Security Services, Inc. v. Kmart Corporation

PETITIONER: Security Services, Inc.
RESPONDENT: Kmart Corporation
LOCATION: Colorado Springs, Colorado

DOCKET NO.: 93-284
DECIDED BY: Rehnquist Court (1993-1994)
LOWER COURT: United States Court of Appeals for the Third Circuit

CITATION: 511 US 431 (1994)
ARGUED: Feb 28, 1994
DECIDED: May 16, 1994

ADVOCATES:
John F. Manning - on behalf of the United States, as amicus curiae, supporting the Respondent
Paul O. Taylor - on behalf of the Petitioner
William J. Augello - on behalf of the Respondent

Facts of the case

Question

Media for Security Services, Inc. v. Kmart Corporation

Audio Transcription for Oral Argument - February 28, 1994 in Security Services, Inc. v. Kmart Corporation

Audio Transcription for Opinion Announcement - May 16, 1994 in Security Services, Inc. v. Kmart Corporation

David H. Souter:

I have the opinion to announce in the case of Security Services against Kmart, No. 93-284.

This case comes to us on writ of certiorari to the United States Court of Appeals for the Third Circuit.

The case presents the question whether a motor carrier in bankruptcy may recover for undercharges based on tariff rates that have void as a matter of law or under the Interstate Commerce Commission's regulations.

A milage rate tariff has two components: charges per mile and stated distance.

The milage rate tariff that petitioner, Security Services filed with the Interstate Commerce Commission, did not list distances for calculating charges for shipments but instead relied on a milage guide filed by the Household Goods Carriers' Bureau.

The milage guide states that it may not be used to determine rates unless the carrier is shown as a participant in the guide.

Participants are listed in a separate tariff filed with the ICC.

When Security Services failed to pay its participation fees, the Bureau canceled Security Services' participation by publishing a supplement to its tariff which listed participants.

Sometime later, Security Services contracted with respondent, Kmart Corporation to transport Kmart's goods at contract rates below its filed tariff rates.

Security Services later filed for bankruptcy and, as debtor in possession, invoked the ICC or the Interstate Commerce Act?s filed rate doctrine which mandates that carriers charge and be paid the rates filed in the tariff.

Security Services, therefore, claimed that Kmart was liable for undercharges based on the difference between the contract and tariff rates.

Kmart refused to pay and Security Services sued.

The District Court granted summary judgment for Kmart and the Court of Appeals affirmed.

We granted certiorari to resolve a second conflict over the enforceability of the ICC void for non-participation regulation and we now affirm.

ICC regulations invalidate a milage-based tariff upon cancelation of the carrier's participation in an agent's distance guide, as occurred here.

Such a tariff is incomplete and seizes to satisfy the fundamental purpose of tariffs which is to disclose the freight charge due to the carrier.

A carrier employing distance rates without being bound by state of distances would be just as well placed to discriminate among shippers by measuring with rubber instruments as it would be by charging shippers for a state of distance at mutable rates per mile.

Security Services makes two main arguments, neither of which is availing.

It argues that the regulation operates retroactively but that is not the case.

Under a regulation, Security Services' tariff reference to the milage guide became void as a matter of law and its tariff filing is incomplete on the phase when the Bureau canceled its participation in the guide.

The transactions with Kmart occurred after that date.

Equally inept is Security Services' reliance on the technical defect rule.

Under our cases, neither procedural irregularity nor unreasonableness nullifies a filed rate.

But a tariff like this one that refers to another tariff for essential information which tariff in turn states that the carrier may not refer to it does not provide the adequate notice of rates to be charged that the court's technical defects cases require.

The trustee and bankruptcy and debtors in possession may rely on the filed rate doctrine to collect for undercharges but they may not collect for undercharges based on filed but void rates.

Justice Stevens has filed a concurring opinion; Justice Thomas and Justice Ginsburg have each filed dissenting opinions.