Covey v. ConAgra, Inc., Civ. A. No. 89-K-1927

• Decision Date: 03 May 1991
• Docket Number: 89-K-1928.,Civ. A. No. 89-K-1927
• Citation: 763 F. Supp. 479
• Parties: Charles COVEY, Trustee for the Bankruptcy Estate of Unzicker Trucking, Inc., Plaintiff, v. CONAGRA, INC., Defendant, Charles COVEY, Trustee for the Bankruptcy Estate of Unzicker Trucking, Inc., Plaintiff, v. TRUC-TRAX, Defendant.
• Court: U.S. District Court — District of Colorado

763 F. Supp. 479

Charles COVEY, Trustee for the Bankruptcy Estate of Unzicker Trucking, Inc., Plaintiff, v. CONAGRA, INC., Defendant, Charles COVEY, Trustee for the Bankruptcy Estate of Unzicker Trucking, Inc., Plaintiff, v. TRUC-TRAX, Defendant.

Civ. A. Nos. 89-K-1927, 89-K-1928.

United States District Court, D. Colorado.

May 3, 1991.

David Oppenheim, Englewood, Colo., for plaintiff.

Peter Greene, Washington, D.C., Terence Ridley, Denver, Colo., and Paul Taylor, Bloomington, Minn., for defendants.

AMENDED ORDER ON MOTIONS FOR SUMMARY JUDGMENT AND MOTIONS TO REFER CASE TO ICC

KANE, Senior District Judge.

These two cases are consolidated for the purpose of ruling on the parties' motions for summary judgment. I will also address the defendants' motions for orders of reference to the Interstate Commerce Commission.

I.

On March 12, 1991, I issued a memorandum opinion and order in Covey v. ConAgra, 758 F.Supp. 644 (D.Colo.1991), which denied ConAgra's motion for an order of reference to the ICC. I denied the motion on the authority of Maislin Industries, U.S., Inc. v. Primary Steel, ___ U.S. ___, 110 S.Ct. 2759, 111 L.Ed.2d 94 (1990). In Maislin, the Supreme Court rejected the "unreasonable practices" defense raised by a shipper who objected to the practice of a bankruptcy trustee attempting to collect undercharges after auditing the freight bills from the estate. The undercharge resulted from a difference between the negotiated rate the shipper actually paid and the legal rate the carrier filed in a tariff with the ICC. Unzicker Trucking is now bankrupt, and its trustee brings these actions to collect the filed rates.

As I explained in my March 12 opinion, the Court in Maislin rejected the "unreasonable practice" defense because it conflicts with the filed rate doctrine. The Court, however, did not address the "unreasonable rate" defense. That question was left "open for exploration on remand." See id., 110 S.Ct. at 2767 n. 10.¹ I amend my earlier order to consider defendants' "unreasonable rate" defense, as well as the pending motions for summary judgment.

II. Covey v. ConAgra, 89-K-1927.

Since the facts are set out in my earlier opinion, I will not repeat them here. Two issues will be considered: ConAgra's motion for an order of reference, and Covey's motion for summary judgment.

I begin with the proposition that the filed rate controls the relationship between the carrier and shipper. The carrier "may not charge or receive different compensation ... than the rate specified in the tariff. 49 U.S.C. § 10761(a) (1989). This proposition is also known as the "filed rate doctrine." The doctrine was first adopted by the Supreme Court in Louisville & Nashville R.R. Co. v. Maxwell, 237 U.S. 94, 97, 35 S.Ct. 494, 495, 59 L.Ed. 853 (1915):

Under the Interstate Commerce Act, the rate of the carrier duly filed is the only lawful charge. Deviation from it is not permitted upon any pretext. Shippers and travelers 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.

ConAgra correctly argues the filed rate must be reasonable, and the filed rate provides for such review. In other words, the tariff or "filed" rate is the "legal" rate. But the legal rate is not the "lawful" rate unless it is reasonable.

ConAgra argues the filed rate in this case is unreasonable and violates 49 U.S.C. § 10701(a) (1988):

A rate ..., classification, rule or practice related to transportation or service provided by a carrier subject to the jurisdiction of the Interstate Commerce Commission under chapter 105 of the title must be reasonable.

According to ConAgra, the entity which determines the reasonableness of a rate is the ICC; the reasonableness issue is within the ICC's primary jurisdiction. See Great Northern Ry. Co. v. Merchants Elevator Co., 259 U.S. 285, 291, 42 S.Ct. 477, 479, 66 L.Ed. 943 (1922).

In evaluating ConAgra's unreasonable rate defense, I am wary of its use to avoid the filed rate doctrine as articulated by the Court in Maislin. Further, I note the delay and complications the bankruptcy process must endure when the estate is referred to an agency, and the trustee must litigate the merits in a third forum. The Supreme Court, however, left open the issue of a reasonable rate defense in cases like these, and I must consider it here.

I reject, however, the idea that a party, simply by mouthing the magic words, "unreasonable rate," wins an automatic trip to the ICC. The party must properly invoke the primary jurisdiction of the agency. The doctrine is invoked when a claim, originally cognizable in the courts, "requires the resolution of issues which, under a regulatory scheme, have been placed within the special competence of an administrative body." United States v. Western Pac. R.R. Co., 352 U.S. 59, 64, 77 S.Ct. 161, 165, 1 L.Ed.2d 126 (1956). The Tenth Circuit directed lower courts to look at the judiciary's familiarity with the issue presented, the need for consistency, and the agency's administrative discretion. Marshall v. El Paso Natural Gas Co., 874 F.2d 1373, 1377 (10th Cir.1989). Agency expertise is also important. See Nader v. Allegheny Airlines, Inc., 426 U.S. 290, 305, 96 S.Ct. 1978, 1987, 48 L.Ed.2d 643 (1976).

I freely recognize the ICC's ability and authority to determine whether a rate is unreasonable. My refusal to grant automatic reference to the ICC is not because I disagree that the ICC has primary jurisdiction over a bona fide rate dispute. Contrary to ConAgra's assertion, my decision is not an exercise of discretion by the trial court. Procedurally, however, I conclude ConAgra has not plead sufficient grounds to warrant a referral.

The filed rate is not discredited merely because the defendants allege it is unreasonable. Unless the ICC concludes otherwise, I presume the filed rates are reasonable.² In any proceeding on the issue of reasonableness before the ICC, the person attacking the rate bears the burden of proving unreasonableness. New Orleans & Lower Coast R.R. Co. v. International Proteins Corp., 514 F.Supp. 46, 49 (E.D.La.1981) (citing Swift & Co. v. United States, 343 U.S. 373, 382, 72 S.Ct. 716, 721, 96 L.Ed. 1008 (1952)). Hence, the defendants seeking an order of reference must make a threshold showing of unreasonableness before I will invoke the primary jurisdiction of the ICC.

My conclusion finds support in Western Pacific. The issue in Western Pacific was one of tariff construction; the item shipped was napalm gel. Since the compound lacked bursters and fuses, the parties clashed on whether the shipment was an "incendiary bomb" or simply "gasoline in steel drums." The Court spoke at length about the doctrine of primary jurisdiction. Although the Court ultimately concluded the issues were best resolved by ICC given its expertise, the Court stated,

No fixed formula exists for applying the doctrine of primary jurisdiction. In every case the question is whether the reasons for the existence of the doctrine are present and whether the purposes it serves will be aided by its application in the particular litigation.

Western Pacific, 352 U.S. at 64, 77 S.Ct. at 165. There is no doubt the ICC and not the courts possesses the expertise to determine a reasonable rate from point A to point B. The district court, however, refers a matter to the ICC when it believes the agency's rate determination will assist in resolving the entire dispute.

Initially, there is a role for the courts to determine the need for the ICC's involvement. Preliminary review in the court deters frivolous delay without infringing on the ICC's primary jurisdiction.

The unreasonable rate defense was not created to insure a role for the ICC, and a preliminary review does not interfere with the ICC's "law making power over certain aspects of commercial relations." Western Pacific, 352 U.S. at 65, 77 S.Ct. at 166. In my earlier order, I cited Justice Harlan's familiar admonition:

The mere fact that the issue is phrased in one instance as a matter of tariff construction and in the other as a matter of reasonableness should not be determinative on the jurisdictional issue. To hold otherwise would make the doctrine of primary jurisdiction an abstraction to be called into operation at the whim of the pleader.

Id. at 68-69, 77 S.Ct. at 167. I recognize that in Western Pacific the government, claiming a lower rate, argued the wrong tariff was applied, and ConAgra in this case argues the tariff is unreasonable. I cite this passage for the following principle: the way the dispute is plead does not control the jurisdictional issue. ConAgra's gloss on the text is deficient. It states, "What the court was saying there is that the ICC's primary jurisdiction to determine issues of reasonableness cannot be defeated by characterizing them as issues of construction." (Df.'s Motion to Reconsider at 5).

The quoted passage simply indicates the court is not bound by the way the parties framed the issues. The court examined the issue as a whole to look beyond the parties' characterization. Primary jurisdiction is not dependent on what the parties state in their pleadings. The court determines when an issue requires the ICC's expertise. After an extensive discussion about the specific facts of the case, the Court in Western Pacific found it was necessary to refer the dispute to the ICC. This comports with the case-by-case decision making process in ruling on motions for reference. Requiring defendants to make a preliminary showing of unreasonableness facilitates the process. Defendants are given leave to amend their motions for reference to comply with this opinion. The parties are directed to 49 U.S.C. § 10701(e) for a sample of the kind of information which is relevant although I do not expect near the detail the parties would include in a presentation to the ICC.

Finally, I postpone ruling on Covey's motion for summary judgment. ConAgra's motion...