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Grace Line Inc. v. Federal Maritime Board

decided: July 13, 1960.

GRACE LINE, INC., PETITIONER,
v.
FEDERAL MARITIME BOARD, RESPONDENT.



Author: Hand

Before HAND, WATERMAN and MOORE, Circuit Judges.

HAND, Circuit Judge.

This case comes before us upon a petition of the Grace Line to review (§ 1032 of Title 5 U.S.C.A.), an order of the Federal Maritime Board under the United States Shipping Act, §§ 812 and 815, Title 46 U.S.C.A. The order was made by the Board after a hearing before one of its "Examiners," and the question is whether the Grace Line, which is concededly a "common carrier by water" of many kinds of goods in trade between South American countries and the United States violated § 812 (Fourth), and § 815 (First) of Title 46 of the United States Shipping Act by unjustly discriminating against shippers of bananas as to "cargo space accommodations," and by the "unreasonable preference" of three shippers of bananas which it accepted from Guayaquil, Ecuador, to New York. The position of the Grace Line is that, because it has always carried bananas on a "contract" basis, and has never "held itself out as a common carrier" of bananas, it has the privilege of allocating its cargo space, and confining its carriage, to those shippers that it prefers. The Board held that because the Grace Line was a "common carrier by water" within §§ 812 and 815, it might not evade those sections as to any part of the goods that it lifted, but must give all shippers of bananas equal access to its ships. We reversed a similar order in the same case (263 F.2d 709) because the Board had based its holding only upon the fact that the bananas were "susceptible" of "common carriage" which we thought to be insufficient since all, or nearly all, goods are "susceptible" of "common carriage."

Bananas require a special kind of carriage. They must be laded in refrigerating compartments ("reefers") in which the temperature is kept within specified limits. No matter how cared for, they cannot be kept merchantable for more than three weeks after they have been cut, during which period their ripening continues although a "reefer" will somewhat delay it. Guayaquil has no means of refrigerating bananas while they await lading in a ship, which is done from barges brought alongside. For these reasons a shipper must know in advance upon what space and upon what ship he can rely to lade and carry a specific consignment, for speedy dispatch to the ultimate consumer is an absolute condition of the business. The order of the Board specified certain conditions to which a shipper must conform in order to become entitled to "common carriage," but the sufficiency of these is not in dispute here.The Grace Line began the carriage of bananas in 1934, and has built up a very substantial business. Continuously from the outset all its banana carriage has been by "special contract" and has been limited to three shippers at a time, though one of these has been changed. It insists that since no carrier becomes a "common carrier" which does not "hold itself out" as such, and since it has never done this as to bananas, it is only a "contract carrier" as to them, and §§ 812 and 815 do not apply. Hence, it says, the sections gave the Board no jurisdiction to regulate its banana business. Four shippers of bananas have been denied any space in its "reefers" and intervened in the proceeding before the Board.

We accept the test that at common law a carrier becomes a "common carrier" only when it "holds itself out" as such, so that the issue at bar resolves itself into whether §§ 812 and 815 are to be construed to mean that a carrier which "holds itself out" as a common carrier of certain kinds of goods, is such only as to those goods and may carry by "special contract" any other kinds of goods it pleases. At common law there was no doubt, that a "common carrier" may on occasion carry by contract. For example, in the Express Cases, 117 U.S. 1, 6 S. Ct. 542, 628, 29 L. Ed. 791, on which the Grace Line especially relies, the railroads were allowed to choose their own express companies for the carriage of goods sent by express. Again, in United States v. Louisville & Nashville Railroad Co., 6 Cir., 221 F.2d 698, a railroad was allowed to fix its charge against the United States for the carriage of silver electrical equipment which the freight classification rules provided that it should not carry. However, for the reasons we shall give, we think that we need not decide in what circumstances, if at all, a carrier ever becomes subject to a common law duty of equal treatment of shippers of goods as to which it has never specifically held itself out as "common carrier." For instance, we need not express any opinion whether the privilege of carrying by "contract" is limited to those situations in which there are no competing shippers for the space granted to a preferred shipper, or to the cargoes of chartered ships, or to what other situations, if any. Arguendo, we will assume that in the case at bar the Grace Line would be privileged at common law to select favorites from among banana shippers who were competing for cargo space in "reefers."

We may leave that question open because we think that §§ 812 and 815 should not be construed to give any "common carrier" the right to "unjustly discriminate against any shipper in the matter of (a) cargo space" (§ 812), or to "give any undue or unreasonable preference or advantage to any particular person" (§ 815). The Grace Line's argument presupposes, not only that these duties are limited to "common carriers by water," as of course they are, but also that they are limited to such carriers while they are carrying goods as to which they have "held themselves out as 'common carriers.'" We can see no reason to impute such a limitation upon the definition of "common carrier" in § 801.

The respondent was organized as part of a policy of "encouraging, developing, and creating * * * a merchant marine to meet the requirements of the commerce of the United States" (prologue to Chapter 451, 39 Stat. 728), and the Board, created in 1936, was given power to "investigate" any complaint setting forth any violation of Chapter 451 by "a common carrier by water" and to "make such order as it deems proper" (§ 821). That of course does limit the Board to the regulation of "common carriers," but we can see no reason for further limiting it to the conduct of such carriers in areas in which they have "held themselves out" as "common." It may tend to impair the maintenance of a "merchant marine" to allow an indubitable "common carrier" to determine at its pleasure that as to some goods it will unjustly discriminate among its shippers by doing all its business with them on a "contract" bases. It may be, indeed it is, true that we should not deal with such interests by generalizations; and that each case should be decided on its peculiar merits, but that is exactly what will be within the power of the Board, unless we add to the phrase "common carrier," the suffix, "while acting as such." There is no verbal necessity for doing this and there is every reason of declared policy to assume that the term was used to include all those who were to some degree "common carriers." Certainly the Board is prima facie better qualified than are courts (Roberto Hernandez, Inc. v. Arnold Bernstein Schiffahrtsgesellschaft, M.B.H., 2 Cir., 116 F.2d 849, 851) to decide when, if at all, a transportation company, which has accepted the status of "common carrier" as to some of its activities, will prejudice the "developing of a merchant marine" by allowing access to its cargo space only to its favorites, instead of to all shippers who qualify for the kind of carriage involved.

No doubt it is relevant in a carrier's or the Board's decision that the goods require "special" carriage, as bananas do.Certainly the carrier is empowered to prescribe these requirements, save only that they be reasonable ones; and no shipper who cannot give assurance that he can, and will, conform to them need of course be considered. All that is here involved is that, if a shipper qualified, he may not be denied space at the pleasure, and for the profit, of the carrier. It appears to us that when Congress enacted authoritative supervision over the equal treatment of shippers it could not have meant to perpetuate what, so far as it may perhaps still exist at common law, would be an exception to the primary purpose of the statute as a whole. Happily we are not confronted even with a verbal embarrassment; for, as we have just said, a "common carrier by water," does not cease to be such because it chooses to make an exception as to a part of the goods that it accepts.

Petition denied.

MOORE, Circuit Judge (dissenting).

I dissent.

The report and order of the Federal Maritime Board, the "Board" (and the affirmance thereof by the majority) are, in my opinion, at such variance with fundamental principles of freedom of contract, so misconstrue the purpose to be served by the Board and so exceed the powers granted and intended to be granted by Congress to the Board that I cannot subscribe to the decision. Furthermore, the decision now rendered is directly contrary, in my opinion, to the recent decision of this court in this very case.*fn1 The history of the case is interesting.

The Facts

The facts are virtually undisputed; only the legal conclusions therefrom are in issue. Prior to 1934 Grace Line had been engaged in carrying passengers and freight in its vessels between the west coast of South America and North Atlantic ports. It had never carried bananas and had no facilities to do so. Because of the unique nature of the banana and the highly specialized requirements for its successful transportation (hereinafter more fully developed), ordinary cargo space could not be used for this purpose. Special refrigerated and ventilated compartments were required. Of prime importance to Grace Line was the assurance that, if it made the necessary substantial capital investment to install such compartments, it would have a customer which would regularly use the ...


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