UNITED STATES DISTRICT COURT SOUTHERN DISTRICT OF NEW YORK
November 24, 1950
ATLANTIC & GULF/WEST COAST OF CENTRAL AMERICA AND MEXICO CONFERENCE (NO. 2743), et al.
UNITED STATES et al.
The opinion of the court was delivered by: FRANK
McGOHEY, District Judge.
This is an action to annul and set aside an order of the United States Maritime Commission and for a permanent injunction against its enforcement.
Plaintiffs are certain individual steamship lines and the conferences which they have established by means of agreements authorized by § 15 of the Shipping Act, 1916,
and previously approved by the Commission. Plaintiffs' trades are between east coast ports of the United States and ports in the Caribbean area, Central and South America.
The defendants are the United States, the Federal Maritime Board
and two organizations of foreign freight forwarders.
The Maritime Commission, on April 1, 1947, on its own initiative, ordered the investigation which resulted in the challenged order. The order directing investigation provided:
'ORDERED that the Commission institute public hearings with respect to the payment and non-payment of brokerage by carriers subject to its jurisdiction, and that at such hearings, evidence be received as to whether conference agreements and regulations adopted thereunder, prohibiting the payment of brokerage, are contrary to law or unjustly discriminatory or unfair as between carriers, shippers, importers, exporters, or ports, or detrimental to the commerce of the United States; and it is further
'ORDERED that respondents show cause before the Commission why conference agreements (including regulations, understandings and other arrangements) to which respondents or any of them are parties, which prohibit the payment of brokerage, should not be disapproved.'
Public hearings were held in New York and San Francisco. Plaintiffs appeared as did other carriers and their conferences as well as freight forwarders and their associations. The Commission's examiners found that agreements not to pay brokerage
were detrimental to the commerce of the United States. Plaintiffs' exceptions to the examiners' report were heard and rejected by the Commission which issued its report
November 17, 1949. The Commission said (p. 177):
'We find that concerted prohibition against the payment of brokerage results in detriment to the commerce of the United States in that it has had and will have a serious effect upon the forwarding industry. We are not impressed with the argument that removal of the ban against the payment of brokerage necessarily will result in increases in rates. Respondents should remove all such prohibitions whether contained in their basic conference agreements, the rules and regulations of their tariffs, or both.
'Nothing herein is to be construed as a directive that individual carriers must pay brokerage nor as any limitation as to the amount of brokerage that may be paid by such individual carriers, provided the payments do not result in violations of applicable statutes. A carrier should be free within limits to pay brokerage or not as its individual managerial discretion dictates. Nor is anything herein to be construed as a prohibition against carriers, acting under a conference agreement, from establishing all reasonable rules or regulations which will prevent the payment of brokerage under circumstances which would violate the Act, or as a prohibition against such carriers from placing limitations upon the amounts which they may pay. On the other hand, as we have found that a prohibition against any payment of brokerage results in detriment to the commerce of the United States, we believe that any limitation below 1 1/4 percent of the freight involved, which is the amount generally paid by carriers in the various trades over a period of years, would circumvent our finding and result in the detriment condemned. * * *
'No order will be entered at the present time, thus giving respondents an opportunity to take necessary steps to accomplish the removal of the prohibitions condemned.'
Plaintiffs, on January 30, 1950, petitioned for reargument and reconsideration. This was denied by the Commission which, on March 8, 1950, ordered 'That respondents herein be, and they are hereby directed, within thirty days after the date of this order, to modify their conference agreements, regulations, and tariffs so as to remove the prohibitions condemned.'
This is the order presently under attack.
This action was commenced April 6, 1950. Plaintiffs' application for an interlocutory injunction was heard on May 9, 1950, and denied by our order of June 9, 1950, D.C., 90 F.Supp. 554. On June 15, 1950, Mr. Justice Jackson refused to stay the Commission's order pending the appeal from our order.
It seems clear to us that there is substantial evidence in the record before the Commission to sustain its findings that forwarding activities have developed American commerce, that the forwarding industry is an integral part of the commerce of the United States, that forwarders, when earning and collecting brokerage are doing so in return for services to the carrier and that agreements not to pay brokerage result in detriment to the commerce of the United States. Plaintiffs urge, however, that whatever the state of the evidence with regard to other carriers and conferences, there was, as to them and the trades in which they are engaged, no evidence sufficient to support the commission's findings and order.
It is true that there is relatively little evidence in the record bearing directly upon plaintiffs' trades. Thus at the outset we have to consider whether evidence relating to the foreign forwarding and carrying industries as a whole may validly be used to support findings and an order affecting these plaintiffs. We believe that it may. It was not necessary to have evidence as to plaintiffs' specific conferences. It was proper for the Commission to make rational inferences from experience in other segments of the industry and to apply them to the segment here involved. This the Commission did.
Adoption of plaintiffs' view as to the evidence required to support the Commission would be unreasonable and unrealistic. Lack of evidence relating to their trades may fairly be laid to the existence of the prohibitions against brokerage in their conference agreements. These prohibitions have been in force for some twenty years only by reason of Commission approval. Under Sec. 15 the Commission may disapprove an agreement it has previously approved, and plaintiffs should not be permitted to urge a condition they helped create as a bar to the Commission's reconsideration and disapproval.
The Commission's order directs merely that plaintiffs' agreements not to pay brokerage be eliminated. Individual carriers are left free, subject to their own judgment and the ordinary operation of lawful competition, to pay or not to pay. The Commission's report did not go so far as to state that all agreements relating to the payment of brokerage would be disapproved, although it considered that an agreement to pay less than 1 1/4 percent would perpetuate the condemned detriment.
Payment of brokerage is not compelled. No more is done than to subject the carriers to normal competitive conditions. It would thus be premature for us to consider whether the Commission could validly order the payment of brokerage and whether the designation of 1 1/4 percent as the minimum rate for agreements is justified. The order is silent on these subjects, and brokerage payments and the 1 1/4 percent minimum may never be prescribed.
It may be that competition will force plaintiffs to pay brokerage, but they have no right to be exceptionally sheltered from competition when such sheltering is detrimental to commerce. Brokerage in ocean commerce is not unlawful or against congressional policy, no matter what that policy may be as to domestic commerce.
We see no merit in plaintiffs' assertion that the Commission's order discriminates between shippers. We cannot at this time know that brokerage will be paid as a result of the order, or that if it is paid the burden will be borne by shippers; or that if these eventualities do occur they will result in the discriminations apprehended by plaintiffs. There is no proof, nor can there be, that such discriminations will obtain, and we cannot set aside the order on the basis of a bare prediction, especially since the Commission, an expert body, apparently foresaw no such difficulties.
If, in the future, discriminations occur, it would then be appropriate for the Federal Maritime Board to consider whether brokerage is or is not detrimental to commerce. The possibility of a future finding of detriment cannot, however, invalidate the present order.
Judgment for defendants. Submit decree.