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Pennsylvania Railroad Co. v. United States

April 5, 1963


Author: Biggs

Before BIGGS, Chief Judge, and STALEY, Circuit Judge, and LEAHY, District Judge.

BIGGS, Chief Judge.

The problem presented by the case at bar is a difficult one. On various dates in 1941 and 1942, 75 carloads of iron and steel articles were shipped via The Pennsylvania Railroad Company from various points in Ohio, West Virginia and Maryland to the Port of New York for export to the British Ministry of War Transportation. The shipments moved on "prepid"*fn1 bills of lading which acknowledged that the lading was "Received * * * subject to the classifications and tariffs in effect on the date of the original bill of lading * * *." There is no question but that the tariffs, thus made part of the contracts of transportation, provided two sets of shipping rates to the Port of New York from the origins designated in the bills. One set of tariffs prescribed applicable domestic rates and the other set up rates applicable to export shipments. The export rates were substantially lower than the domestic rates.*fn2

The tariffs applicable to the export rates provided that the export rates should apply only to shipments that were delivered by the carrier direct to the steamer or steamer's docks and which did not leave the possession of the carrier at the port to which they were consigned originally, prior to exportation.*fn3

General Order O.D.T. 16, 7 F.R. 5194, issued on July 6, 1942, provided that shipments of iron and steel to ports for export could be made only after issuance by the Office of Defense Transportation of a permit called an "ODT block permit". Such a permit was to be granted covering a specified shipment only when definite cargo space at the designated port was available or assurances were received by the issuing officials that within a reasonable time after the arrival of the freight at that port, cargo space would become available. Shipping papers, such as bills of lading, were required to make reference to the ODT permit by number and the bills of lading covering 62 of the 75 carloads bore the notation "ODT block permit" with an appropriate number. Twelve of the carloads were shipped prior to the issuance of O.D.T. 16 and, of course, moved without block permits. One carload was shipped on a bill of lading which failed to show any ODT block permit.

When the 75 carloads reached the Port of New York, due to enemy submarine activity and other wartime causes*fn4 there was no cargo space available. The contents of the cars were unloaded and put in ground storage at Greenville or Manhattan piers, railroad storage yards with lighterage facilities. Later, if this fact be pertinent, the contents of the 75 cars were shipped by rail from the Port of New York to various destinations.*fn5

We are concerned only with the charges from the points of origin to the Port of New York. When the shipments were not exported from the Port of New York, the Railroad submitted supplemental bills claiming the higher "domestic" rates. Pursuant to the provisions of Section 322 of the Transportation Act of 1940, 49 U.S.C. § 66, the charges were paid. But after audit, the Government Accounting Office disallowed the supplemental charges. On the Railroad's failure to make refunds as requested, the additional charges were deducted from sums due the Railroad for other transportation services. The suit at bar was brought to recover the amounts of these deductions. The Railroad moved for summary judgment. The United States filed a cross-motion to the same effect. The court below decided in favor of the Railroad, 199 F. Supp. 586 (1961), and the appeal at bar followed.

Prior thereto, the issue as to what were the correct rates to be charged had come on for hearing before the Interstate of the Supreme Court*fn6 and the Commission, after hearings, held, 305 I.C.C. 259 (1958), that charges based on the domestic rates on these carloads which did not have ODT block permits were just and reasonable, while charges based on the domestic rates on these carloads which had ODT block permits were not; i.e., that the Railroad was entitled to domestic rates on 13 carloads but was not entitled to domestic rates on 62 carloads. The gist of the Commission's decision will be found, we believe, in the following paragraph: "The question of the proper charges on 'frustrated shipments,' such as those here considered, has been before this Commission for determination in a number or proceedings cited by the parties. In some cases, the charges at the domestic rates were found unjust and unreasonable, while in others the requests for relief were denied. In some of the cases cited, an award of reparation was unopposed by the carriers. The decision in each proceeding was made upon the facts and circumstances surrounding the specific movements. A prime factor for consideration in complaints involving shipments of 'frustrated freight' is whether vessel space was reserved prior to shipment. This tends to indicate whether or not due diligence was exhibited on the part of the shippers to avoid noncompliance with the provisions of the export tariff." See 305 I.C.C. p. 263.*fn7 The Commission seemed to treat the fact that ODT certificates were procured for the 62 carloads as creating an overriding "equity" which entitled the United States to the lower export rate.

In addition, the Commission pointed out that effective on December 28, 1942, after the shipments sub judice had moved, the Railroad had established a "frustrated freight tariff"*fn8 which would have been applicable to at least all but two of the shipments under consideration had the shipments been made on or after the date last mentioned.*fn9

The Railroad asserts that the Commission has in effect exacted reparations and that it may not do this under Arizona Grocery v. Atchison Ry., 284 U.S. 370, 52 S. Ct. 183, 76 L. Ed. 348 (1932), that all shipments in the 62 cars, save one shipment of steel ingots,*fn10 moved on the basis of rates "prescribed" by the Commission in Iron and Steel Articles, 155 I.C.C. 517 (1929), as increased by Commission "permissions"*fn11 and (to employ the Railroad's own descriptive terms), that the rates which the Commission has found applicable were substantially below the basic levels which the Commission had itself "prescribed". We think that the prescribing referred to by the Railroad in Iron and Steel Articles, supra, was to the domestic rates which the Commission did make applicable.*fn12 But the Railroad expressly concedes that the effect of the "Ex Parte proceedings" was "permissive" only and that the Arizona Grocery decision cannot be employed as a basis for domestic rate "increases". The Commission says it is not exacting reparations but is relieving the shipper of an unjust rate. It is clear, however, that one of the conditions of the export tariff as filed by the Railroad was not fulfilled in order that the export rate could apply, i.e., the shipments did leave the possession of the Railroad at the Port of New York. See note 3, supra. The Railroad had to collect the rates the tariff called for and those were the domestic rates, the meaning of which had been determined by the Commission in Iron and Steel Articles. See Crancer v. Lowden, 315 U.S. 631, 635, 62 S. Ct. 763, 86 L. Ed. 1077 (1942): "Until changed, tariffs bind both carriers and shippers with the force of law. Under § 6 of the Interstate Commerce Act the carrier cannot deviate from the rate specified in the tariff for any service * * *", citing Lowden v. Simonds-Shields-Lonsdale Grain Co., 306 U.S. 516, 520, 59 S. Ct. 612, 83 L. Ed. 953 (1939).

As we have said the Commission has expressly disclaimed reparations as the basis for refusing the Railroad recovery. It falls back on Standard Oil Co. of New Jersey v. Pittsburgh & L.E.R. Co., 259 I.C.C. 793, 797 (1945). As we read it, the cited case is one in which it was found that the "charges assailed, based upon the domestic rate..., were unjust and unreasonable..." under circumstances very similar to those at bar.

Section 1(5) of the Interstate Commerce Act, 49 U.S.C.A. § 1(5) provides that charges for transportation must be just and reasonable. The question of reasonableness is one of fact. Illinois Cent. Ry. Co. v. Interstate Commerce Commission, 206 U.S. 441, 27 S. Ct. 700, 51 L. Ed. 1128 (1907). There is authority to the effect that the status of the shipment of military stores by a common carrier should be determined at the time of the shipment, Sonken-Galamba Corp. v. Union Pacific R. Co., 145 F.2d 808, 812 (10 Cir., 1944), cited in Northern Pac. Ry. Co. v. United States, 101 F.Supp. 29, 31 (D.C.Minn.1951), and the shipments at bar were received as export shipments but subject to tariff conditions. But the issue of reasonableness of rates charged is one which Congress saw fit to entrust solely to the Commission, Union Pac. R. Co. v. United States, 111 F.Supp. 266, 125 Ct.Cls. 390 (1953), albeit, if the issue is one as to which of two rates shall apply that matter is also one for the courts. Great Northern Railway Co. v. Merchants Elevator Co., 259 U.S. 285, 42 S. Ct. 477, 66 L. Ed. 943 (1922). There can be no doubt that the Commission must rest its decisions on transportation policy. In the case at bar the Commission has stated the considerations that have moved its judgment though it has not expressly found that the export rate was reasonable, as in General Carloading Co. Inc. v. Baltimore & O.R. Co., 266 I.C.C. 243 (1946), or stated any succinct test, albeit almost a subjective one, as in Rogers v. Illinois Central R. Co., 311 I.C.C. 153 (1960).*fn13 The considerations stated by the Commission seem to us to be in support of the national transportation policy, albeit it has not directly said so. It appears to us that the Commission properly has weighed all pertinent factors, including some which the Railroad deems irrelevant. We may remark parenthetically that we do not find that the Commission's decision in respect to the 62 carloads was based on sympathy for the United States. What the Commission in fact has done, as it has in some of the other decisions, cited in this opinion, is to provide for just and reasonable charges on the 62 carloads with which we are concerned. Cf. United States v. Chesapeake & Ohio Rwy. Co., 352 U.S. 77, 80, 77 S. Ct. 172, 1 L. Ed. 2d 140 (1956). The fact that the Commission has disclaimed the application of the reparations principle does not disturb us. The case at bar involves more than an exercise in semantics.

As indicated, we believe that the court below erred in its conclusions. What was stated in Crancer v. Lowden, supra, 315 U.S. at p. 635, 62 S. Ct. at p. 765, although in a somewhat different connotation is pertinent here. Mr. Justice Byrnes said: "The issue of the reasonableness of the rates was not open to the District Court." That issue is not open to this court either.

The order of the court below will be reversed and the case remanded with the direction to dismiss the ...

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