Cincinnati, NO & TP Ry. Co. v. Chesapeake & O. Ry. Co.

• Decision Date: 29 April 1971
• Docket Number: No. 14997-14999.,14997-14999.
• Citation: 441 F.2d 483
• Parties: The CINCINNATI, NEW ORLEANS & TEXAS PACIFIC RAILWAY CO., Appellant, v. The CHESAPEAKE AND OHIO RAILWAY CO., Appellee. The CINCINNATI, NEW ORLEANS & TEXAS PACIFIC RAILWAY CO., Appellant, v. The BALTIMORE AND OHIO RAILROAD COMPANY, Appellee. The CINCINNATI, NEW ORLEANS & TEXAS PACIFIC RAILWAY CO., Appellant, v. PENN CENTRAL TRANSPORTATION COMPANY, Appellee.
• Court: U.S. Court of Appeals — Fourth Circuit

441 F.2d 483 (1971)

The CINCINNATI, NEW ORLEANS & TEXAS PACIFIC RAILWAY CO., Appellant, v. The CHESAPEAKE AND OHIO RAILWAY CO., Appellee.

The CINCINNATI, NEW ORLEANS & TEXAS PACIFIC RAILWAY CO., Appellant, v. The BALTIMORE AND OHIO RAILROAD COMPANY, Appellee.

The CINCINNATI, NEW ORLEANS & TEXAS PACIFIC RAILWAY CO., Appellant, v. PENN CENTRAL TRANSPORTATION COMPANY, Appellee.

Nos. 14997-14999.

United States Court of Appeals, Fourth Circuit.

Argued February 10, 1971.

Decided April 29, 1971.

H. Merrill and Pasco, Richmond, Va. (Hunton, Williams, Gay, Powell & Gibson, Richmond, Va., James L. Tapley and Peter S. Craig, Washington, D. C., on brief) for appellant.

Albert W. Laisy, Baltimore, Md. (Howard W. Smith, Jr., Alexandria, Va., on brief) for appellees.

Before SOBELOFF, BRYAN, and BUTZNER, Circuit Judges.

BUTZNER, Circuit Judge:

This case raises questions about the effects of published tariffs on previously existing private agreements among railroads. The district court held that where the public is not directly affected, preexisting agreements prevail over tariffs, and that the charges due under the tariffs are not collectible. Cincinnati, N. O. & T. P. Ry. v. Chesapeake & O. Ry., 312 F.Supp. 972 (E.D.Va.1970). We reverse.

I

Seven major railroads interchange about thirty-five thousand cars a week in the Cincinnati terminal district, one of the largest rail gateways in the United States. As a consequence of the heavy traffic, switching operations are unusually complicated, and frequently the interchange of cars between connecting lines involves crossing or using the trackage of railroads not engaged in a particular transfer. To improve railroad service through uniform procedures, the companies organized the Cincinnati Superintendents Committee under informal articles of association adopted in 1932. The committee agreed on five rules which, from all that appears, have remained in effect and unchanged since 1932. Rule 4 provides there will be no return charge for cars switched in error to a member railroad.¹ The controversy leading to this case arose after the Cincinnati, New Orleans & Texas Pacific Railway Company (CNO) concluded that Rule 4 was imposing on it too great a share of the cost of handling railroad cars switched in error.

Ideally, cuts of railroad cars are interchanged accompanied by waybills for each car. In some instances, however, one or more cars in a cut are delivered ahead of their waybills. Since the missing waybills usually soon follow, the connecting line accepts these cars even though it is not obliged to do so. This practice, standard procedure for all the member railroads, saves the delivering line the expense of removing cars from a cut only to replace them when waybills appear.

Sometimes, cars having delayed waybills are tendered to the wrong connecting line. Under Rule 4, the railroad accepting delivery of misrouted cars absorbs the costs of storing and returning them. Since the line to which misrouted cars are transferred gets no part of the shipper's fee, Rule 4 effectively shifts the costs of the mistaken delivery away from the company responsible for the error. As should be apparent, Rule 4 taxes lines with reliable waybill procedures for their efficiency, and relieves the less attentive lines from the effects of their mismanagement. Nonetheless, the railroads serving Cincinnati observed Rule 4 without objection until the CNO attempted to have the rule rescinded.

In early 1968, the CNO announced that because of the heavy load of misrouted cars it was being forced to service, it intended to file with the ICC a tariff which would have the effect of circumventing Rule 4.² The proposed tariff assessed a charge of twenty dollars for the return of misrouted cars, and a subsequent modification added an assessment of five dollars a day for holding the cars while awaiting instructions from the delivering carrier.³

The other railroads vigorously opposed the tariff. At the April 1968 meeting of the superintendents committee, they voted six to one, the CNO alone dissenting, to retain Rule 4 as originally published, and promised the CNO improved waybilling. Despite the assurances, however, the CNO noticed no appreciable decline in misrouting during the following months.

The CNO published its tariff in September 1968 to take effect after the minimum statutory waiting period.⁴ At the October 1968 meeting, the superintendents committee reaffirmed its opposition to the tariff, and several members petitioned the ICC to suspend it. The ICC, without approving the tariff, refused suspension and it became effective in November 1968.⁵ Three railroads, the Chesapeake & Ohio Railway Company (C&O), the Baltimore & Ohio Railroad Company (B&O), and the Penn Central Transportation Company (Penn Central) refused to abide by the tariff. To recover the assessments due under it, the CNO began this lawsuit.

II

Initially, the appellees contend that the CNO had no right to file and publish a tariff because it was bound by Rule 4 to make no charge for cars switched to it in error. They assert that Rule 4 supplements Rule 7 of the Code of Car Service Rules adopted by the Association of American Railroads.⁶ Rule 7 deals with the delivery of cars for interchange, allocates responsibility for them between the connecting lines, and it authorizes railroads to alter its provisions by entering into special arrangements. In the appellees' view, Rule 4 is just such a special arrangement.

It is doubtful that Rule 7 is applicable, for it is concerned solely with the interchange of cars for which the receiving road receives a division of the joint rates. Rule 4, on the other hand, does not deal with cars that are interchanged, but with cars that are switched in error, and for them the CNO receives no share of the joint rates. Even if Rule 7 is considered applicable, it does not require a carrier to handle misrouted cars free of charge nor does it prevent a carrier from withdrawing from a "special arrangement." The basic Plan of the Association of American Railroads, under whose auspices the Code of Car Service Rules was promulgated, provides in part:

"Nothing in this Plan shall in any way prohibit or restrain any member road from acting individually and independently of the Association or of any and all other member roads with respect to any of the matters covered hereby, and the right of individual and independent action is expressly reserved to each member road."

This clause, adopted to forestall a charge that the members of the association were violating the antitrust laws, was held to authorize a railroad to take independent action by fixing per diem charges different from those prescribed by the association's Car Service and Per Diem Agreement. Baltimore & O. R. R. v. New York, N. H. & H. R. R., 196 F.Supp. 724, 731 (S.D.N.Y.1961). We perceive no reason why the clause should not also mitigate the binding effects that the appellees attribute to AAR Rule 7 and the superintendents' Rule 4.

The appellees also contend that the CNO could not abrogate Rule 4 without totally withdrawing from the superintendents committee. The committee, it must be observed, handles many problems and operating procedures in the sprawling Cincinnati gateway, and its cooperative ventures are of assistance not only to the member railroads, but also to the shipping public which they serve. Expulsion or withdrawal of the CNO, therefore, would not serve the public interest and we would be loath to condition membership on continued adherence to Rule 4. Fortunately, however, this drastic step appears unnecessary. Nothing in the bylaws requires expulsion of a member who declines to furnish service on terms that are no longer acceptable, and the record does not disclose that any member has moved for the CNO's expulsion. Furthermore, while Rule 4 has not been submitted to the ICC for appoval,⁷ had it been submitted, the Commission could not have relieved the railroads from the operation of the antitrust laws unless the superintendents' agreement complied with 49 U.S.C. § 5b(6), which provides:

"The Commission shall not approve under this section any agreement which establishes a procedure for the determination of any matter through joint consideration unless it finds that under the agreement there is accorded to each party the free and unrestrained right to take independent action either before or after any determination arrived at through such procedure."

In view of this strong expression of public policy, we have no hesitancy in concluding that the CNO's affiliation with the American Association of Railroads and with the Cincinnati Superintendents Committee does not prohibit it from taking independent action by filing and publishing a tariff in accordance with 49 U. S.C. § 6 for the handling of misrouted cars.

III

The next question is whether Rule 4 affords the appellees a defense to the CNO's statutory action to recover charges under its tariff. The CNO contends that its tariff is required by the Interstate Commerce Act, and that it is enforceable despite any prior private agreement. In support of its claim that publication of its tariff was mandatory, the CNO refers to § 6(7) of the Act, which prohibits all carriers from extending "to any shipper or person any privileges or facilities in the transportation of passengers or property, except such as are specified in its published tariffs."⁸ The C&O, the B&O, and the Penn Central, on the other hand, argue that charges arising from routing mistakes are not mandatory tariffs, and any right to make assessments under them is subject to pre-existing contracts. They say that § 6(5) of the Act is statutory recognition that arrangements involving transportation can be made by contract instead of by tariff where the services provided are for the benefit of railroads and not the shipping public.⁹

Section 6(7) of the Act leaves little doubt that if the storing and switching of misrouted cars...