404 F.2d 804 (D.C. Cir. 1968), 21173, Pacific Seafarers, Inc. v. Pacific Far East Line, Inc.

Docket Nº:21173.
Citation:404 F.2d 804
Party Name:PACIFIC SEAFARERS, INC., et al., Appellants, v. PACIFIC FAR EAST LINE, INC., et al., Appellees.
Case Date:September 30, 1968
Court:United States Courts of Appeals, Court of Appeals for the District of Columbia Circuit

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404 F.2d 804 (D.C. Cir. 1968)

PACIFIC SEAFARERS, INC., et al., Appellants,


PACIFIC FAR EAST LINE, INC., et al., Appellees.

No. 21173.

United States Court of Appeals, District of Columbia Circuit.

September 30, 1968

Argued March 12, 1968.

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Mr. Robert E. Sher, Washington, D.C., with whom Messrs. Abraham J. Harris, Marvin J. Coles and Neal M. Mayer, Washington, D.C., were on the brief, for appellants. Mr. Donald D. Webster, Washington, D.C., also entered an appearance for appellants.

Mr. Frederick M. Rowe, Washington, D.C., with whom Messrs. James M. Johnstone, Bertram Walker Rein, Washington, D.C., Edward D. Ransom, Gordon L. Poole, and R. Frederic Fisher, San Francisco, Cal., were on the brief, for appellees, Pacific Far East Line, Inc., et al.

Mr. Verne W. Vance, Jr., Boston, Mass., with whom Mr. Henry E. Foley, Boston, Mass., was on the brief, for appellee Farrell Lines, Inc.

Messrs. James N. Jacobi and Richard W. Kurrus, Washington, D.C., entered appearances for appellee American Export Isbrandtsen Lines, Inc.

Mrs. Amy Scupi, Washington, D.C., entered an appearance for appellee American Union Transport, Inc.

Mr. Robert Burk, Washington, D.C., entered an appearance for appellee Matson Navigation Co.

Mr. J. Franklin Fort, Washington, D.C., entered an appearance for appellee Moore and McCormack Co., Inc.

Mr. Donald J. Mulvihill, Washington, D.C., entered an appearance for appellee Grace Line, Inc.

Mr. John K. Mallory, Jr., Washington, D.C., entered an appearance for appellee Waterman Steamship Corporation.

Mr. Elmer C. Maddy, New York City, entered an appearance for appellee Lykes Bros. Steamship Co., Inc., et al.

Before MCGOWAN, TAMM and LEVENTHAL, Circuit Judges.

LEVENTHAL, Circuit Judge:

This case concerns the applicability of sections 1 and 2 of the Sherman Act to an alleged conspiracy among defendant-appellees, 21, American shipping lines and two conferences to which they belong, 1 to destroy plaintiff-appellants' business of carrying AID 2 -financed cement and fertilizer cargoes between Taiwan and South Vietnam. The charges were first aired before the Federal Maritime Commission, which dismissed plaintiffs' complaint alleging violations of sections 15, 16 First, and 18 of the Shipping Act 3 on the ground that this trade between foreign ports, of goods owned and shipped by foreigners to foreigners, 4

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was not within the Commission's jurisdiction under the Shipping Act. That ruling was not appealed. Plaintiffs' subsequently-filed complaint for damages under the antitrust laws 5 was dismissed, at the close of oral argument, when the District Court granted defendant's motion for dismissal of the complaint. This order was presumably based on the jurisdictional ground that the Sherman Act was inapplicable to the complaint because of the absence of a claim of restraint of foreign commerce. 6 We reverse that determination.

These are the pertinent facts as set forth in the complaint, which must be accepted as true for purposes of a motion to dismiss. Plaintiffs Pacific Seafarers, Inc. (PSI) and Seafarers, Inc. (Seafarers) 7 are American corporations, formerly engaged in the ocean shipping business. They operated United States flag vessels, manned by American crews. Plaintiffs' business operations were centered in New York, and their ships intermittently returned to the United States for personnel and maintenance requirements. Plaintiffs' business was selling their American-flag shipping services to cement and fertilizer exporters in Taiwan, and, to a lesser extent, Thailand, who needed American-flag shipping for AID-financed sales to importers in South Vietnam. AID does not own the goods, nor does it arrange for their transportation. It does, however, provide, either on loan or grant basis, dollars to the South Vietnamese Government, which in turn sells these dollars to South Vietnam merchants desiring to finance their purchases abroad. AID implements the Cargo Preference Law 8 by regulations requiring that at least 50% Of AID-financed cargoes be transported to the recipient country in privately owned United States-flag commercial vessels. Furthermore, as a matter of policy, AID finances the costs of transportation, in addition to cargo, where the shipping is done in American-flag vessels. 9 These regulations effectively reserve the trade in carriage of AID-financed cargo for American shipping.

At the time plaintiffs entered the business it was handled primarily by American-flag competition engaged in roundtrip voyages from the United States to the Far East. In the course of their journeys, these vessels would stop to take on cargoes of foreign origin destined for ports farther along. The rate for this service was set by AFBO, 10 an association of American-flag carriers which are members of either or both AGAFBO 11 or WCAFBO, 12 both conferences of American-flag shippers organized to carry military cargoes for the Government (which must likewise use American-flag shipping where available). Neither the AFBO agreement, nor the rates set thereunder for cargoes originating in foreign ports and destined to foreign ports, were filed with the Federal Maritime Commission.

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Plaintiffs thought that by using older, less-expensive vessels they could institute and profitably operate a substantial service in AID-financed cargoes. As stated by plaintiffs, defendant American-flag shipping lines acted to preserve this profitable trade to themselves, at rates set pursuant to concerted action and not subject to regulatory scrutiny. They first sought to erect legal barriers to plaintiffs' getting the business, and when they failed in that endeavor they dropped their prices and drove plaintiffs out of business.

(a) Their first effort was to seek issuance of a directive from AID limiting AID-financed shipping in the area to 'conference liners.' That would have excluded plaintiffs' vessels, but it was not obtained.

(b) Defendants then successfully urged the Director General of Commerce of South Vietnam to issue a ruling to South Vietnamese importers requiring that all future AID-financed shipments of cement be shipped on liners operated by AFBO members. Plaintiffs were not then members of AFBO, but AID countermanded that directive.

(c) Next, plaintiff PSI was told by the Director General that it would have to join WCAFBO if it wished to continue in the South Vietnamese cement business. When PSI tried to comply, its application for membership was blocked because it had no Military Sea Transportation Service Contract (MSTS) with the Defense Department, as did all other WCAFBO members. Plaintiff sought such a general eligibility contract, and seven of the appellees tried to block it by protesting to the Defense Department. That too was unsuccessful.

(d) Finally, at an AFBO meeting held in the United States, the rates on cement and fertilizer from Taiwan to South Vietnam, and on cement from Thailand to South Vietnam were thrown open, and they dropped from $8.95 per long ton to $4.96 per long ton. All other rates were maintained.

Plaintiffs were shortly driven out of business. Thereafter defendants raised the rates, and indeed raised them to substantially higher levels than those prevailing before plaintiffs sought to enter the trade.

1. We first consider defendants' arguments that principles of collateral estoppel and 'practical primary jurisdiction considerations' preclude relitigation by plaintiffs of the Federal Maritime Commission's determination that this trade, carried on 'totally within the confines of Far Eastern ports,' was not part of 'our foreign commerce.'

Principles of collateral estoppel may properly be applied in administrative cases. 13 In general these principles apply to jurisdictional issues 14 and we may assume that they require giving effect in subsequent litigation to an agency's determination of facts underlying its conclusion that jurisdiction was lacking. In this case, however, there is no real dispute concerning those facts which the Commission held to be jurisdictional. Thus, plaintiffs do not seriously allege that they were plying a trade other than selling shipping services to foreigners, for transportation of foreign-owned goods to foreign consignees. They do not allege that the goods thus transported between foreign ports originated in the United States. On the other hand, defendants cannot seriously contest that the key to this whole trade was that plaintiffs and defendants were not just selling shipping services: They were selling United

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States-flag shipping services, which fact was of crucial importance to importers requiring AID-dollar financing for their transactions. Thus the sole question is whether, under those facts, a conspiracy to drive plaintiffs out of the business of selling United States-flag shipping services is a restraint on United States foreign commerce subject to the Sherman Act.

Although the Commission was of the view that defendant's activities had no effect on United States 'foreign commerce,' that determination rested solely on the standards of the Shipping Act of 1916. Thus the Commission held that its entire jurisdiction was limited to activities affecting 'foreign commerce' within the intendment of section 1 of the Shipping Act, 15 which defines a 'common carrier by water in foreign commerce' as a 'common carrier * * * engaged in the transportation by water of passengers or property between the United States or any of its Districts, Territories, or possessions and a foreign country.' As plaintiffs carried no property or passengers to or from the United States they were not engaged in foreign commerce under the Shipping Act. 16

The Commission did not rule that there was no 'foreign commerce' as that term is used in the Sherman Act, nor did it rule that the standards under the...

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