Central & Southern Motor Frgt. Tar. Ass'n v. United States

• Decision Date: 29 August 1967
• Docket Number: Civ. A. No. 3224.
• Citation: 273 F. Supp. 823
• Court: U.S. District Court — District of Delaware
• Parties: CENTRAL & SOUTHERN MOTOR FREIGHT TARIFF ASSOCIATION, Inc., et al., Plaintiffs, and Freight Forwarders Institute, Intervening Plaintiff, v. UNITED STATES of America and Interstate Commerce Commission, Defendants, and Railway Express Agency, Inc., and the Drug and Toilet Preparation Traffic Conference, Intervening Defendants.

273 F. Supp. 823

CENTRAL & SOUTHERN MOTOR FREIGHT TARIFF ASSOCIATION, Inc., et al., Plaintiffs, and Freight Forwarders Institute, Intervening Plaintiff, v. UNITED STATES of America and Interstate Commerce Commission, Defendants, and Railway Express Agency, Inc., and the Drug and Toilet Preparation Traffic Conference, Intervening Defendants.

Civ. A. No. 3224.

United States District Court D. Delaware.

August 29, 1967.

COPYRIGHT MATERIAL OMITTED

David A. Drexler, of Morris, Nichols, Arsht & Tunnell, Wilmington, Del., for plaintiffs.

Bryce Rea, Jr., Washington, D. C., for plaintiff motor carrier associations.

William H. Dempsey, Jr., James B. Goodbody, Harry C. Ames, and James L. Givan, Washington, D. C., and Giles Morrow, New York City, for plaintiff freight forwarding companies and intervening plaintiff Freight Forwarders Institute.

Alexander Greenfeld, U. S. Atty., and L. Vincent Ramunno, Chief Asst. U. S. Atty., Wilmington, Del.; Donald F. Turner, Asst. Atty. Gen., John H. D. Wigger and Henri F. Rush, Jr., Attys., Department of Justice, Washington, D. C.; Robert W. Ginnane, General Counsel I.C.C., and Leonard S. Goodman, Asst. General Counsel I.C.C., Washington, D. C., Attys., for United States of America and Interstate Commerce Commission.

John Van Brunt, Jr., of Killoran & Van Brunt, Wilmington, Del., Richard M. Freeman and Nuel D. Belnap, of Belnap, Spencer, Hardy & Freeman, Chicago, Ill., for intervening defendant, Drug and Toilet Preparation Traffic Conference, Inc.

John Van Brunt, Jr., of Killoran & Van Brunt, Wilmington, Del., and William Q. Keenan, New York City, for Railway Express Agency, Inc., intervening defendant.

Before FREEDMAN, Circuit Judge, WRIGHT and LAYTON, District Judges.

OPINION

CALEB M. WRIGHT, District Judge:

This action is brought under 28 U.S. C.A. § 1336 (1966) to set aside two Reports and Orders of the Interstate Commerce Commission. Aggregate Rates on Wearing Apparel—Railway Express Agency, 318 I.C.C. 737 (1963) and 326 I.C.C. 92 (1965). In the 1963 case the Commission found the aggregate rate structure used by the Railway Express Agency (REA) was just and reasonable. In the 1965 Opinion the Commission found the same rate structure was compensatory.

Aggregate rates, for the purposes of this case, are discount rates which apply to shipments of goods from one shipper to multiple consignees, provided the shipper tenders the goods at one time to REA. The size of the discount depends upon the gross weight tendered by the shipper; it ranges from 37.1% of first class for tenders of 300 pounds to 58.6% for tenders of 10,000 pounds.¹

Aggregate rate-making was first successfully employed in 1957 from seven West Coast origin points to all destinations.² As originally published the shipper received a discount if his shipment grossed 300 lbs. and further discounts if his shipment attained 1500 lbs. or 2500 lbs. These 1957 rates were the subject of an investigation, inaugurated on August 31, 1955, which culminated in a Division 3 Opinion sustaining the rates as just and reasonable. Wearing Apparel, Railway Express Agency, Inc., 301 I.C.C. 177 (1957) (hereafter cited as the 1957 Opinion). The 1957 Opinion noted that the rates were instituted to compete with parcel post, and to utilize REA's substantial unused capacity. The Opinion further spoke of "apparent" economies in handling aggregated traffic. These economies were in pickup—"direct labor costs of vehicle service"—in delivery —since the type of traffic shipped generally moved to downtown urban destinations—and in billing and bookkeeping —the 1957 rates were not applicable to collect shipments, so all the parcels aggregated would be billed on one invoice to the shipper.

Subsequently REA put these aggregate rates into effect for New York City shippers to 435 destinations for aggregations of 10,000 lbs., 15,000 lbs., and 20,000 lbs. In 1959 REA sought to reduce the size of the discount accorded 300 lb. aggregations, but the Commission demurred and required instead that REA make its aggregate rates available to all origins and destinations throughout the United States. In 1960 REA published a new tariff extending the aggregate rates to the entire United States, and making them applicable to collect as well as prepaid shipments. Plaintiffs and other competitors of REA complained, and the Commission entered an Order suspending the proposed tariff until September 6, 1960. After vehement protest by REA's shippers, the Commission rescinded its suspension order and permitted the rates to take effect provisionally. In January of 1963, one and one-half years later, Division 2 entered its Opinion without a Report from the Hearing Examiner. This 1963 Opinion, in the main, dealt with the legality of a consolidation rule which applied to collect as well as prepaid shipments. The 1963 Opinion reserved for another proceeding the question of the rate's compensativeness, since the record did not contain certain data requisite to compute the rail-car-foot-mile line-haul expense, an indispensable element in the equation used to determine compensativeness. Finally, on December 7, 1965, the Commission handed down its Opinion finding the aggregate rates compensatory.

The plaintiffs' attack is threefold: 1. the aggregate tariff is discriminatory in violation of 49 U.S.C.A. § 2 (1959); 2. REA's use of a wholly-owned consolidator violates 49 U.S.C.A. §§ 2, 3 (1959); and, 3. as applied to collect shipments, the tariff is fatally vague under 49 U.S.C.A. § 6 (1959). Subsidiary contentions are directed to the Commission's failure to comply with § 8 of the Administrative Procedure Act, 5 U.S.C.A. § 1007(a) (1950). The alleged failure of compliance is twofold: the Commission's bypassing of the examiner's report with the most perfunctory statement of urgency; and the Commission's failure to set forth a complete statement of the reasons supporting its finding of reasonableness.

DISCRIMINATION

Section 2 of the Interstate Commerce Act, 49 U.S.C.A. § 2 (1959) provides:

"If any common carrier subject to the provisions of this chapter shall, directly or indirectly, by any special rate, rebate, drawback, or other device, charge, demand, collect, or receive from any person or persons a greater or less compensation for any service rendered or to be rendered, in the transportation of passengers or property, subject to the provisions of this chapter, than it charges, demands, collects, or receives from any other person or persons for doing for him or them a like and contemporaneous service in the transportation of a like kind of traffic under substantially similar circumstances and conditions, such common carrier shall be deemed guilty of unjust discrimination, which is prohibited and declared to be unlawful."

It is conceded that REA charges a lesser rate for a 100 lb. shipment moving from New York to San Antonio, for example, which is aggregated with other shipments to total 10,000 lbs. than it charges for an unaggregated 100 lb. shipment moving from New York to San Antonio.³ Thus, the relevant question is whether the two shipments hypothesized are given a "like service" and whether they are "a like kind of traffic" being transported "under substantially similar circumstances and conditions."

Since the very inception of the Interstate Commerce Act, it has been recognized that reduced costs for one type of shipment would justify that shipment's receiving a lower rate. E. g., F. B. Thurber v. New York Central & Harlem R. R., 3 I.C.C. 473 (1890). The Interstate Commerce Commission urges forcefully that costs savings are involved here. The Commission argues that a single, as opposed to a multiple, pickup of a given number of packages involves inherent economies which Division 3 alluded to in its 1957 Opinion. The plaintiffs counter by showing that the Commission's 1965 Opinion on the compensatory issue restates REA's origin costs by 50% to 44.85¢.⁴ The plaintiffs' contention is that this restatement of origin costs shatters REA's contention that there are significant operating economies in aggregate service. But, even this restatement of REA's costs leaves a marked discrepancy between origin and destination costs—44.85¢ and 58¢ respectively; origin costs are only 77.3% of destination costs. Not having before it any evidence as to the "normal" relationship between origin and destination costs, this Court is ill-equipped to predicate a finding of the presence or absence of cost savings in aggregate traffic upon so flimsy a foundation.

Hence, since the 1963 opinion makes no mention of cost differentials, and since the 1965 opinion casts some doubt upon the accuracy of the generalities voiced in the Commission's 1957 Opinion, this Court is unclear as to whether there are actual cost differentials between aggregated and ordinary traffic, and just what those differentials may be.

The plaintiffs take the further position that the challenged rate reduction must be no greater than the reduction in costs. In support of this contention they cite a 1933 Commission Opinion which also involved a REA tariff. In the 1933 case REA sought to reduce the rate applicable to express shipments which were consolidated at the consignee's end of the shipment, and delivered at one time. In holding the consolidation rule unreasonable, the Commission said:

"Even were the respective services rendered on each lot as described by respondent, the relative minor differences in service which would ensue are not shown to be sufficiently great to warrant the substantial differences in charge which would result if the proposed rule were approved. Citations omitted." Aggregating Express Shipments, 192 I.C.C. 301, 311 (1933).

Apparently, however, the Commission has retreated from the full implications of the above quotation—that rate reductions must be proportionate to economies—in its more recent opinions. Petroleum Rail Shippers' Ass'n. v. Alton & S. R., 243 I.C.C. 589, 625 (1941). Regardless of...