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Safir v. Gibson

decided: February 26, 1970.

MARSHALL P. SAFIR, ARNOLD WEISSBERGER AND SAPPHIRE STEAMSHIP LINES, INC., PLAINTIFFS-APPELLANTS,
v.
ANDREW GIBSON, SUCCESSOR TO AND SUBSTITUTED FOR JAMES W. GULICK, ACTING MARITIME ADMINISTRATOR, MARITIME ADMINISTRATION, UNITED STATES DEPARTMENT OF COMMERCE, JAMES S. DAWSON, JR., SECRETARY, MARITIME SUBSIDIARY BOARD, MARITIME ADMINISTRATION, UNITED STATES DEPARTMENT OF COMMERCE, AND MAURICE STANS, SUCCESSOR TO AND SUBSTITUTED FOR C. R. SMITH, SECRETARY OF COMMERCE OF THE UNITED STATES, APPELLEES. AMERICAN EXPORT ISBRANDTSEN LINES, INC., BLOOMFIELD STEAMSHIP CO., LYKES BROS. STEAMSHIP COMPANY, INC., MOORE-MCCORMACK LINES, INC., UNITED STATES LINES, INC., AMERICAN PRESIDENT LINES, LTD., PRUDENTIAL STEAMSHIP CO., INC. AND PRUDENTIAL GRACE LINES, INC., AND FARRELL LINES, INC., INTERVENORS



Lumbard, Chief Judge, and Friendly and Feinberg, Circuit Judges.

Author: Friendly

FRIENDLY, Circuit Judge:

This appeal is a sequel to our decision in Safir v. Gibson, 417 F.2d 972 (1969), where we held that under § 810 of the Merchant Marine Act, 1936, 46 U.S.C. § 1227, the Maritime Administration was "required to make a considered decision whether to recover the subsidies paid in the past" to members of AGAFBO who had been found by the Federal Maritime Commission (FMC) to have violated § 15 of the Shipping Act, 1916, as amended, 46 U.S.C. § 814. Rates on U.S. Government Cargoes, Docket No. 65-13, 11 F.M.C. 263 (1967). After our decision was handed down, the Maritime Subsidy Board of the Maritime Administration initiated a proceeding, Docket No. S-243, on October 24, 1969, directing its chief hearing examiner to conduct an investigation and compile a public record "which will provide a basis for recommending to the Maritime Subsidy Board whether Section 810, Merchant Marine Act, 1936, as amended (46 U.S.C. § 1227), has been violated and the appropriate action that should be taken." Steamship lines that were members of AGAFBO and received operating-differential subsidies during the period of the violations and the plaintiffs here were named as parties. Dissatisfied with this procedure, plaintiffs moved the District Court for the Eastern District of New York to issue an injunction restraining the defendants "from making any further payments of operating or construction differential subsidies to the members of AGAFBO which have violated Sec. 810 of the Merchant Marine Act, 1936" and to grant other appropriate relief. Judge Dooling denied the motion in all respects.

Insofar as the district court refused to enjoin current subsidy payments, its action was clearly consistent with our opinion, indeed compelled by it. We said we did not believe that § 810 protected "the interest of a carrier in having former violators barred from ever receiving subsidy payments despite their return to the path of virtue," and sharply distinguished making current payments to former violators from refusing to seek recovery of payments during the violation, 417 F.2d at 977. Plaintiffs do not charge that the AGAFBO members now receiving subsidy payments are violating § 810 or indeed that they have done so since March 1, 1966. The argument that these carriers will not have returned "to the path of virtue" until they have refunded all subsidy payments received during the period of violation is a far-fetched misreading of our decision.

On the other hand, while the district court was literally correct in its conclusion that we "did not find that Section 810 had been violated, or that a finding of a violation of Section 15 is a finding of a violation of Section 810 * * *," the primary reason why we did not do the latter was that the question was not raised. We called attention to the failure of the AGAFBO lines to seek intervention and rather pointedly invited them to do so, 417 F.2d at 976 n. 4. Their decision to remain on the sidelines should not prevent us from making a decision that will spare the plaintiffs the necessity of going through a costly and time-consuming redetermination of matters that have already been heard and decided by the agency having authority in the premises.

Section 810 of the Merchant Marine Act, 1936, makes it unlawful

for any contractor receiving an operating-differential subsidy under sections 1171-1182 of this title or for any charterer of vessels under sections 1191-1204 of this title to continue as a party to or to conform to any agreement with another carrier or carriers by water, or to engage in any practice in concert with another carrier or carriers by water, which is unjustly discriminatory or unfair to any other citizen of the United States who operates a common carrier by water exclusively employing vessels registered under the laws of the United States on any established trade route from and to a United States port or ports.

Section 15 of the Shipping Act directs the Commission to disapprove any agreement "that it finds to be unjustly discriminatory or unfair as between carriers, shippers, exporters, importers, or ports * * * or to operate to the detriment of the commerce of the United States, or to be in violation of this chapter * * *." Section 18(b) (5), 46 U.S.C. § 817(b) (5), added in 1961, 75 Stat. 764, directs the Commission to disapprove "any rate or charge filed by a common carrier by water in the foreign commerce of the United States or conference of carriers which, after hearing, it finds to be so unreasonably high or low as to be detrimental to the commerce of the United States." A finding by the FMC that the rates of the AGAFBO members were unjustly discriminatory or unfair as between carriers would thus determine the same conduct as would constitute a violation of § 810, subject only to proof that the AGAFBO lines were receiving operating-differential subsidies at the time and that the carrier adversely affected was a "citizen of the United States who operates a common carrier by water exclusively employing vessels registered under the laws of the United States on any established route from and to a United States port or ports."

When we turn to the discussion by the FMC in Docket No. 65-13, Rates on U.S. Government Cargoes, 11 F.M.C. 263, 279, 283 (1967), we find the following:

We consider now the AGAFBO reduced rates which became effective March 29, 1965. As previously seen, MSTS was informed by AGAFBO that the reductions were temporary and for competitive purposes only, and that they were not believed to be fair, reasonable, or compensatory. There can be little doubt that the drastic reductions were designed for but one purpose: namely, the elimination of Sapphire from the carriage of military cargo. Since the rate reductions were admittedly unreasonable and noncompensatory and were justified only in furtherance of the unfair attempt to drive Sapphire from the trade, we agree with the examiner and, under the circumstances, conclude that the reduced rates were so unreasonably low as to be detrimental to the commerce of the United States, and, therefore, contrary to section 18(b) (5) of the Act.

Thus, we will consider whether the rate reductions offended the provisions of section 15. AGAFBO itself characterized its reduced rates as unreasonably low. The operating data submitted by AGAFBO show that this admission was accurate. The reduced rates were simply an attempt to deprive Sapphire of some of the cargo which Sapphire expected would be generated by its rates. And AGAFBO, by means of its reduced rates, did in fact deprive Sapphire of the nucleus cargo which was indispensable to Sapphire's profitable operation. Under these circumstances, we find that the AGAFBO agreement, through its rate-making functions, operated in a manner which was knowingly at odds with the requirements of section 18(b) (5) and which was detrimental to the commerce of the United States and contrary to the public imterest as well. AGAFBO's rates were detrimental to commerce because they were designed to and did have a disastrous effect on Sapphire. AGAFBO's rates were contrary to the public interest because they were predatory in nature and in derogation of an important aspect of the public interest, the policy to foster competition to the extent compatible with the regulatory purposes of the Act. Isbrandtsen Co., Inc. v. United States, 93 U.S.App.D.C. 293, 211 F.2d 51 (1954) cert. denied, Japan Atlantic and Gulf Conference v. United States, 347 U.S. 990, 74 S. Ct. 852, 98 L. Ed. 1124 (1954). We therefore, conclude that the AGAFBO agreement operated in a manner which was in violation of section 15.

The Commission's "Ultimate Conclusions" included, 11 F.M.C. at 287:*fn1

2. AGAFBO's rates, which were reduced to an admittedly noncompensatory and unreasonable level in an attempt unfairly to compete with Sapphire were so unreasonably low as to be detrimental to the commerce of the United States contrary to the provisions of section 18(b) (5).

3. AGAFBO, by reducing its rates to an admittedly noncompensatory and unreasonable level in an attempt unfairly to compete with Sapphire, violated section 15 by knowingly setting rates which were contrary to section 18(b) (5) and which ...


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