In re Wheat Rail Freight Rate Antitrust Litigation

• Decision Date: 06 February 1984
• Docket Number: No. MDL 534.,MDL 534.
• Parties: In re WHEAT RAIL FREIGHT RATE ANTITRUST LITIGATION.
• Court: U.S. District Court — Northern District of Illinois

579 F. Supp. 517

In re WHEAT RAIL FREIGHT RATE ANTITRUST LITIGATION.

No. MDL 534.

United States District Court, N.D. Illinois, E.D.

February 6, 1984.

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Ross L. Thorfinnson, Perbix, Harvey & Thorfinnson, P.A., Hopkins, Minn., Robert J. Fulgency, Sr. Associate Counsel, General Mills, Inc., Minneapolis, Minn., for plaintiff General Mills, Inc.

James R. Scoggin, Perbix, Harvey & Thorfinnson, P.A., Hopkins, Minn., for plaintiff DCA Food Industries, Inc.

Richard P. Campbell, Anthony S. DiVincenzo, Campbell & DiVincenzo, Chicago, Ill., David Brezina, John Brezina, Burton Ehrlich, Brezina & Buckingham, Chicago, Ill., for plaintiffs Little Crow Milling Co., Inc. and Midstate Mills, Inc.

Thomas C. Dorsey, American Short Line R.R. Ass'n, Washington, D.C., for defendant American Short Line R.R. Ass'n.

Roland W. Donnem, Charles C. Rettberg, Jr., Patricia Vail, Chessie System Railroads, Cleveland, Ohio, James R. Gannon, Lewis, Overbeck & Furman, Chicago, Ill., for defendants Baltimore and Ohio R. Co., Inc., Chesapeake and Ohio R. Co., Inc. and Chicago South Shore & South Bend R.R.

Bruce B. Wilson, Margaret W. Weiner, Consolidated Rail Corp., Laurence Z. Shiekman, Deborah F. Cohen, Philip H. Lebowitz, Pepper, Hamilton & Scheetz, Philadelphia, Pa., Max Wildman, Jerald P. Esrick, Wildman, Harrold, Allen & Dixon, Chicago, Ill., for defendant Consol. R. Corp.

Kinga LaChapelle, Delaware & Hudson R. Co., Albany, N.Y., Thomas A. Donovan, Kirkpatrick, Lockhart, Johnson & Hutchison, Pittsburgh, Pa., Karla J. Letsche, Kirkpatrick, Lockhart, Hill, Christopher & Phillips, Washington, D.C., James G. Heiring, James H. Ryan, Keck, Mahin & Cate, Chicago, Ill., for defendant Delaware and Hudson Ry. Co.

W. Gerald Thursby, Clifton Lake, David C. Gustman, Rooks, Pitts, Fullagar & Poust, Chicago, Ill., Kenneth C. Anderson, Squire, Sanders & Dempsey, Washington, D.C., for defendant Elgin, Joliet & Eastern Ry. Co.

John C. Danielson, Grand Trunk Western R. Co., Detroit, Mich., Erwin C. Heininger, William J. Reifman, Daniel D. Beckel, Mayer, Brown & Platt, Chicago, Ill., for defendant Grand Trunk Western R. Co.

Duane M. Kelley, James A. Vroman, Winston & Strawn, Chicago, Ill., for defendant Illinois Central Gulf R. Co.

Wandaleen Poynter, Seaboard Coast Line R. Co., Jacksonville, Fla., for defendants Louisville & Nashville R.R. and Seaboard Coast Line R. Co.

James R. Gannon, Lewis, Overbeck & Furman, Chicago, Ill., for defendants Louisville & Nashville R., Seaboard Coast Line R. Co. and Richmond, Fredericksburg & Potomac R. Co.

James E. Sykes, Commerce Counsel, Mo. Pacific R. Co., St. Louis, Mo., James H. Durkin, Commerce Counsel, Mo. Pacific R. Co., Chicago, Ill., for defendant Missouri Pacific R. Co.

Richard J. Flynn, G. Paul Moates, R. Merinda Wilson, Stephen S. Hill, Sidley & Austin, Washington, D.C., for defendants Illinois Terminal R. Co. and Norfolk and Western Ry. Co., Inc.

Kirk B. Johnson, Sidley & Austin, Chicago, Ill., for defendants Illinois Terminal R. Co., Norfolk and Western Ry. Co., Inc. and Toledo, Peoria & Western R. Co.

John M. Clifford, Stephen A. Trimble, Hamilton & Hamilton, Washington, D.C., Urchie B. Ellis, Richmond, Fredericksburg, & Potomac R. Co., Richmond, Va., for defendant Richmond, Fredericksburg & Potomac R. Co.

John M. Nannes, Paul J. Kaleta, Skadden, Arps, Slate, Meagher & Flom, Washington, D.C., for defendants Traffic Executive Ass'n, Eastern Railroads, and Eastern Railroads Ass'n.

Richard E. Weicher, Weston Marsh, Santa Fe Industries, Inc., Chicago, Ill., for defendant Toledo, Peoria & Western R. Co.

MEMORANDUM OPINION

PRENTICE H. MARSHALL, District Judge.

This multidistrict antitrust litigation involves wheat rail freight rates. The plaintiffs, shippers of wheat and wheat products, allege that the defendant railroads violated Sherman Act § 1, 15 U.S.C. § 1 (1976) by fixing the price of rail freight rates for wheat and wheat products without following the procedures required to exempt their conduct from antitrust liability under the Interstate Commerce Act, 49 U.S.C. § 10706 (Supp. III 1979). Many motions have been filed and decided. The issues which remain are: 1) whether the Interstate Commerce Commission (ICC) has exclusive jurisdiction over the conduct in question; 2) whether certain plaintiffs sought reparations before the ICC and if so, whether they have elected their remedy and are barred from pursuing their antitrust claims; 3) whether defendants' conduct is expressly immune from antitrust liability; 4) or impliedly immune from antitrust liability; 5) whether defendants' conduct is immune under the Noerr-Pennington doctrine; 6) whether, if defendants' conduct is not immune, it constitutes a per se violation of Sherman Act § 1; 7) whether the parties are collaterally estopped by the ICC finding on damages; and 8) whether a group of plaintiffs should be certified as a class.

The litigation concerns rail freight rates for wheat and wheat products from Chicago to the east. Under 49 U.S.C. § 10706(a)(2)(A), two or more rail carriers may enter into an agreement relating to rates. If the ICC approves the agreement,¹ the railroads may carry out the agreement without antitrust liability.² The defendant railroads have joined in such an agreement—the Agreement of the Eastern Railroads Under Section 5b of the Interstate Commerce Act³ (Agreement). The ICC has approved the agreement, see Eastern Railroads—Agreements, 277 I.C.C. 279 (1950), so when the railroads adhere to the Agreement, they are statutorily immune from the antitrust laws.

The Agreement prescribes a procedure to be followed before a proposal on rates or other matters is filed with the ICC. The parties to the Agreement are divided into committees, A written proposal must first be submitted to the chairman of the appropriate committee. Agreement, Art. III, § 2. The chairman then gives public notice of the proposal in the next issue of Traffic World or another recognized traffic publication. Id. § 3. All interested persons, including shippers, are given fourteen days from the date of publication to communicate to the chairman views on the proposal. Id. If the chairman receives no objection to the proposal within fourteen days, it is presumed that all parties to the agreement have approved the proposal. Id. § 5. If an interested person does object, then the chairman dockets the proposal for hearing at the committee's next meeting. Id. § 6. At the meeting, shippers and other interested persons have an opportunity to be heard. Id. § 8. Each member of the committee receives one vote on the proposal. Id. § 9. After the vote, organization members may request review of the vote by the Traffic Executive Association. Id. § 11. The Traffic Executive Association is composed of all class I railroads that are parties to the Agreement. Id. Art. II, § 3. Once a determination on a proposal is final, notice of the determination is published in Traffic World or another recognized traffic publication, and the tariff is filed with the ICC. Id. Art. III, § 10.

The Agreement enumerates various exceptions to the procedural requirements. Two of these exceptions are relevant to this case. Notice and hearing are excused when a proposal is "of such emergency character that the customary procedure as provided herein cannot reasonably be followed." Id. § 8. Such procedure is also unnecessary "for changes in rates or charges growing out of decisions of and orders by the Interstate Commerce Commission, or State Commissions, and changes in rates having a recognized relation to those directly affected by such decisions or orders." Id. App. E ¶ 8.

Once a rate is filed with the ICC, the ICC may, on its own initiative or on complaint of an interested party, investigate the rate. 49 U.S.C. § 10707(a). In limited circumstances, the ICC may suspend the rate pending its investigation. Id. 10707(c)(1).⁴ If no person objects to the tariff and the ICC does not initiate an investigation, the tariff takes effect.

In the case at hand, the defendant railroads collectively fixed a rate plan without conforming to the notice and hearing procedure required by the Agreement. That joint action was prompted in 1976 when the ICC held that the railroads' existing plan for wheat freight rates from Chicago to the east illegally discriminated against cargo shipped to Chicago by motor carrier.⁵ Board of Trade of the City of Chicago v. Akron, 352 I.C.C. 881 (1976). The Eighth Circuit affirmed the ICC's holding of illegality. Atchison, Topeka & Santa Fe Railway Co. v. United States, 549 F.2d 1186 (8th Cir.), cert. denied, 434 U.S. 874, 98 S.Ct. 223, 54 L.Ed.2d 154 (1977). In response to the ruling, the railroads proposed Plan A for wheat freight. Plan A would have eliminated all proportional rates on wheat shipments, thereby putting all wheat shipments on a flat rate basis. A flat rate is generally higher than a proportional rate.⁶ The ICC suspended Plan A and initiated an investigation. During the ICC investigation of Plan A, the railroads withdrew Plan A from consideration and filed Plan B with the ICC, the rate structure now in issue. Plan B differentiated rates between transit and nontransit shipments. A transit shipment is one in which the shipment is interrupted while the shipped goods are taken off the carrier for storage or processing and then returned to a carrier to proceed to their destination. A nontransit shipment reaches its destination without interruption.

Under Plan B, all transit shipments of wheat were to be charged a flat rate and all nontransit shipments, a proportional rate. Previously, the railroads had accorded shippers a transit privilege that enabled shippers to use the through rate from origin to final destination and pay a transit charge for taking the goods off the carrier and replacing them. The transit privilege applied for both proportional and flat rate shipments. According to Plan B, however, the...