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Chesapeake and Ohio Railway Co. v. United States Corp.

argued: April 25, 1989.

THE CHESAPEAKE AND OHIO RAILWAY COMPANY
v.
UNITED STATES CORPORATION, USS CORPORATION, USS DIVISION (FORMERLY UNITED STATES STEEL CORPORATION), APPELLANT IN 88-3775; UNITED STATES STEEL CORPORATION V. ROBERT W. BLANCHETTE, RICHARD C. BOND AND JOHN H. MACARTHUR, TRUSTEES OF THE PROPERTY OF THE PENN CENTRAL TRANSPORTATION COMPANY; THE PENN CENTRAL TRANSPORTATION RAIL CORPORATION; THE NORFOLK AND WESTERN RAILWAY COMPANY, USS CORPORATION, USS DIVISION (FORMERLY UNITED STATES STEEL CORPORATION), APPELLANT IN 88-3776; UNITED STATES STEEL CORPORATION V. ROBERT W. BLANCHETTE, RICHARD C. BOND AND JOHN H. MACARTHUR, TRUSTEES OF THE PROPERTY OF THE PENN CENTRAL TRANSPORTATION COMPANY; THE PENN CENTRAL TRANSPORTATION RAIL CORPORATION; THE NORFOLK AND WESTERN RAILWAY COMPANY, NORFOLK AND WESTERN RAILWAY COMPANY, APPELLANT IN 88-3803, THE CHESAPEAKE AND OHIO RAILWAY COMPANY, APPELLANT IN 88-3804 V. UNITED STATES STEEL CORPORATION



Appeal from the United States District Court for the Western District of Pennsylvania, D.C. Civil Nos. 76-392, 77-1397.

Higginbotham, Stapleton, and Weis, Circuit Judges.

Author: Weis

WEIS, Circuit Judge

In this suit for the refund of freight payments, the district court decided that the shipper's claims fell within the statutory definition of "overcharges," and that the appropriate statute of limitations had not expired. We agree and will affirm the judgments in favor of the shipper. The district court further held that, in balancing the equities, prejudgment interest would be allowed only for a very limited period of time. We conclude that in these circumstances an award of prejudgment interest is not discretionary, but is mandated. As to this portion of the judgment, therefore, we will reverse and remand for the addition of prejudgment interest from the date the claims accrued, calculated in accordance with the practice of the Interstate Commerce Commission.

The district court entered summary judgment for United States Steel Corporation on its counterclaim against the Chesapeake & Ohio Railway Company, and for United States Steel in its separate suit against the Norfolk & Western Railway. In both instances the court sharply limited the award of prejudgment interest. All parties have appealed.

For twenty years before 1975, USS*fn1 claimed and received refunds from the railroads on coal shipments to its steel plant in Steeltown, Duluth, Minnesota. In 1975, the United States brought suit against USS alleging that its receipt of these refunds violated the Elkins-Hepburn Act, 49 U.S.C. § 11902. Because that statute made it illegal for any person to give or receive an unlawful refund, USS refused to cash the refund checks then in its possession, and the railroads made no further transmittals.

In March 1976, the Chesapeake & Ohio Railroad Company filed suit in the United States District Court for the Western District of Pennsylvania for the return of previously paid refunds. USS counterclaimed in November 1977 for additional refunds it asserted were due. Because at that time the Elkins Act case was still pending, C & O and USS agreed on a stipulation to control the processing of future refunds. If the government's case determined that the refunds were proper, C & O agreed that its suit would be "dismissed with prejudice." In the meantime, claims for refunds that had already been presented by USS "shall be denied without prejudice," and further refunds claimed by USS during the course of the proceedings "shall be denied by the C & O at the time of filing without prejudice."

In December 1977, USS filed a complaint against the Norfolk & Western Railway for refunds allegedly withheld improperly.*fn2 As in the C & O case, the parties stipulated that refund claims filed by USS during the course of the N & W suit "shall be denied by the defendant at the time of filing without prejudice." By joint motion, all further proceedings in both the C & O and N & W cases were stayed pending resolution of the government's suit.

In 1980, the district court in Minnesota granted summary judgment for the government in the Elkins Act suit, and USS appealed. The Court of Appeals vacated and remanded with directions that the controversy be referred to the Interstate Commerce Commission as a matter within the agency's primary jurisdiction. United States v. United States Steel Corporation, 645 F.2d 1285, 1291-94 (8th Cir. 1981). The Commission ultimately declared that the refunds were proper, and in January 1987 the government dismissed the Minnesota case.

On termination of the Elkins Act suit, the Pennsylvania district court reopened the C & O and N & W cases. After a bench trial, the court concluded that USS sought recovery for overcharges, and therefore, that a three-year statute of limitations governed. The court rejected the railroads' contentions that the pleadings and stipulations acted as written disallowances of the refund claims that terminated the statutory tolling period; accordingly, none of the USS claims was barred. Judgments were entered in the principal amounts of $494,538 against C & O and $355,483 against N & W. The court allowed prejudgment interest, but only from January 5, 1987 -- the day the government dismissed the Elkins Act case.

On appeal, USS asserts a right to prejudgment interest from the dates the overcharge claims accrued. Additionally, USS contends that the appropriate method for calculating the interest due should be the average of the rates the government set for 90-day treasury bills between the years 1974 and 1987. The railroads appeal from the district court's refusal to deny certain claims as barred by the statute of limitations. Because this latter contention implicates the threshold issue of liability, we turn first to the railroads' appeal.

I.

THE STATUTE OF LIMITATIONS

The railroads argue that a substantial portion of the USS claims are time-barred. They advance two theories in support of that position -- first, that the USS claims are governed by a two-year statute of limitations, and in the alternative, even if the longer limitations period is applied, that the statutory tolling period has expired.

The Interstate Commerce Act provides that actions to recover "damages not based on overcharges" must be filed within two years after the cause of action accrues. 49 U.S.C. § 16(3)(b); 49 U.S.C. § 11706(c)(1).*fn3 In contrast, actions to recover "overcharges" must be filed within three years of accrual. If, however, an overcharge claim is presented in writing to the carrier within the three year period, the limitations time extends for six months after "notice in ...


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