Petition for Writ of Certiorari — Akron, Canton & Youngstown Railroad v. Pacific Fruit Express Co.

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HAEL RODAK, JR., CLE

In the Supreme Court oP

United States

Ocrozza Tzru 1975

no..29.-.260

Axon, Canton & Younastown Ramzoap Company, et al.,

P. tote x

v8.

Paorrto Frourr Express Company, Inrerstats ComMERCE

Com»assion anp Unrrep Starzs or AMERICA,

Respondents.

Petition for a Writ of Certiorari to the

United States Court of Appeals for the Ninth Circuit

THELEN, Mazar,

Jounsox & Bamwczs

- Qalifornia 94111 Telephone: (415) 892-6820

Of Counsel Attorney for Petitioners

GORS PRINTING COMPANY OF CALIFORNIA, 346 FIRST STREET, GAN PRANCIOGO 84108

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Reasons for Granting the Writ... cccccececececeeeeee ll

TABLE OF CASES AND STATUTES CITED

CasEs

Pages

Kdwards v. Pacifie Fruit Express Co., 390 U.S. 538

BREE Rati at RRS Fr eee OCC CO en PGR 6

Ex Parte No. 137:

318 LC.C. 111 (August 27, 1962)...................... 4, 6, 8-11, 18

340 L.C.C. 754 (February 28, 1972)... 4

L.C.C. v. Oregon-Washington R. Co., 288 U.S. 14, 37

ERPNU Sacasoste esata neidsesSiatas itani otc nshiesdards ance i asnieeabuaccpedcalsoelensec 15, 16

Neisloss vy. Bush, 293 F.2d 873, 878 (D.C. Cir. 1961)... 15

Pacific Fruit Express Co. v. Akron, Canton &

Youngstown R. Co., 355 F.Supp. 700 (N.D. Cal.,

SPUR oyepltetabeicieln oh pada halite nacing shades Gua ncodacansens 2, 5, 12

St. Joe Paper Co. v. Atlantic Coastline R. Co., 347

ME Se OS 4. Sie aa eee pc ee 15, 16

STATUTES

Interstate Commerce Act, 49 U.S.C. § 1 et seq... 7

ae TERE ERE RNR Ete RCD 8 Ren TSS UN 15

TE 6 pS UR Rae ame RT ee Ge sew, eer crater BEEN ON Ro 3, 14

II RY Sa ansscccisrcaclieiaidaomanscadtn ty as OO

PONE BAR IA ooo soci ecsacccerrtccnsicanly 1) ey 28

GEERT St ol ee ca the te AE el 15

Transportation Act of 1940 (54 Stat. 898, 76th Cong.

2d Sess. Chap. 722, Sept. 18, 1940) 2.0... 13, 14

United States Code

I ST sa 3

a 0 6

In the Supreme Court of the

United States

Ocroser Term 1975

Akron, Canton & Youncstown RarLroap Company, et al.,

Petitioners,

vs.

Paciric Fruir Express Company, INTERSTATE COMMERCE

CoMMISSION AND UNITED STATES OF AMERICA,

Respondents.

Petition for a Writ of Certiorari to the

United States Court of Appeals for the Ninth Circuit

Petitioners Akron, Canton & Youngstown Railroad

Company and the other 51 railroad companies and railroad

trustees whose names for the purpose of brevity are set

forth on Appendix A hereto! (said Appendix being incor-

1. Because the appendices required to be appended to this

Petition are voluminous they are separately presented as “Appen-

dices to Petition for Writ of Certiorari”. The pages of each Appendix

are separately numbered by reference to the letter in its heading.

porated herein by reference), all of whom were defendants

below, collectively pray that a Writ of Certiorari issue to

review the judgment of the United States Court of Appeals

for the Ninth Circuit (sometimes herein referred to as the

“Ninth Cireuit’) dated and entered in this case on August

YS. 1975 (Appendix B hereto), and the Amended Opinion

on Which said judgment is based, affirming a judgment of

the United States District Court for the Northern District

of California which granted Respondents Pacifie Fruit

xpress Company and Interstate Commerce Commission

injunctive relief against Petitioners.

OPINIONS BELOW

The Opinion (Memorandum of Decision) of the District

Court, dated March 2, 1973 (Appendix C hereto), which

granted injunctive relief to Respondents Pacifie Fruit ex-

press Company and Interstate Commerce Commission, is

reported at 355 F.Supp. 700 (1973). The Amended Opinion?

of the Circuit Court of Appeals for the Ninth Circuit (Ap-

pendix D hereto) has not vet been officially reported.

JURISDICTION

The Amended Opinion of the United States Court of

Appeals for the Ninth Cireuit (Appendix D) was filed as

of August 28, 1975 and that Court's judgment in this case

2. The reasons why there is an Amended Opinion are as fol-

lows: On August 28, 1975 the Ninth Cireuit filed its original

Opinion and filed and entered its judgment. In that Opinion sev-

eral erroneous statements were inadvertently made concerning one

of the contentions of Petitioner Railroads. A timely petition for

rehearing was filed which simply requested that the Opinion be

moditied to correct those errors. Accordingly, the Amended Opin-

ion making the requested moditications was filed as of the same

date, August 28, 1975. The time for filing this petition is computed

from that date.

(Appendix B) was filed and entered on that date. This

petition for writ of certiorari is being filed within ninety

days of that date. The jurisdiction of this Court is invoked

under 28 U.S.C. § 1254(1).

QUESTION PRESENTED

Does Section 1(14)(b) of the Interstate Commerce Act

(49 U.S. $ 1(14)(b)), which requires that protective serv-

ice contracts between railroad common earriers and third

parties covering interstate shipments of perishables be sub-

mitted to and approved by the Interstate Commerce Com-

mission, empower the Commission or the courts to require

intermediate and terminating railroad carriers to enter

into mechanical protective service contracts with respect

to joint movements of perishables as to which there is such

an approved contract between the originating carrier and

the carline?

STATUTES INVOLVED

1. United States Code, Title 49, Section 1(13)

(Interstate Commerce Act, Section 1(13)).

2. United States Code, Title 49, Section 1(14) (a)

(Interstate Commerce Act, Section 1(14)(a)).

3. United States Code, Title 49, Section 1(14) (b)

(Interstate Commerce Act, Section 1(14)(b)).

(The text of the listed statutes are set forth in Ap-

pendix G hereto).

STATEMENT OF THE CASE

On December 30, 1965 Respondent. Pacific Fruit Express

Company (herein referred to as “PFE") commenced this

action to recover damages from Petitioners (herein refer-

red to as “Petitioner Railroads”) and a number of other

railroads. The basis of jurisdiction of the District Court

was alleged to be 28 U0, S$ 1891, 1832, 8ST and ies, In

the original and six ein and caleaaisdnl complaints

an Ageregate recovery in excess of FLLH00,000 was sought,

the basis of the damage claims being that under an order of

Respondent Interstate Commeree Commission (herein re-

ferred to as “the Commission”) made on August 27, 1902

Ina proceeding known as Aa Parte No. 13> (whieh order is

reported at StS LCLC. LLL and is herein referred to as “the

Commission's 1962 order,” a copy being Appendix H hereto)

each of Petitioner Railroads was obligated to pay its pro:

portionate share of the annual deficits incurred by PEE in

furmshing mechanical protective service te the railroad

industry, Petitioner Railroads filed answers denying liabil.

ity,

On June TS, L970 PRE tiled a motion for summary judg:

ment on the liability issue. Petitioner Railroads filed op

posing aflidavits and alse motions (1) for judgment on the

pleadings because ce subjeet matter of the action was

within the exelusive jurisdietion of the Commission or,

alternatively, (2) for a stay of the action and reference to

the Commission because the subject matter was within its

primary jurisdiction.

By orders dated November 16, 1971 and January 20,

N72 the District Court referred to the Commission certain

questions whieh it considered to be within the primary

jurisdietion of the Commission, On Mareh 8, L972 the Com

mission transmitted its Report and Onder (Appendix i

hereto) replying to the Distriet Court's questions (340

LCL, 74).

A request for injunctive relief became a part of the case

on April 28, 1972 when PEE by an amendment to its Fifth

Amended Complaint ineluded as Count Tl a cause of action

for an injunetion, The amendment added the Commission

and Respondent United States of America (herein referred

to as “the United States”) as defendants in that count,

which sought an injunetive order requiring Petitioner Rail-

roads to comply with the Commission's L962 order. The

basis of jurisdiction of the Distriet Court on that count

was alleged to be 28 ULS.CL $$ 1886, 1898 and 23d21. Peti-

tioner Railroads filed answers denying the charging allega-

tions. On July 21, 1972 the Commission tiled a motion to

intervene as a plaintiff and to file a complaint for an

injunction, the proposed complaint parallelling PEE's

injunctive count and on September 27, 1972 the United

States filed a motion to be realigned as a plaintiff. These

motions were granted.

On August 9 1972 PEE tiled a motion for summary

judgment on the injunction issue, Petitioner Railroads tiled

opposing affidavits raising factual questions together with

a memorandum in opposition te the motion. At the hearing

of November 3, 1972 on PEE's motion for summary judg-

ment for an injunetion the Commission orally joined in the

motion and was permitted to do so.

On December 11, 1972 the Distriet Court entered a brief

order granting (1) the PEE motion for summary judgment

on the liability issue (but reserving determination of the

damage issue) and (2) the motions of PFE and the Com-

mission for injunctive relief. The order recited that a

Memorandum containing the background of the litigation

and findings and conclusions would be issued in due course.

Accordingly on Mareh 2, 1973 the Distriet Court issued its

opinion entitled “Memorandum of Decision” (Appendix C)

setting forth its reasons for, and its findings of faet and

conclusions of law in connection with, its order granting

the summary judgments. On March 7, 19738 the District

Court made and entered its Judgment and Order on the

injunction issue (Appendix F hereto).

An appeal was noticed on May 1, 1973 by Petitioner Rail-

roads pursuant to 28 U.S.C. § 1292(a) (1) “from the injane-

tive relief” granted by the District Court's judgment. The

appeal was limited to the injunctive aspect, since there is

no final decision of the District Court on the “ability and

damage aspect which is appealable.

Turning to the factual background of the case, PFI. is a

carline company owned in equal shares by Southern Pacific

Transportation Company and Union Pacific Railroad Com-

pany (herein respectively referred to as “S.P.” and

“U.P.”). PFE is not a common carrier by railroad.

Edwards v. Pacific Fruit Express Co., 390 U.S. 5388 (1968).

PFE owns or leases in excess of 10,000 mechanical refrig-

erator cars which it furnishes to common carriers for the

transportation of perishables. Petitioner Railroads are

common carriers by rail, generally operating in the Kastern,

Southern and Midwestern parts of the country, east of the

railroad gateway points of Omaha, Council Bluffs, Kansas

City and Chicago.

The basis of PFE’s case is that under the Commission's

1962 order (Appendix H) each of Petitioner Railroads be-

came obligated to enter into contracts for mechanical pro-

tective service with PFE and to pay PFE its proportionate

share of the annual deficits incurred by PFE in furnishing

such service to the railroad industry. As to injunctive

relief, the claim is founded on the assertion that Petitioner

Railroads are in violation of the Commission's 1962 order

because they did not enter into such contracts with PFE.

The mechanical refrigeration cars of PFE contained, as

component parts, mechanical refrigeration units which were

used to provide protective service to shipments of perish-

ables. This case does not involve any controversy with

respect to the refrigerator cars, as distinguished from the

mechanical refrigeration units. “Car service” is covered by

Section 1(14)(a) of the Interstate Commerce Act (herein

referred to as “the Act”).* The subject matter of this case

is limited to the furnishing of the mechanical refrigeration

units and to “protective service against heat or cold” to

property transported in interstate commerce, the latter

subject being covered by Section 1(14)(b) of the Act. That

section, the text of which is set forth in full in Appendix

G, makes it unlawful for any common carrier by rail to enter

into any contract with any person for the furnishing to

such carrier of such protective service “unless and until

such contract, agreement or arrangement has been sub-

mitted to and approved by the Commission as just, reason-

able, and consistent with the public interest .. .”

With respect to the movements of perishables in PFE

mechanical refrigerator cars which this case involves the

following is the factual background:

1. Those movements are eastbound shipments as to

which §8.P. and U.P., the parents of PFE, are the origi-

nating carriers and Petitioner Railroads are intermediate

or terminating carriers.

2. As common carriers, railroads are obligated to pro-

vide shippers protective service for perishable freight. As

between railroads participating in a joint movement of

perishables, the originating carrier has the duty of pro-

viding the refrigerator cars to the shipper and making the

choice of what cars shall be used.

3. Thus, the decision to select and use PFE mechanical

refrigerator cars in the perishable movements involved in

this case was made by PFE’s parent companies, as origi-

nating carriers. Petitioner Railroads, being intermediate

3. The Interstate Commerce Act is embodied in Title 49 of the

United States Code, the numbers of the sections of the Act and of

the title being identical.

Pete ear

Tak alee ew

or terminating carriers, had no voice in such decision and

selection. When the PFE cars were tendered at inter-

change points to Petitioner Railroads, they were compelled,

as common carriers, to accept the PFI. cars for movement

over their lines provided only that they were in safe op-

erating condition,

4. While the PFE cars were on the lines of Petitioner

Railroads all inspection, starting, stopping, regulating,

fueling, repairing and other servicing relating to the opera-

tion of the units was performed by Petitioner Railroads

or by third parties engaged by them. All services, functions

and obligations with respect to the PFE cars and their

mechanical refrigeration units at interchange points which

were required by the rules of the National Perishable

Freight Committee were performed by Petitioner Railroads

or their contractors, and not by PFE.

5. PEE neither furnished nor performed any services

whatever on its mechanical refrigeration units while they

were on the lines of Petitioner Railroads. In the territories

served by Petitioner Railroads PFE had no employees,

facilities or means of furnishing or performing any serv-

icing of any equipment of any kind to or for any of Peti-

tioner Railroads. Consequently, Petitioner Railroads were

compelled to perform such servicing themselves or through

their contractors.

Turning to the background for the Commission's 1962

order,* that order arose out of a general investigation un-

4. The validity of the Commission’s 1962 order is the subject

matter of an action now pending before a three-judge court con-

vened pursuant to 28 U.S.C. § 2284 in the District Court for the

Distriet of Columbia. That action, Southern Railway Company,

ct al. v. United States, Civil No. 1776-73, has been under submis-

sion on the merits sinee May 27, 1975. The plaintiffs in that action

are some of Petitioner Railroads in this case.

GT EGE LILES HALLS TEN PENI BS oma

dertaken by the Commission in 1959 as to the reasonable-

ness of charges for mechanical protective service under

contracts requiring Commission approval under Section

1(14)(b), (818 L.C.C, 111-112, Appendix H hereto, p. H-2).

By its 1962 order the Commission prescribed provisions

to be included in all mechanical protective service contracts

which were submitted to it for approval. Those prescribed

conditions were incorporated by the Commission in regula-

tions included in the Code of Federal Regulations and

published in the Federal Register.®

In the concluding paragraphs of its 1962 order the Com-

mission found that the unapproved protective service

contracts which were before it were just and reasonable,

provided that within 120 days the railroads filed new

or superseding contracts consistent with the regulations

adopted by the Commission and referred to above. The

paragraph further provided as follows:

“In the event new or superseding contracts are not

filed, further consideration will be given to the issuance

of an order finding the presently unapproved contracts

not within the requirements of section 1(14)(b).”

(318 1.C.C. 127, Appendix H. hereto, p. H-27; emphasis

added)

It is coneeded that no such further order has ever been

made.

Paragraph (a) of the Commission's regulations set forth

in Appendix G to the 1962 order contained the following

final sentence:

| “The contracts required herein to be filed shall super-

sede all prior contracts, including Division Sheet 7,

5. See Appendix G to 1962 order, 318 L.C.C. 137-138 (Appen-

dix I] hereto, p. H-39); 49 C.F.R. § 1032.2; 27 F.R. 9406, Sep-

tember 21, 1962.

and such contracts and those filed thereafter shall con-

form in substance to the provisions set forth in sub-

sections (b), (¢), (d), (e), (f) and (g).”

(318 I.C.C. 138, Appendix H hereto, p. H-40)

Since the Commission’s 1962 order Petitioner Railroads

have continued to observe and comply with Division Sheet

7. They have not entered into mechanical protective service

contracts with PFE for a variety of reasons, including the

following: (1) that as intermediate or terminating carriers

they, as distinguished from the originating carriers (S.P.

and U.P., the parents of PFE), do not have any relationship

with PFE which requires such contracts; (2) that the fur-

nishing of a mechanical protective unit is not the furnishing

of mechanical protective service within the contemplation

of Section 1(14)(b) of the Act; and (3) that Division Sheet

7 was filed with the Commission, was conditionally approved

by the 1962 order and that no further order has ever been

made by the Commission setting aside that conditional

approval, as provided for in the Commission’s order.

On the other hand, S.P. and U.P., the originating carriers

of the perishable shipments involved in this case, did enter

into a protective service contract with PFE on June 5,

1963 (effective January 1, 1964) which covered mechanical

protective service. That contract was approved by the Com-

mission pursuant to Section 1(14)(b) on September 9, 1963

and remained in effect during the period covered by the com-

plaints. But PFE’s parents have not entered into protective

service contracts with any other of the nation’s carlines

covering shipments in which they, like Petitioner Rail-

roads, are intermediate or terminating carriers rather than

originating carriers.

RAT, leit oceeianial

REASONS FOR GRANTING THE WRIT

The Decision Below Holding That the Commission's 1962 Order

Either Established a Contractual Relationship, or Ordered

That One Be Entered Into, Between Petitioners and PFE,

Exceeds the Congressional Grant of Authority Provided in

Section 1(14)(b) of the Act and Decides an Important

Question of Federal Law Which Has Not Been, But Should

Be, Settled by This Court.

The decision below, in holding that there was a con-

tractual relationship, or that such a relationship was re-

quired to be entered into, between Petitioner Railroads

and PFE requiring mechanical protective contracts between

them under Section 1(14)(b) of the Act, is without founda-

tion in law and is an unwarranted interpretation of that

section. In so holding, the Ninth Cireuit has decided an

important question of federal law which has not been, but

should be, settled by this Court.

As a consequence of the decisions of the District Court

and the Ninth Circuit in this case, the railroad industry of

this country is now confronted with a series of lawsuits by

other carlines and companies furnishing refrigerator cars

containing mechanical refrigeration units. Such suits, com-

menced in a number of district courts, are founded on the

identical premises involved in the present case and seek

injunctions and the recovery of many millions of dollars.

It is essential, for the conservation of judicial time and

energy and the establishment of uniformity of decision,

that this Court assume jurisdiction of this case and settle

the question as to the meaning and effect of Section 1(14)

(b). This Court has not previously considered and ruled on

the question.

The primary facts relating to the use of PFE refrigera-

tor cars and mechanical protective units by Petitioner Rail-

roads were found by the Ninth Circuit to be as follows:

“The use of PFE cars on appellants’ lines is occa--

sioned by the fact that Union Pacific and Southern

Pacific, as originating carriers on eastbound shipments,

select these PFE cars to transport perishables to the

East. Appellant railroads as common earriers are re-

quired by law to accept, and do accept, such cars at

interchange points to transport perishables over their

respective lines to ultimate destinations. The mechan-

ical units in the refrigerated cars are used by appel-

lants to supply MPS.”

(Amended Opinion, Appendix D, p. D-4)

Virtually identical findings were made by the District Court

(Memorandum of Decision, Appendix C, p. C-2).

It is undisputed that U.P. and S.P., the originating car-

riers of the perishable shipments involved in this case,

had entered into a contract with PFE on June 5, 1963

(effective January 1, 1964) which covered mechanical pro-

tective service and which applied to these shipments of

perishables. On September 9, 1963 that contract was ap-

proved by the Commission pursuant to Section 1(14)(b)

and it remained in effect over the vears covered by PFE’s

complaints in this case.

The District Court’s Judgment and Order which has now

been affirmed by the Ninth Circuit commanded Petitioner

Railroads to enter into mechanical protective service con-

tracts with PFE and to submit such contracts to the Com-

mission for approval under Section 1(14)(b) (Appendix

F, p. F-3). Having in mind (1) that Petitioner Railroads

were intermediate or terminating carriers with respect to

the perishable shipments here involved and (2) that the

originating carriers of such shipments, who selected and

obtained from PFE the cars and units used in such ship-

ments, had in effect a protective service contract with PFE

which had been approved by the Commission pursuant to

Section 1(14)(b), the question is presented whether in

such circumstances Section 1(14)(b) empowers the Com-

mission or the courts to require that these intermediate

and terminating carriers enter into mechanical protective

service contracts with PFE.

In the Amended Opinion the Ninth Circuit considered

Petitioner Railroads’ contention that there was no rela-

tionship between them, as intermediate and terminating

carriers, and PFE which brought Petitioner Railroads

within the purview of Section 1(14)(b). The Ninth Cireuit

disposed of the contention by this pronouncement:

“We are satisfied that the effect of the ICC order,

whether it established a contractual relationship, or

merely ordered that a contractual relationship be

entered into, has the effect of placing the parties in

such relationship to one another as to permit enforce-

ment under § 16(12).”

(Amended Opinion, Appendix D, p. D-10)

The obvious effect of this holding is to read into the limited

Congressional grant of authority embodied in Section 1(14)

(b)—which is only that of approval of protective service

contracts—the additional but unauthorized grant of com-

mand—the power to require the making of protective serv-

ice contracts.

Section 1(14)(b)* is a very limited statute. By its pro-

visions all that it does is to make it unlawful for any com-

6. Section 1(14) (b) was added to the Act by the Transportation

Act of 1940 (54 Stat. 898, 76th Cong. 2d Sess. Chap. 722: Septem-

ber 18, 1940), which embodied a number of amendments and

;

Po,

5, 4

mon carrier by railroad to enter into any protective service

contract with any person

. unless and until such contract, agreement or

arrangement has been submitted to and approved by

the Commission as just, reasonable, and consistent

with the public interest .. .””

To point up the narrow scope of this statutory authoriza-

tion with respect to protective service contracts, a com-

parison may be made with Sections 1(13) and 1(14)(a),

relating to “ear service.” By Section 1(13) the Commission

is authorized to require, by general or special orders, all

rail carriers to file their rules and regulations with respect

to ear service. But beyond that, Section 1(14)(a) authorizes

the Commission, after hearing, to “establish reasonable

rules, regulations, and practices with respect to car service

. ineluding the compensation to be paid and any other

terms of any contract, agreement or arrangement for the

use of any locomotive, car or other vehicle . . .”’

revisions of the Interstate Commerce Act which had been under

consideration by the Congress in the late thirties. The addition of

Seetion 1(14) (b) was not proposed in the original House or Senate

bills, and it first appeared in a Conference Committee report of

April 26, 1940 (Conference Report, Transportation Act of 1940;

H. Rept. 2016, 76th Cong. 3d Sess., House Mise. Repts. Vol. IT, p.

60; April 26, 1940). Congress could not have had mechanical pro-

tective service in mind when it adopted Section 1(14)(b) in 1940,

because at that time there was no such thing. As the Commission

pointed out in its 1962 order, prior to 1953 protection of perishables

from heat or cold required the supplying of ice and salt to the

refrigerator ears and of fuel to ear heaters. As late as December

1959 three principal carlines had a fleet of 22,000 refrigerator cars,

of which only 1,200 were mechanically refrigerated.

7. For the full text of Section 1(14)(b) see Appendix G, p.

G-1-2).

8. Sections 1(13) and 1(14) (a) are set forth in full in Appendix

Gi, p. G-1).

Thus, as to “protective service” the Commission’s author-

> it has been

ity is merely to approve; as to “car service’

granted the authority to command. These differences in the

Congressional grants of authority with respect to “pro-

tective service”, on the one hand, and “car service”, on the

other hand, are not inadvertent. As this Court pointed out

in construing other sections of Section 1 of the Act, Con-

gress in enacting the various provisions of Section 1 “drew

a distinction between what might be permitted and what

compelled.” I.C.C. v. Oregon-Washington R. Co., 288 U.S.

14, 37 (1933).

This Court has recognized that there is a erucial dis-

tinction hetween the power of the Commission to approve

an agreement which has been voluntarily entered into by a

railroad and the power to require such an agree:nent. Thus,

in St. Joe Paper Co. v. Atlantic Coastline R. Co. 347 US.

298, 310 (1953) there was under consideration the authority

of the Commission under Section 5 of the Act with respect

to merger agreements. The Commission proposed to a dis-

trict court a plan of reorganization under which a railroad

involved in reorganization proceedings would have been

compelled to merge with another railroad, This Court held

that

“.. the very heart of $5 is that a merger of two car-

riers may he approved by the Interstate Commerce

Commission only if it originates as a voluntary pro-

posal by the merging carriers.”

(347 U.S. 310)

This same distinction between the power of the Commis-

sion to approve and the power to command was recognized

in Neisloss v. Bush, 293 F.2d 873, 878 (D.C.Cir. 1961), whieh

also involved the Commission’s authority under Section 5

| ee

of the Act with respect to the approval of mergers. Mr.

Justice Reed, sitting by designation in that case, said this:

“However, we find in that seetion only an authorization

for the Commission to consider and approve transac-

tions of the nature of those here at issue. There is no

language of command in the seetion...”

(293 F.2d S78)

The Amended Opinion ignores the distinetion between

the power to approve and the power to command. It con-

verts the power to approve protective service contracts

granted under Seetion 1(14)(b) into the power to command

entry into such contracts. When Congress considered it

appropriate to do so, as with respeet to car service in See-

tion 1(14)(a), it has ineluded in the Act language granting

the power to command, But it did not grant that power in

Seetion 1(14)(b).

CONCLUSION

This Court has never considered or given guidance on

the effect of the provisions of Seetion 1(14)(b) of the Aet.

Yet its decisions in Oregon-Washington R. Co. and in St.

Joe Paper Co., supra, indieate that in determining the scope

of authority granted by various seetions of the Interstate

Commerce Act the distinetion between the power to approve

and the power to command has been reeognized and en

foreed. In the interests of justice, the effeetive administra

tion of the federal judicial system, and the conservation of

judicial time and energy this Court should grant certiorari

in order to settle the important question of federal law

presented in this petition,

Dated: November 24, 1975.

Respeettully submitted,

Gonpvon Jounson

Attorney for Petitioners

Turtesx, Mannix, Jounson &

Bripers

Of Counsel

(Appendices Follow)

SIPREME COUMM Aree Hwy 25 15

In the Supreme Court ofthe

United States

Ooroszs Tzam 1975

No. 45> 760

Axron, Canton & Younestown Ramzoap Company, et al.,

Petitioners,

Vs.

Pacrric Frurr Express Company, Iwrerstate ComMMERCE

Comassion anp Unrrep States or AMERICA,

Respondents.

Appendices to

Petition for a Writ of Certiorari to the

United States Court of Appeals for the Ninth Circuit

| Tueren, Mazar, Gorpon JoHNsON

Jouneon & Baivazs Two Embarcadero Center

Two Embarcadero Center San Francisco,

San Francisco, California 94111

California 94111 Telephone: (415) 892-6820

Of Counsel Attorney for Petitioners

‘GORS PRINTING COMPANY OF CALIFORNIA, 846 FIRST STRERT, SAN FRANCISCO 94108

A-l

Appendix A

List of Petitioners

The Akron, Canton & Youngstown Railroad Company

Atlanta and West Point Railroad Company

Atlantic Coast Line Railroad Company

The Baltimore and Ohio Railroad Company

Boston and Maine Corporation

Burlington Northern Ince,

Canadian National Railways

Canadian Pacific Railway

The Central Railroad Company of New Jersey

Central Vermont Railway Company

The Chesapeake and Ohio Railway Company

Chicago, Burlington & Quincy Railroad Company

Chicago Great Western Railway Company

Chicago, Milwaukee, St. Paul & Pacific Railroad Company

The Chicago, Rock Island and Pacifie Railroad Company

Chicago South Shore and South Berd Railroad

Clinehfield Railroad Company

The Colorado and Southern Railway Company

Columbia, Newberry & Laurens Railroad

The Delaware and Hudson Railroad Corporation

Delaware and Hudson Railway Company

The Detroit, Toledo and Ironton Railroad Company

Elgin, Joliet and Eastern Railway Company

Erie Lackawanna Railroad Company

Erie Lackawanna Railway Company

Florida East Coast Railway Company

Fort Worth and Denver Railway Company

Georgia Railroad

Grand Trunk Western Railroad Company

Great Northern Railway Company

Gulf, Mobile & Ohio Railroad

Illinois Central Railroad Company

Illinois Terminal Railroad Company

Indiana Harbor Belt Railroad Company

The Kansas City Southern Railway

The Lehigh and Hudson River Railway Company

Lehigh Valley Railroad Company

The Long Island Rail Road Company

PROD AMMEN SANE ET ek ip Rt” Eide

A-2

Louisville & Nashville Railroad Company

Maine Central Railroad Company

Midland Valley Railroad Company

Norfolk and Western Railway Company

Northern Pacific Railway Company

Piedmont and Northern Railway Company

Raritan River Railroad

St. Louis-San Francisco Railway Company

Seaboard Air Line Railroad Company

The Texas Mexican Railway Company

Toledo, Peoria & Western Railroad Company

Western Maryland Railway Company

John F. Nash and Robert C. Haldeman,

Trustees of Lehigh Valley Railroad Company

Robert W. Meserve and Charles W. Bartlett,

Trustees of Boston and Maine Corporation

Deeg IE CES a AE WG NEL Rta Se es We beer 8 Te

B-1

Appendix B

Judgment of Court of Appeals

for the Ninth Circuit

United States Court of Appeals

for the Ninth Circuit

No. 73-2184

DC# 44601

Pacific Fruit Express Company,

Plaintiff-Appellee,

Interstate Commerce Commission &

United States of America,

Intervening Plaintiff s-Appellees,

Vs.

Akron, Canton & Youngstown Railroad

Company, et al.,

Defendants-A ppellants.

APPEAL from the United States District Court for the

NORTHERN District of CALIFORNIA

THIS CAUSE came on to be heard on the Transcript of

the Record from the United States District Court for the

NORTHERN District of CALIFORNIA and was duly sub-

mitted,

ON CONSIDERATION WHEREOF, It is now here

ordered and adjudged by this Court, that the —00200000....

judgment of the said District Court in this Cause be, and

hereby is AFFIRMED.

Filed and entered August 28, 1975

ere C4 ATI a oe

C-1

Appendix C

Opinion of District Court

United States District Court

Northern District of California

No. 44601

Pacifie Fruit Express Company, a corpo-

ration,

Plaintiff,

VS.

Akron, Canton & Youngstown Railroad

Company, et al.,

Defendants.

MEMORANDUM OF DECISION

(Dated and filed March 2, 1973)

SWEIGERT, J.

This is a civil action for damages brought by Pacific

Fruit Express (PFE) seeking to recover from 90 mid-

eastern, eastern and southern railroad common carriers,

an amount alleged to be in excess of 12.5 million dollars,

representing compensation claimed to be due PFE for the

use by defendant railroads of plaintiffs’ mechanical pro-

tective services supplied them through PFE refrigeration

cars moving over the lines of defendants in the transporta-

tion of perishable commodities; PFE also seeks an injunc-

tion to compel defendants to comply with a certain order

of the Interstate Commerce Commission (1.C.C.) hereafter

referred to.

The case is now before the court on plaintiffs’ motion

and defendants’ counter motion for summary judgment on

C-2

the issue of liability as related to both damages and injunc-

tion. With respect to injunctive relief the United States,

realigned as a party plaintiff herein, and L.C.C., intervenor

asa party plaintiff, join in the PFE motion.

PFE is a car-line company, wholly owned by the Union

Pacific Railroad Company (UP) and Southern Pacific

Transportation Company (SP) engaged in the business of

furnishing to railroads refrigerated cars containing me-

chanical refrigeration units and supplying mechanical pro-

tective service for perishable commodities against heat and

cold.

The use of PFE cars on defendants’ lines is occasioned

by the fact the UP and SP, as originating carriers on east-

bound shipments, select these PFE cars to transport per-

ishables to the East. Defendant railroads as common car-

riers are required by law ($$1(3)a and 1(4) ICA) to

accept and do accept such cars at interchange points to

transport perishables over their lines to ultimate destina-

tions and the units in the cars are used by them to supply

mechanical protective service.

The complaint charges in substance and effect that PFE

has provided defendants with this protective service but

that defendants have failed and refused to enter into

certain contracts to pay amounts sufficient to cover PFE’s

costs of providing such service despite the fact that such

contracts were ordered on August 27, 1962, by the Inter-

state Commerce Commission in its order entitled “Con-

tracts for Protective Services,” (Ex Parte 137, 318 T.C.C.

ITT, 49 C.F.R. 105.2 (1962)) issued pursuant to the Inter-

state Commerce Act, 49 U.S.C. §1(14)(b), (that order is

attached as an exhibit to and incorporated into the com-

plaint).

iS AR

C-3

Alleging that its receipts from defendant railroads in the

past and up to the present time for said protective service,

under a so-called Division Sheet 7 arrangement! among the

defendant railroads, have been insufficient to cover the

costs thereof, PFE seeks to recover from each of the

defendant railroads its share of the costs of said service—

essentially the difference between the payments made to

PFE under that Division Sheet 7 arrangement and the

amount PFE would have received if defendants had en-

tered into the contracts as required by the I.C.C. order

of August 27, 1962.

So far as damages are concerned the action is brought

pursuant to 49 U.S.C. $8 ($8 of the L.C.C. Act), 49 U.S.C.

$9 ($9 of the Act).

Section 8 provides that in case any common carrier does

anything prohibited by the Act or omits to do anything

required by the Act, the carrier shall be liable to the person

injured for the full amount of damages sustained in con-

sequences thereof, together with reasonable counsel fees;

Section 9 provides that any person claiming to have been

so damaged may make complaint either to the I.C.C. or

may bring suit in District Court.2 PFE also seeks recovery

1. This Division Sheet 7 is an arrangement among the railroads

themselves, issued by their National Perishable Freight Committee

as agent for substantially all railroads. Under its provisions, 80%

of the revenue collected by the railroads under their respective

tariffs for mechanical protective service are paid by the participat-

ing railroads to the railroad initially handling the shipment which

percentage is in turn paid over to the car owner, like PFE, for

the mechanical refrigeration units in its ears, The remaining 20%

of the tariff revenue is divided among all the railroads participating

in the particular shipment. This is the basis on which PFE has

been compensated.

2. Reeovery of damages under See. 8 for violations of the Inter-

state Commerce Act has been sustained in a number of eases, in-

eluding the following: Nemitz v. Norfolk & W. Ry. Co., 436 F.2d

841 (6th Cir. 1971), aff'd in 92 S.Ct. 185 (1971). (Summary judg-

C-4

of its reasonable costs upon a quantum meruit theory to

be hereafter considered.

So far as injunctive relief is concerned the action is

brought pursuant to 49 U.S.C. §16(12) which provides

that, if any carrier fails or neglects to obey any order of

the LC.C. any party injured thereby may apply to the

District Court for the enforcement of the order and the

court may enforce obedience by injunction or other proper

process.*

In its Order of August 27, 1962, Ex Parte 137 (1962),

Contracts for Protective Services, 318 I.C.C. ITI, above

mentioned, I.C.C. sought to determine, pursuant to 49

U.S.C. $1(14)(b), the justness and reasonableness of

charges for the use of mechanical refrigeration units and

protective services as contained in various contracts and

arrangements between railroads.

The Commission found that under the Division Sheet 7

arrangement, PFE and other ear-lines furnishing mechani-

cal protective service assume all of the operational costs

of the mechanical units such as fuel, inspection and repairs

—and that the 80% of tariff revenue received by the car

owner bore no relation to these eosts, (318 I.C.C. at 114-

115) and that PFE expense of furnishing mechanical pro-

tective service exceeded by a substantial amount its revenue

received for such service under Division Sheet 7.

ment granted under See. 8 for damages arising from violations of

the Aet and an I.C.C. order:) Brogan v. Pennsylvania R.R. Co.,

211 F.Supp. 881 (N.D. Til. 1962). (Damages awarded under Sec.

8 for violations of the Act and an I.C.C. order;) Wright v. Chicago,

B. & O. R.R. Co., 223 F.Supp. 660 (N.D. Til. 1963). (Compensatory

and punitive damages for violation of the Act;) Minneapolis &

St. L. Ry. Co. v. Pacific Gamble Robinson Co., 215 F.2d 126 (8th

Cir. 1954). (Damages for violation of the Act.)

3. Both Nemitz, supra and Brogan, supra, granted injunctions

to an injured party under Sec. 16(12), as well as damages under

Section 8.

ay {BRD Se |

RDA Redan:

ee ee

C-5

The Commission ordered (Par. (a)(b)(¢)) that all rail-

roads then receiving protective services under any con-

tracts, agreements or arrangements should submit for ap-

proval to LC.C. on or before 120 days from the effective

date of the order new or superseding contracts covering

protective services performed under contracts then on file

with LC.C. as well as those performed under Division

Sheet 7

tracts, including Division Sheet 7, and to conform with

other provisions of the order [i.e., subsections (b)(¢)(d)

(e)(f) and (g)]; the charge for each protective service to

vield_ to the person performing such service no less than

the cost (to which might be added a reasonable profit not

in excess of 6% [Par. [c]) for performing the service,

cost to be determined as set forth in subsection (d)(i) and

(ii) of the order.

The order also provided (Par. (e)) that in the event

the person rendering the protective service shall not re-

said new contracts to supersede all prior con-

cover costs, such person should bill the railroads on a

proportionate basis for the loss.

The order also provided that those contracts then on

file with the Commission, which had not been approved

theretofore be, and they were thereby approved upon the

condition that they shall be superseded by new contracts

filed in accordance with the above regulations.*

4. I.C.C. has taken no further action in the Ex Parte 137 pro-.

ceedings, although, in March, 1963, the owning and contracting

lines of the American Refrigerator Transit Co., a car-line company,

petitioned the Commission for clarification and/or modification of

the 1962 order requesting, essentially, answers to two questions: (1)

does the 1962 order mean that the furnishing of mechanical refriger-

ator units is a protective service within section 1(14)(b), and

(2) does the 1962 order mean that Division Sheet 7 is not in com-

plianee with the order and must be superseded. The Commission

denied the petition for the stated reason that sufficient grounds for

review of the order were not presented also, shortly after the filing

C-6

PFE alleges that since 1962 it has repeatedly sought

such contracts but that defendants have failed and refused

to so contract or to pay PFE its costs incurred in the

supplying of mechanical protective service.**

PFE contends that defendants’ failure and refusal to

enter into such contracts for the supplying of mechanical

protective service, and to obtain I.C.C. approval thereof,

is a violation of Section 16(7) and Section 1(14)(b).

Section 16(7) provides that it shall be the duty of every

common ¢arrier to observe and comply with orders of the

Commission; Section 1(14)(b) makes it unlawful for any

common earrier to make any arrangement for the furnish-

ing of protective service against heat or cold unless and

until such arrangement has been submitted to and ap-

proved by the Commission as just, reasonable and in the

public interest.®

Tt is upon this statutory basis that PFE seeks damages

from 1964, together with interest thereon, attorneys’ fees

and costs.

of the instant action in 1965, PFE’s parent companies petitioned

1.C.C. for a cease and desist order directing defendants to pay

their share of PFE’s costs as directed by the 1962 order; the peti-

tion raised contentions identical to those raised herein by PFE,

but the I.C.C. denied the petition for the stated reason that the

basie issue was substantially the same as that in this present action.

4a. An affidavit of the Secretary of the LC.C. states: “. . .

that after diligent search none of the parties defendant in the above-

entitled matter have submitted contracts for rail protective services

with the Paeifie Fruit Express Company as required by the Com-

mission decision in Ex Parte 137, Contracts for Protective Services,

318 T.C.C, IIT (1962).”

5. Apart from the violations of See. 1(14)(b) and 16(7), PFE

also asserts defendants have violated See. 1(4). Under this provi-

sion, defendants have a duty “to provide and furnish transporta-

tion,” and 49 U.C.C. See. 1(3) (a) (Seetion 1(3)(a) of the Act),

includes “protective service” as part of “transportation.” Section

1(4) also requires defendants to provide, in connection with their

through routes, “reasonable facilities for the operation of such

routes” and “reasonable compensation” for those who provide such

facilities as mechanical protective service.

C-7

PFE also contends that under the circumstances appear-

ing from the record herein, defendants are liable to it on

a quantum meruit theory for the reasonable value of the

mechanical protective service it has furnished to defend-

ants—measured by the same standard of damages it asserts

in connection with liability premised upon violations of the

Interstate Commerce Act.®

DEFENDANTS’ CONTENTIONS

Defendants have contended in this suit (1) that the ac-

tivities of PFE do not constitute the furnishing of mechan-

ical protective service to defendants as that term was used

in law and in the LC.C. order of August 27, 1962; (2) that,

since the LC.C. temporarily approved the already men-

tioned Division Sheet 7, along with other then existing

contractual arrangements, Division Sheet 7 is still the only

contractual arrangement between PFIe and the railroads

and remains so until 1.C.C. makes an explicit order dis-

approving that arrangement as not fulfilling the require-

ments of Section 1(14)(b): (3) that in any event the order

6. In support of this theory of suit PFE relies on Section 1 of

the Restatement of Restitution (“A person who has been unjustly

enriched at the expense of another is required to make restitution

to the other’), and Baltimore & O.R.Co. v. New York, N.H. &

H.R.Co., 196 F.Supp. 724 (D.Ct. N.Y. (1961) where the court held

that the owners of railroad equipment (freight cars) were entitled

to reasonable compensation from the users of that equipment,

based on the cost of ownership, on a quantum meruit basis, saying:

“.. Plaintiffs are entitled to attempt to collect the rate established

as reasonable and, if declared unreasonable, to be made whole on

a quantum meruit basis... .” (196 F.Supp. at 736). In Chicago,

B. & O. R. Co. v. New York S. & Western R. Co., 332 LC.C. 176

(1969), aff'd 396 U.S. 27, the Interstate Commeree Commission,

pursuant to the reference of the New York District Court in Balti-

more & O. R. Co. v. New York, N. H. & H. R. Co., supra, deter-

mined that the per diem rates charged in the past had been unrea-

sonable, and established reasonable rates for such periods, which

rates were then adopted by the New York District Court as reason-

able rates based on quantum meruit for each vear in the past.

C-8

of August 27, 1962 is not self-executing and did not give to

PFE any substantive right to directly recover its alleged

losses from the defendant railroads since such right would

arise only from such contracts as might be actually entered

into between PFE and the respective railroads; (4) that

the order of August 17, 1962 is vague and ambiguous.

After having considered the record herein, and after

having held hearings on the evidentiary material presented

by the parties in support of or in opposition to the respec-

tive motions for summary judgment, and having received

oral argument and briefs thereon, this court concluded

that the issues raised questions concerning the LC.C. order

of August 27, 1962 and that, therefore, no rulings or further

proceedings in this suit should be made or taken pending

a referral of certain questions to the I.C.C., the agency

having primary jurisdiction in this matter and special ex-

pertise with respect thereto, for the further assurance of

this court in making its own findings and conclusions, See,

Marnell v. United Parcel Service of America, Inc., 260

F.Supp. 391, 412-13 (N.D.Ca. 1966) citing United States v.

Western Pac.R. Co., 352 U.S. 59 (1956), and General Ameri-

can Tank Car Corp. v. El Dorado Terminal Co., 308 U.S.

422 (1940). The court made such referral by its orders of

November 6, 1971 and January 20, 1972.

The court’s questions were directed to the issues raised

by the parties as hereinabove summarized; the I.C.C. by

its Declaratory Order of February 28, 1972, Docket No.

35515, Contracts—Protective Service Between Pacific Fruit

Express Company and The Akron, Canton & Youngstown

Railroad Company, et al., (340 I.C.C. 754), answered these

questions. (Marked as Court’s Exhibit A in this suit and

hereby referred to and by such reference made a_ part

hereof).

C-9

RE PROTECTIVE SERVICES

Concerning whether PFE activities constituted “pro-

tective services” within the meaning of its order, L.C.C.

answered affirmatively to the effect that the activities of

PFE in preparing, furnishing and servicing mechanical

refrigeration units in PFE mechanical refrigerator cars to

the defendants constitutes “protective service” within the

purview of Sec. 1(14)(b); further, that the supplying of

such mechanical protective service to the defendants by

PFE was required to be covered by contractual arrange-

ments submitted to LC.C. for approval and that I.C.C. in

its order of August 27, 1962, so contemplated. (See Answers

to Court’s Questions A, B, C, G, also N, O, P, Q, R and T—

L.C.C. Declaratory Order of February 28, 1972, pp. 766-768 ;

770-774).

The court accepts the LC.C.’s finding. This question, in-

volving the meaning of a technical term in the transporta-

tion field is peculiarly within the special competence and

expertise of the LC.C. and its finding and conclusions, con-

sidered by this court to be fully supported by the record

herein, is hereby adopted as the court’s own finding and

conclusion. See, El Dorado Oil Works v. United States,

328 U.S. 12, 19-21 (1946); General American Tank Car

Corp. v. El Dorado Terminal Co., 308 U.S, 422, 432-33

(1940); Swayne & Hoyt, Ltd. v. United States, 300 U.S.

297, 303-04 (1937) ; Interstate Commerce Comm'n v. Martin

Brothers Box Co., 219 F.2d 811, 818 (9th Cir. 1955) ; cert.

den. 350 U.S. 823 (1955). Further, the court finds upon the

record herein that there is no genuine issue of fact con-

cerning that issue and that plaintiff is entitled to a sum-

mary judgment thereon as a matter of law.

C-10

Rk DIVISION SHEET 7

With respect to the question whether Division Sheet 7

should be deemed still in effeet between PEE and the rail

roads, it will be noted that the LCLC) order provided that

“those contracts now on file with the Commission, whieh

have not been approved heretofore, be, and they are hereby

approved upon the condition that they shall be superseded

by new contracts filed in accord with the above regulation,

J (emphasis added)

The Lec. has answered that Division Sheet 7, although

before it fer informational purposes, was not one of the

contracts officially “en file” with it at the time of its August

Jy, POL order. See, Auswers to Court's Questions Band S

LC.C) Declaratory Order of February 2s, 1962, pp. 766,

ae2. This tinding of the LCLC., invelving its own records,

is Likewise within its special competence and the court,

finding it to be consistent with and supported by the record

herein, adopts that finding as the court's own finding. [t is

clear, therefore, that Division Sheet 7 was net among the

contracts that were temporarily appreved by the Lecce,

However, although Division Sheet 7 was not among the

contracts falling within the temporary approval provision

of the order, it was, nevertheless, as the LClC. has stated, in

Answers to Courts Questions Band S, supra, “specifically

embraced in the terms of that erder™ as ene of the con

tractual arrangements that was to be superseded as re

quired by the order.

Even if we assume that Division Sheet 7 was on dle with

the LC.C. and was among the contracts conditionally ap

proved by it for a temporary 120 day period following the

service of the 1962 order, the defendants failed to file any

new or superseding contracts as required by the last para

graph of the Commission's [al order which clearly stated

C-1l

that such contracts were approved only upon the condition

that they were to be superseded by new contracts filed in

aceord with the order,

Rk BASIS OF PLAIN TIERS’ RIGHT OF ACTION

With respect to the issue whether the 1962 order atYords

a basis for direct recovery by PEE in this court of damages

for its alleged losses, We may assume that neither the LCL,

order, itself, nor Seetion 1(14)(b) is self-exeeuting. Llow-

ever, PEE is not seeking in this suit to reeover on that

theory. Instead, PEE premises its right to recover damages

upon its statutory right to sue under, and defendants’ stat-

utory liability under, Seetions 8 and 2 in that the defendants

have omitted to de what was required of them by Sees. 1( 14)

(b) and 16(7), Le, enter into new or superseding contracts

for the provision of mechanical protective service as re-

quired by the Commission's 1962 order.

Although the LC.C. order of August 27, 1962, did not,

self, operate to invalidate, terminate or reseind any pre-

eXisting contracts upon failure of the railroads to tile new

superseding contracts within the time and in the manner

required by the order, (See Answer to Cou’ t's Question TH,

p. 709), the order was, as indicated in Answer to Court's

Question J, p. 769, clearly “binding upon the carriers to

comply therewith and failure to do so would subject them

to enforcement action by the Commission.”

The order was such that the failure or refusal of the

railroads to file sueh new, superseding contracts in place

of existing contracts, including Division Sheet 7, was a

violation of See. 1(14)(b) and of the order itself. (Answer

to Court's Question I, p. 769). In other words, although the

Lc, order, requiring intermediate and terminal railroads

to enter into such contracts did not, (se/f, constitute a con-

tract between the parties in the sense that the order, itself,

Wasive |

Set)

WA RES ERR ARES LAY DERN REACTS Aa 8G SIL TETRA AN NREL STR " ABA Ibe tae, Slit

C-12

conferred substantive rights on car-line companies, like

PI le, to recover their losses, (Answer to Question J, p. 769),

the LC.C. order was such that such a right to recover those

losses would arise either “from the contracts required by

the Commission’s order” if and when entered into, “or by

other means”—such other means obviously being action

taken under either See, 16(12) or under Sees. 8 and 9,

giving a right of action for injunctive and/or damage relief

to persons injured by the failure or refusal of a railroad to

comply with an order of the LC.C. (See Answers to Court's

Questions Il, | and J, also K, L, M, N,—LC.C. Declaratory

Order of February 28, 1962, pp. 766-768).

Further, although the provision of the LC.C. order of

August 27, 1962, to the effect that car-lines, like PI° le, were

to bill, on a proportionate basis, the railroads on whose

lines the mechanical service was rendered, was not self-

executing and did not, itself, confer any substantive right

on PFE, the LC.C. order did require that such a provision

was to be included in the new, superseding contracts into

which the railroads were ordered to enter and the LC.C.

did contemplate that each participating railroad would be

billed, on a proportionate basis, by car-line companies, like

PEE, “as provided in the contracts to be filed with the

Commission.” (See Answers to Court's Questions D, k, F,

—LC.C. Declaratory Order of February 28, 1972, pp. T67-

768).

Re VAGUENESS AND AMBIGUITY

Defendants also argue that the LC.C.’s order is vague

and ambiguous and therefore unreasonable, as various

terms are not defined, including particularly the term

“cost.” In the first place, the Commission’s 1962 order is

presumed to be valid. B dé O.R. Co, v. United States, 304

U.S. 58 (1938); Toye Bros. Yellow Cab Co. v. Irby, 305

F.Supp. 905, 907 (D.Ct. La. 1969): Braswell Motor Freight,

Ata 7

Sata ar ca

Ie Pa TOR ROCCE SORA LS ean NS. CAE IED. Ow

C-13

Inc, v. United States, 297 F.Supp. 215, 218 (D.Ct. Miss.

1969) ; United States v. Southern Ry. Co., 364 F.2d 86, 91

(5th Cir. 1966).

Further, collateral attack on a decision of the Interstate

Commerce Commission is precluded by 28 U.S.C. See. 2321,

which provides that any action to “suspend, enjoin, annul

or set aside in whole or in part any order of the Interstate

Commerce Commission..." must be brought pursuant to

28 U.S.C. Sees. 2321-25 which in turn preseribes that an

injunction restraining the operation or execution of an

L.C.C. order shall not be granted except by a three-judge

federal court convened under 28 U.S.C. See. 2284. No other

type of suit attacking a Commission decision directly or

indirectly, is permitted. B. I’. Goodrich Co. v. Northwest

Industries, 424 F.2d 1349 (3d Cir. 1970); Toye Bros. Yellow

Cab Co. v. Irby, 487 F.2d 806, 810 (Sth Cir. 1971); REA Ex-

press v. Alabama Great So. R.R. Co., 343 F.Supp. 851 (D.

Ct. N. Y. 1972); United States v. Southern Ry. Co., 380 F.

2d 49, 53-55 (4th Cir. 1957); United States v. Southern Ry.

Co., 364 F.2d 86, 91-93 (Sth Cir. 1955); cert. den. 386 U.S.

1031.

iinally, it will be noted that the order does not merely

order that new or superseding contracts be submitted by

the railroads; it goes further to prescribe the provisions

with which the contracts are to conform in substance and,

with respect to “cost,” prescribes in Par. d(i) (ii) the mat-

ters to be included in the determination of cost.

This court is satisfied that the I.C.C.’s order is not vague

or ambiguous; that it is sufficiently clear to apprise defend-

ants of that which is required of them. See, e.g., United

States v. Southern Railway Co., 364 F.2d 86, at 95-96 (5th

Cir. 1966).”

7. It is apparent that the words “cost” and “costs” of protective

service are “words of art” in the protective service field, as they

C-14

CONCLUSIONS ON ISSUE OF LIABILITY

FOR DAMAGES

lor the foregoing reasons the court finds that defendants

and each of them have failed and refused since 1962 to

comply with the LC.C. order of August 27, 1962 in that

they have failed and refused to enter into or to submit to

L.C.C, for approval on or before 120 days after the effective

date of said order (which time was extended by the LC.C.

to June 10, 1963), new or superseding contracts, either with

Pik or expressly for its benefit, covering protective serv-

ices performed and rendered to them or in their behalf by

plaintiff; that said failure and refusal is a violation of said

order and of the law within the meaning of Sections 8 and

Said issue has been presented and argued by the parties

upon the theory that there are no genuine issues as to any

material fact—only disagreement on matters of law per-

taining to the rights and liabilities of the parties stemming

from the I.C.C. order of August 27, 1962.8 The court agrees

and concludes from the record that plaintiff is entitled as

a matter of law, pursuant to Sections 8 and 9 and Sections

16(7) and 1(14)(b), (and upon .quantum meruit as an

additional basis of action) to a judgment in its favor on

have been used for over 30 years by the Commission in Ex Parte

137 proceedings alone. See references to these terms, in connection

with ecar-line cost, in the following Ex Parte 137 decisions: 246

I.C.C. 145, 155 (1941); 253 I.C.C. 21, 22 (1942); 255 L.C.C. 729,

732 (1943); 256 LC.C, 454 (1943); 272 I.C.C. 248, 253 (1948);

276 L.C.C. 323, 324-25 (1949); 268 L.C.C. 531, 584 (1950). Indeed,

some of the defendant railroads have filed contracts with the Com-

mission containing general provisions to the effect that mechanical

protective services are to be performed at “cost,” and have appar-

ently been able to ascertain their responsibilities under the Com-

mission's orders in Ex Parte 137 proceedings. (See, Ex Parte 137,

321 LC.C. 758, 759 (1963).

8. Defendants have conceded on the reeord that there are no

factual issues before the court. (See, Rep. Tr. May 9, 1972, p. 45).

SMD I RIV ne ~—

| oR etm

[Lo hie.

——

eo ue aC CEMIONEB A 00. He

C-15

the issue of the liability of the defendant railroads to it

for damages occurring since January 1, 1964—essentially

the difference between the amount plaintiff has been paid

under said Division Sheet 7 arrangement, or otherwise, and

the amount which plaintiff would have received if said

defendants had complied with said order by contracting

with plaintiff, or among themselves for plaintiff’s express

benefit, as required by said LC.C. order of August 27, 1962

—together with interest, attorneys’ fees and costs of suit.

The court reserves power to make such further orders

as may be necessary to determine the issue of the amount

of said damages, interest and attorney fees.

RE INJUNCTIVE RELIEF

PFE also seeks an injunction, pursuant to Section 16(12),

enjoining defendants from further failure or refusal to

comply with the I.C.C. order of August 27, 1962, and order-

ing the respective defendants to enter into contracts with

PFE or among themselves expressly for its benefit, in the

manner prescribed by said order and to file such contracts

with I.C.C. for its approval. The United States and inter-

venor LC.C. join in the PFE motion for such injunctive

relief,

Section 16(12) provides that the L.C.C. may apply to

District Court for injunction or other proper process to

enforce its orders; that section also provides that any party

injured may apply to District Court for the enforcement

of such an order and the court may enforce obedience by

injunction or other proper process.

Defendants’ failure and refusal to comply with an I.C.C.

order issued for the benefit of car-lines, such as PFE, is

sufficient to constitute PFE a party injured; also I.C.C.

which has joined in the PFE motion as an intervenor would

itself be entitled to such injunctive relief under See. 16(12).

C-16

Since, as already concluded, there is no genuine issue as

to any material fact and since it appears that plaintiff is

also entitled to judgment in the form of injunctive relief

as a matter of law pursuant to See. 16(12) the court con-

cludes that defendant railroads and each of them, and their

respective officers, agents, servants, employees and attor-

neys, and all persons in active concert or participation with

them, who receive actual notice of this order by personal

service or otherwise, should be, and they are hereby en-

joined from continuing to fail, neglect or refuse to comply

with that certain order of the LC.C. dated August 27, 1962,

and, further, shall, within 60 days from the date of this

order, or within such further time as the court may here-

after order, obey said order by forthwith entering into

good faith negotiations with plaintiff and entering within

such period, into new, superseding contracts with piaintiff,

or among themselves expressly for the benefit of plaintiff,

to be effective January 1, 1975, (the beginning of PFE’s

annual accounting period) covering protective services

heretofore or now being performed under the provisions of

Division Sheet 7, or any other existing contract—said new,

superseding contracts to conform in substance with the

provisions of subsections (b), (c), (d), (e), (f) and (g) of

said LC.C. order of August 27, 1962—and, within said

period, submit said new, superseding contracts to I.C.C. for

approval under See. 1(14)(b) and Sec. 16(7)—at defend-

ants’ expense and diligently prosecute said submission to

the end that approval of said contracts may be obtained

as soon as possible.

It is further ordered that, if such new superseding con-

tracts have not been submitted to I.C.C. within the period

herein fixed on account of failure of the parties to agree

upon the form or content of such contracts, the parties

—

C-17

shall, within 20 days from the expiration of said initial 60

day period, petition I.C.C. for its approval or disapproval

of such provisions as to which said parties do agree and

also for approval, disapproval or modification of such

further provisions, proposed by either party, as to which

the parties cannot agree and for such further instructions

or further orders as I.C.C. may deem necessary concerning

the form or content of such contracts as are herein ordered

consistent with its previous orders of August 27, 1962,

February 28, 1972 and this order. The court desires that

such I.C.C. consideration, if required, take place as expedi-

tiously as possible.

The court reserves power to supervise, modify or sep-

arately formalize the injunctive provisions of this order,

and to enforce the same, but compliance with the above

procedure, and with any I.C.C. order made as a result

thereof and consistent with the I.C.C. previous orders of

August 27, 1962, February 28, 1972 and this order, shall be

deemed compliance to that extent with this order and,

likewise, failure or refusal of any party to follow such

procedure shall be deemed to that extent a non-compliance

with this order.

On the expiration of the 60 day period above fixed, or

the expiration of such extension thereof, as may be here-

after made, the parties shall jointly or separately report

to this court upon the progress of compliance with the

injunctive order herein made.

This memorandum constitutes the findings and conclu-

sions of the court to the extent that such findings and con-

clusions may be necessary.

Dated: March 2, 1973.

/s/ W. T. Sweicert

W. T. Sweigert

United States District Judge

Appendix D

Amended Opinion of Court of Appeals

for the Ninth Circuit

United States Court of Appeals

for the Ninth Circuit

No. 73-2184

Pacifie Fruit Express Company,

Plaintiff-Appellee,

Interstate Commerce Commission &

United States of America,

Intervening Plaintiffs-Appellees,

vs.

Akron, Canton & Youngstown Railroad

Company, et al.,

Defendants-Appellants.

[ August 28, 1975]

Appeal from the United States District Court

for the Northern District of California

Before: KOELSCH and CHOY, Cireuit Judges, and

KELLEHER,* District Judge.

KELLEHER, District Judge:

Appellee Pacifie Fruit Express Company (“PFE”)

brought in the District Court an action for damages under

*Honorable Robert J. Kelleher, United States District Judge,

Central District of California, sitting by designation.

D-2

49 U.S.C. s$8 and 9 and for injunctive relief under 49

U.S.C. §16(12)' against 90 Mid-Eastern, Eastern, and

Southern railroad common carriers for alleged continuing

violation of a 1962 order of the Interstate Commerce Com-

mission (“ICC”). The District Court granted the motion of

PFE for summary judgment on the liability issue and the

motion of PFE and of the intervenor, ICC, for injunctive

relief,

This appeal was taken by 56 of the defendant railroads,

invoking the jurisdiction conferred by 28 U.S.C. § 1291. The

judgment and Order? appealed from recited for its founda-

1. 49 U.S.C. § 16(12):

“Proceedings to enforce orders other than for payment of

money. If any carrier fails or neglects to obey any order of

the Commission other than for the payment of money, while

the same is in effect, the Interstate Commerce Commission or

any party injured thereby, or the United States, by its

Attorney General, may apply to any district court of the

United States of competent jurisdiction for the enforcement

of such order. If, after hearing, such court determines that

the order was regularly made and duly served, and that the

carrier is in disobedience of the same, such court shall enforee

obedience to such order by a writ of injunction or other proper

process, mandatory or otherwise, to restrain such earrier, its

officers, agents, or representatives, from further disobedience

of such order, or to enjoin upon it or them obedience to the

same.

2. The operative portions of the order are as follows:

“ORDERED, ADJUDGED AND DECREED that defend-

ant railroads and each of them, and their respective officers,

agents, servants, employees and attorneys, and all persons in

active concert or participation with them, who receive actual

notice of this order by personal service or otherwise, should

be, and they are hereby enjoined from continuing to fail, ne-

gleet or refuse to comply with that certain order of the L.C.C.

dated August 27, 1962, and, further, shall, within 60 days

from the date of this order, or within such further time as the

court may hereafter order, obey said order by forthwith en-

tering into good faith negotiations with plaintiff and entering

within such period, into new, superseding contracts with plain-

tiff, or among themselves expressly for the benefit of plaintiff,

to be effective January 1, 1973 (the beginning of PF E’s annual

accounting period) covering protective service heretofore or

——

‘Megonezs

D-3

tion: (1) the prior order of the Court granting the motions

of plaintiff and intervenor, ICC, for summary judgment,

and (2) the conclusions of the Court as theretofore set forth

in its extensive Memorandum of Decision.* By its Memo-

randum of Decision, the Court found that there was no

now being performed under the provisions of Division Sheet

7, or any other existing contract—said new, superseding con-

tracts to conform in substance with the provisions of subsee-

tions (b), (e), (d), (e), (ft) and (g) of said I.C.C. order of

August 27, 1962—and, within said period, submit said new,

superseding contracts to I.C.C. for approval under See. 1(14)

(b) and See. 16(7)—at defendants’ expense and diligently

prosecute said submission to the end that approval of said

contracts may be obtained as soon as possible.

“It is further ordered that, if such new superseding con-

tracts have not been submitted to I.C.C. within the period

herein fixed on account of failure of the parties to agree upon

the form or content of such contracts, the parties shall, within

20 days from the expiration of said initial 60 day period,

petition L.C.C. for its approval or disapproval of such provi-

sions as to which said parties do agree and also for approval,

disapproval or modification of such further provisions, pro-

posed by either party, as to which the parties cannot agree and

for such further instructions or further orders as I.C.C. may

deem necessary concerning the form or content of such con-

tracts as are herein ordered consistent with its previous orders

of August 27, 1962, February 28, 1972, and this order. The

court desired that such I.C.C. consideration, if required, take

place as expeditiously as possible.

“The court reserves power to supervise the injunctive pro-

visions of this order, and to enforce the same, but compliance

with the above procedure, and with any I.C.C. order made as

a result thereof and consistent with the L.C.C. previous orders

of August 27, 1962, February 28, 1972, and this order, shall

be deemed compliance to that extent with this order, and, like-

wise, failure or refusal of any party to follow such procedure

shall be deemed to that extent a noncompliance with this

order.

“On the expiration of the 60 day period above fixed, or the

expiration of such extension thereof, as may be hereafter made,

the parties shall jointly or separately report to this eourt upon

ee of compliance with the injunctive order herein

made.

3. Pacific Fruit Express Co. v. Akron, Canton & Youngstown

R. Co., 355 F.Supp. 700 (N.D.Cal. 1973).

D-4

genuine issue as to any material fact and upon what it deem-

ed the undisputed material facts granted the injunctive

relief requested.

PFE, a car-line company wholly owned by the Union

Pacific Railroad Company and Southern Pacific Transpor-

tation Company is engaged in the business of furnishing to

railroads refrigerated units and supplying Mechanical

Protective Service (“MPS”) for perishable commodities

against heat and cold.

The use of PFE ears on appellants’ lines is occasioned by

the fact that Union Pacifie and Southern Pacific, as origi-

nating carriers on eastbound shipments, select these PFE

cars to transport perishables to the East. Appellant rail-

roads as common carriers are required by law to accept,

and do accept, such ears at interchange points to transport

perishables over their respective lines to ultimate destina-

tions. The mechanical units in the refrigerated cars are used

by appellants to supply MPS.

These units are designed to furnish complete continuous

protection to perishables on all railroads over which the

refrigerator car moves. Both PFE’s parent carriers and ap-

pellants are parties to joint tariffs which cover the move-

ment of perishables over their respective lines. These tariffs

provide for a charge to the shippers for the movement of

the commodity and a separate charge for protective service.

The protective service charges are divided among all the

‘arriers in the line haul movement in accordance with Divi-

sion Sheet 7.4

4. As stated by the Distriet Court in its Memorandum of Deei-

sion, 355 F.Supp. at 703, n.1:

“This Division Sheet 7 is an arrangement among the rail-

roads themselves, issued by their National Perishable Freight

Committee as agent for substantially all railroads. Under its

EES AE EGaiire co ote

OM tl penis

D-5

By its District Court action, PFE sought a mandatory

injunction under 49 U.S.C. §16(12) to require appellant

railroads to comply with an order of the ICC entered Aug-

ust 27, 1962. Ex Parte No. 137, Contracts for Protective

Services, 318 LC.C. 111 (1962). The 1962 ICC order in part

required all rail carriers to submit to the ICC for its ap-

proval within a specified time new contracts for the supply

of MPS. PFE also sought by its action damages under 49

U.S.C. $$ 8 and 9 in excess of 12.5 million dollars—essen-

tially the difference between the appellant railroads’ pay-

ments to PEE for MPS under pre-1962 ICC order contracts

and the amount PFE would have received had new contracts

been entered into pursuant to the 1962 ICC order.

The 1962 ICC order provides in part:

“(a) All rail carriers and express companies re-

ceiving protective services under any contracts, agree-

ments, or arrangements requiring approval under

section 1(14)(b) of the Interstate Commerce Act shall

submit for approval, on or before 120 days after the

effective date of this order, new or superseding con-

tracts covering protective services performed under

contracts now on file with the Commission as well as

those performed under the provisions of Division

Sheet 7....The contracts required herein to be filed

shall supersede all prior contracts, including Division

Sheei 7, and such contracts and those filed thereafter

shall conform in substance to the provisions set forth

in subsections (b), (e), (d), (e), (f), and (g).

provisions, 80 percent of the revenue collected by the railroads

under their respective tariffs for mechanical protective serv-

ice are paid by the participating railroads to the railroad

initially handling the shipment, which percentage is in turn

paid over to the car owner, like PFE, for the mechanical

refrigeration units in its ears. The remaining 20 percent of

the tariff revenue is divided among all the railroads partici-

pating in the particular shipment. This is the basis on which

PFE has been compensated.”

kahit Re Pig OR -

or, re ~ YM, A LEA TIO

D-6

“It is further ordered, That those contracts now on

file with the Commission which have not been approved

heretofore, be, and they are hereby approved upon the

condition that they shall be superseded by new con-

tracts filed in accord with the above regulations.” 318

LC.C. at 158. (emphasis added.)

We note that the Judgment and Order appealed trom

granted only the injunctive relief sought, the Court by its

Memorandum of Decision having expressly reserved to

later proceedings determination of the issue of damages.

After the action was filed in the District Court, the rail-

roads sought a stay of the proceedings, claiming that the

subject matter was within the primary jurisdiction of ICC.

Thereafter, the District Court submitted questions, for-

mulated with the assistance of all parties concerned, to the

ICC requesting a clarification and interpretation of its 1962

order.

Following the answers by the ICC,’ which the District

Court later adopted as part of its findings when it granted

summary judgment, the United States, as a statutory de-

fendant pursuant to 28 U.S.C. § 2322, with respect to the

injunction count, was realigned and became a party plain-

tiff. Thereafter, as noted above, ICC sought and was al-

lowed to intervene as a party plaintiff with respect to the

injunctive relief sought.

The appeal raises the following issues:

1. Did the District Court commit error in granting sum-

mary judgment?

5. See the ICC's Deelaratory Order of February 28, 1972, Con-

tracts—Protective Service Between Pacific Fruit Express Company

and The Akron, Canton & Youngstown Railroad Company, et al.,

340 LC.C. 754 (1972).

AL A at EO 8G

oie

Kae te

LRA te OL DAMPERS © OAM is Cin se 1 ae pa EH

etal

D-7

2. Was there on the part of the plaintiff PFE under the

1962 order of the ICC a substantive right enforceable in the

District Court?

3. Was there such a relationship between the railroads

and PFE as to permit District Court enforcement under 49

U.S.C. §1(14)(b), absent a contractual right between the

parties,

4. Was the 1972 order of the ICC issued in violation of

the Administrative Procedure Act, and hence unenforce-

able by the District Court?

5. Were the mandatory injunction portions of the Dis-

trict Court’s order in excess of its powers under the law?

Each of the foregoing issues was considered by the Dis-

trict Court and, we think, rightly decided. Accordingly, and

for the reasons more particularly hereafter set forth, we

affirm the order and judgment of the Court below.

Ill

In reviewing the grant of summary judgment, we apply

the same rule that is initially applied by the trial court un-

der Rule 56(e), Federal Rules of Civil Procedure.’ Soria,

et al. v. Oxnard School District Board of Trustees, 488 F.2d

579, 586 (9th Cir. 1973): Caplan v. Roberts, 506 F.2d 1039,

1042 (9th Cir. 1974). The rule is simply stated: “Summary

judgment is ‘proper only where there is no genuine issue

of any material fact or where viewing the evidence and the

inferences which may be drawn therefrom in the light most

favorable to the adverse party, the movant is clearly en-

titled to prevail as a matter of law.’ ” 506 F.2d at 1042.

6. Rule 56(e). F.R.C.P., provides, in pertinent part : “The judg-

ment sought shall be rendered forthwith if the pleadings, deposi-

tions. answers to interrogatories, and admissions on file, together

with the affidavits, if any, show that there is no genuine issue as to

any material faet and that the moving party is entitled to a judg-

ment as a matter of law.”

D-6

“Tt is further ordercd, That those contracts now on

file with the Commission which have not been approved

heretofore, be, and they are hereby approved upon the

condition that they shall be superseded by new con-

tracts filed in accord with the above regulations.” 318

LC.C. at 138. (emphasis added.)

We note that the Judgment and Order appealed from

granted only the injunctive relief sought, the Court by its

Memorandum of Decision having expressly reserved to

later proceedings determination of the issue of damages.

After the action was filed in the District Court, the rail-

roads sought a stay of the proceedings, claiming that the

subject matter was within the primary jurisdiction of LCC.

Thereafter, the District Court submitted questions, for-

mulated with the assistance of all parties concerned, to the

ICC requesting a clarification and interpretation of its 1962

order.

Following the answers by the TCC,’ which the District

Court later adopted as part of its findings when it granted

summary judgment, the United States, as a statutory de-

fendant pursuant to 28 U.S.C. § 2322, with respect to the

injunction count, was realigned and became a party plain-

tiff. Thereafter, as noted above, ICC sought and was al-

lowed to intervene as a party plaintiff with respect to the

injunctive relief sought.

The appeal raises the following issues:

1. Did the District Court commit error in granting sum-

mary judgment?

5. See the ICC's Declaratory Order of February 28, 1972, Con-

tracts Protective Service Between Pacific Friaat Express Company

and The Akron, Canton & Youngstown Railroad Company, et al.,

340 L.C.C, 754 (1972).

D-7

2. Was there on the part of the plaintiff PFE under the

1962 order of the ICC a substantive right enforceable in the

District Court?

3. Was there such a relationship between the railroads

and PFE as to permit District Court enforcement under 49

U.S.C. § 1(14)(b), absent a contractual right between the

parties,

4. Was the 1972 order of the ICC issued in violation of

the Administrative Procedure Act, and hence unenforce-

able by the District Court?

5. Were the mandatory injunction portions of the Dis-

trict Court's order in excess of its powers under the law?

Each of the foregoing issues was considered by the Dis-

trict Court and, we think, rightly decided. Accordingly, and

for the reasons more particularly hereafter set forth, we

affirm the order and judgment of the Court below.

III

In reviewing the grant of summary judgment, we apply

the same rule that is initially applied by the trial court un-

der Rule 56(¢c), Federal Rules of Civil Procedure.® Soria,

et al. v. Oxnard School District Board of Trustees, 488 F.2d

579, 586 (9th Cir. 1973); Caplan v. Roberts, 506 F.2d 1039,

1042 (9th Cir. 1974). The rule is simply stated: “Summary

judgment is ‘proper only where there is no genuine issue

of any material fact or where viewing the evidence and the

inferences which may be drawn therefrom in the light most

favorable to the adverse party, the movant is clearly en-

titled to prevail as a matter of law.’ ” 506 F.2d at 1042.

6. Rule 56(e), F.R.C.P., provides, in pertinent part: “The judg-

ment sought shall be rendered forthwith if the pleadings, deposi-

tiops, answers to interrogatories, and admissions on file, together

with the affidavits, if any, show that there is no genuine issue as to

any material fact and that the moving party is entitled to a judg-

ment as a matter of law.”

peer

D-8

In arguing that the District Court erred in granting sum-

mary judgment, appellants contend that the record below

presented two genuine issues of fact: (1) What was the

status of Division Sheet 7, viz., had it or had it not been

filed with, and approved as a contract, by the ICC? (2)

Was PFE a “party injured” who could sue for an injunction

under the provision of Section 16(12) of the Interstate

Commerce Act??

It appears that the record before the ICC was ambiguous

as to whether Division Sheet 7 was on file before the Com-

mission and as to whether the sheet was a contract approved

by the Commission. But the Commission's finding as ex-

pressed in answer to one of the District Court’s questions

was that Division Sheet 7 was not on file before it and

hence was not approved by it. The Court below adopted that

finding as one within the special competence of the ICC and

as not presenting a factual dispute before the Court. Fur-

thermore, the District Court found that even if Division

Sheet 7 was on file and approved by the Commission, it was

a contract which was required under the 1962 order to be

superseded by a new contract filed in accordance with the

order, and since the railroads had failed to meet that ob-

ligation to file such new contract, there was a violation of

the order. We think that the Court was correct, for even

under the adjunct to the summary judgment rule, requiring

that the evidence and the inferences which may be drawn

therefrom be viewed in the light most favorable to the ad-

verse party, see Caplan v. Roberts, supra, there was here

presented no genuine issue of fact.

7. It should be noted that the Distriet Court eonsidered that

defendants had eoneeded on the record that there were no factual

issues before the Court. 355 F.Supp. at 708, n.8. We view the

matter in light of their contention on appeal that no such concession

Was made.

. eae

D-9

Similarly with respect to appellants’ contention that a

material issue of fact is presented as to whether PFE was

a “party injured,” the Court below had a record on which

no material dispute existed with regard to the injurious

consequences to PFE by reason of the failure of the appel-

lants to enter into the negotiations for a new and super-

seding contract. The ICC order created an obligation on the

part of appellants to negotiate new contracts. Also, it is

undisputed on the record that the railroads failed over

many years to perform this obligation. Thus, the only

factual question presented as to whether PFE was an in-

jured party relates to the question of how much injury and

consequential damage was suffered. The issue as to quan-

tum of damages was reserved by the Court below for future

proceedings, to wit, a separate trial on the issue of dam-

ages. This being so, the Court below had no need to concern

itself with the question of damages, or indeed whether there

was a factual dispute concerning the nature and extent of

the damages suffered by appellee. Clearly, therefore, as a

matter of law, there was no genuine issue of fact to be re-

solved, and summary judgment was wholly proper.

There is no substance to appellants’ contention that some-

how PFE had no substantive right enforceable in the Dis-

trict Court by reason of the 1962 order of ICC and that

hence no right to injunctive relief was obtainable under

§ 16(12) of the Act. The contention appears to be that the

1962 order conferred no substantive right on PFE for the

direct payment of money, which is correct. But that is not

to say that the right under the order to have the railroads

enter into contract negotiations, a result of which would

provide perhaps for more favorable rights to obtain money,

is not in itself a substantive right subject to enforcement in

the District Court under § 16(12) of the Act. The very

D-10

ground of the complaint to which the 1962 order addressed

itself was the refusal of the railroads to do that which they

should have done, to wit, enter into new contracts, the con-

sequences of which would have been to provide for the pay-

ment of money by the railroads to PFE. Clearly, the de-

privation of the right to a contract which the order

compelled was sufficient in itself to be regarded as a

“substantive right.” See New York, Susquehanna € West-

ern R. Co. v. Penn. Central Co., 287 F. Supp. 704 (S.D.N.Y.

1968). Moreover, whether PFE was injured or not, there

is no statutory requirement that ICC which joined in the

motion, show injury. United States v. City of Jackson, 318

F.2d 1 (5th Cir. 1963).

This issue last dealt with is in some sense intertwined

with the further contention made by appellants that, there

being no contractual rights between the parties, there is no

such relationship as is necessary under 49 U.S.C, § 1(14) (b)

to invoke the power of the District Court to enforce the

rights. We are satisfied that the effect of the ICC order,

whether it established a contractual relationship, or merely

ordered that a contractual relationship be entered into, has

the effect of placing the parties in such relationship to one

another as to permit enforcement under § 16(12).

There is no merit to appellants’ contention that there was

in some manner a failure to comply with the requirements

of the Administrative Procedure Act, or that there was in

some way a failure to exhaust administrative remedies be-

fore the Commission. The Court below ordered enforce-

ment of the 1962 order. There is no issue in the record here

as to whether that order was made in full compliance with

requirements of the Administrative Procedure Act for

notice and hearing. By strained construction, appellants

would have us regard [CC responses to the District Court

ee AME IR

D-11

questions as constituting some new “1972 order,” greater in

breadth than the 1962 order, and promulgated by ICC with-

out the requisite notice or hearing. We reject this conten-

tion, for however we characterize the ICC response of 1972,

as “order” or mere response, any challenge thereto must

have been made in the Court referring such question) to

the ICC within 90 days from the date that the order of the

ICC becomes final, 28 U.S.C. § 1336(b) and (¢).* Appellants

made no attack on these responses; indeed, they embraced

with vigor, in the Court below, those responses. They are

not permitted here for the first time, contrary to § 1336, to

make their attack.

We find little substance and less merit to appellants’ con-

tention that the injunction was defective because it exceeded

the District Court’s authority. While receding not at all

from its previous position that injunctive relief by way of

summary judgment was wholly improper, appellants attack

certain portions of the injunction as excessive. It is con-

tended that the injunctive power of the District Court was

exhausted upon the making of its order enjoining appellants

from continuing failure to comply with the 1962 order. It

is contended that the Court has power to enforce only that

which the ICC has the power to promulgate and that the

latter power is limited to the giving or withholding of ap-

8. 28 U.S.C. § 1336(b) and (ce) states:

“(b) When a District Court or the Court of Claims refers

a question or issue to the Intertate Commerce Commission for

determination, the court which referred the question or issues

shall have exclusive jurisdiction of a civil action to enforce,

enjoin, set aside, annul, or suspend, in whole or in part, any

order of the Interstate Commerce Commission arising out of

such referral.”

“(e) Any action brought under subsection (b) of this see-

tion shall be filed within 90 days from the date that the order

of the Interstate Commerce Commission becomes final.”’ (Em-

phasis added. )

D-12

proval of protective service contracts when filed. It is said

that §1(14)(b) does not grant to ICC any compulsory

power to make parties enter into contracts, and particularly

that power is lacking on the part of the LCC to dictate that

any protective service contract be entered on a retroactive

basis. We consider this argument specious. In the face of

the record here, we find that the ICC's 1962 order was with-

in its power to promulgate and that the District Court, pur-

suant to the broad power to compel obedience under § 16

(12), was within its jurisdiction and had the power to man-

date compliance with that order.

JUDGMENT AFFIRMED.

a BO ne Rig INR NS ap.

Appendix E

Report and Order of the

Interstate Commerce Commission

of February 28, 1972

Served March 8, 1972

Interstate Commerce Commission

No. 35515

CONTRACTS—PROTECTIVID SERVICE BETWEEN

PACIFIC FRUIT EXPRESS COMPANY AND THE

AKRON, CANTON & YOUNGSTOWN RAILROAD

COMPANY, ET AL.

Decided February 28, 1972

Declaratory order entered upon referral of certain ques-

tions by United States District Court for the Northern

District of California.

No appearances.

ReEporRT AND ORDER OF THE COMMISSION

Division 2, COMMISSIONERS WALRATH, JACKSON, AND BREWER

Jackson, Commissioner:

By order entered on November 16, 1971, and received on

November 22, 1971, the United States District Court for the

Northern District of California, in relation to its pending

docket No, 44601, Pacifie Fruit Express Company v. Akron,

Canton & Youngstown Railroad Company, et al., referred

certain issues and questions to the Commission for determi-

nation as being within our primary jurisdiction. By order

of January 20, 1972, the court referred additional issues and

questions to the Commission. This proceeding is hereby

E-2

instituted sua sponte to respond. The court originally re-

quested an opinion within 60 days of the receipt of its order

but by order dated December 14, 1971, extended the time to

February 15, 1972. The court's order of January 20, 1972,

further extended the time for the Commission's determina-

tion to March 15, 1972. Consequently due and timely execu-

tion of our functions requires the omission of an examiner's

report and recommended order.

The court’s orders contain the factual basis supplied by

the parties upon which it requests an opinion with respect to

the question. In view of the circumstances, our responses

to the questions posed should not be considered as having

application to any situation except that before the court.

The following is a reproduction of portions of the court's

orders.)

STATEMENT OF THE NATURE OF THE PENDING

CASK AND THE CONTENTIONS OF THE PARTIES

Pacific Fruit Express Company (hereinafter called PFE)

by its motion for summary judgment asks the Court at pres-

ent for a determination only of the issue of liability, that

the defendants are liable to it In proportion to their use for

mechanical protective service furnished by PFE to the

defendants since 1964 by means of mechanical refrigeration

units in PFI} mechanical refrigerator cars. The bases of

the action are that the defendants have failed to pay the

plaintiff these amounts, in violation of an Order of the

Interstate Commerce Commission, dated August 27, 1962,

in Ex Parte 137, Contracts for Protective Services, and

that, irrespective of this Order, plaintiff is entitled to re-

1. Paragraphs numbered 16-21 hereinafter set forth are repro-

duced from the court's order of January 20, 1972, but have been

renumbered for purposes of continuity in this report.

E-3

cover in quantum meruit for the reasonable value of mech-

anical protective service furnished each defendant.

Defendants by their answers have denied the charging

allegations of the complaint of PFE and the existence of

any indebtedness to PFI. In addition by their answers

defendants have raised a number of affirmative defenses,

including (1) a specific denial of any violation of Section

1 (14)(b) of the Interstate Commerce Act or any other

provision of law and (2) the affirmative allegation that the

subject matter of the action is within the jurisdiction of the

Interstate Commerce Commission.

Following the filing of the motion for summary judgment

by PFE, defendants filed motions (1) for dismissal of the

action on the ground that its subject matter was within the

exclusive jurisdiction of the Commission and (2) for a stay

of further proceedings in the action so that its subject

matter could be referred to the Commission on the ground

that subject matter was within the primary jurisdiction of

the Commission.

In support of its motion for summary judgment on the

liability issue PFE filed affidavits containing factual mat-

ters, together with supporting memoranda containing legal

arguments. In opposition to the motion for summary judg-

ment of PFE, defendants filed affidavits setting forth

factual matters and opposing memoranda embodying legal

arguments.

The recitals of facts and contentions set forth * * * have

been proposed by the parties. Such recitals and contentions

are included * * * for the purpose of informing the Inter-

state Commerce Commission of the issues involved in this

action and of the contentions of the parties. Such recitals

and contentions are not intended to constitute findings of

fact or conelusions of law of the Court. As of now the

E-4

Court has made no determinations in this action other than

to order that further proceedings in this action be stayed

pending receipt from the Commission of responses to the

questions directed to it * * *.

For present purposes, the following facts and contentions

pertaining to the past and present are pertinent to the

issues raised by the parties:

1. PFE operates through ownership or lease, a large

number of mechanical refrigerator cars, each of which con-

tains a mechanical refrigeration unit.

2. The defendants use these cars to transport perish-

ables over their lines of railroad, and the units are used by

them to supply mechanical protective service to. these

perishables,

A majority of the cars are initially furnished by PFE to

railroads in the West, including its owners, Southern Pacific

Transportation Company, and Union Pacifie Railroad Com-

pany, who each own 50 percent of the stock of PFE and,

prior to July 1, 1967, to the Western Pacific Railroad Com-

pany. A significant number of perishable shipments are also

originated in PEE mechanical refrigerator cars by the

defendants themselves, and many of these shipments do not

move over the lines of either Southern Pacific or Union Pa-

cific. PFE contends it also furnishes mechanical protective

service to defendants during these movements.

3. Each railroad named in the shipper’s routing in the

bill of lading has a legal duty, under the Interstate Com-

meree Act, to accept cars in interchange from a delivering

‘ailroad, and each has a legal duty to deliver the ears to

the next railroad named in the routing.

4. Defendants’ use of PFE’s equipment (i.e., the me-

chanieal refrigerator ears and the mechanical refrigeration

units) is substantial, aggregating hundreds of thousands of

days and millions of miles on defendants’ lines of railroad

E-5

collectively. Defendants for many years have paid PFE

their proportionate parts of PF E's costs of ownership and

operation of mechanical refrigerator cars (excluding the

mechanical refrigeration wnits), in accordance with the pro-

visions of Mileage Tariff No. 7. However, such costs, and

the payments made by the defendants, do not compensate

PFE for any of its costs of ownership and operation of the

mechanical refrigeration units.

o. Defendants have adopted National Perishable Freight

Comnnittee’s Cireular 20-F, the “Code of Rules for Handling

Perishable Freight.” Under this Circular it is the responsi-

bility of a railroad delivering a mechanical refrigerator car

to another railroad to inspect the mechanical refrigeration

unit; to make necessary repairs; and to add diesel fuel to the

engine, and refrigerant, if necessary, If a railroad makes

repairs and adds fuel or refrigerant, it bills PFE, and PFE

pays the railroad at an agreed rate, in accordance with the

provisions of this Cireular and Division Sheet 7.

6. Plaintiff's books of account are kept in accordance

with accounting classifications and rules prescribed by the

Interstate Commerce Commission.

7. During the vears 1964 to date, the defendants have

collectively agreed between themselves to pay, and have

paid PFE for mechanical protective service in accordance

with the provisions of Division Sheet 7, which is issued by

the National Perishable Freight Committee, pursuant to the

authority of substantially all railroads. Division Sheet 7

applies for the account of all lines who are parties to Per-

ishable Protective Tariff 18 (1.C.C. No. 37), which includes

the defendants.

Under Division Sheet 7, SO percent of the mechanical

protective service revenue collected by the railroads pur-

suant to Perishable Protective Tariff 18 is:

E-6

“* * * allowed to the car owner to cover the cost of own-

ership of the mechanical unit(s) and other expenses as-

sumed by car owner.”

The latter expenses include fuel and repairs.

The remaining 20 percent of the mechanical protective

service revenue is divided among all carriers participating

in the service on the same basis as governs the division of

the joint through freight rate via the route over which the

shipment moves. Division Sheet 7 also provides that the

car owner is to be paid 80 percent of various other revenues

received by the railroads in connection with the furnishing

of mechanical protective service; that SO percent of the de-

tention charges collected by the defendants will be allocated

to the car owner; that the car owner will receive 80 percent

of the charges when the mechanical car has been placed for

loading and not used by the shipper for transportation: and

that the car owner will be billed by and will pay a railroad

for repairs, refrigerant, antifreeze and other supplies furn-

ished to the mechanical refrigeration unit. These amounts

have been paid to PFE by defendants during the vears 1964

to date, but they are less than the cost to PFE of rendering

the service by sums varying from $2 to $4 million each vear.

After deducting the proportionate amounts of such losses

which have been paid by certain railroads to PFE, including

Southern Pacific Transportation Coimpany, Union Pacific

Railroad Company and (prior to July 1, 1967) Western

Pacific Railroad Company, the total losses which PFE con-

tends should be allocated to the defendant railroads have

heen approximately $1 to $2 million annually.

8. PFE contends that the payments it has received

under Division Sheet 7 are not compensatory. and that the

payments and the provisions therefor contained in Division

E-7

Sheet 7 do not comply with subparagraph (e) [49 CFR

$105.5]? of the L.C.C.’s 1962 Order in Ex Parte No. 137,

Contract for Protective Services, which states:

“In the event the person rendering the protective services

shall not recover costs for any item or service rendered,

such person shall bill the railroads and express companies

receiving these services, on a proportionate basis, for the

amount of the loss.”

PFE also contends that defendants have violated the

provisions of said Order which approved protective service

contracts on file with the Commisison, “upon the condition

that they shall be superseded by new contracts filed in

accordance with the above regulations.”

9. PFE’s affidavits in support of its motion for sum-

mary judgment assert that it has offered, beginning in

1965, to enter into contracts or to revise Division Sheet 7 to

provide that PFE would be compensated in an amount

sufficient to cover its cost of providing mechanical protec-

tive service, but that defendants have refused to do so.

Beginning in 1965, PFE has billed each defendant for its

respective proportionate share of PFE’s losses arising

from the furnishing to or on behalf of said defendant of

mechanical protective service, but each defendant has re-

fused to pay PFE the amounts indicated in such bills, and

has continued to pay PFE the lesser amounts resulting

from application of the provisions of Division Sheet 7.

10. Defendants contend that the only service rendered

to them is the furnishing of the mechanical refrigeration

units in the mechanical refrigerator car, and that this

activity is not “protective service” which is covered by the

1962 Order of the T.C.C. in Ex Parte 137. Defendants also

contend that even if this activity is protective service, the

» Now renumbered as 49 CFR § 1032.2(e).

E-8

Commission’s Order is not self-executing. PFE’s position

is that when a defendant has used a PFE mechanical re-

frigeration unit to protect a shipment against heat or cold,

PEE has thereby furnished to that defendant mechanical

protective service, and that said service is rendered by

PFE to that defendant, whether the latter is an originating,

intermediate or terminating carrier.

ll. Each of the defendants, as well as other railroads

who are not defendants, including Southern Pacifie and

Union Pacific, are parties to joint rates and through routes

for the transportation of perishables, and publish tariffs by

which they thereby hold themselves out to the publie to

transport perishables over such through routes under joint

rates.

12. Defendants contend that PFE’s only legal relation-

ship is with the origin railroad. PFIA’s position is that

there are a number of pertinent legal relationships between

PFI and each of the defendants, which exist whether a

particular defendant is an origin, intermediate or terminal

carrier. These include:

a. Defendants have a legal duty to furnish both trans-

portation and protective service, and a legal duty to supply

the instrumentalities to do so, under $$ 1(5)(a) and 1(4)

of the Interstate Commerce Act. PFE’ services and prop-

erty are used by the defendants in ,. ri orming these legal

duties. PFE. therefore asserts that an implied in law con-

tract arises to pay the reasonable costs of such services and

property (Restatement of Restitution, $1).

b. Each defendant has promised to pay owners of

mechanical refrigerator ears, and in fact, has sinee 1964

paid PFE mileage allowances varying from 4.55 cents to

6.3 cents per mile for each mile a PFE mechanical refrigera-

tor car moves over its line. The defendants have done this in

accordance with their “Mileage Tariff 7”.

E-9

This mileage allowance is determined by the Association

of American Railroads, pursuant to an Agreement among

all railroads which has been approved by the Interstate

Commerce Commission.

ce. Legal relationships are created by Division Sheet 7.

There are frequent references therein to the “car owner”

who is allowed 80 percent of the “Mechanical Protective

Service” revenue, and under its provisions the car owner

must pay any railroad for repairs, fueling and certain other

activities performed by the latter in connection with the

mechanical protective service unit.

d. Legal relationships are also created by National

Perishable Freight Committee Circular 20-F to which the

defendants are parties. This Circular provides that notice

of servicing or repairs to the unit will be sent to the car

owner, e.g., PFI, by the servicing railroad (Rule 425 (A)).

Under Rule 460 of this Circular the defendants also are

obligated to furnish detention data reports to the car owner

and PFE is specifically named in that Rule.

13. Defendants assert that they perform the servicing

and fueling of mechanical refrigeration units when neces-

sary on their lines, and that they also inspect the units.

PFE points out that it must pay the defendants for their

servicing and fueling activities in accordance with Division

Sheet 7. PFE contends that the mechanical refrigeration

units are largely self-operating. During 1969, for example,

PFE contends that only about 1.7 percent of the units were

repaired, and only 17 percent were refueled by all defendant

lines. Over 98 percent of the PFE mechanical refrigeration

units did not need repairs, and over 83 percent did not re-

quire refueling by defendant lines during this period. PFE

contends that in the case of eastbound movements originat-

ing on the railroad lines of Southern Pacific and Union

OMEN BELTED Am PSs nC OR ERS NOE T RSI A e SP Sr BRIE EE AO Mg hh DE IIE OD DE TV mw Oe UBB

E-10

Pacific, the initial servicing performed by PFE employees

of mechanical refrigeration units is responsible for the unit

operating substantially automatically on the lines of the

defendants.

14. PFE contends that defendants, in their Perishable

Protective Tariff 18, and also in their Circular 20-F, have

defined “mechanical protective service” as follows:

“*Mechanical protective service’ means protection fur-

nished the lading by or through the operation of the

mechanical unit in a car so equipped,”

15. PFE also asserts that it has a right to recover under

§ 1(4) of the Interstate Commerce Act which provides that

every carrier establishing through routes must “provide

reasonable facilities for operating such routes”, and “pro-

vide reasonable compensation to those entitled thereto.”

Plaintiff also asserts that it has a right to recover under

common law quantum meruit principles, and also pursuant

to §1(14)(a) of the Interstate Commerce Act, which pre-

scribes “reasonable compensation” for the use of equip-

ment “whether or not owned by a carrier.”

The Court is aware that the Commission, by its Order

of April 4, 1963, in Ex Parte No. 137, denied a Petition for

Clarification and/or Modification of the Commission's Re-

port and Order of August 27, 1962, “for the reason that

sufficient grounds have not been presented to warrant grant-

ing the action sought.” The Court is also aware that by its

Order of May 17, 1966, the Commission denied “without

prejudice to refiling after disposition of the said Court

action”, a Petition filed by Southern Pacifie and Union

Pacific for a Cease and Desist Order. The Petition alleged

that the same railroads who are defendants in this litigation

were violating § 1(14)(b) of the Interstate Commerce Act

and the Commission’s 1962 Order in Ex Parte No. 137, and

ral

‘

6 Rant 2

* FDA Chen RE EE EA — emanated

E-11

requested that the Commission order them to cease and

desist from such violations. The Petition also asked the

Commission to order the respondents in that proceeding

(i.e., the defendants herein) to enter into arrangements pur-

suant to which PFE’s losses from the furnishing of mechan-

ical protective service would be eliminated, and requiring

those respondents to pay their proportionate share of

PFF’s losses arising from the furnishing of mechanical pro-

tective service.

The Petition also sought an order requiring the respond-

ents therein to submit their contract arrangements to the

Commission for approval pursuant to § 1(14)(b). In deny-

ing the request for a Cease and Desist Order, the Commis-

sion recited that it appeared that the basic issue raised

thereby was substantially the same as that under considera-

tion in this litigation.

16. One of the basic contentions of defendants in this

action is that PFE has not furnished mechanical protective

service to any of them. In support of that contention defend-

ants advance the following detailed contentions:

(a) Generally, defendants are midwestern, eastern and

southern railroads operating east of such points as Chicago,

Omaha, Council Bluffs and Kansas City. Although de-

fendant Santa Fe operates out of California, Arizona and

New Mexico and some of the component lines of what is

now the Burlington Northern system operate out of the

Pacific Northwest, the great bulk of perishable traffic on the

lines of Santa Fe moves in mechanical refrigerator cars

which it owns, while the Burlington lines use carline com-

panies which they own.

(Plaintiff contends there is no dispute as to the relative

use by Santa Fe and Burlington Northern of their mechan-

ical refrigeration units as compared to their use of PF E's

E-12

mechanical refrigeration units to supply perishable ship-

ments moving over their lines with mechanical protective

service against heat and cold. PFE contends that Santa Fe

and the Burlington Northern are supplied mechanical pro-

tective service by PFE to the extent indicated in the

Exhibits attached to the complaint on file in this action.)

(b) With minor exceptions, the movements of perish-

able commodities in PFE mechanical refrigerator cars

which are involved in this action are eastbound shipments

as to which Southern Pacific and Union Pacific, the parent

companies of PFE, are the originating carriers and de-

fendants are intermediate or terminating carriers. While

some shipments originate on other lines, including some

westbound shipments, their number is relatively insig-

nificant as compared with the total number of shipments in

PFE cars.

(Plaintiff contends that during 1969 approximately 4,800

such shipments originated on railroads other than Southern

Pacific and Union Pacific, including some westbound ship-

ments. This is about 1/20th of the total number of ship-

ments of perishable commodities which during 1969 were

protected from heat or cold by PFE mechanical refrigera-

tion units in PFE mechanical refrigerator cars.)

ants, and principally at interchange points such as Council

Bluffs, none of the defendants have had any contracts or

agreements for mechanical protective service with PFE.

(Plaintiff contends that the latter contention is erroneous,

as shown by the affidavits and counter-affidavits on file

herein, and by the Court’s Order of November 16,1971 * * *

(describing contractual relationships between PFE and

defendants set forth in National Perishable Freight Com-

mittee’s Circular 20-F), and * * * (deseribing various legal

FB Go 0 TEPER A

E-13

relationships between PFE and the defendants created by

statute, and pursuant to Mileage Tariff 7, Division Sheet 7,

and Circular 20-F).)

(It is PF E's position that each and all of said documents

create legal relationships between PFE and the defendants,

and contracts or agreements for the furnishing to each of

the defendants by PFE of mechanical protective service,

through the supplying of mechanical refrigeration units

which are used by defendants to protect perishable ship-

ments against heat or cold in fulfillment of the defendants’

statutory duty to do so. It is further PFE’s position that,

even in the absence of an express contract, implied contracts

are thereby created and that PFE is thereby entitled to

recover in quantum meruit for the reasonable value of

mechanical protective service furnished each defendant.)

(d) The decision to select and use mechanical refrigera-

tor cars of PFE in the movements of perishables involved

in this action has been made by its parent companies, as

originating carriers. Defendants have had no voice or part

in such decision and selection. When the PFE cars are

tendered to defendants, as intermediate or terminating

carriers they are compelled as common carriers to accept

the cars for movement over their lines, provided that the

cars are in safe operating condition and the mechanical

units are operating properly.

(Plaintiff contends that under the provisions of the

Interstate Commerce Act, the originating carrier, whether

it be one of PFE’s parent companies, or one of the defend-

ants, is required to tender the PFE mechanical refrigerator

ear to the connecting carrier named in the shipper’s bill

of lading and that the same statutory provisions require

intermediate or terminating carriers to accept cars for

movement over their lines. In addition, plaintiff contends

LE AIA! Nh. NE Nit 25 non

E-14

that the affidavits show that 4,800 shipments during 1969

in PFE mechanical refrigerator cars, in which the mechan-

ical refrigeration unit furnished mechanical protective serv-

ice against heat or cold to such shipments, did not originate

on PFE’s parents’ lines. Therefore the latter could not have

made the decision to select and use PFI cars with respect

to such shipments, and it is not true that defendants had

no voice or part in the selection and use of PFE cars as

to such shipments. Moreover, the statements ignore PF E's

contention that defendants use PFI mechanical refrig-

eration units to supply mechanical protective service (pro-

tection against heat to cold) to shipments moving over

their lines in PFE mechanical refrigerator cars, in fulfill-

ment of both their statutory duty to do so and their holding

themselves out by tariff to do so, and that it is only fair,

proper and equitable that they should pay either the cost

thereof, pursuant to the provisions of the LC.C.’s Order

of August 27, 1962, in Ex Parte No. 137, Contracts for Pro-

tective Services, or that they should pay the reasonable

value of the service furnished to them on the basis of quan-

tum meruit. Plaintiff's position is that it makes no differ-

ence which railroad is the originating carrier of a perish-

able shipment requiring the use of a PFE mechanical re-

frigeration unit in a PFE mechanical refrigerator car to

: provide mechanical protective service (protection against

heat or cold). The essence of PFE’s causes of action is that

defendants, individually and collectively, use PFE’s

mechanical refrigeration units to protect shipments moving

over defendants’ lines in plaintiff’s mechanical refrigerator

cars; that they reap the benefits of the use of such units;

and at the same time they deny any obligation to pay PFE

therefor.)

SAW East he ‘

hE ARATE TOR AS ER at Po tt RAB Pe a

E-15

(e) While PFE mechanical refrigerator cars equipped

with mechanical refrigeration units are on the lines of de-

fendants, all required servicing in connection with the oper-

ation of the units is performed by defendants. All required

inspection, starting, stopping, regulating, fueling, repairing

and other servicing in connection with the operation of the

units, as well as the transferring of the lading if necessary,

is performed by defendants or by third party contractors

or carline companies engaged by defendants. While PFE

pays for the fuel, refrigerants and certain repair items, all

of the other costs of required servicing are borne by de-

fendants.

(Plaintiff PFE contends there is no dispute between the

parties concerning the activities performed by PFF, on the

one hand, in connection with the supplying of mechanical

protective service by it, and by the defendants on the other.

However, PFE asserts that defendants’ description in the

foregoing paragraph of the activities performed by them is

inaccurate, and plaintiff therefore objects on the ground it

is misleading, as it fails to recognize, as set forth in the

Court’s Order of November 16, 1971, *** PFE’s contention

that in the great majority of instances, no servicing what-

sover of the PFE mechanical refrigeration units by de-

fendants is necessary, as the initial make-ready work, re-

pairs, and servicing is performed by PFE forces and

thereafter the mechanical refrigeration units are largely

self-operating, and that any servicing performed by de-

fendants is paid for by PFE.)

(PFE agrees that some defendants inspect PFE’s me-

chanical refrigeration units on their lines, and that these

“inspections” may include starting, stopping, and regulating

the units, but only to the extent that this is then necessary.

PFF contends that the defendants have the duty to perform

E-16

“fueling and repairing” of PFE mechanical refrigeration

units under the provisions of Division Sheet 25, and that

pursuant thereto all “fueling and repairing’, as well as

defendants’ charges for refrigerant, lubricating oil and sup-

plies, are paid for by PFE. Division Sheet 25 and Circular

20-F speak for themselves with respect to the deseription

of the respective activities of PFE and the defendants.)

(f) PEE neither furnishes nor performs any servicing

whatever on the mechanical refrigeration units while they

are on the lines of defendants. All servicing and similar

activities with respect to such PFE cars and their mechan-

ical refrigeration units at interchange points beyond the

lines of Southern Pacifie and Union Pacifie which are

required by Code of Rules of the National Perishable

Freight Committee Circular 20-F are performed by defend-

ants or their contractors, and not by PFE.

(PFE contends there is no dispute between the parties

with respect to the activities performed by PFE on the one

hand and defendants on the other in connection with the

supplying of mechanical protective service to defendants

by the mechanical refrigeration units of PFE. However,

PFE objects to the deseription of those activities in the

foregoing paragraph on the ground that it is inaccurate.

PFE agrees that insofar as the present record before the

Court is concerned, PF E’s employees do not personally per-

form the servicing and repairing of PFE’s mechanical re-

frigeration units on the defendants’ lines, but points out

that in the great majority of instances no servicing what-

soever of the mechanical refrigeration units by defendants

is necessary, as the initial make-ready work, repairs, and

servicing is performed by PFE forees and thereafter the

mechanical refrigeration units are largely self-operating,

and that any servicing performed by defendants is paid for

by PFE.)

Dats Yim 6 sare

a GAY ae Re ae CRN ie OH CR ae CI AOA AM. BE

E-17

(g) With respect to shipments of perishables which

move over the lines of defendants PFE furnishes mechan-

ical refrigerator cars containing mechanical refrigeration

units to the originating carriers. Such cars are tendered to

defendants at interchaage points. PFE does not furnish any

servicing of mechanical refrigeration units to defendants

while its mechanical refrigerator cars are on defendants’

lines. In the territories served by defendants PFE has no

employees, facilities or means of furnishing or performing

any servicing of any equipment of any kind to any of the

defendants. Although PFE does have offices and some em-

ployees in some eastern, midwestern and southern cities,

the functions of such offices and employees are administra-

tive and clerical and also relate to the furnishing of PFE

cars to defendants, Consequently, defendants are ompelled

to perform all such servicing themselves or to engage third

party contractors or other carline companies to perform

such servicing. PFE has not performed such servicing for

any of defendants.

(Plaintiff contends that in the great majority of in-

stances, PFE forces do not personally perform servicing

on defendants’ lines, as no servicing whatsoever of the

mechanical refrigeration units by defendants is necessary,

as the initial make-ready work, repairs, and servicing is

performed by PFE forces and thereafter the mechanical

refrigeration units are largely self-operating, and that any

servicing performed by defendants is paid for by PFF).

(Plaintiff also contends that the duties of PFE employees

in eastern, midwestern and southern cities include the

tracing and diverting of PFE mechanical refrigerator cars

for receivers and shippers located both on and off the lines

of defendants, and for the defendants, pursuant to their

request.)

ieee Coa eee, Se al > ,

SET, NACE NE AICTE ADS 58 INN SEER DN A ABI EL AI LINBO DDD AEDT BIS kh Ses GOST

E-18

(h) PFE does furnish full and complete protective serv-

ice to its parents, Southern Pacific and Union Pacific, under

the Protective Service Contract between them dated June

5, 1963, effective January 1964 and approved by the Com-

mission on September 9, 1963. By paragraph 1 of said

agreement PFI agrees “to furnish refrigeration, heating,

ventilation and inspection services necessary for the pro-

tection of perishable freight” handled by its parents, By

paragraph 3 PFI undertakes to “furnish labor, tools,

refrigerant, fuel and/or other materials and items neces-

sary to carry out the provisions of this Agreement”. Under

paragraphs 5 and 9 records are to be kept by PFE, inelud-

ing “records of the handling, inspection, refrigeration,

heating and ventilation of shipments.” Under paragraph 7

PFE is required to “make studies concerning heat or cold”

and perform other services relating to the preparation and

publication of protective service tariffs. Paragraph 10 re-

quires PFE to cooperate with its parents “in every reason-

able and proper way to promote the mutual interests of the

parties hereto with respect to business covered by this

Agreement”.

(Plaintiff contends that such activities performed for its

parents result in shipments of perishables in PFE mechan-

ical refrigerator cars, to which mechanical protective serv-

ice against heat or cold is furnished by PFE’s mechanical

refrigeration units, generally moving to their destinations

on the railroad lines of the defendants without the necessity

of further repairs or servicing by the defendants. Under

the provisions of PFE’s Protective Service Contract with

its parents, which was approved by the Commission on Sep-

tember 9, 1963, the parents pay PFE the full cost of such

services and activities.)

FI AR ithe We 4 BASSET A! PLS Oe A

5 eee EA ok Ske SPD OPI NRE LER AEST ¥

Yale EN a eRe SSD a TEN

E-19

17. Another issue relates to Division Sheet 7, published

by the National Perishable Freight Committee as to which

defendants make the following contentions:

(a) Division Sheet 7 is an agreement between the rail-

roads which are parties to Perishable Protective Tariff 18.

While PFE is a carline company rather than a railroad and

is not a party to Division Sheet 7, it is referred to therein.

However, its parent companies, Southern Pacifie and Union

Pacific, are parties to Tariff 18 and to the Division Sheet.

(Plaintiff contends that under Division Sheet 7 it is a

third party beneficiary of the contract thereby created, and

that the Division Sheet constitutes a unilateral contract

between all railroads, including the defendants, and PFE,

PFE contends that the Division Sheet method of allocating

revenues to PFI is invalid and illegal, and was so found

by the Commission in its decision in Ex Parte No, 137,

Contracts for Protective Services, dated August 27, 1962.)

(b) The agreement between the railroads embodied in

Division Sheet 7 provides for the division between such rail-

roads of the revenue which they receive from shippers

under Perishable Protective Tariff 18 for furnishing pro-

tective service. By the express terms of the Division Sheet

such revenue is divided as follows: (1) “80% to the carrier

initially handling the shipment in line-haul service to be

allowed to the car owner to cover cost of ownership of the

mechanical unit(s) and other expenses assumed by car

owner ***”; and (2) “The remaining 20% of the revenue

to be divided between all carriers participating in such

service on the same basis as governs the division of the

joint through freight rate ***” Division Sheet 7 provides

for a like division between the railroads of certain other

revenue related to protective service, 80° of such revenue

to go to the carrier initially handling the shipment in line-

seteiieiieiianed stile Rene, a tag Sate er a iN eae tea:

Daa of Deis a

E-20

haul service to be allowed to the car owner, and the remain-

ing 20% to be divided between all participating carriers.

railroads which are parties to Division Sheet 7 have not

divided the protective service revenue among them as pro-

vided in the Division Sheet or that the initial carrier has

~not made payments to it of the amounts provided to be

allowed to it.

(Plaintiff contends, however, that such payments are

inadequate, as PFE incurred a deficit in supplying mechan-

wal refrigeration service (including the PFI mechanical

/prefrigeration units involved) to and in behalf of the defend-

ants by sums varying from $2 to $4 million each year, PF ’s

parents, Southern Pacifie and Union Pacifie, have paid

“PFE not only the amounts provided in Division Sheet 7,

but additional amounts in order to fulfill their contractual

obligations, which have been approved by the Interstate

Commerce Commission, to pay PFE the full proportionate

costs of rendering mechanical protective service to them on

their respective lines.)

18. Another issue raised by defendants is the question

whether by its 1962 report in Ex Parte No. 137 (318 L.C.C.

111) the Commission intended to determine and hold that

every railroad in the country over which a PFE refrigera-

tor car equipped with a mechanical refrigeration unit moved

was required, under Section 1(14)(b) of the Act, to enter

into a protective service contract, agreement or arrange-

ment with PFE and to submit the same to the Commission

for approval. In support of their contention that neither

the Act nor the Commission's report so require defendants

make the following assertions:

(Plaintiff objects to subparagraphs (a) and (b) below on

the ground they are sheer argument.)

ae 1 OR DL CIAL LANAI 0

E-21

(a) The railroads who contracted for mechanical pro-

tective services with PFE as of December 31, 1959 are listed

in appendix A (318 L.C.C. at p. 129) under the headings of

proprietary lines, subsidiaries of proprietary lines, non-

proprietary lines (only Western Pacific Railroad being so

listed) and short-line connections of contract lines. None of

the defendants nor any other western, midwestern, eastern

or southern railroad is listed in this catalog of railroads

under contract for mechanical protective services with

PFE.

(Plaintiff contends that the railroads listed as being

under contract with PFE are the railroads with which

PFE had succeeded in negotiating bilateral contracts, and

that its position is that Division Sheet 7 itself constitutes a

unilateral contract under which the defendants collectively

agree to pay PFE an inadequate and illegal amount for

supplying mechanical protective service to them or in their

behalf.)

(b) It is the contention of defendants that they were not

listed in the PFE catalog of appendix A because, as inter-

mediate and terminating carriers, they had no relationship

with PFE which required them to have a contract, agree-

ment or arrangement with it under Section 1(14)(b) of the

Act or under the 1962 report.

(Plaintiff objects, in addition to the ground for objection

to paragraph 3(a) and (b) stated above, i.e., that the fore-

going statement is argumentative, on the further ground

that it is a statement of a legal conclusion, and, moreover,

such conclusion has no support in the record, for the reason

that numerous legal relationships exist between PFE and

the defendants, as set forth in the Court's Order of Novem-

her 16, 1971 ***.)

| theme ge et Ee tees Riek a

E-22

19. In the first paragraph under the heading of *Find-

ings” of the 1962 report in Ex Parte No, 137 the Commis-

sion found that the unapproved protective service contracts

set forth in appendix F of the report were just and reason-

able, provided that within 120 days new or superseding

contracts were filed. The paragraph then went on to pro-

vide: “In the event new or superseding contracts are not

filed, further consideration will be given to the issuance of

an order finding the presently unapproved contracts not

within the requirements of section 1(14)(b).” (318 LC.C. at

p. 127) Defendants assert that PFE, as distinguished from

its parents, has never invoked the Commission's jurisdiction

by requesting it to enter an order against defendants, or

any of them, requiring that they, or any of them, enter into

a contract, agreement or arrangement with PFE, and that

the Commission has never made any such order.

(Plaintiff objects to the foregoing paragraph 4, on the

grounds that (1) it is irrelevant and immaterial whether or

not the Commission ever issued an order finding that certain

contracts violated Section 1(14)(b), and (2) that the last

sentence thereof is specious and misleading, Defendants

have chosen to ignore the basis of the Commission's juris-

diction in making the investigation of mechanical protective

service which culminated in its 1962 Report and Order in

Ex Parte No. i87. The Commission's jurisdiction in Part I

of the Interstate Commerce Act, which includes See, 1(14)

(h) extends to “common carriers” and only to “common

‘arriers”. In Bx Parte No. 187 both the Commission's order

initiating the proceeding and its 1962 Report and Order

i) aan were directed to the railroads, as respondents, and not to

PFE. Not being a respondent in the proceeding PFE did

not contest the Commission’s Order, whereas PFE’s par-

ents, Southern Pacific and Union Pacifie, were respondents

a Fer SEP ERE HDR Oat ana Lm tatiana ill peeeamiaenadel

E-2¢

and filed a Petition for a Cease and Desist Order with the

Commission, directed against the defendants herein. As

pointed out in the Court's Order of November 16, 1971, ***

this Petition was denied by the Commission by its Order of

May 17, 1966, without prejudice.

Paragraph 4 also ignores PFE’s position that the Com-

mission's 1962 Order is self-executing : that the Commission

stated at 3518 LC.C. 125 that the railroads “shall submit”

new contracts, “which shall replace all prior contracts”;

and that “present charges should be revised immediately.” )

20. Since PFE is not a common carrier, it is net

compelled to furnish mechanical refrigerator cars to any

railroad. With knowledge that its parent companies, as

originating carriers, tender such cars to defendants at inter

change points for movement over their lines, PFE has

voluntarily continued to furnish such ears (including

mechanical refrigeration units) to its parent companies

for such use and has thereby gained monetarily by receiving

the profitable car mileage revenne resulting from such use.

(Plaintiff objects on the ground that the foregoing is

irrelevant and immaterial and, moreover, that it fails to

recognize the right of a shipper under the Interstate Com-

merce Act to route shipments over such lines of railroads

as he desires, and the corresponding duty on the part of the

railroads to observe such routing PFF is entitled to enter

into the business of owning mechanical refrigerator cars

and supplying mechanical protective service (including the

furnishing of PFE mechanical refrigeration units) to or

in behalf of the railroads. Since the railroads indisputably

use PFE’s equipment and service it is PFE’s contention

that they must pay PFE’s reasonable cost of rendering

such service, in accordance with the Commission’s 1962

Order and, in any event, on the basis of quantum meruit,

A SEE LCE N TALIA NR Hit I Sage

E-24

Just as the railroads pay for their use of other railroads’

equipment generally, as prescribed by the Interstate Com-

merce Commission in the Per Diem eases (Baltimore & O.R.

Co. v. New York, N.H. d& HR. Co. (D. Ct., N.Y., 1961) 196

F.Supp. 724: Chicago, B.€Q. R. Co. v. New York S. & West-

ern R.Co., 332 L.C.C. 176 (1968) : aff’d. Boston & Maine R. v.

United States, 297 F.Supp. 218 (1969); and Union Pacific

Railroad Co. v. United States, 300 F.Supp. 318 (1969);

aff'd, 396 U.S. 27, 24 L.Ed.2d 142).)

21. With respect to the fleet of mechanical refrigerator

ears which PFE operates through ownership or lease, de-

fendants point out that in the last quarter of 1969 the total

mechanical car fleet of PFE consisted of 10,660 cars. Aec-

cording to the 1969 report of PFE to the Commission, as

disclosed by Account No. 418, it leased 7,389 cars from its

parent lines. 3,697 cars were leased from Southern Pacific

for total 1969 rentals of $7,221,116 while 3,692 cars were

leased from Union Pacifie for total 1969 rentals of $6,-

969,509, resulting in total 1969 rental payments to its par-

ents of $14,217,675.

(Plaintiff objects to the foregoing paragraph 6 on the

ground that the amounts of such lease rentals are irrele-

vant, immaterial and misleading because they are rentals

for the entire car. Only a small portion of such rentals is

for the mechanical refrigeration unit. Moreover, the use of

the allocated portion of such rentals as rental of the unit

results in a substantially lower PFE deficit from the sup-

plying of mechanical protective service to or in behalf of

the defendants than if the PFE deficit were computed as if

PFI had owned the units. This PFF deficit was over $8

million between 1964 and 1969; as of December 31, 1971, it

is estimated as $13 million.)

—— ee ee ee, ee ote Ss eee itt ASCII «

E-25

Based on the foregoing facts and contentions related by

the court, our responses to the specific questions, which are

quoted, follow *

A. In its Report and Order of August 27, 1962, did

the Commission find that the activities of PFE in pre-

paring, furnishing and servicing mechanical refrigera-

tion units in PFE mechanical refrigerator cars to the

defendants constituted “protective service,” within the

purview of §1(14)(b) of the Interstate Commerce

Act?

Answer: Yes. Although no such specific finding is made in

the report and order, it is clear from the terms of the orders

and the discussion at pages 111 and 112 of the report that the

specified service performed by PFE is included in “protec-

tive service.” These orders instituted (and subsequently

broadened) an investigation to determine, among other

things, whether the charges for the use of mechanical refrig-

eration units for the protection of property, contained in

numerous contracts between various rai] carriers and the

specified protective service companies, and filed with the

Commission under the provisions of § 1(14)(b) of the act

are just, reasonable, and consistent with the public interest.

The fact that the Commission considered the preparing,

furnishing, and servicing of mechanical refrigeration units

in mechanical refrigerator cars as constiuting “protective

service” within the meaning of that tern as it is used in

$ 1(14)(b) is further indicated by the discussion at pages

125-126 where it is stated: “In order to avoid the placing

upon one protective service the burden of helping to support

another protective service, it is desirable that the charge for

each protective service be sufficient to cover the costs of

3. Questions designated L-V hereinafter set forth are repro-

duced from the court’s order of January 20, 1972, but have been

redesignated for purposes of continuity in this report.

AU Alin i ln fn

RD DE a Ge Ee eT Sey AA I I AEG NaNO AE TS CBE EG LEI A a rte #

E-26

rendering that service. This also applies to services per-

formed under division sheet 7.” Division sheet 7 apparently

applies to the preparing, furnishing and servicing of

mechanical refrigeration units by, among other parties,

PFE.

B. If the Commission so found, is the supplying of

such mechanical protective service to the defendants

by PFE required to be covered by contractual arrange-

ments which must be submitted to the Commission for

approval?

Answer: Yes, the Commission's rules and regulations,

49 CFR § 1032.1, require that any protective service fur-

nished to or on behalf of a railroad shall be covered by a

written contract, The Commission's order in the Twentieth

Supplemental Report in Ex Parte No. 137, Contracts for

Protective Services, 318 1.C.C. 111, enlarges this rule by

requiring that all contracts, agreements, or arrangements

previously filed with and approved by the Commission be

superseded by the filing of new ones for its approval in

conformity with the criteria set forth in the order. Although

division sheet 7, the agreement which the court states ap-

pliei to the mechanical protective service furnished to the

defendants, had not previously been filed with and approved

by the Commission, it also was specifically embraced in the

terms of that order.

C. In its 1962 Order (39 CFR § 105.2(e)), did the

Commission contemplate that in supplying mechanical

protective service through the furnishing of a mechan-

ical refrigeration unit, PFE rendered “protective serv-

ice” as that term is used in the Report and Order?

Answer: Yes. At page 120 of the report, the finding is

made that PFI furnishes protective services, and it is ob-

served that PFE’s testimony was restricted to, as here

: ~ te etree me: xd

i | 338 Ah 6 327A EL le BEGET 2 ied me

E-27

pertinent, mechanical services. Consequently, it was clearly

contemplated that the supplying of mechanical protective

service by the furnishing of refrigeration units constitutes

“protective service.” \

D. Did the Commission direct, PFE to bill the rail-

roads and express companies, Jos whose lines the

mechanical protective service was rendered on a pro-

portionate basis, for the amount of PFE’s loss in-

curred in this service?

Answer: No. The Commission merely required that

contracts for protective service include a provision to ac-

count for that eventually. At pages 125-126 of the report,

it is stated that:

All rail carriers and express companies receiving

protective services under any contracts, agreements,

or arrangements ae approval under section

1(14)(b) of the Intersjate Commerce Act shall submit

for approval *** new or superseding contracts cover-

ing protective services which shall replace all prior

contracts, including division sheet 7. *** The pro-

visions of the new or superseding contracts shall be in

accord with the requirements hereinafter set forth. ***

The contracts to be filed shall be drawn so as to comply

with the following:

* * a, * * ~ *

4. In the event;the person rendering the services

shall not recover ests for any service rendered, such

person shall bill the railroads and express companies

receiving those er Ee on a proportionate basis, for

the amount of the loss. ***

See also 49 CFR § 1032.2(a) and (e) which codified the

Commission's order.

. E. Did the Commission contemplate that each

carrier participating in a movement of a loaded

E-28

mechanical refrigerator car during which mechanical

protective service is rendered is legally obligated to

share, on a proportionate basis, in the amount of the

loss of the person servicing and supplying the mechan-

ical refrigeration unit?

Answer: No. As indicated in the quotation immediately

above, it was required that such a provision be included

in any contract, agreement, or arrangement filed for ap-

proval of the Commission. However, in the absence of sucha

a contract, agreement, or arrangement, the Commission’s

report and order confers no substantive rights.

F. If the answer to the preceding question is “no”,

then who did the Commission contemplate would be

billed by the person rendering mechanical protective

service for the amount of such person’s loss?

Answer: As stated above, each participating railroad),

on a proportionate basis, as provided in the contracts to be

filed for approval of the Commission.

G. If the Commission did not contemplate that the

service rendered in furnishing mechanical refrigera-

tion units by PFE constitutes “protective service” to

all carriers participating in a particular movement,

did the Commission contemplate that the car owner

would recover its costs of ownership and operation of

the unit through the mileage or other rate paid by car

users for the use of the mechanical refrigerator car?

Answer: The Commission did, as previously stated,

contemplate that the service of furnishing mechanical re-

frigeration units constitutes “protective service” to all car-

riers participating in the movement.

Moreover, as stated in the original report in the pro-

ceeding, 246 LC.C. 145, 146 (1941):

et eth

EE ERR sit

E-29

It is clear that section 1(14) makes a distinction

between protective service and the use of the cars

which are associated with and necessary to such serv-

ice, This proceeding is for the purpose of passing upon

contra*ts insofar as they provide for the furnishing of

protective service. We shall not here pass upon any

contract insofar as it determines the compensation

and other terms for the use of refrigerator cars, That

matter will be reserved for another proceeding.

And at page 156 of that report, the carriers were admon-

ished:

4. In view of the distinction made in section 1(14)

of part I of the Act between “car service” payments

and “protective service” payments, it would be well

for the railroads to make separate contracts for these

two forms of service or, in any event, to deal separately

with them in a single contract, so that the charges for

protective service may be clearly segregated from

other charges. ***

Therefore, the compensation for the furnishing of pro-

tective service—in this instance, the mechanical protective

units—is not to be derived from the amounts paid for the

use of the car itself. The two services are distinct and

require separate remuneration. See also 318 LC.C. at page

126.

H. By its Report and Order of August 27, 1962.

did the Commission find that the method set forth in

Division Sheet 7 of compensating 'e owner of the

mechanical refrigeration unit by allocating to it 80

percent of the mechanical protective service tariff

revenues, would be invalid if new contracts were not

filed within 120 days, as the railroads receiving

mechanical protective service would not under Division

Sheet 7 be compensating the owner, on a proportionate

basis, for the amount of its loss?

iets ne

nw ML I Gd Lit tt Re hee es SLES Pons SOE ONE BINS EM OAT, Ba tak she

CS Ps ODA IO MTN OE dT aa

E-30

Answer: No. The order at page 138 [part (a) ] provided

that the new required contracts would supersede all prior

contracts, including division sheet 7, and that such con-

tracts and those filed thereafter should conform to the pro-

visions of the order. However, the order did not per se

invalidate or rescind any preexisting contracts, agreements,

or arrangements where new agreements or arrangements

were not filed with the Commission for approval.

I. Ifa railroad other than an originating railroad

has not filed with the Commission its arrangements

with PFE covering the furnishing of mechanical pro-

tective service by means of mechanical refrigeration

units, was and is such railroad in violation of the

Commission's 1962 Order, or was and is it in violation

of $ 1(14)(b)?

Answer: Yes. Where such arrangements exist, the fail-

ure of “all rail carriers” participating therein to file such

arrangements with the Commission for approval is a viola-

tion of § 1(14)(b) of the act. Moreover, the failure to submit

new or superseding contracts in conformity with the terms

of the order is also a violation of that order.

J. Is the Commission’s 1962 Report and Order in

Ex Parte No, 137 self-executing with respect to those

intermediate and terminal carriers who refuse to enter

into contracts with parties who have furnished mechan-

ical protective service to them?

Answer: The order is binding upon the carriers to comply

therewith, and failure to do so sulyjects them to enforcement

action by the Commission. Although the Commission’s order

requires the carriers to enter into contracts and prescribed

certain terms to be included in those contracts, the order

itself does not constitute a contract between the parties. In

short, the Commission’s order does not confer substantive

—_—ae

E-31

rights upon the protective service companies to recover

losses; that right must, if at all, arise from the contracts

required by the Commission’s order or by other means.

K. Does the Commission consider § 1(14)(b) to be

self-executing with respect to these intermediate and

terminal carriers who refuse to comply therewith hy

refusing to enter into contracts with parties who have

furnished mechanical protective service to them?

Answer: No. See the answer to question “J” above.

L. Must there be a contract, agreement or arrange-

ment for mechanical protective service between PFE,

a carline company, and every earrier participating in a

shipment of perishable commodities by mechanical pro-

tective service against heat or cold?

«Answer: Yes. See answer to question “B” above.

M. Did the Commission by its 1962 report in Er

Parte No. 137 intend to require a contract, agreement

or arrangement between PFE and every such railroad

(including intermediate and terminating carriers)

with respect to the furnishing of mechanical protective

service?

Answer: Yes. See answer to question “B” above.

N. Will the requirement to submit a contract.

agreement, or arrangement for mechanical protective

service to the Commission for approval under Section

1(14)(b) of the Interstate Commerce Act vary, depend-

ing on whether the mechanical refrigeration unit is

owned by (a) a railroad owned carline company: (hb)

another railroad directly; or (¢) a private car owner?

«lnswer: No, The requirements of section 1( 14)(b) of

the act are directed to the furnishing of the protective

service, It is immaterial how the necessary instrumentali-

ties were acquired by the person or company actually fur-

nishing the service to others.

DN ME PUES TORO PANO ROS:

E-32

O. Which of the following items are included in the

term “mechanical protective service”:

(a) The furnishing of the mechanical refrigerator

car by PFE;

(b) The furnishing of the mechanical refrigeration

unit by PFE;

and other supplies such as lubricating oil and refriger-

ants for the mechanical refrigeration unit by PFE;

(d) The furnishing of inspection, control, adjust-

“ment and maintenance services from certain inter-

change points to destination by defendants?

(Plaintiff objects to subparagraph (d) above on the

ground that it is misleading and misstates the evidence

as it ignores the fact that under Division Sheet 7 and

Cireular 20-F PFE pays for all repairs and supplies

placed by defendants on the mechanical refrigeration

units supplied by PFE.)

Answer: As stated in the answer to question “G,” the

furnishing of the car does not constitute protective service ;

the service is provided through the mechanical protective

unit. As set forth in paragraph “14” of the court’s state-

ment of facts, the defendants themselves have defined

mechanical protective service as “protection furnished the

lading by or through the operation of the mechanical unit

in a car so equipped.” Obviously the unit cannot function

without fuel, supplies, and repairs; they are an integral

part of the service. If the defendants furnish fuel, supplies,

and repairs, the defendants are pro tanto furnishing pro-

tective service. On the other hand, if the defendants were

reimbursed therefor by the plaintiff, the defendants would

he acting as agents of the plaintiff, and the protective ser-

vice would actually be furnished by the plaintiff.

Therefore, “(a)” is not included in the term “mechanical

protective service,” but “(b)” and “(¢)” are, With respect

E-33

to “(d),” assuming that it refers to the units, it is included

to the extent that those services are necessary to the fune-

tioning of the unit and that the costs thereof are not reim-

bursed by the plaintiff.

P. When a carline company such as Pacifie Fruit

express does not have operating personnel or facilities

at the interchange points of connecting and destination

‘arriers beyond the lines of its parents and as a result

the inspection, control, adjustment and maintenance

servicing of mechanical refrigerator units are per-

formed by such carriers or for their account hy other

‘arline companies, can it be said that Pacific Fruit

Express is furnishing mechanical protective service to

such carriers by furnishing mechanical refrigeration

units to them?

(Plaintiff objects to question {P] above on the

grounds that it is misleading for the reasons previously

stated * * * above.)

(Question | P] also ignores the provisions of Division

Sheet 25 and Circular 20-F (part of the record in this

action) which impose the obligation on PFE to pay for

all repairs and fueling. Question [P] also ignores

PFE’s contention that in the great majority of in-

stances no servicing whatsoever of the mechanical re-

frigeration units by defendants is necessury, as the

initial make-ready work, repairs, and servicing is

performed by PFE forces and thereafter the mechani-

cal refrigeration units are largely self-operating, and

that any servicing performed by defendants is paid

for by PFE. PFE agrees that the defendants “inspect”

PEE’s mechanical refrigeration units, and that such

“inspection” may include “control” and “adjustment”

of the units.)

(Question [P| is also misleading in that it charac.

terizes PF E's activities as “furnishing mechanical re-

frigeration units to them” * * *, thereby ignoring the

evidence of record that PFE does much more than

E-34

furnishing the unit. As heretofore stated, PFE makes

ready the unit for service on all lines of railroads by

its repair, maintenance, fueling and preparation activi-

ties at PF E's shops and yards, and PFE pays for all

repairs and fueling done by the defendants. )

-Luswer: See answer to question “O" above.

Q. Has the Commission ever ordered any railroad

serving eastern, southern or midwestern territory to

enter into a contract with PFE for the furnishing of

mechanical protective service against heat or cold to

perishable shipments by mechanical refrigeration units,

or to submit any such contract, agreement or arrange-

ment to the Commission for approval pursuant to

section 1(14)(b) of the Act? If so, identify any such

order by date and citation.

Alnswecr: Yes, if PFE renders protective service to or

on behalf of the carriers operating in those territories. See

answer to question “B” above. The rules and regulations

were originally prescribed in the order of October 15, 1940,

+ FLR, 4253.

-R. Are intermediate and terminating carriers obli-

gated under the Interstate Commerce Act. to accept

mechanical refrigerator cars tendered to them at an

interchange point so long as such cars are in safe

operating condition, the mechanical refrigeration unit

is operating properly and the cars are accompanied by

proper waybill instructions complying with established

tariff authority?

Answer: Yes. The term “transportation,” as defined in

part by section 1(3)(a) of the act, includes “ventilation.

refrigeration or icing * * *. Section 1(4) makes it the duty

of each railroad “to provide and furnish transportation

upon reasonable request therefor * * *." Moreover, it has

long been established that a shipper has a right to have his

E-35

freight transported from origin to destination over two or

more carriers without a transfer of lading at junction

points. Wissour’ & MMlinvis Coal ¢ ‘0. U. [Mlinois Central R.Co..

22 LC.C. 39 (1911). Finally, it is to be noted that section

15(8) of the act permits a shipper to specify the routing of

his shipments,

S. Are the carline companies parties to Division

Sheet 7?

(Plaintiff objects to question |S] on the grounds

that (1) it calls for the Commission’s cone lusion on a

Inatter of law; (2) the question calls for an answer

which is beyond the scope of the Eur Parte No. 137 pro-

estes and (5) the question should be limited, in any

event, to PFE, as the relationship of other carline

mension to the defendants is beyond the scope of this

proceeding. )

Answer: Division sheet 7 and its supplements are not

officially on file with the Commission but rather are pro-

vided for informational purposes only. The information

furnished the Commission shows that the latest rule for

application of division sheet 7 is in item 5-H of supplement

80 thereof, effective January 17, 1972, which reads as

follows:

Basis of divisions as published herein governs the

division of revenue received under the rules and

charges for protective services to perishable freight

as published in Perishable Protective Tariff 18, LC.C.

oi °° * or reissues,

The provisions of this Division Sheet apply for account

of all lines parties to Perishable Protective Tarif?

18, L.C.C. 37 * * * or reissues.

See also paragraphs A-11, 12, 14.15, or 17 of Item 25

for provisions governing allowances to mechanical ear

owner in connection with special rates not subject te

Mechanical Protective Service charges published) in

Section 7 of Perishable Protective Tariff 18.

E-36

The list of lines participating in the Perishable Protective

Tariff contains the names of no carline companies. The

second paragraph above indicates that such lines must be

parties to the protective tariff in order for them to be

parties to division sheet 7, The Commission, however, is

not in a position to make a judgment on this question, since

division sheet 7 is not officially on file.

T. Are the Ex Parte No. 137 regulations intended

to bind railroads other than those which were made

parties to that proceeding (as listed in Appendix A or

Appendix F to the 1962 report) and which other rail-

roads are not presently parties to any protective ser-

vice contracts?

(Plaintiff objects to question [|T] on the grounds

that it is (1) misleading; (2) it fails to recognize the

Commission's Second Supplemental Order in Ex Parte

No, 137, dated December 9, 1959; and (3) it is beyond

the scope of the Ex Parte No. 187 proceedings. That

one or more of the defendant railroads voluntarily

chose not to appear in the Ex Parte No. 137 proceed-

ings, or take any part in the hearings, does not mitigate

against the 1.C.C.’s Orders being effective as to such

railroads, where, as here, the Commission had juris-

diction over all railroads under See. 1 (14)(b) of the

Interstate Commerce Act. While it appears obvious,

under the Commission's Second Supplemental Order,

dated December 9, 1959, that the Commission was in-

vestigating the reasonableness of all charges for

mechanical protective services against heat or cold

“contained in contracts or amendments to contracts

which require approval” under See, 1 (14)(b) of the

Act (see 318 L.C.C. 111, at 112), the status of railroads

who did not actually appear in the proceeding, or who

have not presently entered into express bilateral pro-

tective service contracts, is a legal question which is

beyond the scope of Ex Parte No. 137. Moreover, it is

irrelevant and immaterial to the disposition of the

E-37

ultimate issue in this litigation, which is whether PFE

is entitled to recover the reasonable value of the ser-

vices performed by PFE for and in behalf of the de-

fendants in supplying them with mechanical protective

service against heat or cold.)

Answer: Yes, The rules and regulations preseribed in

connection with the Twentieth Supplemental Report in

Contracts for Protective Services, 318 1.C.C. 111, are the

result of an investigation to determine, among other things,

whether the findings and orders in prior proceedings in bey

Parte No. 137 should be modified, changed, or amended in

any respect. See second supplemental order, December

1959, 24 FR. 10420, Notice of the pendency of the proceed-

ing which resulted in the Twentieth Supplemental Report

was given by publication in the Federal Register, as cited

above, Subsequently, hearings were condueted in which any

interested railroad not specifically named as a respondent

could have participated, Thus, compliance was made with

the notice and hearing requirements for rulemaking con-

tained in the Administrative Procedure Aci, sections 553(b)

and (¢). Having fulfilled the requirements for rulemaking,

the Commission clearly intended that the rules and regula-

tions prescribed in connection with the Twentieth Supple-

mental Report would have applicati

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