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SEABOARD COAST LINE R.R. CO. v. LONG ISLAND RAIL R

January 10, 1978

SEABOARD COAST LINE RAILROAD COMPANY, Plaintiff, against LONG ISLAND RAIL ROAD COMPANY, Defendant.


The opinion of the court was delivered by: NEAHER

MEMORANDUM OF DECISION AND ORDER

 NEAHER, District Judge.

 This case involves a controversy over interline accounts between the parties dating back to 1953 arising from defendant railroad's use of plaintiff railroad's freight cars. *fn1" Defendant, believing it had overpaid plaintiff for the use of the latter's freight cars during the period 1953-1965, set off $ 184,664 against per diem freight car charges due plaintiff for the period 1970-1975. In 1976 plaintiff brought this action to recover the alleged unpaid balance of per diem charges for the 1970-1975 period and defendant counterclaimed for the overpayments it claimed it had made to plaintiff during 1953-1965. The matter is before the court on cross-motions for summary judgment based on an agreed statement of facts.

 I.

 For decades defendant, which owns no freight cars, has used plaintiff's freight cars and has paid per diem rental charges. Prior to 1969, the per diem rates were fixed by the Association of American Railroads ("AAR") pursuant to an agreement to which its members, including the parties to this action, subscribed. Each subscriber, however, retained the right to establish different rates by contractual agreements with individual railroads.

 In 1953 some railroads, including defendant, decided to negotiate rates on a road-by-road basis. The railroads on the other end of the negotiations, among them plaintiff, promptly filed a complaint with the Interstate Commerce Commission ("ICC") to determine the reasonableness of the AAR rates. *fn2" In 1955 the ICC determined that the AAR rates were just and reasonable. Chicago, Burlington & Quincy R. Co. v. New York, Susquehanna & Western R. Co., 297 I.C.C. 291 (1955).

 In 1957, while the appeal from the ICC order was pending in the United States District Court in Massachusetts, the parties to this action entered into an interim agreement pursuant to which defendant agreed to pay the higher AAR rates under appeal upon the following understanding:

 
"That [Seaboard Coast Line Railroad Company] will reimburse [Long Island Rail Road Company] without interest for any overpayment if a lower rate is eventually so agreed upon or is determined by the courts to be reasonable in or on appeal from a decision in the foregoing litigation [i.e., the appeal in the District of Massachusetts] or in any other action or proceeding, or is so found by the Interstate Commerce Commission with the approval of the courts." Appendix C, Agreed Statement of Facts at App. 12.

 In 1958 a three-judge court in the District of Massachusetts reversed the ICC's order and remanded the case to the ICC to consider the reasonableness of the AAR's per diem rates in the light of a detailed investigation of a "time-mileage plan," an alternative method of computing car hire rates. *fn3" Boston & Maine Railroad v. United States, 162 F. Supp. 289 (D. Mass. 1958). An appeal of this decision to the Supreme Court was dismissed as premature on the ground that the ICC had expressed its willingness to make more detailed findings in accordance with the terms of the district court's remand. Boston & Maine Railroad v. United States, 358 U.S. 68, 3 L. Ed. 2d 34, 79 S. Ct. 107 (1958).

 Ten years later, after extensive hearings, the ICC concluded that the AAR rates were not just and reasonable and that the time-mileage plan provided more equitable rates. Chicago, Burlington & Quincy R. Co. v. New York, Susquehanna & Western R. Co., 332 I.C.C. 176 (1968). Since mileage figures were not available for the years 1953-1965, however, the ICC fixed what it considered reasonable per diem rates for that period. *fn4" A three-judge court affirmed this determination in Boston & Maine Railroad v. United States, 297 F. Supp. 615 (D. Mass. 1969), as did the Supreme Court in Boston & Maine Railroad v. United States, 396 U.S. 27, 24 L. Ed. 2d 142, 90 S. Ct. 196 (1969).

 Following the Supreme Court's affirmance, which was announced on November 10, 1969, defendant's president sent plaintiff a letter on April 23, 1970 in which he noted that, pursuant to their 1957 interim agreement, the time had come for an adjustment of the per diem accounts for the period of 1953-1965. The letter continued:

 
"A review of our books of account reveal that our company paid your company during the period August 1953 through December 1965 per diem rates in excess of those found reasonable by the Commission. For your review, I am attaching herewith a statement of the excess per diem charges which we claim we are entitled to have refunded to us."

 Plaintiff's president gave the following brief response on May 21, 1970:

 
"I have had an opportunity to review the figures on your statement of charges and find they do not agree with our records. Therefore, I suggest that a meeting of our accounting ...

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