Brief for the Respondents in Opposition — Long Island Rail Road Co. v. Interstate Commerce Commission

Gu the Supreme Court of the United States

OcroBerR TERM 1974

No. 74-27

THE Long Istanp Rat. Roap Company, veririoNrenr

v.

INTERSTATE COMMERCE COMMISSION, ET AL.,

RESPONDENTS

ON PETITION FOR A WRIT OF CERTIORARI TO THE UNITED

STATES COUKT OF APPEALS FOR THE SECOND CIRCUIT

BRIEF FOR THE INTERSTATE COMMERCE COMMISSION

IN OPPOSITION

QUESTION PRESENTID

In our view, the question presented is whether the

Court of Appeals properly found that petitioner was

entitled only to its actual damages pursuant to a

stated formula as compensation for its unlawful in-

clusion in a general rate increase, and was not entitled

to the **windfall” of its local rates for the period of

unlawfulness,

STATEMENT

This case arose when the Tariff Executive Associa-

tion—FEastern Railroads (*‘TEA-ER”), a rate bureau

(1)

2

formed pursuant to Section 5a of the Interstate Com-

meree Act (49 U.S.C. §5b), adopted increased rail

rates and charges pursuant to the 6% general increase

authorized by the Interstate Commerce Commission

in Ex Parte No. 262, Increased Freight Rates, 1969,

effective in November 1969. Petitioner (“LIRR”)

Caimed that the increase, which included rates on

joint-line traffic to and from points on LIRR’s lines,

was adopted without LIRR’s consent and over its ob-

jections. After disruption of rail service was threat-

ened heeause of the dispute between LIRR and its

connecting railroads, a shipper on LIRR’s lines songht

an injunction from the United States District Court

for the Eastern District of New York to prevent such

an oceurrenee. The connecting railroads cross-claimed

against LIRR. The problem was initially resolved in

the district court by adoption of a stipulation among

the railroads to maintain service, pending referral of

certain questions to the Commission to ascertain the

rights and responsibilities of the various parties.

The Commission concluded, in two separate reports,

that the inclusion of LIRR’s joint rates in the Ex

Parte No. 262 increase was proper. Ex Parte No. 262

(Sub-No. 1), Petition for Declaratory Order—Rule

52 of Tariff Circular No. 20, 337 LCC. 247; 337 LCC.

274.

LIRR then brought a third-party complaint in the

district court action to review the Commission’s or-

ders, naming the United States and the Commission

as third-party defendants.’ The district court sus-

1The United States filed an answer confessing error, but the

Commission defended the validity of its orders.

facet

RT rahe * ri

LE Lt SSE ROFL GUIRY tesla Bess REE e Le, GAARA vip

a ee ee oe eee

ED SN

3

tained the Commission (350 F. Supp. 111), but on ap-

peal the court of appeals reversed (Pet. App. A, 487

F. 2d 179), holding that the Commission had erred in

finding that LIRR had “failed to take the proper steps

to opt out of” the Ex Parte No. 262 increase; that

LIRR “was entitled to a hearing before the new joint

‘ates went into effect’; and that until such a hear-

ing might be held, LIRR “had a right to sist on the

maintenance of its existing joint rates” (Pet. App. A

23-24; 487 F. 2d at 182-185).

As a remedy for the unlawful inclusion of LIRR’s

joint rates in the increase, the court of appeals held

that LIRR was entitled to recover from the connect-

ing railroads only such damages as it actually suffered

by reason of the unlawful increase in its joint rates.

The court reasoned that if it “*were to order that the

Long Island should collect as damages the difference

between what it had to charge as divisions of the joint

‘ate and what its local rates’ were when the charges

were made, the Long [:tand would receive a windfall

without any showing of actual damages.”’* The case

was remanded to the district court to determine the

?The term “local rates” refers to rates applying solely to

traflic on a single railroad’s lines. Local rates apply on traffic

which is transported only over one railroadd’s lines. and also on

joint-line movements where no aj plicable joint rate is available.

Where a joint rate is applicable it is quoted as one rate to the

shipper: each participating carrier takes a share. or “division”.

of the joint rate. Where no joint rate is available. the total rate

for a joint-line shipment is computed by adding together the

combination of applicable local rates.

*That “windfall”. though never precisely ascertained on the

record, was generally agreed to exceed $70 million.

4

amount of any damages to which LIRR might be en-

titled (Pet. App. - 24-25; 487 F. 2d at 183).

Neither the Commission nor the connecting railroad

appellees before the court of appeals sought further

review of the court of appeals’ decision. LIRR, on the

other hand, continued to litigate the question of dam-

ages. As the result of a conference before the district

court following the court of appeals’ remand (at which

LIRR maintained that it was entitled to its local rates

as the proper measure of damages), petitions for

clarification were filed with the court of appeals seek-

ing further amplification of its remand to ascertain

damages. Despite the court of appeals’ clear ruling

that LIRR was not entitled to collect its local rates

for the period in which its joint rates were unlawfully

increased, LIRR continued to argue that it was so en-

titled. On March 29, 1974, the court of appeals, in a

supplemental opinion (Pet. App. A 28-30; 496 F. 2d

21), held that LIRR “is entitled to any net revenue

reduction caused by the increased joint rates to which

it objected”, and elaborated its formula for the deter-

mination of damages.

Following the court of appeals’ clarification of the

damages issue, LIRR went back to that court, this

time with a petition for rehearing of the clarifying

opinion. Once again the question of damages, and

LIRR’s repeated ciaim that it was entitled to its local

rates, were extensively argued. On May 1, 1974, the

court of appeals granted rehearing (Pet. App. A 32-

33), and in an opinion entered the same day (A 34-

36), affirmed its earlier clarifying decision.

a)

On July 29, 1974, LIRR filed the instant petition

for a writ of certiorari in this Court.

ARGUMENT

As the principal decision of the court of appeals

makes clear, the main point at issue (i.e¢., whether

LIRR took the proper steps to remove itself from the

Kx Parte No. 262 increase) was resolved in LIRR’s

favor. The only remaining issue is the measure of

recovery to which LIRR is entitled as a result of this

admittedly improper increase, an issue whieh is un-

likely ever to recur, since the nation’s railroads and

the rate bureaus have ceased any efforts to include

LIRR in joint-rate increases over LIRR’s objections,

and the Commission has authorized no such increase

in any order entered since the court of appeals’ deci-

sion. The court of appeals has properly—and repeat-

edly—held that LIRR is entitled only to such actual

damages as it can prove to have resulted from the un-

lawful increase, rather than the “windfall” of its

local rates for the period of unlawfulness, and there

is no occasion for further review of this essentially

discretionary determination.

The sole basis for LIRR’s alleged right to recover

its local rates is the Commission’s Rule 52(b) of Tariff

Circular No. 20 (Pet. App. B 44; 49 C.#.R. § 1300.52

(b)). Rule 52(b) is a technical rule of tariff pro-

cedure outlining the course of conduct to be fol-

lowed by a carrier which believes itself to have been

named in a joint tariff without proper authority. The

rule provides that a carrier is bound by the terms

of a joint tariff in which it has lawfully concurred.

7

6

Where it has not lawfully concurred, it must demand

payment under its lawful tariffs and may not seek

to collect under the tariff in which it has not con-

curred, So here, when initially confronted with the Fx

Parte No, 262 increase in its joint rates which it

believed unlawful, LIRR properly sought to collect

under what it contended was its lawful tariff. How-

. ever, this effort was superseded when LIRR acceded

to a stipulation in the district court under which it

continued to colleet its division of the increased joint

rate.

The fact that the court of appeals later held that

LIRR iad taken proper steps to opt out of the in-

crease does not give rise to an inference that Rule

,52(b) entitles LIRR to recovery of its loeal rates for

the period of the effectiveness of the joint rate in-

creases. In essence LIRR argues that a rule of tariff

procedure establishes a right to the collection of dam-

ages. Such a contention is patently incorrect, and the

court of appeals properly rejected it more than once.

Nor is there any support for LIRR’s assertion that

there is a policy behind the rule to punish other ear-

riers when unlawful joint-rate increases are adopted

(c.g., Pet., at 11).’

4

Des Tse ow cna, ea |

ai 2

\

*The Commission decisions cited by peticioner (Pet.. p. 14)

do not add substance to this argument. In St, Lows & O'Fallon

Ry. Co... BSH. LoS. By. Co. 3 LOC. 558. the Commission

found that. where a carrier had been unlawfully creluded from

a joint rate arrangement but the joint rate for the entire

movement was being collected by other earricr participants.

those carriers had a duty to pay the excluded carrier the

equivalent of its local rates until such time as the tariff was

corrected to accord with the law. There is no issue in the pres-

A TAD OT Re ae BR

TE Te ae Pg Mag ew eer

7

Not only was there no prescribed statutory remedy

for the wrong which was found—as in Pollard v.

Bailey, 87 U.S. 520—there was no prescribed remedy

at all. The comt of appeals was thus free—and ob-

ligated—to formulate a remedy which is appropriate

and equitable in the circumstances. Cf. Pollard v.

Bailey, supra. This the court did, by holding that

LIRR is entitled to whatever actual damages it can

prove attributable to the harm done. This was an eu-

tirely proper action in the premises, and LIRR’s con-

tinual and repeated objections to the court's remedy

reflect nothing more than its desire to get more money

from the respondent railreads—feour of which, mei-

dentally, are bankrupt.’

As earlier stated, the question here presented is not

likely to recur, and is thus not a matter of continuing

significance meriting plenary review by this Court.’ In

ent proceedings of excluding LIRR from collecting its division

of the joint rate during the period of its unlawful inclusion in

that arrangement, and the O°Fa//on case is clearly inapposite.

Declaratory Order—Rule 52 of Tariff Cir, No. 20, 337 TCL.

247. is similarly inapposite since it merely reiterates the re-

quirement of Rule 52(b) that a carrier must demand the lawful

rate, and says nothing about recovery for past wrongs.

*Penn Central, Central of New Jersey, Lehigh Valley and

Erie-Lackawanna.

©The problem arose in three later general increase proceed-

ings. Ex Parte Nos. 265 and 267, Lucreased Freight Rates, 1970

and 1971, 399 LC.C. 125, and Ex Parte No. 281. /nereased

Freight Rates and Charges, 1972, 341 L.C.C. 288, all of which

were decided prior to the court of appeals’ decisions here. As

to the combined Ex Parte Nos. 265 and 267 increases, petitioner

did not seek judicial review. With respect to the Ex Parte No.

281 inerease LIRR did seek review, and a three-judge court in

the Eastern District of New York recently entered an order

all increases since the court of appeals’ decision the

right of LIRR to remove itself from general increases

has been observed by the connecting carriers, the rate

bureaus, and the Commission,’ and on this issue the

law is now settled. The sole remaining issue of dam-

ages has been extensively litigated, and an entirely

equitable remedy imposed. There is no occasion for

further review.

CONCLUSION

The petition for a writ of certiorari should be

denied.

Respectfully submitted.

Fritz R. Kaun,

General Counsel,

Berry Jo CHRIsTIAN,

Associate General Counsel,

Hanrorp O’Hara,

Attorney,

Interstate Commerce Commission,

Washington, D.C. 20423.

essentially following the court of appeals’ decisions in the in-

stant matter. Long Island Rail Road Co. y. United States, et al..

Civil Action No. 73 C 310 (E.D.N.Y.) (Order filed July 26,

1974). LIRR filed a notice of appeal from this order on August

9, 1974.

*E.g.. Ex Parte No. 295, Increased Freight Rates and

Charges, 1973, Nationwide, 344 LCC. 589, and Ex Parte No.

305, Nationwide Increase of Ten Percent in Freight Rates and

Charges, 1974 (preliminary order entered June 3, 1974).