WASHINGTON — An attorney for Kmart Corp. told the Supreme Court the retailer should not be held liable for $500,000 that a trucking company claims it undercharged.
Security Services Inc. v. Kmart Corp. is the last in a series of cases the High Court has heard involving bankrupt carriers looking to recoup revenues based on the nation’s intricate trucking laws.
The case was heard last week. The Court could take several months to render its verdict.
Last year, in Reiter v. Carolina Motor Express, the Supreme Court ruled in favor of carriers, claiming they were owed money based on the Interstate Commerce Commission’s filed rate doctrine, which requires truckers to post its tariffs with the agency.
The court ruled that rate — often higher than the negotiated rate paid for trucking services by the shipping companies — is what shippers are legally required to pay.
The case heard last week, though, has a new twist that would favor shippers if Kmart’s viewpoint is upheld. Kmart’s position has been upheld by lower courts. There are an estimated 111 other shippers facing undercharge claims similar to Kmart’s.
In 1984, Kmart contracted with the carrier Riss Internal Corp., now known as Security Services, which filed a tariff with the ICC based on a distance formula. As required by the agency, the formula was tied to a certified mileage guide provided by the Household Goods Carriers’ Bureau.
The next year, HGCB dropped Riss from its certification because the carrier failed to pay its $83 dues — a move that Kmart claims effectively disqualified Riss from having an ICC-approved tariff.
“The filed rate doctrine must be strictly enforced against carriers, as well as shippers,” argued Kmart attorney William Augello before the court. “Without an effective tariff, there is no basis for an undercharge.”
In arguments before the court, Paul Taylor, attorney for Security Services, countered, “There never has been a requirement for perfect tariffs.”
Security Services based its bill of $500,000 for Kmart on the filed rate up to 1989, when Riss declared bankruptcy.
Regardless of the court’s ruling in the Kmart case, and the signing Dec. 3 by President Clinton of a bill addressing the issue, the undercharge story is far from over.
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The law was considered a compromise between shippers and carriers that enumerated ways to settle undercharge claims. It is now being challenged in court by bankruptcy attorneys, who claim the law technically doesn’t apply under bankruptcy statutes.
This should be the last challenge by undercharge litigators, and it may ultimately also find its way to the Supreme Court, said Morrison Cain, vice president of legal and public affairs for the International Mass Retail Association.
“The bankruptcy trustees are out to lunch. The money tree is withering, and they want anything for it to continue,” Cain said. “They are saying bankruptcy is sacred and different and the negotiated rate act doesn’t apply to them. It’s clear Congress made it apply to bankrupt companies.”