UNITED STATES COURT OF APPEALS FOR THE DISTRICT OF COLUMBIA CIRCUIT
July 30, 1969
MARINE SPACE ENCLOSURES, INC., PETITIONER
FEDERAL MARITIME COMMISSION AND UNITED STATES OF AMERICA, RESPONDENTS, THE CITY OF NEW YORK, THE PORT AUTHORITY OF NEW YORK, GREEK LINES, INC., ET AL., INTERVENORS 1969.CDC.232
McGowan, Leventhal and Robinson, Circuit Judges.
UNITED STATES COURT OF APPEALS FOR THE DISTRICT OF COLUMBIA CIRCUIT
DECISION OF THE COURT DELIVERED BY THE HONORABLE JUDGE LEVENTHAL
Marine Space Enclosures, Inc. (Petitioner) brings this action to review a decision and order of the Federal Maritime Commission , approving without hearing a contract for the construction and maintenance of maritime passenger terminal facilities in the port of New York City, and a companion agreement between carriers and the Port Authority for use of the terminal. We think that the Commission's failure to hold a hearing was a violation of § 15 of the Shipping Act of 1916, and remand for further proceedings. I. BACKGROUND AND PROCEDURES.
A. The proposals for a new terminal.
On January 17, 1969, after extensive hearings before the City Council of New York, the City entered into an agreement with the Port of New York Authority (the Port Authority) authorizing the Port Authority to construct and maintain on City-owned property a new terminal to handle maritime passenger traffic. Under the agreement financing will be provided by the City and the Port Authority will lease the facility at a fixed rental, calculated to amortize the City's $60,000,000 cost over a 20-year period.The contract is subject to renewal at expiration by the Port Authority. Tariffs, which include under the contract "rates of dockage and wharfage and the amounts of passenger fees, visitors' fees and parking rates, for all users of the . . . terminal" are to be fixed by the Port Authority. The only limitation placed on the Port Authority is that tariffs be maintained "having due regard to estimated maintenance and operating costs, and to increases thereof which may be occasioned by the passage of time and the aging of the facility." *fn1
The agreement also establishes an "interim" arrangement whereby, pending completion of the new proposed facilities, the City will turn over to the Port Authority certain piers and docks in Manhattan which are presently used for maritime passenger traffic. Existing leases with private operators for the maintenance of these piers will be terminated, or negotiated release obtained, wherever possible.
Implementing the basic arrangement are certain restrictive covenants, covering the term for both interim and permanent operations, which are the focus of this controversy. First, the contract provides that neither the City nor the Port Authority will "promote, finance, establish, construct, operate, or maintain any pier, wharf, bulkhead, dock, terminal or other facilities for the accommodation of passenger vessels, or authorize any other person so to do [for a term] no more than fifty years after the expiration of the original term of the letting of the permanent premises." Thus there is provided a restraint lasting in excess of 70 years. *fn2 A separate restriction precludes construction or effective maintenance of facilities on privately owned frontage that might be suitable for a terminal. *fn3
It is also provided that the agreement between the City and the Port Authority is conditioned on the separate agreement of the ship lines to use exclusively the new facility once completed, and the interim facilities in the meanwhile. *fn4 The clause has been given effect in a contract, which is also before the FMC, wherein the signatory carriers agree with the Port Authority to "undertake, from the date of the commencement of the letting under the Basic Agreement, to operate all their passenger vessel service to and from the Port of New York . . . only to and from the Interim Terminal . . . and upon completion of the construction, to and from the Permanent Terminal only." Under the agreement with the subscribing carriers the City and Port Authority promise not to allow non-signatory carriers to use the Interim or permanent facilities. The term of this agreement is coextensive with the 70-year term of the Basic Agreement. Six carriers have thus far subscribed to the agreement.
B. Proceedings before the Commission.
In accordance with § 15 of the Shipping Act of 1916, the City's and Port Authority's plans and the two proposed agreements were filed with the FMC for approval and on February 28, 1969, the Commission noticed the matter in the Federal Register and invited comments or requests for a hearing. *fn5 Petitioner, Marine Space Enclosure, identifying itself as interested in operation of a different terminal, filed a timely response on March 11, 1969, protesting the anti- competitive features of the two contracts, which, it contended, constituted a prima facie contravention of the "public interest" under applicable case law. The protest urged disapproval of the arrangement, or that, at the very least, a hearing be scheduled.
By way of answer the City and Port Authority defended the agreements on the grounds that the plans for the proposed terminal had been the subject of public hearings before the City Council of New York; that new facilities were urgently needed and that a hearing before the Commission would cause unnecessary and critical delay; and that the restrictive provisions of the two agreements did not preclude construction and maintenance of terminal facilities on property not controlled by or under the jurisdiction of the City or Port Authority, *fn6 and finally, that no carrier had intervened or protested before the Commission.
Supplemental papers were subsequently lodged by both the petitioner and terminal proponents, including correspondence between the Port Authority and several carriers, indicating that carrier approval of the plan was not without some reservations, a fact stressed by petitioner in its supplemental protest.
On April 7, 1969, based on this skeleton record, *fn7 the Commission issued a memorandum Order of Approval. The FMC found, in conclusory terms, that there was a "demonstrated need" for the agreements and that they were not "unjustly discriminatory or unfair or detrimental to the Commerce of the United States and are not contrary to the public interest." Petitioner's protest was dismissed on the ground that Marine Space Enclosures had only an "indirect and remote interest." Noting, however, that the contract provisions were "unique" and had "especially anticompetitive character and effect," the Commission asserted continuing jurisdiction "to cancel or modify" the agreements and to monitor operations by requiring reports from the Port Authority.
C. Developments subsequent to the FMC's decision. *fn8
Subsequent to the April 7 Order of Approval the Commission received requests from several carriers for further informal discussion of the proposals for the new terminal. In a supplemental order of May 12, the Commission discounted the significance of this request which it noted did not amount to a formal protest. The April 7 order was reaffirmed, relying on the stipulation of the City and Port Authority to resubmit the agreements for approval at the end of the amortization period. On May 14, the carriers applied to this court for leave to intervene and their motion was granted by an order of May 29. *fn9 II. REQUIREMENT OF HEARING PRIOR TO APPROVAL OF AGREEMENTS UNDER SECTION
A. The hearing requirement of § 15.
We think the mandate of Congress was violated when the Commission failed to hold a hearing on petitioner's objections to the contracts for development and use of the planned Port Authority terminal.
This conclusion appears from the plain language of § 15 of the Shipping Act of 1916, which required the Port Authority to file the two agreements with the FMC for approval, and further directed:
The Commission shall by order, after notice and hearing, disapprove, cancel or modify any agreement, or any modification or cancellation thereof, whether or not previously approved by it, that it finds to be unjustly discriminatory or unfair as between carriers, shippers, exporters, importers, or ports, or between exporters from the United States and their foreign competitors, or to operate to the detriment of the commerce of the United States, or to be contrary to the public interest, or to be in violation of this chapter, and shall approve all other agreements, modifications or cancellations. *fn10
The vitality of this statutory directive is underscored by two recent decisions of the Supreme Court. In FMC v. Svenska Amerika Linien, 390 U.S. 238, 244, 88 S. Ct. 1005, 1009, 19 L. Ed. 2d 1071 (1968), the Court approved the FMC's policy of shifting to an applicant for approval of a restrictive agreement the burden of demonstrating the need for anticompetitive restraints, noting "By its very nature an illegal restraint of trade is in some ways 'contrary to the public interest.'" In Volkswagenwerk Aktiengesellschaft v. FMC, 390 U.S. 261, 88 S. Ct. 929, 19 L. Ed. 2d 1090 (1968), the Court disapproved the Commission's failure to require the filing of certain agreements and to give them active consideration for approval or rejection, even though the restraints were only incidental to a management-labor pact designed to avoid impediments to commerce. *fn11
A quick and over-literal reading of § 15 might generate the notion that a hearing is required only if the Commission disapproves an agreement and not if the Commission merely grants approval. In all fairness to counsel, this thought, if put forward at all by the Commission, was suggested only softly, as a backdrop for other sturdier contentions.
Section 15 requires an affirmative act of approval. *fn12 The significance of this is undeniable. On the one hand, it is unlawful to act in pursuance of the agreement prior to receipt of approval. On the other hand, the Commission's imprimatur, when received, carries with it immunity from the antitrust laws. *fn13 It would be a travesty to suppose that Congress meticulously required an appropriate hearing and reasoned disposition as a condition of disapproval of industry agreements but was prepared to acquiesce in agency approval on the basis of back-office and one-sided conversations, and unpublished disposition unaccompanied by reasoned analysis and opportunity for appropriate presentation of objection, evidence and argument. What the words of § 15 fairly indicate is that an appropriate hearing shall be held prior to either approval or disapproval.
B. Inapplicability of implied exceptions from the hearing requirement.
There may be an implied exception to the literal command of section 15 when the Commission has made appropriate determination that certain agreements are of purely routine nature or have an impact on commerce that the Commission finds is de minimis. *fn14
However, the matter before us is not appropriate for establishing any implied exception to section 15. To begin with, there is no Commission rule announcing an exemption for the agreements involved. *fn15 These agreements are neither routine nor de minimis. They plainly have a significant impact on maritime commerce. The seventy-year restriction affecting over-all steamship passenger traffic to the Port of New York is anything but routine. The Commission, by its own Order, characterized these restrictions as "unique" and highly anticompetitive in nature. III. SUFFICIENCY OF THE PLEADINGS TO ACTIVATE HEARING REQUIREMENT.
Even if it be assumed that a new passenger terminal is required, it is by no means plain that these particular and extensive restrictions are necessary. The lease and the exclusive dealing arrangement, exacted from the carriers as a price for using the new facility, extend fifty years beyond the term needed to amortize the original capital investment by the City (assuming the terminal proves viable). The arrangement covers all property, private and public, that would be suitable for a new terminal, and the restrictions cover all five New York City boroughs. *fn16 The agreements thus amount to a significant and perhaps total barrier to entry for the next seventy years.
The seriousness of such all-inclusive restraints of this duration is clear not only in terms of general antitrust doctrine, *fn17 but also under the FMC's own rulings considering the impact of restraints in the maritime industry. *fn18 It is, to say the least, surprising that the Commission would depart from its own prior decisions whether they be treated as having precedential quality or merely the signposts of reflective past determinations, and would approve such restrictions without even briefs and argument, and without discussing what points might further require an evidentiary hearing. It is surprising to the point of concern that the Commission would make such a departure in an opinion that offers the sparsest of findings and speaks in the most conclusory terms. *fn19
An agency may modify or even reverse its past policies and announcements, *fn20 but the confidence of a reviewing court that these adjustments are made in accordance with the requirements of law is not enhanced when the prior precedents are not discussed, the swerves and reversals are not identified, and the entire matter is brushed off once over lightly.
Antitrust questions in general, and in particular contracts involving such all-encompassing restraints, present issues of the kind that should be explored sua sponte in order to discharge an agency's "active and independent duty to guard the public interest," and if need be, the Commission should order a hearing to ascertain whether there exist "alternative courses, other than those suggested by the applicant." *fn21 This is responsive to the dominant consideration that anticompetitive restraints, the kind that would be illegal or of doubtful legality if used in unregulated industry, are in some ways contrary to the public interest that shapes rules governing the persons in directly regulated industry. *fn22
The importance of adherence to the "fundamental policies" of the antitrust laws *fn23 is undeniable. We need not consider whether or to what exent they may in some cases permit relaxation of customary requirements of the adversarial process in order to ensure the surveillance contemplated by law. *fn24 Certainly consideration of antitrust issues is required in this case, where they were timely raised by petitioner's protest, albeit in general terms. The Commission cannot fairly say it was in no wise alerted to the magnitude of the problems -- for when the issue fairly clamors for attention, even a gentle reminder speaks loud enough for the agency conscientiously discharging its duty. Here the protest was more than a diffident clearing of the throat; it noted the extent and duration of the restrictions, *fn25 and specifically reminded the Commission of the Supreme Court's philosophy set forth in FMC v. Svenska Linien (see supra note 22). *fn26 Considering the nature and gravity of the issues, petitioner's protest was sufficient to alert the Commission to the need for further inquiry.
Petitioner's failure to develop in detail controverted factual issues is excusable since the Federal Register notice called only for "comments with reference to an agreement including a request for hearing, if desired, [to be] submitted within 12 days after publication of this notice. . . ." (34 Fed.Reg. 3639, Feb. 28, 1969.) The brief time span allotted must also be taken into account. *fn27
If, after receiving petitioner's protest, the Commission still deemed a hearing unnecessary, it should have, at the very least, afforded interested parties an opportunity to submit affidavits and an outline of controverted issues that could be profitably explored in an evidentiary hearing. *fn28 IV. COMMISSION'S PUBLIC INTEREST CONTENTIONS DO NOT OBVIATE HEARING
The Commission's brief on appeal emphasizes the urgent need for a new terminal, and contends that the retention of jurisdiction, formalized by the agreement of the parties, adequately protects the public interest.
We have already indicated reservations about the soundness of the Commission's bare and unsupported conclusions, that a new facility was needed in New York, and urgently so. The discussion is couched in conclusory terms without any support of record. *fn29 The Commission apparently relies on views of passenger lines, labor groups and other interested bodies that appeared at the public hearings before the New York City Council, none of which is in the record before this court. *fn30 The Commission then went on to say:
We are persuaded that these factors [the dilapidated state of the passenger facilities in New York harbor, the favorable comment before the City Council, and absence of carrier protest] demonstrate that the agreements encompass sufficient transportation benefits in the public interest to warrant their approval. In fact, the transportation need is so clear we consider it essential that the project be permitted to be initiated as soon as possible.
These recitations are ample in rhetoric, but "sparing in detail." *fn31 They are without support in the record, save for the Port Authority's bare assertion that "a hearing would only result in critical delay of an urgently needed terminal facility." We do not think that the Commission's discussion meets the "burden of justification resting on the Commission . . . in a case like this where the agency not only failed to notice an evidentiary hearing, but disposed of the matter without even brief or argument from the petitioner." Citizens for Allegan County v. FPC supra note 21, 134 U.S. App. D.C. 229, 414 F.2d 1125, 1129. *fn32 Such terse and summary treatment is even more inappropriate for the disposition of antitrust issues. *fn33
If time was of the essence, the appropriate solution was not to by-pass entirely the statutory requirement of hearing, but to structure an expedited hearing. *fn34 The Commission erred if it supposed that the defect was rescued by its retention of jurisdiction. This approach ignores the realities confronting carriers like intervenors, who were compelled in effect to reroute their voyages on short notice or subscribe to the seventy-year agreement in order to use the Interim facilities.
We have taken into account the Commission's insertion on rehearing, apparently at the prodding of the Justice Department, of an express provision in its order retaining jurisdiction to consider any application filed 20 years hence to build or operate new terminals. This is not wholly without significance, but it is too flimsy to bear the weight now being thrust on it by counsel as a provision that is decisive assurance of safeguard of the public interest. The provision does not remove the barrier to a new entrant into terminal service interposed by the fact that such entrant would have to induce transportation companies to invest time and energy in exploring a proposal that would require them to move in contravention of their agreement as written. And if the interim exclusion is a restraint going beyond the necessities of the case, the retention of jurisdiction could not undo the consequences of twenty years of complete market foreclosure and the vested interests and relationships that will inevitably develop. Compare Community Broadcasting Co. v. FCC, 107 U.S.App.D.C. 95, 274 F.2d 753 (1960). *fn35 V. SCOPE OF REMAND.
We turn now to the question of what course should be followed on remand. The requirement of a hearing in a proceeding before an administrative agency may be satisfied by something less time-consuming than courtroom drama. In some cases briefs and oral argument may suffice for disposition. *fn36 Ordinarily, however, antitrust issues do not lend themselves to disposition solely on briefs and argument. *fn37 Even though there may be no disputed "adjudicatory" facts, *fn38 the application of the law to the underlying facts involves the kind of judgment that benefits from ventilation at a formal hearing. In some cases, however, the public hearing may usefully approach the legislative rather than the adjudicatory model. *fn39
At a public hearing the parties could focus on whether a new terminal is, in fact, needed and whether a seventy-year exclusive dealing arrangement is necessary to provide for return of capital and maintenance costs; whether the carriers will, in fact, use the terminal and whether, if there is resistance to the plan, traffic will be diverted from New York, and to what extent; whether it is feasible to reduce the restraints proposed by projecting a smaller terminal providing high-quality facilities for part of the traffic, yet leaving carriers free to employ more modest private port terminal facilities. These matters are of the kind we have referred to as "questions of public interest . . . [that] will often be illuminated by an exploration in greater depth than can be provided simply by pleadings and documents." Citizens for Allegan County v. FPC, supra note 21, 134 U.S.App.D.C. at p. 233, 414 F.2d at p. 1129.
The requirement of an evidentiary hearing is not a mandate of a prolix procedure protracted beyond endurance and beyond the requirements of the issues. Even in the most formal proceedings a capable hearing officer can evolve techniques that both expedite the proceeding and illuminate the issues. *fn40
Notwithstanding these considerations, we refrain at this juncture from specifying that our remand order requires an evidentiary hearing. It may be, as the Commission said in its original order, that there is a pressing and urgent need for new facilities, even assuming that the contours of the problem may be redefined and adjustments made. It may be that the issues can be adequately developed for Commission determination through receipt of documents and sworn statements, and hearing oral argument. Any evidentiary hearing may be limited to certain specific issues. These procedures, however, represent the very minimum requisite to satisfy the hearing requirements of § 15 when approval is sought for agreements which contain restrictions that are, in the Commission's words, of such "unique" and of "especially anticompetitive character." VI. STANDING.
We turn now to the Commission's standing contention that petitioner lacks standing to request a hearing under § 15. Marine Space Enclosures is a New York corporation engaged in real estate development. Among its contemplated projects is a terminal complex that will combine berthing facilities for passenger ships with on-shore conveniences for travelers, including hotel accommodations, etc. In the protest petitioner asserted that "planning officials of New York have expressed in writing enthusiastic interest in these plans, and preliminary consultations have begun."
The standing of a potential enterprise to object to agency action may be subject to skeptical inquiry when the action is of a type that increases competition. *fn41 Petitioner's standing as a competitor, however, is established not only by its interests as a potential competitor, but by the nexus between that interest and the substantive objection that an order approving the agreements would not be in the public interest because of the way it operates to foreclose competition. *fn42 Even a potential competitor has standing to present non-frivolous claims of undue restraint on future competition, and certainly the seventy-year agreements contemplating a monopoly raise questions that are far from frivolous. We must respect fully the standing requirements that insist on the kind of opposition of interests establishing a case or controversy. But we must be on guard lest the kind of depreciation of a competitor's standing, which evolved at common law in turning aside objections protesting against competition, should be applied mechanically and mistakenly in the direction of turning aside objections that are intended to preserve and enlarge competition. Standing of potential competitors is implicit. A major consideration of antitrust policy is preservation of potential market. *fn43
This conclusion is fortified by the policy established by legislative enactment and extended by judicial doctrine, of vindicating antitrust legislation through private actions. In Perma Life Mufflers, Inc. v. Int'l Parts Corp., 392 U.S. 134, 88 S. Ct. 1981, 20 L. Ed. 2d 982 (1968), the Supreme Court overturned a decision that barred a private treble damage action based on the plaintiff's "dirty hands," saying that "the purposes of the antitrust laws are best served by insuring that the private action will be an ever-present threat to deter anyone contemplating business behavior in violation of the antitrust laws." 392 U.S. at 139, 88 S. Ct. at 1984. See also Fortner Enterprises, Inc. v. United States Steel Corp., 394 U.S. 495, 502, 89 S. Ct. 1252, 22 L. Ed. 2d 495 (1969). Likewise in administrative proceedings "private citizens play a role in the effectuation of our national antitrust policy." City of Pittsburgh v. FPC, 99 U.S.App.D.C. 113, 126, 237 F.2d 741, 754 (1956). The pennant of "private attorney general," which may be hoisted by anyone with an economic stake who desires to signal issues of public interest, may be run to the very pinnacle of the mast in order to alert all concerned to storm signals of anticompetitive restraints.
The Commission took the position that petitioner's "particular interests . . . appear to be indirect and remote." The Commission also supports its position by the action taken by the City Council, pointing out that historically terminal facilities have been publicly managed in New York, that the Port Authority is the logical choice to construct and operate new facilities, and that the City, the owner of the property, has not seen fit to negotiate with petitioner for the use of the new proposed terminal site.
None of these observations about the City and Port Authority supports the view that petitioner is somehow to be ignored because its interest is "indirect." As long as a petitioner is not outside the class Congress desired to protect from unlawful action, there seems little value in exploring the semantic question whether the law's shield is a safeguard against "direct" or "indirect" injury. And potential competitors are among the beneficiaries of the antitrust laws.
A different kind of consideration is presented by the problem of remoteness. When economic capability is frivolous, standing is not to be acquired merely by plucking from the air the bare label of potential competitor. However, even an interest that falls short of legal standing may serve to awaken the agency's function of acting in the public interest by getting answers to worthwhile questions. And in the case before us the petitioner has enough support from persons who seem to be responsible business men to avoid dismissal on the ground that its interest is all gauze and no substance.
Counsel for the Port Authority refer to petitioner's proposed terminal venture as merely the dream of a real estate promoter, a dream supported only by the presentation of what is called a "rendering." We cannot say, and we do not see how on this record the Commission could say, whether it was a mere fantasy or whether it represented an advance in terminal planning. Petitioner has taken some step toward formulating its project, and making a forward presentation that embodies thought and reflection. Its development has been sufficient to preclude dispensation with the hearing required by statute, a hearing wherein the Commission can consider whether all restrictions contained in the proposed agreements were necessary and consistent with the public interest.
It may be that to raise a different issue we would require a different interest to support standing. Here there is, as already discussed, a nexus between the interest and the objection. We revert again to the all-encompassing covenants contained in these agreements, terms which would abort petitioner's program and block the very conception of other possibilities of a competing facility. And all this would be accomplished by agreements with the subscribing carriers that had received Commission approval and hence were insulated from the usual antitrust remedies. *fn44 In view of the questions raised, the fact that serious people have come forward with a serious intention suffices for standing under § 15.
We remand for further proceedings not inconsistent with this opinion. *fn45