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February 21, 1978

AXINN & SONS LUMBER CO., INC., et al., Plaintiffs,
The LONG ISLAND RAIL ROAD COMPANY, Defendant and Third-Party Plaintiff, v. TRAFFIC EXECUTIVE ASSOCIATION-EASTERN RAILROADS et al., Third-Party Defendants

The opinion of the court was delivered by: BARTELS

Motion by third-party defendants to dismiss the amended complaint. A similar motion to dismiss was made by The Long Island Rail Road Company ("LIRR"), which was argued and denied on October 3, 1975. Thereafter the third-party defendants were impleaded by the LIRR and they promptly proceeded to bring this motion to dismiss the complaint.

A history of this litigation may be found in Ajayem Lumber Corp. v. Penn Central Transportation Co., 487 F.2d 179 (2d Cir. 1973), Opinion clarified and affirmed on rehearing, 496 F.2d 21, Cert. denied, 419 U.S. 884, 95 S. Ct. 151, 42 L. Ed. 2d 124 (1974), and also in the two decisions of this court dated October 3, 1975 and January 6, 1976. The action was originally brought by Axinn & Sons Lumber Co., Inc. pursuant to Sections 8 and 9 of the Interstate Commerce Act, 49 U.S.C.A. §§ 8, 9, by and on behalf of various shippers, against The Long Island Rail Road Company to recover alleged freight overcharges. The rates at issue here are increased joint freight rates (Ex Parte Nos. 262, 265, 267 and 281). In Ajayem, supra, the Court of Appeals specifically held that the LIRR had properly "flagged out" of certain proposed joint rate increases filed by the Traffic Executive Association-Eastern Railroads ("TEA-ER"), which the court held were unlawfully promulgated in violation of LIRR's right of independent action under 49 U.S.C. § 5b(6).

 The third-party defendants (hereafter "defendants") have presented new arguments and additional authorities not heretofore considered, which they claim should change this court's decision. The LIRR, of course, joins in this motion in taking its second bite of the cherry. On the other hand, plaintiffs claim that the decision of October 3, 1975, is the law of the case, (White v. Higgins, 116 F.2d 312 (1st Cir. 1940)), and that the legal issue should not be relitigated. It will be unnecessary to pass upon this contention since the court believes that the interest of justice would be best served to consider the additional claim of the defendants.

 The fundamental issues raised by the parties are two: (1) were the flag out tariffs illegal as to LIRR Ab initio, and (2) if so, do the principles of equitable restitution bar plaintiffs from recovery? Defendants on this motion argue that under the authority of Keogh v. Chicago & Northwestern R. Co., 260 U.S. 156, 43 S. Ct. 47, 67 L. Ed. 183 (1922); Atlantic Coast Line R. Co. v. State of Florida, 295 U.S. 301, 55 S. Ct. 713, 79 L. Ed. 1451 (1935), and Moss v. C.A.B., 172 U.S.App.D.C. 198, 521 F.2d 298 (1975), there is no basis for any recovery by the shippers against the railroads. They vigorously contend that Ajayem held only that LIRR's contractual right to "flag out" was violated and not that any provision of the ICA was violated; that the tariffs on file under Ex Parte Nos. 262, 265, 267 and 281 were lawfully on file and authorized the change of rates; and that plaintiffs' recovery would interrupt the rate scheme provided by the ICA and would allow a windfall to the plaintiffs. In support of their contentions defendants assert that plaintiffs cannot prove that the prior rates established by the previous tariffs on file in Ex Parte 259 were legal. They point out that the joint increased rates of Ex Parte Nos. 262, 265, 267 and 281 were subsequently held reasonable by the ICC and that consequently they were of necessity lawfully on file at the time filed. Therefore, they claim that the increased rates charged pursuant to the Commission's order were not "overcharges." The real test as to overcharges, according to these defendants, is whether there has been a violation of the provisions of the ICA.

 The difficulty with the defendants' arguments, it seems to us, is that they ignore completely the fact that the increased rates, as far as LIRR is concerned, were unauthorized and that there is no authority for the proposition that the subsequent finding of reasonableness by the ICC converts an unauthorized tariff retroactively into an authorized tariff. They seem to ignore completely the predicate upon which Ajayem was founded, i. e., it is not the filing of the tariffs Per se to which the right of independent action attaches but the filing of the tariff without the consent of all the parties to the proposed tariff. See § 5b(6) of the ICA. If lack of agreement is properly communicated, the status quo is maintained as far as dissenters are concerned. ICC Rule 52, contained in Tariff Circular No. 20 (49 CFR Chap. X, Subchap. D, § 1300.52), makes it quite clear that all tariffs published by agents on behalf of carriers must be duly authorized. As far as LIRR was concerned, the tariff rates filed under Ex Parte Nos. 262, 265, 267 and 281 were unauthorized and in violation of the ICA.

 LIRR's right of independent action

 As pointed out in Ajayem, supra, section 5a of the Reed-Bulwinkle Act permitted LIRR to exercise its right of independent action by "flagging out" of the new rates and thereafter entitled it to a hearing before the new joint rates went into effect, and until such a hearing was held and a determination made of the lawfulness of the rates, the LIRR had a right to insist on the maintenance of its existing joint rates (487 F.2d at 183). Defendants cite Keogh v. Chicago & Northwestern R. Co., supra, for the proposition that, in substance, plaintiffs' claim is not predicated upon a violation of the Interstate Commerce Act but upon a violation of the Anti-Trust Act and upon certain contract claims against the TEA-ER. We reject this contention. Plaintiffs' claim is not comparable to that of plaintiffs in Keogh, which was based, as the court stated, upon hypothetical liability under the Anti-Trust Act and a claim for speculative damages. There the rates complained of were found to be legal by the Commission before they became effective. Here, the improper filings of third-party defendants in Ex Parte Nos. 262, 265, 267 and 281 made the increased rates, as far as the LIRR was concerned, a violation of the ICA and unlawful at the outset. Accordingly, the plaintiffs are not suing under the Anti-Trust Act, nor are they suing TEA-ER for breach of contract, but have confined themselves to their remedy under the ICA; therefore, they do not fall within the parameters of the Keogh case.


 The defendants argue that the amounts paid under the increased rates by the plaintiffs are not "overcharges," as that term is defined in section 16(3)(g) of the Interstate Commerce Act, 49 U.S.C. § 16(3)(g). That section states that "the term "overcharges' as used in this section shall be deemed to mean charges for transportation services in excess of those applicable thereto under the tariffs lawfully on file with the commission." So the issue presented is: What tariffs are "lawfully on file with the commission"? The defendants admit that a tariff is not "lawfully on file" when it has not been filed and published in accordance with the procedures dictated by 49 U.S.C. § 6. In this case it has not been so filed.

 Section 6, subsection 6, 49 U.S.C., specifically requires that all rate schedules be filed in compliance with "regulations prescribed by the Commission." The Commission has issued such regulations in 49 CFR Chap. X, Subchap. D, § 1300.52, under "Responsibilities of carriers under tariffs." This section specifically provides: "(b) if one or more carriers are, without proper authority, so shown as participating in any tariff and other carriers are lawfully shown as parties thereto, the use of the publication is unlawful as to the carriers that are named as parties thereto without proper authority and lawful as to those that are parties to it under proper authority." Since the filing of the tariffs in Ex Parte Nos. 262 Et seq., naming LIRR, were clearly without the proper authority of LIRR, these filings were "unlawful" under the terms of the regulations (s 1300.52) and consequently "unlawful" under 49 U.S.C. § 6(6). *fn1" Concluding, therefore, that the complained of increases were unlawful as to LIRR when originally filed, we find that plaintiffs' claim is properly one for statutory "overcharges," and that this case is controlled by Chicago, M., St. P. & P. R. Co. v. Alouette Peat Products, 253 F.2d 449 (9th Cir. 1957), as we have heretofore held in Axinn v. LIRR, 75-C-280, Memorandum-Decision and Order dated October 3, 1975.

 Equitable Restitution

 The main contention of the defendants is that the plaintiffs' claim in this case is in reality not one for overcharges but rather an action for equitable restitution. Such an action they claim is barred under the authority of Atlantic Coast Line R. Co. v. State of Florida, supra, and Moss v. C.A.B., supra. Since we find these authorities not controlling, a brief analysis is necessary. In Atlantic there existed, in Florida, the so-called Cummer rate scale for intrastate transportation of logs, tariffs for which had been approved by the Florida Railroad Commission. The ICC, acting upon a complaint that the rates were unduly discriminatory against interstate commerce, issued an order dated February 8, 1929, granting an increase, for the future, in such rates to a parity with interstate rates. By a mandate filed March 7, 1931, the Supreme Court reversed the ICC's order, holding that it was void for want of supporting findings. Between February 8, 1929 and March 7, 1931, Atlantic made freight collections at the increased rate. Subsequently, by an order effective February 25, 1933, the ICC, after making a new set of findings, prescribed the same increase in rates, which were sustained by the Supreme Court on the ground of sufficiency of the new findings. In the meantime, shippers and others instituted a non-statutory action for restitution of the excess rates paid to Atlantic between February 8, 1929 and March 7, 1931, under the ICC's order dated February 8, 1929.

 By a 5 to 4 decision, the Supreme Court held that restitution was a matter of equity and was not owing from the carrier for the whole or any part of the excess rates collected from the shippers under the first order which was void. In brief, the Court reasoned that inequality and injustice were inherent in the Cummer scale rates during the years they were suspended for increased rates and also the years they were in force. Accordingly the Court held that any claim for restitution of excess rates, seeking the benefit of the Cummer scale rates, was not based upon any equitable consideration but upon procedural entanglements resulting in a voidable ICC order. Consequently the Court held that the plaintiff's claim was insufficient to invoke an exercise of the Court's discretion. *fn2"

 We find the factual context of the present case to be quite different from the background in Atlantic. In this case there is no claim of discriminatory rates, no claim that the filing of the joint rate increases was merely voidable rather than void, and no claim for equitable restitution based upon unjust enrichment of the LIRR. Indeed, the LIRR never claimed it was equitably entitled to the excess rates which it was forced to collect despite its strenuous and ultimately successful opposition to their imposition. Here the shippers' claim is based upon a ...

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