Indiana Port Com'n v. Bethlehem Steel Corp., Civ. No. H 71-228.

• Decision Date: 23 January 1987
• Docket Number: Civ. No. H 71-228.
• Citation: 653 F. Supp. 604
• Parties: INDIANA PORT COMMISSION, Plaintiff, v. BETHLEHEM STEEL CORP., Defendant and Lake Carrier's Association, Intervenor-Defendant.
• Court: U.S. District Court — Northern District of Indiana

653 F. Supp. 604

INDIANA PORT COMMISSION, Plaintiff, v. BETHLEHEM STEEL CORP., Defendant and Lake Carrier's Association, Intervenor-Defendant.

Civ. No. H 71-228.

United States District Court, N.D. Indiana, Hammond Division.

January 23, 1987.

Steven M. Schneebaum, Jonathan N. Halpern, Patton, Boggs & Blow, Washington, D.C., Timothy P. Galvin, Jr., Galvin, Galvin & Leeney, Hammond, Ind., David C. Weigel and William Daily, Atty. Gen.'s Office, Indianapolis, Ind., for plaintiff.

Charles T. Clifford, Valparaiso, Ind., J.B. Smith, Timothy Kelly, Hammond, Ind., Jerry P. Belknap, Barnes and Thornburg, Indianapolis, Ind., Joseph O'Malley, Bethlehem, Pa., for defendant.

Thomas O. Murphy, Cleveland, Ohio, and J.B. Smith, Hammond, Ind., for intervenor-defendant.

ORDER

MOODY, District Judge.

On Monday, December 1, 1986, a bench trial commenced in this action brought by plaintiff Indiana Port Commission against defendant Bethlehem Steel Corporation and intervenor-defendant Lake Carriers' Association. All parties were represented by counsel. Having examined the entire record and having determined the credibility of witnesses after viewing their demeanor and considering their interests, the court hereby renders the following Findings of Fact and conclusions of Law pursuant to Fed.R.Civ.P. 52(a).

I. Findings of Fact

This action involves the collection of fees for the use of a harbor under the jurisdiction of the Indiana Port Commission (IPC). The case has a lengthy history which is set out in the District Court opinion at 534 F.Supp. 858 (N.D.Ind.1981) and the Seventh Circuit Court of Appeals decision at 702 F.2d 107 (7th Cir.1983). The following facts, as previously revealed by the Seventh Circuit Court of Appeals, are supported by the trial evidence or by stipulation of the parties:

The Indiana Port Commission was created by the Indiana state legislature in 1961 for the purpose of promoting "the agricultural, industrial and commercial development of the state, and to provide for the general welfare" by the construction and operation of various port facilities, including "a modern port on Lake Michigan." Ind.Code Ann. § 8-10-1-1 et seq. (Burns, 1973). To carry out its legislative mandate, the IPC decided to construct a port and public terminal, to be known as the Burns Waterway Harbor ("the Harbor"), on Lake Michigan near Portage, Indiana. In mid-1962, the IPC, defendant-appellant Bethlehem Steel Corporation ("Bethlehem") and the Midwest Division of National Steel Corporation ("National") entered into an agreement to construct the new Harbor adjacent to parcels of land already owned by Bethlehem and National. Under the terms of the agreement, the IPC (1) purchased some land from Bethlehem; (2) granted Bethlehem riparian rights on the lake; (3) waived in perpetuity its right to condemn Bethlehem's land, and (4) agreed to allow Bethlehem's vessels "access to and across the waters of the outer harbor under the same terms and conditions extended to all other vessels and under the same regulations governing all other vessels making use of Burns Waterway Harbor." Indiana Port Commission v. Bethlehem Steel Corp., 534 F.Supp. 858, 860 (N.D.Ind.1981). In exchange for this, Bethlehem agreed, inter alia, to construct part of the Harbor entrance, the bulkhead at the east end (the Bethlehem side) of the Harbor, the east deflector wall and riparian enclosure walls. National also agreed to build a bulkhead on its property (the west end).

In late 1969, a further agreement was reached between the IPC and the federal government providing that the federal government would reimburse the IPC for certain of its expenditures on the Harbor; that the work paid for by these funds would be carried out under the supervision of the Chief of Engineers of the Army Corps of Engineers; and that, upon completion, the project would be accepted by the government as part of an authorized Federal Project with the maintenance and repair expenses for the portion of the project accepted by the government paid for by the government. Pursuant to this agreement, the State of Indiana granted to the federal government a deed covering the land around the outer breakwaters of the Harbor and a perpetual right-of-way easement for the use of the outer Harbor.

The IPC spent approximately $25 million on land and construction for the Harbor. This money was appropriated by the Indiana General Assembly with an express proviso that the IPC was not required to reimburse the state for the money. The United States Government, through the Army Corps of Engineers, reimbursed the IPC for approximately $13 million of these expenditures, pursuant to the 1969 agreement.

The Harbor opened in 1970. The IPC established a schedule of fees for the use of the Harbor, including a general usage fee entitled a "Harbor Service Charge" ("HSC"). The HSC was intended to defray part of the expense of administration and maintenance of the Harbor. The IPC immediately began to bill Bethlehem and National, as well as users of the public port, the HSC payable on all vessels calling at these facilities. Bethlehem and National strenuously objected to the imposition of HSC upon the ships using their private docking facilities, arguing that the ships calling at their docks used only the federally owned portion of the Harbor and in no way used the IPC facilities. The IPC has remained unconvinced by this argument, and, since July 1971, has been engaged in litigation to collect the unpaid HSC.

The case before us was originally filed in Indiana state court in July of 1971. After the case was removed to the United States District Court for the Northern District of Indiana in late 1971, proceedings in the case were held up pending the outcome of a challenge to the HSC, which Bethlehem had initiated before the Federal Maritime Commission. After nine years of hearings before, and decisions by Administrative Law Judges of the Commission, the Commission itself and the United States Court of Appeals for the District of Columbia Circuit, the Federal Maritime Commission dismissed the proceedings for lack of jurisdiction. Plaintiff then filed an amended complaint in the action in the Northern District of Indiana in October 1980. By the order of Chief Judge Sharp, proceedings in the case were bifurcated into a liability phase and a quantum phase. After receiving motions for summary judgment from both Bethlehem and the IPC on April 1, 1981, the district court granted IPC's motion and entered judgment for it on all liability issues on April 14, 1981. The district court, on February 24, 1982, entered a final judgment awarding $327,258.82 to the IPC. 702 F.2d at 108-109.

On appeal, the grant of summary judgment was reversed on the grounds that Bethlehem Steel had not been given a meaningful opportunity to challenge the IPC's summary judgment motion. 702 F.2d at 111.

As a defense to the IPC's action for debt collection, the defendants request the court to find that the Harbor Service Charge (HSC) is invalid on the grounds that the HSC (1) violates the prohibition against duties of tonnage, U.S. Const. Art. I, § 10, cl. 3; (2) violates the terms of the Rivers and Harbors Appropriation Act of 1884, 33 U.S.C. § 5, and the River and Harbor Act of 1902, 33 U.S.C. § 565; (3) violates the terms of a 1962 agreement between Bethlehem and IPC because at least one user of the public port (Cargill, Inc.) is afforded access to the Harbor on terms preferable to Bethlehem's; (4) impermissibly charges Bethlehem fees for vessels neither owned nor operated by Bethlehem; and (5) violates a condition of the federal funding in which the State of Indiana agreed not to charge vessels for the privilege of entering the Harbor.

Duty of Tonnage

In 1962 when IPC, Bethlehem Steel, and the Midwest Division of National Steel agreed to construct the Harbor adjacent to parcels of land already owned by Bethlehem and National, it was not known whether the federal government would reimburse the IPC for any of its expenditures. As stated above, Bethlehem constructed part of the Harbor entrance, the bulkhead at the east end (the Bethlehem side) of the Harbor, the east deflector well, and riparian enclosure walls. National constructed a bulkhead on its property (the west end). The IPC used state-appropriated funds (a) to dredge the outer harbor, including the entrance channel; (b) to construct the outer breakwaters; and (c) to construct the public terminal facility. The IPC also contributed the land under the outer Harbor itself and under the breakwaters and committed a 20-acre site for future dredge spoils disposal. The United States reimbursed the IPC for the expenses of (a) dredging the outer Harbor, the entrance channel, and the east and west harbor areas, excluding the berthing areas; and (b) constructing the outer breakwaters. The United States accepted the outer Harbor, the east and west harbor arms and the outer breakwaters as part of an authorized federal project and assumed the expense of maintaining and repairing these portions of the Harbor.

In 1970, the Burns Harbor Waterway opened and the IPC began charging the HSC, at a rate of one cent per gross registered ton, on all "commercial vessels entering the physical limit" of the Harbor regardless of whether the vessel used the IPC's public terminal facility. The following categories of vessels were exempt from the HSC except that the IPC reserved the right to charge them for services actually rendered: vessels which enter the Harbor solely to refuel, resupply or change pilots and remain for less than 24 hours; vessels which neither receive nor discharge cargo and remain for less than twelve hours; government vessels not carrying cargo, troops, or supplies; and vessels using the Harbor as a harbor of refuge.

The IPC does not provide pilotage services for vessels entering the Harbor. Nor does the IPC provide Bethlehem, or other ships entering the Harbor, with accommodations for wharfing or...