Advance United Expressways, Inc. v. Eastman Kodak Co.

• Citation: 965 F.2d 1347
• Decision Date: 26 June 1992
• Docket Number: No. 91-1320,91-1320
• Parties: ADVANCE UNITED EXPRESSWAYS, INC., Plaintiff-Appellee, v. EASTMAN KODAK COMPANY, Defendant-Appellant.
• Court: United States Courts of Appeals. United States Court of Appeals (5th Circuit)

Page 1347

965 F.2d 1347

ADVANCE UNITED EXPRESSWAYS, INC., Plaintiff-Appellee, v. EASTMAN KODAK COMPANY, Defendant-Appellant.

No. 91-1320.

United States Court of Appeals Fifth Circuit.

June 26, 1992.

Byron D. Olsen, Barbara R. Kueppers, Felhaber, Larson, Fenlon & Vogt, Minneapolis, Minn., for Eastman Kodak.

Nicholas J. DiMichael, Richard D. Fortin, Donelan, Cleary, Wood & Maser, Washington, D.C., for amicus curiae Nat. Indus. Trans. League.

Judith A. Albert, Atty., I.C.C., Washington, D.C., for amicus curiae I.C.C.

Paul O. Taylor, Minneapolis, Minn., David G. Sperry, Independence, Mo., Daniel J. Sweeney, McCarthy, Sweeney & Harkaway, Washington, D.C., for amicus curiae Health & Personal Care Dist. Conference, et al.

Appeal from the United States District Court for the Northern District of Texas.

Before GOLDBERG, JOLLY, and WIENER, Circuit Judges.

E. GRADY JOLLY, Circuit Judge:

In this interstate tariff undercharge case, we examine the roles played by the Interstate Commerce Commission and the district courts when the reasonableness of a tariff rate or practice is at issue. For the reasons set forth below, we hold that, in the light of Maislin Industries, U.S., Inc. v. Primary Steel, Inc., 497 U.S. 116, 110 S.Ct. 2759, 111 L.Ed.2d 94 (1990), shippers may assert rate unreasonableness as a defense in an action by a carrier for undercharges and that district courts should refer issues pertaining to rate unreasonableness in such cases to the Interstate Commerce Commission.

I

Advance United Expressways, Inc. ("Advance") hauled cargo for the Eastman-Kodak Company ("Kodak") at rates below the rates in some of the tariffs Advance posted with the ICC. Advance filed for Chapter 11 bankruptcy in Minnesota in 1987.

In 1988, a rate auditor for Advance's bankruptcy estate began billing Kodak for "undercharges," or the difference between the amount paid and the applicable tariff price, on some 7,596 freight bills.

In May 1989, Kodak sought a declaratory order from the Interstate Commerce Commission ("ICC" or "Commission") declaring Advance's rates and practices unreasonable. Advance moved for a contempt order in bankruptcy court, alleging Kodak's petition for a declaratory order violated the automatic stay. The ICC action was then stayed until the bankruptcy stay was lifted on August 14, 1989.

On August 9, 1989, Advance sued Kodak in the United States district court in Dallas, seeking $456,838 in undercharges. Kodak moved for a stay pending the ICC ruling, which was denied. At the invitation of the court, Advance filed its motion for summary judgment on December 22, 1989.

Meanwhile, the ICC had lifted the stay on its proceedings in August 1989. Both Advance and Kodak submitted evidence to the Commission. In February 1990, the ICC ruled for Kodak, applying the Commission's "negotiated rates policy." This policy provides that, because a carrier is responsible for filing a new tariff when it negotiates a rate below the existing filed tariff's rate, the carrier who fails to file a new tariff, but later tries to collect undercharges on the higher rate of the old filed tariff, acts unreasonably. ¹ Thus, Advance's attempt to collect undercharges was an unreasonable practice. The Commission also considered arguments that tariff ADUE 652, a tariff rate with a 20% discount, governed some portion of the shipments in dispute. The Commission found that letters from Advance to Kodak satisfied a "letter of participation" provision of ADUE 652 and that the discounts in the letters that conformed to ADUE 652 governed the shipments. The Commission separately found that Advance's distinct practices

(1) of negotiating rates, billing and accepting payment at the negotiated rate, but assertedly failing to file the rates; (2) of billing and accepting payment under discount programs provided for in a filed tariff and written agreements of participation, but denying the applicability of such discounts, ...

were unreasonable.

In March 1990, the district court stayed proceedings pending a ruling by the United States Supreme Court in Maislin, which was issued in June. 497 U.S. 116, 110 S.Ct. 2759, 111 L.Ed.2d 94 (1990). In Maislin, the court struck down the negotiated rates doctrine as violative of the "filed rate doctrine." As its name implies, this doctrine derives from the Interstate Commerce Act requirement that a carrier's rate be filed, 49 U.S.C. § 10761, and which, simply stated, is that

this rate is the only lawful charge. Shippers and travellers are charged with notice of it, and they as well as the carrier must abide by it, unless it is found by the Commission to be unreasonable. Ignorance or misquotation of rates is not an excuse for paying or charging either less or more than the rate filed.

Louisville & Nashville R. Co. v. Maxwell, 237 U.S. 94, 97, 35 S.Ct. 494, 495, 59 L.Ed. 853 (1915), quoted in Maislin, 110 S.Ct. at 2765, 2766.

Following the decision in Maislin, on November 30 the district court entered summary judgment for Advance. The court rejected Kodak's argument based upon the ICC's 1990 decision as an argument based solely on the negotiated rates policy discredited in Maislin. The court further refused to hear the defense that the filed rate was unreasonable. Citing our opinion in In re Caravan Refrigerated Cargo, Inc., 864 F.2d 388 (5th Cir.1989), the court held that, although Kodak may properly raise the issue of rate unreasonableness before the ICC, Kodak may not raise the issue as a defense in the action for undercharges. The court, therefore, awarded Advance the entire amount requested and also granted prejudgment interest from the dates of shipment. Two weeks later, judgment was entered for $469,244.78 in undercharges, $150,079 in interest, and $120 in costs. Kodak moved for reconsideration, and later for alteration or stay of the judgment, all of which were denied.

On July 12, 1991, the ICC granted a petition by Kodak to reopen its proceedings against Advance in the light of Maislin. That decision reaffirmed the determination that the 20% discount rate applied to a significant number of the disputed bills. The ICC has set a schedule for the introduction of evidence on the reasonableness of Advance's tariffs.

Kodak here appeals the summary judgment entered by the district court. Kodak has taken pains to point out that it does not appeal the refusal of the district court to apply the negotiated rates doctrine. Instead, Kodak attacks the summary judgment by raising three distinct arguments: (1) the district court should have deferred to the ICC in its decision on the applicable tariff; (2) Kodak should have been allowed to present its defense that the tariffs were unreasonable; and (3) if the court refused to grant Kodak an opportunity to present its defense of unreasonableness, then the court should have stayed its proceedings to allow the ICC to rule on the issue. ²

II

We review de novo the summary judgment, applying the same standards of law as those available to the district court. Trial v. Atchison, Topeka and Santa Fe R. Co., 896 F.2d 120, 122 (5th Cir.1990). Therefore, to sustain the summary judgment rendered below, we must find that there is "no genuine issue as to any material fact and that the moving party is entitled to judgment as a matter of law." Fed.R.Civ.P. 56(c).

III

Our consideration of this appeal begins with an examination of the recent United States Supreme Court opinion in Maislin, a case whose issues and procedural history are similar to our case today. Maislin, a bankrupt carrier, sued a shipper, Primary, for undercharges for freight shipments carried over two years. Primary answered, asserting defenses that the asserted tariff rates were inapplicable to the shipments in issue, that the rates sought were unreasonable, and that the practice of negotiating a rate lower than the tariff and rebilling at the higher tariff rate was unreasonable. The district court found that these defenses raised issues in the "primary jurisdiction" of the ICC, ³ stayed the court proceedings, and referred the matter to the Commission. Maislin, 110 S.Ct. at 2764. The ICC ruled in Primary's favor, basing its decision on its negotiated rates policy, but not reaching the issue of reasonableness of the rates. Id., and at 2767 n. 10. The district court relied upon the ICC ruling and granted summary judgment to Primary. The Eighth Circuit affirmed. Maislin Industries v. Primary Steel, Inc., 879 F.2d 400 (8th Cir.1989).

As we described above, the Supreme Court reversed, holding that the negotiated rates policy of the ICC is contrary to the purpose and scheme of the Interstate Commerce Act, primarily because the negotiated rates policy undermines the filed rate doctrine, which is fundamental to achieving the purposes of the Act, to provide all shippers a uniform non-discriminatory rate. Maislin, 110 S.Ct. at 2765-2767, 2770-2771. The court then restated the inherent limitation of the filed rate doctrine: The filed rate is not enforceable if it is unreasonable. Maislin, 110 S.Ct. at 2761, citing, e.g., Louisville and Nashville R. Co. v. Maxwell, 237 U.S. 94, 35 S.Ct. 494, 59 L.Ed. 853 (1915). Because the ICC had yet to determine whether the tariff rate was itself unreasonable, the court assumed, for the purposes of its opinion, that the rates were reasonable. Maislin, 110 S.Ct. at 2767, n. 10. Significantly, the court noted that, "The issue of the reasonableness of the tariff rates is open for exploration on remand." Id.

IV

With the lessons of Maislin in mind, we now turn to the issues raised in this appeal. The district court applied the filed rate doctrine, relying on Maislin, to reject Kodak's position based on the ICC application of its negotiated rates policy. On those grounds, the court granted summary judgment for Advance. Kodak argues that summary judgment was inappropriate because questions of material fact persisted: which tariffs governed the bills in dispute and whether the rates applied...