Reproduced with the Permission of Miles L. Kavaller

Many shippers are now receiving undercharge claims from Superior Fast Freight in connection with its Chapter 11 bankruptcy in United States Bankruptcy Case No. LA 93-54051-ER. Superior Fast Freight operated as a freight forwarder until 1993 from facilities in Irwindale, California. ICC regulation of freight forwarders terminated in 1986 after which filed rates were no longer required. Accordingly, there can be no undercharges for those shippers who received a freight forwarder service.

However, correspondence from Superior Fast Freight, Inc.'s attorneys states that it operated as a motor common carrier since it held operating authority from the ICC in MC-12136, maintained tariffs on file with the ICC, held its services out to the general public as a motor common carrier, transported shipments in its own vehicles and issued bills of lading stating that the freight was subject to the classification and tariffs on file with the ICC. Whether a shipper received a motor carrier service, or a freight forwarder service, a distinction not always simple to make, will have to be resolved either by the bankruptcy court or the ICC.

Even if Superior Fast Freight performed a motor carrier service, however, it must be shown as a participant in the filed tariffs containing the charges it seeks to collect. Information currently available from the Rocky Mountain Motor Tariff Bureau indicates that a company called Superior Fast Drayage dba Superior Express with the same ICC MC number is identified as a participant in various RMB tariffs. Whether participation by Superior Fast Drayage dba Superior Express in the RMB tariffs will suffice, will have to be determined either by the ICC or the bankruptcy court.

Current law provides for exemptions, settlement options and defenses for both interstate and intrastate undercharge claims. Under the Negotiated Rates Act of 1993 an exemption from the collection of undercharge claims for small business concerns, as defined by regulations issued by the Small Business Administration, is available. It further authorizes settlements of fifteen percent (15%) for shipments weighing 10,000 lbs. or less and twenty percent (20%) for shipments weighing more than 10,000 lbs. if elected within ninety (90) days of notification of interstate undercharge claims. Defenses to interstate undercharge claims include unreasonable practices and unreasonable rates. The Negotiated Rates Act of 1993 has been found to apply to bankrupt carriers by recent decisions of both the United States Courts of Appeals for the Ninth Circuit (Gumport, Trustee v. Sterling Press [In re: Transcon Lines]--petition for rehearing denied on September 14, 1995) and the Eighth Circuit (Jones Truck Lines, Inc. v. Whittier Wood Products Company).

SB 595, California's Negotiated Rates Act, provides virtually the same exemptions, settlement options and defenses to intrastate undercharges as the NRA of 1993 does for interstate shipments. However, whether or not SB 595, once enacted, applies to bankrupt motor carriers is a question which will have to be resolved. The Bankruptcy Code prohibits forfeiture of a bankrupt's property and the California statute may violate that prohibition.

The PUC has scheduled hearings in the Industrial Freight System undercharge matter for the week of January 22, 1996. The complaints in six (6) "lead" cases will be decided by the Commission and the other 300 or so complaint cases pending will be held in abeyance. The primary issue is the so-called "late-pay" question in which the trustee for Industrial Freight System contends that shippers forfeited the discounted freight rate if payment was not made within fifteen (15) days of billing. In their defense the shipper interests have asserted that payment within fifteen (15) days of billing applies to the carrier's extension of credit and not to the terms of the tariff containing conditions applicable to discounts. Moreover, the terms in Industrial Freight's tariff which purport to limit discounts to accounts which are "current" and not "delinquent" are vague and ambiguous and should be construed against the carrier. The shipper interests also contend that it was the custom of Industrial Freight to accept payment of freight charges without protesting the time within which they were made and otherwise asserting disqualification from the charges which were billed. A decision in the Industrial Freight undercharge cases is not likely until March or later of 1996.