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order the carrier to pay damages to the extent of the difference between the rates charged by the carrier and those found by the Commission to be just and reasonable. It will thus be seen that there is now available to the shipper a means by which redress may be obtained for the charging of an unreasonable or an unlawful rate but because of the complicated and expensive procedure necessary it can only be used in instances where the amount of the damage is sufficiently large to warrant incurring the expense or where large industries have competent traffic departments and attorneys regularly employed who will handle matters of this character as a part of their regular daily duties.

This leaves the small shipper without adequate opportunity to obtain the benefit of fair, just, and reasonable rates as provided by the Interstate Commerce Act. It should also be pointed out that the statute of limitations in connection with claims for damages varies according to the several States and that the periods are generally far in excess of 2 years. As indicated on pages 10 and 11 of the hearings before the Interstate and Foreign Commerce Committee of the House on H. R. 2324, the periods range from a minimum of 3 to a maximum of 15 years, the majority of States providing for a period of 6, 8, or 10 years. It would seem, therefore, that it would be distinctly to the advantage of the carriers to provide for a period of 2 years and to avoid the danger of having a complaint filed under which a rate may be found unreasonable and then allow retroactive damages for a period of 6, 8, or 10 years.

The motor carriers' representatives in their testimony before the House committee contended that an award of reparation may be of such a character as to virtually bankrupt small truck lines. This situation exists today, and the threat is much greater than it would be under the proposed bill. Under the State statutes now applicable damages may be collected on past shipments moving during a 6-, 8-, or 10-year period while under the proposed bill the period would be limited to 2 years.

In summarizing the effect of S. 1194 on the question of reparation, it may be said that the shippers will benefit by obtaining a simplified procedure under which equality of treatment will be accorded both small and large shippers, and motor carriers as well as freight forwarders will benefit even more by having the present State statutes made inapplicable through the enactment of a 2-year Federal statute which minimizes very substantially the potential amount of damages which may be obtained from such motor carriers or freight forwarders. Witness J. V. Lawrence, testifying on behalf of motor carriers, as shown on page 26 of the report of the hearings on H. R. 2324, March 18, 1947, emphasized to a considerable extent the fact that the motor-carrier industry is made up of literally thousands of small business concerns; that it would be unreasonable to require these small motor carriers to pay reparation on every shipment that had moved under the rates in effect in the past. Of course, any one familiar with transportation knows that reparation is not awarded on all past shipments but only after clear and convincing proof of the unreasonable and unlawful character of a particular rate or rates has been presented to the Interstate Commerce Commission. Furthermore, the small motor carriers to which Mr. Lawrence refers are now subject to potential reparation claims where the amounts may be substantial and where the danger of bankruptcy may be great, due to the long periods of time allowed for filing such claims by State statutes.

The present procedure is unduly expensive and burdensome, and we ask that the Congress give the same consideration to the rights of the small shipper as Mr. Lawrence would ask Congress to give to the small trucker. Many small business concerns do maintain traffic departments nor do they maintain a staff of attorneys to handle matters of this character in a regular daily routine manner, but must employ outside help. The procedure should be simplified as provided by the bill so the small shipper, as a practical matter, may have the same opportunity to obtain redress for violations of the act as a large shipper and should not be burdened with unreasonable and unduly expensive procedure in order to obtain fair and equitable treatment.

In conclusion, we earnestly urge that the committee report favorably S. 1194 without amendments, that a uniform statutory period of limitations is necessary, that it will lessen the potentiality of large claims being filed against motor carriers and freight forwarders, that it will avoid discrimination and the undue burden now placed upon shippers that it will avoid the necessity of keeping records for long periods of time and for different periods for different types of transportation services, and that it will provide for equality of regulation with respect to the transportation services via all forms of transportation.

We understood that there is also before the committee for consideration S. 571 and S. 935, introduced by Senator Cordon. These bills provide for a 3-year statutory period insofar as motor carriers and freight forwarders are concerned and increase from 2 to 3 years the statutory period for the filing of claims by and against railroads. While we appreciate the intent of the sponsors of this legislation to increase the statutory period, it is our firm belief that the 2-year period provided for under S. 1194 is reasonable. Such period is now applicable in connection with the filing of claims by shippers against railroads and by railroads against shippers. The 2-year period gives both the carriers and the shippers a reasonable time within which to audit bills to determine proper and applicable rates and charges.

We are opposed to H. R. 2759, which is limited to the matter of claims for overcharges and undercharges. As previously pointed out, a proper provision with respect to the filing of claims and the recovery of damages for a violation of the act and for the charging of unreasonable rates on past shipments is necessary; and therefore we urge the adoption of S. 1194, which would include in general the provisions of H. R. 2759 but which would also include proper provisions with respect to the filing of claims for reparation. Respectfully submitted.

THE CHICAGO ASSOCIATION OF COMMERCE AND INDUSTRY,
A. H. SCHWIETERT,

MARCH 30, 1948.

Traffic Director.

BRONX CHAMBER OF COMMERCE, INC., Bronx, New York 51, N. Y., March 30, 1948.

Subject: Extension of time limit for recovery of freight charges to 3 years.

Hon. CLYDE M. REED,

United States Senate Committee on Interstate and

Foreign Commerce,

Senate Office Building, Washington, D. C.

DEAR MR. SENATOR: Thank you for your letter of March 24 regarding hearing on the above subject, together with copies of three other similar bills.

By direction of the president, I am enclosing memorandum of facts showing why the time limit for recovery of freight overcharges should be increased to 3 years, and requesting that this communication and memorandum be placed in the written record for consideration at hearing.

Very truly yours,

HELEN C. DURKIN, Executive Assistant.

Memorandum of facts showing why the time limit for recovery of freight overcharges should be increased to 3 years:

1. Many freight overcharges are located more than 2 years after payment due to the complexity of freight tariffs as well as annual accounting practices.

2. Most shippers of necessity employ outside agencies to audit their freight bills, and for commercial reasons the auditing is often completed more than 1 or 2 years after payment.

3. A 3-year time limit would go far enough in encouraging promptness in bringing action, especially as a freight overcharge is a heinous offense.

4. The limitation period covering freight overcharges in the various States is generally three or more years.

5. On interstate commerce via water carriers the time limit for recovery of overcharges is 3 years.

6. In connection with claims against the Government for recovery of transportation taxes, the time limit is 4 years.

7. A 3-year time limit would still be shorter than that governing ordinary debts, and over 35 percent of overcharge claims presented by audit agencies cover shipments more than 1 to 2 years old.

8. The general limitation period governing adjustment of freight accounts between common carriers is 3 years.

9. When Commissioner Eastman as Coordinator of Transportation sounded public opinion on the question of reducing the time limit below 3 years, he reported, "The responses of individual shippers indicate a rather general opposition" thereto.

10. In the Seventy-ninth Congress the Senate passed S. 356 and S. 432 making the recovery period 3 years via all carriers, but those bills died with the adjournment of Congress.

FREIGHT FORWARDERS INSTITUTE,
Washington 5, D. C., April 13, 1948.

Re bills S. 1194 and H. R. 2759-Overcharges, undercharges, and reparations. Hon. CLYDE M. REED,

United States Senate, Washington, D. C.

DEAR SENATOR REED: I testified before your subcommittee on March 31, 1948, on the foregoing bills. My oral testimony consists of a brief summary of the prepared statement which I filed.

It is feared that the presentation, thus divided, does not do full justice to the tremendous importance of the subject from the standpoint of the industry. Time did not permit the fullest treatment of some of the questions raised. For the benefit of your subcommittee, as well as the members of the full committee and the Senate at large, it seems desirable to summarize briefly and in concise fashion our position and reasoning. Also, in the interest of constructive criticism, I can suggest a way in which the harmful effects of a reparations provision might be minimized if applied to freight forwarders, although it is desirable that the provision be eliminated entirely.

I think it will be very helpful in the consideration of this subject if this letter can be reproduced in the record of the hearings, and I respectfully request that that be done.

WHY REPARATIONS PROVISIONS ARE UNDESIRABLE FROM THE STANDPOINT OF FREIGHT FORWARDERS

We favor the 2-year statutory period of limitation on suits to recover overcharges and undercharges, as provided for in bills H. R. 2759 and S. 1194. We strongly oppose the provisions of S. 1194 which would authorize the Commission and the courts to award reparations or damages in the case of shipments that have moved in the past on established rates of the freight forwarders. The reparations provisions are so potentially harmful and destructive that the industry opposes the legislation as a whole if it includes such a provision, even though there is need and justification for the overcharge and undercharge limitations.

It seems to us that the first question to be considered is, "Why should freight forwarders be made subject to reparations?" It is highly significant that no advocate of the bill pointed to any real need for such a provision in the case of forwarders. In fact the Intertstate Commerce Commission, in advocating the provision in the House, said that experience under part IV has so far "not shown any important need for a provision authorizing awards of reparations against freight forwarders" (Rept. No. 208). The representative of the National Industrial Traffic League, speaking before your subcommittee, referred to the "cumbersome" and expensive present procedure under which shippers are required to go to court, after obtaining an administrative ruling from the Commission, to recover damages on past shipments. No example was cited where it has been necessary to follow such a procedure in the case of freight forwarders. The sole argument advanced in favor of a reparations provision for forwarders was that it would make for uniformity in the law as applicable to all types of carriers. This argument totally ignores the fundamental difference in the types of agencies, in the conditions under which they operate, and in the legal situation which attaches now in the case of railroads, after years of litigation, which would be entirely different in the case of forwarders.

Let us weigh this argument for alleged "uniformity" against the facts.

(1) The legal situation as applied to forwarders and to railroads is different as respects a provision for reparations.

The reparations provisions of part I of the act, proposed to be transplanted to part IV, have a long and stormy history of litigation, of tremendous awards of money, of abuse, and if inequities repeatedly referred to by the Commission in its efforts to have the law changed. Since 1931, when the Supreme Court held, in the Arizona Grocery Company case (284 U. S. 370), that reparations could not be awarded on shipments which moved under rates prescribed by the Interstate Commerce Commission, the subject has been of comparative insignificance

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in the case of railroads. Forwarder rates, on the other hand, have not been prescribed by the Commission, although they are on file and are the lawful rates which the forwarders must observe. Hence the doctrine of the Arizona case, which protects the railroads now, would afford no protection whatsoever to freight forwarders.

Forwarders file what they consider to be just and reasonable rates. They are required by law to observe those rates until they are changed. Shippers may protest and if they can show the rates to be unreasonable the Commission will order them changed. But under bill S. 1194 the Commission could make its decision retroactive, as to every shipment that had moved under the assailed rate for the preceding 2 years. An honest mistake of judgment on the part of the forwarders-a difference of opinion between the forwarders and the Commission as to the reasonableness of a rate-could result in a tremendous penalty on the forwarding industry.

These arguments are not new. They were advanced and emphasized by the Interstate Commerce Commission in its annual reports to Congress in 1916, 1919, 1930, 1931, and 1932, in a strong appeal to have the law under part I changed. In 1919 the Commission said to Congress that the reasonableness of a rate is a matter of opinion and is "preeminently a question upon which opinions of the Commission and the carriers may differ, and the act contemplates an original exercise of the carriers' judgment." Under the bill the forwarders would exercise that judgment at their peril, and for a mistake in judgment they would be penalized although the wrong, if any, would be a public wrong and the shipper claiming reparations could recover without proving any actual damage to himself. Again in 1919 the Commission said that it would be preferable, if a penalty is to be assessed for such an error of judgment, that the money be paid into the Public Treasury rather than "to continue the policy which permits a private individual who has not really suffered damage to recover." The striking thing about the way in which this law has been interpreted is that the shippers who have paid a rate later found to be unreasonable do not have to show that they have been injured or have suffered any loss whatsoever. It satisfies the law, under the doctrine of the Darnell-Taenzer case (245 U. S. 531), if the shipper shows that he paid the freight charges. A commission merchant, who paid · freight charges, sold the consignment, deducted the freight charges from the proceeds and remitted the balance to the owners, has nevertheless been permitted to recover damages from the carriers (Adams v. Mills, 286 U. S. 396).

It is no secret in the transportation industry that questionable practices long attended the subject of reparations. Agencies sprang up the sole purpose of which was to solicit paid freight bills of the shippers in an effort to recover reparations on a commission basis. Much useless litigation resulted. These conditions would inevitably be revived with reparations made applicable to a newly regulated industry, unprotected by the doctrine of the Arizona Grocery

case.

This argument runs against reparations as such. It is our earnest plea that Congress consider the whole question de novo before taking a step the sole excuse for which is uniformity. There is another way to achieve uniformity, and that is to strike the provisions from part I of the act, where they have come to be comparatively dormant, rather than stirring up what we conceive to be a sleeping monster.

(2) The factual situation as applied to railroads and to forwarders is different, so that uniformity of language would not achieve uniformity of result.

It is a well-established practice, long understood and accepted by the public, that forwarders' rates are patterned on the less-than-carload rates of the railroads. Forwarders have rigid floors and ceilings on their rates, and their net is small compared to their volume of business. They pay out more than 80 percent of every dollar they take in for transportation charges to the underlying carriers. That leaves only 20 percent of their gross revenue for all other operating expenses. Experience over a period of many years has demonstrated that the less-than-carload rates of the railroads provides a ceiling which may not reasonably be exceeded by the forwarder rates.

It is not necessary, nor is it possible, for the freight forwarders to maintain large financial reserves. A large retroactive award of damages could easily wipe out the net of the entire industry in any given year. Further than that, it could bankrupt large segments of the industry. If reparations were sound in principle, and if shippers seeking damages were required to show actual loss to themselves, perhaps this argument would not be so cogent. But I have already shown that such is not the case. The Supreme Court said, in the Darnell-Taenzer

case, to which I have referred, that in the end the public probably pays the damages in most such cases, and that the ultimate consumer who may have been actually damaged by the unreasonable charge cannot recover. It thus becomes a case of enriching those who paid the freight charges at the expense of the carrier who mistakenly thought he was charging a reasonable rate-a rate originally accepted by the Commission and permitted to become the statutory charge. If, as we fear, such a procedure threatens the disruption of a public-service agency of value to the country, then such procedure is wrong in principle, and it is the public which will ultimately be penalized by the loss of a service.

During the course of my testimony it was suggested to me that the freight forwarders, in the year 1947, showed a considerable improvement in net revenue, the implication being that they should now be in a position to withstand awards of reparation. It should be pointed out that the 1947 figures did not reflect certain large increases in expense which have been imposed upon the forwarders. For example, effective December 1, 1947, the Commission permitted increases in the loading and unloading charges which the railroads assess against forwarders to $1.56 per ton, which is 81 cents per ton above the 75-cent charge prevailing prior to the 1946 general increases. In the proceeding (I. & S. 5466) participating forwarders estimated that this increase would cost them 2.7 million dollars a year. The current figures will reflect this and other increases in expense, and the general proposition that freight forwarders operate on a very small net revenue is still true. This net is wholly inadequate to protect the industry against retroactive rate adjustments, which is just what reparations amount to. A further suggestion advanced at the hearings was that it might be possible to apply a reparations provision to certain classes of motor carriers and freight forwarders, and not to others. The suggestion was undoubtedly prompted by the thought that the smaller segments of the industries might be subjected to an undue burden by such provisions, whereas the larger units would be better able, financially, to bear the burden. There are two compelling reasons why this suggestion is unsound. First, it would constitute class legislation which would clearly discriminate against the larger companies and in favor of the smaller ones. Second, if there is any need or excuse for a reparations provisions it seems fair to assume that the need applies with equal or greater force in the case of the smaller, and perhaps less responsible companies than in the case of the larger ones.

SUGGESTIONS OF FORWARDING INDUSTRY

Our first suggestion is that reparations provisions be eliminated from the bill S. 1194, and that House bill, H. R. 2759, which does not contain such provisions, be approved.

If, however, after considering the whole subject, your committee is persuaded that some provision for reparations should be provided for part IV of the act, then we respectfully suggest that the following amendments be incorporated:

(1) That provision be made so that the law shall not permit any person to recover reparations except to the extent that he shows he has suffered damage. This recommendation was repeatedly made by the Interstate Commerce Commission to Congress over a period of many years.

(2) That in any case where a forwarder rate is attacked as unreasonable, and damages are sought, the law provide that the forwarder rate be protected by the doctrine in the Arizona Grocery case to the same extent as the comparable rate of the underlying rail carriers on which the forwarder rate is based. In other words, if the forwarder rate is based on a rail rate which has been prescribed by the Commission, the forwarder rate should also be considered to have been prescribed by the Commission for purposes of passing on reparations claims.

(3) That if reparations be awarded against a freight forwarder under the terms of the bill, provision be made that the forwarder shall have a right to bring a suit or claim for reparations against the underlying carriers utilized, and that in any such case the doctrine of the Arizona Grocery case shall not be interposed as a defense by the underlying carrier. This is only fair since the underlying carriers will already have received four-fifths of the charges on which the claim for reparations is based, and no technical interpretation of the law should be permitted to prevent the assessing of the penalty against the carrier actually at fault.

It is believed that the foregoing suggestions are constructive and sound, in the event reparations provisions are made applicable to forwarders. They would

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