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G. & T. Terminal Packaging Co. v. Consolidated Rail Corp.

argued: June 22, 1987.


On Appeal from the United States District Court for the District of New Jersey -- Newark, D.C. Civil No. 84-1173.

Gibbons, C.j., Weis and Aldisert, Circuit Judges.

Author: Gibbons


GIBBONS, Chief Judge

Several rail shippers*fn1 of agricultural commodities appeal from a summary judgment in favor of Consolidated Rail Corp. (Conrail) in their action to set aside rates fixed by Conrail for their shipments. The shippers' appeal poses the question whether the Congressional decisions in the Railroad Revitalization and Regulatory Reform Act of 1976 (4 R Act), Pub. L. No. 94-210, 90 Stat. 31, and the Staggers Rail Act of 1980, Pub. L. No. 96-448, 94 Stat. 1898, in favor of deregulation of most rail tariffs should be deemed to have overruled the holding in Texas & Pacific Railway Co. v. Abilene Cotton Oil Co., 204 U.S. 426, 51 L. Ed. 553, 27 S. Ct. 350 (1907) that courts may not entertain common law challenges to rates established pursuant to the Interstate Commerce Act. 49 U.S.C. §§ 10101-11917. The district court held that the Abilene Cotton Oil rule survives the 4 R Act and the Staggers Rail Act. We affirm.


On April 10, 1980 rates for rail transportation of potatoes and other agricultural commodities were exempted form regulation under the Interstate Commerce Act. Ex Parte No. 436 (Sub No. 2), Rail General Exemption Authority -- Miscellaneous Commodities (filed March 24, 1980), 45 Fed. Reg. 204 (1980). The plaintiff shippers are served by Conrail, which delivers to them at Hunts Point or Kingbridge rail car shipments of potatoes and other commodities received from western connecting carriers. Apparently because the plaintiff shippers filed numerous claims against Conrail for loss or damage, Conrail informed all western connecting carriers in May or June of 1983 that it was imposing a surcharge of $500 or $600 per car (depending on the point of origin) on all rail car shipments to them. A Conrail internal memorandum noted that one of the plaintiff shippers had filed claims for amounts exceeding Conrail's revenues. Faced with the surcharges of $500 or $600 per car, the shippers on September 30, 1983 wrote a letter to the Chairman of the Interstate Commerce Commission, contending that the rates were discriminatory and unreasonable and inquiring whether the Commission retained any jurisdiction over them. Herbert Hardy, Director of the Office of Proceedings, directed by ICC Chairman Taylor, responded:

The Interstate Commerce Commission no longer exercises jurisdiction over the rates charged by the railroads for the movement of the commodities covered by the exemption or over the practices engaged in by the railroads in the course of transporting them. Because your client and its affiliates appear to deal only in products covered by the agricultural commodities exemption, any dispute they may have with Conrail, or other railroads would have to be settled in the courts rather than before the Commission.

After receiving Mr. Hardy's letter, the shippers filed in the district court a seven count complaint alleging that the new rates violated the Interstate Commerce Act, 49 U.S.C. § 10101-11917, the common law, the antitrust laws, and the United States Constitution. In essence the common law claims assert that the decision by Conrail to impose a surcharge on shipments to the plaintiff shippers was made in retaliation for the shippers pursuing valid claims for past damages and delays, and discriminated against them in comparison with shippers similarly situated. The district judge to whom the case was first assigned granted Conrail's motion for summary judgment on the Interstate Commerce Act and constitutional claims. The antitrust claims were later dismissed with prejudice by stipulation. Conrail's motion for summary judgment on the shippers' common law claims was initially denied.

In September, 1985, Conrail filed a petition with the Interstate Commerce Commission, pursuant to 49 U.S.C. § 11701, requesting the commencement of a declaratory order proceeding to the effect that the commission retained jurisdiction over rates exempted pursuant to 49 U.S.C. § 10505, and that such jurisdiction was exclusive. On March 5, 1986 the Commission, responding to the Conrail petition, stated that, despite Mr. Hardy's letter, it n.2 [Footnote Omitted] retained jurisdiction over exempted rates and that such unexercised jurisdiction preempted common law causes of action challenging such rates. Consolidated Rail Corporation -- Declaratory Order -- Exemption, 1 I.C.C. 2d 895 (Feb. 27, 1987).

Armed with the Commissioner's ruling, and with the intervening decision in Transcontinental Gas Pipe Line Corp. v. State Oil and Gas Bd. of Mississippi, 494 U.S. 409, 106 S. Ct. 709, 88 L. Ed. 2d 732 (1986), Conrail renewed its motion for summary judgment.

In Transcontinental the Supreme Court considered whether the states could impose conditions on the first sale of natural gas which, by direct statutory exemption, was placed beyond regulation by the Federal Energy Regulatory Commission (FERC). Prior to 1978 regulation by FERC preempted any state regulation. See Northern Natural Gas Co. v. State Corporation Comm'n of Kansas, 372 U.S. 84, 9 L. Ed. 2d 601, 83 S. Ct. 646 (1963). In the Natural Gas Policy Act of 1978, Pub. L. 95-621, 92 Stat. 3351, Congress substantially restricted FERC's regulatory authority. The Transcontinental Court noted that a "decision to forego regulation in a given area may imply an authoritative federal determination that the area is best left unregulated, and in that event would have as much preemptive force as a decision to regulate." 106 S. Ct. at 717 (citations omitted). The Court refused to accept the argument that Congress "in revising a comprehensive federal regulatory scheme to give market forces a more significant role in determining the supply, the demand, and the price of natural gas, intended to give the States the power it had denied FERC." Id.

A second district judge to whom the renewed Conrail motion for summary judgment was assigned, found both the Commission's declaratory ruling and the Transcontinental Court's reasoning to be persuasive and granted summary judgment. The order granting summary judgment on the shipper's common law claims resulted in an appealable order because it disposed of all the remaining claims. See Fed. R. Civ. P. 54(b). This appeal followed. Since summary judgment was entered on all claims not voluntarily dismissed, our review is plenary.


The shippers contend that the court erred in dismissing their statutory claims, in holding their common law claims to be preempted, and in dismissing their constitutional law claims. We address these contentions in that order.


The shippers point out that under the Interstate Commerce Act a holder of a receipt or bill of lading is entitled to recover for the actual loss or injury to the property caused by the carrier. 49 U.S.C. § 11707(a)(1), (c)(1). They urge, as well, that this carrier's responsibility for loss or damage survives deregulation. See First Pennsylvania Bank v. Eastern Airlines, Inc., 731 F.2d 1113 (3d Cir. 1984). From these unquestionably sound premises the shippers urge the conclusion that an attempt to increase rates in an amount sufficient to cover the cost of processing, defending, and paying damage claims must be illegal. This conclusion, however, does not follow from the premises. The summary judgment record establishes that some of the plaintiff shippers have filed and are litigating loss or damage claims against Conrail, pursuant to 49 U.S.C. § 11707, in appropriate state courts. Recovery in those pending actions, or in any subsequently filed, will not be affected by the tariffs here challenged. The shippers' statutory argument would be equally applicable to rates fixed by the Commission prior to deregulation, or to rates fixed under the 4 R Act and Staggers Rail Act for dominant non-exempt traffic. Yet the shippers cite no authority -- statutory, regulatory, or judicial -- for the proposition that carrier liability under section 11707 is not a cost which may be taken into account in fixing rates. The absence of such authority suggests the obvious: section 11707 prohibits rail carriers from relieving themselves of the cost of paying loss or damage claims; it simply does not deal with what costs may be taken in account in determining rates. Indeed the 4 R Act, as amended by the Staggers Act, states specifically that "nothing in this subsection or section 11707 . . . shall . . . give the Commission the authority to require any specific level of rates or services based upon the provisions of section 11707 . . ." 49 U.S.C. § 10505(e). Under the 4 R Act and the Staggers Act, levels or rates of service are to be determined primarily by competition in the marketplace for transportation services. Thus we agree with the district judges, both of whom rejected the claim that the challenged rates violated any relevant federal statute.


On the motion for summary judgment we are obliged to accept as true the shippers' contention that the surcharges imposed on their shipments resulted in tariffs higher than those being charged to some of their competitors. We also accept, arguendo, their legal contention that at common law there were remedies against common carriers for discrimination in rates among shippers. After the enactment of the Interstate Commerce Act, however, rail shippers were no longer subject to such remedies. See Texas & Pacific Railway Co. v. Abilene Cotton Oil Co., 204 U.S. 426, 51 L. Ed. 553, 27 S. Ct. 350 (1907) (no common law actions challenging rates established under the Interstate Commerce Act). See also Chicago & N.W. Transp. Co. v. Kalo Brick & Tile Co., 450 U.S. 311, 67 L. Ed. 2d 258, 101 S. Ct. 1124 (1981) (state common law remedy imposing service requirements preempted by Interstate Commerce Act). From the time Abilene Cotton Oil was decided to date, no case has permitted a shipper to challenge a freight rate in a common law action. The shippers, however, discern in the deregulation scheme of the 4 R Act and Staggers Act a Congressional intention to restore the common law authority of the state or federal courts, at least in cases in which the Commission has found commodities to be exempt.

Prior to 1976, railroads were required to file tariffs with the Commission and interested parties were able to challenge these rates. 49 U.S.C.A. §§ 1(5), 15 (1959) (amended 1976, repealed 1980). The authority of the Commission to exempt rates from challenge has its roots in the 4 R Act, which had a declared purpose of "permit[ting] railroads greater freedom to raise or lower rates for rail services in competitive markets." 45 U.S.C. § 801(b)(3)(1982). The exemption authority was a principal component of the Staggers Act, which furthered the policy of "allow[ing], to the maximum extent possible, competition and the demand for services to establish reasonable rates for transportation by rail." 49 U.S.C. § 10101a(1) (1982). But while both the 4 R Act and Staggers Act decreased the Commissioner's role with respect to rate-making, neither their text nor their legislative history suggests a Congressional intention to resurrect common law remedies moribund since 1907. Indeed the Staggers Act expressly codified the holding of Abilene Cotton Oil, adding to the Interstate Commerce Act the provision:

The jurisdiction of the Commission . . . over transportation by rail carriers, and the remedies provided in this title with respect to the rates, classifications, rules, and practice of such carriers, is exclusive.

49 U.S.C. § 10501(d)(1982). While this provision could be literally interpreted to mean that it is jurisdiction over provided remedies -- and not the remedies themselves -- which are exclusive, the ...

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