A/S Ivarans Rederi v. U.S., s. 88-1597
| Decision Date | 06 April 1990 |
| Docket Number | 89-1105,Nos. 88-1597,s. 88-1597 |
| Citation | 895 F.2d 1441 |
| Parties | A/S IVARANS REDERI, Petitioner, v. UNITED STATES of America and Federal Maritime Commission, Respondents, Companhia de Navegacao Lloyd Brasileiro, et al., Intervenors. A/S IVARANS REDERI, Petitioner, v. UNITED STATES of America and Federal Maritime Commission, Respondents, United States Lines (S.A.), Empresa Lineas Maritimas Argentinas S.A., Companhia de Navegacao Lloyd Brasileiro, Intervenors. |
| Court | U.S. Court of Appeals — District of Columbia Circuit |
Elmer C. Maddy, with whom Walter H. Lion, New York City, was on the brief, for petitioner.
Gordon M. Shaw, Atty., Federal Maritime Com'n, with whom Robert D. Bourgoin, Gen. Counsel, Federal Maritime Com'n, was on the brief, for respondent Federal Maritime Com'n., Carol J. Neustadt, Atty., Federal Maritime Com'n, Washington, D.C., also entered an appearance for Federal Maritime Com'n.
John J. Powers, III and Robert J. Wiggers, Attys., Dept. of Justice, Washington, D.C., entered appearances for respondent U.S.
Neal M. Mayer and Paul D. Coleman, for Empresa Lineas Maritimas Argentinas S.A. and Companhia de Navegacao Lloyd Brasileiro, et al., and John W. Angus, III, Washington, D.C., for U.S. Lines, S.A., were on the joint brief, for intervenors.
Before SILBERMAN, BUCKLEY and SENTELLE, Circuit Judges.
Opinion for the Court filed by Circuit Judge SILBERMAN.
A/S Ivarans Rederi ("Ivarans") is a Norwegian steamship line that operates freight vessels between the United States Atlantic and Gulf coasts, the Caribbean, and parts of South America. Ivarans petitions this court to review a decision by the Federal Maritime Commission, the agency responsible for regulating the waterborne foreign commerce of the United States, to dismiss Ivarans' complaint against the intervenors, who along with petitioner were parties to a revenue pooling agreement. Petitioner also challenges the FMC's refusal to grant a stay pending the outcome of related litigation in Brazil. Although the FMC properly heard the dispute, we conclude that the Commission unreasonably construed the language of the pooling agreement. We therefore grant the petition for review and reverse the FMC's dismissal of the complaint.
Between 1960 and 1970, instability existed in the trade between the United States and Brazil because of conflicting laws on the allocation among shipping companies of exports destined for the United States Atlantic coast. The FMC, acting pursuant to its statutory duty under the Shipping Act of 1916 to review agreements among ocean carriers filed with the Commission, see 46 U.S.C.App. Sec. 814 (1982), 1 rejected the then-existing government-imposed allocation of cargo, particularly since those rules discriminated against third-flag carriers. 2 In March 1970, the United States and Brazil agreed to permit all the carriers in the trade to negotiate a revenue pooling agreement for the northbound commerce to the United States, subject to the FMC's and Brazilian approval. Consequently, in 1972 the carriers in the trade 3 signed Agreement No. 10027, which assigned a 20% pool share to the three third-flag carriers in the northbound trade; the American and Brazilian national flag carriers were allocated the remaining 80% pool share.
Under Agreement No. 10027, a carrier exceeding its allotted pool share in a given year--by earning more revenues than the percentage of the trade assigned to it--was required to pay a pool penalty, to be distributed to the other pool members, consisting of a portion of the overcarrier's excess revenues. And Article 5(a) of that agreement specified a minimum number of sailings from Brazil to United States Atlantic ports that pool members must maintain in a calendar year:
National Flag Lines
Lloyd )
Netumar ) 80 sailings
Moore McCormack )
Non National Flag Lines
ELMA 12 sailings
Ivarans 15 sailings
Hopal 6 sailings
As is apparent, in 1972 the pooling agreement did not impose individual minimum sailing obligations for the three national flag carriers. Accompanying Agreement No. 10027, however, the national flag carriers negotiated a side contract, designated Agreement No. 10028, which divided their 80% revenue share and 80 minimum sailings requirement; the two Brazilian carriers, Lloyd and Netumar, took a 40% share and 40 sailings, and Moore McCormack, the sole American line, assumed the remainder. The FMC simultaneously approved both agreements.
In 1980, the carriers modified Agreement No. 10027 in several respects. Under the new version, approved and designated by the FMC as Agreement No. 10027-10 (the "Agreement"), the side contract between the national lines was incorporated into the main pooling agreement. In addition, the amended agreement reflected the addition of new carriers in the northbound trade. Under the modified Article 5(a), the minimum sailing requirements were delineated as follows:
National Flag Lines 80 sailings
Brazilian Flag
Lloyd )
Netumar ) 40 sailings
United States Flag:
Moore McCormack )
Sea Land 4 ) 40 sailings
Non National Flag Lines 28 sailings
ELMA )
Bottacchi ) 12 sailings
Ivarans ) 12 sailings
Hopal ) 4 sailings
The revenue shares were similarly divided under a new Article 2:
National Flag Lines No Less Than 80 Percent
Brazilian Flag:
Lloyd )
Netumar ) 40 percent
United States Flag:
Moore McCormack )
Sea Land ) 40 percent
Non National Flag Lines No More Than 20 Percent
ELMA )
Bottacchi ) 9.25 percent
Ivarans ) 9.25 percent
Hopal ) 1.50 percent
Article 6 of both the old and new Agreements deals with the consequences of a party's or parties' failure to attain the minimum annual sailings. Under section 6(a), the pool share of a party which did not maintain the minimum sailing requirements would be reduced in proportion to the reduction in minimum sailings; this sum would be proportionately distributed to the other members of the same national or non-national flag category. 5 Section 6(e), however, provides for a more drastic remedy--suspension of the agreement--in certain situations:
In the event that any party or any combination of parties exceeding 1/3rd. of the total pool share for reasons of their own or in accordance with Article 11 [] do not provide minimum number of sailings in accordance with Article 5 ..., the pool to be suspended for such duration and the pool to be resumed only when adequate service is again restored. (emphasis added)
In early 1982, Moore McCormack reduced the number of its sailings by drydocking three of its ships to modify them for expanded capacity. Consequently, in November 1982, Ivarans notified the other members of the Agreement that Moore McCormack was unlikely to maintain its required 40 minimum sailings for 1982. And, therefore, Ivarans considered revenue pooling suspended for 1982, pursuant to Article 6(e), since Moore McCormack represented more than a third of the revenue pool. Moore McCormack in fact made only 34 or 35 sailings in 1982.
After several unsuccessful attempts to negotiate the dispute, the other parties to the Agreement filed a notice of arbitration under Article 13's mandatory arbitration provision. A three-member arbitration panel then selected a Brazilian site for adjudication and declared that Brazilian law applied in interpreting the Agreement. 6 In a split decision, the panel majority in December 1985 concluded that suspension of the pool was not warranted under the circumstances. The majority viewed the language of Article 6(e) as ambiguous, and referring to Brazilian law, emphasized that the "object and purpose" of the Agreement must supersede the literal text. The tribunal decided that Ivarans must contribute nearly $1.5 million, which represents a portion of its excess revenue, in 1982 pool payments. But the majority also excluded Moore McCormack, now named United States Lines, from receiving any part of the award--rather than merely suffering a proportional reduction of its share--because the arbitrators felt that paying the carrier its pool share in light of its deliberate violation of the sailing requirements would constitute "unjust enrichment." Apparently, then, the arbitrators crafted a rough compromise between Article 6(a) and 6(e).
Following the unfavorable arbitration judgment, in March 1986 Ivarans filed a complaint with the FMC, alleging that the arbitration award and the other pool members" interpretation of the Agreement violated section 10(a)(2) and (3) of the Shipping Act of 1984, 46 U.S.C.App. Sec. 1709(a)(2)-(3) (Supp. V 1987), and section 32(c) of the Shipping Act of 1916, 46 U.S.C.App. Sec. 831(c) (Supp. V 1987), by implementing an agreement different from that approved by and filed with the Commission. United States Lines counterclaimed for the amounts owed under the pool agreement. In December 1986, an administrative law judge agreed with the arbitration majority that the pool should not be suspended because of United States Lines' failure to make its 40 sailings. In his view, Article 6(a)'s proportional reduction clause was the preferred remedy for violations of the sailing requirements. Applying this provision, the ALJ disagreed with the arbitrators' denial of any pool payments to United States Lines, and he granted United States Lines the right to receive its share of the 1982 pool payments, subject to a penalty in proportion to the reduction in required...
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