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CONRAIL v. ACF INDUS.

October 29, 1990

CONSOLIDATED RAIL CORPORATION, Plaintiff,
v.
ACF INDUSTRIES, INC., Defendant


Milton I. Shadur, United States District Judge.


The opinion of the court was delivered by: SHADUR

MILTON I. SHADUR, UNITED STATES DISTRICT JUDGE

 Consolidated Rail Corporation ("Conrail") filed an Amended Complaint against ACF Industries, Inc. ("ACF"), charging that ACF owes Conrail $ 29,378.47 in freight charges for the transportation of 22 empty cars owned by ACF. ACF now moves for summary judgment under Fed. R. Civ. P. ("Rule") 56. *fn1" For the reasons stated in this memorandum opinion and order, ACF's motion is granted in principal part and denied to a minor extent (as to which judgment will be entered in Conrail's favor).

 Facts and Procedural History2

 ACF is a corporation that manufactures, sells, owns and leases rail cars. It leases railroad tracks at Granite City, Illinois, where it inspects, processes and stores cars awaiting future disposition -- either by further lease assignment or by scrapping (retiring the cars from service). Of the empty ACF cars shipped to Granite City between the years 1986 and 1989, 46% were scrapped in 1986, 62% in 1987, 61% in 1988 and 48% in 1989. All the remaining cars in each of those years were returned to lease service.

 Characterization of the movements of 22 of ACF's cars, all tank cars or covered hopper cars, is at issue in this case. It is undisputed that:

 
1. All the cars were moved into storage at Granite City between May 1986 and December 1987. They remained in storage for varying periods ranging between 11 and 578 days.
 
3. All 22 cars were eventually sold for scrap and sent about 10 miles from Granite City to National City, Illinois for scrapping.

 ACF traditionally followed certain procedures in its decision whether to scrap cars. First, the ACF Sales Department ("Sales") located in one of several cities identified possible candidates for scrapping from a computer-generated list of cars available for lease. But as indicated by the percentages referred to two paragraphs back, that was not at all equivalent to an affirmative decision to scrap the cars. Instead it could (but did not necessarily) lead to the next step in the decisional process: a recommendatory "scrap" notation made by either Sales or a Representative of the Fleet Operations Department in Earth City, Missouri ("Representative") on the "R" form -- shorthand for the "Notice of Transfer" or "Notice of Release" form used to notify that a car was coming off lease.

 Each "scrap" recommendation, if one was made, in turn led to a Property Retirement Authorization ("PRA") -- a formal recommendation that a car be retired from service, requiring signatures from individuals in three different departments within ACF: Sales, Fleet Operations and Accounting. In addition to the PRA, a physical inspection of the car served several purposes:

 
1. in the case of a car coming off lease assignment, to determine whether the lessee had subjected the car to more than ordinary wear and tear;
 
2. to determine what, if any, parts were salvageable; and
 
3. to ensure that the car was free of hazardous and toxic substances before sending it to Saint Louis Auto Shredding ("SLAS"), the scrap dealer in National City.

 That inspection occasionally led to a decision to void the PRA and return the car to lease service. If not, SLAS would dismantle the car and send a notice to ACF confirming the scrapping.

 Before any delivery of a car to SLAS for scrapping, the Representative would send a "speed letter" notifying it that the car was coming to it for that purpose. In the case of two of the 22 cars at issue, the Representative sent such a speed letter before the car's arrival at Granite City. Such a speed letter is not a binding commitment to scrap the car; its only purpose is as a courtesy to SLAS to enable it to make advance plans for storage of the cars. ACF and Conrail agree that the speed letter itself is not equivalent to a sale.

 SLAS would issue a monthly price list to ACF stating what it would pay per-net-ton to ACF for the cars that ACF might scrap that month. SLAS' list was an open purchase quote and was apparently not binding. Based on those prices, the Representative would calculate the scrap car values for the cars that had been authorized for release to SLAS, and Accounting would then send an invoice to SLAS. When SLAS purchased a car from ACF at Granite City, it would pay the freight charges for moving the empty cars between Granite City and National City.

 This dispute involves ACF's nonpayment of freight charges for the movement of the 22 empty cars into Granite City. Conrail did not originally bill ACF for those empty car movements. However, the Chicago Regional Office of Compliance and Consumer Assistance ("OCCA") of the Interstate Commerce Commission ("ICC") conducted an investigation, identified the movements as requiring billing and sent Conrail an April 25, 1988 letter (Walsh Aff. Ex. 1) asking that it bill ACF. After ACF refused to pay the charges for those as well as other such movements (290 in all), OCCA brought a complaint against ACF for the nonpayment of freight charges. *fn4" On September 11, 1989 Conrail filed its own Amended Complaint with this Court.

 Basic Principles

 Both railroad-owned and privately-owned cars make up the national fleet of railroad cars. *fn5" Movement of empty private rail cars is governed by the National Mileage Tariff, I.C.C. PHJ 6007-I (the "Tariff"). *fn6"

 Conrail argues that the Tariff does not govern this action. It highlights the application sections that state that the Tariff governs the handling of cars of private ownership "when used by railroads parties to this tariff . . . for transportation over their lines. . ." (Tariff Items 25 & 200, emphasis added by Conrail). Conrail says the cars at issue had been permanently removed from the national fleet and were therefore no longer available for use by the railroad for transportation over the railroad's lines, so that the Tariff does not apply.

 But that really assumes the conclusion that Conrail would like this Court to reach -- and it is belied by the fact that such large percentages of the cars sent to Granite City were returned to lease service and not scrapped. It would be impermissibly artificial to split into two parts ACF's process of (1) shipping cars to Granite City, (2) deciding what disposition to make of the cars stored there and (3) either leasing or scrapping the respective cars -- one of those parts being the step of withdrawing the cars "permanently" from the ...


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