American President Lines, Ltd. v. United States

• Citation: 224 F. Supp. 187
• Decision Date: 10 October 1963
• Docket Number: No. 28426,28705.,28426
• Court: United States District Courts. 9th Circuit. United States District Courts. 9th Circuit. Northern District of California
• Parties: AMERICAN PRESIDENT LINES, LTD., a corporation, Libelant, v. UNITED STATES of America, Respondent. UNITED STATES of America, Libelant, v. AMERICAN PRESIDENT LINES, LTD., et al., Respondents.

224 F. Supp. 187

AMERICAN PRESIDENT LINES, LTD., a corporation, Libelant, v. UNITED STATES of America, Respondent.

UNITED STATES of America, Libelant, v. AMERICAN PRESIDENT LINES, LTD., et al., Respondents.

Nos. 28426, 28705.

United States District Court N. D. California, S. D.

October 10, 1963.

Peter N. Teige, George D. Wick, Jr., San Francisco, Cal., J. Franklin Fort, Kominers & Fort, Washington, D. C., for American President Lines, Ltd.

Cecil F. Poole, U. S. Atty., Keith R. Ferguson, Special Asst. to the Atty. Gen., Lawrence F. Ledebur, John F. Meadows, Ralph F. Bagley, Attys., Admiralty & Shipping Section, Dept. of Justice, San Francisco, Cal., for the United States.

WEIGEL, District Judge.

These cases involve a bareboat charter under which American President Lines, Ltd. (hereafter "APL") commercially operated numerous Government owned cargo vessels during the years 1946-1955. APL alleges that the charter provided for illegally excessive rates of hire based on erroneous interpretations of pertinent statutes by the United States Maritime Commission and its successor agency, the Maritime Administration (hereafter sometimes collectively referred to as "Maritime"). APL accordingly seeks a declaratory judgment of its nonliability to the Government's demand for some two million dollars. The Government, denying illegality, libels APL and its surety for the hire allegedly due.

APL moves for summary judgment, the parties having filed numerous affidavits and exhibits. There being no genuine issue of material fact, the cases are ripe for decision. The libels are within this Court's jurisdiction. Sword Line, Inc. v. United States, 351 U.S. 976, 76 S. Ct. 1047, 100 L.Ed. 1493 (1956); Luckenbach Steamship Co. v. United States, 312 F.2d 545 (2d Cir., 1963).

The legal issues stem from the provisions of the charter referred to at the outset. It is one of the standard "Form No. 303-SHIPSALESDEMISE" charters used in leasing out Government vessels to private operators under the Merchant Ship Sales Act, 1946, 50 U.S.C. App. §§ 1735-1746. Some history of this standard charter and of the litigation about it are set forth in American-Foreign Steamship Corp. v. United States, 291 F.2d 598 (2d Cir., 1961), certiorari denied 368 U.S. 895, 82 S.Ct. 171, 7 L.Ed.2d 92 (1961), and in Massachusetts Trustees of Eastern Gas & Fuel Associates v. United States, 312 F.2d 214 (1st Cir., 1963).

For the purposes of this memorandum, other relevant matters will be set out or indicated in connection with the issues to which they relate. There are five issues to be considered. The first is major and central.

1. The "sliding scale" or "progressive profit-sharing" issue.

The Merchant Ship Sales Act, supra, empowered Maritime to reject or approve applications for charter of the type of vessels here involved. (Sec. 5(a), 50 U.S.C. App. § 1738(a)). Ensuing statutory provisions regarding charter hire underlie the principal controversy between the parties here and the conflict of authority among the courts which have passed upon the same question in other cases. Those provisions are these:

MERCHANT SHIP SALES ACT OF 1946

50 U.S.C. App. § 1738

"Charter of War-Built Vessels to Citizens

"Sec. 5. * * *

"(b) The charter hire for any vessel chartered under the provisions of this section shall be fixed by the Commission at such rate as the Commission determines to be consistent with the policies of this Act, but, except upon the affirmative vote of not less than four members of the Commission, such rate shall not be less than 15 per centum per annum of the statutory sales price (computed as of the date of charter). Except in the case of vessels having passenger accommodations for not less than eighty passengers, rates of charter hire fixed by the Commission on any war-built vessel which differ from the rate specified in this subsection shall not be less than the prevailing world market charter rates for similar vessels for similar use as determined by the Commission.

"(c) The provisions of sections 708, 709, 710, 712, and 713, of the Merchant Marine Act, 1936, as amended, shall be applicable to charters made under this section."

MERCHANT MARINE ACT, 1936 46 U.S.C. § 1199

"Sec. 709. (a) Every charter made by the Commission pursuant to the provisions of this title shall provide that whenever, at the end of any calendar year subsequent to the execution of such charter, the cumulative net voyage profits (after payment of the charter hire reserved in the charter and payment of the charterer's fair and reasonable overhead expenses applicable to operation of the chartered vessels) shall exceed 10 per centum per annum on the charterer's capital necessarily employed in the business of such chartered vessels, the charterer shall pay over to the Commission, as additional charter hire, one-half of such cumulative net voyage profit in excess of 10 per centum per annum: Provided, That the cumulative net profit so accounted for shall not be included in any calculation of cumulative net profit in subsequent years."

The charter before the court provides, as to rates, for (1) a monthly firm or fixed "basic charter hire" of at least 15 per centum per annum of the vessels' statutory sales prices, plus (2) a contingent annual "additional charter hire" of from 50 to 90 percent of the charterer's cumulative net voyage profit in excess of ten per centum per annum of the capital necessarily employed in the charter operations.

This court holds that the challenged sliding scale is contrary to the governing statutory provisions. In so holding, I have considered the conflicting decisions on the question, all of which will be later cited, as well as the able advocacy, written and oral, of counsel expert on the issues. I would not add to the welter of words on the subject were it not for my conviction that the question is not close and that exposition of the reasons underlying this conclusion may be useful in the ultimate resolution of the conflict in authority.

At the threshold, I am unable to find any critical or, indeed, significant inconsistency between Section 5(b) and Section 709(a). The meaning of the words in these sections is clear. They make sense as part of a statutory purpose and plan within the province of the Congress. The judicial function, broad though it be, does not properly include substitution of the views of a court for those of Congress on economic and business questions. Judicial restraint in areas such as these is the measure of judicial wisdom, if, indeed, in an ultimate sense, not of judicial authority.

Section 5(b) begins by authorizing the Commission to fix charter hire "at such rate as the Commission determines to be consistent with the policies of this Act * * *". This grant of authority is then limited in three respects.

The first limitation is that the rate of charter hire shall not be less than 15 per centum per annum of the statutory sales price, computed as of the date of charter, except upon the affirmative vote of no less than four members of the Commission. This limitation, contained in the first sentence of § 5(b), is not involved in this case because the charter here requires a hire of at least the 15 percent requisite to avoid application of the limitation.

The second limitation is to the effect that the rates of charter hire fixed by the Commission shall, if they "differ from the rate specified", not be less than the prevailing world market charter rates. This limitation, set out in the second sentence of § 5(b), is not here involved because the rate provided in the charter does not so differ.

The third limitation stems from the statutory declaration of Section 5(c) requiring that the provisions of Section 709(a) "shall be applicable to charters made under" Section 5(b) (emphasis added). The charter here is undeniably one made under Section 5(b). No one has suggested that there is any other authority for it, and there is none. It is plain, therefore, that the provisions of § 709(a) apply. Congress could hardly have used language more clearly so requiring.

It is perhaps worthy of note here that, while the first two limitations upon the authority granted the Commission are stated as exceptions, the limitation imposed by Section 5(c) is stated positively and affirmatively through employment of the command "shall". It would hardly seem appropriate to treat a positive command as having less force in specifying a qualification upon a grant of power than a statement or statements qualifying that grant in the form of exceptions.

What, then, is the limitation upon the authority of the Commission thus made applicable by explicit command? It is a declaration in § 709(a) which spells out in detail those provisions which must be included in "Every charter made by the Commission pursuant to the provisions of this title * * *" (emphasis added). When examination is made of the provisions which Congress had thus declared requisite to every charter made by the Commission, we find an unambiguous, carefully worded and easily understood statement that every charter shall provide that "the charterer shall pay over to the Commission, as additional charter hire, one-half of such cumulative net voyage profit in excess of 10 per centum per annum * * *". Congress was careful and exact in its designations in § 709(a) as to what it meant by the terms used in the quoted phrase.

Summarizing, the mandate of Congress relevant to the charter now before the court is this:

The provisions of Section 709(a) shall be applicable and, accordingly, the charter shall provide that the charterer shall pay over to the Commission, as additional charter hire, one-half of cumulative net voyage profit in excess of 10 per centum per annum.

The words "as additional charter hire" obviously mean charter hire in addition to that provided for by the Commission in exercise of its authority under Section 5(b). To hold otherwise is judicial amendment striking those words out of the...