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In re Olympia Holding Corp.

July 24, 1996


Appeal from the United States District Court for the Middle District of Florida. (No. 92-825-CIV-J-16). John H. Moore, II, Judge. 90-04223-3P7/92-10756. BKRPTCY JUDGE: PROCTOR, GEORGE L.

Before Tjoflat, Chief Judge, and Barkett, Circuit Judge.*fn*

Author: Tjoflat

TJOFLAT, Chief Judge:

During the times relevant to the controversy in this case, the Interstate Commerce Commission ("ICC") authorized motor common carriers to file tariffs, which indicated the rates the carrier would charge a shipper for transporting certain commodities from one location to another, without identifying the shipper by name.*fn1 Instead, the carriers were given the option of identifying the shipper by code. P*fn* I * E Nationwide, Inc. ("P * I * E"), a now-bankrupt motor common carrier, employed this code option when filing its tariffs with the ICC. Its trustee in bankruptcy, appellant Lloyd T. Whitaker, contending that the practice of encoding shipper names violates the Interstate Commerce Act, and that such tariffs are therefore invalid, has instituted several adversary proceedings against shippers who were identified by code in P * I * E tariffs. Whitaker seeks to recover the "undercharge," that is, the difference between the discount rate actually billed to the shippers (based on the rates prescribed in the coded tariffs) and the full undiscounted rates, or "class rates." Class rates are rates that are applicable to all shippers; tariffs containing these rates therefore do not identify the shippers in any manner.

The district court held that the trustee lacked standing to pursue a claim based on P*fn* I * E's identification of Frito-Lay, Inc., in tariffs by code and thus dismissed the complaint in that case. Whitaker v. Frito-Lay, Inc. (In re Olympia Holding Corp.), 160 Bankr. 185 (M.D.Fla.1993). The trustee now appeals, presenting one question: May a trustee in bankruptcy for a motor common carrier assert undercharge claims against that carrier's shippers on the basis that the carrier's tariffs on file with the ICC are invalid because they identify the shipper by code rather than by name? We answer this question in the negative, and therefore affirm the district court's judgment on the ground that the trustee has failed to state a claim for relief.

In order to understand the nature of the controversy in this case, it is necessary first to comprehend the significance of the "filed rate doctrine," which we explain in part I. In part II, we recite the facts giving rise to this adversary proceeding. Finally, in part III, we examine the Negotiated Rates Act of 1993, Pub.L. No. 103-180, 107 Stat. 2044, and explain why that statute bars the trustee's claim.


Until recently, motor common carriers were responsible for filing tariffs with the ICC that disclosed their transportation rates.*fn2 See 49 U.S.C. § 10762(a)(1) (1994).*fn3 This filing requirement, originally used only to regulate the railroad industry, see Interstate Commerce Act ("ICA"), ch. 104, 24 Stat. 379 (1887), was extended to reach the trucking industry with the modification of the ICA in 1935, see Motor Carrier Act of 1935, ch. 498, 49 Stat. 543. As opposed to motor contract carriers, whose rates were set out in continuing, individual agreements with their particular customers, see 49 U.S.C. § 10102(16), the rates for transportation by motor common carriers were governed by tariffs on file with the ICC.*fn4 Originally, these rates, known as "class rates," applied to any shipper who desired to move the particular type of commodity specified in a tariff over the particular routes covered by that tariff.*fn5

The filing requirement led to the development of what has become known as the "filed rate doctrine." This doctrine requires that a common carrier adhere to its rates on file with the ICC, irrespective of any rate it may have separately negotiated with a shipper. See Maislin Industries, U.S., Inc. v. Primary Steel, Inc., 497 U.S. 116, 126-27, 110 S. Ct. 2759, 2765-66, 111 L. Ed. 2d 94 (1990); 49 U.S.C. § 10761(a). Therefore, "unless and until suspended or set aside, this [filed] rate is made, for all purposes, the legal rate, as between carrier and shipper." Keogh v. Chicago & N.W. Ry., 260 U.S. 156, 163, 43 S. Ct. 47, 49, 67 L. Ed. 183 (1922).

The primary purpose behind mandating the collection of filed rates is to prevent carriers from discriminating among shippers in the pricing of services.*fn6 See, e.g., Maislin, 497 U.S. at 126, 110 S. Ct. at 2766. The ICA contained an explicit prohibition on "unreasonable discrimination" by motor common carriers.*fn7 See 49 U.S.C. § 10741. The filed rate doctrine is designed to further this objective by foreclosing the possibility that carriers maintain one rate on file while either negotiating another (secret) lower rate with some shippers or providing those shippers with illegal rebates or discounts. See Armour Packing Co. v. United States, 209 U.S. 56, 81, 28 S. Ct. 428, 435, 52 L. Ed. 681 (1908). The doctrine thus protects smaller shippers from being undercut competitively. See In re Caravan Refrigerated Cargo, Inc., 864 F.2d 388, 390 (5th Cir.1989), cert. denied, 497 U.S. 1010, 110 S. Ct. 3254, 111 L. Ed. 2d 763 (1990).

The Supreme Court has applied the filed rate doctrine quite strictly, often with harsh results. See, e.g., Louisville & N.R.R. v. Maxwell, 237 U.S. 94, 100, 35 S. Ct. 494, 496, 59 L. Ed. 853 (1915) (permitting railroad to recover undercharge on passenger's tickets where railroad employee had misquoted applicable fare to passenger). Shippers are charged with constructive knowledge of the rates, and are thus liable for the filed rate even if a carrier intentionally misquotes the applicable rate. See Maislin, 497 U.S. 116, 120, 110 S. Ct. 2759, 2763, 111 L. Ed. 2d 94 ("The statute does not permit either a shipper's ignorance or the carrier's misquotation of the applicable rate to serve as a defense to the collection of the filed rate."); Maxwell, 237 U.S. at 97, 35 S. Ct. at 495. Therefore, despite inequities, the Court has steadfastly maintained that the filed rate must prevail as the only legal rate, notwithstanding any equitable defenses the shippers might assert. See Security Servs., Inc. v. KMart Corp., 511 U.S. 431, 114 S. Ct. 1702, 1706, 128 L. Ed. 2d 433 (1994); Maislin, 497 U.S. at 131, 110 S. Ct. at 2769 ("we have never accepted the argument that such "equities' are relevant to the application of § 10761").

A refashioning of the tariff filing system commenced with the advent of deregulation of the industry in the Motor Carrier Act of 1980 ("MCA"), Pub.L. No. 96-296, 94 Stat. 793. The MCA was an effort to make the forces of competition determine motor carrier tariffs, see H.R.Rep. No. 96-1069, 96th Cong., 2d Sess. 3-4, reprinted in 1980 U.S.C.C.A.N. 2283, 2285-86, but it did not represent a complete deregulation, for the filed rate doctrine was retained. The MCA did, however, make numerous changes that had an enormous impact on the trucking industry. Among several changes designed to encourage competition was a loosening of the then-cumbersome restrictions on carriers seeking to enter the industry. See H.R.Rep. No. 96-1069, at 3, 1980 U.S.C.C.A.N. at 2285; 49 U.S.C. § 10922 (amended by MCA § 5, 994 Stat. at 794-96). As a consequence, the number of licensed motor carriers more than doubled in the 1980s. See Wayne Johnson, The Negotiated Rates Act of 1993: Congress Curtails Undercharge Litigation in Bankruptcy by Amending the Filed Rate Doctrine, 68 Am.Bankr.L.J. 319, 335 (1994). As anticipated, this resulted in increasingly fierce competition among carriers.

In response to these increased competitive pressures, carriers began to set rates with most of their customers on an individual basis. This individualized pricing represented a significant departure from prior practice, in which class rates applied to any and all shippers whose commodities and desired routes fit within the parameters of a particular tariff.*fn8 The ICC, which had previously forbidden the practice of providing rates applicable only to individually named shippers on the ground that these rates were per se discriminatory, lifted that prohibition in 1984. Rates would now be evaluated on a case-by-case basis to determine whether they were discriminatory. See Rates for a Named Shipper or Receiver, 367 I.C.C. 959 (1984). The ICC subsequently authorized carriers to identify these individual shippers in their tariffs by using an alphabetical or numeric code instead of using the shipper's name. See Special Tariff Authority No. 86-639, Outstanding Relief for "Shipper Account Codes"--Individual Motor Common Carriers and Freight Forwarders (March 28, 1986) (amended April 29, 1986) (not published). Rate disparities, once strictly forbidden, became acceptable under certain circumstances.

A major consequence of this movement toward individualization was that many carriers, perhaps unable to keep up with the sheer volume of individualized rates, began to negotiate rates for shipments without filing a corresponding tariff with the ICC. After many inefficient carriers were forced into bankruptcy, trustees in bankruptcy for these carriers discovered that the carriers had often billed shippers at lower negotiated rates rather than the rates on file with the ICC. In an effort to maximize the value of the bankruptcy estates, the trustees instituted adversary proceedings against those shippers, seeking to collect "undercharges," that is, the difference between the rate ...

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