Seaboard Coast Line R. Co. v. Long Island RR Co.

• Citation: 447 F. Supp. 108
• Decision Date: 10 April 1978
• Docket Number: No. 76 C 292.,76 C 292.
• Parties: SEABOARD COAST LINE RAILROAD COMPANY, Plaintiff, v. LONG ISLAND RAIL ROAD COMPANY, Defendant.
• Court: U.S. District Court — Eastern District of New York

447 F. Supp. 108

SEABOARD COAST LINE RAILROAD COMPANY, Plaintiff, v. LONG ISLAND RAIL ROAD COMPANY, Defendant.

No. 76 C 292.

United States District Court, E. D. New York.

January 10, 1978.

Memorandum on Reargument April 10, 1978.

Whitman & Ransom by Donald L. Wallace, New York City, and Albert B. Russ, Jr., Richmond, Va., for plaintiff.

George M. Onken, Jamaica, N. Y. by Richard H. Stokes, Jamaica, N. Y., for defendant.

MEMORANDUM OF DECISION AND ORDER

NEAHER, District Judge.

This case involves a controversy over interline accounts between the parties dating back to 1953 arising from defendant railroad's use of plaintiff railroad's freight cars.¹ Defendant, believing it had overpaid plaintiff for the use of the latter's freight cars during the period 1953-1965, set off $184,664 against per diem freight car charges due plaintiff for the period 1970-1975. In 1976 plaintiff brought this action to recover the alleged unpaid balance of per diem charges for the 1970-1975 period and defendant counterclaimed for the overpayments it claimed it had made to plaintiff during 1953-1965. The matter is before the court on cross-motions for summary judgment based on an agreed statement of facts.

I.

For decades defendant, which owns no freight cars, has used plaintiff's freight cars and has paid per diem rental charges. Prior to 1969, the per diem rates were fixed by the Association of American Railroads ("AAR") pursuant to an agreement to which its members, including the parties to this action, subscribed. Each subscriber, however, retained the right to establish different rates by contractual agreements with individual railroads.

In 1953 some railroads, including defendant, decided to negotiate rates on a road-by-road basis. The railroads on the other end of the negotiations, among them plaintiff, promptly filed a complaint with the Interstate Commerce Commission ("ICC") to determine the reasonableness of the AAR rates.² In 1955 the ICC determined that the AAR rates were just and reasonable. Chicago, Burlington & Quincy R. Co. v. New York, Susquehanna & Western R. Co., 297 I.C.C. 291 (1955).

In 1957, while the appeal from the ICC order was pending in the United States District Court in Massachusetts, the parties to this action entered into an interim agreement pursuant to which defendant agreed to pay the higher AAR rates under appeal upon the following understanding:

"That Seaboard Coast Line Railroad Company will reimburse Long Island Rail Road Company without interest for any overpayment if a lower rate is eventually so agreed upon or is determined by the courts to be reasonable in or on appeal from a decision in the foregoing litigation i. e., the appeal in the District of Massachusetts or in any other action or proceeding, or is so found by the Interstate Commerce Commission with the approval of the courts." Appendix C, Agreed Statement of Facts at App. 12.

In 1958 a three-judge court in the District of Massachusetts reversed the ICC's order and remanded the case to the ICC to consider the reasonableness of the AAR's per diem rates in the light of a detailed investigation of a "time-mileage plan," an alternative method of computing car hire rates.³ Boston & Maine Railroad v. United States, 162 F.Supp. 289 (D.Mass.1958). An appeal of this decision to the Supreme Court was dismissed as premature on the ground that the ICC had expressed its willingness to make more detailed findings in accordance with the terms of the district court's remand. Boston & Maine Railroad v. United States, 358 U.S. 68, 79 S.Ct. 107, 3 L.Ed.2d 34 (1958).

Ten years later, after extensive hearings, the ICC concluded that the AAR rates were not just and reasonable and that the time-mileage plan provided more equitable rates. Chicago, Burlington & Quincy R. Co. v. New York, Susquehanna & Western R. Co., 332 I.C.C. 176 (1968). Since mileage figures were not available for the years 1953-1965, however, the ICC fixed what it considered reasonable per diem rates for that period.⁴ A three-judge court affirmed this determination in Boston & Maine Railroad v. United States, 297 F.Supp. 615 (D.Mass.1969), as did the Supreme Court in Boston & Maine Railroad v. United States, 396 U.S. 27, 90 S.Ct. 196, 24 L.Ed.2d 142 (1970).

Following the Supreme Court's affirmance, which was announced on November 10, 1969, defendant's president sent plaintiff a letter on April 23, 1970 in which he noted that, pursuant to their 1957 interim agreement, the time had come for an adjustment of the per diem accounts for the period of 1953-1965. The letter continued:

"A review of our books of account reveal that our company paid your company during the period August 1953 through December 1965 per diem rates in excess of those found reasonable by the Commission. For your review, I am attaching herewith a statement of the excess per diem charges which we claim we are entitled to have refunded to us."

Plaintiff's president gave the following brief response on May 21, 1970:

"I have had an opportunity to review the figures on your statement of charges and find they do not agree with our records. Therefore, I suggest that a meeting of our accounting representatives be arranged to iron out the differences."

When defendant requested a list of the items in question, plaintiff indicated in a letter dated October 2, 1970 that it considered most of defendant's claims for the 1953-1965 period were time-barred but was willing to settle the parties' differences over that period for $35,000, and to apply to the 1966-1970 period the basis used in defendant's April 23, 1970 letter in calculating amounts due for the earlier period.

Defendant did not accept the proposal. Instead, beginning in November 1970 and continuing through October 1975, defendant periodically underpaid car hire charges owed to plaintiff. On February 13, 1976 plaintiff filed the present action to recover the amounts set off, which totaled $184,664.44. On August 13, 1976 defendant answered the complaint and filed a counterclaim for the excess per diem it claims was owed to it by plaintiff for the 1953-1965 period. The parties have agreed that the correct amount of those payments is $132,500.65.

II.

This case is remarkable because although the court's jurisdiction is invoked on diversity grounds, each party seeks to defend against the other's claim by relying on a three-year statute of limitations found in the Interstate Commerce Act as amended. The pertinent provision reads as follows:

"All actions at law by carriers subject to this chapter for recovery of their charges, or any part thereof, shall be begun within three years from the time the cause of action accrues, and not after." 49 U.S.C. § 16(3)(a).⁵

Presumably in an effort to avoid this federal statute of limitations and to come within a longer State limitations period, plaintiff alleged only common law claims as alternative grounds for defendant's liability: (1) plaintiff is entitled to restitution for the value of defendant's use of plaintiff's cars; (2) defendant promised to pay the value of its use of the cars; and (3) defendant is liable on an account stated. Although defendant in its answer denied each of these claims and allegations, it does not dispute that it underpaid plaintiff $184,664.44 for the use of plaintiff's cars during 1970-1975. Aside from its counterclaim, defendant contends that § 16(3)(a) supra stands as a bar to plaintiff's recovery of any unpaid per diem charges which were due prior to February 13, 1973, three years before the filing of the complaint. As hereinafter discussed, the court is of opinion that in a suit such as this between carriers, § 16(3) has no application.

In attacking defendant's counterclaim, plaintiff argues that federal law precludes the recognition of any right of set-off. Reliance is placed on cases cited in the margin,⁶ three of which on examination deal with the special problems of railroads in reorganization and are inapplicable here. The argument is rejected, since the real question is whether defendant's counterclaim is barred by the limitation of § 16(3) supra or any other period of limitations.

The court concludes that the parties and the nature of their controversy are such as to place the claims involved beyond the scope of § 16(3). As is plain from the Agreed Statement of Facts, including Appendices A and B, and as plaintiff itself acknowledges (Brief, p. 5), what is involved here is a dispute over the settlement of interline accounts solely between carriers relating to past per diem charges which appear to be the subject of a valid agreement. There is no question of condoning the assertion of stale claims that would upset the policy "of uniformity and equality of treatment, as between carrier and shipper," which § 16(3) was designed to promote. Midstate Horticultural Co., Inc. v. Pennsylvania Railroad Co., 320 U.S. 356, 361, 64 S.Ct. 128, 131, 88 L.Ed. 96 (1943).

Although plaintiff cites a number of unreported district court cases⁷ for the proposition that recovery of overpayments between carriers has been held to be subject to the three-year limitation of § 16(3), the facts of those cases are not revealed nor is any reason indicated why such a result was reached. On the contrary, there is authority pointing to an opposite result where, as here, the subject matter is a dispute over payments as between carriers.

In Thompson v. St. Louis-San Francisco Railway Company, 218 F.2d 166 (8 Cir. 1954), cert. denied, 348 U.S. 964, 75 S.Ct. 525, 99 L.Ed. 752 (1955), one Missouri railroad sued another Missouri railroad over a claimed improper division of revenue earned for transporting tank cars of crude petroleum interstate. The transportation took place during the period 1944-1945; the formal demand by the plaintiff for payment was made within the then two-year limitation in § 16(3)(a) for bringing suit; but the action was not commenced until 1952 — almost five years after the limitation had...