Wheat Rail Freight Rate Antitrust Litigation, Matter of
| Decision Date | 20 May 1985 |
| Docket Number | Nos. 84-1383,84-1449 and 84-1505,s. 84-1383 |
| Citation | 759 F.2d 1305 |
| Parties | 1985-1 Trade Cases 66,571 In the Matter of WHEAT RAIL FREIGHT RATE ANTITRUST LITIGATION. Appeals of LITTLE CROW MILLING CO., INC., Midstate Mills Inc., DCA Food Industries Inc., General Mills, Inc., and The Pillsbury Company. |
| Court | U.S. Court of Appeals — Seventh Circuit |
Ralph Sauarese, Howrey & Simon, Washington, D.C., for plaintiffs.
Steve McGisech, U.S. Dept. of Justice, Washington, D.C., for amicus curiae.
Laurence Z. Shiekman, Pepper, Hamilton & Scheetz, Philadelphia, Pa., for amicus curiae.
Before BAUER and COFFEY, Circuit Judges, and DOYLE, Senior District Judge. *
In this multidistrict antitrust litigation, certain plaintiff shippers of wheat and wheat products appeal from the district court's order holding the defendant railroads impliedly immune from antitrust liability under the Sherman Act Sec. 1, 15 U.S.C Sec. 1 (1976), for allegedly conspiring to fix the price of wheat rail freight rates filed with and approved by the Interstate Commerce Commission (ICC). 579 F.Supp. 517. We affirm the district court's finding of implied immunity for the railroads from antitrust liability and uphold the dismissal of the suit.
In 1950, the ICC approved the defendant railroads' Agreement of the Eastern Railroads Under Section 5b of the Interstate Commerce Act (Agreement), which provided that rail carriers who were members of the Agreement could periodically meet and jointly set freight rates following the procedures outlined in the Agreement. Under the Interstate Commerce Act, 49 U.S.C. Sec. 10706(a)(2)(A) (Supp. III 1979) (ICA), two or more rail carriers may enter into an agreement relating to rates. The carriers must submit the agreement to the ICC for approval, and, if it is approved and carried out under the conditions required by the Commission, the railroads will not be subject to antitrust liability "with respect to making or carrying out the agreement." Id. See Eastern Railroads Agreement, 277 I.C.C. 279 (1950).
The railroads' 1950 Agreement prescribes procedures that the carriers must follow before filing a proposal on rates or other matters with the ICC. The members of the Agreement must give public notice of a rate proposal in a recognized traffic publication. Agreement, Art. III, Sec. 2. All interested persons, including shippers, are given fourteen days from the date of publication to communicate their views on the proposal to the members' designated committee and its chairman. Id. If the chairman receives no objection to the proposal within fourteen days, it is presumed that all members have approved the proposal. Id. Sec. 5. If an interested person does object, the chairman makes a proposal for a hearing at the members' next meeting. Id. Sec. 6. At the meeting, shippers and other interested parties have an opportunity to be heard regarding the proposed rate structure. Id. Sec. 8. The committee votes on the rate plan after having heard the views of the interested parties. Finally, the parties may seek review of the committee's decision by the Traffic Executive Association.
In 1976, the ICC, reviewing the railroads' existing plan set pursuant to the Agreement for wheat freight rates from Chicago to the east, held that the plan illegally discriminated against cargo shipped to Chicago by motor carrier. Board of Trade of the City of Chicago v. Akron, 352 I.C.C. 881 (1976), aff'd Atchison, Topeka & Santa Fe Railway 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 this decision, the railroads submitted wheat freight rate Plan A to the ICC, which eliminated proportional rates on wheat shipments in favor of higher flat rates. 1 In August, 1978, the ICC suspended Plan A and initiated an investigation of the Plan pursuant to its statutory authority under 49 U.S.C. Sec. 10707(a). The railroads thereafter cancelled the Plan A tariffs and, in February, 1979, filed wheat freight rate Plan B with the ICC. The defendant railroads adopted Plan B without giving public notice or holding a hearing regarding Plan B. Plan B was filed with the ICC, which initiated an investigation but refused to suspend Plan B pending the investigation. Transit on Wheat Between Reshipping Point and Destination, No. 37146 (March 16, 1979) (Transit on Wheat I ).
Under Plan B, all transit shipments of wheat were to be charged a flat rate, and all nontransit shipments, a proportional rate. A transit shipment is one in which a 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 is uninterrupted. Previously, transit shippers paid the lower of the proportional or flat rate plus a separate fee for the transit privilege. 2 Plan B eliminated the transit privilege for proportional rate shipments. If a shipper chose the lower proportional rate for a transit shipment, that rate applied only to the intermediate transit destination; the flat rate applied to the remainder of the journey. Only if the shipper chose the higher flat rate could he use the transit privilege and apply the through rate.
The shippers sought review by the ICC of the carriers' failure to give notice and a hearing. The protesting shippers alleged that, with respect to Plan B, the railroads had failed to comply with the notice and hearing provisions regarding rate proposals of the Agreement which provide shippers an opportunity to comment to the rail carriers about the proposals. See Agreement, Art. III, Sec. 2. The railroads responded that they were exempted from the notice and hearing provisions because the rejection by the ICC of Plan A constituted an emergency and because 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. at Sec. 8, or when changes in rates grow "out of decisions of and orders by the Interstate Commerce Commission." Id. at App. p 8. On January 16, 1980, the ICC approved Plan B. The ICC agreed with the shippers that the Plan B was not of an emergency character and that the decision to eliminate transit privileges did not grow out of the previous ICC decision. The ICC excused compliance with the Agreement procedures, however, because it found that the exceptions to the notice and hearing requirements in the Agreement were vague and because it found that the shippers had received constructive notice of Plan B.
On appeal, a panel of this court reversed the ICC, holding that the ICC could not approve the proposal if the railroads did not comply, and were not exempt from complying with, the Agreement. Board of Trade v. ICC, 646 F.2d 1187, 1191-93 (7th Cir.1981). On remand, the ICC held that the railroads had violated the Agreement by failing to conform to its procedures and ordered the tariff cancelled within 30 days. The ICC refused, however, to grant the shippers' request to declare the Plan B rates void ab initio. The ICC further refused to award reparations to the shippers, finding that they had failed to demonstrate "actual injury flowing from the carriers' unlawful tariff publication." Transit on Wheat Between Shipping Point & Destination, 365 I.C.C. 890 (1982) (Transit on Wheat IV ).
Rather than appeal the ICC's decision regarding reparations, the shippers filed the present suit in the federal district court alleging that the railroads' conduct in jointly meeting and conspiring to fix the Plan B rates constituted a per se violation of the antitrust laws. The shippers alleged further that the railroads had lost their immunity from antitrust laws provided by section 10706(a)(2)(A) when they failed to follow the notice and hearing requirements of the Agreement. The district court dismissed the shippers' antitrust damage claims on the grounds that the railroads were impliedly immune from antitrust liability for their conduct. 3
Section 10706(a)(2)(A) of the Interstate Commerce Act (ICA), 49 U.S.C. Sec. 10706(a)(2)(A), provides rail carriers with express immunity from antitrust liability for implementing agreements for joint rate setting approved by the ICC. 4 The district court found and the facts in the record indicate that the carriers in this suit did not carry out the 1950 Agreement, but rather violated it, when they adopted Plan B without giving public notice and holding a hearing pursuant to Article III of the Agreement after the ICC suspended and began to investigate the carriers' Plan A. Thus, the language of the ICA does not expressly immunize the conduct of the carriers from the reach of the antitrust laws.
The district court held, however, that despite the lack of express immunity under the ICA, the carriers were nonetheless impliedly immune from antitrust liability. In determining that the railroads were impliedly immune from antitrust liability for their failure to follow the 1950 Agreement procedures in adopting Plan B, the court relied principally upon the Supreme Court's decision in Keogh v. Chicago & Northwestern Railway, 260 U.S. 156, 43 S.Ct. 47, 67 L.Ed. 183 (1922). In Keogh, the Court held that a shipper cannot recover antitrust treble damages based upon a claim that, but for an alleged conspiracy among carriers, the shipper would have been entitled to transportation rates lower than the rates which were filed with and approved by the ICC. Keogh involved an antitrust suit brought by a flax and excelsior shipper against railroad carriers, alleging that the carriers had conspired through their committee, the Western Trunk Line Committee, to fix excessive rates. The challenged rates had been filed, suspended, investigated, and finally approved as reasonable and nondiscriminatory by the ICC. The shippers claimed that under section 7 of the Sherman Act th...
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