THE UNITED STATES COURT OF APPEALS

FOR THE FIFTH CIRCUIT

 

No. 91-1320

 

ADVANCE UNITED EXPRESSWAYS, INC.,

Plaintiff-Appellee,

versus

EASTMAN KODAK COMPANY,

Defendant-Appellant.

_________________________________________________________________

_

Appeal from the United States District Court for the

Northern District of Texas

_________________________________________________________________

 (June 26, 1992)

Before GOLDBERG, JOLLY, and WIENER, Circuit Judges

E. GRADY JOLLY, Circuit Judge:

In this interstate tariff undercharge case, we examine the

roles played by the Interstate Commerce Commission and the district

courts when the reasonableness of a tariff rate or practice is at

issue. For the reasons set forth below, we hold that, in the light

of Maislin Industries, U.S., Inc. v. Primary Steel, Inc., 497 U.S.

116 (1990), shippers may assert rate unreasonableness as a defense

in an action by a carrier for undercharges and that district courts

should refer issues pertaining to rate unreasonableness in such

cases to the Interstate Commerce Commission. 
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I

Advance United Expressways, Inc. ("Advance") hauled cargo for

the Eastman-Kodak Company ("Kodak") at rates below the rates in

some of the tariffs Advance posted with the ICC. Advance filed for

Chapter 11 bankruptcy in Minnesota in 1987. 

In 1988, a rate auditor for Advance's bankruptcy estate began

billing Kodak for "undercharges," or the difference between the

amount paid and the applicable tariff price, on some 7,596 freight

bills.

In May 1989, Kodak sought a declaratory order from the

Interstate Commerce Commission ("ICC" or "Commission") declaring

Advance's rates and practices unreasonable. Advance moved for a

contempt order in bankruptcy court, alleging Kodak's petition for

a declaratory order violated the automatic stay. The ICC action

was then stayed until the bankruptcy stay was lifted on August 14,

1989. 

On August 9, 1989, Advance sued Kodak in the United States

district court in Dallas, seeking $456,838 in undercharges. Kodak

moved for a stay pending the ICC ruling, which was denied. At the

invitation of the court, Advance filed its motion for summary

judgment on December 22, 1989. 

Meanwhile, the ICC had lifted the stay on its proceedings in

August 1989. Both Advance and Kodak submitted evidence to the

Commission. In February 1990, the ICC ruled for Kodak, applying
 

1See NITL -- Petition to Institute Rulemaking on Negotiated

Motor Common Carrier Rates, 5 I.C.C.2d 623 (1989)(often called

the "Negotiated Rates II" decision). 

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the Commission's "negotiated rates policy." This policy provides

that, because a carrier is responsible for filing a new tariff when

it negotiates a rate below the existing filed tariff's rate, the

carrier who fails to file a new tariff, but later tries to collect

undercharges on the higher rate of the old filed tariff, acts

unreasonably.1 Thus, Advance's attempt to collect undercharges was

an unreasonable practice. The Commission also considered arguments

that tariff ADUE 652, a tariff rate with a 20% discount, governed

some portion of the shipments in dispute. The Commission found

that letters from Advance to Kodak satisfied a "letter of

participation" provision of ADUE 652 and that the discounts in the

letters that conformed to ADUE 652 governed the shipments. The

Commission separately found that Advance's distinct practices 

(1) of negotiating rates, billing and accepting payment

at the negotiated rate, but assertedly failing to file

the rates; (2) of billing and accepting payment under

discount programs provided for in a filed tariff and

written agreements of participation, but denying the

applicability of such discounts,...

were unreasonable.

In March 1990, the district court stayed proceedings pending

a ruling by the United States Supreme Court in Maislin, which was

issued in June. 497 U.S. 116 (1990). In Maislin, the court struck

down the negotiated rates doctrine as violative of the "filed rate
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doctrine." As its name implies, this doctrine derives from the

Interstate Commerce Act requirement that a carrier's rate be filed,

49 U.S.C. § 10761, and which, simply stated, is that

this rate is the only lawful charge. Shippers and

travellers are charged with notice of it, and they as

well as the carrier must abide by it, unless it is found

by the Commission to be unreasonable. Ignorance or

misquotation of rates is not an excuse for paying or

charging either less or more than the rate filed. 

Louisville & Nashville R. Co. v. Maxwell, 237 U.S. 94, 97 (1915),

quoted in Maislin, 110 S.Ct. at 2765, 2766. 

Following the decision in Maislin, on November 30 the district

court entered summary judgment for Advance. The court rejected

Kodak's argument based upon the ICC's 1990 decision as an argument

based solely on the negotiated rates policy discredited in Maislin.

The court further refused to hear the defense that the filed rate

was unreasonable. Citing our opinion in In re Caravan Refrigerated

Cargo, Inc., 864 F.2d 388 (5th Cir. 1989), the court held that,

although Kodak may properly raise the issue of rate

unreasonableness before the ICC, Kodak may not raise the issue as

a defense in the action for undercharges. The court, therefore,

awarded Advance the entire amount requested and also granted

prejudgment interest from the dates of shipment. Two weeks later,

judgment was entered for $469,244.78 in undercharges, $150,079 in

interest, and $120 in costs. Kodak moved for reconsideration, and

later for alteration or stay of the judgment, all of which were

denied. 
 

2Kodak raises another issue which we note only in passing: 

the court improperly granted summary judgment because of a yearlong delay after the motion was filed. This issue lacks merit,

since the parties were on notice that summary judgment could be

issued at any time later than 20 days after the motion was filed. 

N.D.Tex. Local R. 5.1. This point is moot, in any event, as we

find below that summary judgment was improper for other reasons.

Kodak also argues that the district court abused its

discretion by awarding prejudgment interest to Advance and also

that it improperly calculated interest from the date of the

shipments. Because we reverse the entire award and remand for

further consideration, we will pretermit this issue. We note in

passing, however, that the proper standard for the award appears

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On July 12, 1991, the ICC granted a petition by Kodak to

reopen its proceedings against Advance in the light of Maislin.

That decision reaffirmed the determination that the 20% discount

rate applied to a significant number of the disputed bills. The

ICC has set a schedule for the introduction of evidence on the

reasonableness of Advance's tariffs.

Kodak here appeals the summary judgment entered by the

district court. Kodak has taken pains to point out that it does

not appeal the refusal of the district court to apply the

negotiated rates doctrine. Instead, Kodak attacks the summary

judgment by raising three distinct arguments: (1) the district

court should have deferred to the ICC in its decision on the

applicable tariff; (2) Kodak should have been allowed to present

its defense that the tariffs were unreasonable; and (3) if the

court refused to grant Kodak an opportunity to present its defense

of unreasonableness, then the court should have stayed its

proceedings to allow the ICC to rule on the issue.2
not to be one of discretion, but, barring extraordinary

circumstances, such awards seems to be considered mandatory in

order to make the injured party whole, Louisiana & Arkansas Ry.

Co. v. Export Drum Co., 359 F.2d 311 (5th Cir. 1966). Cf.

Southern Pacific Transp. Co. v. San Antonio, 748 F.2d 266, 274

(5th Cir. 1984). 

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II

We review de novo the summary judgment, applying the same

standards of law as those available to the district court. Trial

v. Atchison, Topeka and Santa Fe R. Co., 896 F.2d 120, 122 (5th

Cir. 1990). Therefore, to sustain the summary judgment rendered

below, we must find that there is "no genuine issue as to any

material fact and that the moving party is entitled to judgment as

a matter of law." Fed.R.Civ.P. 56(c). 

III

Our consideration of this appeal begins with an examination of

the recent United States Supreme Court opinion in Maislin, a case

whose issues and procedural history are similar to our case today.

Maislin, a bankrupt carrier, sued a shipper, Primary, for

undercharges for freight shipments carried over two years. Primary

answered, asserting defenses that the asserted tariff rates were

inapplicable to the shipments in issue, that the rates sought were

unreasonable, and that the practice of negotiating a rate lower

than the tariff and rebilling at the higher tariff rate was

unreasonable. The district court found that these defenses raised
 

3Under the "primary jurisdiction doctrine," a district court

must refer issues committed to the special competence of the ICC

to the Commission for determination. City of New Orleans v.

Southern Scrap Material Co., 704 F.2d 755, 758 (5th Cir. 1983). 

The ambit of this doctrine is discussed in greater detail below. 

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issues in the "primary jurisdiction" of the ICC,3 stayed the court

proceedings, and referred the matter to the Commission. Maislin,

110 S.Ct. at 2764. The ICC ruled in Primary's favor, basing its

decision on its negotiated rates policy, but not reaching the issue

of reasonableness of the rates. Id., and at 2767 n.10. The

district court relied upon the ICC ruling and granted summary

judgment to Primary. The Eighth Circuit affirmed. Maislin

Industries v. Primary Steel, Inc., 879 F.2d 400 (8th Cir. 1989). 

As we described above, the Supreme Court reversed, holding

that the negotiated rates policy of the ICC is contrary to the

purpose and scheme of the Interstate Commerce Act, primarily

because the negotiated rates policy undermines the filed rate

doctrine, which is fundamental to achieving the purposes of the

Act, to provide all shippers a uniform non-discriminatory rate.

Maislin, 110 S.Ct. at 2765-2767, 2770-2771. The court then

restated the inherent limitation of the filed rate doctrine: The

filed rate is not enforceable if it is unreasonable. Maislin, 110

S.Ct. 2676, citing, e.g., Louisville and Nashville R. Co. v.

Maxwell, 237 U.S. 94 (1915). Because the ICC had yet to determine

whether the tariff rate was itself unreasonable, the court assumed,

for the purposes of its opinion, that the rates were reasonable. 
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Maislin, 110 S.Ct. at 2767, n.10. Significantly, the court noted

that, "The issue of the reasonableness of the tariff rates is open

for exploration on remand." Id. 

IV

With the lessons of Maislin in mind, we now turn to the issues

raised in this appeal. The district court applied the filed rate

doctrine, relying on Maislin, to reject Kodak's position based on

the ICC application of its negotiated rates policy. On those

grounds, the court granted summary judgment for Advance. Kodak

argues that summary judgment was inappropriate because questions of

material fact persisted: which tariffs governed the bills in

dispute and whether the rates applied were reasonable. 

A

Kodak contends, first, that the district court erred in its

failure to entertain the defense of unreasonable tariff rates. The

district court based its decision on this issue upon our holding in

In re Caravan Refrigerated Cargo, Inc., 864 F.2d 388 (5th Cir.

1989). In that case, we determined that unreasonableness of the

rate was no defense in an action to collect for undercharges.

Caravan, 864 F.2d at 392. Shippers must first pay the undercharge

found owing by the district court; thereafter, the shipper could

seek a determination from the ICC that the rate was unreasonable

and in a separate proceeding could seek to recoup such money

wrongly collected. Id. The district court applied this rule and
 

4Caravan has not found much support among the circuits. In

Delta Traffic Service, Inc. v. Transtop, Inc., 902 F.2d 101 (1st

Cir. 1990), the First Circuit strongly criticized the Caravan

result and rejected it by construing earlier decisions of the

Supreme Court to bar referral for ICC review of future rates, not

historic rates. 902 F.2d at 105. Cf., Delta Traffic Service,

Inc. v. Appco Paper & Plastics Corp., 893 F.2d 472, 475 (2d Cir.

1990); Orscheln Bros. Truck Lines, Inc. v. Zenith Electric Corp.,

899 F.2d 642, 646 (7th Cir. 1990); West Coast Truck Lines, Inc.

v. American Industries, Inc., 893 F.2d 229, 234 (9th Cir. 1990). 

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denied both the defense and a stay to allow Kodak to challenge the

tariffs as unreasonable before the ICC. 

Kodak urges that the circumstance of this case, in which the

carrier was bankrupt at the time of judgment, illustrates a

practical fallacy of the approach in Caravan.

4 Because the

carrier's assets, along with the judgment collected in this case,

will have been distributed to the creditors before a subsequent

action can be filed, Kodak is unlikely ever to recover wrongfully

paid monies. We must acknowledge that the bulk of these cases do

seem to arise out of bankruptcies.

The ICC, before us now as amicus curiae, argues that the

district court's refusal to refer this defense to its jurisdiction

nullifies the requirement of 49 U.S.C. § 10701(a) that rates be

reasonable. In Maislin, the ICC points out, the Supreme Court

expressly based the reasonableness requirement of the filed rates

doctrine upon section 10701. Maislin, 110 S.Ct. at 2767.

Moreover, in Maislin, the Supreme Court suggested a result

directly contrary to our earlier declaration in Caravan: the
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reasonableness of the undercharged tariff can be explored on

remand. 110 S.Ct. at 2767, n.10. This comment by the Court

follows its observation that the filed rate is not enforceable if

the rate is unreasonable. Id. 2767. Thus, any issue raised

concerning reasonableness obviously would require a determination

before the judgment in the case; consequently, unreasonableness of

the rate necessarily is a proper defense to raise against the

collection of the undercharges. This understanding of Maislin was

applied in Orr v. ICC, 912 F.2d 119 (6th Cir. 1990), when the Sixth

Circuit expressly applied Maislin to remand an undercharge case to

determine reasonableness of the tariff. See also Atlantis Express,

Inc. v. Standard Transportation Services, Inc., ___F.2d___ (8th

Cir. 1992).

The Supreme Court's allowance of unreasonableness as a defense

against collection of undercharges trumps our holding to the

contrary in Caravan. We therefore hold that the district court

erred in refusing Kodak this defense.

B

In support of its argument that the applicable tariff rates

are still undetermined, Kodak points to the ICC determination that

the discount rate governed many of the shipments instead of the

more expensive non-discount tariffs. The district court evidently

based the judgment on the higher rate tariffs, although there is no

reference to the calculations in the court's opinion or judgment.
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Both sides agree that discovery concerning the matter was ongoing

at the time the court entered summary judgment. We therefore hold

that a genuine question of material fact persists as to which

tariffs govern the bills in issue, and accordingly vacate the

summary judgment in all respects. 

V

Having determined that Kodak was entitled to assert rate

unreasonableness as a defense and that the applicable rate is yet

to be determined, we are still confronted with the question of the

appropriate forum for the determination of these issues. Kodak

argues that the district court should have stayed the whole matter

and referred the issues to the ICC. In the event the district

court was not bound to refer the matter to the ICC, Kodak still

seeks to stay enforcement of the district court's judgment until

the ICC has rendered its opinion on these issues that are now

pending before it. 

The general division of initial jurisdiction between the

courts and the ICC is defined by the "primary jurisdiction

doctrine," which requires that 

"issues of transportation policy which ought to be

considered by the Commission in the interests of a

uniform and expert administration of the regulatory

scheme laid down by the act" be submitted initially to

the Commission for determination. Therefore, a district

court trying a case under the Interstate Commerce Act

must, if presented with such an issue, stay its

proceedings and refer the case to the Commission.
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City of New Orleans v. Southern Scrap Material, 704 F.2d 755, 758

(5th Cir. 1983) (emphasis added) quoting ICC v. Atlantic Coast R.,

383 U.S. 576, 579 (1966). Where the reasonableness of a tariff

rate is at issue, the primary jurisdiction doctrine compels that

"there must be preliminary resort to the Commission." Southern

Pacific Transport Co. v. City of San Antonio, Texas, 748 F.2d 266,

272 (5th Cir. 1984) (emphasis added) quoting Great Northern Ry. v.

Merchants Elevator, 259 U.S. 285, 291 (1922). Furthermore, when

questions of construction and reasonableness of a tariff are "so

intertwined that the same factors are determinative of both issues,

then it is the Commission which must first pass on them."

Coca-Cola Co v. Atchison, T. & S. F. Ry. Co., 608 F.2d 213, 220

(5th Cir. 1989) (emphasis added) quoting U.S. v. Western Pac. R.R.,

352 U.S. 59 (1956). 

Clearly, the primary jurisdiction doctrine mandates that the

defense of unreasonableness initially be committed, according to

the usual procedures under 28 U.S.C. § 1336(b), to the ICC for its

review and decision. Upon return of the referred issues from the

ICC, the district court should then accord appropriate review. See

Coca-Cola v. Atchison, Topeka and Santa Fe R. Co., 608 F.2d 213,

218 (5th Cir. 1979); Consolo v. Federal Maritime Comm'n, 383 U.S.

607, 619-617 (1966).

A separate question of referral and appropriate forum exists,

however, concerning the issue of rate applicability. Matters in
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which the facts "raise technical or complex issues, regarding

appropriate rates, that require the expert administration of the

Commission" are, along with reasonableness, within the primary

jurisdiction of the Commission. Caravan, 864 F.2d at 389. Issues

of tariff construction and application may be committed to the ICC,

particularly if they involve terms or art, cost allocation, or

extraordinary constructions of language. Coca-Cola, 608 F.2d at

220. Otherwise, the courts are as competent as the Commission to

determine the issue. Id. Even when complicated tariffs are in

issue, the doctrine of primary jurisdiction does not require that

all questions regarding the tariffs must be first answered by the

ICC; when the ICC has already determined the applicable rate, the

courts need not refer the question again to the Commission. CocaCola, 608 F.2d at 219. 

Thus, the district court should initially determine whether a

given issue involves reasonableness, complicated or specialized

issues of construction, cost allocation, or other bases of primary

jurisdiction. If the district court finds that the issue is within

the primary jurisdiction of the ICC, the issue must be referred to

the Commission. Only if the district court finds that it can

resolve the issues before it, using the plain language of the

tariffs and the ordinary rules of construction, should the court
 

5In making such a determination, the district courts should

be mindful of the economy of maintaining only one action between

two parties. Therefore, as in this case, a pending ICC petition

between the parties who are also in the district court would

militate in favor of referral of any issues related to the

pending ICC petition.

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then proceed to resolve the issues without referral to the

Commission.5 

In this case, the issue of reasonableness of the applicable

tariff is inextricably linked to a prior determination of which

tariff will govern the bills in issue. Furthermore, the parties

had litigated a portion of the applicability issue before the ICC

before the entry of judgment by the district court. Both of these

issues should surely have been referred to the ICC for initial

determination.

VI

The summary judgment is VACATED and this cause is REMANDED to

the district court for further proceedings not inconsistent with

this opinion.

V A C A T E D and R E M A N D E D.