Lovett v. Honeywell, Inc., 90-5145

• Decision Date: 15 April 1991
• Docket Number: No. 90-5145,90-5145
• Citation: 930 F.2d 625
• Parties: , Bankr. L. Rep. P 73,938 Thomas G. LOVETT, Jr., Trustee for the Bankruptcy Estate of Transportation Systems International, Inc., Appellant, v. HONEYWELL, Inc., Appellee.
• Court: U.S. Court of Appeals — Eighth Circuit

Page 625

930 F.2d 625

59 USLW 2712, Bankr. L. Rep. P 73,938

Thomas G. LOVETT, Jr., Trustee for the Bankruptcy Estate of Transportation Systems International, Inc., Appellant, v. HONEYWELL, Inc., Appellee.

No. 90-5145.

United States Court of Appeals Eighth Circuit.

Submitted Dec. 13, 1990.

Decided April 15, 1991.

Paul Taylor, Minneapolis, Minn., for appellant.

Barbara Kueppers, Minneapolis, Minn., for appellee.

Before McMILLIAN, Circuit Judge, MORRIS S. ARNOLD, ^* District Judge, and JOHN R. GIBSON, Circuit Judge.

JOHN R. GIBSON, Circuit Judge.

The sole issue before this court is whether the district court ¹ erred in reversing the bankruptcy court award of attorneys' fees and punitive damages against Honeywell, Inc. The bankruptcy court awarded these damages to Thomas G. Lovett, the bankruptcy trustee for Transportation Systems International, Inc., because Honeywell filed a petition with the Interstate Commerce Commission seeking a declaratory order, in violation of the automatic stay of the bankruptcy code. The district court reversed the bankruptcy court's order, holding that Honeywell did not violate the automatic stay because Honeywell's action before the ICC was in the nature of an interpleader, not an action against the debtor, and was not brought for the purposes of either obtaining possession of the debtor's property or exercising control over property of the bankruptcy estate. We affirm the judgment of the district court, although on somewhat different grounds.

Transportation Systems is a trucking company that transported products for Honeywell. The Interstate Commerce Act requires that motor carriers file tariffs with the Interstate Commerce Commission setting forth charges for all transportation services offered. 49 U.S.C. Secs. 10761(a); 10762 (1988). Carriers can only collect the rates published in these filed tariffs. 49 U.S.C. Sec. 10761(a). The Act also specifies that a carrier's rates and practices must be reasonable. 49 U.S.C. Sec. 10701(a) (1988).

Following the deregulation of motor carriers in 1980, motor carriers began to negotiate rates with shippers. Many carriers, however, failed to file the negotiated rates with the ICC. As a result, at a later date, many carriers (or trustees in bankruptcy) would return to the shipper seeking undercharges (the difference between the negotiated rate and the higher tariff rate). Numerous disputes arose between carriers and shippers. Shippers argued that the collection of undercharges constituted an unreasonable practice in violation of 49 U.S.C. Sec. 10701(a). Because undercharge claims are brought in federal district courts or in adversarial proceedings in bankruptcy, and not before the ICC, the ICC in 1986 offered to provide courts with an advisory opinion as to whether the collection of undercharges constituted an unreasonable practice. National Indus. Transp. League--Petition to Institute Rulemaking on Motor Common Carrier Rates, 3 I.C.C.2d 99, 100, 107 (1986) (Negotiated Rates I ). On June 14, 1989, the ICC issued a second order, effective June 29, 1989, modifying its earlier policy, stating that it would accept initial jurisdiction of negotiated rate-undercharge cases without awaiting court referral. National Indus. Transp. League--Petition to Institute Rulemaking on Motor Carrier Rates, 5 I.C.C.2d 623, 624 (1989) (Negotiated Rates II ).

Between 1984 and 1987, Transportation Systems negotiated rates with Honeywell for the transportation of Honeywell's products. The negotiated rates were different than the tariff rates filed with the ICC.

On June 10, 1987, creditors of Transportation Systems filed an involuntary petition in bankruptcy against Transportation Systems. The bankruptcy court appointed an auditor to examine Transportation Systems' freight bills to determine if Transportation Systems' customers had paid the lawful rates published in tariffs with the ICC. As a result of the audit, Honeywell received notice in late 1988 or early 1989 that it owed the trustee for Transportation Systems $271,151.41 for undercharges. ²

The day after the ICC decision in Negotiated Rates II became effective, Honeywell filed a petition with the ICC seeking a declaratory order that Transportation Systems' claimed undercharges constituted an unreasonable practice in violation of 49 U.S.C. Sec. 10701(a). The following day, Transportation Systems filed an adversary proceeding in the bankruptcy court against Honeywell seeking to recover the undercharges. Transportation Systems notified Honeywell that its commencement of proceedings before the ICC violated the bankruptcy code's automatic stay provision and requested that Honeywell withdraw the pleadings. Honeywell refused, and Transportation Systems moved for a temporary restraining order from the bankruptcy court and an order holding Honeywell in contempt and imposing sanctions.

The bankruptcy court held that Honeywell's action before the ICC was barred while Transportation Systems was in bankruptcy. Transportation Sys. Int'l, Inc. v. Lovett, No. 4-87-1952, slip op. at 2-3 (Bankr.D.Minn. July 27, 1989). The bankruptcy court determined that Honeywell and its counsel knew that Transportation Systems was in bankruptcy before they initiated the ICC proceeding and then refused to withdraw the pleadings even after Transportation Systems' attorney requested that they do so. Id. at 3. The court concluded that Honeywell "unequivocally, intentionally and willfully violated the automatic stay provisions" of 11 U.S.C. Sec. 362(a)(1) and (3) by initiating the ICC proceeding without leave of court. Id. at 2-3. The bankruptcy court assessed punitive damages in the amount of $5,000.00 and also ordered the reimbursement of attorneys' fees in the amount of $1,500.00. Id. at 3-4.

Honeywell appealed and the district court reversed the bankruptcy court's award of punitive damages and attorneys' fees. Lovett v. Honeywell, Inc., 110 B.R. 888, 895 (D.Minn.1990). The district court concluded that section 362(a)(1) did not apply because the ICC action was not against the debtor and that Honeywell had not violated section 362(a)(3). Id. at 893. Although the court noted that the bankruptcy court judge had taken a clear position against referring undercharge disputes to the ICC, the court observed that Honeywell filed its petition with the ICC in response to the ICC's decision in Negotiated Rates II. The court held that the ICC action did not violate the purposes of the automatic stay provision because Honeywell's action did not assert a claim against the debtor's estate or threaten to disrupt the liquidation procedure. Id. at 893. The district court concluded that Honeywell's action sought only a determination from the ICC that Honeywell's claim for undercharges was an unreasonable practice. Thus, the action was neither an effort to obtain possession of the debtor's property nor an effort to exercise control over the debtor's estate, and did not therefore violate section 362(a)(3). Id. at 895.

Shortly before the bankruptcy court held a hearing on Transportation Systems' motion, this court decided Maislin Industries v. Primary Steel, Inc., 879 F.2d 400 (8th Cir.1989), and after the bankruptcy court issued its order, this court decided INF, Limited v. Spectro Alloys Corp., 881 F.2d 546 (8th Cir.1989). ³ In those cases, we held that the reasonableness of freight carriers' billing practices are matters within the primary jurisdiction of the ICC and that the decisions of the ICC could be set aside only if arbitrary, capricious, or unsupported by substantial evidence. INF, 881 F.2d at 550. On June 21, 1990, the Supreme Court reversed the decisions of this court and of several other circuits, holding that the filed rate doctrine reflected in 49 U.S.C. Sec. 10761 barred consideration of whether a carrier's attempts to collect undercharges constituted an unreasonable practice in violation of 49 U.S.C. Sec. 10701. Maislin Indus. v. Primary Steel, Inc., --- U.S. ----, 110 S.Ct. 2759, 111 L.Ed.2d 94 (1990). The Supreme Court also observed that in the Maislin case the ICC only determined that the carrier engaged in an unreasonable practice, leaving the issue of whether the tariff rates were unreasonable open for exploration on remand. Id. 110 S.Ct. at 2767 n. 10.

Viewed in this context, the order of the proceedings shows the appropriateness of Honeywell's conduct. Honeywell filed its petition with the ICC the day after the effective date of Negotiated Rates II. Transportation Systems argued its motion for sanctions in the bankruptcy court some 11 days after this court's decision in Maislin. We also observe that in both Maislin and INF, the district court referred the issue of whether the carriers' billing for undercharges constituted an unreasonable practice to the ICC for ruling. At oral argument, the parties revealed that in the course of the bankruptcy proceeding, Honeywell filed a motion with the bankruptcy court to refer the reasonable rate issue to the ICC for ruling, and that the bankruptcy court entered an order making this referral.

We must decide only the propriety of the award of $1,500.00 in actual damages representing attorneys' fees and $5,000.00 punitive damages against Honeywell. ⁴ Thus, the legal issue before us is the applicability of 11 U.S.C. Sec. 362(h), which provides: "An individual injured by any willful violation of a stay provided by this section shall recover actual damages, including costs and attorneys' fees, and, in appropriate circumstances, may recover punitive damages." To recover under section 362(h), the party seeking the award must show that he was injured by the violation of the stay and that the violation was willful. See H.T. Bowling, Inc. v. Bain, 64 B.R. 581, 584 (W.D.Va.1986).

Honeywell argues that there is no evidence of injury, willful or otherwise, to...