UNITED STATES DISTRICT COURT FOR THE EASTERN DISTRICT OF NEW YORK
April 10, 1978
SEABOARD COAST LINE RAILROAD COMPANY, Plaintiff, against LONG ISLAND RAILROAD COMPANY, Defendant.
Edward R. Neaher, U. S. D. J.
The opinion of the court was delivered by: NEAHER
MEMORANDUM ON REARGUMENT
On consent of the defendant, the court granted plaintiff's application for reargument and vacated its summary judgment so as to avoid the need for perfecting a prompt appeal. That seemed the appropriate course in view of plaintiff's contention that pertinent decisions not considered by the court rendered its judgment erroneous as a matter of law.
On reargument plaintiff renewed its primary contention that the three-year statute of limitations, 49 U.S.C. § 16(3)(a), quoted in Part II, supra, alone governs the controversy between these two railroad carriers and it was error to apply the New York six-year statute, CPLR § 213, to their respective claims. If plaintiff is correct, defendant's counterclaim for set-off would be wholly barred and plaintiff's judgment would have to be increased.
With remarkable ambivalence, plaintiff also urges that it should recover $ 184,664.44, representing six years of per diem car rental charges allegedly unpaid by defendant prior to the commencement of this action in 1976. That theory of unilateral escape from the bar of the three-year statute, plaintiff argues, applies to plaintiff's claim because the charges in question were ICC-prescribed rates which plaintiff was bound to collect. See n. 4 supra.
There is no question that 49 U.S.C. § 15 gives the ICC authority to "prescribe" rates and mandates that carriers shall not "demand or collect" different rates. But it is fallacious to suggest that uncollected "charges, even though prescribed, may be sued for after the three-year limitation period has expired. The very authorities plaintiff now urges on the court reveal that the statute begins to run from the time the obligation to pay the prescribed rate or charge arose. The court did not overlook plaintiff's contention on prior consideration. Plaintiff was allowed full recovery (less defendant's setoff) because the court was of opinion that § 16(3) had no application to this controversy between carriers over their inter-line accounts.
Moreover, it considered plaintiff's contention that the ICC's legislative function overrode § 16(3) (assuming it applied) was patently unsound, and it is still of that opinion.
Turning now to the mooted point -- whether § 16(3) is applicable to this controversy -- plaintiff relies on the triad of unreported New Jersey District Court decisions referred to in n. 7, supra, and on a very recent ICC decision which holds that § 16(3)(b) applies to claims between carriers as well as those between carriers and shippers. ICC Docket No. 35940, In the Matter of Investigation into Lawfulness of Interchange Arrangements Between The Bangor and Aroostook Railroad and CP Rail At Brownville Junction, Maine, decided on February 4, 1977.
Although plaintiff cited the unreported New Jersey cases in its original briefs, it did not make copies available to the court until this reargument. All were suits between carriers involving claims for either payment or refund of per diem rental charges growing out of the same protracted litigation described in the court's original decision, Part I, supra. In two of the three cases Judge Whipple held that § 16(3)(a) barred recovery on all claims for refund of unreasonable per diem rental overcharges paid more than three years before suit was commenced. In the third case, he made the same ruling with respect to undercharges, and also held that § 16(3) was not limited to suits between carriers and shippers, finding support for his views in Judge Johnson's comment in Thompson v. St. Louis-San Francisco Railway Company, Part II, supra, quoted in the margin,
although acknowledging that the latter concurred in the result. In declining to follow the Thompson rule, Judge Whipple distinguished a suit for recovery of disputed transportation revenues from cases like those before him (and this case) where "per diem charges" were involved. It is clear that the rationale for his decision in all three cases was his view that
"recovery of unreasonable rate overcharges is a matter governed by the [Transportation] Act [49 U.S.C. § 1, et seq.] and for this reason any suit seeking recovery of rate overcharges should be regulated by the three year period of limitations discovered in the Act. Congress has decided under its pre-emptive power to exclusively regulate interstate commerce and thus this period of limitations 'not only bars the remedy, but destroys the liability,'" citing A.J. Phillips Co. v. Grand Trunk, W.R. Co., 236 U.S. 662, 59 L. Ed. 774, 35 S. Ct. 444 (1915).
Contrary to Judge Whipple's view, the per diem charges constituting the defendant's set-off counterclaim were not regulated by the Act or the ICC, as even plaintiff acknowledged in its original brief. Such charges for freight car rental were entirely matters of private agreement between carriers. Moreover, the parties here by their bilateral agreement fulfilled a condition for the tolling of the three-year statute (if applicable), which Judge Whipple would have allowed; viz., that defendant "place [plaintiff] on formal notice that it would seek such a refund." See New York Susquehanna and Western Railroad Company, etc. v. Seaboard Coast Line Railroad Company, etc. (D.N.J. 1974), Civil No. 1998-72, Opinion at 8. And see also his decision, n. 10 supra, where he said: "Because of this lack of formal notice to [Seaboard] in the instant case, I conclude that the ICC action Docket 31358 did not toll the running of the three year statute of limitations . . . ." Civil No. 648-72, Opinion at 6. Plaintiff here cannot claim any lack of notice and it would have been wholly unreasonable to cut off rights in protracted litigation between carriers -- so customary in the railroad industry -- by applying a statute of limitation before it was even possible to determine whether causes of action existed. This court does not read the New Jersey decisions as dictating such a result in this case, but if they do, it declines to follow them.
The 1977 ICC decision, supra, at first blush, seems to present a more formidable obstacle to the allowance of defendant's counterclaim for set-off. Viewing Thompson v. St. Louis-San Francisco Ry., supra, as improperly decided," the ICC found "no indication whatsoever that the amended language in section 16 of the Act was narrowly meant to apply to actions between shippers and carriers only." ICC Docket No. 35940, supra, at 38. Although the extensive legislative history reviewed by the ICC hardly illumines with any clarity the purpose and meaning of § 16 as now construed by the ICC, there is much support for the view that the interpretation of a statute by the agency charged with its administration is entitled to great weight, if it is reasonable. See Davis, Administrative Law Treatise § 5.06 at 164. Certainly this court would not be inclined to disagree with the ICC's view that "uniform adjudication of damage claims brought before this Commission in actions between carriers necessitates that a federal statute of limitations govern such causes of action which arise under the Act." ICC Docket No. 35940, supra, at 42.
In this case, however, the claims involved are not before the ICC, do not arise out of matters which had been regulated by the ICC, and occurred during an extended period when the ICC had chosen not to interfere with the long-standing practice it has now decided to overturn. To apply retroactively the ICC's new interpretation of § 16(3) to this case would be unreasonable and would serve no apparent regulatory purpose. On the contrary, it would allow plaintiff, the party which reneged on a contract, to recover a windfall as a reward for its own default in failing to make the agreed refund to defendant. To avoid such an unjust result, the ICC's new interpretation of § 16(3) will be limited to prospective operation and will thus not bar the entry of a new judgment as before. See Davis, supra, § 5.09.
Accordingly, plaintiff's claim is allowed in the sum of $ 184,644.44 (Appendix A, App. 9) and defendant's counterclaim is allowed as a set-off to the extent of $ 132,500.65 (Appendix B, App. 10). The Clerk is directed to enter summary judgment in favor of plaintiff for the difference, namely, $ 52,163.79 with interest at the rate of 4% from February 13, 1976, each party to bear its own costs.
Edward R. Neaher
U. S. D. J.
Dated: Brooklyn, New York
April 10, 1978