Indiana Port Commission v. Bethlehem Steel Corp.

• Decision Date: 14 April 1981
• Docket Number: H 80-680.,No. 71 H 228,71 H 228
• Citation: 534 F. Supp. 858
• Parties: INDIANA PORT COMMISSION, Plaintiff, v. BETHLEHEM STEEL CORPORATION, Defendant. INDIANA PORT COMMISSION, Plaintiff, v. NATIONAL STEEL CORPORATION, Defendant. INDIANA PORT COMMISSION, v. LAKE CARRIERS ASSOCIATION, Intervenor.
• Court: U.S. District Court — Northern District of Indiana

534 F. Supp. 858

INDIANA PORT COMMISSION, Plaintiff, v. BETHLEHEM STEEL CORPORATION, Defendant.

INDIANA PORT COMMISSION, Plaintiff, v. NATIONAL STEEL CORPORATION, Defendant.

INDIANA PORT COMMISSION, v. LAKE CARRIERS ASSOCIATION, Intervenor.

Nos. 71 H 228, H 80-680.

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

April 14, 1981.

COPYRIGHT MATERIAL OMITTED

Lindley E. Pearson, Atty. Gen. of Indiana, Indianapolis, Ind., Patton, Boggs & Blow, Washington, D. C., Galvin, Galvin & Leeney, Hammond, Ind., for plaintiff.

J. M. O'Malley, Bethlehem, Pa., Barnes, Hickam, Pantzer & Boyd, Indianapolis, Ind., Beckman, Kelly & Smith, Hammond, Ind., Douglas, Douglas & Douglas, Valparaiso, Ind., Scott H. Elder, Cleveland, Ohio, for defendants.

MEMORANDUM AND ORDER

SHARP, Chief Judge.

There are cross motions for summary judgment pending on the issues of liability in this case which the Court now takes up.

I.

Plaintiff Indiana Port Commission was created by the General Assembly of the State of Indiana in 1961, ch. 11, § 1, p. 14; Indiana Revised Statutes § 8-10-1-1 et seq. Its purpose is to "promote the agricultural, industrial and commercial development of the state, and to provide for the general welfare" by the construction and operation of port facilities, and in particular, "of a modern port on Lake Michigan." Id. Plaintiff has been described as "a public corporate entity separate from the state as a sovereign entity," or, in other words, "an instrumentality or agency of the state although it is not the state in its sovereign corporate capacity." Orbison v. Welsh, 242 Ind. 385, 179 N.E.2d 727, 734 (1962).

In carrying out its legislative mandate, the Commission determined to plan and construct a port and public terminal, called Burns Waterway Harbor, on Lake Michigan near Portage, Indiana. The Commission agreed with Defendants, Bethlehem Steel Corporation ("Bethlehem") and the Midwest Division of National Steel Corporation ("National"), in 1962, to construct the new facilities adjacent to parcels of land already owned by Bethlehem and National.

According to the terms of the 1962 agreement, the Commission (1) purchased some land from Bethlehem; (2) granted Bethlehem riparian rights in the Lake; (3) waived in its 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." Exhibit B hereto, ¶ 10. In exchange for this, Bethlehem agreed inter alia to construct part of the Harbor entrance, as well as the bulkhead at the east end (i.e. the Bethlehem side) of the Harbor, the east deflector wall, and riparian enclosure walls. National undertook to build the bulkhead on its property (the west end).

The Commission paid for all other construction involved in the creation of the Harbor. In addition, it contributed the land under the Harbor itself and under the breakwaters, 20 acres of land for disposal of future dredge spoils, and the cost of dredging the Harbor. The Commission also built a public port facility on the land to which it had title, i.e., the central portion of the site.

Lands contributed by IPC had been purchased with an appropriation of $2 million by the Indiana General Assembly in 1957. In the years 1965 through 1967, the General Assembly appropriated another $25.5 million to the construction of Burns Waterway Harbor. It appears that approximately $23 million of this was actually spent by the Commission on the Harbor project.

Pursuant to the River and Harbor Act of 1965, Pub.L. 89-298, the United States Government through the Army Corps of Engineers agreed to reimburse the Commission part of these expenditures. Over a period beginning in April 1970 and ending in October 1975, the Corps remitted to IPC a total of $13,364,266.12. Thus some $9.6 million, approximately was not returned to the Commission. Some of this money was attributable to the construction of the public port facilities, and the remainder was part of the costs of the Harbor itself. Bethlehem and National, of course, also had unreimbursed costs connected with the portion of Harbor construction undertaken by them.

Burns Waterway Harbor came into operation in 1970. The tariff then published by the Commission, setting fees payable by users of the Harbor and of the public terminal facilities, included an item styled the "Harbor Service Charge" ("HSC"). HSC was assessed upon "all commercial vessels entering the physical limits" of the Harbor. Its purpose was stated to be

to assist in defraying the expense of the administration and maintenance of the Port and Harbor, including the supervision of the shipping of the Port, with the view of preventing collisions and fires, policing the harbor and dock areas, aiding in the extinguishing of fires in vessels and their cargoes, on wharves and in other facilities and equipment.

The HSC was assessed on all vessels, according to their gross registered tonnage, including those owned by Bethlehem and National and those calling at the docks owned by Defendants.

The tariff provided further that

every vessel by its master, agent or owner shall pay to the IPC the amount due for the Harbor Service Charge upon presentation of an invoice by the Commission.

Four categories of vessels were made exempt from the HSC:

a) Vessels calling at the Harbor for the sole purpose of receiving bunker fuel and/or ship supplies or changing pilots, and remaining less than twenty-four hours in the Harbor;

b) Vessels passing through the Harbor and remaining less than twelve hours and not receiving or discharging cargo;

c) Government vessels not engaged in carrying cargo, troops or supplies; and

d) Vessels using the harbor as a harbor of refuge.

The Commission reserved the right to charge such exempt vessels for any services actually rendered to them.

Pursuant to this tariff, the Commission began to bill National and Bethlehem, as well as users of the public port, for HSC payable on all vessels calling at their facilities. Some of these vessels were owned and/or operated by Defendants, and some, presumably, were not.

From the outset, Bethlehem and National refused to pay the HSC. As of the end of 1980, these unpaid charges amounted to approximately $200,000 in the case of Bethlehem.

In July 1971 Plaintiff began a debt collection action against Bethlehem in an Indiana State Court. The action was removed to this Court on Defendant's motion later in 1971.

At the same time, Bethlehem mounted a challenge to the HSC before the Federal Maritime Commission ("FMC"). The FMC has jurisdiction over certain aspects of the carriage of goods in interstate commerce, and in particular, is charged with the administration of § 17 of the Shipping Act of 1916, 46 U.S.C. § 816, which reads in pertinent part:

Every ... carrier and other person subject to this chapter shall establish, observe and enforce just and reasonable regulations and practices relating to or connected with the receiving, handling, storing or delivery of property.

The FMC is granted the authority to "determine, prescribe, and order enforced a just and reasonable regulation or practice" whenever it finds that this provision is not being observed. Id.

Hearings were held and testimony taken by the FMC on the question whether the HSC violated § 17, and the FMC's Administrative Law Judge struck down the charge. The Commission took exception to that ruling, and on March 4, 1974, the FMC issued its Report and Order.

The Federal Maritime Commission upheld the Administrative Law Judge's opinion. It ruled that a charge is "reasonable" within § 17 only if it is reasonably related to a service performed for, or a benefit conferred upon, the person against whom it is assessed. The FMC concluded that the Commission neither performed services for nor conferred benefits upon vessels using the Harbor but not the public terminal.

IPC appealed this determination to the United States Court of Appeals for the District of Columbia Circuit, pursuant to 28 U.S.C. § 2342(3). The Court of Appeals reversed, on October 16, 1975, and remanded the proceedings to the FMC for further consideration. Indiana Port Commission v. Federal Maritime Commission, 521 F.2d 281 (D.C.Cir.1975).

The Court of Appeals found that while no "service" performed by IPC was sufficient to justify the HSC under the Shipping Act, it was unable to reach such a conclusion with respect to "benefits." IPC, the Court held, could be said to confer cognizable benefits by its very investment in the Harbor itself. The Court stated that

the steel companies' investment in the Harbor went to create a harbor which their own vessels will use profitably; the Port Commission has no vessels and therefore must obtain the return on its investment in the Harbor itself by the Harbor Service Charge.

521 F.2d at 285, (emphasis added).

While the FMC below had apparently conceded that at least some of IPC's unreimbursed expenses "do not relate to the public terminal facilities and thus may relate to the Harbor generally," 521 F.2d at 286, emphasis in original, it had made no attempt to quantify those disbursements. Rather, the FMC had held that neither the $10 million not reimbursed by the Corps, nor the other contributions by the Commission to the Harbor (such as land, the waiver of eminent domain, and the provision of the entire construction cost pending Federal reimbursement), could substantiate the charge "because they were `part of a quid pro quo arrangement' between the Port Commission and Bethlehem." 521 F.2d at 287.

The Court stated that it "disagreed with this line of reasoning," and therefore set aside the FMC decision. 521 F.2d at 287. It found that an identifiable benefit, as required by § 17 of the Shipping Act, could be constituted by initial investment in construction of the...