In re Transcon Lines, Bankruptcy No. LA 90-10680-RR

CourtUnited States Bankruptcy Courts. Ninth Circuit. U.S. Bankruptcy Court — Central District of California
Writing for the CourtROBIN L. RIBLET
Citation147 BR 770
PartiesIn re TRANSCON LINES, Debtor. Leonard L. GUMPORT, Trustee of the Bankruptcy Estate of Transcon Lines, Plaintiff, v. INTERSTATE COMMERCE COMMISSION, an agency of the United States of America, Defendant.
Docket NumberBankruptcy No. LA 90-10680-RR,Adv. No. 92-04510.
Decision Date09 October 1992

147 B.R. 770 (1992)

Leonard L. GUMPORT, Trustee of the Bankruptcy Estate of Transcon Lines, Plaintiff,
INTERSTATE COMMERCE COMMISSION, an agency of the United States of America, Defendant.

Bankruptcy No. LA 90-10680-RR, Adv. No. 92-04510.

United States Bankruptcy Court, C.D. California.

October 9, 1992.

147 BR 771

Patrick L. Shreve, Marjorie S. Steinberg, Members of Tuttle & Taylor, A Law Corp., Los Angeles, Cal., Joseph L. Steinfeld, Jr., Sims, Walker & Steinfeld, Washington, D.C., for plaintiff Leonard L. Gumport, Chapter 7 Trustee of the Bankruptcy Estate of Transcon Lines.

Patricia Burke Kuhlmann, Charles E. Wagner, Office of Compliance & Consumer Assistance, I.C.C., Robert S. Burk by Federal Exp., Henri F. Rush, Ellen D. Hanson, Evelyn G. Kitay, Office of General Counsel, I.C.C., Washington, D.C., for I.C.C.

Anthony L. Steinmeyer, Robert M. Loeb, Civil Div., Dept. of Justice, Washington, D.C.

Marcy J.K. Tiffany, Charmayne Mills, Brian Fittipaldi, U.S. Trustee, Los Angeles, Cal.


ROBIN L. RIBLET, Bankruptcy Judge.

On September 21, 1992 at 9:00 a.m. in Courtroom 1345 of the Roybal Building,

147 BR 772
255 East Temple Street, Los Angeles, California 90012, there came on for hearing pursuant to an order shortening time the Motion of Leonard L. Gumport, Chapter 7 Trustee of the bankruptcy estate of Transcon Lines ("Trustee" and "Transcon," respectively), for Preliminary and Permanent Injunctive Relief and Declaratory Judgment ("Trustee's Motion") filed herein on September 11, 1992. Attached to the Trustee's Motion was the Declaration of Leonard L. Gumport ("Gumport Decl.") and the Declaration of James Fox ("Fox Decl."). At that hearing, the Trustee filed with the Court a Request for Judicial Notice with respect to certain pleadings heretofore filed in this case

On September 18, 1992 Defendant Interstate Commerce Commission ("ICC") filed a responsive pleading titled "Notice of Motion and Motion for Partial Dismissal, Notice of Motion and Motion for Escrow Fund Establishment and Memorandum of Points and Authorities" ("ICC Motion"). The ICC Motion presented no evidentiary matter.

On that same date, the National Industrial Transportation League filed a Motion for Leave to file Memorandum of Points and Authorities as Amicus Curiae in Opposition to the Trustee's Motion, which motion attached such Memorandum of Points and Authorities ("Amicus Memorandum"). Such Memorandum provided no evidentiary matter.

The Court having considered the Trustee's Motion, the ICC Motion (as a responsive pleading) and the Amicus Memorandum, the papers and pleadings filed herein, including the Gumport Declaration and the Fox Declaration, the Request for Judicial Notice and the matters included therein and the arguments of counsel, the Court hereby makes its findings of fact and conclusions of law. An Order hereon is filed concurrently herewith.

Findings of Fact

1. Prior to its bankruptcy, Transcon Lines was one of the largest less-than-truckload interstate trucking companies in the United States. (Fox Decl. ¶ 2)

2. In May 1990, Transcon Lines became a debtor in bankruptcy when certain of its pension funds filed an involuntary bankruptcy petition against it in this Court. (Fox Decl. ¶ 4). Shortly before that bankruptcy, thousands of employees were terminated and, by early June 1990, approximately 80 employees remained. Fox Decl. ¶ 4. There now remain only two employees and there are no longer any trucking operations. Fox Decl. ¶ 4.

3. Leonard L. Gumport was appointed as Trustee in June 1990. The case was converted to one under Chapter 7 shortly after the Trustee was appointed. Gumport Decl. ¶ 3.

4. Included in the property of the estate at the date of the petition were claims against former shippers for undercharges resulting from what the Trustee contends were illegal discounts off the rates contained in duly filed tariffs given by Transcon to such shippers, including undercharges resulting from putative "contracts" which did not meet applicable statutory or regulatory standards for contract carriage. Gumport Decl. ¶ 4. These claims are hereinafter referred to as "filed rate" claims.

5. The primary asset of the Transcon Lines bankruptcy estate consists of those filed rate claims. Gumport Decl. ¶ 4.

6. In August, 1990, the Trustee, with this Court's approval, employed professionals to pursue these claims. Gumport Decl. ¶ 5.

7. Following a challenge by the Interstate Commerce Commission ("ICC") to certain of the Trustee's collection efforts, the Ninth Circuit Court of Appeals in the case of Interstate Commerce Commission v. Transcon Lines, Inc., 968 F.2d 798 (9th Cir.1992) ("ICC v. Transcon"), has upheld the right of the Trustee to pursue claims against shippers under Transcon's tariff providing for the loss of a discounted rate in the event the freight charges were not paid within 90 days ("90-Day-Loss-of-Discount Claims"). The ICC has petitioned for rehearing of that portion of the Ninth Circuit's opinion upholding these claims. The Ninth Circuit has not yet acted on that request. Gumport Decl. ¶ 6.

147 BR 773

8. The ICC itself has estimated that on the 90-Day-Loss-of-Discount Claims alone the Transcon estate may recover $23,000,000. Exhibit 8 to Trustee's Motion (Petition for Rehearing with Suggestion for Rehearing en banc filed by the ICC in ICC v. Transcon).

9. On September 3, 1992 the ICC issued regulations be published at 8 I.C.C.2d 742; 49 C.F.R., §§ 1321 et seq. together with an Order, Ex-Parte No. MC-208, "Non-Operating Motor Carriers—Collection of Freight Undercharges" ("ICC Bankruptcy Regulations" and "Ex-Parte Order," respectively).

10. On September 11, 1992 the Trustee filed a complaint herein styled Leonard L. Gumport, Chapter 7 Trustee of the bankruptcy estate of Transcon Lines v. Interstate Commerce Commission, Adv. No. 92-04510 ("Trustee's Complaint"), and Motion for Preliminary and Permanent Injunctive Relief and Declaratory Judgment ("Trustee's Motion").

11. The ICC Bankruptcy Regulations purport to prohibit the Trustee from pursuing the 90-Day-Loss-of Discount Claims upheld by the Ninth Circuit in ICC v. Transcon and all other filed rate claims, including claims challenging putative "contracts of carriage." In particular, the ICC Bankruptcy Regulations:

(A) Require the Trustee to submit all (or representative examples of) filed rate claims to the ICC for review and approval that such claims are permissible claim;
(B) Prohibit the Trustee from taking any steps to prosecute or pursue his filed rate claims pending such review of such claims by the ICC;
(C) Require the Trustee to notify all shippers against which claims have been made of the ICC Bankruptcy Regulations within sixty days of the effective date of the Regulations; and
(D) Require the Trustee to submit for ICC review all claims heretofore settled in this case.

In the event the ICC concludes that any claims are not "valid, permissible" claims, the Trustee would be prohibited from pursuing such pending claims or, in the case of settled claims, would be required to return settlement monies.

12. The ICC admits that the Bankruptcy Regulations provide no deadline for the ICC's prescreening of claims. ICC Motion at 27.

13. The ICC Bankruptcy Regulations purport to exercise immediate and pervasive control over property of this estate. They require the Trustee to engage in an adult version of "Mother-May-I?" with respect to each step he wishes to take in pursuing his claims against shippers. The filed rate claims are removed entirely from the control of the Trustee pending re ICC's review and for an indeterminate period of time pending the ICC's review; certain claims are subject to be determined adversely as a result of that review and court-approved settlements are subject to being set aside. Without such approval, the Trustee may not serve complaints, conduct discovery, enter into or complete settlements of claims or try cases now pending on this or any other court's docket.

14. The ICC Bankruptcy Regulations may be enforced by civil and criminal penalties. 49 U.S.C. § 11901 et seq. Pursuant to the Ex Parte Order, it is clear that the ICC intends to impose personal liability on bankruptcy trustees for such penalties. Exhibit 1 to Trustee's Motion at 758.

15. The Trustee, with this Court's approval, has settled many filed rate cases and claims in this case, including claims attacking putative "contracts of carriage." Gumport Decl. ¶ 14.

16. The amount of cash now available to the estate is less than the amount collected from the settlement of such claims. Fox Decl. ¶ 8.

17. If the Trustee is unable to pursue pending claims, cash flow to the estate will be severely reduced and the ability of the Trustee to administer the estate will be jeopardized. Gumport Decl. ¶ 14.

18. The Transcon estate would be irreparably harmed by the application or enforcement of the Regulations to or against it.

147 BR 774

19. Although the ICC Bankruptcy Regulations purport to affect carriers other than those in bankruptcy, it appears from the Ex Parte Order that the Regulations were promulgated specifically for application in this case. See Ex Parte Order at 743 ("We instituted this proceeding because of serious problems arising out of the collection efforts being made by the Transcon and P*I*E trustees, among others."). As such, they are directly violative of the automatic stay.

20. Pursuant to the decision of the ICC dated September 17, 1992, the ICC Bankruptcy Regulations will become effective October 8, 1992. Attachment 1 to ICC Motion.

21. Notice of the Trustee's Motion was reasonable and sufficient under all the circumstances.

22. Any Finding of Fact which is more properly a Conclusion of Law shall be deemed a Conclusion of Law.

Conclusions of Law

1. This Court has jurisdiction...

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