TEAMSTERS URGE COURT TO UPHOLD RULING ON TRANSCON LINES' DISCOUNTS

TEAMSTERS URGE COURT TO UPHOLD RULING ON TRANSCON LINES' DISCOUNTS

The Teamsters Union urged a U.S. appeals court to uphold a lower court ruling that found many discounts to shippers by a now-bankrupt trucking company were illegal.

The union told the U.S. Court of Appeals for the Ninth Circuit, based in San Francisco, that it is the largest creditor of the former carrier, Transcon Lines Inc., with claims in excess of $39 million.In addition to claims for back wages and pension benefits, the union said its members are also the largest equity holder in Transcon. In an effort to help the company increase its cash flow, the employees had agreed to a 15 percent wage reduction. That money was used to purchase shares in Transcon's parent corporation through an employee stock ownership plan.

The union's comments were contained in a "friend of the court" petition filed Feb. 27.

"The undercharge claims brought by Transcon's trustee against various shippers who benefited from the carrier's unlawful discounting practices represent the only hope which these former employees have of recovering anything from the bankruptcy estate," the union said.

Undercharge claims result when trucking companies give discounts on published tariffs but do not file the lower rate with the Interstate Commerce

Commission. Conflicts arise, sometimes years later, when bill collectors try to collect the difference between the rate on file at the ICC and the rate actually charged to move the freight.

Estimates of the undercharge claims by former trucking companies against shippers generally range from $1 billion to $2 billion.

The Teamsters said if the district court is reversed, it is certain that its members, who are the "forgotten victims" of the Transcon truck bankruptcy, will receive nothing.

But shippers fear that if the appeals court does not reverse the lower court's ruling in the Transcon case, it will amount to a precedent that would expand undercharge claims by many billions of dollars.

The lower court judge voided the discount tariffs of Transcon because the carrier employed shipper account code tariffs that permit trucking companies to discriminate among customers. These tariffs, which describe shippers in secret codes rather than by name, are routinely used by most carriers.

The judge also ruled that although Transcon used a tariff that violated certain ICC credit rules, it could still collect back payments based on this tariff.

As a result of those rulings, shippers' potential liability for Transcon undercharge claims has been as high as $1 billion. Transcon had been the 12th- largest U.S. carrier.

The Teamsters urged the appeals court to send a message to the carrier and shipper communities that "published tariff rates must be adhered to, without qualification; and secret unfiled agreements and/or gimmicks to obfuscate the filed rate doctrine are illegal."

The union also said the use of shipper codes means the ICC does not know the identity of the shipper involved, and "hence many of its regulatory and review powers are rendered either meaningless or unenforceable."