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LIFSCHULTZ FAST FREIGHT v. RAINBOW SHOPS

February 11, 1992

LIFSCHULTZ FAST FREIGHT, INC., Plaintiff, against RAINBOW SHOPS, INC., d/b/a RAINBOW USA, INC., Defendant.


The opinion of the court was delivered by: MICHAEL B. MUKASEY

 MICHAEL B. MUKASEY, U.S.D.J.

 Defendant, Rainbow Shops, Inc., moves for an order referring certain issues to the Interstate Commerce Commission ("ICC") and to stay this case pending the ICC's resolution of those issues. For the reasons set forth below, the motion is denied.

 I

 Plaintiff, Lifschultz Fast Freight, Inc., is a motor common carrier operating in interstate commerce pursuant to authority granted by the ICC. Between 1988 and 1990, plaintiff carried defendant's goods and now sues to collect unpaid freight charges in the amount of $ 83,153.15. (Amended Complaint paras. 3)

 The charges are "loss of discount" and "penalty" fees arising from defendant's late payments in violation of plaintiff's tariff. (Amended Complaint para. 3; Zottoli Aff. para. 7) Defendant argues that the "penalties hidden in Lifschultz's tariff" are unreasonable and, therefore, unenforceable under 49 U.S.C. § 10701(a). (Zottoli Aff. para. 7) Defendant also alleges that plaintiff's rates and practices are inconsistent with ICC regulations and that defendant was fraudulently induced to enter the shipping contract. In addition, defendant raises five counterclaims alleging fraudulent inducement, damage to its goods in the course of shipment, and violation of the Interstate Commerce Act's tariff, reasonableness, and discrimination provisions.

 Defendant now moves to stay this litigation and refer to the ICC the issues raised by its unreasonable rate defense. It argues that such issues are within the ICC's primary jurisdiction.

 II

 The doctrine of primary jurisdiction applies when an issue arises in the course of litigation which, pursuant to a regulatory scheme, is within the special competence of an administrative agency. In such instances, the litigation is stayed pending resolution of the issues by the appropriate administrative body. United States v. Western Pacific R. Co., 352 U.S. 59, 64, 1 L. Ed. 2d 126, 77 S. Ct. 161 (1956). The question raised here is whether staying this litigation and referring the reasonableness issue to the ICC is consistent with the Interstate Commerce Act.

 The purpose of the Act is to prevent rate discrimination by common carriers. The Act provides that a "common carrier . . . may not charge or receive from a person a different compensation . . . for a service rendered, . . . than it charges or receives from another person for performing a like or contemporaneous service." 49 U.S.C. § 10741(a) (1982 ed.). In order to prevent discrimination, all shippers and carriers must adhere to the rates contained in the carrier's tariffs filed with the ICC. A "carrier may not charge or receive a different compensation . . . than [sic ] the rate specified in [its] tariff." 49 U.S.C. § 10761(a). The Act also regulates the level of rates, stating that a "rate . . . or practice related to transportation or service . . . must be reasonable." 49 U.S.C. § 10701(a) (1982 ed.). The ICC is charged with enforcement of the Act, and is responsible for determining whether a carrier's rates are reasonable. 49 U.S.C. §§ 11701 (1982 ed.); see Texas & Pacific R. Co. v. Abilene Cotton Oil Co., 204 U.S. 426, 440-42, 51 L. Ed. 553, 27 S. Ct. 350 (1907).

 In cases such as this, tension arises between the tariff and reasonableness provisions. In order to prevent discrimination, tariffs must be strictly enforced. See Louisville & Nashville R. Co. v. Maxwell, 237 U.S. 94, 97, 59 L. Ed. 853, 35 S. Ct. 494 (1915). However, it is uncertain whether in a suit to collect freight charges the tariff must be enforced before the ICC decides whether it is reasonable. If so, a court must enforce the tariff rate, without referring the reasonableness issue to the ICC. On the other hand, if the shipper may withhold payment of freight charges, a court may invoke the doctrine of primary jurisdiction, await the ICC's determination, and then enforce the rate deemed reasonable by the ICC. The circuits disagree as to which approach is proper.

  Recently, in Maislin Industries, U.S., Inc. v. Primary Steel, Inc., 497 U.S. 116, 110 S. Ct. 2759, 111 L. Ed. 2d 94 (1990), the Court addressed the question of whether a carrier's unfair practices may excuse a shipper from paying the filed rate. Before Maislin, the Court had held repeatedly that the only rate to be charged and received is the filed rate. See e.g., Southern Pacific Transp. Co. v. Commercial Metals Co., 456 U.S. 336, 352, 72 L. Ed. 2d 114, 102 S. Ct. 1815 (1982); Keogh v. Chicago & Northwestern R. Co., 260 U.S. 156, 163, 67 L. Ed. 183, 43 S. Ct. 47 (1922); Maxwell, 237 U.S. at 97. For instance, in Maxwell Justice Hughes wrote: "Under the Interstate Commerce Act, the rate of the carrier duly filed is the only lawful charge. Deviation from it is not permitted upon any pretext." 237 U.S. at 97. In Maislin, the carrier and shipper negotiated rates below those filed with the ICC. Thereafter, the carrier filed for bankruptcy protection and, citing the filed rate doctrine, sued for the difference between the tariff and the negotiated rates. The shipper argued, and the ICC found, that rebilling at the tariff rate constituted an unreasonable practice and the shipper need pay only the negotiated rate. The Supreme Court reversed:

 For a century, this Court has held that the Act, as it incorporates the filed rate doctrine, forbids as discriminatory the secret negotiation and collection of rates lower than the filed rate. By refusing to order collection of the filed rate solely because the parties had agreed to a lower rate, the ICC has permitted the very price discrimination the Act by its terms seeks to prevent.

 110 S. Ct. at 2768 (citing Armour Packing Co. v. United States, 209 U.S. 56, 81, 52 L. Ed. ...


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