UNITED STATES DISTRICT COURT SOUTHERN DISTRICT OF NEW YORK
June 28, 1956
GRACE LINE, Inc., et al., Plaintiffs,
PANAMA CANAL COMPANY, Defendant
The opinion of the court was delivered by: WALSH
This is an action by a group of steamship lines to compel defendant to prescribe new tolls for the Panama Canal and for damages based upon its collection of allegedly excessive tolls. Defendant moves to dismiss the complaint, claiming that the court has no jurisdiction over the subject matter because(1) the prescription of new tolls is discretionary; (2) plaintiffs have no standing to sue; and (3) defendant's action is subject to the approval of the President.
The statute in question is Sections 411 and 412, Tit. 2, of the Canal Zone Code
"411. Authority To Prescribe Measurement Rules and Tolls. -- The Panama Canal Company is authorized to prescribe and from time to time change (1) the rules for the measurement of vessels for the Panama Canal, and (2), subject to the provisions of the section next following, the tolls that shall be levied for the use of the Panama Canal: Provided, however, That the rules of measurement, and the rates of tolls, prevailing on the effective date of this amended section shall continue in effect until changed as provided in this section: Provided further, That the said corporation shall give six months' notice, by publication in the Federal Register, of any and all proposed changes in basic rules of measurement and of any and all proposed changes in rates of tolls, during which period a public hearing shall be conducted: And provided further, That changes in basic rules of measurement and changes in rates of tolls shall be subject to, and shall take effect upon, the approval of the President of the United States. whose action in such matter shall be final and conclusive."
"412. Bases of Tolls. -- * * *
"(b) Tolls shall be prescribed at a rate or rates calculated to cover, as nearly as practicable, all costs of maintaining and operating the Panama Canal, together with the facilities and appurtcnances related thereto, including interest and depreciation, and an appropriate share of the net costs of operation of the agency known as the Canal Zone Government. * * *"
It is incidental to the authorization for the transfer of the Canal to the defendant by the President and took effect upon the execution of that transfer on July 1, 1951.
Until then the Canal had been administered as an independent agency, under the Secretary of War and the Secretary of the Army.
Defendant is a government corporation, reorganized in 1948 to conform with the Government Corporation Control Act.
Its predecessor, the Panama Railroad Company, had been a New York corporation, organized in 1849 for the purpose of constructing a railroad across the Isthmus. The United States had acquired all of its stock from the French stockholders who had previously attempted to dig the Canal. Until 1950, defendant operated facilities incidental to the Canal, such as a railroad, steamship line, dry docks and hotels, but it did not operate the Canal itself.
The United States, as owner of the defendant, is represented by the President or such other officer of the United States as he may designate. The President or the designated officer is known as the stockholder. The Board of Directors is appointed by and holds office at his pleasure, except that the Governor of the Panama Canal Zone
must be a director and president of the corporation.
The transfer of the Canal was in furtherance of a plan to make the commercial facilities of the Canal self-supporting.
It was authorized upon a recommendation of the Bureau of the Budget to separate the facilities for the service of commerce from those required for national defense and the police functions of the Canal Zone Government, and to get the former under the businesslike accounting and budget control which a government corporation is permitted to use rather than those required of government departments.
It was precipitated by the belief that an increase in Canal tolls was necessary, and one had actually been proclaimed by the President although it was deferred pending consideration of the legislation.
It was hoped that the statute would establish a permanent tolls policy which would permit periodic adjustment of tolls, to keep the commercial facilities of the Canal self-supporting and make it most useful to commerce.
There is no question but that new tolls, if they are prescribed, must conform with Section 412. The first question is whether the statute which 'authorized' the fixing of flexible toll rates in accordance with this section, mandated a change to toll rates so computed, or whether it left to the discretion of the defendant, the continuation of the prevailing rates for an indefinite period of time. Plaintiffs claim that Section 411 mandates the prescription of new tolls in accordance with the formula contained in Section 412; that plaintiffs, as users of the Canal, have a right to transit at these prescribed tolls; that execution of the formula of Section 412 would result in a reduction in toll rates; and that the continuation of the previous tolls constitutes an unlawful exaction for the exercise of this right. It is assumed for the purpose of this motion that tolls prescribed pursuant to Section 412 would be lower than those now prevailing, but defendant contends that under such circumstances it was left with the discretion to keep the prevailing toll rates in effect.
It is my conclusion that the statute did not compel prescription of tolls under the statutory formula as long as defendant was content with the then prevailing tolls. It fixed no time within which the new tolls were required to be prescribed. It expressly provides for the continuation of the prevailing tolls until changed by the defendant. Its language giving power to prescribe new tolls under the statute is permissive in form; it 'authorizes' the prescription of new tolls.
When the present provision is read against the pre-existing one, it is apparent that the language 'is authorized to prescribe and from time to time change' is identical with the language formerly authorizing the fixing of tolls by the President, whose power was indisputably discretionary.
The discriminating use of the permissive form in Section 411 and the mandatory form 'shall' in Section 412 manifests an intent to make this language permissive.
In addition, grammatically, the phrase subjecting tolls to the statutory formula, 'subject to the provisions of the section next following', modifies the words 'prescribe' and 'change' not 'authorize'. Consequently, it is a limit on the extent of change, not the decision whether to change or not. The essential language is as follows:
'The Panama Canal Company is authorized to prescribe and from time to time change * * *, subject to the provisions of the section next following, the tolls that shall be levied for the use of the Panama Canal * * *'.
In amending the section Congress did not leave that phrase in its original position immediately following the word 'authorize' but moved it away from that word to a position after the words 'prescribe' and 'change'.
Such a transposition was quite evidently a precaution against the very ambiguity which plaintiffs are now trying to read into the statute.
The legislative history is consistent with this construction of the statute's language. Congress in all probability expected that the new formula would be resorted to as soon as defendant could conveniently make the required studies and computations because it had been informed that the new formula would produce more revenue than the prevailing toll rates. Congress did not, however, suggest or consider compelling defendant to depart from the then prevailing tolls. It assumed defendant would do so voluntarily. The expectation that tolls would be increased is spread through the reports of the Congressional Committees and their hearings.
The estimate submitted to Congress by the Bureau of the Budget was that a five cent per ton increase would be required by the statutory formula,
and Congressional discussions centered primarily on proposed restrictions to prevent it from going substantially higher.
Although on one occasion a spokesman of the Bureau of the Budget spoke of the bill as providing that the Company 'shall prescribe' toll rates in accordance with the statutory formula,
equally important statements regarding the language of Section 411 speak of it in a permissive sense.18A The principal spokesman for the steamship lines described it as a transfer of the President's authority rather than a contraction of it.
Further, although the House Report speaks of the statute as 'establishing tolls policy',
there was express recognition in the hearings and in the debate that defendant might delay the imposition of new tolls and that Congress could control such action or non-action upon review of its budget.20A
It is also noteworthy that Congress permitted a bill to die which would have expressly required the Governor of the Canal to report proposed rates under a similar new formula within sixty days,
and that it failed to act upon the request of a representative of the steamship lines that a Congressional Committee be designated a 'watchdog' to receive at regular intervals suggestions by the steamship industry as to the execution of the Act.
At the heart of any consideration of the nature of the duty imposed upon the defendant, as well as the other questions raised by this motion, is the power entrusted by Congress to the President with respect to the Canal in general and its tolls in particular. Section 411, itself, gives the President unrestricted power to block any change in tolls. And his unrestricted control over the appointment and removal of defendant's directors, gave him full power to compel them to perform any duty with respect to the prescription of toll rates to which the statute might subject them.
No objection was expressed to the continuation of his control.
Indeed, it was pointed to as one of the bill's two important safeguards, the other being Congressional control of the defendant's budget.
The interposition of the defendant in the toll making procedure was as an aid to the President, not as a restriction upon him. It was to delegate the 'almost ministerial' aspects of this work to an agency with an adequate staff for this work.
It was intended that after defendant prescribed tolls on the basis of the factors which determine how high a toll must be to cover the cost of service, the broader questions of the needs of the national transportation policy and foreign policy would be left as an unlimited delegation to the President.
Defendant is no more than a corporate subordinate of the President and the act here in question is subject to the control of and nullification by the President. Under such circumstances the courts will not construe it as ministerial. Marbury v. Madison, 1 Cranch 137, 170, 5 U.S. 137, 170, 2 L. Ed. 60;
see also United States ex rel. McLennan v. Wilbur, 283 U.S. 414, 418, 420, 51 S. Ct. 502, 75 L. Ed. 1148.
The courts will, by mandamus, compel an officer to exercise discretion when he has failed to do so because of a misconception of law, McGrath v. Kristensen, 340 U.S. 162, 71 S. Ct. 224, 95 L. Ed. 173; Gutnayer v. McGranery, D.C.D.C., 108 F.Supp. 290, modified and affirmed sub. nom. Brownell v. Gutnayer, 94 U.S.App.D.C. 90, 212 F.2d 462; or because of disregard of the statutory standards for the exercise of his discretion, United States ex rel. Accardi v. Shaughnessy, 347 U.S. 260, 268, 74 S. Ct. 499, 98 L. Ed. 681. But mandamus cannot be had to compel the exercise of judgment or discretion in a particular way or to direct the retraction or reversal of action already taken in the exercise of judgment or discretion. I.C.C. v. United States ex rel. Members of Waste Merchants Ass'n of N.Y., 260 U.S. 32, 34, 43 S. Ct. 6, 67 L. Ed. 112; Wilbur v. United States ex rel. Kadrie, 281 U.S. 206, 218, 50 S. Ct. 320, 74 L. Ed. 809. Unless plaintiffs merely seek to have defendant formalize its views on tolls, a step not required by the statute, there could be no possible use of mandamus here except to compel the defendant to act in a particular way, to compel it to prescribe tolls upon a formula it has in its discretion declined to use. Mandamus will not lie to direct discretion in this manner. United States ex rel. Roughton v. Ickes, 69 App.D.C. 324, 101 F.2d 248, 253. Here the discretion given defendant as to whether to change to the new formula is so unrestricted that even if its action could be regarded as final rather than advisory to the President, there could be no legislative standard applicable as a basis for court interference as long as defendant earns enough revenue to carry out the Canal functions contemplated by the statute.
Accordingly the complaint must be dismissed for lack of jurisdiction over the subject matter.
Even though defendant's duty were held to be mandatory rather than permissive it would be necessary to dismiss the complaint because (1) the action of defendant, being subject to nullification by the President, lacks finality and (2) plaintiffs lack standing to sue.
Even when an administrative agency is independent of the President, its duty to act mandatory, and its determination otherwise reviewable, if its determination is subject to Presidential nullification the court will not review it. Such a determination lacks finality in the sense that the action of the court will not determine any right of the parties. The court cannot control whether the determination of the agency, once given, is heeded or disregarded by the President. Such an administrative order has been held merely advisory and not reviewable, either as to the correctness of the advice or for errors of law. Chicago & Southern Airlines, Inc., v. Waterman S.S. Corp., 333 U.S. 103, 68 S. Ct. 431, 92 L. Ed. 568; Trans World Airlines v. Civil Aeronautics Board, 2 Cir., 184 F.2d 66; Pan American Airways Co. v. Civil Aeronautics Board, 2 Cir., 121 F.2d 810; Employers Group of Motor Freight Carriers v. National War Labor Board, 79 U.S.App.D.C. 105, 143 F.2d 145, 151, certiorari denied 323 U.S. 735, 65 S. Ct. 72, 89 L. Ed. 589.
Plaintiffs attempt to distinguish the Civil Aeronautics Act cases because the statute involved, Section 801, 49 U.S.C.A. § 601, expressly required the President's approval of Board action when an application was denied as well as when it was granted.
They claim that here the President has only a veto power and that accordingly action by the defendant was final, unless a change in tolls was prescribed. Such a claim places too nice a reliance upon the independence of the defendant's directors from the sole stockholder at whose pleasure they serve. The President, directly as stockholder or through his designee, had ample power to compel defendant to prescribe new toll rates for his consideration if he wanted it to do so. If the President, himself, were defendant's stockholder, he could not obtain mandamus without first exercising his powers as stockholder. The fact that these powers are held by a designee is not significant; the designee also serves at the President's pleasure.31A The corporate policy in issue is of major importance. Removal for difference of view on such a matter would not be such a clumsy means of controlling defendant's action as to be ineffective, particularly in the light of Congress' express reliance on the President's approval of any change. Certainly need for interference by the courts is not great enough to require departure from the position the courts have so persistently and emphatically stated, that they will not act when their action may be nullified by the executive before it can affect the rights of the parties before it.
Even if it could be said that defendant's duty to prescribe rates is mandatory, plaintiffs lack standing to sue. To have standing, they must allege a violation of a recognized legal right.32A The complaint alleges that defendant has compelled plaintiffs to pay tolls at rates in excess of the standards provided by the 1950 statute, but there is no basis for their claim that they are entitled to transit the Canal at such tolls.
Plaintiffs argue that defendant is analogous to a public utility exacting an unreasonable charge and assume, without supporting authority, that a person has the same right to the use of the Canal as to the services of a common carrier.
Assuming, however, that plaintiffs have a right to use the Canal,
they were given no right to have tolls fixed in accordance with the formula of Section 412. In the absence of a statute there is no right by users to have tolls fixed at a particular rate.34A The statute contains no expression of such a private right. Nor is there any mention of such a right in its legislative history. Congress was concerned with the effect of toll rates upon the national transportation policy as well as with their sufficiency to cover the cost of Canal operation. Although the formula in Section 412 constitutes a complete legislative scheme for the computation of toll rates which will make certain facilities of the Canal self-supporting, no complete standards were enacted for the implementation of the national transportation policy or the preservation of the competitive balance between steamships and railroads. Because of the significance of Canal tolls in this respect, the President was given power to disapprove any prescribed change, even though it might conform exactly with the statutory formula.34B This power of the President was unrestricted and expressly final and conclusive. Under such circumstances, how can plaintiffs be said to have a right to transit the Canal at rates fixed pursuant to Section 412?
Neither was it Congress' apparent intent to give plaintiffs standing to compel the performance of defendant's advisory function for the President. Congress relied upon the supervision of the President and its own control of defendant's budget to prevent arbitrary action by defendant.
In this regard, it is particularly significant that the statute lacks any provision for the initiation of a proceeding for a change in tolls upon complaint of a user, and that the decision not to change tolls need not be based upon any record or hearing. The only requirement for a hearing is after notice that a change in tolls has been proposed. Further, the hearing is not one to provide a basis for the determination of the rights of users, or one which will formulate a record upon which a court may review the compliance with the statutory standard. It is of the legislative type, in which an opportunity is given to the public to express its views, but which does not limit action to the views expressed.
In such a hearing a user of the Canal is given no different standing from any other person.
Defendant also contends that the action is necessarily one against the government. If it is only the President and not the defendant who could make effective the relief plaintiffs seek, the action would be one to be brought against the government and not against defendant. To the extent that plaintiffs' action is based upon the collection of excessive tolls, such is the case. The government never having consented to be sued, and the President being immune from suit,
the court could not grant this relief in a suit against the defendant. To the extent that the action merely seeks to compel the defendant to perform an alleged mandatory duty owed the public, it may be that the action is properly brought against the defendant, but as already explained, it must be dismissed upon other grounds.