Court Opinion

ID: 8995742
Source: CourtListenerOpinion
Date Created: 2022-11-27 12:35:58.302079+00
Date Added: 2024-06-11T17:11:02.569963
License: Public Domain

K.K. HALL, Circuit Judge,
concurring in part and dissenting in part:
I agree with the majority’s application of Maislin to the cases before us to the extent that the shippers’ defense of “unreasonable practice” is disallowed as violative of the filed-rate doctrine. I disagree, however, with the majority’s holding that a shipper may not raise “unreasonable rate” as a defense in an undercharge action. Furthermore, I believe that the equitable defense of unreasonable rate implicates a matter within the primary jurisdiction of ICC, and, therefore, referral to that agency and a stay of the court proceedings is the proper course of action.
Maislin involved a fact pattern similar to the instant cases. A carrier filed for bankruptcy, an audit revealed that several shippers had paid negotiated rates rather than the filed rate, an undercharge action was instituted, and the defendant shippers raised both unreasonable-rate and unreasonable-practice defenses. The primary thrust of the Supreme Court’s decision is to invalidate ICC’s 1986 Negotiated Rates policy and thereby affirm the continued validity of the filed-rate doctrine. The Court noted, however, that the “filed rate is not enforceable if ICC finds the rate to be unreasonable.” Id., 110 S.Ct. at 2767. Although both the reasonableness of the rates and the practice of charging a negotiated rate were referred to ICC by the district court in Maislin, only the unreasonable practice issue was addressed by the agency. Maislin Industries, U.S. v. Primary Steel, 705 F.Supp. 1401, 1402-03 (W.D.Mo.1988). The Supreme Court noted, without elaboration, that “[t]he issue of the reasonableness of the tariff rates is open for exploration on remand.” Maislin, 110 S.Ct. at 2767 n. 10. This somewhat cryptic footnote “has created uncertainty as to whether, in a carrier’s suit to collect undercharges, a shipper may assert as a defense that the applicable tariff rate is unreasonable and obtain a stay of the suit and a reference to ICC for a determination of whether the rate is unreasonable.” Duffy v. BMC Industries, Inc., 938 F.2d 353, 355 (2nd Cir.1991). This uncertainty leads the majority to a decision that I believe is at odds with precedent and sound practice.1
The majority finds, and I agree, that the three appellant-shippers have preserved the issue of rate reasonableness. The question remaining after Maislin is whether the shippers should be allowed to dispute the reasonableness of the rates in the context of the undercharge action, or whether their sole recourse should be an independent reparations 2 action under 49 U.S.C. § 11705(b)(3). For a variety of reasons, I believe the former path is correct.
I believe the sounder position is set forth in Delta Traffic Service v. Transtop, Inc., 902 F.2d 101, 104-07 (1st Cir.1990). In addition to demolishing the legal basis for the non-referral rule adopted by the Fifth Circuit in Supreme Beef Processors, the First Circuit explains the historical basis for the referral and stay rule which it believed was “universally accepted” until Supreme Beef Processors was discovered. Id. at 105. To the First Circuit’s analysis I can only add the names of other post-Mais-lin decisions that have followed the referral and stay rule. Duffy v. BMC Industries, 938 F.2d 353 (2nd Cir.1991); Horn’s Motor Express v. Harrisburg Paper Co., 765 F.Supp. 211 (M.D.Pa.1991); Overland Express v. International Multifoods, 765 F.Supp. 1386 (S.D.Ind.1990); Oneida Motor *113Freight v. Ormond Shops, 126 B.R. 431 (D.N.J.1991); In re Sharm Express, Inc., 122 B.R. 999 (D.Minn.1991).
One of the majority’s arguments against referral and stay is that such a procedure “would provide a strong incentive for shippers routinely to contest the validity of the carrier’s rates in order to delay paying the carrier’s filed rate.” Op. at 110. This argument ignores the disincentives against the filing of frivolous pleadings, e.g., Fed. R.Civ.P. 11, as well as other provisions to discourage delaying tactics. See, e.g., 49 U.S.C. § 11705(d)(3) (allowing an award of attorney’s fees to a prevailing party in an action to enforce an ICC order for damages). Moreover, a complaining shipper should be required to present a threshold level of evidence of unreasonableness before referral is warranted; “a bold, conclu-sory allegation of rate unreasonableness” is insufficient. Oneida Motor Freight, 126 B.R. at 442; see also In re Sharm Express, 122 B.R. at 1004-05 (fifty percent disparity between rates of the carrier claiming undercharges and other ICC carriers sufficient to warrant referral); Covey v. Conagra, 763 F.Supp. 479, 482 (D.Colo.1991) (party requesting reference must “make a threshold showing of unreasonable-ness_”). This threshold determination would act as a further check against the referral of non-meritorious claims of rate unreasonableness.
These undercharge cases often arise in bankruptcy proceedings. Allowing the bankruptcy to proceed unabated, despite a claim of rate unreasonableness, may well leave the complaining shipper without a remedy. An independent reparations action might conclude after the termination of the bankruptcy proceedings, leaving a shipper with an ICC determination of unreasonableness that is unenforceable because the assets of the debtor’s estate had been distributed earlier.3
I would reverse in 89-3259 and affirm the district court’s order in 89-3261 and 89-*1143262 to the extent the bankruptcy court’s orders in these cases were reversed, and I would remand with instructions to refer the rate unreasonableness issue to ICC and to stay other proceedings pending ICC’s determination. I would, however, condition the referral upon a showing by each shipper that its rate claim was more than a “bold, conclusory allegation of rate unreasonableness.” Oneida Motor Freight, 126 B.R. at 442.

. Upon remand, the district court in Maislin did stay proceedings and referred the rate issue to the ICC. Maislin Industries, U.S. v. Primary Steel, 1990 WL 264536 (W.D.Mo. Nov. 21, 1990) (unpublished).

. The term "reparations” was changed to "damages" in 1978. Pub.L. 95-473, 92 Stat. 1451 (1978).

. The majority establishes the following procedure for cases of this kind: (1) the shipper first pays to the bankruptcy trustee the difference between the negotiated rates paid and the filed rate; (2) the shipper’s assertion of an unreasonable rate is treated as an unsecured claim against the bankruptcy estate; (3) the bankruptcy court estimates the value of this claim by determining the reasonable rate; and (4) the shipper receives, along with other unsecured creditors, a pro rata share of his claim. Op. at 111, n. 4. Presumably, the independent reparations action before the ICC continues apace. See Op. at 110. Should the ICC eventually determine that the filed rate was not reasonable (and, therefore "not enforceable," Maislin, 110 S.Ct., at 2767), it is not clear what the shipper’s remedy is at that point. Even if the bankruptcy action is still pending, the only effect would be to substitute the ICC’s determination for the bankruptcy court's estimate of the claim’s value.
I believe this stands the matter on its head. It is the bankruptcy trustee who is making a claim against the shipper; the shipper, in turn, has asserted the defense of "unreasonable rate.” If the shipper is correct, the filed rate is "not enforceable,” id., and the trustee should receive nothing more than the unpaid portion of the reasonable rate. The majority, however, would give automatic judgment to the trustee and make the shipper pay a possibly unreasonable, unlawful and unenforceable rate. After this rate is paid, the shipper is left with a claim against the estate; even if the court estimates the value of this claim as the full difference between the negotiated rate and the filed rate, the shipper can only receive a pro rata share with the other unsecured creditors, an amount likely to be substantially less than the "claim" itself.
As the majority correctly notes, this procedure puts these shippers in the same position as those that had paid the filed rate' initially. The majority ignores the fact that in the cases involving negotiated rates, the shippers are asserting a defense. See Delta Traffic Service, Inc. v. Transtop, Inc., 902 F.2d 101, 104 (1st Cir.1990) ("Because shippers may assert the unreasonableness of a rate as grounds for recovery in a. reparations suit, courts ordinarily have permitted shippers to assert this same ground as a defense in a carrier’s suit to collect the filed (‘legal’) rate.") (citing United States v. Western Pac. R.R. Co., 352 U.S. 59, 77 S.Ct. 161, 1 L.Ed.2d 126 (1956), and other cases). In an undercharge action by a non-bankrupt carrier, there is no question that the shipper would be entitled to assert this defense. In an undercharge action brought as an adversary proceeding by a bankruptcy trustee, I see no reason why the defense should be disallowed. See Bankruptcy Rule 7008. That this places the negotiated-rate shippers in a somewhat better position than the filed-rate payors is not a basis for eliminating the defense of rate unreasonableness. See Delta Traffic Service, Inc. v. Georgia-Pacific Corp., 936 F.2d 64 (2nd Cir.1991) (ordering district court to separately maintain the amount paid by the shipper as the difference between the negotiated and filed rates until rate reasonableness issue resolved by ICC).