INTERSTATE COMMERCE COMMISSION v. TRANSCON LINES
Legal provision: Interstate Commerce, as amended
Argument of Lawrence G. Wallace
Chief Justice Rehnquist: We'll hear argument next in Number 93-1318, Interstate Commerce Commission v. Transcon Lines.
Spectators are admonished not to talk until you get out of the courtroom.
The court remains in session.
You may proceed, Mr. Wallace.
Mr. Wallace: Thank you, Mr. Chief Justice, and may it please the Court:
Since 1920, the Interstate Commerce Act has prohibited common carriers from delivering freight on credit except pursuant to regulations adopted by the Interstate Commerce Commission governing credit transactions, and that prohibition was extended to motor carriers when they came under the ICC's jurisdiction in the Motor Carrier Act of 1935.
Prior thereto, it was focused on railroads, of course.
The ICC first adopted credit regulations in 1920 and from 1920 until 1988 those regulations contained no authorization of liquidated damages for late payment of freight charges.
The only authorized remedy was to collect the prescribed rate for a timely payment plus interest for the delay.
In rulemakings in the late 1980's, the ICC for the first time, at the behest of the American Trucking Association and other carrier interests, authorized liquidated damages for collection expense charges in the regulations, and those are set forth beginning at page 83a of the appendix to our petition, subpart g of the regulations, entitled "Collection Expense Charges".
In an amicus brief filed in our support by the Health & Personal Care Distribution Conference and some other shipping associations, on page 4 and 5, the course of the rulemaking proceedings is recounted and the citations are given.
The shipping interests were, of course, participants and quite concerned about unfairness to them that may eventuate and, because of that, the ICC included initially in the 1988 regulations and added in the revised regulations in 1989 certain conditions for the collection of these liquidated damages which, it is undisputed, were not complied with in this case.
Those include from, beginning with the provision that was in the original 1988 regulations and was retained, a requirement that the original bills advise shippers of the consequence of late payment.
That is set forth on page 86a.
It's subpart (c).
And the two provisions that were added in 1989 to further protect shippers from the unfair practices are set forth first on page 85a, and that is subpart (g)(2)(vi), that revised bills have to be issued within a 90-day period after the original credit period had expired.
That also admittedly was not complied with.
And then on page 84, subpart (iii) of (g)(2), it says that the loss of discount, or the liquidated damages, cannot be applied on an aggregated basis but can only be applied on separate and independent freight bills.
There are obviously great economies of scale in aggregate collections, and there was concern that aggregate collections would be made, particularly after carriers became insolvent, and there's a specific reference in that provision to a bankruptcy trustee attempting to collect on an aggregate basis.
So what we are concerned with here is an effort that was made by respondent, as the trustee for this insolvent carrier, to bill shippers from several years earlier and collect additional payments, including these very heavy liquidated damage charges, an effort that was specifically foreseen by the Commission in adopting the regulations authorizing credit transactions, and--
Unknown Speaker: Mr. Wallace, could you clarify for me what this... what you've been calling the liquidated damages which the respondents call the bureau rate, when, other than in the context of liquidated damages for failure to pay on time, would this bureau rate apply, and in connection with that, what rate would apply to someone who is shipping these same goods on these same routes who pays on delivery, who doesn't get credit terms?
That wouldn't be the bureau rate, would it?
It would be some--
Mr. Wallace: --That is correct.
It would be the same discount rate that applies to the credit transactions, plus there can be a service charge for the delayed payment in the--
Unknown Speaker: --But wouldn't... I'm positing no delay in payment.
Wouldn't there be something even more favorable than the discounted rate?
The shipper who pays on delivery, who's not asking even for 30 days, is that also--
Mr. Wallace: --That could be, and as far as I'm aware was, the same discount rate, although there might be some further discount for cash payment which is not reflected in anything I've read in this case.
Perhaps Mr. Gumport could clarify that.
Unknown Speaker: --So does the bureau rate... it certainly doesn't apply to one who pays promptly.
Does it apply to anything other than this liquid... as a liquidated damage--
Mr. Wallace: So far as I'm aware, it does not.
There's no indication that it does.
It is not... it is a source from which the real rates, the real filed rates are... the discount rates, it's a source from which the discount rates are calculated.
So that it's a source... it's a rate bureau source that determines the proportionality of what are the real rates, which are the discount rates, and the only way that this record reflects that those rates come into play at all is not as what I think are accurately regarded as rates for transportation, but as the measure of the liquidated damages for collection costs that is authorized under these regulations under the collection expense charges in little point (ii) at the top of page 84a of the appendix.
That is one method of calculating liquidated damages that is authorized under this rule, if the rule is complied with.
Now, the rule was designed specifically to forestall precisely the problem that arose here by conditioning the availability of these liquidated damage charges on compliance with certain safeguards for the shippers.
Unknown Speaker: --Well, could the trustee, in an action brought by the shipper, raise this as a defense?
Mr. Wallace: Well, ordinarily it's... it's the other way around that it occurs.
The shippers have made their payments and would not be bringing an action.
It's the trustee who is trying to get additional payments from the shippers through the bankruptcy proceedings.
He has made claims against them, and the... this Court's holding in Southern Pacific Transportation Company v. Commercial Metals suggests that the shippers cannot themselves raise a defense, and we have briefed the case on that assumption.
Unknown Speaker: Well, I was going to ask you, do you have a position as to whether or not the defense is available in the action itself?
Mr. Wallace: We have briefed the case on the assumption that it would not be available to the shippers under the rationale of the Commercial Metals case, but I think in candor an argument could be made that Commercial Metals should not extend that far because what was directly involved in Commercial Metals was an effort not to pay the transportation rate itself, which--
Unknown Speaker: Well, if it's an invalid rate, then under our K Mart line of... under the K Mart case, it would seem to me that it's just a nonenforceable rate in the court, and it would seem to me that that would almost have to be the premise if you're to prevail here.
I'm not quite sure why there should be a difference.
Mr. Wallace: --Well, we do take some solace from the K Mart case.
I don't want to overdraw the analogy, because the Court determined there that there was no valid, filed rate.
There was a rate that could be ascertained from tariff filings and the Court said that that could not prevail over a violation of the Commission's regulations, and in that way the case is very analogous to our case.
But Commercial Metals held, in the context of an effort by the shipper not to pay the transportation charge at all, the transportation rate, that the shipper could not raise that as a defense, that if there's to be a challenge to it because of violation of the Commission's credit regulations, and that is the only case of this Court that deals with a claim of violation of the credit regulations, that is to be enforced in the courts by the ICC.
The reason I think that an argument could be made by shippers that Commercial Metals doesn't extend as far as this case is because in this case what is sought to be collected is not the rate for transportation or services that the statute requires to be in a tariff as a rate filing.
That rate is what would be payable in the transaction if the payment were made promptly, plus whatever interest there would be for delay in payment, precisely what the ICC's requested injunction would limit the trustee to collecting here.
What is sought to be collected in addition are these liquidated damages called collection expense charges authorized by the regulation beginning on page 83a, which are in the tariff, but not because the statute requiring the rates for transportation or services require it to be in the tariff... those statutes we've set forth in our brief on page 74a and 75a of the appendix to the petition... but instead it's because the regulation itself requires that those liquidated damage rates be in the tariff.
They're entirely a creature of the regulation, and that is on 84a of the petition appendix under 2(i),
"Shall be described in the tariff rule. "
and (ii) says,
"Shall be applied without unlawful prejudice and/or unjust discrimination. "
Those requirements are creatures of the regulation, just as the authorization to collect these charges at all are creatures of the regulation, and the Commission, as I started to say at the outset, is acting in an area where Congress expressly relied on the Commission's regulations to set the rule.
Congress proscribed altogether any credit transactions here except pursuant to regulations which the Commission may adopt, so the Commission was acting really at the zenith of its regulatory powers in fulfilling a mandate that Congress expressly relied on the Commission and only the Commission to fulfill here.
So regardless of whether the shippers could raise a defense, what Commercial Metals looked to was an even more venerable provision of the act that dates back to the original Interstate Commerce Act in 1887, the statutory authority for the Commission to bring an enforcement action in Federal court, and the Court in Commercial Metals emphasized that that could be an injunctive action to enforce the credit regulations.
It should be remembered that at the time of the Commercial Metals decision in 1982, the credit regulations did not yet authorize this liquidated damages for the cost of collection, and the only defense being made by the shipper was a defense not to have to pay the filed rate for transportation itself.
So there might have been anticipation that the Commission would be unlikely to bring an injunctive action which would say that the carrier should not be paid at all for the transportation, even in the circumstance where the carrier did not fully comply with the credit regulations, but at least as the Court interpreted the act, that was to be left to the Commission's enforcement authority rather than an equitable defense by the shippers.
Well, since the conditions admittedly were not complied with for assessing the liquidated damages, it might seem obvious, in light of Commercial Metals and the Commission's enforcement authority in 49 U.S.C. 11702 that I've referred to, that the Commission's action to enjoin this belated effort of the trustee acting in perfect good faith to try to enhance the value of the estate, to enjoin this effort to collect liquidated damages when these very carefully constructed conditions had not been complied with to the obvious prejudice of the shippers whom the conditions were designed to protect, and that the trustee, standing in the shoes of Transcon, should be relegated to the historic remedy that existed from 1920 to 1988 of the transportation charge plus interest for any lateness in the payment, obviously a remedy that could not be said to be incompatible with the act.
The court of appeals, however, said no, that that rather obvious conclusion should not be reached because of the filed rate doctrine as it understood that doctrine to have been applied by this Court in Maislin Industries v. Primary Steel.
Now, we think that this was misconceived by the court of appeals from the outset, and the first thing to be said is that Maislin, in contrast to this case, involved an effort to enforce an unfiled rate, the negotiated rate which was never filed, but under the Commission's then negotiated rates policy was to be enforced in preference to the actual filed rate.
And Maislin itself, in footnote 11 of the Maislin opinion, pointed out that the case was therefore different from prior decisions of the Court in which the question was which of two filed rates should be applied, rather than an effort to depart from the filed rate schedule altogether.
And we think that that footnote applies a fortiori in this case, because here it's not a choice between two filed rates for transportation, it's a choice between the filed rate for transportation, which the Commission says the trustee is entitled to, and this other charge of liquidated damages that is not a filed rate for transportation within the meaning of the statutes that require rates for transportation and services to be provided, but as I previously explained is entirely a creature of the regulations which is required to be in the tariff only because the regulations require it to be in the tariff.
That is the source of the obligation.
Then this Court decided Reiter v. Cooper after the court of appeals' initial decision, which we thought made the error more manifest because Reiter established quite clearly the principle that Maislin did not mean that the filed rate doctrine would preclude claims and defenses that are specifically accorded by the act itself, such as the Commission's express statutory authority to bring an action for an injunction to enforce its credit regulations.
So when we petitioned for certiorari for the first time in this case, we suggested that the judgment be vacated and the case remanded for reconsideration in light of Reiter v. Cooper, which is the course that the Court took, but on remand the court of appeals reached the same conclusion, basically holding that the ICC statutory enforcement authority should be subordinated to its view of the filed rate doctrine, which is--
Unknown Speaker: Mr. Wallace, did that occur in the Ninth Circuit after reargument and fresh briefing, or when the response to Reiter--
Mr. Wallace: --It was rebriefed, I'm told.
I have to get some help from the--
Unknown Speaker: --and reargued before the same... not reargued, just rebriefed.
Mr. Wallace: --Not reargued, just rebriefed, apparently.
So it seemed to us that what the Court held was merely, to the contrary of Reiter, that the express statutory provision should be subordinated to the Court's view of the filed rate doctrine, which is just the opposite of the way the Court came out in Reiter.
And it also... in its rationale on remand it seemed to us the Court intruded into and effectively nullified the ICC's enforcement discretion with respect to what remedy it can seek among the remedies expressly given to the Commission for the credit regulation violations, and the Ninth Circuit said other remedies will suffice.
But those other remedies, while they might suffice against operating characters... carriers because of their prospective nature, would be of little assistance, if any, in the context of the trustee in bankruptcy, who is trying to dun shippers for these charges years after the shipment.
Unknown Speaker: Mr. Wallace, I'm not sure I quite understand what the Government's position is regarding provisions that are in rate filings because they are required to be there by these regulations.
Is it your position that somehow they do not enjoy the protections that other provisions of the rates enjoy?
Mr. Wallace: Well, I wouldn't say quite that they don't enjoy the protections, but it is important that they're not required by statute to be filed rates that govern, rather than any contract to the contrary, the payment for transportation and services, and--
Unknown Speaker: Aren't there a number of things that might be optionally included in rates but do not have to be included in rates?
Mr. Wallace: --We think that these are rules relating to the rates, rather than rates themselves, rules about what is to be done in the nonpayment, but part of the relevance of this in the case is that respondents are arguing in some of their amici that there would be discrimination if these rates were not evenhandedly applied to all shippers, even though long after the fact and even though there were violations of these regulations, but the prohibition--
Unknown Speaker: Do you think that's because of enforcement discretion, because you could move against some and not against others?
Mr. Wallace: --Well, I don't want to make their argument for them.
What I'm trying to point out is that the prohibition against unjust discrimination that is involved here is only the prohibition in the Commission's own regulations, which the Commission is entitled to considerable deference in construing, since these charges are entirely a creature of these regulations to begin with.
I'd like to reserve the balance of my time, if I may.
Unknown Speaker: Very well, Mr. Wallace.
Argument of Leonard L. Gumport
Mr. Gumport: Mr. Chief Justice, and may it please the Court:
The Government concedes in its brief in this Court that the loss of discount tariff provision is lawful.
The Government also concedes in its brief in this Court that the regulations still do not create a defense to payment of the filed rate assertable by shippers.
This is therefore a simple case, because Congress has explicitly addressed the issue in the statute.
It's much easier than Maislin.
The carrier, unless and until this tariff is rendered ineffective, set aside, or suspended, must, under pain of civil and criminal penalties, enforce the concededly lawful loss of discount tariff provision.
The Government's position to the contrary is contradicted by the express language of the statute, it's contradicted by the legislative history of the statute, it's contradicted by the decisions of this Court from the 1907 Texas Abilene decision through this Court's 1994 decision last term in MCI Telecommunications, and it's contradicted by the ICC's own interpretation of its credit regulations.
Unknown Speaker: Not if you read the filed rate as the discounted rate, and the liquidated... what you call the bureau rate, what they call the liquidated damage provision, if you read that as simply a credit term, not... the filed rate, the rate is the discounted rate.
Then, if you don't pay up on time there's this liquidated damage provision.
Mr. Gumport: Justice Ginsburg, if one could reasonably do that, that would be right, but in this case it was impossible to do that, and there's at least four reasons why it's impossible.
First of all, the tariff is unambiguous.
There's no dispute that under the express terms of the tariff a shipper is not entitled to the discount unless it pays the tariff charge within 90 days, and only then... only then is it entitled to the discount, and when certain shipper amici tried to argue to the contrary, they had to change the language of the tariff to make that argument.
Unknown Speaker: Why shouldn't the Commission's own rules be treated as a supplement to the tariff, since admittedly you can have this higher rate, bureau rate, liquidated damage rate, you can have it only by virtue of the credit provisions, so why not say, as a supplement to this tariff, we read in the ICC conditions, forgetting the liquidated damages, put it in the bill, 90 days passes, send them another notice... why shouldn't those ICC credit regulations in effect be treated as a supplement to the tariff?
Mr. Gumport: There are several reasons, Your Honor.
First of all, it's contrary to this Court's decision in Davis v. Portland Seed, where a carrier had filed a tariff that contained a higher rate for the shorter route than for the longer route, and the tariff was arguably unlawful on its face.
It was contrary to the express provisions of the statute, and this Court said, it doesn't matter, it's the filed rate, and unless and until the ICC suspends or sets it aside--
Unknown Speaker: That was for the purpose of a defense by the shipper, isn't that right--
Mr. Gumport: --Yes, Your--
Unknown Speaker: --not for purposes of suit by somebody else.
It seems to me it just can't be that the Interstate Commerce Act means anything that you put... you know, any provision you put in your rate filing has to be executable.
I mean, suppose you say, you know, any shipper who doesn't pay within 90 days, the CEO shall be shot.
You're going to say, well, there it is, it's in the filed rate, the ICC didn't get around to striking it down, so we have to go ahead and perform it.
I mean, obviously it's unlawful and you can't perform it.
Mr. Gumport: --Your Honor, first of all the ICC could retroactively reject that kind of tariff, it could reject it, it could suspend it, and that is not this case.
Unknown Speaker: But until it did that, you are entitled to go ahead and execute the contract, in fact obliged to, as you'd say, under--
Mr. Gumport: Your Honor, let's take your hypothetical, precisely your hypothetical.
If that was executed and somebody was killed under the terms of the tariff provision, there would be criminal penalties for doing that, and indeed, in Maislin, in the Maislin decision--
Unknown Speaker: --How can you have criminal penalties for complying with Federal law?
You're telling me that you're obliged to perform that contract by the legislation--
Mr. Gumport: --Yes.
Unknown Speaker: --because it's there in the rate and it hasn't been set aside by the ICC?
Mr. Gumport: Your Honor, it's--
Unknown Speaker: Surely... I mean, I think the law against murder is just a State law, and this is Federal law, which supersedes it.
Mr. Gumport: --Your Honor, it's a question of remedy, because in the Maislin case there was no question, and the Court pointed out in footnote 12 of its decision that if the carrier was lying to shippers about what it's real rates were, it was a crime, and nevertheless in Maislin the Court held that the ICC could not have a valid policy which created a remedy that operated to prevent the carrier from enforcing its filed rate.
And in this case we don't dispute that the ICC has a remedy.
The ICC could criminally prosecute people who knowingly extended credit in violation of its regulations.
We don't dispute that.
Unknown Speaker: But here there is another rate, and that does make it different.
Mr. Gumport: --Your Honor, let me--
Unknown Speaker: Let me ask you just to clarify this point, which I think is clear, but if it's not, tell me.
The only reason that you can have this two-track system, the discounted rate which applies originally and the liquidated damage rate, the only reason you can have that liquidated damage rate is because of the ICC's credit regulations.
Mr. Gumport: --We disagree, Your Honor.
Unknown Speaker: Where do you get the authority to put in the two-track system, other than the credit regulations?
Mr. Gumport: Your Honor, there is nothing in the regulations of the ICC that says you can't have a loss of discount tariff provision except under our credit regulations.
There's nothing in those regulations that say that, nothing at all.
Let me return to your earlier question.
Unknown Speaker: Please clarify for me, then, the extent to which you disagree with Mr. Wallace, who said this was not possible until the eighties rulemaking.
Until then, you got the interest for late payment, it was only that rulemaking that brought in the credit regulations, and one way of calculating the liquidated damages was having this additional tariff.
Is it true that you had these two-track systems, the discounted rate and the higher rate, before there were any credit regulations?
Mr. Gumport: Your Honor, in 1985, the ICC authorized the filing of tariffs giving discounts for early payment, and in that 1985 regulatory decision they said, we're not sure you can do this, but we're now specifically authorizing you to do it.
This denial of discount, I would submit, is no different, so that--
Unknown Speaker: I'm sorry, I don't know that you've answered my question.
Did you... were there these two-track tariff systems before the eighties rulemaking?
Mr. Gumport: --Your Honor, I don't know.
Let me return to your question as to whether there are two filed rates.
There's only one filed rate.
The ICC, in its 1988 decision authorizing the filing of loss of discount tariff provisions, said that under the filed rate doctrine the carrier must enforce the loss of discount tariff provision.
In the trial court, before Judge Hill heard the issue that he disposed of by summary judgment, he specifically asked the ICC's counsel whether it agreed that the loss of discount tariff provision, which is a part of the rules tariff, whether the ICC agreed that the rules tariffs were a part of the carrier's filed rate within the meaning of Maislin, and the ICC's counsel responded, yes, I don't take issue with that.
The ICC also put in a declaration from a tariff expert, a Mr. Manning, on November 8, 1991, in support of its cross motion for summary judgment, and he said in his declaration that Transcon's TCON 625, which is the discount tariff, is governed by Transcon's TCON 103, which is the rules tariff, in which the loss of discount tariff provision appears.
So there is no dispute, and there was no dispute in the trial court, and the evidence was only on one side on this issue, that this loss of discount tariff provision governs the rate.
It sets the rate.
Unknown Speaker: You don't consider it a liquidated damages provision.
It's just a rate.
Mr. Gumport: It's a rate.
It doesn't matter what it's called, Your Honor, it's a rate, and even if it was unlawful--
Unknown Speaker: Well, indulge me.
I mean, suppose I think it makes a difference what it's called.
Is it liquidated damages or is it just a different rate?
Mr. Gumport: --Your Honor, I think arguments could be made either way.
My position would be it's a liquidated damages provision, but I think it's a rate.
That's the important thing.
It is a rate.
Unknown Speaker: You say it's both.
Mr. Gumport: Excuse me?
Unknown Speaker: The credit regulations said one way of calculating liquid damages is what you have put in as the bureau rate, and you have followed that way of calculating liquidated damages, so was your answer to Justice Scalia that it's both?
Mr. Gumport: My answer is, it doesn't matter, but my answer... when put to the test of how would you characterize it, I would say it's a liquidated damages provision.
I would also say, it doesn't matter, because it is a rate, and the issue before this Court is the remedy, and Congress has said what the remedy should be.
Unknown Speaker: I'm curious abut the statute.
Isn't there a statute here?
I may not understand it correctly, but if I do, I thought that the... there is a statute that governs the tariff, and it says that you can't have a tariff that allows a person credit, except "under regulations of the Commission", so the statute seems to say the only reason you could have this provision in the tariff is because you will file, follow, regulations of the Commission.
And now I take it what the Commission said is, you did follow regulations of the Commission when you put that in, you did follow regulations of the Commission when you accepted the freight on credit, but you did not follow the regulations of the Commission when you sought damages, because you can't seek damages aggregate, and you have to present your bill within 7 days, or something like that, under the regulations of the Commission.
Mr. Gumport: But Your Honor, the question isn't whether the regulations were violated.
The question is, what is the remedy for the violation of the regulations?
Unknown Speaker: I know.
I'm asking about the statute.
It seems to me there is a difference between this and the other cases, because here there is a statute that specifically governs.
Now, maybe it doesn't.
That's what I'm asking, though.
Mr. Gumport: This statute's language says one important thing about what's to be in the regulations.
It says that the regulations are to be regulations "preventing discrimination" and that--
Unknown Speaker: Maybe I don't have it right.
"governing the payment for transportation and service and-- "
Mr. Gumport: --"# and preventing discrimination".
Unknown Speaker: --Yes, but I take it this was governing the payment for transportation.
Mr. Gumport: Your Honor, there's no question that it's governing the payment, but the question is, what is the remedy, and the statutory language tells us not only that they govern payment but that they are to be regulations "preventing discrimination", and preventing discrimination is a judicially defined term.
It was judicially defined in this Court's Texas & Pacific Railway Company decision, v. Abilene Cotton, in 1907 before these... this statute was enacted, and in that case, which was quoted with approval in the MCI case--
Unknown Speaker: You mean their regulations are unlawful because they don't deal with discrimination?
Mr. Gumport: --They are unlawful insofar as they are applied to create a judicial injunction preventing the carrier from performing its statutory duty to collect the filed rate, and that's because, just as in Maislin, there was a broad grant of power to the Commission to prohibit unreasonable practices.
Here we have a statute that uses the words, ICC cannot provide for in its regulations is the remedy of directing the carrier not to adhere to its tariff rate.
Unknown Speaker: And that's simply because of the term... the statute says one of the things is preventing discrimination?
You place all that weight on those two words?
Mr. Gumport: I don't just place all that weight on those two words, which have been defined... were defined by this Court before those words were put in the statute, and the definition was reaffirmed.
I also place weight on the absolutely clear legislative history, which confirms that Congress meant what it said.
The legislative history, which was explained by this Court in the Commercial Metals case, was that the credit rules of the Commission serve three basic purposes.
One is, they exist for the benefit of the carrier, and the ICC in its brief in this Court doesn't deny that, but here it's seeking to enforce the credit rules for the benefit of the shipper, and the credit rules are also to serve the additional two purposes of preventing discrimination, which this Court has always held, right through MCI, last term... that there is an indissoluble unity.
That's... those are the words of the Court in the Texas & Pacific case, those are the words of the Court in MCI Telecommunications, that there's an indissoluble unity between a carrier's duty to adhere to the filed rate and the statutory goal of preventing discrimination.
In addition, the Court also explained in Commercial Metals that the other purpose of the credit rules is to protect the working... the capital structure of the carrier, yet here, the credit rules are to be applied to prevent the carrier from recovering funds that it needs to pay its creditors.
Unknown Speaker: Well, why shouldn't the Commission have considerable discretion in interpreting its own regulation?
Mr. Gumport: Because under Chevron, Your Honor, the Commission has no discretion to interpret its regulations when Congress has specifically addressed the issue, and in this statute, which uses the words, "preventing discrimination", which is a judicially defined term--
Unknown Speaker: That seems to... I still think that just puts a great deal of weight, that it won't bear, on two words in a fairly long statute.
Mr. Gumport: --Your Honor, I can only... I can only refer--
Unknown Speaker: Well, I realize.
I simply disagree with you on it, and you also rely very heavily on Maislin, but there have been two cases since then which suggest that Maislin, you know, is not the be-all and end-all in this thing.
Mr. Gumport: --This case is a far more compelling case than Maislin.
Maislin involved a statute that was unqualified.
The Commission has the power to prevent unreasonable practices, and this Court said if a carrier commits an unreasonable practice the Commission can criminally prosecute the carrier, but what the Commission can't do because of the utterly central filed rate provisions which are subject to civil and criminal penalties for disobedience to, what it can't do is create basically a agency-made injunction against a carrier's enforcing the filed rate.
Unknown Speaker: Mr. Gumport, can I just clarify one thing?
Are you contending that the credit regulations are invalid?
Mr. Gumport: Invalid as applied, not on their face.
Unknown Speaker: What... are there any valid applications of the regulations?
Mr. Gumport: Absolutely.
The historical application of the credit rules, and the case law reflects this, is suing a carrier prospectively to not extend credit to shippers who won't pay the carrier's filed rate, because these regulations--
Unknown Speaker: So the Commission's only remedy is to an injunction against future extensions--
Mr. Gumport: --Absolutely not, Justice Stevens.
Other remedies include the right to award reparations to any shipper who can show that the bureau rate as applied is unreasonable--
Unknown Speaker: --Let me just... I want to be sure I understand your position.
You're not contending the regulations are invalid, merely the particular remedy is not authorized by the statute?
Mr. Gumport: --Absolutely.
That's exactly it.
Unknown Speaker: The regulations on their face do command conduct that the ICC can command.
Mr. Gumport: Yes, Your Honor.
Unknown Speaker: And your client has not obeyed that command?
Mr. Gumport: Your Honor, that's not--
Unknown Speaker: Is that true?
Mr. Gumport: --That's not accurate, Your Honor.
My client is the bankruptcy estate of Transcon Lines.
Transcon Lines shipped... Transcon Lines' bankruptcy estate shipped no freight.
Unknown Speaker: Let me just shorten it a little.
Are you contending that you complied with the credit regulations in all respects?
Mr. Gumport: I'm... no, I am not, Your Honor.
Unknown Speaker: Okay.
Mr. Gumport: My position is, and I concede Transcon shipped freight before its bankruptcy.
It shipped no freight after its bankruptcy.
I concede that when--
Unknown Speaker: What remedy is available today for the violations of the credit regulations by the carriers?
Mr. Gumport: --As to Transcon, there are multiple remedies.
First, there is an award of reparations, and the ICC says in its brief in this Court that those can't be awarded, but it said in its 1988 decision reparations can be awarded if the bureau rate is unreasonable.
Unknown Speaker: No, that's if the rate is... for violation of the credit regulations, what would the reparations be?
Mr. Gumport: --Well, reparations, reparations are to the extent that the rate being imposed is unlawful, reparations can be awarded.
If this is an unlawful rate, let the Commission say so.
It's simply not doing its job of saying what the rate should be.
Unknown Speaker: Let's see about the "if".
Mr. Gumport: Okay.
Unknown Speaker: --We... it's conceded that the invoices when they were sent out did not have the credit terms.
It's conceded that the 90-day notice was not sent out.
Let's take those violations, Transcon now in bankruptcy court.
What remedies does the ICC have for its admittedly valid credit regulations?
Mr. Gumport: It can impose civil and criminal penalties on everyone who knowingly participated in those violations.
It can do that, and on Transcon as well.
What it can't do--
Unknown Speaker: Could it impose a penalty equal to the amount you seek to collect?
Mr. Gumport: --Your Honor--
Unknown Speaker: I mean, that's--
Mr. Gumport: --the penalties are a per-day penalty.
Unknown Speaker: --All right.
Mr. Gumport: The penalties are a per-day penalty, and it's... I--
Unknown Speaker: Well, could it calculate a per-day penalty that would bring out that result and say, once you get to this limit, you can't collect anything more?
Mr. Gumport: --Your Honor, I don't know whether it could under the law.
I think that... I think one thing I would emphasize on that is, that... it just doesn't matter from the standpoint of my case.
I don't... I don't care one way or the other.
Unknown Speaker: Well, the thing that I'm puzzled about is, there's a valid regulation out there that's been violated, and the Commission says they want this remedy, and you're saying, well, there's some other remedy, but the other remedy that you describe is the functional equivalent of this one, as I understand it.
Mr. Gumport: It's not, Your Honor, because under the Interstate Commerce Act so long as the rate is in effect there is a civil and criminal duty to comply, and the one remedy that they're asking for is what the statute commands they can't have.
They can fine Transcon.
They can criminally prosecute the people who knowingly participated in this--
Unknown Speaker: But the only one who's here at the moment is the trustee, so the ICC practically... practically, what can the ICC do to say, here's our credit regulations plainly violated, and we want to do something that will realistically enforce these rules?
Mr. Gumport: --Your Honor, I don't... it seems to me that the ultimate sanction of the Government for people who violate its rules is to throw them in jail, and the people who used to run Transcon are all still around running another trucking company, and it would have a salutary effect on the trucking industry, if the ICC really wants to stop, make people comply with their regulations, to go out and prosecute them.
Unknown Speaker: How about the trustee, because of the bill... they were sent out with average balances instead of aggregating, instead of making a separate--
Mr. Gumport: Your Honor, that's... first of all, the regulations as interpreted by the ICC only apply to the following situation, and this is reflected in the decisions: a trustee or somebody else sends out a whole slew of bills in an envelope and says, unless you pay these right away within the 90-day time period, I'm going to deny you the discount and impose the higher bureau rate.
There's no evidence in the record, and in fact it's the case that that was never done in the Transcon case.
All that happened in Transcon was, Transcon shipped freight before it went under, it went into bankruptcy, and more than 90 days later, rate auditors were hired, and people were sued saying, you didn't pay the bills for the freight within 90 days, and therefore the... by the unequivocal terms of Transcon's tariff, you must pay the bureau rate, which--
Unknown Speaker: --So the trustee gets the benefit of the sweep that Transcon did, it has this higher rate, but it's not saddled with any of the, even going to jail, that the Transcon people would have had.
Mr. Gumport: --Your Honor, if I was violating the credit regulations, I could go to jail, and if the rate imposed is an unlawful rate, and the Government concedes it is not an unlawful rate, the ICC could say, this is just too high.
You can't collect this money.
Unknown Speaker: Mr. Gumport, why shouldn't it be considered impliedly part of any rate whatever the Commission's regulations demand with regard to that rate?
Why shouldn't it simply be considered part of the filed rate?
Even if you leave it out it's implied that, of course, the other conditions required by the Commission's regulations apply?
Mr. Gumport: Because that argument proves too much, Justice Scalia.
Unknown Speaker: Okay.
Mr. Gumport: Under that argument, the ICC could promulgate regulations just like it issued a negotiated rates policy in Maislin saying no carrier shall collect its filed rate, period, and Maislin should have come out the other way.
It should have--
Unknown Speaker: If Transcon had put in--
Mr. Gumport: --come out the other way.
Unknown Speaker: --No, no, no, that's--
--just copied into its tariff the ICC's credit regulations, then you would lose, is that right?
Mr. Gumport: I would be out of luck.
I couldn't be here.
What's interesting, Your Honor--
Unknown Speaker: I thought it would be discriminatory as applied even in that case.
Mr. Gumport: --Your Honor, it would be... that tariff would be invalidated by the court of appeals on Hobbs Act review under then-Judge Scalia's decision in Regular Common Carrier Conference v. United States in 1986, where the D.C. Circuit wrote, you can't have a tariff that really doesn't allow the shipper and the carrier to figure out what rate will really apply.
And the Commission was aware of that decision at the time it issued its decision approving these credit regulations.
It didn't want, it knew that it couldn't have a tariff that had all these discretionary provisions in it.
That's why it doesn't want to suspend this tariff, because there's lots of these out there.
The carriers are using them.
This isn't the only loss of discount tariff that's like this.
The Commission is in here not because it wants to stop carriers from disobeying its credit regulations, because there's lots of other--
Unknown Speaker: I'm still curious about... go back to the statute for one second.
Regulations of the Commission governing payment for transportation and service and, you say, preventing discrimination.
Mr. Gumport: --Correct.
Unknown Speaker: Well, fine.
The Commission says we want notice given of these things because otherwise big shippers with big lawyers know and little shippers with little lawyers don't.
We want to have no aggregate, because we think otherwise the people who are customers of the trustee in bankruptcy will have to pay, the other guys won't.
We want to be certain, whatever the third one was, that you don't give, years later, notice, because we don't want them picking and choosing, all there to stop discrimination as well as transportation.
How do you respond to that?
Mr. Gumport: And I'm saying they can enforce that any way they want to, except in one way, and that is to sue the carrier to prevent it from performing its statutory duty to charge and collect its filed rate unless and until--
Unknown Speaker: Even the filed rate that discriminates, because it does discriminate, since it violates these regs.
Mr. Gumport: --Your Honor, I would disagree, because the Court has defined discrimination as being per se occurring when a carrier is disregarding its tariff rate.
That is the teaching of the filed rate doctrine from Texas & Pacific Railroad v. Abilene Cotton through MCI Telecommunications.
The rule of this Court has always been, it is discriminatory when a carrier departs from its filed rate unless and until the ICC sets it aside, and in your hypothetical, Justice Breyer, the Commission could prosecute people for wilfully disobeying the credit regulations.
It could also sue a carrier prospectively saying, you've got to send out these reminder notices, you have to let people know, and it could get contempt penalties for violation of that injunction.
What it couldn't do is to say, you violated our credit regulations.
Therefore, even though we've done nothing with your tariff, even though we concede that your tariff is lawful, even though the statutory provisions of the act say you must charge and collect your tariff provision and you shall go to jail if you disregard it, we still want an injunction against you stopping you from doing what the statute commands.
This is really a case about remedy.
It's not about--
Unknown Speaker: Suppose the credit regulations were written into the statute.
You already told me if they were written into the tariff you'd be... you'd have no case.
Suppose they were written into the statute as distinguished from being regulations, would that make a difference?
Mr. Gumport: --It would make no difference, Your Honor, under Davis v. Portland Seed.
It would make no difference.
A tariff can be blatantly unlawful on its face, and unless and until the ICC suspends it, rejects it, cancels it, does something like that, the carrier must comply.
Now, I think, to go back to Justice Scalia's hypothetical, if I was the trustee and I found that there were some tariffs on file saying go out and kill people, I would petition the ICC to strike that tariff.
That's what would happen.
But I would have been duty bound to enforce it, unless and until they set it aside.
I'd immediately start an enforcement proceeding.
But this is a case about remedy, and the one remedy that they cannot have under--
Unknown Speaker: You're a hard man, Mr. Gumport.
You better seek counsel before you do that.
Mr. Gumport: --Thank you.
I can appreciate those remarks.
But it is a case about remedy, and the one remedy that they cannot have is an injunction to set... directing a carrier permanently to disregard a filed rate, and Mr. Chief Justice, those words, "preventing discrimination", as construed by this Court are controlling.
In Maislin, there weren't those words in the statute, and the Court still found that the remedy could not be created that would force the carrier to depart from its filed rate.
Thank you very much.
Unknown Speaker: Thank you, Mr. Gumport.
Mr. Wallace, you have 3 minutes remaining.
Mr. Wallace, tell me why this is different from the case where... that Justice Ginsburg asked about.
Even if the filed rate violated the statute, the filed rate doctrine would apply, and it would have to be set aside before it could be collected, and you're coming in and saying, ah, but if it violates a regulation, that's different.
Rebuttal of Lawrence G. Wallace
Mr. Wallace: Well--
Unknown Speaker: That doesn't seem to make much sense.
Mr. Wallace: --that isn't the only thing that I'm saying.
It's... the suggestion that the Commission could strike this provision is really a rather impractical one.
There's nothing on its face that's incompatible with the statute or the regulation.
This, the liquidated damages provision as it appears in the tariff could have been lawfully enforced if the conditions that were not complied with had been complied with, so there was no basis for striking it from the tariff.
If the tariff had also said, and these liquidated damages can be assessed on an aggregated basis, not merely on an individual basis, that would have been a provision that the Commission could have struck from the tariff.
But what good would it have done the Commission to strike that from the tariff when under the respondent's submission the same result could be reached anyway, because the liquidated damages provision itself remains in the tariff, and that has to be enforceable regardless of violations of the safeguards that were placed in the Commission's regulation.
And I want to say, in response to a question raised by Justice Ginsburg, on page 33a of the petition for certiorari appendix the court of appeals discusses the meager case authority, in the first paragraph on that page, that existed about efforts to try to include liquidated damages provisions before they were authorized by regulation.
The Commission took the position in this litigation that those cases striking down those efforts to have them solely as a creature of tariff were correctly decided.
They were... only one of the district court decisions was reported, but that was all there was on the subject.
The great controversy that took place over a period of 3 years in the late eighties would have been rather meaningless if carriers had been free to prescribe this for themselves in their tariff filings without authorization from the Commission.
That's what the controversy in the rulemaking was about.
Chief Justice Rehnquist: Thank you, Mr. Wallace.
The case is submitted.
Unknown Speaker: The honorable court is now adjourned until tomorrow at ten o'clock.
Argument of Speaker
Mr. Speaker: The opinion of the Court in two cases will be announced by Justice Kennedy.
Argument of Justice Kennedy
Mr. Kennedy: The first case I have to announce for the Court is Interstate Commerce Commission versus TRANSCOM.
This is another in a series of recent cases from the Court involving the Filed Rate Doctrine.
Interstate Commerce Act requires motor carriers to file rates applicable to shippers and these rates maybe collected even if the shipper and the carrier later agree upon some lesser amount.
In Maislin Industries versus Primary Steel decided in 1990.
We held that the ICC could not interpret the bar on unreasonable practices to prevent carriers from suing for the filed-rate.
We reason that this would undermine the filed-rate doctrine.
In the case before as a trucking company now in bankruptcy seeks through its bankruptcy trustee to collect liquidateddamages from its former customers.
The ICC soon joined these collections because the carrier had not complied the certain ICC credit regulations.
The original bills did not advise the penalty for late payment.
Revised bills were not issued within 90 days and the damages were being applied in the aggregate instead of in separate bills.
All of these violations were in contravention of the regulations of the ICC.
The bankruptcy trustee defended against the injunction of the ICC sought and it sided Maislin.
The District Court in the Court of Appeals for the Ninth Circuit agreed with the trustee that Maislin applied.
We remanded to the Court of Appeals for the Ninth Circuit for further consideration in light of an intervening decision of this court that intervening decision was Ryder versus Cooper.
The Court of Appeals adhered to its earlier decision, we again granted certiorari and we now reverse.
The Interstate Commerce Commission can pursue those remedies necessary to prevent the carrier from violation as regulations.
Injunctive remedy sought here appears to the ICC and to us necessary to the effective enforcement of the regulations.
Remedy serves to protect the regulations intended beneficiary, so our conclusion follows from our 1982 decision in Southern Pacific Company versus Commercial Metals and it’s that decision not the Maislin case that is the applicable President here.
The judgment of the Court of Appeals for the Ninth Circuit is accordingly reversed and the case is remanded and the opinion is unanimous.