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AJAYEM LUMBER CORP. v. PENN CENT. TRANSP. CO.

August 24, 1972

AJAYEM LUMBER CORP., Plaintiff,
v.
PENN CENTRAL TRANSPORTATION CO. et al., Defendants. The LONG ISLAND RAILROAD COMPANY, Third-Party Plaintiff, v. UNITED STATES of America and Interstate Commerce Commission, Third-Party Defendants. PENN CENTRAL TRANSPORTATION CO. et al., Plaintiffs, v. The LONG ISLAND RAILROAD COMPANY, Defendant


Bartels, District Judge.


The opinion of the court was delivered by: BARTELS

BARTELS, District Judge.

This action arises from the filing by the Traffic Executive Association-Eastern Railroads ("TEA-ER") of a master tariff increasing the joint freight rates *fn1" of the Long Island Rail Road ("LIRR") and plaintiff railroads by 6% allegedly without the authority of the LIRR. Underlying the present controversy is the claim of the LIRR that its divisions of joint rates are inadequate as evidenced by the complaint filed by it on August 20, 1969 with the Interstate Commerce Commission ("Commission"), *fn2" antecedent to the present action, seeking a change in the existing divisions of joint freight rates, which claim has not yet been decided. The LIRR, objecting to the 6% increase and claiming that the master tariff was filed on its behalf by TEA-ER without authority, refused to accept freight cars interchanged to it without receiving its local rates as its divisions of the joint rates. *fn3" To prevent irreparable injury to themselves and to the public, plaintiffs instituted this action to enjoin the LIRR from refusing (1) to accept freight cars tendered to it, and (2) to accept as its divisions of their joint rates the percentages and proportions previously established by mutual agreement until the Commission made its final determination in the LIRR's divisions complaint above described. Before proceeding to the issues here involved, some background of the controversy is necessary.

 Background

 The LIRR is a member of the TEA-ER, an association of railroads, authorized by Section 5a of the Interstate Commerce Act ("Act"), 49 U.S.C. § 5b(6), and approved by the Commission, which executed an agreement with its members authorizing joint actions, sometimes termed "rate legislation" within the framework of the agreement. The agreement also provides, as Section 5a requires, that each member retains the right to take independent action by giving appropriate notice of its intended action either before or after any TEA-ER determination. Prior to May 1, 1907, the date on which the Commission freight-tariff rule became effective, there was no uniform rule followed by carriers in regard to concurrence in joint tariffs, and the publication of joint rates without the affirmative consent of connecting carriers was a common practice. If at that time a non-consenting carrier objected to the proposed rate it could file a notice of non-concurrence, described as a negative concurrence. This system was inadequate as it did not afford sufficient notice to shippers relying upon the file tariff. In addition, the practice was subject to abuse by non-consenting connecting carriers which would abide by the joint tariff for a time and later, when convenient, reject the same upon the claim that it had not concurred therein although such carrier was often shown to have accepted traffic and collected charges in accordance with such tariff up to the date of filing the notice of non-concurrence.

 Tariff Circulars 14-A and 20, issued in 1907, were designed to eliminate the uncertainties of this negative concurrence practice. Rule 17 of Tariff Circular 14-A abolished negative concurrences, and Rule 52 of Tariff Circular 20 (49 CRF § 1300.52) provided that a carrier named a party to a joint tariff without authority was not bound thereby and must charge the previously effective rate. In other words, old negative concurrences were abolished in favor of affirmative concurrences. To facilitate the filing and publishing of tariffs by an association, such as TEA-ER, as agent on behalf of one or more of its members, the Commission authorized a carrier to do so by filing with the Commission a limited or unlimited power of attorney or concurrence in accordance with the provisions and forms established in Rules 17, 18 and 19 of Tariff Circular 20 (49 CRF 1300.17, 1300.18 and 1300.19). Rule 26(b) provides that such powers of attorney and concurrences may be revoked on "not less than sixty days' notice by filing a notice of revocation with the Commission and serving at the same time a copy thereof on the agent * * *." Rule 26(c) provides that when the power of attorney or concurrence is revoked, corresponding revisions in the tariff must be made no later than the effective date stated in the tariff or else the previous tariffs remain effective.

 Whenever a power of attorney or a concurrence is properly revoked by a carrier, the changes sought in the tariff must, pursuant to Section 15(1) of the Act, be filed, all persons given notice, and the carrier involved must subject its proposed rates to the statutory rate investigatory proceeding by the Commission. These new rules as well as the Act *fn4" were meant to guarantee to the public that once a local or joint tariff was filed with the Commission, the public might rely thereon in making their shipments, and that all carriers named in the tariff would be bound thereby until the tariff was changed pursuant to proper procedures.

 There are on file with the Commission several powers of attorney from the LIRR appointing the TEA-ER as its tariff-filing agent, and several concurrences to freight tariffs filed by the Lehigh Valley Railroad. There are on file no revocations of these powers of attorney or concurrences. On October 7th the LIRR received notice from its representative who attended the meeting of the TEA-ER, that a joint increase in railroad revenues was discussed but the carriers could not agree on the amount of the increase. On October 9th the TEA-ER wrote a letter to the LIRR regarding the petition for joint rates to be filed on October 10th, notifying it that the TEA-ER assumed that the LIRR desired "to join with other railroads in the petition now being prepared for filing and the name of your company will be included as a petitioner. If this should be contrary to your desires, you may direct me to eliminate the name of your company and the petition will be amended accordingly." The petition sought a 6% increase in joint freight rates of the member railroads and was filed with the Commission on October 10th. However, the October 9th letter was not received by the LIRR until October 14th. In the meantime on October 10th there appeared in the New York Times a story that on that date the railroads would file a petition with the Commission seeking a 6% general increase in rates. After reading this story in the Times, the LIRR on the same day wired the TEA-ER and the Secretary of the Commission that it was not agreeable to the increase and did not desire to be made a party to the petition. This wire was not received until October 13th, after the petition had been filed.

 The Commission, by special permission, dated October 14, 1969, after it had received the LIRR's telegram, nevertheless authorized the carriers in whose behalf the petition was filed to use the short form method of publication by filing a master tariff containing the 6% increase effective no sooner than November 18, 1969. Also by separate order the Commission initiated an investigation of the tariffs which was docketed as Ex Parte No. 262 Increase Freight Rates 1969. The master tariff, as originally filed on October 10th and issued on October 16th, became effective on November 18th but because of the telegram of the LIRR, the TEA-ER filed amendments to the tariffs exempting the 6% rate increase from any local rates or charges of the LIRR. The chief executive of TEA-ER explained his refusal to make any further amendments exempting the joint rates from the 6% increase on the ground that the action of the LIRR was unilateral, without the support of any connecting carrier, and in direct conflict with the instructions of all other participating railroads. On November 5th the LIRR filed with the Commission a protest and motion to reject or suspend the tariff insofar as it provided for an increased rate on traffic to and from the LIRR's points. On November 12th a suspension hearing was conducted by the Commission and by an order dated November 17th the Commission rejected the LIRR's protest and allowed the master tariff and the connecting link supplements to become effective on November 18th subject to investigation in Ex Parte No. 262. On December 1st the LIRR filed a petition for reconsideration of the order of November 17th, which was denied by an order dated December 29, 1969, "for the reason that sufficient grounds have not been presented to warrant granting the action sought." On the same day the LIRR sent telegrams to the chairmen of the various rate bureaus and to other railroads informing them that it would begin collecting its local rates as its divisions of the joint through rates.

 After abortive attempts on the part of the plaintiffs to collect in advance joint freight rates with respect to shipments destined to LIRR and on the part of LIRR to require all shipments to points on LIRR billed collect, the plaintiffs attempted to adjust the dispute by a junction-point settlement which would substitute for the through revenue waybill, which generally accompanied freight cars in interchange, a memorandum waybill. Under this procedure, the LIRR could not ascertain the total freight charges due. Whereupon the LIRR refused to accept the tender of freight cars interchanged to it, accompanied only by a memorandum waybill, which refusal, plaintiffs allege, resulted in terminal congestion and deprived shippers and consignees of rail service in mid-December 1969. The shipperconsignee, Ajayem Lumber Corp., then instituted an action in this court for injunctive relief against all the railroads involved in the dispute (69 Civ. 1585), which in turn stimulated the connecting roads to institute the present action (69 Civ. 1586) against the LIRR.

 After obtaining the agreement of the parties to resume service on a status quo basis, reserving to the LIRR the right of making a retroactive adjustment if its position was upheld, the court, recognizing the experience and expertise of the Commission, held that the right of the LIRR to collect its local rates as its divisions should, in the first instance, be resolved by the Commission and accordingly directed counsel to contact the Commission and submit for its consideration the following question:

 
"Whether the provisions of 49 CFR 1300.52 and Court and Commission decisions require or permit the Long Island Rail Road Company to take its local rates as its divisions of the joint through rates at the Ex Parte No. 262 level."

 The Commission unanimously concluded, on February 2, 1970, that the question "must be answered, without qualification, in the negative" (337 ICC 247, at p. 255).

 During the course of a subsequent hearing held by this court on February 26, 1970, the LIRR raised certain additional questions which, pursuant to the court's suggestion, were submitted by the LIRR to the Commission for consideration. The questions, as answered unanimously by the Commission on June 23, 1970, were as follows: *fn5"

 
1. "Under Rule 17 of Tariff Circular 20, may the Traffic Executive Association-Eastern Railroads, approved by the Commission in a proceeding pursuant to Section 5a, to whom the Long Island Railroad Company has granted power of attorney, lawfully change interline freight rates to and from points on the Long Island Rail Road, after having received notice from The Long Island Rail Road of its non-concurrence prior to the actual filing of the tariff ...

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