In Re REA Express, Inc., Private Treble Damage, Etc., M.D.L. No. 115.

Decision Date18 February 1976
Docket NumberM.D.L. No. 115.
Citation412 F. Supp. 1239
CourtU.S. District Court — Eastern District of Pennsylvania

Franklin Poul, Judith R. Cohn, Wolf, Block, Schorr & Solis-Cohen, Philadelphia, Pa., for plaintiffs.

Edwin Zimmerman, Gerald P. Norton, James R. Atwood, Liaison Counsel, Covington & Burling, Washington, D. C., for defendants.



I. Preliminary Statement
A. The Parties

This antitrust case is now before us on defendants' motion for summary judgment. Plaintiff REA Express, Inc. ("REA") was incorporated in 1928 by the nation's railroads to provide an expedited transport service for small packages to the public.1 Approximately eighty-six railroads held all of REA's stock from the time of its formation until 1968. The shareholding railroads, together with some 300 short lines,2 contracted with REA during this period to provide transport services to it. In 1969 nearly all the railroad-shareholders divested themselves of their REA stock and their control over the corporation3 (hereinafter "divestiture").

In 1928, at the time of the formation of REA, the railroads applied to the Interstate Commerce Commission ("ICC") for approval of their joint control of REA and of a pooling arrangement, under which: (1) express shipments would be carried by the railroads for REA under uniform operating contracts; and (2) REA's gross express revenues would first be used to pay the agency's out-of-pocket costs, and all remaining revenues would be paid to the roads in proportion to their express carriage as "rail transportation revenues," leaving REA with no net revenues of its own.4 The ICC approved the control and pooling arrangements in 1929, and for the next forty years, REA was operated as a wholly owned joint facility of the participating railroads.

REA originally filed this action against 160 railroads comprising the major railroad-shareholders of REA, and a number of railroads which were parties to the uniform contracts but never REA shareholders. A number of former railroad shareholders of REA were not named as defendants. Some of those are roads which broke rank and agreed to certain individual dealings with REA after divestiture. After the complaint was filed, REA voluntarily dismissed without prejudice certain of the defendants from the action. Thirty-seven defendants filed motions alleging that venue in this District was improper (and some also attacked the validity of service of process). We held a conference with the parties, following which counsel for REA and counsel for the defendants reached an agreement resolving the pending motions. As a result of this agreement, the action was dismissed against nine defendants, ten defendants withdrew their venue motions, and the actions against thirteen defendants were transferred to other districts.

REA thereupon moved before the Judicial Panel on Multidistrict Litigation (JPML) under 28 U.S.C. § 1407 (1970) for the pretrial consolidation of the transferred actions in this Court. In addition REA requested that actions brought against it elsewhere by two of the defendants be consolidated with the actions here for pretrial proceedings: Seaboard Coast Line R. R. v. REA Express, Inc. (M.D.Fla., No. 70-937); St. Louis-Southwestern Ry. Lines v. REA Express, Inc. (N.D.Cal., No. C-71-2030 ACW). On December 21, 1972, the JPML transferred all of the actions to this Court under the above Jud.Pan.Mult.Lit. Docket Number. In Re REA Express, Inc., 352 F.Supp. 803 (Jud.Pan.Mult.Lit.1972).5 A third action, Chicago, Milwaukee, St. Paul & Pacific R. R. v. REA Express, Inc., (N.D. Ill., No. 74C-1093) was later transferred here.6 (For purposes of this opinion, we will refer to the Chicago, Milwaukee, St. Paul & Pacific R. R. as a party defendant.) REA has recently dismissed against a few other now defunct railroads.7

B. Summary of Plaintiff's Claims

In its complaint, REA alleges that from the time it began operations in 1929 it was the victim of an antitrust conspiracy that violated Sections 1 and 2 of the Sherman Act, 15 U.S.C. §§ 1, 2 (1970).8 The alleged conspirators are the defendant railroads, a number of whom owned all the stock of REA until August 1969, the others being the short line railroads which were parties to the uniform contracts. While REA's discovery submissions have shown that in fact all former shareholders are not defendants, all such shareholders are among those claimed to have been co-conspirators.

Plaintiff claimed the alleged conspiracy had three objectives. First, plaintiff alleges that, prior to divestiture, the defendants conspired to avoid competition among themselves and other railroads in furnishing transportation services to REA, by conferring with each other, both individually and through railroad rate bureaus, about prices to be charged REA for rail transportation services, and by dictating contract terms which were disadvantageous to the plaintiff. Inter alia, REA attacks a 1967 resolution of its railroad controlled Board of Directors, whereby the railroads supposedly established minimum charges to be imposed upon REA for TOFC (trailor-on-flat-car or "piggyback") service, and which also limited REA's right to divert traffic from one railroad to another. Furthermore, after the railroads' sale of REA in 1969, the defendants allegedly continued their practice of avoiding competition with respect to REA by employing regional rate bureaus to establish uniform transportation contracts with REA. Plaintiff claims also that in late 1970 the defendants and other railroads attempted to impose increased charges upon REA for rail services and that, despite requests from the plaintiff, refused to negotiate individually concerning charges and terms for transportation services.

The second alleged purpose of the conspiracy was to impose excessive and onerous charges and other conditions on REA's use of the defendants' properties and facilities. The complaint charges that the defendants established uniform rates, terms and conditions which REA was obliged to accept in lease agreements for terminal space, and that in 1968, prior to the sale of REA to non-railroad interests, these terms were incorporated in Uniform Carrier's Agreements. REA claims that it has been unable to negotiate rentals at rates different from those uniformly applied and that in instances its efforts to terminate the standard leases have been ignored.

Third, REA claims that the conspiracy had the purpose and effect of preventing it from engaging in activities competitive with those of the railroads and from employing non-rail modes of transportation. As to this allegation, REA has asserted only pre-divestiture actions by the railroads. Plaintiff claims that between 1929 and 1959 REA was permitted to provide over-the-road truck service only with the consent of the affected railroads and that a May 1929 resolution by the REA board limited its management in negotiating contract terms with motor carriers. REA also claims that the railroads forced it to use motor carrier subsidiaries of the railroads and, prior to 1969, continually protested to the REA management concerning proposed applications for truck routes. In 1968 the railroads allegedly caused REA to seek ICC approval of an inefficient nationwide motor route system, and prevented REA from making appropriate applications to regulatory agencies in order to acquire appropriate routes. Additionally, it is claimed that defendants sought to limit REA's ability to provide air express service in competition with the railroads. The defendants and other railroads are alleged to have agreed with certain airlines that REA's contracts with the airlines would require excessive and non-competitive air express rates, and in 1948 allegedly directed REA's management, through its railroad controlled board, to ignore a CAB proposal for revision of the Air Express Agreement which would have proven favorable to REA.

As a further part of its antitrust claim, REA alleges that the defendants caused its Board of Directors to authorize it to make an unsound investment in certain refrigerated rail cars in 1955. It is claimed that the railroads intended the purchases both to burden REA with a financial obligation which would hinder its ability to compete with the railroads and to bind REA to the use of the rail mode. The refrigerator cars allegedly were obsolete at the time of their purchase and had been unprofitable for many years. The same refrigerator car claims are realleged in Count II as a pendent claim that the railroads induced the REA board to breach its fiduciary duties owed to the plaintiff.9

C. The Grounds of Defendants' Motion for Summary Judgment

Defendants' motion for summary judgment is bottomed upon a number of distinct grounds, some of which apply to plaintiff's pre-divestiture claims, and others of which apply to its post-divestiture claims.

The first basis of defendants' attack on the pre-divestiture claims is that REA may not make a claim based upon the conduct of all its former shareholders or upon conduct which preceded the REA Holding Corporation's ownership. (The Holding Corporation was the vehicle for divestiture.) The attack is essentially upon plaintiff's standing. This defense proceeds from the doctrine announced by Dean Pound in the famous case of Home Fire Insurance Co. v. Barber, 67 Neb. 644, 93 N.W. 1024 (1903), that it would be inequitable to permit new stockholders to obtain a windfall recovery of a large part of their purchase price by bringing suit in the corporate name against prior management for its alleged misappropriations notwithstanding that the stock was worth all they paid for it and that they obtained all they bargained for. After the filing of defendants' motion the Supreme Court decided the case of Bangor Punta Operations, Inc. v. Bangor & Aroostook R. R., 417 U.S. 703, 94 S.Ct. 2578, 41 L.Ed.2d 418 (1974)...

To continue reading

Request your trial
12 cases
  • Mt. Hood Stages, Inc. v. Greyhound Corp.
    • United States
    • U.S. Court of Appeals — Ninth Circuit
    • June 9, 1977
    ...See International Tel. & Tel. Corp. v. General Tel. & Elec. Corp., 518 F.2d 913, 918-19 (9th Cir. 1975).15 See In re REA Express, Inc., 412 F.Supp. 1239, 1261 (E.D.Pa.1976); Air Freight Haulage Co. v. Ryd-Air, Inc., 408 F.Supp. 446 (S.D.N.Y.1976).16 See Scroggins v. Air Cargo, Inc., 534 F.2......
  • Intern. Tel. & Tel. Corp. v. General Tel. & Elect. Corp.
    • United States
    • U.S. District Court — District of Hawaii
    • February 28, 1978
    ...the Interstate Commerce Commission (ICC) pursuant to the Interstate Commerce Act § 5(11) are shielded. In Re REA Express, Inc., Private Treble Damage, Etc., 412 F.Supp. 1239, 1261 (D.C.) Antitrust immunity may also arise by implication. This is because there may be instances where regulatio......
  • Zenith Radio Corp. v. Matsushita Elec. Indus. Co.
    • United States
    • U.S. District Court — Eastern District of Pennsylvania
    • May 13, 1981
    ...1104 (E.D.Pa.1976), aff'd, 554 F.2d 1253 (3d Cir.), cert. denied, 434 U.S. 860, 98 S.Ct. 186, 54 L.Ed.2d 133 (1977); In re REA Express, Inc., 412 F.Supp. 1239 (E.D.Pa.1976); V. & L. Cicione v. C. Schmidt & Sons, Inc., 403 F.Supp. 643 (E.D.Pa.1975), aff'd, 565 F.2d 154 (3d Cir. 1977); Chuy v......
  • Daniels v. Powell
    • United States
    • U.S. District Court — Northern District of Illinois
    • March 14, 1985
    ...Daniels in a representative capacity. He did her job thereby entitling him to fees...." 17 Defendants' reliance on In re REA Express, Inc., 412 F.Supp. 1239 (E.D.Pa.1976), is equally misplaced. That case dealt with the liability under federal antitrust law and Delaware corporate law of a ho......
  • Request a trial to view additional results
2 books & journal articles
  • Statutory Exemptions for Regulated Industries
    • United States
    • ABA Antitrust Library Handbook on the Scope of Antitrust Regulated industries and targeted exemptions
    • January 1, 2015
    ...15 U.S.C. § 18. 368. See, e.g., Minnesota & St. Louis Ry. Co. v. United States, 361 U.S. 173, 187-88 (1959); In re REA Express, Inc., 412 F. Supp. 1239, 1261-62 (E.D. Pa. 1976) (“a narrow construction of this grant of immunity would render Congress’ efforts meaningless, and this we shall no......
  • Table of Cases
    • United States
    • ABA Antitrust Library Handbook on the Scope of Antitrust Procedural issues
    • January 1, 2015
    ...108 Rambus Inc. v. FTC, 522 F.3d 456 (D.C. Cir. 2008), 233 Ray v. Edwards, 725 F.2d 655 (11th Cir. 1984), 84 REA Express, Inc., In re, 412 F. Supp. 1239 (E.D. Pa. 1976), 335 Reazin v. Blue Cross & Blue Shield of Kansas, Inc., 663 F. Supp. 1360 (D. Kan. 1987), aff’d in part & remanded in par......

VLEX uses login cookies to provide you with a better browsing experience. If you click on 'Accept' or continue browsing this site we consider that you accept our cookie policy. ACCEPT