Maislin Industries US Inc. v. Primary Steel Inc./Dissent Stevens

by John Paul Stevens

Justice STEVENS, with whom the Chief Justice joins, dissenting.

The "filed rate doctrine" was developed in the 19th century as part of a program to regulate the ruthless exercise of monopoly power by the Nation's railroads. Today the Court places an interpretation on that doctrine even more strict than the original version. In doing so, the Court misreads the text of the Interstate Commerce Act (Act), 49 U.S.C. § 10101 et seq. (1982 ed.), ignores the history of motor carrier regulation in this country, and gives no deference to the sensible construction of the Act by six Courts of Appeals ^[1] and the administrative agency responsible for its enforcement. Most significantly, the majority fails to appreciate the significance of the "sea change" in the statutory scheme that has converted a regime of regulated monopoly pricing into a highly competitive market. Even wearing his famous blinders, old Dobbin would see through the tired arguments the Court accepts today.

* As originally enacted in 1887, the Act provided, in part:

"And when any such common carrier shall have established and published its rates, fares, and charges in compliance with the provisions of this section, it shall be unlawful for such common carrier to charge, demand, collect, or receive from any person or persons a greater or less compensation for the transportation of passengers or property, or for any services in connection therewith, than is specified in such published schedule of rates, fares, and charges as may at the time be in force." 24 Stat. 381.

Read literally, this text commanded strict adherence to the tariffs filed by a carrier. From the beginning, however, the Court construed that command as subject to the unstated exception that a filed rate would not be enforced if the Interstate Commerce Commission (Commission) determined that the rates were "unreasonable." ^[2] Amendments to the Act incorporated language that expressly allows exceptions in cases in which the Commission determines that strict enforcement would be unreasonable. ^[3]

Thus, 49 U.S.C. § 10761(a) (1982 ed.) now provides:

"Except as provided in this subtitle, a carrier providing transportation or service subject to the jurisdiction of the Interstate Commerce Commission under chapter 105 of this title shall provide that transportation or service only if the rate for the transportation or service is contained in a tariff that is in effect under this subchapter. That carrier may not charge or receive a different compensation for that transportation or service than the rate specified in the tariff whether by returning a part of that rate to a person, giving a person a privilege, allowing the use of a facility that affects the value of that transportation or service, or another device." (Emphasis added.)

The emphasized language in the foregoing provision obviously refers, inter alia, to § 10701(a) which states, in part: "A rate (other than a rail rate), classification, rule, or practice related to transportation or service provided by a carrier subject to the jurisdiction of the Interstate Commerce Commission under chapter 105 of this title must be reasonable." (Emphasis added.)

Furthermore, § 10704(b) expressly authorizes the Commission, after finding that a rate or practice of a carrier is unreasonable, to prescribe the rate or practice that the carrier must follow. ^[4]

The action of the Commission in this case faithfully tracks its statutory grant of authority. After considering all of the relevant evidence, the Commission determined "that it would be an unreasonable practice now to require Primary to pay undercharges for the difference between the negotiated rates and the tariff rates." App. to Pet. for Cert. 44a. That determination was unquestionably consistent with the plain language of the statute governing the Commission's authority. A carrier's failure to file negotiated rates obviously does not make it reasonable for the carrier to quote low rates and collect higher ones; the Commission is free to find, as it has done, that a practice of misquotation, failure to file, and subsequent collection is unreasonable under § 10701(a).

The Court offers no reason whatsoever to doubt this conclusion. Indeed, the Court's discussion of the statutory text consists almost entirely of vague references to some unarticulated interplay between §§ 10761(a) and 10762(a)(1), ^[5] see ante, at 126-127, an interplay which the Court contends would be "render[ed] nugatory" if carriers are not permitted to obtain payment of the filed rate when they have led shippers to rely upon a lower negotiated rate. Ante, at 133. For the reasons I have already stated, the text of those provisions does not generate any "interplay" capable of sustaining so rigid an inference. The Court virtually concedes as much, for it recognizes that the unreasonableness of a rate is a longstanding ground for denying collection of the filed rate, ante, at 128-129, and n. 10, and refuses to hold that the unreasonableness of a practice can never bar collection of a filed rate, ante, at 129-130.

Having admitted that the doctrine synthesized from the "interplay" between §§ 10761(a) and 10762(a)(1) is susceptible of exceptions based upon the nature of a carrier's rates and practices, the Court can argue only that this particular exception is impermissible. ^[6] The source of the exceptions is, however, not the "interplay" that dominates the majority's reasoning, but the combined effect of the "Except as otherwise provided" language of § 10761(a) and the express authority to determine reasonableness granted to the Commission by § 10701(a). This second "interplay" gets little attention from the majority, and it is difficult to see how the text of either component might yield the distinction which the majority insists upon drawing. Nor can the Court mean that the exception literally voids the obligations imposed by §§ 10761(a) and 10762(a)(1), because the Commission maintains, and the Court does not deny, that the filed rate doctrine would still provide an effective right to recover for undercharges in some cases. See, e .g., NITL-Petition to Institute Rulemaking on Negotiated Motor Common Carrier Rates, 5 I.C.C.2d 623, 629, and n. 13 (1989). Moreover, even if the "filed rate doctrine" were discarded entirely, a knowing or willful failure to comply with §§ 10761(a) and 10762(a)(1) may subject a carrier to prosecution. ^[7]

The Court's assertion that the agency policy now before us "renders nugatory" the "interplay" between §§ 10761(a) and 10762(a)(1) therefore amounts to no more than an observation that the policy substantially diminishes the importance of the "filed rate doctrine" as a means for enforcing those sections. Consideration of the statute's structure makes all the more clear what should already be evident from the statutory text: The Court's observation is true but utterly irrelevant.

Because no particular provision of the statute supports the Court's position, its principal argument must be that the agency's construction of the Act is inconsistent with the regulatory scheme as a whole. See ante, at 131. There are, of course, important differences between markets in which prices are regulated, either by private cartels or by public authority, and those in which prices are the product of independent decisions by competitors. Rules requiring adherence to predetermined prices are characteristic of regulated markets, but are incompatible with independent pricing in a competitive market. ^[8] The "filed rate doctrine" has played an important role, not just in the segments of the transportation industry regulated by the Commission, but in other regulated markets as well. ^[9] It requires the courts to respect the public agency's control over market prices and industry practices; moreover, it significantly reduces the temptation of regulated parties to deviate from the marketwide rules formulated by the agency.

The filed rate doctrine has been a part of our law during the century of regulation of the railroad industry by the Commission. In 1935, when Congress decided to impose economic regulation on the motor carrier industry, partly if not primarily in order to protect the railroads from too much competition, ^[10] the filed rate doctrine was applied to their rates just as it had previously applied to the railroads. It had the same regulatory purpose. ^[11] In its applications during the period of regulatory control over motor carrier ratemaking, the doctrine was for the most part applied to reinforce the policies and the decisions of the regulatory agency. ^[12] After years of debate over whether it was sound policy to substitute regulation for competition in the motor carrier industry, Congress decided to eliminate the regulatory barriers to free entry and individual ratemaking. The 1980 amendments to the Act represented a fundamental policy choice in favor of deregulation. ^[13] Overnight the application of the filed rate doctrine in that market became an anachronism. As Judge Posner has explained:

"Many years later came deregulation, which has changed the trucking industry beyond recognition. As a result of amendments made to the Motor Carrier Act in 1980 and their interpretation by the Commission, the present regime is essentially one of free competition. No longer does the ICC seek to nurture and protect cartel pricing and division of markets. A motor carrier that wants to lower its price can file a new tariff effective the following day. Short Notice Effectiveness for Independently Filed Motor Carrier and Freight Forwarder Rates, 1 I.C.C.2d 146 (1984), affirmed as Southern Motor Carriers Rate Conference v. United States, 773 F.2d 1561 (11th Cir.1985). No longer does the Commission seek to limit the number of motor carriers, which has more than doubled in less than a decade. Most important, a carrier and shipper who want to get out from under tariff regulation altogether have only to negotiate a contract of carriage, and then the lawful price is the price in the contract rather than in any filed tariff. There used to be all sorts of restrictions on contract carriage, which greatly limited it as an escape hatch from regulation. There are no longer. Wheaton Van Lines, Inc. v. ICC, 731 F.2d 1264 (7th Cir.1984). The skeleton of regulation remains; the flesh has been stripped away." Orscheln Bros. Truck Lines, Inc. v. Zenith Electric Corp., 899 F.2d 642, 644 (CA7 1990).

The significance of these fundamental changes was also noted and explained by Judge Alarcon:

"A variety of practices that previously would have been considered discriminatory are now allowed. For example, the ICC has recently ruled that volume discount rates are not per se unlawful and may be justified by cost savings to the carrier. See Lawfulness of Volume Discount Rates by Motor Common Carrier of Property, 365 I.C.C. 711, 715-16 (1982). Moreover, carriers may impose geographic or product line restrictions that must be met to obtain rate reductions. See Rates for Named Shipper or Receiver, 367 I.C.C. 959, 962-965 (1984).

"In addition to increased competitive pressures, statutory changes, and a relaxed regulatory climate, the ICC's Negotiated Rates decisions are a practical response to the information costs faced by shippers. The ease of filing tariffs and the sheer number filed no longer makes it appropriate to allocate the burden of discovering a filed rate to the shipper in all cases. Reduced tariff rates may now be filed to become effective on one day's notice." West Coast Truck Lines, Inc. v. Weyerhaeuser Co., 893 F.2d 1016, 1026 (CA9 1990).

The Court catalogs these reforms, ante, at 133-134, but fails to analyze their implications for the "reasonableness" requirement of § 10701(a) and, consequently, for the provisions of § 10761(a). What the Court now misses has been succinctly set forth by Judge Alarcon:

"The ICC's determination that the collection of undercharges constitutes an unreasonable practice if the shipper is unaware of the filed rate is also a reflection of changing legislative goals. Congress modified national transportation policy when it amended 49 U.S.C. § 10101(a) in the Motor Carrier Act of 1980. Section 10101(a)(2) now directs the Commission, 'in regulating transportation by motor carrier, to promote competitive and efficient transportation services in order to (A) meet the needs of shippers, receivers, passengers, and consumers; [and] (B) allow a variety of quality and price options to meet changing market demands and the diverse requirements of the shipping and traveling public. . . .' 49 U.S.C. § 10101(a)(1)(A), (B) (1982). In addition, § 10101(a)(1)(D) directs the ICC to encourage the establishment of reasonable transportation rates without 'unfair or destructive competitive practices.' 49 U.S.C. § 10101(a)(1)(D) (1982). Congress intended these sections of the Motor Carrier Act 'to emphasize the importance of competition and efficiency as the most desirable means for achieving transportation goals while, at the same time, providing the Commission with sufficient flexibility to promote the public interest.' H.R.Rep. No. 96-1069, 96th Cong., 2d Sess. 12, reprinted in 1980 U.S.Code Cong. & Admin.News 2283, 2294.

"Section 10701(a) provides the ICC with the mechanism to put into effect Congress' restated goals of national transportation policy. By declaring the adherence to filed rates unreasonable under the circumstances presented in this case, the ICC has demonstrated its intention to prevent carriers from engaging in unfair competitive practices." Weyerhaeuser, 893 F.2d, at 1026-1027.

Despite the Court's puzzling suggestion that the filed rate doctrine is essential to the "core purposes of the Act," ante, at 133, the doctrine is instead, as the Court elsewhere seems to concede, "an anachronism in the wake of the [Motor Carrier Act of 1980]," ante, at 136. If plain text is a poor basis for the Court's holding, statutory purpose is altogether worse. As Judge Posner has explained:

"Counsel for the carrier in this case-which is to say for the carrier's trustee in bankruptcy-conceded at argument that the motor carrier industry is today highly competitive. But if so, the filed-rate doctrine has lost its raison d'etre. The classic explanations for the doctrine are from a different world. 'If a mistake in naming a rate between two given points is to be accepted as requiring the application of that rate by the carrier, the great principle of equality in rates, to secure which was the very purpose and object of the enactment of these several statutes, might as well be abandoned.' Poor v. Chicago, Burlington & Quincy Ry., supra, 12 I.C.C. at 421. 'Stability and equality of rates are more important to commercial interests than reduced rates.' Id., at 422. 'Occasional hardships may result from any inelastic rule of general application. The principle, however, is vital in our commercial life that there shall be one fixed and absolutely rigid rate governing the transportation at a given time of any given commodity between two given points.' Id., at 423.

"Cessante ratione legis, cessat et ipsa lex. Firms in a competitive market cannot discriminate against weak shippers, for even the weak shipper has, by definition of competition, alternative sources of supply to which to turn if one of his suppliers tries to make a monopoly profit off him. 'In the more competitive, more flexible pricing atmosphere created by [deregulation], there is little likelihood of carriers using a rate misquotation as a means to discriminate in favor of particular shippers.' Petition to Institute Rulemaking on Negotiated Motor Common Carrier Rates, supra, 5 I.C.C.2d at 625. And since it is no longer the policy of Congress or the ICC to foster monopoly pricing in the motor carrier industry, no public object is served by forcing carriers to adhere to published price schedules regardless of circumstances. All this the Commission found and persuasively articulated in National Industrial Transportation League, supra, 3 I.C.C.2d at 104-08." Orscheln, 899 F.2d, at 644-645.

Judge Posner's conclusion that strict mechanical adherence to the filed rate doctrine produces absurd results and serves no social purpose, id., at 645, is one that I share. It is likewise shared by the agency charged with administration of the Act.

A few years ago, in Chevron U.S.A. Inc. v. Natural Resources Defense Council, Inc., 467 U.S. 837, 104 S.Ct. 2778, 81 L.Ed.2d 694 (1984), we reiterated the importance of giving appropriate deference to an agency's reasonable interpretation of its governing statute. Indeed, long before our decision in Chevron, we recognized that even when faced with a "long history of the Commission's construction and application of the Act contrary to its present position," American Trucking Assns., Inc. v. Atchison, T. & S.F.R. Co., 387 U.S. 397, 415, 87 S.Ct. 1608, 1618, 18 L.Ed.2d 847 (1967), we must defer to the Commission's interpretation of a statute which it is responsible for administering:

"[W]e agree that the Commission, faced with new developments or in light of reconsideration of the relevant facts and its mandate, may alter its past interpretation and overturn past administrative rulings and practice. . . . In fact, although we make no judgment as to the policy aspects of the Commission's action, this kind of flexibility and adaptibility to changing needs and patterns of transportation is an essential part of the office of a regulatory agency." Id., at 416, 87 S.Ct., at 1618.

Four Courts of Appeals have expressly invoked Chevron in the course of upholding the agency action challenged in this case, ^[14] but this Court does not deem Chevron-or any other case involving deference to agency action-worthy of extended discussion. The Court dismisses Chevron by means of a conclusory assertion that the agency's interpretation is inconsistent with "the statutory scheme as a whole." Ante, at 131. Insofar as the Court offers any justification for that result, it does so by relying on cases in which this Court's action was entirely consistent with the agency's interpretation of the Act. ^[15] The fact that the Court has strictly enforced the filed rate doctrine in the many cases in which it served the agency's regulatory purposes provides no justification for enforcing the doctrine in a competitive market in which it frustrates the agency's attempt to carry out the plainly expressed intent of Congress.

The Court's failure to adhere today to the teaching of Chevron is compounded by its misplaced reliance on Square D Co. v. Niagara Frontier Tariff Bureau, Inc., 476 U.S. 409, 106 S.Ct. 1922, 90 L.Ed.2d 413 (1986). See ante, at 134-135. In Square D, we adhered to a longstanding settled construction of § 4 of the Clayton Act that had not been affected by any subsequent statutory amendment. No question of agreeing or disagreeing with agency action, or with an agency's interpretation of a congressional policy choice, was presented. That case is therefore totally inapplicable to the question presented here. Even less persuasive authority for the Court's position is California v. FERC, 495 U.S. 490, 110 S.Ct. 2024, 109 L.Ed.2d 474 (1990), see ante, at 131, 135, a case in which we upheld an agency interpretation that conformed to longstanding precedent.

Finally, I must express my emphatic agreement with the Commission's conclusion, App. to Pet. for Cert. 44a, that an unreasonable practice would result if the carrier in this case were rewarded for violating its duty to file a new rate promptly. There is no evidence of discrimination in this record; nor is there any reason to believe that any shipper or any competing motor carrier was harmed by the negotiated rate or by the failure to file it. The only consequence of today's misguided decision is to produce a bonanza for the bankruptcy bar. "Now that off-tariff pricing is harmless to the (de)regulatory scheme, the only purpose served by making the statutory obligation to price in conformity with published tariffs draconian is to provide windfalls for unsecured creditors in bankruptcy." Orscheln, 899 F.2d, at 646.

As Justice Black said more than 30 years ago in similar circumstances, "I am unable to understand why the Court strains so hard to reach so bad a result." T.I.M.E. Inc. v. United States, 359 U.S. 464, 481, 79 S.Ct. 904, 914, 3 L.Ed.2d 952 (1959) (dissenting opinion). The Court's analysis is plausible only if read as a historical excursus about a statute that no longer exists. Nothing more than blind adherence to language in cases that have nothing to do with the present situation supports today's result.

I respectfully dissent.

Notes

1. See Delta Traffic Service, Inc. v. Transtop, Inc., 902 F.2d 101 (CA1 1990); Delta Traffic Service, Inc. v. Appco Paper & Plastics Corp., 893 F.2d 472 (CA2 1990); Orscheln Bros. Truck Lines, Inc. v. Zenith Electric Corp., 899 F.2d 642 (CA7 1990); 879 F.2d 400 (CA8 1989) (case below); West Coast Truck Lines, Inc. v. Weyerhaeuser Co., 893 F.2d 1016 (CA9 1990); Seaboard System R. Co. v. United States, 794 F.2d 635 (CA11 1986). The decision of the Court of Appeals for the Eleventh Circuit in Seaboard System involved railroad regulation rather than motor carrier regulation, but presented very similar issues.
2. Thus, in the most frequently quoted statement of the filed rate doctrine, we wrote:
3. See, e.g., 34 Stat. 587.
4. Title 49 U.S.C. § 10704(b)(1) (1982 ed. and Supp. V), provides in part:
5. Section 10762(a)(1) provides:
6. The Court attempts to make hay of the fact that under § 10761(a) carriers "may not charge or receive a different compensation for that transportation or service than the rate specified in the tariff." According to the Court, this provision "requires the carrier to collect the filed rate." Ante, at 131. That is true if the Court means that the carrier is obligated to seek payment of the filed rate, but not if the Court means that the carrier is entitled to receive payment of the filed rate. The longstanding reasonableness exception to the filed rate doctrine an exception not contested by the Court-makes this much clear. Moreover, as has already been noted, the clause that prefaces § 10761(a) allows for the existence of exceptions to the collection requirement. The Court's argument simply begs the question before us, which is under what conditions a valid defense to a carrier's suit may exist.
7. See, e.g., 49 U.S.C. §§ 11903 and 11904 (1982 ed.).
8. See, e.g., Sugar Institute, Inc. v. United States, 297 U.S. 553, 582-583, 56 S.Ct. 629, 635-636, 80 L.Ed. 859 (1936) (regulation by private agreement in violation of the Sherman Act); California Retail Liquor Dealers Assn. v. Midcal Aluminum, Inc., 445 U.S. 97, 99, 100 S.Ct. 937, 940, 63 L.Ed.2d 233 (1980) (state regulation of wine prices); United Gas Pipe Line Co. v. Mobile Gas Service Corp., 350 U.S. 332, 338, 76 S.Ct. 373, 377, 100 L.Ed. 373 (1956) (federal regulation of natural gas prices).
9. See, e.g., Montana-Dakota Utilities Co. v. Northwestern Public Service Co., 341 U.S. 246, 251-252, 71 S.Ct. 692, 695-696, 95 L.Ed. 912 (1951) (federal regulation of prices for electrical power); Arkansas Louisiana Gas Co. v. Hall, 453 U.S. 571, 577-578, 101 S.Ct. 2925, 2930-2931, 69 L.Ed.2d 856 (1981) (federal regulation of prices for natural gas); H.J. Inc. v. Northwestern Bell Telephone Co., 492 U.S. 229, 234, n. 1, 109 S.Ct. 2893, 2898, n. 1, 106 L.Ed.2d 195 (1989) (state regulation of rates for telephone service).
10. "Though identical statutory standards govern both motor carrier and rail consolidations, their legislative backgrounds differ. The demand for motor carrier regulation came, not from shippers, as in railroads, but from the roads themselves, who urged that virtually unregulated motor carrier competition threatened railroad financial stability. This view was also supported by the Interstate Commerce Commission, and the Federal Coordinator of Transportation who, in his 1934 and 1935 reports, recommended legislation regulating interstate motor carriers. In addition, during hearings on proposed legislation, many truck operators, previously opposed to Federal regulation, favored such control because they feared the effects of unrestrained competition on the motor carrier industry itself. The result was legislation, enacted in 1935, which from the first placed considerable restraint on motor carrier competition.
11. "To understand the purpose of the filed-rate doctrine and hence the Commission's recent efforts to relax it, on which see National Industrial Transportation League-Petition to Institute Rulemaking on Negotiated Motor Common Carrier Rates, 3 I.C.C.2d 99 (1986); Buckeye Cellulose Corp. v. Louisville & Nashville R. R., 1 I.C.C.2d 767 (1985), affirmed as Seaboard System R. R. v. United States, supra; Petition to Institute Rulemaking on Negotiated Motor Common Carrier Rates, 5 I.C.C.2d 623 (1989), one must understand the history of federal regulation of common carriers. Railroads have heavy fixed costs,
12. As the Court's opinion makes clear, there was no tension between judicial interpretation and agency policy in the cases that developed the filed rate doctrine. See ante, at 128, citing Poor v. Chicago, B. & Q. R. Co., 12 I.C.C. 418, 421-422 (1907). On the contrary, a recurring theme in those cases is that the Commission, rather than the courts, should have primary responsibility for administration of the statute. The filed rate doctrine was regarded in significant part as a means for ensuring that this allocation of responsibility was respected. See, e.g., Texas & Pacific R. Co. v. Abilene Cotton Oil Co., 204 U.S. 426, 440-442, 27 S.Ct. 350, 355-356, 51 L.Ed. 553 (1907); Arizona Grocery Co. v. Atchison, T. & S.F.R. Co., 284 U.S. 370, 384-385, 52 S.Ct. 183, 184-185, 76 L.Ed. 348 (1932); Baldwin v. Scott County Milling Co., 307 U.S. 478, 483-485, 59 S.Ct. 943, 947-948, 83 L.Ed. 1409 (1939). The most notable exception to this pattern is the 5-to-4 decision in T.I.M.E. Inc. v. United States, 359 U.S. 464, 79 S.Ct. 904, 3 L.Ed.2d 952 (1959), in which this Court prohibited district courts from staying collection proceedings pending agency review of the reasonableness of a filed rate. Although T.I.M.E. is striking similar to today's decision in a host of respects, the majority does not rely upon it. Its reluctance to place any substantial weight upon T.I.M.E. is easily understood because that precedent was greatly limited by this Court's subsequent decision in Hewitt-Robins Inc. v. Eastern Freight-Ways, Inc., 371 U.S. 84, 88-89, 83 S.Ct. 157, 159-160, 9 L.Ed.2d 142 (1962), and what remained of it was soon thereafter unambiguously repudiated by Congress. See Act of Sept. 6, 1965, Pub.L. 89-170, §§ 6-7, 79 Stat. 651-652 (codified at 49 U.S.C. § 11705(b)(3) (1982 ed. and Supp. V), 49 U.S.C. § 11706(c)(2) (1982 ed.)).
13. Motor Carrier Act of 1980, Pub.L. 96-296, 94 Stat. 793.
14. Delta Traffic Service, Inc. v. Transtop, Inc., 902 F.2d, at 109; Orscheln Bros. Truck Lines, Inc. v. Zenith Electric Corp., 899 F.2d, at 646; 879 F.2d, at 406 (case below); West Coast Truck Lines, Inc. v. Weyerhaeuser Co., 893 F.2d, at 1023, 1025-1026.
15. See n. 12, supra.