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11/29/83 Dart Containerline Company v. Federal Maritime

November 29, 1983






Robinson and Edwards, Circuit Judges, and MacKinnon, Senior Circuit Judge. Opinion for the Court filed by Senior Circuit Judge MacKinnon.


MacKINNON, Senior Circuit Judge:

Petitioner Dart Containerline Company, Ltd. ("Dart") appeals from an order of the Federal Maritime Commission , which conditioned on certain capacity limitations its approval of Dart's proposed agreement substituting a partner in a joint venture operating as a common carrier by water. After hearing oral argument in this case, this Court remanded to the Commission for a full report on whether the agency had properly asserted jurisdiction over Dart's agreement and amendments thereto. Having received and considered the Commission's "Report on Remand" and Dart's objections to that report, the Court is now satisfied that the FMC had jurisdiction in this matter. Because, in effect, petitioner seeks to reverse an FMC order granting petitioner precisely the authority it sought, and because petitioner has acceded to the condition, we affirm the order of the FMC. I. BACKGROUND

In 1969, FMC approved Agreement No. 9745 ("the Agreement"), whereunder Dart was created to operate a joint venture *fn1 in the trades between (1) ports in Eastern Canada and United States North Atlantic ports, on the one hand, and ports in Europe, on the other; and (2) ports in Eastern Canada and United States North Atlantic ports. The scope of the Agreement was subsequently modified (No. 9745-1) by substituting United States South Atlantic ports for Eastern Canadian ports in the transAtlantic service. Another amendment (No. 9745-2) substituted Consolidated Container Service Company, Ltd. ("Consolidated") for Clarke by means of a stock transfer. The parties sought and obtained approval from FMC under section 15 of the Shipping Act of 1916, 46 U.S.C. ยง 814 (1976 & Supp. V 1981), for both of these amendments to the original Agreement.

A third amendment (No. 9745-3), and the order of FMC granting conditional approval thereto, give rise to this appeal. The amendment substitutes Centennial Shipping Ltd. ("Centennial"), a subsidiary of Canadian Pacific, Ltd., for Bristol, reflecting thereby Centennial's purchase of all of Bristol's shares in Dart. This substitution occurs at a time when Dart is restructuring its entire service between North America and Europe. Dart no longer intends to call at Canadian ports as an adjunct to its service from United States ports. In addition, Dart will add Charleston as an Atlantic port of call and will continue to offer weekly service in the trade using four new containerships, each with a capacity of 1069 twenty-foot equivalent units ("TEUs"). Dart has transferred its trading rights in Canada to its coventurer Belge, whose subsidiary Dart Containerline (Canada) N.V. ("Dart Canada"), together with Canadian Pacific Steamships Ltd. (another subsidiary of Canadian Pacific, Ltd.) and Manchester Liners, Ltd., will operate a reorganized service from Canada to Europe. There exists, therefore, a commonality of ownership among those carriers involved in Canada and Europe service, on the one hand, and those involved in Dart's contested United States and Europe service, on the other. *fn2

Dart informed FMC of the impending stock transfer while maintaining that FMC approval was not required because such transfer was within the authority already granted Dart under the Agreement. FMC disagreed and advised Dart to submit the proposed transfer as an amendment for separate section 15 approval. Dart complied.

Sea-Land Service, Inc. ("Sea-Land"), a competitor of Dart and intervenor herein, protested the amendment because of alleged potential adverse impact on competitive conditions in the North Atlantic/Europe trade. Sea-Land viewed the amendment as but one part of an overall restructuring of Dart service from Canada and the United States to Europe, and it urged the Commission to consider the amendment in that context. While Sea-Land initially requested a full hearing under section 15, it stated that it would agree to approval for one year while a hearing was conducted, with a 4276 TEU capacity limitation -- equivalent to the combined capacity of the four new containerships Dart proposed to utilize in its restructured service between the United States and Europe.

Dart, in turn, reiterated its contention that approval was not necessary and insisted that the amendment be approved without a hearing. Dart indicated a willingness to accept a three-year term and the deletion of its United States-Canada service, but it resisted imposition of capacity limitations.

The Commission rejected Dart's contention that the amendment merely substitutes one party for another; instead, FMC viewed the amendment as "establish[ing] an entirely new joint venture . . . [which] is subject to the approval requirements of section 15. . . ." FMC also concluded that the new arrangement would be per se violative of the antitrust laws absent section 15 approval, but the Commission ruled that transportation and public interest benefits accruing from the agreement outweighed any anti-competitive impact. Accordingly, the Commission rejected Sea-Land's request for a hearing, but did limit Dart's service to its planned capacity of 4276 TEUs. Subject to this condition -- plus the two conditions Dart had previously agreed to accept, see supra -- FMC approved Agreement No. 9745-3 on February 10, 1982. Two months later, Dart's new coventurers filed a revised agreement accepting the Commission's conditions. See Appendix A to Brief for Respondent. Sea-Land has not appealed from the order.

Upon appeal, Dart offered three grounds for assailing the agency's decision to impose capacity limitations: that FMC exceeded its authority by presuming to pass on a stock transfer Dart was entitled to effect without FMC approval; that the decision is not supported by substantial evidence; and that the decision was arbitrary and capricious. After hearing oral argument, this Court, acting sua sponte, issued an order remanding to the FMC on March 8, 1983. The Court ordered the Commission to provide "a statement for its reasons for asserting jurisdiction over the matter in controversy."

In response to this Court's order, the Commission on May 15, 1983, issued its Order on Remand stating that "proponents of Agreement 9745 and Protestant Sea-Land Service, Inc. may present evidence and argument addressing the question of the Commission's jurisdiction over Agreement 9745. . . ." Dart declined the FMC's invitation to participate in the remand proceedings. The Commission filed its "Report on Remand" on September 2, 1983, vigorously defending the FMC's exercise of jurisdiction in this matter. Subsequently, on September 21, 1983, this Court allowed Dart to file a response to the FMC's Report on Remand, notwithstanding Dart's refusal to participate before the Commission. II. THE COMMISSION'S JURISDICTION OVER THE DART AGREEMENT

The first issue in this case is necessarily that which this Court remanded to the Commission for a full report: whether the FMC had statutory jurisdiction over Agreement No. 9745, establishing Dart, and amendments thereto. The Commission's "Report on Remand" has convinced us that ...

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