Southern Railway Co. v. United States

502 F. Supp. 975, 1980 U.S. Dist. LEXIS 17136
CourtDistrict Court, District of Columbia
DecidedOctober 23, 1980
DocketCiv. A. No. 1776-73
StatusPublished

This text of 502 F. Supp. 975 (Southern Railway Co. v. United States) is published on Counsel Stack Legal Research, covering District Court, District of Columbia primary law. Counsel Stack provides free access to over 12 million legal documents including statutes, case law, regulations, and constitutions.

Bluebook
Southern Railway Co. v. United States, 502 F. Supp. 975, 1980 U.S. Dist. LEXIS 17136 (D.D.C. 1980).

Opinion

MEMORANDUM

Section 11105 of the Transportation Act, 49 U.S.C. § 11105,1 gives the Interstate Commerce Commission authority to regulate rates carriers must pay to persons furnishing protective services against heat or cold for rail cars transporting spoilable goods. In 1976, this court held that the Commission had the power to regulate protective service rates prospectively. It remanded to the Commission for further consideration the question of whether railroads could or should be held responsible for previous noncompliance with its protective service rate orders, retaining jurisdiction in order to consider this issue in light of the Commission’s conclusions. In response, the Commission ruled the railroads were liable to pay protective service rates ordered by the Commission retroactively.

I. Background

The lengthy and complex history of this case is set out in detail in the court’s earlier opinion. See Southern Ry. Co. v. United States, 412 F.Supp. 1122, 1127-34 (D.D.C. 1976). We summarize this history only briefly, adding an account of the events which have occurred since the remand to the Commission.

Since 1953, “mechanical protective services” (MPS) against heat and cold have been available for use in the rail transportation of perishables. Since one car line, or other MPS supplier, is alone responsible for the supply and operation of MPS units, thus potentially bearing the entire cost of the [977]*977protective service, problems developed in setting rates to govern the use of such specially equipped rail cars over more than one railroad. The industry responded privately to this problem by developing a system, known as “Division Sheet 7,” for allocating protective service revenues. In 1962, however, after extensive hearings, the Commission concluded that this system of allocation did not adequately compensate MPS suppliers for their expenses. The Commission therefore promulgated its 1962 Report and Order, Contracts for Protective Services, 318 I.C.C. 111 (1962) (“1962 Order”). In this order, the Commission approved, for a limited period of time, certain MPS contracts, but only on the conditions (1) that carriers already receiving protective services submit new and superseding contracts covering these services for approval by the Commission and (2) that any new and superseding contracts contain, among other things, a guarantee that such contracts compensate MPS suppliers for costs plus reasonable profit for the service they provided. 318 I.C.C. at 125-127.

This order greatly confused the industry. Although one railroad petitioned for clarification and/or modification of the order, the Commission denied the petition. After the order became effective, on June 10, 1963, the Commission added to the confusion over its meaning by conditionally approving contracts submitted to it as being in compliance with the 1962 Order, including contracts that continued to use the apparently invalidated Division Sheet 7 and that failed to reimburse MPS suppliers for costs and reasonable profit.

In 1965, Pacific Fruit Express Company (“PFE”), a company that provides MPS, brought an action in the Northern District of California against certain railroads for injunctive relief and to recover cost plus profit compensation for furnishing MPS units. That district court certified certain questions to the I.C.C. In response, in 1972, the I.C.C. provided the court with its conclusions in Contracts-Protective Service Between Pacific Fruit Express Company and the Akron, Canton & Youngstown R. R. Co., et al., 340 I.C.C. 754 (1972) (“the 1972 Order”). It declared that: (1) PFE’s furnishing of a MPS unit constituted “protective service” within section 11105; (2) the 1962 Order required the filing of contracts between PFE and non-originating carriers; and (3) Division Sheet 7 was “specifically embraced” by the 1962 Order, and the failure to file contracts superseding it therefore violated section 11105. 340 I.C.C. at 754, 766-71. Consequently, the court held that the defendant railroads had violated the 1962 Order and section 11105 by failing to enter new contracts superseding Division Sheet 7, and that this violation gave plaintiffs a right of action for damages and injunctive relief. Pacific Fruit Express Co. v. Akron, Canton & Youngstown R. R. Co., 355 F.Supp. 700, 707 (N.D.Calif.1973), aff’d. 524 F.2d 1025 (9th Cir. 1975), cert. denied, 424 U.S. 911, 96 S.Ct. 1107, 47 L.Ed.2d 315 (1976).

Thereafter, plaintiff railroads brought this suit against the Commission, seeking to set aside its 1962 Order on the grounds, inter alia, that it was vague and lacked statutory authorization. PFE intervened as defendant in the suit. The court declined to set aside the 1962 Order, and further held that the 1962 Order, together with section 11105, authorized the Commission’s 1972 Order and prospective application of it. The court was reluctant, however, to give retroactive effect to the 1972 Order which would expose the railroads to liability for past noncompliance with the 1962 Order. This reluctance about giving retroactive effect to the order derived, first, from equitable concerns. The court noted the vagueness of the 1962 Order, and the Commission’s refusal to clarify it, as well as the I.C.C.’s approval of Division Sheet 7 contracts despite their apparent violation of the 1962 Order. Second, this reluctance derived from concern whether retroactive enforcement of the order would be barred by section 107052 of the Transportation [978]*978Act, 49 U.S.C. § 10705, since the Supreme Court has interpreted that provision as prohibiting the I.C.C. from requiring readjustments of past divisions, or shares of the total revenue produced by a rail shipment, that have privately been agreed to by carriers. Brimstone R. and Canal Co. v. United States, 276 U.S. 104, 48 S.Ct. 282, 72 L.Ed. 487 (1928) (“Brimstone"). This concern was aggravated by the fact that this circuit has extended the Brimstone doctrine by holding that section 10705 bars courts, as well as the Commission, from equitably adjusting past agreements on divisions. B & O R. Co. v. Alabama Great Southern R. Co., 506 F.2d 1265 (D.C.Cir.1974) (“B & O ”). This court recognized that the doctrine established in Brimstone did not necessarily govern the issue in the instant case because Brimstone, and section 10705, concern agreements on divisions between carriers, rather than specific compensation for protective services paid by carriers to MPS suppliers. Nevertheless, the court was concerned that section 10705 may bar an award of damages for past noncompliance with section 11105, since alteration of previous MPS contracts could indirectly affect division agreements by altering the expectations carriers had as to past receipts. In light of these reservations, the court remanded the issue of retroactive liability for noncompliance with the 1962 Order to the I.C.C. for further consideration, stating:

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502 F. Supp. 975, 1980 U.S. Dist. LEXIS 17136, Counsel Stack Legal Research, https://law.counselstack.com/opinion/southern-railway-co-v-united-states-dcd-1980.