Black Diamond Steamship Corp. v. United States

• Decision Date: 31 July 1964
• Docket Number: Adm. No. 3885.
• Citation: 233 F. Supp. 373
• Parties: BLACK DIAMOND STEAMSHIP CORP., Libelant, v. UNITED STATES of America, Respondent. UNITED STATES of America, Cross-Libelant, v. BLACK DIAMOND STEAMSHIP CORP., Cross-Respondent.
• Court: U.S. District Court — District of Maryland

233 F. Supp. 373

BLACK DIAMOND STEAMSHIP CORP., Libelant, v. UNITED STATES of America, Respondent.

UNITED STATES of America, Cross-Libelant, v. BLACK DIAMOND STEAMSHIP CORP., Cross-Respondent.

Adm. No. 3885.

United States District Court D. Maryland.

July 31, 1964.

Galland, Kharasch & Calkins, Washington, D. C., and Robert H. Williams, Jr., Baltimore, Md. (Robert N. Kharasch, Washington, D. C., advocate), for Black Diamond Steamship Corp.

Thomas J. Kenney, U. S. Atty., Baltimore, Md. (Lawrence F. Ledebur, Atty., Admiralty & Shipping Section, Dept. of Justice, Washington, D. C., advocate), for the United States.

THOMSEN, Chief Judge.

The libel of Black Diamond Steamship Corp. (Black Diamond) seeks to recover $726,937.47 paid as "additional charter hire" for the use of government vessels under Contract No. MCc-41815 during the period September 1946 to August 1949. The libel is founded on two claims: first, a "cumulation" claim, which asserts that such additional charter hire should be calculated on Black Diamond's net profits cumulated over the entire period of the contract; and second, a "sliding scale" claim, which asserts that additional charter hire due should be calculated at the rate of 50% of the profits and not at the higher rates imposed by the Maritime Commission.

The government's answer denies the validity of both claims and contends that both are time-barred. Its cross-libel asserts that Black Diamond is indebted to it in the amount of $28,252.04, or, alternatively, on quantum valebat, for a much larger sum.

Both sides agree that there is no genuine issue of material fact, and each party has moved for summary judgment. Those motions originally presented five issues for decision by this court, but the parties are agreed that two recent opinions, one by the Fourth Circuit and one by the Supreme Court, have determined how three of those issues must be decided. Those issues are:

I. "Cumulation." Whether, in the computation of "additional charter hire", Black Diamond has the right to cumulate its profits and losses over the entire period of the contract, rather than treat each year as a separate accounting unit. In United States v. Moore-McCormack Lines, Inc., 4 Cir., 308 F.2d 866 (1962), cert. den. 372 U.S. 944, 83 S.Ct. 937, 9 L.Ed.2d 969 (1963), it was decided that the Maritime Commission erroneously interpreted sec. 709(a) of the Merchant Marine Act, 1936, 46 U.S.C.A. § 1199(a), as prohibiting the averaging of profits and losses over the entire contract period. That decision establishes the right of Black Diamond to "cumulate" the profits and losses involved in this case, subject to (a) the provisions of the "Foreign Trade Addendum" (see II, below) and (b) the time-bar defense (see V, below).

II. "Foreign Trade Addendum." In Massachusetts Trustees of Eastern Gas & Fuel Associates v. United States, 377 U.S. 235, 84 S.Ct. 1236, 12 L.Ed.2d 268, the Supreme Court held valid the so-called "Foreign Trade Addendum", which permits the government to require two separate cumulations, one before September 1, 1947, and one after September 1, 1947, as a result of a modification of the contract made in 1947.

III. "Sliding Scale." The same Supreme Court case held that the Maritime Commission had the power under sec. 5(b) of the Merchant Ship Sales Act of 1946 to impose and collect a sliding scale of additional charter hire, and that sec. 709(a) of the Merchant Marine Act, 1936, does not negate that authority. That means that the government had the right to collect from Black Diamond additional charter hire on the sliding scale called for by the contract, and disposes of Black Diamond's second claim, referred to in the first paragraph of this opinion.

Two issues remain:

IV. "Time-Bar." The government's time-bar defense to Black Diamond's "cumulation" claim is still open. The time-bar defense to the "sliding scale" claim has become moot.

V. "World Market Charter Rates." Also open is the government's cross-claim based on its claimed right to charge "World Market Charter" rates.

Facts — Time-Bar

1. Black Diamond operated ships under contract MCc-41815 from September 26, 1946 until August 13, 1949. Throughout that period, Black Diamond made regular payments of "basic charter hire". In addition, in accordance with Maritime Commission requirements, Black Diamond made "preliminary payments" of "additional charter hire".

2. Contract MCc-41815 contains, in clause 13, language required by sec. 709 (a) of the Merchant Marine Act, 1936, which was quoted by the Fourth Circuit in Moore-McCormack, 308 F.2d at 868 et seq.¹ Clause 13 continued: "* * * The Charterer agrees to make preliminary payments to the Owner on account of such additional charter hire * * * at such times and in such manner and amounts as may be required by the Owner; provided, however, that such payment of additional charter hire shall be deemed to be preliminary and subject to adjustment either at the time of the rendition of preliminary statements or upon the completion of each final audit by the Owner, at which times such payments will be made to the Owner as such preliminary statements or final audit may show to be due, or such overpayments refunded to the Charterer as may be required."

3. Operations in the years 1946 and 1947 were profitable; operations in 1948 and 1949 resulted in losses.

4. "Preliminary payments" of "additional charter hire" were made to the Maritime Commission in accordance with Supplement 8 to General Order 60, a regulation issued by the Commission on October 29, 1946. Neither this regulation nor Contract MCc-41815 dealt specifically with cumulation of profits and losses over the term of the charter.

5. Black Diamond's last preliminary statement was submitted to the government on April 24, 1950. Its last preliminary payment of additional charter hire accompanied an earlier preliminary statement in June 1948. None of the preliminary statements were based upon Black Diamond's present "cumulative" theory, and none referred to a possible "cumulative claim".

6. The Maritime Commission did not publish any regulations governing the method of settling accounts until the issuance of Supplement 21 to General Order 60 on March 30, 1950.²

7. Accounting under Contract MCc-41815 and Maritime Commission regulations is highly complex; various questions were raised by Black Diamond and answered by the District Comptroller of the Maritime Commission during 1950 and 1951.

8. On November 28, 1950, the District Comptroller wrote Black Diamond as follows:

"At a recent conference in your office you advised our Mr. T. Conroy that your final accounting pursuant to the provisions of Supplement 21 to General Order 60 has been prepared, however, before submitting such accounting to this office you desired information as to the handling of adjustments in connection with expendable equipment inventories, unsettled claims, and other liabilities applicable to the bareboat operations which may be recorded subsequent to the date of your final accounting.

"As regards items of this nature, it is suggested that you submit the accounting required under General Order 60, Supplement 21, with the reservation that such accounting will be subject to adjustment if, and to the extent required as a result of (1) subsequent decisions with respect to any items pending with the Maritime Administration (2) subsequent adjustments in connection with unsettled claims and (3) subsequent establishment of any liabilities which have not as yet arisen, which would affect such accounting.

"The certification required in Part VI of the procedure prescribed in Supplement 21 to General Order 60 may be modified to indicate that the accounting covered thereby is subject to subsequent adjustment with respect to the aforesaid items."

9. On December 13, 1950, Black Diamond replied, referring to specific items that might require a supplementary accounting, and asked for instructions with respect thereto. None of the items referred to any possible "cumulation" claim.

10. On January 26, 1951, the District Comptroller replied to Black Diamond's letter, reiterating what he had said in his letter of November 28, 1950, and concluding:

"The Administration realizes that certain adjustments may have to be made subsequent to the date of the final accountings under Supplement 21 to General Order 60, which will require the Charterer to revise its statements and submit supplementary Accountings, therefore, your Accountings should be submitted with the reservation suggested in our letter of November 28, 1950, as soon as possible."

11. On May 14, 1951, the District Comptroller sent a form letter to all Bareboat Charterers, which read in part as follows:

"Where a voucher check is tendered by the Charterer, it is requested that no reference be made thereon through restrictive legend or otherwise to the effect that it is a final settlement. The accompanying letter of transmittal should state that the remittance is on account of additional charter hire due the Maritime Administration and is subject to adjustment upon the completion of final accounting between the Charterer and the Maritime Administration and that neither the tender of such payment by the Charterer, nor its acceptance by the Maritime Administration shall be construed as an approval of the correctness of the amount thereof, nor as a waiver of the rights or remedies of either party under the terms of the agreements involved or otherwise."

This is the letter referred to in footnote 10 to the Moore-McCormack opinion, 308 F.2d at 871.

12. A letter from Black Diamond to the District Comptroller, dated June 15, 1951, inquired about the "types of expenses" which had been the subject of Black Diamond's December 13, 1950 letter, but still made no reference to any "cumulation" claim. No reply to the June 15, 1951 letter is in the record.

13. On August 31, 1951, Black Diamond submitted a "final accounting" running through July 1, 1951,...