Opinion ID: 379003
Heading Depth: 1
Heading Rank: 3

Heading: the inapplicability of section 20(11) to government arrangements pursuant to section 22

Text: 14 For present purposes we accept as correct, without deciding, the plaintiffs' contention that they are holders of these government bills of lading and that therefore they fall within the terms of the limitation of liability protections in section 20(11). We also assume, arguendo, that the plaintiffs are correct in their contention that strict, not merely substantial, compliance with that section is required before a carrier to which it applies can claim the protection of a contractual limitation of liability. 5 However, since the plaintiffs' rights as holders are no greater than those of the consignor (United States), to whom the bill of lading was issued, we must first consider the contention that section 20(11) is inapplicable to government bills of lading by virtue of section 22. We conclude that both history and policy support that construction of section 22.
15 The language of section 22, quoted above, has been a part of the Interstate Commerce Act from the date of the Act's first passage on February 4, 1887. See Act of February 4, 1887, ch. 104, § 22, 24 Stat. 387. 6 But its antecedents are even older. The issue of federal regulation of interstate railroads had been the subject of congressional debate for more than twenty years prior to the Act. The 1887 enactment was the culmination of these debates. Previously, a provision similar to section 22 had been included in other proposed bills 7 on which the Senate and the House had failed to agree. 8 16 The unsuccessful proponents of federal railroad regulation were not writing, however, on a clean slate with respect to their attempt to exempt government contracts from the general coverage of the act. The subject had already been addressed in the Act of June 15, 1866, ch. 124, § 1, 14 Stat. 66 (1866). This was the first railroad statute passed pursuant to commerce clause powers. It was precipitated by the New Jersey statutory grant of a monopoly to the Camden & Amboy Railroad of the traffic between New York and Philadelphia. 9 The act authorized all railroads to carry through traffic and to interconnect with other lines. Congress thus intended to eliminate this monopoly by imposing this interconnection principle on all railroads. The act contained the proviso (t)hat this act shall not affect any stipulation between the government of the United States and any railroad company for transportation or fares without compensation, nor impair or change the conditions imposed by the terms of any act granting lands to such company . . . . 14 Stat. 66. This reference to any act granting lands to such company is the key to the understanding of the shall not apply language in the original section 22. 17 Most railroad companies, whether chartered by the states or built pursuant to federal legislation, were the recipients of various forms of public support for which the government sought a quid pro quo of more favorable treatment. 10 This treatment of the railroads was consistent with the earlier treatment of canal companies which received government support. 11 By 1866, the land grant acts stated in fairly specific terms exactly what favorable treatment the government expected. A land grant act in 1866 is particularly illustrative and significant: 18 That the grants aforesaid are made upon the condition that the said companies shall keep said railroad . . . in repair and use, and shall at all times transport the mails, . . . for the . . . United States, . . . and that the government shall at all times have the preference in the use of said railroad . . . at fair and reasonable rates . . . not to exceed the rates paid by private parties . . . . And said railroad shall be and remain a public highway for the use of the government of the United States, free of all toll or other charges upon the transportation of the property or troops of the United States; and the same shall be transported over said road at the cost, charge, and expense of the corporations or companies owning or operating the same, when so required by . . . the United States. 19 Act of July 25, 1866, ch. 242, § 5, 14 Stat. 240-41 (1866). Some members of Congress assumed that these conditional land grants provided for exactly what they stated: the government was entitled to free transportation for its property and troops from those railroads which had received the land grants. In 1874, Congress attempted to enforce the free transportation provisions and accordingly prohibited the use of army appropriations to be paid for these expenses. Act of June 16, 1874, ch. 285, 18 Stat. 74. The Supreme Court disagreed with Congress's interpretation of its own legislation, and held in Atchison, Topeka & S. F. Co. v. United States, 93 U.S. (3 Otto) 442, 23 L.Ed. 965 (1876), that such statutory provisions applied to tolls, not to transportation charges. The railroads were, by then, sufficiently well-connected in Congress that the decision was not overturned by subsequent legislation. But, Congress did continue to insist that the beneficiaries of its land grants do business with the United States at reduced rates. 12 20 Congress was certainly aware in 1887, when it passed the Interstate Commerce Act, of its own statutes that required preferential treatment. Numerous states have also enacted similar preferential legislation. 13 To understand why it was necessary for Congress to exempt governmental business from coverage of the Interstate Commerce Act, it must be recognized that the primary feature of that Act was to prohibit any undue or unreasonable preference or advantage to any particular person, company, firm, corporation, or locality, or any particular description of traffic, in any respect whatsoever . . . . Interstate Commerce Act of 1887, ch. 104, § 3, 24 Stat. 380. Thus if the governmental exception, embodied in section 22, had not been included in the Act, a large number of federal and state statutes providing for preferences or advantages to governmental traffic would have been repealed. 21 However, the real concerns of the 1887 Congress did not involve governmental traffic. The aforementioned stalemate between the House and the Senate over federal railroad regulation finally came to an end in 1887 with the passage of the Act, because of the coincidental occurrence of two events. One was the decision of the Supreme Court in Wabash St. L. & Pac. Ry. Co. v. Illinois, 118 U.S. 557, 7 S.Ct. 4, 30 L.Ed. 244 (1886). In that case, the Court held that the 1870 Illinois statute prohibiting discrimination between long haul and short haul shippers was, under the commerce clause, unconstitutional. The other precipitating event was the disclosure of evidence that the Standard Oil Company had conspired with railroads in Western Pennsylvania; it was intended that the railroads would charge higher rates for transportation of Pennsylvania crude to refineries in Pittsburgh than for transportation to Standard's refinery in Cleveland. 14 Further investigation by congressional committees revealed that five leading railroads had been part of a conspiracy to monopolize the petroleum trade. It was the railroad's ability to charge various rates that enabled them to effect anticompetitive policies. In 1887, Congress was interested in the elimination of the discrimination in favor of classes of private shippers, and not in the elimination of a longstanding legislative judgment that the government could insist upon such discrimination. 22 The early history of section 22 compels the conclusion that Congress intended to preserve the federal government's power to bargain with carriers, or to impose upon carriers preferential rates and terms free of the antidiscrimination prohibitions of the Interstate Commerce Act, and free of regulation by the Commission which the Act created. Subsequent amendments to section 22 do not indicate any intention on the part of Congress to eliminate this right of the federal government to make its own arrangements. 23 The first several changes in the section consisted of the addition of new classifications for which reduced rates would be allowed if the carrier decided to offer such rates. For example, the Act of March 2, 1889, ch. 382, § 9, 25 Stat. 862, which also changed the wording from apply to prevent, added destitute, homeless and indigent persons, persons from National or State Homes, and soldiers to the list. Similarly, blind persons accompanied by a guide were added to section 22 in the Act of February 26, 1927, ch. 217, 44 Stat. 1247-48, and the reduced rate exception was extended to transportation of property to or from parts of the country with the object of providing relief from earthquakes, floods, fires, and other such disasters. See Act of March 4, 1927, ch. 510, § 1, 44 Stat. 1446-47. In 1934, an exception was added for improving nationwide housing, as specified by the Commissioner, see Act of June 27, 1934, ch. 847, § 511, 48 Stat. 264, but was repealed in 1940. See Act of September 18, 1940, ch. 722, § 3, 54 Stat. 900-901. Other minor changes were made by the 1940 Act. During the intervening years, motor carriers were added to the Act. See Motor Carrier Act of August 9, 1935, ch. 498, 49 Stat. 543, 563, seeing eye dogs were subsequently allowed for blind persons, see Act of July 5, 1937, ch. 432, 50 Stat. 475, and additional relief for disasters when authorized by the Commission (with or without a hearing). See Act of August 25, 1937, 50 Stat. 809. 24 It wasn't until 1957 that a significant change relevant to this litigation was proposed but not adopted. In that year, the Senate Committee on Interstate and Foreign Commerce recommended an amendment to section 22. The bill was directed to the first clause of the act under which the United States, state, and municipal governments were allowed reduced rates. The bill proposed to limit the granting of such rates to times of war or national emergency. 25 The Senate report on this proposal discusses the various positions of the bill's proponents and opponents. The following excerpts are relevant to Congress's understanding of the scope of the section. 26 The Interstate Commerce Commission advocates amendment of section 22 as indicated in this bill on the ground that the reduced rates so obtained have a strong tendency to increase the cost of regulated transportation. 27 Leading advocates of repeal are members of the motor carrier industry. . . . It is argued that it is unfair to the commercial shipper to allow the government to move its traffic without regulation because under this policy the various levels of government obtain low rates that must be subsidized, or the difference made up by commercial shippers in the form of higher rates to them.The railroads generally contend that as long as unregulated means of transportation are available to the government . . . that section 22 should be available to the railroads to allow them to compete for government business. 28 The Department of Defense does not favor passage of S. 939. Its representative pointed out . . . that the Department . . . deems it imperative that it continue to have the means for obtaining quick action on rate adjustments now available under section 22. The usual rate bureau procedure for obtaining such adjustments is considered too slow to meet the Department's needs. 29 S.Rep.No.410 (June 6, 1957), reprinted in (1957) U.S.Code Cong. & Admin.News, pp. 1782, 1783-84 (emphasis added). 30 The discussion is, in a large part, a comparison of the commercial regulated traffic with the unregulated government transportation. The report presumes that government traffic is unregulated and that the determination of its rates and regulations is not subject to normal ICC procedures. Significantly, the Department of Defense suggested that section 9 of S. 1457, 85th Congress, be substituted. That section would make rates on government traffic subject to all provisions of the Interstate Commerce Act, including the requirements for filing and public inspection, except the long-and-short-haul clause and the terms of the act providing for suspension of rates. (1957) U.S.Code Cong. & Admin.News at 1784. This proposal itself indicates that the government at that time was not subject to the other provisions. The Report recommends legislation in lieu of S. 939 which essentially is a compromise between the different proposals urged by various carriers and various government agencies. (The federal agencies could not agree among themselves about S. 939). 31 The amendment to section 22 that was passed reflects a balancing between the government's need for flexibility, particularly with respect to matters of defense, the carriers desire to repeal the exception, and the need, as the committee saw it, for section 22 quotations to be made available for public scrutiny. Rates for Government traffic, like other business transactions of the Government, are, in the absence of compelling reasons to the contrary, best handled in the daylight of complete publicity. Requirement for such action is deemed necessary here. Id. at 1786. So, in rejecting the original version of S. 939, a new paragraph was suggested which would require carriers to submit to the Interstate Commerce Commission copies of section 22 quotations simultaneously with their submittal to the agencies and departments of the United States Government. The Commission would not have any regulatory authority over rates made under section 22, but would be required to make section 22 tenders or quotations available for public examination. Id. (emphasis added). 32 The 1957 Congressional activity resulted in the requirement that copies of quotations (MRT 1-H) to the United States government be filed with the Interstate Commerce Commission for informational purposes, and open for public inspection. See 49 U.S.C. § 22(2). Neither the text of the 1957 amendment nor its legislative history suggest any departure by Congress from the decision made in 1887 that the federal government, despite the passage of the Act, remained free to contract with common carriers on its own terms. Indeed, a departure from that policy was expressly rejected in 1957. 33 Not directly in point, but nevertheless relevant to an understanding of section 22, are the exceptions for certain classes of passengers to the free pass prohibition found in section 1(7) of the Act, 49 U.S.C. § 1(7). 15 That section is aimed at prohibiting non-excepted passes because they operate, in effect, as unjust discrimination. The free pass prohibition was not enacted by Congress until 1906, but those persons excepted from the free pass prohibition are similar to those excepted in section 22. Commentators have noted that the two sections must be cross-referenced 16 because they embody a common purpose. 17 The correlation between the reduced fare and a limitation on liability has been recognized; limitations on carrier liability in free passes made pursuant to the Act have been consistently upheld. 18
34 The plaintiffs acknowledge that section 22 appears to reserve to the federal government the right to contract with common carriers on its own terms. They contend, however, that section 22 had no bearing upon the issue of carrier liability. Apparently, they regard that issue as completely unrelated to section 22 rights, and instead, urge that the matter has been dealt with comprehensively and preemptively in section 20(11). 35 The evolution of section 20(11) illustrates very different policies than the legislative history of section 22. The first version of section 20(11) was the Carmack Amendment of the Hepburn Act. See Act of June 29, 1906 (Hepburn Act), ch. 3591, § 7, 34 Stat. 593. The Carmack Amendment was Congress's reaction to the decision in Pennsylvania R. R. Co. v. Hughes, 191 U.S. 477, 24 S.Ct. 132, 48 L.Ed. 268 (1903). 19 According to the Hughes Court, the Interstate Commerce Act of 1877 did not provide any guidance on the issue of carrier liability, and that, instead, state law controlled. However, the 1887 Act had carried forward the carrier interconnection principle which first appeared in the Act of June 15, 1866, ch. 124, § 1, 14 Stat. 66 (1866). It was for this reason that the Hughes case created a problematic situation: the lawful holder of a bill of lading would have to identify and locate the interconnecting carrier actually responsible for the loss. This was often an impossibility. 20 Thus under the Carmack Amendment, and therefore a uniform federal standard, the initial carrier, which issued the bill of lading, was made responsible not only for the damage which it caused but also for any damage caused by an interconnecting carrier. 36 In Adams Express Co. v. Croninger, 226 U.S. 491, 33 S.Ct. 148, 57 L.Ed. 314 (1913), the Court construed the Carmack Amendment to be only an adoption of the common law rule that a common carrier may not contract itself out of liability for negligence. However, under state common law, a carrier could contract for a limited valuation of goods. Thus, the Court held that under state law, which had not been preempted by the Amendment, it was lawful for a carrier to limit its exposure to liability. The Adams Express holding introduced the possibility that common carriers could discriminate among shippers by offering reduced rates in exchange for real or imaginary limitations in declared value. In 1915, Congress reacted to this situation, and passed the First Cummins Amendment to the section. See Act of March 4, 1915, 38 Stat. 1196. It provided that a carrier could contract to limit liability as to valuation only if the goods were hidden from view by wrapping, boxing, or other means. In such a case, the carrier and the shipper could agree on a declared value, and the shipper could obtain a reduced rate dependent on value, but only if such reduced rates were filed with the Interstate Commerce Commission in advance. 37 Finally, in 1916, as a result of a Commission construction of the 1915 Amendment, 21 Congress passed the Second Cummins Amendment. 22 The purpose of this amendment was to restore the rule of liability for full value as it had previously existed. The Commission could establish rates which varied with the value of the property declared or agreed upon. A limitation of liability was allowed if expressly authorized by the Commission. These released values were to be filed, as rates were, with the Commission. The Second Cummins Amendment contained all the relevant language of the current section 20(11). 23 As we view the legislative evolution of section 20(11), we discern three aspects. First, Congress in the Carmack Amendment in 1906 federalized, and thus made uniform, the law of common carrier liability in interstate commerce transactions. Next, in the First Cummins Amendment, Congress endorsed one of the aspects of the Adams Express interpretation of the Carmack Amendment: a carrier could not contract out of negligence absolutely, but it could contract for a rate reflecting a declared value of the goods shipped. Third, Congress recognized that to allow private parties to contract for special rates based upon declared values would open the door to discrimination. Thus, Congress made such contracts the subject of filed tariffs, and thus of the filed tariff rule. 24 We must decide how each of these aspects bears upon the federal government's pre-existing section 22 power to do business with carriers on its own terms. 38 The first aspect of section 20(11) is, we think, irrelevant for present purposes. In 1906, Congress probably did not have in mind the protection of the federal government from the vagaries of state law, and from carrier contracts that exculpated the carrier from negligence. Congress' basic position was reflected in section 22: the federal government could deal with carriers on whatever terms it bargained for. But, even if we assume that the 1906 legislation was intended to benefit the United States, that aspect of section 20(11) is not in issue. The government bills of lading in this case did not exculpate the carriers from their own negligence, and no one suggests that we should look elsewhere but to federal law. 25 39 The second aspect of section 20(11) is equally irrelevant. The First Cummins Amendment endorsed the concept of the Adams Express rule that a shipper and a carrier could contract for a limitation on liability tied to the declared value of the goods. The endorsement of this concept neither added to nor subtracted from the pre-existing authority of the federal government, recognized in section 22, to contract in exactly that manner if federal officials so desired. 40 The third aspect of section 20(11), the requirement that shipper-carrier agreements be made only pursuant to approved filed tariffs, is the only possibly relevant aspect. The question is a narrow one: did Congress, when it brought agreements as to declared value of shipments within the antidiscrimination coverage of the Interstate Commerce Act, intend to modify the longstanding policy that the federal government was not bound by the antidiscrimination principle. There is no evidence of any such intention in 1915, or in 1916, or at any time since. 41 The plaintiffs contend that section 22 is solely a rate section, while section 20(11) is solely a carrier liability section, and thus each section must govern exclusively on the separate issues. They urge that the federal government is free under section 22 to negotiate for discriminatory rates, but is bound under section 20(11), like private shippers, by the prohibition against contractual limitations on liability unless, of course, it has fully complied with the released value exception. But section 20(11) itself recognizes the interrelationship between the declared value of property and the rate charged for carriage. According to that section, a shipper who chooses to self-insure for any excess over the declared value is entitled to a reduction in rate, since the carrier is thereby relieved of a portion of the risk that it would otherwise be responsible for. The amount of the reduction must be determined, however, in accordance with an approved filed tariff, in order to prevent favored shippers from using the self-insurance device as a method of exacting rate discriminations. A government shipper, exempted under section 22, who agrees to a declared value, similarly acts as a self-insurer in order to seek a rate concession to relieve the carrier of part of the risk of loss. Thus, since a government shipper may lawfully exact a discriminatory rate, there is no reason to require adherence to the antidiscrimination released value provisions of section 20(11).
42 Few cases have been called to our attention dealing expressly with the applicability of section 20(11) to a government bill of lading. The case which gives the plaintiffs the greatest comfort is Anton v. Greyhound Van Lines, 591 F.2d 103 (1st Cir. 1978). On facts similar to those presented here, the court held that a carrier was liable to a serviceperson for full value of goods damaged in transit because it had not complied with the released value requirements of section 20(11). The court mistakenly refers to the military person as the shipper, although it seems clear that the goods were, as here, shipped on a government bill of lading at a declared value of 60 cents per pound pursuant to a general tender to the DOD. No mention is made in the opinion of section 22, and apparently it was not called to the court's attention. Had it been, we are confident that the result in Anton would have been different. 43 No other cases on which the parties rely are particularly helpful. In Rocky Ford Moving Lines, Inc. v. United States, 501 F.2d 1369 (8th Cir. 1974), the court enforced the 60 cent per pound limitation of liability, but did not clearly disclose whether its decision rested upon a section 22 exemption or upon substantial compliance with section 20(11). In Fort Worth & Denver R.R. Co. v. United States, 242 F.2d 702 (5th Cir. 1957), the court held that the carrier was liable to the United States for full value because neither the section 22 quotation nor the bill of lading contained a lower declared value. 242 F.2d at 705. 44 In C & H Transp. Co. v. United States, 436 F.2d 480, 193 Ct.Cl. 872 (1971), the government argued that the section 22 tender (which contained no released value provision) governed. The carrier contended that the section 22 quotation incorporated by reference the carrier's published tariff regulations and released values. The court held for the government. Although the court recognized that a section 22 rate was exclusive, it did not mention section 20(11). 26 45 In a similar context, section 22 quotations were recognized as lawfully published and filed with the commission, although not approved. See Atchison, Topeka & S. F. R. Co. v. United States, 572 F.2d 843 (Ct.Cl. 1978). Apparently, the court viewed publication and filing as the only necessary elements for section 22 rates. However, the court did not discuss the applicability of section 20(11). 46 Finally, plaintiffs rely on dicta in Hughes Transp. Co. v. United States, 121 F.Supp. 212, 128 Ct.Cl. 221 (1954), which was vacated, and summary judgment was granted to the government for other reasons in a subsequent decision. 27 168 F.Supp. 219, 144 Ct.Cl. 200 (1958), cert. denied, 359 U.S. 968, 79 S.Ct. 879, 3 L.Ed.2d 835 (1959). To the extent that the Hughes opinion tends to support plaintiffs' version of the interaction between sections 20(11) and 22, we find it unpersuasive. 47 This is, so far as we can tell, the first case which has considered whether the Carmack and Cummins Amendments require Interstate Commerce Commission approval of declared value limitations in government tariffs and bills of lading. As indicated above, we think the government is free to contract for declared value limitations without such approval.
48 The government's shipment of household goods is a massive operation and is part of a comprehensive compensation plan for the military. See 37 U.S.C. § 406(b). The government has elected to act as a self-insurer for the excess of value over 60 cents per pound, upon the reasonable belief that by doing so, it will obtain more favorable rate quotations from the common carriers of household goods. It is undisputed that the DOD need not have Interstate Commerce Commission approval for the solicitation and acceptance of tenders for carriage. There is no feasible method to separate the component of a tendered rate reflecting risk of loss from the rest of the tender. Thus, as a practical matter, either all aspects of tenders to the government should be made subject to the Commission's approval jurisdiction or none should be. Congress chose in 1957 to continue the policy, adopted in 1887, of allowing the federal government to bargain freely for preferential treatment. Moreover, it is not unreasonable to assume that the government, as a shipper, has sufficient strength to reach a fair bargain. In light of the close relationship between rates and declared values, it would be unrealistic to interpret the Act as imposing partial coverage.