Bankruptcy Estate of United Shipping Co., Inc. v. General Mills, Inc.

• Decision Date: 07 September 1994
• Docket Number: No. 93-1232,93-1232
• Citation: 34 F.3d 1383
• Parties: The BANKRUPTCY ESTATE OF UNITED SHIPPING COMPANY, INC., Appellant, v. GENERAL MILLS, INC., Appellees. United States of America, on behalf of the Interstate Commerce Commission, Intervenor-Appellee.
• Court: U.S. Court of Appeals — Eighth Circuit

Page 1383

34 F.3d 1383

25 Bankr.Ct.Dec. 1732

The BANKRUPTCY ESTATE OF UNITED SHIPPING COMPANY, INC., Appellant, v. GENERAL MILLS, INC., Appellees United States of America, on behalf of the Interstate Commerce Commission, Intervenor-Appellee.

No. 93-1232.

United States Court of Appeals, Eighth Circuit.

Submitted Oct. 11, 1993.

Decided Sept. 7, 1994.

Thomas E. Wolff, Eden Prairie, MN, argued, for appellant.

Brent William Primus, Minneapolis, MN, argued (Louis A. Harris and William J. Augello, on the brief), for appellee.

Before McMILLIAN, Circuit Judge, LAY, Senior Circuit Judge, and BOWMAN, Circuit Judge.

McMILLIAN, Circuit Judge.

The Bankruptcy Estate (Estate) of United Shipping Co. (United), the plaintiff in an adversary proceeding in the bankruptcy court, appeals from a final judgment entered in the District Court for the District of Minnesota ¹ that affirmed the order of the bankruptcy court ² awarding summary judgment in favor of General Mills, Inc. (General Mills). In re United Shipping Co., No. 3-92-0668, 1992 WL 683810 (D.Minn. Dec. 24, 1992), aff'g No. 4-88-533 (Bankr.D.Minn. Aug. 27, 1992) (No. ADV 4-89-345). The United States intervened in the appeal on behalf of the Interstate Commerce Commission (Commission or ICC) because Estate challenged the bankruptcy court's decision to give effect to a determination made by the ICC, pursuant to the bankruptcy court's referral, that the transportation relationship between United and General Mills constituted contract carriage. General Mills, Inc., 8 I.C.C.2d 313 (1992) (General Mills ). For reversal, Estate argues that the district court erred in applying a deferential standard of review and in affirming the decision of the ICC because the ICC failed to follow its own precedents and in effect improperly attempted to retroactively invalidate the applicable regulation, 49 C.F.R. Sec. 1053.1 (1991). Estate also argues the bankruptcy court erred in failing to award prejudgment interest. For the reasons discussed below, we affirm in part and reverse in part and remand the case with directions.

REGULATORY BACKGROUND

The ICC is an independent regulatory agency charged by Congress to administer the Interstate Commerce Act (ICA), as amended, 49 U.S.C. Sec. 10101 et seq., including the regulation of interstate motor carrier transportation. To lawfully provide interstate motor carriage, a person must obtain appropriate operating authority from the ICC. Id. Secs. 10921-10923. The ICC has plenary power to supervise and insure that carriers comply with their licensing permits. Id. Secs. 10925, 11701(a), 11702(a)(4).

Motor carriers regulated by the ICC can operate as contract carriers as well as common carriers. Common carriage involves services that are held out indiscriminately to all shippers; contract carriage is limited to shippers with which carriers enter into specific agreements or contracts. A carrier may be licensed to provide services in one or both capacities. Id. Secs. 10102(14), 10923(b). The prohibition against "dual operations," that is, providing both common and contract carriage, was eliminated in 1980. Motor Carrier Act of 1980; Pub.L. No. 96-296, 94 Stat. 793 (repealing 49 U.S.C. Sec. 10930(a)(1)). This case demonstrates the difficulties one encounters in distinguishing contract carriage from common carriage.

Motor common carriers must publish and file tariffs with the ICC containing their transportation rates. 49 U.S.C. Sec. 10762; see e.g., Security Services, Inc. v. K Mart Corp., --- U.S. ----, ----, 114 S.Ct. 1702, 1706, 128 L.Ed.2d 433 (1994). The applicable tariff rate (the filed rate) filed by a common carrier is the legal rate and the only rate that the carrier may charge, and that a shipper may pay, for common carriage unless and until that rate is set aside by the ICC as unreasonable or unlawful. 49 U.S.C. Sec. 10761(a); Maislin Industries, U.S., Inc. v. Primary Steel, Inc., 497 U.S. 116, 120, 128-29, 110 S.Ct. 2759, 2762-63, 2766-67, 111 L.Ed.2d 94 (1990) (Maislin); ICC v. American Trucking Ass'ns, 467 U.S. 354, 360 n. 4, 104 S.Ct. 2458, 2462 n. 4, 81 L.Ed.2d 282 (1984) (American Trucking ); see also Reiter v. Cooper, 113 S.Ct. 1213 (1993). The purpose of the filed rate doctrine is to prevent rate discrimination and to promote rate stabilization.

Motor contract carriage is exempt from the tariff filing requirement and, therefore, the filed rate doctrine does not apply to shipments that move as contract carriage. 49 U.S.C. Secs. 10761(b), 10762(f); Exemption of Motor Contract Carriers from Tariff Filing Requirements, 133 M.C.C. 150 (1983), aff'd sub nom. Central & Southern Motor Freight Tariff Ass'n v. United States, 244 U.S.App.D.C. 226, 757 F.2d 301, cert. denied, 474 U.S. 1019, 106 S.Ct. 568, 88 L.Ed.2d 553 (1985). Yet, like the obligation of a common carrier to adhere to its filed rates, a contract carrier must observe the limits of its operating permit and may not, under its contract permit, provide or unilaterally recharacterize its service as a common carriage. If a contract carrier believes that its operations have crossed over into common carriage, it must test that in a proceeding brought before the ICC and, if necessary, have the ICC modify or revoke its contract carriage permit. 49 U.S.C. Sec. 10925(e); see Global Van Lines, Inc. v. ICC, 704 F.2d 829, 833-34 (5th Cir.1983).

Because Congress has given the ICC broad regulatory responsibility over a carrier's contract carriage operations, ICC v. J-T Transport Co., 368 U.S. 81, 88, 82 S.Ct. 204, 209, 7 L.Ed.2d 147 (1961), it is for the ICC to interpret and apply the statutory standards that define contract carriage. Atlantis Express, Inc. v. Standard Transportation Services, Inc., 955 F.2d 529, 532-34 (8th Cir.1992). The ICA defines a contract carrier as a person providing motor carriage under continuing agreements by either assigning vehicles for the exclusive use of a shipper or providing service designed to meet that shipper's distinct needs. 49 U.S.C. Sec. 10102(15)(B)(ii). At the time of the General Mills decision (March 1992), ICC regulations also required that contract carrier agreements be bilateral and in writing, provide for transportation for a particular shipper or shippers, impose specific obligations upon both carrier and shipper or shippers, and cover a series of shipments during a stated period of time in contrast to separate contracts of carriage governing individual shipments. See 49 C.F.R. Sec. 1053.1 (1991) (repealed, effective June 20, 1992, in Contracts for Transportation Property, Ex Parte No. MC-198 (I.C.C. Mar. 5, 1991, Sept. 11 1991), 8 I.C.C.2d 520 (1992), appeal dismissed sub nom. Central States Motor Freight Bureau, Inc. v. United States, No. 92-1258, 1993 WL 558020 (D.C.Cir. Dec. 28, 1993) (order)). ³

BACKGROUND FACTS

General Mills, a national producer and distributor of food products, began using United's common carriage service in 1982. In September 1985, United obtained contract carriage authority from the ICC, and in October 1985 entered into a written agreement with General Mills for transportation service. The agreement provided that: (1) United was a contract carrier desiring to provide service to General Mills in that capacity; (2) General Mills agreed to tender shipments to United for motor transport; (3) United would maintain and operate a sufficient and adequate amount of equipment to furnish service to General Mills according to the contract; and (4) the agreement would continue until either party terminated it by 30 days written notice or if United's contract carrier operating authority was revoked, suspended, or cancelled. Compensation for this transportation was based on rate schedules that were periodically revised and updated as appendices to the agreement.

After the agreement was executed, United cancelled its common carriage tariffs that were applicable to General Mills' traffic, effective November 1985. Between November 1985 and December 1987, General Mills tendered some 3,000 shipments to United, including both customer deliveries and interplant shipments between its flour mills, production plants, and distribution centers. At rates set pursuant to the agreement, General Mills paid United millions of dollars in freight charges.

After initiation of Chapter 11 bankruptcy proceedings by United, Estate brought an adversary proceeding against General Mills to collect roughly $63,000 in undercharges on 695 of the shipments, contending that the shipments moved as common carrier rather than contract carriage and thus were subject to common carrier tariff rates. General Mills contended that the shipments satisfied all statutory and regulatory requirements and properly moved as contract carriage. By stipulation of the parties, the bankruptcy court stayed the adversary proceeding and referred the underlying regulatory issues to the ICC.

ICC DECISION

Estate did not dispute or refute any of General Mills' allegations of fact or the language of the agreement. Estate argued that (1) the agreement did not meet the "exclusive use" or "distinct needs" tests of 49 U.S.C. Sec. 10102(15) because there were no provisions in the agreement that explicitly addressed either of those requirements, and (2) the agreement did not satisfy the "series of shipments" and "bilateral obligations" requirements of 49 C.F.R. Sec. 1053.1 because it did not require General Mills to tender a particular number of shipments to United. Estate also contended that the agreement failed to provide for a written schedule of rates at all times.

After examining all of the evidence, including the agreement, the parties' subsequent conduct, and all circumstances surrounding this traffic, the ICC found that the shipments moved as contract carriage. 8 I.C.C.2d at 320-25. The ICC found that the agreement provided that the parties intended that the shipments would move under United's contract carriage permit, the agreement would terminate if United's contract...