Isbrandtsen Company v. United States

Citation239 F.2d 933
Decision Date09 November 1956
Docket NumberNo. 13027.,13027.
PartiesISBRANDTSEN COMPANY, Inc., Petitioner, v. UNITED STATES of America and Federal Maritime Board, Respondents, The Secretary of Agriculture, Intervenor, Japan-Atlantic and Gulf Freight Conference, et al., Intervenors.
CourtUnited States Courts of Appeals. United States Court of Appeals (District of Columbia)

Mr. John J. O'Connor, Washington, D. C., for petitioner.

Mr. Daniel M. Friedman, Atty., Dept. of Justice, with whom Messrs. Neil Brooks, Asst. Gen. Counsel, United States Dept. of Agriculture, and Donald A. Campbell, Atty., U. S. Dept. of Agriculture, were on the brief, for respondent United States of America, and intervenor The Secretary of Agriculture.

Mr. Charles H. Weston, Atty., Dept. of Justice, also entered an appearance for respondent United States of America.

Mr. Edward D. Ransom, Gen. Counsel, Federal Maritime Board, with whom Messrs. James L. Pimper, Asst. Gen. Counsel, Federal Maritime Board, and Edward Schmeltzer, Atty., Federal Maritime Board, were on the brief, for respondent Federal Maritime Board.

Mr. Elkan Turk, New York City, with whom Messrs. James M. Landis, White Plains, N. Y., and Elkan Turk, Jr., Brooklyn, N. Y., were on the brief, for intervenors Japan-Atlantic and Gulf Freight Conference and others.

Messrs. Abba P. Schwartz, Seymour J. Rubin and Wallace M. Cohen, Washington, D. C., also entered appearances for intervenors Japan-Atlantic and Gulf Freight Conference and others.

Before PRETTYMAN, FAHY and WASHINGTON, Circuit Judges.

Writ of Certiorari Granted March 25, 1957. See 77 S.Ct. 664.

FAHY, Circuit Judge.

Pursuant to 64 Stat. 1130 (1950), 5 U.S.C. § 1034 (1952), 5 U.S.C.A. § 1034, Isbrandtsen Company, Inc., petitions as a party aggrieved for review of orders of the Federal Maritime Board which are described as a Report served December 14, 1955, and orders served December 21, 1955, and January 11, 1956. The respondents are the Board and the United States, the latter being a statutory respondent under section 1034, supra. The United States, however, represented by the Attorney General, has joined Isbrandtsen in attacking the validity of the orders under review. The intervenors are the Secretary of Agriculture, supporting Isbrandtsen, and the Japan-Atlantic and Gulf Freight Conference, defending the orders of the Board.

The Conference is a voluntary association of 17 steamship lines operating between Japan, Korea, and Okinawa, and the Gulf and Atlantic Coasts of North America. Five of the members are American, eight are Japanese, and four are of other nations. The primary purpose of the Conference is to establish and maintain agreed rates among the members. The basic agreement under which the Conference operates was approved by a predecessor agency of the Federal Maritime Board in 1934 under section 15 of the Shipping Act of 1916, 39 Stat. 733, as amended, 46 U.S.C. § 814 (1952), 46 U.S.C.A. § 814.1

Isbrandtsen is not a member of the Conference, although membership is open to any common carrier regularly operating or intending regularly to operate in the trade. Since shortly after World War II Isbrandtsen has been the sole non-Conference line which has maintained a berth service in the Japan-Atlantic trade. This trade is overtonnaged and consequently the vessels of both Isbrandtsen and the Conference have had a substantial amount of free and usable space after completion of loading in Japan. Between 1947 and March 12, 1953, Isbrandtsen maintained its rates on most commodities an average of 10 per cent below the rates established by Conference members under their agreement. Isbrandtsen's share of the business during this period was substantial, and its average carryings per sailing were much higher than were the average carryings of the Conference lines. In order to meet this competition the Conference members voted to adopt the exclusive patronage contract/non-contract dual-rate system described below, but when the Conference was restrained by this court from putting this system into effect prior to its approval by the Board the Conference, on March 12, 1953, opened the rates on ten major commodities. This permitted the member lines to set their own rates and to compete effectively with Isbrandtsen.

After March 12, 1953, rates dropped sharply, even to noncompensatory levels with respect to some commodities. In May, 1953, Isbrandtsen established minimum rates below which it would not go. This adversely affected its competitive position, so that since that date Isbrandtsen has carried little cargo in the trade.

On December 24, 1952, before rates had been opened by the Conference, it had filed with the Board, pursuant to the latter's General Order 76,2 a statement advising the Board of the Conference's intention to institute in 30 days an exclusive patronage contract/non-contract dual-rate system in the Japan-Atlantic trade, hereinafter referred to as the dual-rate system. Under the proposed system shippers who declined to sign an exclusive patronage contract with the Conference would be charged rates 9½ per cent higher for the same transportation service than the rates charged shippers who enter into such contracts. Breach of the exclusive patronage contracts would be sanctioned by means of a liquidated damage clause under which a shipper who breaches the contract by shipping with a non-Conference line would be obligated to pay to the Conference 50 per cent of the contract rate on the shipment. The contract would be entered into for an indefinite period, subject to cancellation by either party on three months notice.

Protests against the proposed dual-rate system were filed by Isbrandtsen and the Department of Justice, who requested the Board to prohibit the Conference from implementing the system until after a hearing had been held. The Board granted the request for a hearing, but declined to suspend operation of the dual-rate system, stating that the system appeared to be in compliance with the Shipping Act.

On petition for review in this court, we held that section 15 of the Act, note 1, supra, required the Board to approve the dual-rate system before it could legally be initiated. Isbrandtsen Co. v. United States, 93 U.S.App.D.C. 293, 211 F.2d 51, certiorari denied 347 U.S. 990, 74 S.Ct. 852, 98 L.Ed. 1124. Consequently we set aside the action of the Board allowing the system to go into effect without such approval, and enjoined the Conference from acting under the system until it was approved by the Board. Thereafter the Board's hearings resulted in its approval of the dual-rate system in the orders which are now here for review.

If the arrangements in question are such as the statute authorizes the carriers to make or the Board to approve, they are exempt from the inhibitions of the antitrust laws under section 15, note 1 supra. In providing for such exemption, however, the statute also places definite limits. For example sections 16 and 17 of the Act, 46 U.S.C.A. §§ 815, 816 provide, "it shall be unlawful" for any common carrier by water, alone or in conjunction with another, to

"make or give any undue * * * preference or advantage to any particular person,"

or to

"demand, charge, or collect any rate, fare, or charge which is unjustly discriminatory between shippers * * *."

The Board strongly urges that the dual-rate system cannot be said to give any "undue preference or advantage" or to constitute a demand, charge, rate or fare which is "unjustly" discriminatory. It says that because of competitive conditions in the trade the preference is not "undue" or the discrimination "unjust". In explaining these conditions the Board points to the differences in the operating costs of carriers of different nationalities, to the need for stability of rates and services, to freedom of any steamship company to enter this trade in contrast to the requirements of the Interstate Commerce Act, 49 U.S.C.A. § 1 et seq. that there be a finding of public convenience and necessity, to the relationship between costs of operating and the quantity of cargo carried, and to other factors, all of which, in the view of the Board, are shown by the record and support the Board's findings that the inauguration of the dual-rate system is a necessary competitive measure to offset the harmful effect of non-Conference competition in an overtonnaged trade subject to the injurious practice of undercutting of Conference rates. The Board points furthermore to its finding that the dual-rate system will decrease the possibility of continued rate wars with their disastrous consequences to American-flag lines, consequences repugnant to the purposes of the Act to encourage the development and creation of a naval auxiliary and reserve, and a merchant marine able to meet the requirements of the commerce of the United States with foreign countries.

We might agree with the Board that the objectives it seeks in approving the dual-rate system are consistent with the objectives of the statute; but these can be furthered only by means permitted by the statute. It is here that we find an insuperable barrier. Section 14, Third, of the Act, 46 U.S.C.A. § 812, subd. 3, provides that no common carrier by water shall

"Retaliate against any shipper by refusing, or threatening to refuse, space accommodations when such are available, or resort to other discriminating or unfair methods, because such shipper has patronized any other carrier * * * or for any other reason."

As we have seen, shippers who decline to sign an exclusive patronage contract with the Conference would be charged for the same transportation service rates 9½ per cent higher than those charged shippers who enter into such contracts, and breach of contract by one who does sign would entail liquidated damages of 50 per cent of the contract rate. While in terms the 9½ per cent higher rate is for failure to enter into an exclusive patronage contract rather...

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  • United States v. Baltimore and ORR
    • United States
    • U.S. District Court — District of Columbia
    • 15 April 1982
    ...and therefore illegal without elaborate inquiry as to the precise harm they have caused"). 15 See, e.g., Isbrandtsen Co. v. United States, 239 F.2d 933, 937-38 (D.C.Cir.1956), aff'd sub nom., Federal Maritime Board v. Isbrandtsen, 356 U.S. 481, 78 S.Ct. 851, 2 L.Ed.2d 926 (1958) (group boyc......
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    ...on the ground that the system of dual rates was illegal per se under § 14 of the Shipping Act of 1916, 46 U.S.C.A. § 812 1956, 99 U.S.App. D.C. 312, 239 F.2d 933. The Supreme Court 353 U.S. 908, 77 S.Ct. 664, 1 L.Ed.2d 662 granted certiorari to resolve the issue as to the legality of the du......
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