Transcript

IN THE SUPREME COURT OF THE UNITED STATES

CHICAGO AND NORTH WESTERN TRANSPORTATION COMPANY, Petitioner, v. KALO BRICK & TILE COMPANY, Respondent

No. 79-1336

December 9, 1980

The above-entitled matter came on for oral argument before the Supreme Court of the United States at 1:01 o'clock p.m.

APPEARANCES;

BRUCE E. JOHNSON, ESQ., 2600 Ruan Center, Des Moines, Iowa 50309; on behalf of the Petitioner.

HENRI F. RUSH, JR., ESQ., Associate General Counsel, Interstate Commerce Commission, Washington, D.C. 20423; on behalf of the Petitioner as amicus curiae.

M. GENE BLACKBURN, 142 North 9th Street, Fort Dodge, Iowa 50501; on behalf of the Respondent.

PROCEEDINGS

MR. CHIEF JUSTICE BURGER: We will hear arguments next in Chicago and North Western v. Kalo Brick & Tile.

Mr. Johnson, you may proceed when you're ready.

ORAL ARGUMENT OF BRUCE E. JOHNSON, ESQ., ON BEHALF OF THE PETITIONER

MR. JOHNSON: Mr. Chief Justice and may it please the Court:

This case involves a state law damage action commenced in state court in Iowa because of damages allegedly sustained due to the cessation of interstate transportation service over the Railroad's line serving the respondent's factory.

The issues are as follows. First, have provisions of the Interstate Commerce Act preempted state court damage actions founded on state law in the areas of provision of interstate transportation service that are involved in the facts of this case? Secondly, has an earlier ruling of the Interstate Commerce Commission precluded the respondent from relitigating issues that are necessary to the success of the respondent's state law damage claims?

Prior to entry of the judgment of the Iowa trial court, the Commerce Commission ruled that the cessation of interstate service over the Railroad's line was caused by conditions that were beyond the control of the Railroad, and the Railroad's issue preclusion defense contends that in order for the respondent's state law theories to be sustained the respondent would have to obtain an Iowa trial court ruling that the conditions that led to the cessation of service were in fact within the control, or could have been prevented by the Railroad. Secondly --

QUESTION: What was the nature of the ICC proceeding, Mr. Johnson?

MR. JOHNSON: The ICC proceeding was an abandonment application. The Railroad filed an application to receive permission from the Commerce Commission to abandon its trackage. The Railroad's abandonment application was filed after the respondent had decided to go out of business and after the respondent had ceased operating his business. The Railroad then filed an application for permission to abandon, and a year and half after service ceased over the trackage, the respondent filed an action in state court seeking damages grounded on state law theories.

This case involves the Supremacy Clause, it involves interstate commerce provisions which require interstate carriers to provide interstate service, transportation service; Commerce Act provisions which require interstate carriers to provide interstate car service; it involves the provisions of the Act which regulate the abandonment and extension of lines, and also the provisions of the Commerce Act that entitle a shipper to commence an action for damages either before the Interstate Commerce Commission or in federal district court where they can prove a violation of the Commerce Act on the part of interstate carrier. Kalo did not commence its action before the Commission or in federal district court. Instead, it went to state court and seeks damages under a state car service theory, a state car service statute, a state negligence statute, and common law tortious interference.

QUESTION: What if the shipper had sought to sue the Railroad under the Hepburn Act, under the Carmack Amendment to the ICC, is federal court jurisdiction there exclusive?

MR. JOHNSON: Section 9 would permit a damage action to be filed before the Commission or in federal district court. If a damage action were filed in federal district court, under the circumstances of this case, I think that the federal district court would stay the action and refer the issue of causation of cessation of service to the Interstate Commerce Commission.

QUESTION: But what if it were -- you say then that it couldn't be filed in the state court?

MR. JOHNSON: No, because, if you look at --

QUESTION: No, what? No, you can't file it, or no, you can?

MR. JOHNSON: No, you could not file an action claiming violation of the Interstate Commerce Act in state court. And here is the reason. The Commerce Act has been construed in Puritan, among others, which is a case relied upon by the Respondent -- it's been construed to restrict Section 9 damage actions to the forums set cut in Section 9, which are the Commerce Commission and federal district court. And there are good reasons for doing that.

First of all, if you restrict it to federal district court or the Commerce Commission, you are going to have one system of federal law which is going to govern damage actions as well as the other regulatory functions of the Commission. However, if you allow the Commerce Act, if you allow damage actions for violation of the Commerce Act to be filed in state court, you are essentially allowing each state to create a separate regulatory system consisting of damage actions and the U.S. Supreme Court faced a similar situation in San Diego Unions v. Garmon, where the U.S. Supreme Court recognized that if it permitted state damage actions to be filed by an employer for economic loss sustained because of peaceful picketing, not violent picketing, then in effect it would be allowing a state court system to create a system of regulation by damage actions which would create a separate body of law competing with the body of law that is created under the federal judicial system interpreting and applying the National Labor Relations Act.

QUESTION: But it's one thing to say that the body of law has to be common and uniform; but it's another thing to say that concurrent jurisdiction exists between the state courts and the federal courts in applying that uniform body of law.

MR. JOHNSON: The Esch Car Service Act, and in the context of this case, more importantly, I think, the Transportation Act of 1920 evidence a new and radically different philosophy of Congress with regard to regulation of interstate commerce.

The Transportation Act of 1920 was designed to give plenary control, exclusive jurisdiction to the federal system to govern the provision of interstate transportation service, the abandonment of lines, the extension of lines, and the reason for that, the Court in Transit Commission v. U. S. stated, is because it had been found that concurrent state and federal jurisdiction in the areas of interstate commerce addressed in the 1920 Act had been found to be detrimental to interstate commerce.

The competing local interest in this case, the respondent's local interest, is economic loss, and if you analyze his state law claims, although the claims of the respondent are couched in terms of state law, they are claiming damage to their business because of cessation of interstate transportation service. And each state law claim requires proof of two things: first, the existence of a duty on the part of the Railroad to provide interstate transportation service; and secondly, to prove that such a duty was breached by the Railroad.

It is undisputed -- and this is the crucial and central fact of this case -- it is undisputed that every rail shipment to and from Kalo's factory was in interstate commerce. Now, if there is no duty on the part of the Railroad after April 4, 1973, when the line became physically impassable, there is no duty on the part of the Railroad after that date to provide interstate transportation service, then Kalo's state law claims fall, because they all presuppose the existence of that duty. This is not a situation where there is a physical injury or something of that nature where there may have existed a stronger local interest.

QUESTION: Would your position here be any different if ten percent of the shipments were intrastate?

MR. JOHNSON: That issue has been addressed by some state courts and that percentage; basically, in state courts, most of the state courts have said, that's not enough intrastate commerce to set aside the overriding national interest. But I think the way to determine that question is to look at Section 1-17(a) of the Commerce Act, which says the states' regulation of intrastate commerce is invalid if it conflicts with a lawful order of the Commission. And I think that the cases indicate that under the Commerce Act, the Commerce Act will govern even intrastate commerce if the effect of intrastate commerce on interstate commerce is so great that it creates an undue burden on interstate commerce.

In this case we have no intrastate rail shipments, it's strictly interstate. There's never been any factual dispute about that in this lawsuit. And the respondent has characterized this as a negligence case, a car service case, common law tortious interference. But none of those state law theories hold any weight unless the respondent proves a duty to provide interstate rail service to its plant site. And that is an inquiry which should be addressed under the provisions of the Interstate Commerce Act.

QUESTION: You say, then, that the State of Iowa can't tell a railroad it must provide the cap service to a particular plant, even though it doesn't conflict directly with the ICC provisions?

MR. JOHNSON: The State of Iowa cannot require provision of interstate car service under state law. The Esch Car Service Act was enacted to preempt state law, and Missouri Pacific Railroad v. Stroud in 1926 stated that state law has no application to provision of car service in interstate commerce. Now, the Federal Courthouse in Fort Dodge is four blocks from the State Courthouse and the Interstate Commerce Act provides that if there is a violation of the federal car service provisions or transportation service provisions, that may be attacked in the Commerce Commission or in federal district court. And it's attacked under the provisions of the Interstate Commerce Act.

The Interstate Commerce Act has been construed to make the forum provisions of Section 9 exclusive with regard to a damage action commenced pursuant to Section 8 of the Interstate Commerce Act. And, as I indicated earlier, the reason for -- in addition to the reason for having interstate service questions determined under one act, the Interstate Commerce Act, there is another reason, and that is that the philosophy of the Interstate Commerce Act has been to place the interests in forming a national transportation system, an economically efficient national transportation system, over and above the competing local interests.

QUESTION: Mr. Johnson, do I correctly understand that this argument based on the absence of any state law duty is equally strong if there had been no abandonment proceeding? You don't rely on the abandonment proceeding in connection with this argument?

MR. JOHNSON: I do not. The abandonment proceeding -- the ruling of the Commerce Commission buttresses our argument in two respects. First, before theme was any trial court ruling -- which, by the way, the trial court ruled in our favor and the Court of Appeals saw fit to reverse.

Before there was any trial court judgment, the Commerce ruled, the Commerce Commission ruled that our cessation of service was not due to any condition that we could have controlled. Now, that puts the Court of Appeals of Iowa's ruling directly in conflict with Section 1-17(a) which says that even regulation of intrastate service is invalid if it conflicts with the lawful order of the Commission.

Here we have the Court of Appeals saying that a Webster County District Court can regulate by damage action interstate transportation service in direct contradiction to an order of the ICC. The Respondent admitted in its brief that central and necessary to its state law claim is a finding by the trial court that the cessation of service was due to conditions within the control of the Railroad. And the ICC has found just the opposite.

So having followed the Interstate Commerce Act, followed the provisions, gone to the ICC, participated in a proceeding in which Kalo was a party, and having our conduct approved by the ICC, we now find ourselves in the situation of being subjected to exposure of a state law damage action which can be successful by the respondent's admission in its brief only if a trial court reaches a finding opposite to the finding that ICC has already made in a lawful proceeding.

So I think that the ICC's order should be issue preclusive, even if there were jurisdiction in the state court. But more importantly, I think that there should be no jurisdiction permitted to a state court when you're talking about simply provision of interstate transportation service.

QUESTION: Do you say the plaintiff could attack the action of the Railroad either before the ICC or in the federal district court?

MR. JOHNSON: Under Section 9 the plaintiff may seek damages in either of those forums for a violation of the Interstate Commerce Act.

QUESTION: But, if he sues in the federal district court, don't the controlling cases suggest or hold that the district court should refer the guts of the case to the ICC?

MR. JOHNSON: I feel that in the situation we have in this case, where you have physical impassability of the line, I think a district court, where you're talking about awarding damages --

QUESTION: Well, whether the suspension of service was justified or not?

MR. JOHNSON: Yes. I think they would refer this to --

QUESTION: Or would they have to? That's what I want to know.

MR. JOHNSON: I believe they would. In an abandonment proceeding some of the --

QUESTION: Because of primary jurisdiction?

MR. JOHNSON: Yes. Because it would require -- if you're going to make a final and conclusive award of damages, I think that you should refer to the ICC, but --

QUESTION: Suppose the reference was made and the ICC ruled that cessation was proper and no damages, can the district court them come to the contrary conclusion?

MR. JOHNSON: Well, that's an appealable decision.

QUESTION: Well, so in that very case? In that very case or -- now, I thought appeal was to a court of appeal?

MR. JOHNSON: Yes.

QUESTION: Right?

MR. JOHNSON: Yes, I think it's --

QUESTION: So the district court can't come to a contrary conclusion?

MR. JOHNSON: Well, I think if the district court decided in the facts of the case that it required the discretion or expertise of the Commission referred it, then the district court would follow the Commission's ruling. If it decided it did not require the expertise of the Commission, and it could decide the issue itself, then it would not refer to the Commission.

QUESTION: But what if it decided that it should have the benefit of the Commission's views, the Commission said the abandonment was justified, could the district court overturn that finding of the Commission?

MR. JOHNSON: No, I believe that the district court --

QUESTION: Don't you have to appeal that to the Court of Appeals now?

MR. JOHNSON: Yes. That would be my opinion, because I believe the district court is saving that this is not a decision I think I should make, I think it's within the primary jurisdiction of the Commission. And then I think appeal of that order would be under the statutory procedures for appealing the Commerce decision.

QUESTION: Well, suppose you start off with damages before the Commission, don't go to the district court, what kind of a proceeding is that? That is a damages action, I take it?

MR. JOHNSON: Yes, as I understand it. And --

QUESTION: Well, then what if the ICC says the cessation was justified?

MR. JOHNSON: Then they would not award damages.

QUESTION: Well, and then -- let's assume you then go to the district court, would the Railroad -- I suppose you would suggest the Railroad would plead res judicata?

MR. JOHNSON: Yes, I think it would be preclusive.

QUESTION: There's no difference between that case, and than when you start off in the district court, is there?

MR. JOHNSON: In the state court, you mean?

QUESTION: No, in the district.

MR. JOHNSON: If there's primary jurisdiction. I would prefer to reserve what lime I have left, if any, for rebuttal, if I may. We have divided argument with the Commerce Commission. Thank you.

MR. CHIEF JUSTICE BURGER: Mr. Rush.

ORAL ARGUMENT OF HENRI F. RUSH, JR., ESQ., ON BEHALF OF THE UNITED STATES AS AMICUS CURIAE

MR. RUSH: Mr. Chief Justice and may it please the Court:

This Court has held in a number of decisions interpreting the Esch Car Service Act, a statute which my colleague referred to, and also the Transportation Act of 1920, which brought for the first time extension and abandonment of rail lines under the jurisdiction of the Federal Government, under federal regulation.

This Court has held that the provisions of these Acts vests exclusive responsibility for the regulation of car service and cessation of service in the Interstate Commerce Commission. Principally among those and on which we largely rest our case in this proceeding are this Court's decisions in Colorado v. United States, in the Purcell case, in the Transit Commission case, and in the case of Mo. Pac. v. Stroud.

The Government has urged this Court to grant certiorari and appears today to present a single point, but one that is of extreme importance to the Commission in performing its responsibilities under the provisions I have just referred to.

That point is that the recognition of a state or common law cause of action for damages in state court in matters relating to an interstate railroad cessation of service would undermine the accomplishment of federal objectives embodied in the abandonment and car service provisions of the Interstate Commerce Act.

QUESTION: Mr. Rush, what do you do with that last paragraph in Stroud that says the state law has no application to the furnishing of cars to shippers for the transportation of freight in interstate commerce?

MR. RUSH: Well, I would hang my hat on it, Justice Rehnquist. I mean, that seems to me exactly the point here, that a state damage action is asserted on a matter involving either car service or abandonment, both of which have been found to be within the exclusive province of the Federal Government and the Commission to regulate. So that, I mean, I would simply underline that sentence that you read, that it does have no applicability. And that as this Court recognized in the Government case, damages are as effective a way of regulating as injunctive or regulatory relief. Indeed, I would suggest to this Court that the right asserted here to obtain damages after the fact is vastly more pernicious and disruptive of the federal scheme than the seeking of injunctive relief.

QUESTION: Is it a form of review, in a sense, of the Commission's action? judicial review by a state court?

MR. RUSH: Mr. Chief Justice, that thought hadn't occurred to me. They ignored our decision so I think they were not purporting to perform nonfederal Hobbs Act required review. But it certainly--

QUESTION: It has the same consequence, does it not?

MR. RUSH: Yes, sir.

QUESTION: As though they were reviewing you and the Commission and reversing you?

MR. RUSH: Yes, I think it would. And, of course, a state court could in theory refer a question to the Commission and get an answer back from the Commission. And so I would suppose it might be closer to that, although they did not refer the question, nor did they in any fashion defer. And as my colleague, Mr. Johnson points out, they can't defer, for the plaintiff to succeed.

QUESTION: Well, would the state court be bound by the action that it got back from the ICC?

MR. RUSH: A state court? I should think so. A federal court, I would think that our decision on referral under the Referral Act would be as binding on that Court as the reasoning which went into it.

QUESTION: Then, you don't really have a uniform system if, as your colleague contends, where you have it in the federal court alone, since the federal court according to you is not bound to follow the ICC.

MR. RUSH: No, but it would be subject to normal principles of judicial review so that provided the reasoning was sound and we stayed within out statutory authority, they would be obligated to follow it, in my view.

QUESTION: Why wouldn't that be reviewable in the Court of Appeals rather than in the district court?

MR. RUSH: Because if it were referred, initial review is by law in the district court that referred it.

QUESTION: That's because of the referral statute?

MR. RUSH: Yes, Justice White. They perform a mixed review and acceptance of the referral, but then appeal from that, of course, goes to the Court of Appeals.

QUESTION: But review is on the record, isn't it, or is it?

MR. RUSH: Yes, it would be on the record, just as any other agency proceeding. Once --

QUESTION: But the district court couldn't rehear the whole matter, could it? It would have to review it on the record?

MR. RUSH: No, sir. No --

QUESTION: Why?

MR. RUSH: It would be my view they cannot review it ab initio, that they would have to accept the record made before the Commission. And in that respect it --

QUESTION: And if the findings are supported by substantial evidence, accept them.

MR. RUSH: That's correct. So there would be a heavy presumption favoring the valid interpretation of the Commission. I do not want to leave the impression that it had to be accepted regardless, was my only point.

But to turn to this question of damages and the problem that we perceive in connection with that, the respondents don't suggest, nor could they in the face of the cases decided by this Court which I have named, that the state court could require the restoration of service. But injunctive relief, actually, is preferable from the standpoint that you have the equitable considerations being laid in that context. And the cases cited in the respondent's own brief demonstrate that when action is brought in federal court, as all of their cases parenthetically I would note, were -- they have been properly brought before a federal court -- the question becomes one of whether it is equitable to require restoration of service pending & decision by the Commission. That injunction, of course, dies when a decision has been handed down by the Commission, if in fact a mandatory injunction is entered.

QUESTION: And then the Commission's decision is reviewable only in the normal appellate process?

MR. RUSH: That's correct, Justice Rehnquist. Respondents in the Court, of Appeals relied through their proposition supporting an award of damages ultimately entirely on three decisions of this Court, decided in 1915 and 1916, interpreting Section 22 of the Act.

We believe those cases are all distinguishable on the ground that no question of the reasonableness of the Railroad's challenged practice was before the courts, and hence if one were to take a primary jurisdiction approach to the issue of preemption, there would have been nothing to defer to the Commission's primary jurisdiction. However, more fundamentally, we submit that those decisions ought to be found not to have survived the enactment cf the Esch Car Service Act and the Transportation Act of 1920.

As I have indicated, this court has held that those enactments vested sole jurisdiction or responsibility, I should say, in the Commission for regulation of the matters of car service and cessation of rail service. This Court has consistently recognized that Section 22 is not to be read literally to absolutely preserve common law rights. It's early decision in Texas & Pacific Railway v. Abilene Cotton Oil Company found that to hold that a state right of damages survived because of Section 22 would be destructive to the pervasive scheme of rate regulation embodied within the Act. And hence it ought to be found hot to survive.

We believe that the Esch Car Service Act and the Transportation Act cf 1920 similarly encompass a pervasive scheme of regulation, where interstate commerce and interstate railroads are involved, of all matters relating to the cessation of rail service by such an interstate carrier.

We ask this Court to find, as it did in -- or to hold as it did in the rate area, that no such remedy survives in connection with these matters under any circumstances. Anything less than that, a resort to the question of, are there issues of primary jurisdiction or not, will simply breed more litigation, I suggest, in this area, and it is not a satisfactory test. In the rate area the Court has absolutely and clearly foreclosed state and common law remedies. We ask it to do so in connection with the cessation of interstate rail service.

QUESTION: Is primary jurisdiction simply a question of deferral and then the Court ultimately deciding, or is it a question that the Court simply keeps its hands off and it's a decision for the Commission to finally make?

MR. RUSH: Literally, as I've always considered the doctrine, it means that the Court must defer initially to a decision by the Commission.

QUESTION: When you say "initially," what do you mean?

MR. RUSH: Well, it's subject to -- as I indicated to you earlier, Justice Rehnquist, a review on the traditional grounds of judicial review of Commission decisions. So it has some limited role, but--

QUESTION: It's not like a review under the Administrative Procedure Act, where any agency action can be reviewed for it's arbitrary or contrary to law.

MR. RUSH: No, sir, I'm suggesting it is comparable to APA review, but that is a very limiting type of review. It does not make take Court a co-equal partner, it is not at liberty to say, well, here are some facts and here are some facts. You looked at the facts and came out this way, we looked at the facts and come out this way. If what the Commission has done based on these facts is supported by substantial evidence, which as you well know is an elusive test, but if it's supported by substantial evidence, it must be sustained.

QUESTION: Well, then, for your counsel or your associate counsel for the Railroad to state that the courthouse at Fort Dodge is only four miles or four blocks away, is really rather elusive so far as the plaintiff is concerned because it means that the plaintiff has to come back to Washington.

MR. RUSH: I'm not sure that I follow that argument, Mr. Justice Rehnquist.

QUESTION: Well, I mean, you can't get a final trial of your case in the federal court if you're right.

MR. RUSH: Yes, that's correct. That's our position.

QUESTION: Everybody all over the country has to come back to Washington and try their case before the ICC.

MR. RUSH: Well, I would modify that only in one respect, Justice Rehnquist. That is, we have a procedure known as modified procedure which was in fact followed in this case, which would have meant all they would have had to do to try their case would have been to go to their mailbox and mail their pleadings and evidence to the Commission. Then, but only if a material issue of fact were in dispute, would the matter be required to be set for cross-examination. And that indeed, probably, under Commission practice, would have taken place out in Iowa.

QUESTION: As I understand it, Mr. Rush, your position is that there is no room here for the doctrine of primary jurisdiction or for a reference to the Commission by a state court, but that the enactment of the Interstate Commerce Act and its companion legislation means that state courts are completely ousted from jurisdiction in this field. Is that correct?

MR. RUSH: That's correct, Justice Stewart. That is exactly our position.

QUESTION: Do you mean, not only state law is ousted but the state courts are ousted?

QUESTION: Right. Just as in ratemaking proceedings.

MR. RUSH: Yes, I would think that's correct. It is conceivable a state court could try an action based on a federal statute and issue we don't have in this case, of course.

QUESTION: Oh, it is under the National Labor Relations Act. They try collective bargaining cases in the state courts, although it's federal law that's administered.

MR. RUSH: Yes, sir, although our --

QUESTION: Do you think, here -- have there been some holdings that federal court jurisdiction is exclusive?

MR. RUSH: That's correct, Your Honor, under Section 9 of our Act. Wrongs are complained of --

QUESTION: Does the present Act say so? Does it say it's exclusively a federal court matter?

MR. RUSH: No, but the way those cases go, since it says you may bring it in federal court, that that means you must, if you're complaining under it.

QUESTION: I see; yes.

MR. RUSH: Thank you.

MR. CHIEF JUSTICE BURGER: Mr. Blackburn.

ORAL ARGUMENT OF M. GENE BLACKBURN, ESQ., ON BEHALF OF THE RESPONDENT

MR. BLACKBURN: Mr. Chief Justice, may it please the Court:

An affirmance of the Iowa Court of Appeals decision in this case would not do violence to the railroad industry, nor would it do violence to the federal scheme for regulating the industry or to national transportation policy. Instead, Your Honors, we submit that it would cause railroads to make early decisions about abandonment plans.

We also submit that it would avoid the practice --

QUESTION: By that you mean that it would go to the state courts first?

MR. BLACKBURN: Yes, Your Honor. And --

QUESTION: On the abandonment of an interstate line?

MR. BLACKBURN: The facts of this case, Your Honor, show that the railroad was neglected over a long period of time and ultimately failed because of that neglect. If the Transportation Company had made an early decision to abandon that line, the Kalo Brick and Tile Company which is now out of business could have made management decisions about relocation or could have made management decisions about merger with other companies.

QUESTION: But suppose you're contemplating building this plant, no plant is there, so you build a plant there. Could the state courts of Iowa compel service to that plant?

MR. BLACKBURN: Your Honor, we do not think that is going to be an issue in this case.

QUESTION: No, that's hypothetical.

MR. BLACKBURN: Right.

QUESTION: Obviously not an issue here.

MR. BLACKBURN: No, we would not claim that at all.

QUESTION: But once the service is available, it must be maintained?

MR. BLACKBURN: Right. At least the track must be maintained, and the car service must be maintained under the Iowa statutes.

QUESTION: Well, what else -- I'm not sure I follow. What else would there be besides the track and the service?

MR. BLACKBURN: Well, we would suggest, Your Honor, that those state statutes do impose duties upon the Railroad.

QUESTION: Well, certainly if you were dealing with an interurban service between two cities in Iowa or a public utility, the state would have the right to require the utility to extend its services to any willing customer under existing law, would it not?

MR. BLACKBURN: Yes, Your Honor.

QUESTION: In the absence of congressional preemption.

MR. BLACKBURN: Right. We would also suggest, Your Honor, that it would be, it would avoid the kind -- Railroad and the amicus in this case discussed somewhat obliquely the unreasonable burden upon interstate commerce. We suggest to this Court that there is a reverse burden upon interstate commerce by the action, the unilateral neglect, the unilateral abandonment that the Chicago North Western has taken, and we would also suggest that an affirmance of the Iowa Court of Appeals would have a tendency to stabilize the railroad industry by striking a balance between the carrier, between the shipper and between the Interstate Commerce Commission.

We suggest, Your Honors, that the fault, or the problem with the petitioner's position in this case is simple. It was pointed out by Justice Frankfurter in the case of Pan American Oil Company v. Superior Court about 20 years ago, and that is this, that a party who brings the suit is the master to decide what law he will rely upon. And in the district court of Iowa, the Kalo Brick & Tile Company relied upon three theories. The first was failure to provide car service upon reasonable notice and within reasonable time, pursuant to Iowa Statute 479.3. The second and the most important one to the issues here, is the fact that Kalo pled a cause of action based upon the negligence of the Railroad and its employees, a state statute.

And that statute, I've pointed it out here and I don't like to take a lot of time reading, but it says,

"Every corporation operating a railroad shall be liable for all damages sustained by any person in the consequences of the acts of the agents."

There is also a third, kind of a throwaway issue and that is, interference with prospective business advantage or business relationships. Now, both the Railroad and the amicus before this Court have characterized this case as either, number one, a car service case, or number two, an abandonment case. And they have conveniently for purposes which are obvious to this decision, have avoided discussing either in their briefs or in argument the question of the Iowa negligence statute, which is 479.122.

QUESTION: Mr. Blackburn, could I ask you a question about the negligence theory?

MR. BLACKBURN: Yes, sir.

QUESTION: Assume that the Railroad was losing money on this line and they went in before the ICC and got an abandonment on economic grounds that it's a loss operation and it's not necessary to maintain the public interest and the ICC gave permission. Would there have been any duty under Iowa law to continue to operate?

MR. BLACKBURN: Your Honor, we do not contend -- and here is where the amicus and the railroad and we are in agreement -- we disagree, we do not disagree with very much of what they said. We simply say, what they say does not apply to the facts of this case.

QUESTION: Your answer is, no, I take it?

MR. BLACKBURN: My answer is, no.

QUESTION: Well, if there's no duty in that case, they can willfully abandon. Why can't they negligently abandon?

MR. BLACKBURN: Because the Interstate Commerce Commission Act does provide for provisions for abandonment and has language to the effect.

QUESTION: But I mean, as a matter of Iowa law. I'm assuming they comply with federal law in either case, and I'm asking you, as a matter of Iowa law, if they can willfully abandon, why can't they carelessly abandon? It would -- that's reaching the same duty, I would think.

MR. BLACKBURN: Well, we would suggest they could, but then they would subject themselves to the jurisdiction of the Iowa court if they carelessly abandoned. We say that is this case.

QUESTION: But if they don't have a duty to refrain from willful abandonment, what is the nature of the duty to refrain from negligent abandonment?

MR. BLACKBURN: We would suggest, Your Honor, under -- the duty arises under the statute that provides --

QUESTION: Well, would they have a defense to your action if they filed an answer and said, we didn't do this negligently, we planned it five years ago. We let the ponds develop and we were doing it because we intended to abandon. It's exactly what our corporate objective was.

MR. BLACKBURN: No, I do not -- I do not think that would isolate them from liability, if that's what your question is.

QUESTION: But you seem to acknowledge there'd be no cause of action if it were willful, but there is a cause of action if it's negligent.

MR. BLACKBURN: Well, maybe I misspoke myself, Your Honor. I may have --

QUESTION: My first question is, assume no negligence but merely a corporate plan, let's abandon this line because we're not making any money. And I'd ask you, would that violate any Iowa duty? And I thought you said, no.

MR. BLACKBURN: Oh, I'm sorry, I intended to say, yes, if that was the question.

QUESTION: So then your claim does not really depend -- your duty exists whether they were negligent or not?

MR. BLACKBURN: Whether they were negligent or not, yes.

QUESTION: At any rate, we have the decision of the final court in Iowa that passed on the question that in the circumstances of this case a damage action was permissible under state law. So that unless there's a federal question that the Iowa court decided wrongly, Iowa allows recovery here.

MR. BLACKBURN: Yes, Your Honor, that is true. And that is based upon -- and this is an issue that goes to -- when this case was first started plaintiff's attorneys relied upon three United States Supreme Court decisions and three Iowa Supreme Court decisions and a decision of the 9th Circuit Court of Appeals for establishing state court jurisdiction. And to our knowledge those cases, none of them, have ever been overruled.

It is also important, Your Honors, to find, to note, we feel, to this issue, that the trial court found as a fact that the Railroad, the imponding of the water was a factor in the failure of this Railroad, and that the permitting ponded water to stand was not good maintenance practice. That's noted at Appendix, page 16a.

I don't want to burden the Court with facts, but I think the chronology of these --

QUESTION: Mr. Blackburn, before you get to facts, are you going to talk about the Colorado case? You talked about the other one.

MR. BLACKBURN: Yes, Your Honor.

QUESTION: Thank you.

MR. BLACKBURN: We think those cases are all cases involving regulation and not remedy, and the amicus disparages our attempt to distinguish between the remedial effect as opposed to the regulatory effect of a regulatory scheme. And Your Honor, we suggest this, that -- and it might be somewhat trite to suggest that the regulatory scheme falls basically within what we've known as the police power, whereas the remedies involve suits between parties. And so therefore we think that there is a great distinction in those kinds of cases.

QUESTION: Well, wouldn't that remedy destroy the Colorado case?

MR. BLACKBURN: Well, Your Honor --

QUESTION: In quotes, as you put it? Would it destroy it?

MR. BLACKBURN: We simply suggest that the Colorado case was a regulatory case and most of the cases relied upon by the amicus and the Chicago North Western are cases which are apposite to this case. They are cases involving discrimination, they are cases involving reparations, they are cases involving national transportation policy, they are cases which involve any number of things which are not within the facts of this case.

QUESTION: How about the Stroud case, that last language there where it says that obviously the state law has no application to the furnishing of cars to shippers for the transportation of freight in interstate commerce?

MR. BLACKBURN: Well, that again, Your Honor, is a nice statement but taken -- it's in the case itself, it's stated somewhat hypothetically without reference to the facts of the case. And we have no argument with the suggestion of the amicus or the Chicago North Western that the Interstate Commerce Commission does have exclusive jurisdiction over such things as rates, over such things as abandonments, over such things as rate discrimination, discrimination against the furnishing of cars. But our approach is fairly narrow in that it arises basically under an Iowa negligence statute which has nothing to do with national transportation policy, which has nothing to do with the intercession of administrative expertise, and it has none of the rubric of your ordinary regulation-type case.

The facts: basically, the Kalo Brick & Tile Company which was a family business, been in business for almost a hundred years, had been served for 75 years by this same rail line, had been served very well until 1960 when the Chicago North Western took it over. During the '60s, not only did the track begin to fail, but Kalo was not getting the switches, Kalo was not getting adequate cars -- they were getting bad cars, they were getting all sorts of poor service. They were promised better service but it never came. And so, consequently, through that period of time they were led to believe that things will be better, but they never got better.

Now, the Court is obviously aware that the cause of the failure of the railroad was because of imponding water along the side of the tracks. In April of '73 the track became impassable, and then in August. Kalo because it required railroad transportation to be competitive in its business, sold its assets and went out of business. And it wasn't until three months after that, that finally the application for a certificate of convenience and necessity was filed with the Interstate Commerce Commission.

Now, our point, going back again to the Iowa negligence statute, is this: that tort became, that state court tort action became complete on the day when the damage existed. And I think that's general negligence law. So the negligence, and the damages, if any, were established in August, quite a bit of time prior to the time that the railroad made application for abandonment.

Now, we submit, Your Honors --

QUESTION: Mr. Blackburn, for a time did Kalo transport its interstate shipments by truck?

MR. BLACKBURN: There was, Your Honor, yes, a short period of time when alternate facilities were offered by truck to the landing dock, to the railhead, or whatever, but that simply did not work out. I think that --

QUESTION: Did not work out financially?

MR. BLACKBURN: And I think physically it does not work out, because you get a certain amount of jiggling and there's a special way of packing bricks, as I understand it, and loading and unloading and so forth.

We submit that it was not -- no matter what might be said about the preemption statutes, and the cases that interpret, we simply say that it was not the clear and manifest purpose of Congress to preempt the state court duty to exercise reasonable care, or to take any cumulative remedies in the state car service statutes.

The negative intent of the congressional Act is manifest in several ways. Number one, throughout the Esch Car Service Statute, and the Transportation Act of 1920, Congress felt it right to leave intact Sections 8, 9, and 22 of that Act, which are the very sections relied upon in Puritan Coal.

QUESTION: Are those set forth anywhere in the briefs?

MR. BLACKBURN: Yes, Your Honor, they are.

QUESTION: In the Appendix?

MR. BLACKBURN: And in the Appendix.

QUESTION: Mr. Blackburn, under your theory would it be possible to have exactly 50 different theories of negligence for abandonment of interstate railroads?

MR. BLACKBURN: Your Honor

QUESTION: Is that possible?

MR. BLACKBURN: -- therein lies the distinction. We do not claim that there was negligent abandonment. We claim that there was negligent maintenance of the track which ultimately caused abandonment.

QUESTION: Could there be 51 --

MR. BLACKBURN: Yes.

QUESTION: Different maintenance of track theories of negligence in the country?

MR. BLACKBURN: Yes.

QUESTION: Do you think that's what Congress wants?

MR. BLACKBURN: Let me rephrase that. I'm sorry I preempted the question.

QUESTION: I think you'd better.

MR. BLACKBURN: I think negligence law is general law. It commences from the duty to exercise reasonable care. It's basically hornbook law. It does not vary that much from state to state.

QUESTION: But could it?

MR. BLACKBURN: If possibly could.

QUESTION: I say it possibly could, so you agree it possibly could.

MR. BLACKBURN: I agree it --

QUESTION: And it possibly could have 50 different theories about running railroads.

MR. BLACKBURN: Yes, Your Honor.

QUESTION: And that gives you no problem?

MR. BLACKBURN: It gives me no problem to this extent, that I think it creates a -- let me analogize to another area of modern tort law. The emergence in the last 20 years or 25 years of products liability litigation has caused manufacturers to recognize their duties and their obligations to the consumers. Now, I don't think there are very many people except perhaps some manufacturers who would not say that that has a salutary and good effect. And I think the same thing would happen in this kind of case. The railroads in this case, I think, in this country, I think everyone would admit are in bad condition. We've had a regulatory scheme since 1887 which has not cured those conditions. Now, we're simply saying that the state tort claim would put the presence on the railroads to make those decisions rather than to let the railroads fall by neglect and what we term abandonment by neglect.

QUESTION: Well, are you saying then, that's a products liability theory?

MR. BLACKBURN: No, I'm not suggesting that. I'm simply saying that that's an analogy that the products liability cases have caused manufacturers to recognize their duties.

QUESTION: But those have been generated largely by state court fashioning of tort law remedies. Here we have congressional statutes that govern us and we aren't free to depart from them.

MR. BLACKBURN: Except, Your Honor, that we're saying that the way this case is pleaded it's not pleaded within those federal guidelines. The case was pleaded as a state court case. I think the best case in support of our theory, and it doesn't get to the question of primary jurisdiction or preemption, is the case of Johnson against Chicago, Milwaukee, and St. Paul, out of the 9th Circuit, which is a diversity case. And the court reached some of these issues that we're talking about here.

In any event, Section 22 of the Act preserves to the states, preserves in clear and unqualified language, existing remedies. And states, the remedies provided for in this subtitle are in addition to remedies existing under another law or at common law. And that is in the 1978 recodification to the Transportation Act, and it's significant to note that that section which is 101.03 was given its separate place, and it was taken out of a rate section, which was 22, which defined rates, and it was given special emphasis by giving it a special section.

We also suggest, Your Honor, that the law as pronounced by this Court in the case cited by the petitioner, Jones v. Rath Packing Company, is that there is an assumption against preemption, particularly unless there is a clear and manifest purpose otherwise. We suggest also that there is no conflict between state law remedies or any federal or regulatory scheme.

One of the questions that was posed in opposing counsel's discussion I think can be answered in this way. Under Kalo's theory of negligent track maintenance and granted it's a narrow theory, there is no cause of action in federal court or before the Commission. We do not contend that there is. There are no federal track maintenance standards. The only way that Kalo could get into federal court would be, under this theory, would be via diversity action, which would call upon the district court to grant original jurisdiction. Any claim -- and we concede -- any claim that is made under the Act must be made through the Commission, and then referred to the federal court, or if it's brought in federal court, I would agree with the question that was previously asked that it probably must be referred to the Commission.

But that overlooks our theory of the case. Our theory, the federal act, the federal Interstate Commerce Act, does not encompass negligent track maintenance. Our theory is narrow but it's viable under the decisions of this Court, and we know of no case which overrules the Puritan case. It's never been expressly overruled, and I think this Court has said on several occasions that it did not favor implied overruling of cases.

But in any event our theory is based upon negligent track maintenance and there's nothing about that theory which imposes or incites a federal rule or a federal statute.

Now, one of the theories that the Railroad would have us follow is, if you're is, harmed, you seek injunction. Well, Your Honors, in this case, injunction was not an adequate remedy. It would be foolish for the Kalo people to spend their then inadequate resources to enjoin the abandonment of a railroad that had already failed, and for which they'd been told that it wasn't going to be rebuilt. But the injunction theory, which they would have us follow, is a very narrow theory.

Under the 8th Circuit decisions which are cited in, I think, both briefs, the Interstate Commerce Commission v. the Chicago North Western, and the Interstate Commerce Commission v. Chicago, Rock Island, & Pacific, the Chicago, Rock Island, & Pacific case indicated that the only question before in that proceeding is whether or not there is an illegal abandonment. Well, at that point of the proceedings, Kalo was out of business and had no incentive to proceed further by injunction.

Likewise, those issues, of course, go to the question of the primary jurisdiction. If the Interstate Commerce Commission had no primary jurisdiction -- in other words, if this does not involve questions of national transportation policy, if it does not require the administrative expertise to solve this problem, if it is of a kind of problem that can be handled by the conventional wisdom of judges, then the ICC has no primary jurisdiction, unless it's found somewhere else within the statute. And under our theory, once again, we'd say it's not found anywhere else in the statute.

So if there is no primary jurisdiction, there is no collateral estoppel. And there are other reasons for denying collateral estoppel in this case. First, there are policy reasons. The issues are not the same. The issue before the Commission was limited to one thing: was the Railroad entitled to a certificate of convenience and necessity which would permit it to abandon the line? The issues before the state court were negligence, car service issues, and with the defense that the failure of the road was an act of God, which I think is rather interesting. Because under Iowa law and under law generally, and this is also cited in the 9th Circuit case of Johnson v. Chicago, Milwaukee, in order for a defense in a civil suit, the extents of acts of God in a civil suit to be a defense, it must be the sole proximate cause.

Now, Kalo -- another reason for denying collateral estoppel in this case before the Interstate Commerce Commission is this: Kalo had no incentive to go to Washington to be involved in those proceedings. It was out of business. This Court also announced the Fairness Doctrine in the Parklane Hosiery case, and we call your specific attention to Note 15 of that case, which sets forth the fact that it may often times be unfair to call a party out of and come to a foreign forum to litigate issues which are beyond the reach of its own discovery procedures and so forth.

I also call the Court's attention to the general rule of the restatement of judgments which is now in a tentative draft fourth edition, which says, in the case of a judgment entered without contest by concession, consent, or default, none of the issues is actually litigated. "Therefore the rule of this section does not apply with respect to any issue in a subsequent action."

Finally, Your Honors, with regard to the question of collateral estoppel or res judicata or issue preclusion, we suggest that -- and writers have suggested that there is a general fear that overuse of issue preclusion will cause litigants to overtry their cases and therefore you get a reverse-adverse effect, because the reason for the collateral estoppel rule in the first place is to preserve the judicial economy and not extend it.

Also, Your Honors, I would suggest that collateral estoppel should never be used as a trap for the unwary.

Once again, Your Honors, we would suggest that an affirmance of the Iowa Court of Appeals would provide a check against abandonment by neglect, and a balancing process between the regulated, the regulator, and the public.

We thank you very much, Your Honors, and it's been an honor to be here.

MR. CHIEF JUSTICE BURGER: Do you have anything further, counsel?

MR. JOHNSON: A very short one.

MR. CHIEF JUSTICE BURGER: You have one minute remaining.

ORAL ARGUMENT OF BRUCE E. JOHNSON, ESQ., ON BEHALF OF THE PETITIONER -- REBUTTAL

MR. JOHNSON: Thank you, Mr. Chief Justice. I'd just like to call the Court's attention to the Puritan case cited by the respondent, wherein the Court in Puritan says that the Congress evidenced its intent to make the Commerce Commission and the federal district court the exclusive forums for Section 9 damage action. And their reason for that is that after Section 9 was enacted by Congress, it enacted the Carmack amendment on freight loss and damage claims, which specifically gave actions in state or federal court.

Secondly, that the Johnson case, the 9th Circuit case cited by respondent in his argument as his foremost case, specifically states that it is deciding the case under federal law and declined to apply state law. And that case was tried in a federal district court.

I have nothing further, unless there are some questions.

MR. CHIEF JUSTICE BURGER: Thank you, gentlemen. The case is submitted.

(Whereupon, at 2:09 o'clock p.m., the case in the above-entitled matter was submitted.)