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Bowser and Campbell v. Knox Glass Inc.

February 5, 1968


Hastie, Freedman, and Van Dusen, Circuit Judges. Van Dusen, Circuit Judge, concurring.

Author: Freedman

FREEDMAN, Circuit Judge.

This appeal presents the question whether a contract carrier may collect from its shipper the difference between its schedule of rates filed with the Interstate Commerce Commission and the lower rates it actually charged under its arrangement with the shipper which were inadvertently omitted from the schedule. The district court held that the carrier was barred from recovery. 264 F. Supp. 522 (W.D. Pa. 1967).

Plaintiff, a contract motor carrier regulated by the Interstate Commerce Act,*fn1 performed services for defendant pursuant to contract. The contract presently involved was executed on May 12, 1958, and provided that the carrier should be compensated in accordance with the minimum rates fixed in a designated schedule of charges, its supplements and reissues. The schedule of charges, filed with the Interstate Commerce Commission, was issued on April 28, 1958, effective May 1, 1958, and was in effect during the period here involved. In practice the charges actually made and collected were less than those required by the scheduled rates but were what the parties had agreed upon. A small fee was charged for stops in transit, instead of treating each stop as an independent shipment and applying to it the applicable minimum rate as the schedule required. The district court found that the carrier inadvertently and mistakenly failed to file a schedule which would accord with the actual practice.

An investigation by the Interstate Commerce Commission disclosed the departures from the schedule of charges, and in consequence the Commission instituted successful criminal proceedings against the carrier and the shipper for violation of the Interstate Commerce Act. As a result of the investigation the carrier amended its schedule of charges effective January 25, 1964, to reflect the existing practice of the parties. Shortly after the criminal proceedings were instituted the present parties on August 21, 1964, entered into an agreement in which the carrier acknowledged that the charges it had collected were what it had in fact agreed upon with the shipper and therefore promised that it would make no claim for undercharges.

The carrier later brought the present action to recover from the shipper $26,978.32, constituting the undercharges for the period from January 24, 1960, which was free from the bar of the Pennsylvania statute of limitations.*fn2 After a nonjury trial the district court entered judgment in favor of defendant on the ground that it would be unconscionable to permit the carrier to recover. The court also reasoned that the amount of the undercharges would be cancelled out by the shipper's right to an equal amount as damages for the carrier's failure to file the proper rate, although no counterclaim for this had been pleaded by the shipper.

If plaintiff were a common carrier it clearly would be entitled to recover the undercharges regardless of the reason for the charge to the shipper of less than the rate filed with the Commission.*fn3 More than fifty years ago Mr. Justice Hughes in announcing the right of a common carrier to recover the undercharge from an innocent customer said: "Deviation from the filed rate . . . is not permitted upon any pretext. Shippers . . . are charged with notice of it, and they as well as the carrier must abide by it . . . . Ignorance or misquotation of rates is not an excuse for paying or charging either less or more than the rate filed. This rule is undeniably strict and it obviously may work hardship in some cases, but it embodies the policy which has been adopted by Congress . . . ." Louisville & Nashville Railroad Co. v. Maxwell, 237 U.S. 94, 97, 59 L. Ed. 853, 35 S. Ct. 494 (1915). Similarly, Pittsburgh, Cincinnati, Chicago & St. Louis Railway Co. v. Fink, 250 U.S. 577, 63 L. Ed. 1151, 40 S. Ct. 27 (1919). This policy prevents the application of the doctrine of estoppel.*fn4

The problem is whether the same result is required in the case of a contract carrier. The regulation of contract carriers is a relatively new development arising out of the use of motor vehicles. Motor carriers became subject to federal regulation by the Motor Carrier Act of 1935 amending the Interstate Commerce Act.*fn5 The statute requires contract carriers to file their rates with the Interstate Commerce Commission and in language substantially the same as that relating to common carriers proscribes the charging of a rate different from the filed rate.*fn6 The shipper urges upon us, however, that a distinction exists because the Interstate Commerce Act contains a specific provision condemning discrimination among shippers by a common carrier*fn7 but makes no similar provision in relation to a contract motor carrier.*fn8 It points to the Supreme Court's recognition that the policy against discrimination by a common carrier among shippers is inherent in the purpose of the statute.*fn9

It is true that the regulation of contract carriers is not designed to prevent discrimination among shippers, as it is in the case of common carriers. The purpose in regulating contract carriers is to prevent destructive competition between contract carriers and common carriers and among the contract carriers themselves.*fn10 The statute therefore originally authorized the Commission to regulate only the minimum rates filed by contract carriers.*fn11 In 1957 the statute was amended to require contract carriers to file their actual charges as well as their minimum rates.*fn12 As a result, there was thus conferred on common carriers a right of knowledge and surveillance of the actual competition from contract carriers.*fn13

The fact that the policies underlying the regulation of common carriers do not coincide completely with those relating to contract carriers must be considered in relation to the basis for permitting a carrier's recovery of undercharges. A common carrier's recovery of the preferential discount fully repairs the discrimination among its shippers by the deviation from its published tariff, whereas a contract carrier's recovery of a discount deviation from the published rate will not retrospectively return the business which may have been taken from a competing common carrier or retrospectively restore a common carrier rate which may have been depressed by the contract carrier's unlawful discount.

This difference, however, reflects only a partial factor and is not enough to justify a disregard of the general policy that the rate filed must be observed, a policy which pervades the regulation of contract as well as common carriers and which is enforced by permitting any undercharges to be recovered in order to preserve the integrity of the filed rates. In the case of both the common and the contract carrier the refusal to validate the economic distortion by such doctrines as agreement, estoppel or unclean hands is a deterrent weapon in the enforcement of the statute and the public policy which underlies it. In the case of contract carriers it discourages pressure by powerful shippers for discounts, which create competition destructive to common carriers as well as to other contract carriers, by making it clear that the undercharges will accumulate and may always be recovered by the contract carrier within the period of the statute of limitations. For the same reason it also discourages the acceptance by shippers of discounts from contract carriers in the general course of competition.*fn14

It is of no legal significance that the rate which the parties agreed upon among themselves would probably have been approved if it had been filed with the Commission. The forum for dealing with the schedule of charges is the Commission. Courts cannot in effect validate illegal rates long after the event, especially when in the interim the contract carrier's competitors -- other contract carriers and common carriers -- have relied upon the published charges.

The innocence of the shipper in relying upon the carrier to obtain approval of the rate they had agreed on is equally unavailing. The rate filed is a matter of public record of which the shipper must take notice at his peril. The hardship which is urged upon us is one which has already been dealt with in cases involving common carriers and has been found inadequate to alter the policy underlying the integrity of the schedule of charges.*fn15 Such instances of hardship may not be permitted to destroy the more far-reaching need to maintain respect for the rates established under the Commission's procedure and which other shippers and contract and common carriers alike must be able to rely upon as realistic facts rather than a screen which conceals illegal private practices.

Although the question has not often been presented under the federal statute, the view we take finds support in the few decisions which are reported.*fn16 In the several states where statutes regulate intrastate carriers and contain provisions quite similar to those of the Interstate ...

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