Government of Guam v. Federal Maritime Commission

• Citation: 329 F.2d 251
• Decision Date: 23 January 1964
• Docket Number: No. 17488.,17488.
• Parties: The GOVERNMENT OF GUAM, Petitioner, v. FEDERAL MARITIME COMMISSION and United States of America, Respondents, Pacific Far East Line, Inc., American President Lines, Ltd., Intervenors.
• Court: United States Courts of Appeals. United States Court of Appeals (District of Columbia)

329 F.2d 251 (1964)

The GOVERNMENT OF GUAM, Petitioner, v. FEDERAL MARITIME COMMISSION and United States of America, Respondents Pacific Far East Line, Inc., American President Lines, Ltd., Intervenors.

No. 17488.

United States Court of Appeals District of Columbia Circuit.

Argued October 24, 1963.

Decided January 23, 1964.

Mr. Eugene L. Stewart, Washington, D. C., for petitioner.

Mr. Jon Magnusson, Atty., Federal Maritime Commission, with whom Mr. James L. Pimper, Gen. Counsel, and Mr. Robert E. Mitchell, Deputy Gen. Counsel, Federal Maritime Commission, and Messrs. Robert L. Wright and Irwin A. Seibel, Attys., Dept. of Justice, were on the brief, for respondents.

Mr. Mark P. Schlefer, Washington, D. C., with whom Mr. J. Lovering Truscott, Washington, D. C., was on the brief, for intervenor Pacific Far East Line, Inc.

Mr. Alfred L. Scanlan, Washington, D. C., with whom Mr. Warner W. Gardner, Washington, D. C., was on the brief, for intervenor American President Lines, Ltd.

Before PRETTYMAN, Senior Circuit Judge, and WILBUR K. MILLER and McGOWAN, Circuit Judges.

PRETTYMAN, Senior Circuit Judge.

This is a petition to review an order of the Federal Maritime Commission approving two rate increases for the transportation of commodities by water between the United States and Guam. The petitioner is the Government of Guam. The transportation companies involved are the Pacific Far East Line, Inc., and the American President Lines, Ltd. They are intervenors in this court.

Approximately half the population of Guam consists of United States military and civil service personnel and their dependents. The principal activities on the Island are related to the military establishment. Guam is directly dependent upon ocean transportation from the United States for virtually all goods consumed on the Island. The two companies here involved are the only common carriers serving the Island.

A threshold question must be considered. Pacific Far East says the Government of Guam has no standing to petition for review in this proceeding, because it is not a "party aggrieved" within the meaning of the statute.¹

The Government of Guam was admitted as a party to the proceeding before the Commission. In its petition for review it alleges that the carriers here involved are the only ocean transportation carriers providing freight service between the United States and Guam, and that "The lawfulness of freight rates and charges is of vital concern to the Government and people of Guam, the economics of whose very existence is predicated on the ocean freight supply line to the United States." It alleges that it is aggrieved by the Commission's order. Pacific Far East says Guam's only basis for standing is its capacity as parens patriae, and points to cases such as our State of Minnesota ex rel. Lord v. Benson² and the Supreme Court cases of Massachusetts v. Mellon,³ Florida v. Mellon,⁴ and similar cases. But the Benson case dealt with the problem of parens patriae in respect to an action of the Federal Government itself, i. e., a milk regulation, and the Supreme Court cases dealt with the capacity to sue as a plaintiff in the federal courts. We think they are not applicable here. It has long been recognized that in utility cases involving private operators a state or municipal government may be a proper party and, if adversely affected as such by an order, is aggrieved. Thus, in People of State of California v. Federal Power Comm'n,⁵ the allegation of California was that it was aggrieved "in that your petitioners are charged with the duty of protecting the interests of the several million gas consumers in the State of California, the vast majority of whom are served by the aforementioned California public utilities." And in Commonwealth of Puerto Rico v. Federal Maritime Board⁶ we recognized the government of Puerto Rico as a proper petitioner for review in a case precisely like the one presently at bar, procedurally speaking. In that case (Puerto Rico) we specifically denied a motion to dismiss grounded upon lack of capacity in the petitioner for review. The doctrine of the matter is reflected in the cases cited in the margin.⁷ We regard the point as foreclosed.

We come then to the case on the merits. Petitioner presents, principally, four questions.

1. For rate-base purposes the Commission, following the prudent-investment theory, which in this case was the net book value, used December 31, 1959, as the valuation date of property committed to the trade.⁸ Guam says that this was error and contends that the valuation date should be June 30, 1960. Guam premises its position on the fact that the Commission, in computing revenues and expenses for a test year, used the actual figures⁹ for the six-month period January to June, 1960, and then multiplied by two. This calculation gave it a test year of 1960, which was a projection based upon actual figures for the first six months.

In the first place, this point is of "negligible importance. Its presence or absence would not make the difference between confiscation and a fair return."¹⁰ The disputed amount is $72,212. Using the projected net annual profit of $150,121, an adjustment of $72,000 in the rate base would affect the rate of return by one-fifth of one per cent.

In the second place, the selection of a method or formula for computing permissible rates is for the Commission, unless its action is arbitrary.¹¹ A method similar to the one followed here has been used in other cases, both by the Federal Maritime Commission and by the Interstate Commerce Commission.¹² It is a rational method for test-year purposes in a projection of future rates. We cannot say its use here was arbitrary.

2. In addition to military goods and freight and other commercial cargo, the transportation companies carried in the test period a certain amount of bulk cement. Prior to the effectiveness of the tariffs here in dispute, this cement was carried under a special contract, and the carriage was at rates less than the published tariffs. In its projected rate base, revenues and expenses, the Commission included figures attributable to the carriage of this bulk cement, along with the figures for other commodities moving under the tariffs under consideration. Guam says that bulk cement should have been segregated and treated as non-tariff freight.

The tariffs under consideration contained a rate applicable to bulk cement, and the Commission found that this cement has been moving under that rate since July 1, 1960. Thus, as a matter of fact, this freight has been a tariff freight under the schedules involved in this proceeding.

Guam argues that the transportation of bulk cement was a "one-time movement not to be repeated in the future which moved at all only because of the special rate granted in a clear departure from the tariff." We think, however, that the Commission's finding is adequately supported by the record. Two of Pacific Far East's witnesses testified that at the time of the hearing cement was being moved under the tariff rate, and nothing in the record directly contradicts this testimony.

Guam says that bulk cement is a non-compensatory item, in that amounts paid for its carriage are not sufficient to pay the expenses of that carriage when those expenses are calculated on a proportionate basis with other items of freight. But it frequently happens that, when general revenues and expenses are computed on an overall basis, applicable to the entire business of a carrier, some items, if separated, appear as carried at non-compensatory rates. This result ensues from the compelling obligation of the carrier to render public service, and it has been approved.¹³ The doctrine is applicable here. These rates apply to ocean transportation, and the fact is that when a vessel moves, the whole vessel moves; the carrier is not divisible into parts adjusted to the amount or character of freight being moved on a particular trip. Bulk cement is a "filler" cargo. It is accepted for carriage on a space-available basis. The handling is at the expense and risk of the shipper, and the only expense borne by the carrier is the added vessel time in port. Thus whatever revenue is derived in the carriage of this freight tends to reduce the charges necessarily made to other shippers. We think Guam's contention on this matter cannot be sustained.

3. The service of Pacific Far East is in part subsidized. In respect to certain general expenses direct allocations are impracticable. Therefore in respect to such expenses an allocation between subsidized and unsubsidized service had to be made upon some doctrinal basis. The Commission made this allocation on a voyage expense prorate. It said: "Overhead expenses should be allocated on the basis of voyage expense. They should follow the expense to which they relate." Guam says that such a prorate does not equitably allocate as between the two services. It says that the effect of the method is to charge the unsubsidized trade with a substantial amount of the expenses actually due to the subsidized service. The Maritime Administration has a General Order (No. 31) which requires that, where direct allocations are impracticable, income and expenses shall be allocated between subsidized and unsubsidized operations on the basis that the operating and maintenance expenses separately bear to the total of such expenses.

The problem posed by a situation such as the one we have just outlined is not a simple one, nor is it susceptible of a scientifically precise answer. The Supreme Court had occasion to refer to the difficulty in the Colorado Interstate Gas case¹⁴ and in New York v. United States.¹⁵ Since allocation involves judgment and discretion, the method used here by the Commission has support in the General Order of the Maritime Administration to which we have referred, and a similar method has been used in other cases.¹⁶

It has long since been established, as we have already...