Chicago & North Western Ry. Co. v. Union Packing Co.

• Citation: 373 F. Supp. 734
• Decision Date: 22 February 1974
• Docket Number: Civ. No. 71-0-392.
• Parties: CHICAGO AND NORTH WESTERN RAILWAY COMPANY, a corporation, Plaintiff, v. UNION PACKING COMPANY, a corporation, Defendant.
• Court: U.S. District Court — District of Nebraska

373 F. Supp. 734

CHICAGO AND NORTH WESTERN RAILWAY COMPANY, a corporation, Plaintiff, v. UNION PACKING COMPANY, a corporation, Defendant.

Civ. No. 71-0-392.

United States District Court, D. Nebraska.

February 22, 1974.

COPYRIGHT MATERIAL OMITTED

Gaines, Spittler & Otis, Omaha, Neb., for plaintiffs.

White, Lipp, Simon & Powers, Omaha, Neb., for defendant.

MEMORANDUM OPINION

SCHATZ, District Judge.

This matter is before the Court upon the filing of a complaint by the Chicago and North Western Railroad Company against the Union Packing Company seeking money damages for freight charges allegedly due and unpaid. The defendant counterclaims for property damage and cartage expenses it incurred in connection with prior shipments via the plaintiff railroad. This Court has jurisdiction of the controversy by virtue of 28 U.S.C. § 1337 and 49 U.S.C. § 1 et seq. The facts have been agreed upon by the parties and the matter has been submitted to the Court, without formal hearing, on stipulations of fact and briefs of counsel. Since the defendant does not contest its liability for the freight charges, asserting that because of its counterclaims, it is not indebted to the plaintiff in any amount, the Court finds that there is no real issue concerning the defendant's liability for the freight charges and confines its examination to the issues raised by the defendant in its counterclaims.

I.

The defendant's first counterclaim arises out of a contract between the parties for shipment of fresh beef. Under the contract, the plaintiff railroad was to pick up the beef at the defendant's place of business, carry it to the rail lines, transport it to Chicago, and deliver it to the consignee. This last delivery service is known as "cartage." When the carloads of beef reached Chicago, the plaintiff did not perform the cartage service because of a Teamsters' strike. Due to the strike, the plaintiff declared an embargo on shipments entering Chicago, but continued to accept shipments provided the shipper arranged for its own cartage at Chicago and consigned the shipments to itself. The defendant elected to ship its beef under these conditions and, in its first counterclaim, seeks to recoup from plaintiff the cartage expenses it incurred as a result of the embargo.

An embargo has been defined as "an emergency measure placed in effect because of some disability on the part of the carrier which makes the latter unable properly to perform its duty as a common carrier. It is not promulgated for protection of the shipper or the consignee but to protect transportation generally." See Froehling Supply Co. v. United States, 194 F.2d 637, 641 (7th Cir. 1952). This is substantially the same definition given the term in Holt Motor Co. v. Nicholson Universal S.S. Co., 56 F.Supp. 585 (D.Minn.1944). Further, as stated in Holt Motor, it is the right of a carrier to establish an embargo if circumstances warrant it, and the right of the carrier to determine in the first instance the need of an embargo and the right to place that embargo for the proper conduct of its business are well settled. Pennsylvania Railroad Co. v. Puritan Coal Mining Co., 237 U.S. 121, 35 S.Ct. 484, 59 L.Ed. 867 (1915); Asbury v. Chesapeake & Ohio Ry. Co., 314 F.Supp. 310 (D.D.C.1970); New York Central R. R. Co. v. United States, 201 F.Supp. 958 (S.D.N.Y.1962); United States v. Metropolitan Lumber Co., 254 F. 335 (D.N.J.1918); Chamber of Commerce v. B & O Railroad Co., 45 I. C.C. 40 (1917). The merits and reasonableness of the embargo in question are not seriously contested by the defendant herein¹ and in any event, it would appear that the initial validity of an embargo and the reasonableness of its continuance involve a question which rests exclusively within the jurisdiction of an administrative body and not the Court. As stated in Holt, supra, 56 F.Supp. at page 592, by Judge Nordbye:

It is an exclusive factual question which involves extrinsic evidence.

See also United States v. Metropolitan Lumber Co., supra, 254 F. at 348.

Plaintiff argues that the embargo in question absolves it from all damages resulting to shippers, including defendant, as a consequence of the plaintiff's inability to provide the cartage service. Defendant asserts that it is unjust and inequitable to permit the plaintiff railroad to collect prepaid freight charges, including cartage, for service not actually rendered. In the instant case, the embargo constitutes an amendment to the ordinary tariff during the time that the embargo remains in effect. Here, defendant elected to accept shipping conditions calling for a specific service to be performed for a specific and duly published rate with full knowledge of the limitations on the service because of the embargo. In this situation, it is well settled that the defendant shipper is not entitled to payment for damages, or recoupment, which results from such an embargo. This precise question was before the Court in Asbury, supra, wherein the Court held, 314 F.Supp. at page 313:

The embargo being lawfully invoked there are no damages to be recovered.

Similar holdings were set forth in Holt Motor, supra, and Froehling Supply Co., supra.

Thus, where prompt notice of the embargo is given to the shipper, and the validity of the embargo has been established, the shipper is not entitled to payment for damages, or to recoup for damages, which result from the embargo. Therefore, defendant is precluded here from recovery on its first counterclaim.

II.

The defendant's second counterclaim arises from yet another shipment of fresh beef carried by the plaintiff for the defendant. This shipment was received by the plaintiff as the initiating carrier and was transferred at some point by the plaintiff to the Boston and Maine Railroad for delivery to the destination. Upon delivery by the Boston and Maine, the consignee rejected the beef on the grounds that it was damaged. The Boston and Maine then sold the beef for salvage. The proceeds of this sale, however, have not been remitted to the defendant because the Boston and Maine is in reorganization and the proceeds have been impounded by the court in which the reorganization is pending. At the time of delivery of the beef by defendant to the plaintiff, it was in an unspoiled and merchantable condition, and had a fair market value of $15,145.21. The salvage sale by the Boston and Maine produced $9,589.11. The plaintiff has offered defendant the difference between these two sums (and thereby impliedly admitted that the plaintiff is liable for this amount of damage to the beef), but the defendant has refused this amount and demands the entire $15,145.21. Thus, the real question concerning the second counterclaim is which party is to be required to assert a claim in the reorganization proceedings of the Boston and Maine Railroad.

The liability of the initiating carrier is governed by 49 U.S.C. § 20(11), sometimes referred to as the Carmack Amendment. Under this statute the initiating carrier is liable to the shipper for the full amount of any damage to the goods occurring while they are in the care of the initiating carrier, any of the connecting carriers, or the delivering carrier. The initiating carrier is then subrogated to the rights of the shipper as to the damage caused by each of the other carriers. The purpose of the Carmack Amendment is to relieve the shipper of the burden of searching out a particular negligent carrier from among the often numerous carriers handling an interstate shipment. Reider v. Thompson, 339 U.S. 113, 70 S.Ct. 499, 94 L.Ed. 698 (1950). This liability for the full amount of the damages is known as the initiating carrier's insurer liability. However, this insurer liability is not interminable. After a certain point, damage to the shipment is recoverable only from the carrier causing that damage, and not from the initiating carrier. This point is reached when the delivering carrier is no longer acting in the role of a carrier, but rather in the role of a warehouseman. In Adams Seed Co. v. Chicago...