Baltimore & OR Co. v. New York, NH & HR Co.

• Decision Date: 09 July 1961
• Citation: 196 F. Supp. 724
• Parties: BALTIMORE AND OHIO RAILROAD COMPANY et al., Plaintiffs, v. NEW YORK, NEW HAVEN AND HARTFORD RAILROAD COMPANY and Boston & Maine Railroad, Defendants.
• Court: U.S. District Court — Southern District of New York

196 F. Supp. 724

BALTIMORE AND OHIO RAILROAD COMPANY et al., Plaintiffs, v. NEW YORK, NEW HAVEN AND HARTFORD RAILROAD COMPANY and Boston & Maine Railroad, Defendants.

United States District Court S. D. New York.

July 9, 1961.

COPYRIGHT MATERIAL OMITTED

Alexander & Green, New York City, for plaintiff Baltimore and O. R. Co. (Donald M. Dunn, New York City, of counsel).

Clark, Carr & Ellis, New York City, for plaintiffs Atchison, T. and S. F. R. Co. and others (Charles D. Peet, G. Clark Cummings, New York City, Richard R. Bongartz, Philadelphia, Pa., and Smith R. Brittingham, Jr., Chicago, Ill., of counsel).

Richard E. Costello, New York City, for plaintiff Delaware, L. and W. R. Co.

Davis, Polk, Wardwell, Sunderland & Kiendl, New York City, for plaintiff Western Maryland R. Co. (Matthew V. Stepsis, New York City, of counsel).

Gerald E. Dwyer, New York City, for plaintiffs New York Central R. Co. and others (Jerome H. Shapiro, New York City, of counsel).

Richard D. Lalanne, New York City, for plaintiff Lehigh Valley R. Co.

Donovan, Leisure, Newton & Irvine, New York City, for defendants New York, N. H. and H. R. Co. and Boston and M. R. R. (Carl E. Newton, Granville Whittlesey, Jr., Peter B. Spruance, M. Lauck Walton, New York City, and Roger A. Clark, Washington, D. C., of counsel).

William T. Griffin, New York City, for defendant New York, N. H. and H. R. Co.

RYAN, Chief Judge.

In these 109 suits, which have been consolidated by the Court for all purposes, similarly situated railroad plaintiffs seek to recover from railroad defendants The New York, New Haven and Hartford Railroad Company and Boston & Maine Railroad per diem rental rates for the use by defendants of plaintiffs' freight cars at a rate of $2.40 from August 1, 1953 to December 31, 1956 and at a rate of $2.75 from then to date.

Plaintiffs have moved for summary judgment and to strike defendants' Fourth Affirmative Defense and Third Counterclaim as being insufficient in law and on the ground of res judicata.

Defendants have moved for a stay of all the suits pending final determination including judicial review, if any, of two petitions pending before the Interstate Commerce Commission to determine the reasonableness of past per diem rates.

We have before us as a result of extended pretrial hearings a rather voluminous and complete statement of agreed and undisputed facts.

The controversy revolves around the contractual obligation of defendants to pay the per diem rates established by three instruments: "The Car Service and Per Diem Agreement", "The Plan of Organization" and "Agreement No. 7". There is no dispute concerning the making of these agreements, or their execution by the parties. What is in dispute is whether defendants withdrew from them in accordance with their terms.

As stipulated by the parties, the sole issue is: "whether the defendants are obligated to pay the amount of per diem published from time to time subsequent to July 31, 1953 and incorporated as changes in Rule 1(a) of the Per Diem Rules Freight published by the AAR since then." (¶ 24 S of F.)

Each of the several suits is based on "Car Service and Per Diem Agreement" (C.S.P.D.A.) subscribed to by each plaintiff and defendant and filed with the Association of American Railroads or its predecessor wherein each agreed to settle its monthly freight car hire balances at the per diem rate published in Rule 1(a) of the Code of Per Diem Rules— Freight, promulgated by the Association of American Railroads. The rates so published were $2.40 from August 1, 1953 to December 31, 1956; $2.75 from January 1, 1957 to November 30, 1959; and $2.88 since then. The amounts sought to be recovered by plaintiffs represent the difference between these rates and the interim payments made by defendants under a temporary settlement.

It is contended by defendants:

(1) that they are obligated to settle per diem balances only at the rate fixed by Rule 1 at the time they subscribed to the "C.S.P.D.A.", which for defendant New York, New Haven and Hartford was ninety cents when it subscribed in 1920 and for defendant Boston & Maine $1 when it subscribed in 1927, which rates by agreement were increased to $1.15 in 1945 (1st Affirmative Defense);

(2) that the "C.S.P.D.A." ceased to exist in that it was superseded by the later "Agreement No. 7" from which they withdrew in June, 1953; but that in any event if the first agreement continued in effect, plaintiffs may not recover under it because it is illegal under the anti-trust laws (2nd Affirmative Defense);

(3) that defendants have paid more than the reasonable rate for the use of the cars and are entitled to recover these overpayments (3rd Affirmative Defense and 2nd Counterclaim);

(4) that plaintiffs since January 1, 1947 have been conspiring to force defendants to pay fixed charges in violation of Section 5a(6) of the Interstate Commerce Act, 49 U.S.C.A. § 5b(6) and Sections 1 and 2 of the Sherman Act, 15 U.S.C.A. §§ 1, 2, in refusing to negotiate or agree to a reasonable rate outside the agreement and in filing these actions to enforce their illegal agreement (4th Affirmative Defense);

(5) that these suits are in breach of a written agreement by 88 of these plaintiffs not to bring suit, to settle on an interim rate pending final determination by the Commission of the proceedings before it and to be bound by the final determination of a reasonable rate by that body (5th Affirmative Defense).

By way of 3rd Counterclaim, defendants seek under Section 4 of the Clayton Act, 15 U.S.C.A. § 15, treble damages incurred as a result of plaintiffs' coercive measures, their withholding of tariffs and their institution of administrative and judicial proceedings.

Plaintiffs reply that while defendants could have withdrawn from their obligation under the C.S.P.D.A. on three months' previous notice in writing to the General Secretary of the Association, they did not do so, that these agreements are continuing obligations not superseded by Agreement No. 7 and defendants' withdrawal, which is not disputed, from that agreement did not effect withdrawal from the earlier agreement. Plaintiffs also deny that the C.S.P.D.A. is illegal and assert that in any event this is a question which has been determined adversely to defendants by the Interstate Commerce Commission and the district court of Massachusetts.

Resolution of the issue before us requires a reading of the agreements in question and the circumstances surrounding their evolution.

The Per Diem Rules Agreement:

As early as 1902 the major railroads including the two defendants had gotten together to work out a uniform system for freight car rentals on a per diem basis. The first formal agreement was the "Per Diem Rules Agreement", which made binding upon each of the subscribers per diem rules regulating rental of one another's cars. This had been promulgated by the American Railway Association—a voluntary association of which defendants and most of the major railroads were members.

Under it, each "subscriber railroad company promises and agrees with each railroad company severally which subscribes and files a counterpart hereof with the secretary of the American Railway Association, that the subscriber will abide by the rules governing settlements for the use of freight cars, adopted by the association and designated `per diem rules' on the minutes of its proceedings; this agreement to continue for one year beginning July 1st, 1902, and thereafter until withdrawn on or after July 1st, 1903, by three months previous notice in writing to the secretary of the association."

By 1916 the dates in the Agreement had been eliminated and the "per diem rules" had been incorporated in a "Code of Per Diem Rules", and a "Code of Car Service Rules" governing the interchange, use and return of freight cars which had been adopted by the members of the American Railway Association.

Substantial changes were made in that year in the Codes, among them an increase in the per diem rate fixed by Rule 1 of the Codes and an increase in the power of the Association's Commission on Car Service created by the Code of Per Diem Rules to add to or modify any of the Car Service or Per Diem Rules. No provision was made for resubscription then or in the future by any of the railroads which had subscribed prior to that time in order to be bound by the changes then effected and further contemplated. That no such resubscription was considered necessary in order to make the changes binding on the various subscribers is clear from this and from the fact that subsequent changes in December, 1916 and 1917 were made and that both defendants settled their per diem balances accordingly.

In May 1917 the Esch Car Service Act (40 Stat. 101; amended by Transportation Act of 1920 (41 Stat 456, 476) now 49 U.S.C.A. § 1(10)-1(17)) was enacted imposing upon every carrier subject to the Interstate Commerce Act (I.C.A.) the duty to establish and enforce just and reasonable rules with respect to car service and declaring every such unreasonable rule or regulation unlawful. The Interstate Commerce Commission, which was given authority to establish such reasonable rules and punish for non-observance, created the Bureau of Car Service to administer its powers under the Act; this Bureau worked directly with the American Railway's Association's Commission on Car Service to help it establish and enforce reasonable rules and practices with respect to car service.

The Car Service and Per Diem Agreement:

In March 1920, upon the return by the Government of the railroads to their owners after wartime operation, "The Car Service and Per Diem Agreement" was made and counterparts were subscribed to and filed by most of the major railroads including the defendants.

This agreement provided:

"The subscribing railroad company promises and agrees with each railroad company severally which subscribes and files a counterpart hereof with the General Secretary

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