U.S. v. U.S. Steel Corp.

• Decision Date: 01 April 1981
• Docket Number: No. 80-1206,80-1206
• Citation: 645 F.2d 1285
• Parties: UNITED STATES of America, Appellee, v. UNITED STATES STEEL CORPORATION, Appellant.
• Court: U.S. Court of Appeals — Eighth Circuit

Page 1285

645 F.2d 1285

UNITED STATES of America, Appellee, v. UNITED STATES STEEL CORPORATION, Appellant.

No. 80-1206.

United States Court of Appeals Eighth Circuit.

Submitted Nov. 10, 1980.

Decided April 1, 1981.

Wayne L. Emery (argued), Richard J. Munsch, J. F. Wilson, Pittsburgh, Pa., for appellant United States Steel Corporation.

Alice Daniel, Asst. Atty. Gen., Washington, D. C., Thomas K. Berg, U. S. Atty., Minneapolis, Minn., Michael Kimmel, Bruce G. Forrest, Richmond I. McKay (argued), Attys., Civ. Div., Dept. of Justice, Washington, D. C., for appellee.

Before LAY, Chief Judge, HENLEY, Circuit Judge, and HANSON, ^* Senior District Judge.

LAY, Chief Judge.

United States Steel appeals from a grant of summary judgment assessing damages against it in a civil forfeiture proceeding brought by the United States under the Hepburn Act, § 2, 49 U.S.C. § 41(3). ¹ The Hepburn Act makes it illegal for a shipper knowingly to obtain the transportation of property at less than the published and filed tariff rates. This action was brought by the United States seeking forfeiture in the sum of three times the value of the rebates received by U.S. Steel between August 1969 and March 1974. Both the Government and U.S. Steel filed motions for summary judgment. On October 6, 1978, the United States Magistrate issued a report and recommended that the Government's motion be granted. By order filed January 14, 1980, the United States District Court for the District of Minnesota denied U.S. Steel's motion for summary judgment and granted the Government's. Judgment was entered in the total amount of $3,557,276.73, representing treble the value of rebates received by U.S. Steel, from which this appeal is taken. We vacate the judgment of the district court and remand for further proceedings in accord with this opinion.

I. Background.

U.S. Steel purchased coal from mines in the eastern United States for the production of steel at its Duluth Works in Duluth, Minnesota. The coal was initially shipped from the mines by the Chesapeake & Ohio Railway to Toledo, Ohio, (first leg of a lake cargo route), then by lake steamer to the port of Duluth (second leg), and finally by rail to U.S. Steel's Duluth Works (third leg). A separate tariff was filed by the carriers for each leg. The tariffs published by the Chesapeake & Ohio for the first leg of the route included provisions for payment of refunds to qualifying shippers upon certification that the third leg movement was to "an interior destination" as defined in the tariff. ² Between August 1969 and March 1974 the Chesapeake & Ohio refunded U.S. Steel $1,185,758.91 of the amount initially charged for the shipment of coal to Toledo. These refunds are the subject of this appeal.

The tariff applicable in this case, first published in its present form in February 1953, authorized eastern railways to refund a portion of their transportation charges:

Upon evidence in form of certificate shown in Item 155 that cargo coal shipped hereunder has been placed in vessels consigned to docks

1. In the United States on Lake Superior, including Sault Ste. Marie, MI., and the West Bank of Lake Michigan north of the Illinois-Wisconsin State Line, and thence transported from such docks (either as coal or as coal briquettes produced from such coal at the docks) to interior destinations in the United States not more than two (2) years after the date coal was loaded into vessels at Lake Erie Ports. (Emphasis Supplied)

The tariff also defined the term "interior destination" with respect to third leg movements by rail or other modes of transportation:

For purposes of tariff application, transportation from docks in the United States on Lake Superior, including Sault Ste. Marie, MI., or on the West Bank of Lake Michigan north of the Illinois-Wisconsin State Line, to interior destinations in the United States, or from docks on Lake Superior including Sault Ste. Marie, MI. and Sault Ste. Marie, On. in the United States or Canada to interior destinations in Canada referred to above means :

(1) If transported from said docks by rail, the transportation must be by rail as road-haul freight ;

(2) If transported from said docks by any other means, the transportation must be to interior destinations in the United States or to interior destinations in Canada located outside both the railroad switching limits and the corporate limits of the origin port city. (Emphasis Supplied)

U.S. Steel's Duluth Works is within the corporate limits of the City of Duluth. This fact raises the issue of whether intracity movements of coal from the Duluth docks to Duluth Works was transportation to an "interior destination" within the meaning of the tariff so as to qualify U.S. Steel for rebates under the lake cargo coal tariff. ³ U.S. Steel argued before the magistrate that the tariff defines interior destination alternatively as (1) any destination in or outside Duluth reached by rail as road-haul freight, or (2) any destination outside the railroad switching limits and corporate limits of Duluth if transported from such docks by any means other than road-haul freight. The magistrate rejected this interpretation, and recommended judgment for the Government.

U.S. Steel alleges the district court erred in granting the Government's motion for summary judgment on various grounds: (1) the tariff is not ambiguous and requires no interpretation; (2) alternatively, the court erred in its construction and failed to consider evidence bearing on the appropriate construction of the tariff; (3) if the tariff is ambiguous, the Interstate Commerce Commission had primary jurisdiction to interpret the tariff; (4) the court erred in concluding, as a matter of law, that the defendant knowingly violated the tariff and, thus, deprived U.S. Steel of its right to trial by jury; and (5) the court erred in refusing to dismiss the complaint because of unreasonable delays in bringing the suit.

II. Whether the Tariff is Ambiguous.

U.S. Steel argues that it was entitled to summary judgment because the tariff unambiguously authorizes refunds to a shipper located within the upper lakes port city which has the coal moved from the docks by rail as road-haul freight. U.S. Steel's position is that the term "interior destination" has no geographic prerequisite where the ex-dock transportation is by rail as road-haul freight. The Government contends that the Commission has already defined "interior destination" as a matter of law to include a geographic requirement that the third leg movement be transportation to a location outside the corporate limits of the port city. The Government further urges that a contrary interpretation cannot be given because the tariff would then be discriminatory in violation of section 2 of the Interstate Commerce Act, 49 U.S.C. § 2.

The district court noted the differing interpretations of the term "interior destination" and determined that the tariff was ambiguous. Arguably, the modifier "interior" would ordinarily suggest a destination other than one within the port city. Alternatively, subparagraph (1) of the defining clause seems to define "interior destination" as a mode of transportation without regard to a geographic destination. The finding of ambiguity seems correct, particularly in light of the existence of issues of fact concerning the drafting of the tariff and disputes over the relevance and meaning of various court and Commission decisions. Thus, the district court correctly denied U.S. Steel's motion for summary judgment.

III. The Construction of the Tariff.

In recommending judgment in favor of the Government, the magistrate found that U.S. Steel violated the Hepburn Act by receiving rebates not authorized by the tariff because shipments to destinations within the corporate limits of the City of Duluth are not shipments to "interior destinations." The magistrate reasoned that U.S. Steel's interpretation of the tariff was unacceptable, as a matter of law, because that interpretation would cause the eastern railways to discriminate against shippers by allowing rebates for wholly intracity third leg movements by rail but disallowing rebates for wholly intracity third leg movements of coal by truck or other means. The court believed that such intermodal discrimination would violate 49 U.S.C. § 2 ⁴ and, therefore, was not an interpretation that could be adopted by the court, regardless of the resolution of disputed facts. We have difficulty with this analysis. ⁵

In United States v. Wabash Railroad, 321 U.S. 403, 64 S.Ct. 752, 88 L.Ed. 827 (1944), the Supreme Court held that the determination of total charges due under a filed tariff for a combination of carrier services was to be accomplished by an investigation of the facts of the carrier's service to the particular shipper to be charged, irrespective of whether charging for a spotting service as part of the total charge would discriminate against the shipper in violation of section 2. Id. at 413, 64 S.Ct. at 756. ⁶ The lesson of Wabash is that to determine if a person has violated a tariff the primary inquiry is whether the particular carrier's and shipper's situation comes within the terms of the tariff, as defined according to their ordinary and intended meaning, practical application, and commercial context. Accord Penn Central Co. v. General Mills, Inc., 439 F.2d 1338, 1340-41 (8th Cir. 1971).

The Hepburn Act prohibits only a shipper's departure from the terms of a tariff; that the tariff might be subsequently determined to be unlawful under section 2 in proper proceedings is not controlling for Hepburn Act purposes. ⁷ The district court apparently overlooked the possibility that the Chesapeake & Ohio may have published a discriminatory tariff, the compliance with which by U.S. Steel would incur it no liability under the Hepburn Act.

The magistrate relied on Great Northern Railway v. Delmar Co., 283 U.S. 686, 51 S.Ct. 579, 75 L.Ed. 1349 (1931), for a...