises

prior to bankruptcy, but does not create a right of set-off that did

not exist independently of the bankruptcy. See 11 U.S.C.

§ 553(a); 4 Collier on Bankruptcy 9553.06, at 553-38 (15th ed. 1992)

(“Prepetition set-offs are governed by applicable non-

bankruptcy law”).

14

Other matters. Several shipper groups propose

that, if we promulgate final rules, we incorpo-

rate a mechanism into the tariff-rule methods

that would allow shippers to toll the time at

which they become liable for collection charges.

They aver that if they have a legitimate dispute

over an assessed transportation rate they should

be allowed to file with the carrier (within a short

time period after completion of the transporta-

tion) a letter disputing the rate. The shippers

suggest that, as long as a shipper legitimately

disputes the rate and is not lodging a pro forma

protest, then such a letter of protest should

exculpate it from collection charges. We decline

to adopt such a provision. We believe it is imprac-

tical. The distinction between a legitimate, hon-

est protest and an illegitimate pro forma protest

is not an easy distinction and would likely gen-

erate a flood of unnecessary litigation. It is also

too easily susceptible to unequal application and

thus could promote unlawful discrimination.

Finally, as noted supra, shippers are obligated to pay

first. Set-offs of freight charges are not lawful. Id. at

6 (emphasis added and footnote omitted).

The ICC made these observations without even consider-

ing the possible use of Fed.R.Civ.P. 67. Rule 67 makes the

quoted reasoning of the ICC even more strongly militate

against judicial creation of a right of set-off.

3. The Plain Meaning Conflicts With The Pro-

posed Equitable Right Of Recoupment

Petitioners’ amici suggest that their right to repara-

tions justifies judicial creation of an implied right of

15

“recoupment.” See brief of amicus NITL at 28. This argu-

ment does no more than give another label to the incor-

rect conclusion that the Act permits a shipper to withhold

payment of the filed rate.

The proposed implied right of “recoupment” must be

rejected for an additional reason. Petitioners’ amici admit

that: “Recoupment is an equitable doctrine. . . .” See brief

of amicus NITL at 28 n.3 (emphasis added). But Maislin

precludes judicial creation of equitable defenses to

enforcement of the filed rate. The Court stated in Maislin:

Given the close interplay between the duties

imposed by [49 U.S.C.] §§ 10761-10762 and the

Statutory prohibition on discrimination, see

§ 10741, this Court has read the statute to create

strict filed rate requirements and to forbid equita-

ble defenses to collection of the filed tariff. 111

L.Ed.2d at 108 (emphasis added).

F. Agency Referral Based On Unsubstantiated

Claims Of Filed Rate Unreasonableness Will

Undermine The Filed Rate Doctrine And Con-

done Illegality

“[I}n order to merit reference of a matter to the ICC, a

shipper must provide more than a bald, conclusory alle-

gation of rate unreasonableness.” In re Oneida Motor

Freight v. Ormond Shops, 126 B.R. 431, 442 (D.N.J.

1991)(collecting authorities). “[T]he district court need

not refer the issue of reasonableness to the ICC if there is

no reasonable likelihood that the ICC will reach a deter-

mination favorable to the shipper.” Milne Truck Lines, Inc.

v. Makita U.S.A., Inc., __F2d __ (9th Cir., July 7, 1992).

Similarly, when a tariff is unambiguous, this Court has

16

refused to refer it to the ICC for interpretation. Great

Northern Railway Co. v. Merchants Elevator Co., 259 US.

285 (1922).

In light of these principles, a shipper should have no

right to ageacy referral of a reparations claim absent

evidence from which the ICC could reasonably decide in

the shipper’s favor. This Court should halt now the latest

effort to nullify the filed rate doctrine and to revive the

ICC’s illegal Negotiated Rates policy. This new defense

tactic, condoned by the ICC, relies on this syllogism:

- Illegal unfiled rates are legitimate evidence of

“reasonable” rates.

- When a carrier’s filed rate is higher than an

unfiled rate, then the carrier's filed rate is

unreasonably high.

- Therefore, the shipper is entitled to pay only

the unfiled rate, Maislin is overruled, and Nego-

tiated Rates is reinstated.

This syllogism has the same defect as the ICC’s ille-

gal Negotiated Rates policy that this Court rejected in

Maislin. In Maislin, the ICC attempted to enforce unfiled

rates by declaring that it was an “unreasonable practice”

for a carrier to attempt to collect its filed rate after agree-

ing to an unfiled rate. The ICC called this policy its

“Negotiated Rates” policy. In rejecting this policy, Maislin

held that the filed rate doctrine prohibits the ICC from

adopting a policy “sanctioning ‘adherence to unfiled rates”

because such a policy “undermines the basic structure” of

the Interstate Commerce Act. Maislin, 111 L.Ed.2d at 112

(emphasis added).

17

Unfiled rates therefore cannot legally serve as evidence

to support agency referral of a reparations claim. Under the

filed rate doctrine as defined in Maislin, an illegal, unfiled

rate cannot be used to show that a filed rate is “unreason-

able.” Otherwise, a carrier would risk liability for reparations

based on evidence of unfiled rates. This would sanction

adherence to unfiled rates, and Maislin expressly forbids any

policy “sanctioning adherence to unfiled rates. ...” Maislin,

111 L.Ed.2d at 112.5

Despite Maislin’s mandate, the ICC recently noted that it

historically has considered “a carrier’s proffer of a particular

rate” to be evidence of rate unreasonableness. Petitions for

Issuance of Rate Reasonableness and Unreasonable Practices Policy

Statement, 8 1.C.C.2d 61, 74 (1991); see also amicus brief of ICC

at 6 n.5. The obvious implication of this post-Maislin com-

ment is that the ICC may use unfiled rates to support

findings of rate unreasonableness.

5 The standard for referral should be that the shipper must

submit competent evidence from which the ICC reasonably

could find that the filed rate of the carrier is unreasonable,

taking into account the “reasonable profit” standard of 49 U.S.C.

§ 10701(e) and the national transportation policies stated in 49

U.S.C. § 10101. “Competent evidence” would not include ille-

gal, unfiled rates.

The national transportation policies stated in 49 U.S.C

§ 10101 include: (a) “to promote safe, adequate, economical, and.

efficient transportation” (§ 10101(a)(1)(B)), (b) “to encourage

sound economic conditions in transportation, including sound

economic conditions among carriers” (§ 10101(a)(1)(C)), (c) “to

encourage the establishment and maintenance of reasonable

rates for transportation, without unreasonable discrimination

or unfair or destructive competitive practices”

(§ 10101(a)(1)(D)), and (d) “to encourage fair wages and work-

ing conditions in the transportation industry” (§ 10101(a)(1)(F)).

18

G. The Rule Urged By Petitioners Would Be

Highly Prejudicial To Both Solvent And Insol-

vent Carriers

Petitioners’ amici contend that no prejudice will

result to a bankrupt carrier if its filed rate claim is post-

poned pending the outcome of the referral of the ship-

per’s rate unreasonableness claim. See brief of amicus

ICC at 22; brief of amicus NITL at 24. On the contrary, the

rule urged by the ICC will prejudice both insolvent and

solvent carriers and will needlessly undermine the filed

rate doctrine.

A rule that permits a shipper to delay payment of the

filed rate based on a claim of rate unreasonableness will

inevitably invite shippers to assert such claims, regard-

less of their merit. Prejudice will result to all carriers:

A. All carriers will frequently be forced to deviate

from all filed rates, regardless of whether they are reason-

able rates. In order to obtain prompt payment and to

avoid the cost of litigation, carriers will frequently accept

less than the filed rate in “settlement” of spurious rate

reasonableness defenses. Unless such “settlements” are

publicized and filed with the ICC (an unlikely scenario),

they will in substance constitute secret, unfited, ratemak-

ing agreements.

B. Carriers that do not settle spurious reasonable-

ness claims will frequently suffer increased delays in

payment while the carriers endure interminable adminis-

trative proceedings on spuciovs rate reasonableness

defenses. A marginally solvent carrier will go bankrupt

from delays in payment based on spurious rate rea-

sonableness claims. A bankrupt carrier will be unable to

19

make prompt distributions to creditors on their claims

during the pendency of protracted litigation.6 Unsecured

creditors of a bankruptcy estate are acutely prejudiced by

delays in distribution, because unsecured claims do not

accrue interest during bankruptcy. See 11 U.S.C.

§ 502(b)(2).

The attempted distinction between solvent and insol-

vent carriers also fails because it is based on a false

premise: that an insolvent carrier is not operating. Urging

adoption of this false premise, amicus NITL cites an ICC

study and states:

Insolvent carriers ~ precisely because they are no

longer operating - do not require a constant and

predictable cash flow to preserve their solvency.

See brief of amicus NITL at 24. To credit this assertion,

this Court would have to forget the existence of chapter

11 of the Bankruptcy Code, 11 U.S.C. §§ 1101-1174. Many

insolvent carriers do operate under chapter 11, and they

© A favorite tactic of the ICC and shippers’ lobbying groups

is to emphasize that a portion of the recoveries of filed rate

claims may go to pay the court-approved contingent fee of

counsel employed by the carrier’s bankruptcy estate. But a

bankruptcy estate cannot afford to pay counsel on an hourly

basis when the estate is deprived of cash by shippers who

wrongfully withhold payment of the filed rate. Further, if the

law gives the shipper an incentive to assert a spurious defense

to a filed rate claim, then the law also causes an increase: (a) in

the employment of defense counsel by shippers to assert such

defenses, and (b) the size of the contingent fee demanded by

counsel for the estate. These legal costs By both sides of filed rate

litigation necessarily diminish the recoveries by the carrier, its

employees, and other creditors. Strict enforcement of the filed

rate doctrine would stop this.

20

do provide services to the public and jobs and income to

their employees. But these same insolvent carriers will

fail and liquidate if this Court permits their customers to

delay performing their legal duty to pay the filed rate.

Thus, the results of the unfounded rule urged by

Petitioners will be highly prejudicial. Further, these preju-

dicial results are unnecessary. Instead of adopting Peti-

tioners’ unfounded rule, the Court should require the

shipper to perform its legal duty to pay the filed rate -

either to the carrier, or to the court’s registry under

Fed.R.Civ.P. 67. This rule will deter a shipper from assert-

ing a spurious defense, because the assertion of the

defense will not delay payment of the filed rate. This rule

also will deter spurious litigation that occurs only if

shippers have an incentive to assert rate reasonableness

as a defense. This rule will further the “utterly central”

filed rate doctrine (Maislin, 111 L.Ed.2d at 112), because

shippers, carriers and the public will know that shippers

are presumptively paying the filed rate. By reason of

Fed.R.Civ.P. 67, this rule will not in any way impinge ona

shipper’s reparations claim. Finally, this rule will prevent

unjustified carrier bankruptcies that will result if this

Court gives shippers an incentive to stall payment of the

filed rate.

21

Il. THE COURT SHOULD NOT REWRITE THE ACT

SO AS TO REFER FILED RATE CLAIMS TO AN

AGENCY THAT HAS PUBLICLY ANNOUNCED

THAT IT: (A) WANTS TO ABOLISH THE FILED

RATE DOCTRINE AND (B) WILL NOT SAFE-

GUARD THE ALLOWANCE OF REASONABLE

RATES TO COMMON CARRIERS

Amicus NITL purports to describe at pages 2-6 of its

brief the “Regulatory Environment” ‘and the “Nature of

the Problem” in this case. But, as described below, the

Court may take judicial notice that the “regulatory envi-

ronment” in reality consists of official opposition by the

ICC to enforcement of the filed rate doctrine by carriers.

Not surprisingly, this “environment” results in the “prob-

lems” of illegal, unfiled rates and of shippers’ trying to

get filed rate claims improperly referred to ICC so that it

can prevent their enforcement.

Congress enacted the filed rate doctrine in 1887 to

promote uniform, published transportation rates that

would create a more level playing field for competition

among businesses using the channels of transportation

and that would prevent discrimination against members

of the shipping public. See S.Rep.No. 46, 49th Cong., Ist

Sess. 188, 198 (1886).7 In addition, the Interstate Com-

merce Act as amended now expressly states that one of

7 In recommending enactment of the Act, the Senate Select

Committee on Interstate Commerce reported:

[T]he committee believes that every effort possi-

ble should be put forth by Congress to secure equality

betweer man and man in respect to the matter of

tlansportation, and that one means to that end would

be the prohibition of personal preferences under

22

the nation’s transportation policies is to prevent “destruc-

tive competitive practices” by carriers. 49 U.S.C.

§ 10101(a)(1)(D). This policy furthers another express

statutory policy: “fair wages” for employees of carriers.

49 U.S.C. § 10101(a)(1)(F).

Through its Chairman, the ICC has publicly attacked

these statutory goals. On March 10, 1992, the Chairman of

the ICC assailed these goals in a written speech (“JCC

Chairman's Speech”) entitled “The Revolution in Motor

Carrier Transportation” which was presented to the Rar-

itan Traffic Club, Inc.®:

A. Abolish the filed rate doctrine: Instead of sup-

porting the filed rate doctrine, the ICC Chairman

described the tariff freight undercharge issue as a “fur-

ball” that “the ICC has in its throat” because bankruptcy

trustees are attempting “to collect monies on filed tariff

rates despite the existence of lower negotiated rates that

were agreed to by a carrier and a shipper... . ” ICC

Chairman's Speech at 3. The Chairman described this

Court’s decision in Maislin as a source of “headaches”

(id.) and condemned the filed rate doctrine as “a dinosaur

that should be sent to its reward.” Id. at 4 (emphasis in

original); see Appendix A.

suitable penalties, which should be supplemented by

proper provisions for securing publicity of rates.

S.Rep.No. 46, 49th Cong., Ist Sess. 190 (1886).

8 The Court may take judicial notice of this written and

widely publicized speech under Rule 201 of the Federal Rules of

Evidence. We do not request the Court to take judicial notice of

the truth of the speech, only that the*words were spoken by the

Chairman of the ICC.

23

B. Permit below-cost pricing: Instead of supporting

reasonable rates for carriers, the ICC Chairman sup-

ported below-cost rates. The Chairman stated: “Then

there are charges of destructive below-cost pricing in the

LTL [less-than-truckload] sector. In my view, to the extent

that it exists, below-cost pricing in the present competi-

tive environment is essentially a derogatory name for

very aggressive —- and often very efficient - marketing

and yield management.” ICC Chairman's Speech at 2; see

Appendix A.

Not surprisingly, both Carolina Motor Express and

amicus Transcon Lines went bankrupt in a “regulatory

environment” polluted by this attitude and the illegal

Negotiated Rates policy. Many more carriers will fail if this

Court permits improper referral of filed rate and unsub-

stantiated rate reasonableness claims to an agency which:

(1) condemns the filed rate doctrine, and (2) endorses

below-cost pricing. The federal judicial system will then

have to administer those future carrier bankruptcies

while former employees and other creditors endure need-

less delay and economic hardship.

¢

CONCLUSION

A private shipper should not be permitted to with-

hold payment of an unambiguous filed rate pending the

outcome of ICC hearings on rate reasonableness. The

shipper must forthwith pay the filed rate, either to the

carrier, or into the registry of the court under Fed.R.Civ.P.

67. The shipper has no right to" agency referral of a

reparations claim unless the shipper submits evidence to

24

the court from which the agency could reasonably rule in

favor of the shipper. Such evidence does not include

evidence of unfiled or otherwise illegal rates.

Respectfully submitted,

Leonarp L. Gumport, Esq.”

355 South Grand Avenue,

39th Floor

Los Angeles, California 90071

(213) 617-7070

*Leonard L. Gumport, Trustee of the

Bankruptcy Estate of Transcon Lines

September 1, 1992

App. 1

APPENDIX A: EXCERPTS OF WRITTEN REMARKS

BY HONORABLE EDWARD J. PHIL-

BIN, CHAIRMAN, INTERSTATE

COMMERCE COMMISSION, TO THE

RARITAN TRAFFIC CLUB, INC. ON

TUESDAY, MARCH 10, 1992, AT

PINES MANOR RESTAURANT, ED!-

SON, NEW JERSEY

“THE REVOLUTION IN MOTOR

CARRIER TRANSPORTATION”

President Bush has repeatedly said that government

regulations must be necessary, economically sensible,

understandable, responsive to public concern and cost

beneficial. I couldn’t agree more, and I’ve done my best

since becoming Chairman to have repealed or amended

useless and outdated regulations that hamper the busi-

ness operations of the trucking industry and drain the

vitality of our nation’s economy. While the Commission

has made great progress in this effort, there’s a lot left to

do.

If, as suggested recently by Federal Reserve Board

Chairman Alan Greenspan (and others), the economy is

showing signs of rebound, the industry could well see a

financial Renaissance through higher freight rates and

improved business.

Despite all the evidence to the contrary, allegations of

the failure of deregulation continue: a favorite complaint

is that there is now, or soon will be, undue if not dan-

gerous carrier concentration in the LTL sector. (The big

guys are swallowing the little guys.) | believe that any

App. 2

apparent concentration in the LTL sector is the result of

the unleashing of pent-up market pressures and not the

result of a failure of the marketplace. In fact, ICC studies

indicate that undue concentration has not occurred.

* * all

Then there are charges of destructive below-cost pric-

ing in the LTL sector. In my view, to the extent that it

exists, below-cost pricing in the present competitive envi-

ronment is essentially a derogatory name for very aggres-

sive - and often very efficient - marketing and yield

management.

The major “furball”’ the ICC has in its throat is the

“undercharge issue” caused by attempts of trustees of

bankrupt motor carriers to collect monies based on filed

tariff rates despite the existence of lower negotiated rates

that were agreed to by a carrier and a shipper, billed by

the carrier and paid by the shipper, but never filed in a

tariff at the ICC by the carrier. The Commission currently

has pending more than 200 such cases.

The Commission has addressed this issue to the best

of its ability under current law. Last September, we dis-

cussed applicable rate reasonableness standards and

some techniques available to shippers to show that the

higher tariff rates sought may not be lawfully collected.

The ICC has also issued decisions in individual cases that

% All emphases and quotatiof marks are in the text of the

Chairman's written speech.

App. 3

provide relief to specific shippers and also offer guidance

to others facing similar claims.

The use of contracts seemed a safe remedy for some

of the headaches brought about by the Maislin decision.

But that course of action has its own perils and ambi-

guities, which we hope to eliminate soon by clarifying the

differing requirements of the law and the ICC regula-

tions. The 37,000 carriers who have contract authority

deserve to drive on a highway free of legislative and

regulatory potholes.

The real solution to the undercharge problem lies in

remedial legislation. The Commission has supported two

bills introduced by Senator Exon and co-sponsors, neither

of which has been enacted. For the future, we can only

hope for the best.

The undercharge issue, among other things, casts

serious doubt on the continued utility of mandatory filing

of motor carrier rate tariffs, given the swift pace at which

trucking business is done in today’s partially deregulated

and fiercely competitive transportation marketplace.

In short, I've seen no evidence that the current statu-

tory filing requirement serves any beneficial interest. Its

only function appears to be the perpetuation of an out-

dated system through sheer aversion to change. The pre-

sent “filed rate doctrine” is a dinosaur that should be sent

to its reward.