Landstar Exp. America v. Federal Maritime Com'n
| Decision Date | 26 June 2009 |
| Docket Number | No. 08-1152.,08-1152. |
| Citation | 569 F.3d 493 |
| Parties | LANDSTAR EXPRESS AMERICA, INC. and Landstar Global Logistics, Inc., Petitioners v. FEDERAL MARITIME COMMISSION and United States of America, Respondents. |
| Court | U.S. Court of Appeals — District of Columbia Circuit |
Benjamin K. Trogdon, Attorney, Federal Maritime Commission, argued the cause for respondent. With him on the brief were Deborah A. Garza, Acting Assistant Attorney General, U.S. Department of Justice, John J. Powers, III and Robert J. Wiggers, Attorneys, and Peter J. King, General Counsel, Federal Maritime Commission.
Before GINSBURG, HENDERSON, and KAVANAUGH, Circuit Judges.
Opinion for the Court filed by Circuit Judge KAVANAUGH.
This case illustrates the basic rule-of-law maxim that statutory text binds federal agencies. Ocean Transportation Intermediaries help arrange shipping for U.S. companies. Federal law requires Ocean Transportation Intermediaries to obtain licenses from the Federal Maritime Commission. On occasion, Ocean Transportation Intermediaries will use agents—who are not themselves Ocean Transportation Intermediaries—to assist them in some of their myriad activities, such as packing or trucking services. In the order at issue here, the Federal Maritime Commission required agents of Ocean Transportation Intermediaries to obtain licenses. The Commission's decision requiring agent licensing may or may not be wise policy. But the fundamental problem, as Federal Maritime Commissioner Dye explained in her persuasive dissenting opinion, is that the Commission does not possess statutory authority to require agents of Ocean Transportation Intermediaries who are not themselves Ocean Transportation Intermediaries to obtain licenses. We therefore grant Landstar's petition for review, vacate the Commission's declaratory order, and remand to the Commission.
Under the Shipping Act of 1984, 46 U.S.C. §§ 40101 et seq., the Federal Maritime Commission regulates ocean shipping between the United States and foreign countries. Section 19 of the Act mandates that all Ocean Transportation Intermediaries be licensed by the Commission:
A person in the United States may not act as an ocean transportation intermediary unless the person holds an ocean transportation intermediary's license issued by the Federal Maritime Commission. The Commission shall issue a license to a person that the Commission determines to be qualified by experience and character to act as an ocean transportation intermediary.
Id. § 40901(a) (emphasis added).
Ocean Transportation Intermediaries are defined as either Ocean Freight Forwarders (OFFs) or Non-Vessel-Operating Common Carriers (NVOCCs). Id. § 40102(19). Both OFFs and NVOCCs are intermediaries between (i) shippers, who seek to export cargo, and (ii) ocean carriers, who physically carry the cargo on their vessels. See NLRB v. Int'l Longshoremen's Ass'n, 447 U.S. 490, 496 n. 8, 100 S.Ct. 2305, 65 L.Ed.2d 289 (1980) (NVOCCs); Nat'l Customs Brokers & Forwarders Ass'n of Am., Inc. (NCBFAA) v. United States, 883 F.2d 93, 94-95 (D.C.Cir. 1989) (OFFs).
An Ocean Freight Forwarder is "a person that ... dispatches shipments from the United States via a common carrier and books or otherwise arranges space for those shipments on behalf of shippers," and "processes the documentation or performs related activities incident to those shipments." 46 U.S.C. § 40102(18). In practice, that typically means that the OFF "secures cargo space with a shipping line (books the cargo), coordinates the movement of cargo to shipside, arranges for the payment of ocean freight charges," and provides other "accessorial services ... such as arranging insurance, trucking, and warehousing." NCBFAA, 883 F.2d at 95. OFFs receive compensation from both the shipper and the carrier. Id.
A Non-Vessel-Operating Common Carrier, meanwhile, is "a common carrier that ... does not operate the vessels by which the ocean transportation is provided" and "is a shipper in its relationship with [a vessel-operating] common carrier." 46 U.S.C. § 40102(16); see also id. § 40102(17). Although NVOCCs usually do not own or operate vessels to actually carry the cargo, they lease facilities and services from other firms—making them the "common carrier[s]" responsible for transportation of the cargo from origin to destination. See NCBFAA, 883 F.2d at 101. Most NVOCCs consolidate small parcels from multiple shippers bound for the same destination and arrange for them to be shipped as a single, large, sealed container under one bill of lading. See id. Upon arrival, NVOCCs arrange for the container to be broken down and for each parcel to be distributed to each customer. Thus, unlike an OFF, the NVOCC issues its own bill of lading to each shipper, and the vessel-operating common carrier issues a bill of lading to each NVOCC. See Fireman's Fund Am. Ins. Cos. v. Puerto Rican Forwarding Co., 492 F.2d 1294, 1295 (1st Cir.1974). Unlike OFFs, NVOCCs receive compensation only from the shipper. See NCBFAA, 883 F.2d at 101.
Under § 19 of the Act, all persons or entities acting as Ocean Transportation Intermediaries must obtain licenses from the Federal Maritime Commission. Thus, all persons or entities acting as OFFs must obtain OFF licenses, and all persons or entities acting as NVOCCs must obtain NVOCC licenses.
In recent decades, the Ocean Transportation Intermediary industry has expanded and modernized. OFFs and NVOCCs have increasingly forged agency arrangements with certain third parties to enhance their operational efficiencies. For example, NVOCCs rely on agents such as warehouses, truckers, container lessors, steamships, and receivers—especially in foreign countries where it may be difficult to hire employees or open branch offices.
Petitioner Landstar is a licensed NVOCC. In January 2006, Landstar requested an opinion letter from the Federal Maritime Commission's General Counsel on the lawfulness of using unlicensed agents to assist with certain aspects of its Ocean Transportation Intermediary services. The General Counsel responded that a licensed NVOCC could lawfully use unlicensed agents to perform NVOCC services. "As agents, acting on behalf of [Landstar], they would not be subject to the licensing requirements of section 19 of the Shipping Act" because they would not "be holding out in their own right to provide NVOCC services." Letter from FMC General Counsel to Landstar (Jan. 26, 2006), Joint Appendix 1, 2-3.
In August 2006, Team Ocean Services, Inc., an Ocean Transportation Intermediary licensed as both an OFF and NVOCC, petitioned the Commission for a declaratory order that would reaffirm the conclusions of the FMC's General Counsel. Team Ocean requested that the Commission dispel any regulatory uncertainty so it could move forward with plans to incorporate unlicensed agents—providing OFF and NVOCC services on its behalf—into its business model. In the Team Ocean proceeding, Landstar (the petitioner in this case) filed comments advancing the position that agents providing NVOCC services are not subject to the licensing requirement of § 19.
In a 3-1 decision, the Commission ruled that the use of unlicensed agents was unlawful because an agent that provides Ocean Transportation Intermediary services "act[s] as an ocean transportation intermediary" within the meaning of § 19 and is therefore subject to the licensing requirement. In re Lawfulness of Unlicensed Persons Acting as Agents for Licensed Ocean Transportation Intermediaries—Petition for Declaratory Order, at 8, No. 06-08 (Fed. Mar. Comm'n Feb. 15, 2008) (Order). The Commission did not rely on the text of the Shipping Act. The Commission instead relied on the "remedial purposes" of the Act, which the Commission said were to address "complaints concerning NVOCC practices" by protecting the shipping public from unqualified or unscrupulous service providers. Id. at 10-11 (internal quotation marks omitted). The Commission concluded that sanctioning the use of unlicensed agents would undermine the "spirit and basic policy" behind § 19 and render the statute "absurd." Id. at 9-10 (internal quotation marks omitted).
In dissent, Commissioner Dye primarily argued that the text of § 19 of the Shipping Act does not permit licensing of agents who only provide NVOCC services on behalf of a licensed NVOCC principal. Commissioner Dye explained that an agent working on behalf of a disclosed, licensed NVOCC does not "act as an ocean transportation intermediary" because by definition it does not operate as an NVOCC or common carrier: "Since such NVOCC agents would be acting on behalf of a licensed principal without `holding out' and without `assuming responsibility,' section 19 of the Shipping Act would not require them to obtain separate OTI licenses." Id. at 26, 30 (Dye, Commissioner, dissenting). Recognizing that "many licensed NVOCCs currently use unlicensed agents for different aspects of their businesses," she warned that the "policy adopted by the majority would stifle this business innovation." Id. at 31. Commissioner Dye thus favored issuing a declaratory order stating that licensed NVOCCs may use unlicensed agents as long as the agent does not hold out to provide Ocean Transportation Intermediary services in its own right.
Landstar petitions for review of the Commission's declaratory order to the extent it applies to NVOCCs and their use of agents to provide NVOCC services. Landstar argues that the Commission's order contravenes the text of the statute. Cf. Chevron USA, Inc. v. Natural Res. Def. Council, 467 U.S. 837, 104 S.Ct. 2778, 81 L.Ed.2d 694 (1984).
The plain language of § 19 of the Shipping Act requires Ocean Transportation Intermediaries to obtain licenses: "A person in the United...
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