State of California v. United States City of Oakland v. Same

• Decision Date: 03 January 1944
• Docket Number: Nos. 20,22,s. 20
• Citation: 320 U.S. 577,88 L.Ed. 322,64 S.Ct. 352
• Parties: STATE OF CALIFORNIA et al. v. UNITED STATES et al. CITY OF OAKLAND v. SAME
• Court: U.S. Supreme Court

320 U.S. 577

64 S.Ct. 352

88 L.Ed. 322

STATE OF CALIFORNIA et al.

v UNITED STATES et al.

CITY OF OAKLAND

v. SAME.

Nos. 20, 22.

Argued Dec. 6, 1943.

Decided Jan. 3, 1944.

Rehearing Denied Jan. 31, 1944.

See 321 U.S. 802, 64 S.Ct. 516.

Appeals from the District Court of the United States for the Northern District of California.

Mr. Lucas E. Kilkenny, of San Francisco, Cal., for appellants State of California and another.

Mr. W. Reginald Jones, of Oakland, Cal., for appellant City of Oakland.

Mr. Charles Fahy, Sol. Gen., of Washington, D.C., for appellee.

Mr. Justice FRANKFURTER delivered the opinion of the Court.

The United States Maritime Commission found that terminals along the commercial waterfront in the Port of San Francisco were engaged in preferential and unreasonable practices in that they allowed excessive free time and made noncompensatory charges for their services, all in violation of §§ 16 and 17 of the Shipping Act of 1916, as amended.¹ Accordingly, the Commission ordered the cessation of these proscribed practices, and in order to assure lawful practices it prescribed schedules of maximum free time periods and of minimum charges to reflect the actual cost of services. 2 U.S.M.C. 588. Two of the terminal operators in the San Francisco Bay area were the State of California and the City of Oakland. They brought these proceedings to set aside the Commission's order in so far as it applied to them. A district court of three judges denied relief. 46 F.Supp. 474. The case is here on direct appeal under § 31 of the Shipping Act (c. 451, 39 Stat. 738, Ex.Ord. No. 6166, c. 858, 49 Stat. 1987, 2016, 46 U.S.C. § 830, 46 U.S.C.A. § 830) in connection with the Urgent Deficiencies Act of 1913 (c. 32, 38 Stat. 220, 28 U.S.C. §§ 47 and 47a, 28 U.S.C.A. §§ 47, 47a) and the Judiciary Act of 1925 (c. 229, 43 Stat. 938, 28 U.S.C. § 345(4), 28 U.S.C.A. § 345(4)). California and Oakland denied the power of the Commission to issue the kind of order that it did, and in any event they urged that the authority under which the Commission acted does not or, if it does, cannot constitutionally cover their operations.

The legal issues depend for their solution upon an understanding of the situation to which the Commission addressed itself—the circumstances as the Commission found them and the appropriate way of dealing with them. What follows is a rapid summary of a voluminous record.

Through its Board of State Harbor Commissioners, California provides facilities for the handling of freight and passengers on the San Francisco waterfront, under a statute which prohibits the Board from making charges beyond the cost of furnishing such facilities and administering them. California Harbors and Navigation Code, §§ 3080, 3084, St.1937, p. 856. Pier and office space is assigned by the Board to various steamship lines, and charges fixed by the Board are collected by these assignees for the Board. Except at two piers, the assignees handle the cargo, but the Board employs a staff of men to check all cargo and vessel movements and collect its charges. Oakland, through its Board of Port Commissioners, operates piers and terminals which, like those of California, are designed to accommodate vessels in coastwise, intercoastal, offshore, and foreign trade. Whether the facilities are operated by the City directly or leased to another, the City prescribes and collects the charges.

In thus providing facilities for waterborne traffic, Oakland and California have for many years competed with privately owned terminals in San Francisco Bay. Cut-throat competition ensued, with the inevitable chaos following abnormally low rates. In an attempt to remedy the situation, the California Railroad Commission investigated the operations of terminals in San Francisco Bay, and, more particularly pertinent for present purposes, the prevalent discrimination among users of the terminal services. The conclusions from this inquiry were embodied in an order issued by the Railroad Commission in 1936. 40 Calif. R.R. Comm. Decisions 107. But publicly-owned terminals, and therefore those of California and Oakland, are not subject to the jurisdiction of the Railroad Commission. Since these public bodies operated the major portion of the dock facilities in the area, the Railroad Commission naturally found it impossible to order adjustments in the practices of the private terminals unless the competing public bodies agreed to make similar adjustments. The order of the Commission was so conditioned. California and Oakland acceded to the recommendations in some respects but failed to do so as to practices now to be described.

When cargo is brought to a wharf for shipment or removed to a wharf from a ship, it is the custom to allow a period of 'free time' during which the cargo may rest on the wharf without charge. The length of the free time is fixed, broadly speaking, by determining the period reasonably necessary for the shipper to assemble or to remove his goods and for the ship to load or to discharge. When cargo is left on the wharf beyond the free time period, a charge called 'wharf demurrage or storage' is assessed. The Railroad Commission recommended free time periods shorter than was the practice of California and Oakland, and wharf demurrage charges greater in many instances than those collected by them. These recommendations California and Oakland rejected. This impasse, due to the immunity of California and Oakland from state regulation, was followed by the proceedings before the United States Maritime Commission which resulted in the order now before us. Extended hearings were held before the Commission's examiner, at which the principal witnesses were officials of the Board and Oakland and an expert of the Railroad Commission. After full submission of the controversy, the examiner made his report and findings. On exceptions to some of his findings, the issues were again thoroughly canvassed before the Commission, and on September 11, 1941, it made its order.

The Commission found that there was a marked lack of uniformity in the free time periods allowed by the various terminals, and that to the extent that appellants' free time allowances were greater than those recommended by the Railroad Commission they were unreasonable and led to discrimination against those persons who did not and could not use extended free time. After consideration of the cost studies submitted by its experts as well as of the data introduced by appellants, the Commission further found that appellants' demurrage charges were less than the cost of the services and the carrying charges of the facilities which furnished them. It concluded that unless those who took advantage of wharf storage supplied revenue sufficient to meet the cost of the service, the burden would be shifted to those who paid appellants for other terminal services, such as docking of vessels, loading and unloading, and transportation privileges over and through the terminals. Accordingly the Commission ordered appellants to cease and desist from allowing greater periods of free time than those found reasonable by the Railroad Commission, and to abstain from collecting wharf demurrage and storage rates less than those prescribed by the California authority for private terminals.²

Having found violations of §§ 16 and 17, the Commission was charged by law with the duty of devising appropriate means for their correction. It could have issued an order generally prohibiting further preferential and unreasonable practices, leaving the parties to translate such a generality into concreteness and to devise their own remedies. The Commission chose to do otherwise. It can hardly be suggested that the protection of the national interest in interstate and foreign commerce or even the convenience of the parties would, as a matter of sensible and economic administration, limit the Commission to such negative means of dealing with the evils revealed on this record in one of our greatest ports. Cf. Phelps Dodge Corp. v. National Labor Relations Board, 313 U.S. 177, 194, 61 S.Ct. 845, 852, 85 L.Ed. 1271, 133 A.L.R. 1217. Explicit formulation of duties owed by a business subject to legal regulation is desirable if indeed not necessary. Only thus can it avoid the hazards of uncertainty whether its attempted compliance with an undefined requirement of law is in fact compliance. Neither industry nor the community which it serves is benefitted by the explosion of intermittent lawsuits for determining the relative rights of conflicting interests. What more natural for the Commission, having found disobedience of the law against discriminatory and unreasonable practices, than to define the outer bounds of practices that would not be unreasonable nor discriminatory.³ And so the Commission fixed a schedule of maximum free time and another schedule for avoiding discrimination through non-compensatory charges. It acted on authoritative information and fully canvassed testimony in fixing the minimum charges that would reflect cost. It was proper to choose the cost standard, because just as unreasonably long free time tends to be parasitic on rates for other services, non-compensatory demurrage results in the same mischief. Cf. Baltimore & O.R. Co. v. United States, 305 U.S. 507, 524, 59 S.Ct. 284, 290, 83 L.Ed. 318.

Appellants' objection is that while §§ 17 and 18 specifically give the Commission rate-making power over common carriers by water,⁴ no such power is given over those who like California and Oakland, are not common carriers by water. We fully agree that no rate-making power such as the Commission has been given over water carriers is conferred over other persons subject to the Shipping Act. But the order of the Commission, though it pertains to demurrage charges, is not an exercise of conventional rate-making. By § 17 all those who are subject to the Act are under a duty to 'establish, observe, and enforce just and...