In re Palmer Trucking Co., Inc.

• Decision Date: 23 September 1996
• Docket Number: Bankruptcy No. 93-40834-HJB,95-4317.
• Citation: 201 BR 9
• Parties: In re PALMER TRUCKING CO., INC., Debtor. David J. NOONAN, Trustee of the Debtor's Estate of Palmer Trucking Co., Inc., Plaintiff, v. CELLU TISSUE CORPORATION, CST Office Products, Inc., Hartford Cooperage Co., Inc. a/k/a New England Container, Luxo Lamp Corporation a/k/a Luxo Corporation, Mailrite, Inc., Creative Bronze, Inc., and Performance Polymers, Inc., Defendants.
• Court: U.S. Bankruptcy Court — District of Massachusetts

201 B.R. 9 (1996)

In re PALMER TRUCKING CO., INC., Debtor.

David J. NOONAN, Trustee of the Debtor's Estate of Palmer Trucking Co., Inc., Plaintiff, v. CELLU TISSUE CORPORATION, CST Office Products, Inc., Hartford Cooperage Co., Inc. a/k/a New England Container, Luxo Lamp Corporation a/k/a Luxo Corporation, Mailrite, Inc., Creative Bronze, Inc., and Performance Polymers, Inc., Defendants.

Bankruptcy Nos. 93-40834-HJB, 95-4317.

United States Bankruptcy Court, D. Massachusetts.

September 23, 1996.

COPYRIGHT MATERIAL OMITTED

David J. Noonan, Trustee.

Claudia J. Reed, Springfield, MA, for the Trustee.

Frank J. Weiner, Canton, MA, for CST Office Products, Inc.

MEMORANDUM OF DECISION

HENRY J. BOROFF, Bankruptcy Judge.

Before the Court for determination is a "Motion for Summary Judgment, or Alternatively, Motion for Partial Summary Judgment, Stay and Referral to the Massachusetts Department of Public Utilities" (the "Motion") filed by CST Office Products, Inc. ("Defendant" or "CST"), one of the defendants in the instant adversary proceeding. Through his complaint, David J. Noonan, the Chapter 7 Trustee in Bankruptcy ("Plaintiff" or the "Trustee") of Palmer Trucking Co., Inc. (the "Debtor"), seeks to collect from CST the difference between the amount paid by CST for intrastate transportation services rendered by the Debtor and the rate established by the Debtor's published tariff (the "undercharge claim").¹

I. Facts

The following facts are not in material dispute.

The Debtor was a motor carrier engaged in both the interstate and intrastate transportation of property. As a common carrier, the Debtor was required by Mass.Gen.L. ch. 159B, § 6 to publish and file with the Commonwealth of Massachusetts Department of Public Utilities (the "MDPU") tariffs containing all rates charged by the Debtor for the intrastate transportation of property. More importantly, Mass.Gen.L. ch. 159B, § 6A required the Debtor to charge its customers only those tariff rates which were on file with the MDPU. The Debtor did file its tariff rates with the MDPU, but failed to restrict itself to charging only those rates. Between October 1, 1992 and April 6, 1994, the Debtor charged several of its customers, including CST, rates which were less than those rates filed with the MDPU.

On March 24, 1993, the Debtor filed with this Court a voluntary petition for relief under Chapter 11 of the Bankruptcy Code. On August 23, 1994, the Chapter 11 case was converted to a Chapter 7 case. The Trustee commenced this adversary proceeding on October 12, 1995, seeking to collect the sum of $157,316.95² from CST, representing the difference between the rate paid by CST for the Debtor's services on intrastate shipments and the rates which were filed with the MDPU at the time the services were rendered. CST subsequently filed the instant motion to which the Trustee objected. After a hearing thereon, the Court took the motion under advisement.

II. Positions of the Parties

CST asserts that § 601(c) of the Federal Aviation Administration Authorization Act of 1994 (the "FAAAA")³ preempts all state law related to the prices, routes or services of motor carriers; and, therefore, the Trustee's undercharge claim is barred. In the alternative, CST claims that a statute of limitations contained in the rules and regulations of the New England Motor Rate Bureau, Inc., a rate tariff publishing agent, precludes the Trustee's undercharge claim. CST also maintains that, to the extent that its requests for summary judgment are denied, the MDPU has primary jurisdiction. Therefore, CST urges the Court to stay these proceedings and refer any issues involving the reasonableness of the Debtor's rates to the MDPU for determination. Finally, CST argues that the matters raised by the Trustee's complaint are non-core under 28 U.S.C. § 157; and, therefore, this Court's role is limited to the submission of proposed findings of fact and conclusions of law to the district court. See 28 U.S.C. § 157(c)(1).

The Trustee argues that the FAAAA should not be retroactively applied to bar claims based on shipments which occurred before the January 1, 1995 effective date of the FAAAA. In addition, the Trustee maintains that the FAAAA is inapplicable in the instant case. The Trustee interprets the statute to prohibit only actions by entities which constitute a State, political subdivision of a State, or political authority of 2 or more States; and the Trustee is not such an entity. The Trustee also contends that summary judgment is improper because of the existence of disputed material issues of fact, including the amount of the Trustees's claim, whether CST paid for each shipment at issue, and whether the Debtor was a participant in the tariffs published by the New England Motor Rate Bureau, Inc. Finally, the Trustee asks that if the Court finds that the undercharge claim is preempted by the FAAAA, the Trustee be allowed to amend his complaint to include a claim for breach of contract based on the bills of lading that exist for each shipment at issue.

III. Discussion

A. Summary Judgment

Pursuant to Rule 56(c) of the Federal Rules of Civil Procedure, made applicable to adversary proceedings by Fed.R.Bankr.P. 7056, the Court may award summary judgment if "the pleadings, depositions, answers to interrogatories, and admissions on file, together with the affidavits, if any, show that there is no genuine issue of material fact and that the moving party is entitled to a judgment as a matter of law." Fed.R.Civ.P. 56(c); see, e.g., Celotex Corp. v. Catrett, 477 U.S. 317, 323, 106 S.Ct. 2548, 2553, 91 L.Ed.2d 265 (1986); Anderson v. Liberty Lobby, Inc., 477 U.S. 242, 256, 106 S.Ct. 2505, 2514, 91 L.Ed.2d 202 (1986). In the instant case, the Trustee and CST agree that the provisions of Mass.Gen.L. ch 159B, § 6A constitute a law related to the prices, routes, and services of motor carriers. Both parties agree that the threshold issue which must be determined — whether the FAAAA preempts state law actions commenced after the January 1, 1995 effective date of the FAAAA based on intrastate shipments which occurred before January 1, 1995 — is a purely legal issue. The facts claimed by the Trustee to be disputed are not material to the resolution of this issue.

B. The Filed Rate Doctrine

Mass.Gen.L. ch. 159B, § 6A⁴ (the "Massachusetts Rate Statute") codifies a "highly esoteric and counter intuitive"⁵ legal principle known as the filed rate doctrine. That doctrine was first created at the federal level to regulate interstate transportation and was later adopted by many states with respect to intrastate transportation.⁶

The filed rate doctrine requires a motor carrier to charge and collect only those rates contained in tariffs filed with state regulatory agencies. The carrier may not charge or receive compensation different than the rate specified in the tariff. In addition, the carrier's customers (known as shippers) are responsible for paying the filed rate and thus are liable for any difference between the filed rate and the rate paid.⁷ Undercharge claims, such as the one at issue in the instant case, are claims for the difference between what a motor carrier was legally required to charge its customers under the filed rate doctrine, and the lower rates that were actually charged and collected.

Increased competition among motor carriers due to the deregulation of the industry at the interstate level during the 1980s resulted in widespread violations of the filed rate doctrine. See Johnson, supra note 5, at 341-45. Motor carriers began discounting rates yet failed to file these new rates. Id. Predictably, the heightened competition in the industry resulted in an increase in bankruptcy filings among motor carriers. Id. at 344. These bankruptcies spawned undercharge suits by trustees seeking to increase the assets of the estate. See id. at 345. This "undercharge crisis" culminated with the passage of the Negotiated Rates Act of 1993 (the "NRA"),⁸ which attempted to resolve the majority of the undercharge claims. See Johnson, supra note 5, at 348 & 354-55. However, the NRA applies only to interstate transportation. See 49 U.S.C. § 13709(a)(1). The Trustee seeks to enforce the filed rate doctrine at the intrastate level. The application of the FAAAA, subsequently passed by Congress to resolve intrastate undercharge claims is, therefore, the critical inquiry.

C. Application of the FAAAA

The FAAAA provides in relevant part that ". . . a State, political subdivision of a State, or political authority of 2 or more States may not enact or enforce a law, regulation, or other provision having the force and effect of law related to a price, route, or service of any motor carrier. . . ." 49 U.S.C. § 14501(c)(1). The Trustee argues that because he is not a State, political subdivision of a State, or political authority of two or more States, the FAAAA is inapplicable to his undercharge claim against CST.

The language of the FAAAA is broad and preempts a wide range of state regulations. Kelley v. United States, 69 F.3d 1503, 1508-09 (10th Cir.1995), cert. denied, ___ U.S. ___, 116 S.Ct. 1566, 134 L.Ed.2d 665 (1996); St. Johnsbury Trucking Co., Inc. v. Mead Johnson & Johnson (In re St. Johnsbury Trucking Co., Inc.), 199 B.R. 84, 87 (S.D.N.Y. 1996); see Morales v. Trans World Airlines, Inc., 504 U.S. 374, 384, 112 S.Ct. 2031, 2037, 119 L.Ed.2d 157 (1992) (virtually identical language in § 1305(a)(1) of the Airline Deregulation Act of 1978 was found to "express a broad preemptive purpose").

In enacting the FAAAA, Congress specifically found that:

(1) the regulation of intrastate transportation of property by the States has

(A) imposed an unreasonable burden on interstate commerce;

(B) impeded the free flow of trade, traffic, and transportation of interstate commerce; and

(C) placed an unreasonable cost on the American consumers; and

(2) certain aspects of the State regulatory process should be preempted.

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