Opinion ID: 702344
Heading Depth: 2
Heading Rank: 3

Heading: Proper Construction of Section 2(a) of the NRA

Text: 39 Having found that the NRA applies to undercharge claims made by bankrupt carriers, we next examine Section 2(a) of the NRA, 49 U.S.C. Sec. 10701(f) to address the Trustee's claim that the application of the NRA violates the antiforfeiture provisions of the Bankruptcy Code. 13 In general Sec. 10701(f) creates three classes of undercharge claims and provides that if a shipper pays a fixed percentage of their value, then the undercharge claim is deemed satisfied. See Sec. 10701(f)(2), (3) & (4). In order for these settlement options to apply, however, certain conditions must be satisfied; those conditions are set forth in Sec. 10701(f)(1). However, apart from allowing discounted settlements on certain claims, Sec. 10701(f) completely eliminates liability on some types of undercharge claims. See Sec. 10701(f)(9). The question here is whether the conditions set forth in subsection (f)(1)(A) must be satisfied in order to employ the bar on claims created by subsection (f)(9). That is, we must decide whether the statute unconditionally extinguishes a small business concern's liability to pay undercharges or whether that dispensation is reserved only for those claims by carriers that are no longer transporting property, or are transporting property for the purpose of avoiding Sec. 10701(f). 40 On appeal, the Trustee asserts that the district court erred when it concluded that the limiting conditions for carriers set forth in (f)(1)(A) did not apply to subsection (f)(9). The Trustee argues that when subsection Sec. 10701(f) is read properly a carrier must meet the threshold criteria set forth in subsection (f)(1)(A) in order to obtain the exemption from undercharge suits contained in subsection (f)(9). If the Trustee's reading of Sec. 10701(f) is correct, it would mean that the bar on undercharge claims against shippers created by subsection (f)(9) applies only where the claim is made by a carrier that is non-operating or that is operating to avoid the effect of Sec. 10701(f). Assuming that interpretation, the Trustee maintains that a non-operating carrier is almost always bankrupt. The Trustee next argues that applying the dispensation under (f)(9) to undercharge claims brought by bankrupt carriers violates the antiforfeiture provisions of the Bankruptcy Code, 11 U.S.C. Secs. 363(l ) and 541(c)(1)(B). According to the Trustee, the conditions set forth in Sec. 10701(f)(1)(A) make the operation of Sec. 10701(f)(9), which in this case extinguishes undercharges as property of the estate, contingent on the financial condition (as opposed to operating condition) of the carrier bringing the undercharge claim. Therefore, he argues, applying Sec. 10701(f)(9) violates the antiforfeiture provisions which, generally speaking, trump any law that is triggered by the insolvency of the debtor and diminishes the bankruptcy estate. See 11 U.S.C. Secs. 363(l ) and 541(c)(1)(B). 41 The Trustee's argument hinges on his reading of the statute, and that argument rests on two supports. First, the Trustee relies on the In General heading at the beginning of section (f)(1). Here, the Trustee argues that the In General heading in subsection (f)(1) indicates that it applies to all of the following subsections, including (f)(9). The Trustee also argues that reading (f)(9) independently of (f)(1)(A) contradicts the Notwithstanding paragraphs (2), (3), and (4) ... language in subsection (f)(9). According to the Trustee, since subsection (f)(9) expressly provides that it operates notwithstanding only (f)(2), (f)(3), and (f)(4), then by necessary implication subsection (f)(1) does apply to subsection (f)(9). 42 After carefully reviewing the statute and the legislative history, we conclude that the conditions set forth in (f)(1)(A) do not apply to subsection (f)(9). First, and most importantly, we are convinced that Congress did not intend to limit the application of (f)(9) to undercharge claims made by carriers described in (f)(1)(A). Where Congress intended to reference this limitation, it did so. See, e.g., Section 2(a), Sec. 10701(f)(6); 14 Section 2(g). 15 43 This reading of the statute also jibes with the structure of Sec. 10701(f) and the Notwithstanding language in subsection (f)(9). Subsections (f)(2), (f)(3) & (f)(4) describe classes of undercharge claims and set a percentage of the claim that, if paid by the shipper, satisfies the claim. 49 U.S.C. Sec. 10701(f)(1)(B)(v). In contrast, subsection (f)(9) is not a settlement option; it is an absolute bar on the class of undercharge claims created therein. That total bar operates notwithstanding the more limited settlement options set forth in (f)(2), (f)(3), and (f)(4). For this reason, where (f)(1) links the conditions set forth in (f)(1)(A) to subsections (f)(2), (f)(3), and (f)(4), the statute is addressing the satisfaction of valid undercharge claims under those subsections. But that portion of the statute does not apply to the total bar on claims provided separately by subsection (f)(9). The In General heading at the beginning of (f)(1) does not require a different result because the general rule created by Sec. 10701(f) is the satisfaction of undercharge claims; the total bar on claims created by (f)(9) is an exception to the general rule. Finally, subsection (f)(7) is an example of where Congress specifically intended to treat subsection (f)(9) and subsections (f)(2), (f)(3) & (f)(4) together. It did so by listing the subsections together in the paragraph under (f)(7). See Matter of Best Refrigerated Exp., Inc., 168 B.R. 978, 984-85 (Bankr.D.Neb.1994). Had Congress intended the 'no longer transporting property' clause of (f)(1)(A) to apply to (f)(9), the small business concern paragraph, it would have listed paragraph (9) with (2), (3) and (4) under 10701(f)(1), as it did under 10701(f)(7). Id. 44 The legislative history also supports this reading of the statute. The House Report on the NRA indicates that subsection (f)(9) is intended to create an amnesty regarding undercharge claims described therein, see House Report 103-359, p. 10, and the section-by-section summary restates this intent. Id. at p. 12. The House Report, like the statutory language, also links the conditions set forth in (f)(1)(A) & (B) to the settlement of claims. Id. at pp. 11-12. And the legislative history, like the statutory language and structure, belies any claim that the bar created by (f)(9) applies only where the settlement options listed in subsections (f)(2), (f)(3), and (f)(4) would apply. The unsuccessful Senate version of the NRA expressly referenced subsection (f)(1)(A) in the text of its analogue to subsection (f)(9), see North Penn Transfer, Inc. v. ATD-American Co., 175 B.R. 168, 170 n. 1 (E.D.Pa.1994) (and legislative materials cited therein), and so did a prior version of the legislation. See Senate Committee on Commerce, Science, and Transportation, Report on S. 1675, the Undercharge Equity Act of 1992, S.Rep. No. 102-359, 102 Cong., 2d Sess., (1992) pp. 2, 10, 15. But these drafts did not become law. In contrast, the final version of the NRA enacted by Congress does not reference the provisions of (f)(1)(A) in subsection (f)(9). This significant and clearly deliberate omission defeats any claim that the bar created by subsection (f)(9) only operates with respect to claims brought by a carrier that satisfies the conditions set forth in subsection (f)(1)(A). 45 Thus, we conclude that the conditions set forth in 49 U.S.C. Sec. 10701(f)(1)(A) need not be satisfied in order for a shipper to enjoy the immunity from undercharge claims provided by Sec. 10701(f)(9). See In re: Jones Truck Lines, Inc., 57 F.3d at 647-49; Matter of Brown Transport Truckload, 176 B.R. 82, 86 (Bankr.N.D.Ga.1994) (citing cases). The operation of Sec. 10701(f)(9) does not violate the antiforfeiture provisions of the Bankruptcy Code. The conditions set forth in subsection (f)(1)(A) do not make the operation of Sec. 10701(f)(9) contingent on the financial condition of the carrier/debtor bringing an undercharge claim. 46 The Negotiated Rates Act was designed to limit the undercharge recovery of bankrupt companies. Section 9, a last-minute amendment to the Act, declared the NRA should not limit the application of the Bankruptcy Code or ERISA. We conclude that Section 9 means the NRA is overridden if it comes into a direct conflict with the Bankruptcy Code or ERISA. In so doing, we avoid reading Section 9 out of the statute, but also prevent it from rendering several more specific provisions of the NRA superfluous; and we prevent a general savings clause from undermining, if not nullifying, the whole statute. We also conclude that there is no direct conflict between the NRA and the Bankruptcy Code in this case. Under Section 2(a) of the NRA, Sec. 10701(f)(9), small business concerns like FDSI are exempt from liability for undercharge claims. Since the small business exemption is unconditional, there is no colorable argument that it violates the antiforfeiture provisions of the Bankruptcy Code or Section 9 of the NRA. 47 For the foregoing reasons, we affirm the district court.