APPEALS FROM THE UNITED STATES DISTRICT COURT FOR THE DISTRICT OF UTAH*fn*
Warren, Black, Reed, Frankfurter, Douglas, Burton, Clark, Minton, Harlan
Opinion of the Court by MR. JUSTICE HARLAN, announced by MR. JUSTICE CLARK.
These cases involve the validity of railroad tariff provisions exonerating the appellee railroads from liability for stated percentages of damage to shell eggs shipped over their lines. The cases come to us by direct appeal*fn1 from a judgment of a three-judge district court in Utah,*fn2 which dismissed an action brought to set aside and enjoin an order of the Interstate Commerce Commission*fn3 approving such tariff provisions. We noted probable jurisdiction on October 14, 1954.*fn4
Claims against the railroads for damage to egg shipments steadily and rapidly increased in the years following 1939, particularly on shipments to the eastern seaboard area.*fn5 In 1950 the railroads, believing that because of the difficulties of proof they were being exposed to liability for damage for which they were not responsible, filed with the Commission proposed tariff provisions similar in form to those approved by the order under review. After an investigation and hearing,*fn6 the Commission concluded
that egg shipments ordinarily contained substantial amounts of damage for which the railroads were not responsible -- namely, (a) damage existing prior to shipment, and (b) damage unavoidably arising in transit because of the inherently fragile nature of eggs. The average amount of such damage was found to be 3% for eggs packaged at railhead points and 5% for those packaged elsewhere. On the basis of this finding, the Commission, although rejecting the higher-percentage provisions proposed by the railroads,*fn7 found reasonable -- and hence authorized the railroads to include in their tariff schedules*fn8 -- the following tolerance provision:
"On eggs placed in packages at rail point of origin of the shipment, no claim shall be allowed where the physical damage to the eggs at destination does not exceed 3% of the contents of the packages containing damaged eggs. Where damage exceeds 3%, claims shall be allowed for all damage in excess of 3%, if investigation develops carrier liability.
"Exception. -- Where bona fide certificates of Federal or State egg inspection agencies showing extent of physical damage to eggs determined at rail point of origin of the shipment immediately prior to tender for rail transportation indicate the actual shell damage to be other than 2%, the percentage of actual damage as shown on such certificates, plus 1% shall be used in lieu of 3% specified in this Section."
An otherwise identical provision applicable to "eggs placed in packages at points other than the rail point of
origin" was determined to be reasonable with a tolerance of 5%.
It is claimed that these tariff provisions violate § 20 (11) of the Interstate Commerce Act, 24 Stat. 386, as amended, 49 U.S.C. § 20 (11), which provides that any common carrier subject to the Act receiving property for interstate transportation "shall be liable . . . for any loss, damage, or injury to such property caused by it . . . and no contract, receipt, rule, regulation, or other limitation of any character whatsoever shall exempt such common carrier . . . from the liability hereby imposed . . . ."
The Commission and the court below (one judge dissenting) held that the tolerance provisions did not violate § 20 (11) because the pre-shipment and unavoidably-caused damage represented by the tolerances was not damage "caused by" the railroads; hence the tolerance regulations, in providing a means for determining the extent of such damage, did not limit the railroads' proper liability, but operated simply to eliminate from damage claims the damage for which the railroads were not liable.
The appellants attack the provisions on six principal grounds: (1) the Commission has no jurisdiction over damage claims and hence no power to prescribe regulations governing their disposition; (2) tolerances based on averages necessarily embrace a forbidden limitation of liability since, by definition, some shipments will contain less than the "average" damage, resulting in those cases in the carrier being relieved of its full liability; (3) the railroads are liable for in-transit damage even though "unavoidable";*fn9 (4) the averages found by the Commission are not supported by the evidence; (5) the approval of uniform nation-wide tolerances was unreasonable in light
of the wide differences in the egg-damage experience of consignees located in different areas of the country;*fn10 and (6) the conclusion that the tolerances do not limit liability is not supported by the Commission's findings.Our agreement with this last contention makes it unnecessary for us to consider the other arguments, and we may assume, though we do not decide, that the tariff provisions are not invalid for any of the other reasons assigned.
The Commission's justification of the tolerance regulations as not limiting liability rests upon two distinct propositions: (1) that there is present in every case of eggs at destination physical damage not "caused by" the railroads -- and hence for which they are not liable under § 20 (11) -- in the amount of the specified percentages; and (2) that the deduction of those percentages from damage claims ...