Armement Deppe, SA v. United States

• Decision Date: 08 August 1968
• Docket Number: No. 24427.,24427.
• Citation: 399 F.2d 794
• Parties: ARMEMENT DEPPE, S. A., et al., Appellants, v. UNITED STATES of America, Appellee.
• Court: U.S. Court of Appeals — Fifth Circuit

399 F.2d 794 (1968)

ARMEMENT DEPPE, S. A., et al., Appellants, v. UNITED STATES of America, Appellee.

No. 24427.

United States Court of Appeals Fifth Circuit.

August 8, 1968.

Leonard G. James, San Francisco, Cal., Donald A. Lindquist, New Orleans, La., F. Conger Fawcett, San Francisco, Cal., for appellants.

David L. Rose, Norman Knopf, Stephen R. Felson, Attys., Dept. of Justice, Washington, D. C., for appellee.

Before BELL, AINSWORTH and GODBOLD, Circuit Judges.

AINSWORTH, Circuit Judge:

Appellants are nine foreign common carrier steamship lines, which were members of the Continental-U.S.A. Gulf Westbound Freight Conference, engaged in the operation of ocean vessels from the Continent of Europe to United States Gulf ports. They moved to dismiss for lack of jurisdiction over the subject matter of the complaint, this civil action brought by the United States under Sections 14b and 15 of the Shipping Act of 1916 as amended (46 U.S.C. §§ 813a, 814), to recover penalties for violations of the Act.¹

This is an interlocutory appeal under 28 U.S.C. § 1292(b) from the denial by the District Court of the motion to dismiss.²

In 1958, the Supreme Court held in Federal Maritime Board v. Isbrandtsen Company, 356 U.S. 481, 78 S.Ct. 851, 2 L.Ed.2d 926 (1958), that the dual-rate (exclusive patronage) contract system of ocean common carriers and conferences violated the Shipping Act of 1916 and was a "resort to other discriminating or unfair methods" prohibited by the Act. 356 U.S. at 493, 78 S.Ct. at 859. The decision was far reaching and disturbing in its effect in the maritime industry, and Congress in 1961 enacted legislation amending the Shipping Act of 1916 by adding a new section, 14b,³ by the terms of which the use of dual-rate contracts was permitted under certain conditions. A dual-rate contract system is one under which shippers, by agreement, tender all or any fixed portion of their cargo destined for certain designated American ports to conference carriers, as a result of which they pay a lower rate for the shipping of commodities than other shippers.

Under the new Section 14b of the Shipping Act of 1916 as amended, conference carriers in American foreign commerce were required to amend their shipper contracts by including the eight substantive provisions set out in Section 14b, and to obtain approval thereof by the Federal Maritime Commission. Otherwise, such dual-rate contracts would be unlawful and expose the violator to a penalty of $1,000 per day for each violation of Section 14b, to be recovered by the United States in a civil action as provided in Section 15 of the said Act as amended (46 U.S.C. § 814). Under terms of the new amendments to the Shipping Act, a grace period of one year for contracts amended in accordance with the new provisions was granted, provided they were filed with the Commission within six months after the enactment of the statute which occurred on October 3, 1961. Appellants failed to amend and obtain approval from the Federal Maritime Commission of their dual-rate contracts in accordance with the new amendments to the law, by the required date of April 3, 1962. On August 15, 1962, they dissolved their Conference and terminated the dual-rate contracts. Thus the United States is seeking to recover penalties in this civil action for the period April 3, 1962, to August 15, 1962, at the rate of $1,000 for each day of a violation by each carrier.

We are called upon to decide whether Congress may enact a statute which gives the United States jurisdiction over foreign shipowners and their shipping contracts in the transportation of commodities to American ports in foreign commerce, which may subject such foreign shipowners to penalties for violation of the statutory provisions due to noncompliance; and if such jurisdiction is permissible, whether Sections 14b and 15 of the Shipping Act of 1916 as amended, were intended by Congress to be applicable to such contracts and foreign-flag shipping lines transporting commodities to American ports in foreign commerce.

I.

It is well settled that when a foreign-flag shipping line chooses to engage in foreign commerce and use American ports it is amenable to the jurisdiction of the United States and subject to the laws thereof. The Schooner Exchange v. M'Faddon and Others, 7 Cranch 116, 3 L.Ed. 287 (1813). This time-honored principle was reiterated in the "Wildenhus's Case," Mali v. Keeper of the Common Jail, 120 U.S. 1, 11, 7 S.Ct. 385, 387, 30 L.Ed. 565 (1887), in the following language: "It is part of the law of civilized nations that, when a merchant vessel of one country enters the ports of another for the purposes of trade, it subjects itself to the law of the place to which it goes, unless, by treaty or otherwise, the two countries have come to some different understanding or agreement. * * *" Later the Supreme Court said in Benz v. Compania Naviera Hidalgo, S. A., 353 U.S. 138, 142, 77 S.Ct. 699, 701, 702, 1 L.Ed.2d 709 (1957), "It is beyond question that a ship voluntarily entering the territorial limits of another country subjects itself to the laws and jurisdiction of that country. * * *" In Lauritzen v. Larsen, 345 U.S. 571, 592, 73 S.Ct. 921, 933, 97 L.Ed. 1254 (1953), it was held that Congress may "condition access to our ports by foreign-owned vessels upon submission to any liabilities it may consider good American policy to exact."

Appellants find no fault with the foregoing principles and in their reply brief admit that the United States has the "power" to exclude foreign vessels from United States ports and, correspondingly, to condition their entry into United States ports; that the conduct of foreign vessels is subject to United States law while they are "within U. S. ports"; and that contracts of foreign shipowners, wherever executed, may be governed by United States law when they are performed or effectuated "within the U. S."

But appellants contend that these principles are not at issue here. They state that the Government has admitted "that nothing more than the `tender' of the shippers' cargo was involved in the contracts,"⁴ and contend that "Nothing could have been done under the contracts, by any party, outside the territorial waters of a Continental port in Europe." They attempt thereby to impress us that so far as the dual-rate contracts are concerned, they were completed in a foreign country when tender of shipments was made by foreign shippers to foreign carriers.⁵ Appellants contend, therefore, that all of the dual-rate contracts here involved are by foreign shipowners with foreign shippers and that the Shipping Act of 1916 as amended, cannot have extraterritorial effect in relation to these foreign nationals. But they thus ignore the provisions of their own dual-rate contracts and the plain language of Section 14b. The sample contract in the record discloses that the merchant who contracts with the carriers agrees to transport all of his commodities to United States Gulf ports from Europe, using Conference carriers, and that the failure to do so is a violation of the contract. By the terms of the contract (para. 1) "the Merchant agrees to offer, or cause to be offered to the Carriers for transportation by them to the United States through any port * * * in the Gulf of Mexico * * * all shipments of the commodities mentioned. * * *"⁶ (Emphasis added.)

As the United States points out, its complaint in this case charges appellants with "employing a dual-rate system not amended to comply with Section 14b of the Shipping Act of 1916 * * *." (para. 10). The Government urges that the amended statute refers to "the use by any common carrier or conference of such carriers in foreign commerce of any contract" not conforming to the Act and the applicable section states that "it shall be unlawful to carry out" any such contract (Section 14b). (Emphasis added.)

We have no difficulty, therefore, holding that under the power which Congress has to regulate commerce with foreign nations under Art. I, § 8 of the Constitution, it has authority to enact laws regulating the shipping contracts of foreign-owned shipping lines regardless of the fact that the contracts are executed in foreign countries with foreign nationals, inasmuch as the contracts are to be used, employed, and carried out in American foreign commerce in the delivery of goods to American ports. Consummation of the contracts is, therefore, by acts which are ultimately performed in the United States — thus making them subject to the laws of this nation. The only logical conclusion fairly to be reached is that foreign-owned ships which use our American ports must comply with the laws of the United States in connection with shipping contracts and specifically with the employing of the dual-rate contract system.⁷

II.

The historical background for the enactment of Sections 14b and 15 of the Shipping Act of 1916 as amended, by Congress in 1961, gives clear evidence of the intention to apply the provisions of the Act to foreign-owned shipping lines. The amendments to the Shipping Act directly flowed from the Supreme Court's decision in Federal Maritime Board v. Isbrandtsen Company, supra, the purpose being to legislatively overrule that decision under certain limitations and restrictions provided for in the new enactment. The legislative history indicates that foreign-flag vessel owners sent their representatives to the congressional hearings on the bills and objected to having these penalty provisions apply to foreign-flag shipowners. However, no exception was made in the Act for foreign-flag shipowners, and the terms of the applicable sections regulate all common carriers or conferences, foreign or American, using a dual-rate contract system, which are engaged in American foreign commerce and use American ports.⁸

We observe no determination by Congress to limit the application of these regulatory provisions to American exporters or importers, as contended...