Opinion ID: 510023
Heading Depth: 2
Heading Rank: 2

Heading: Proceedings Before the FMC

Text: 6 Petchem filed a complaint with the Federal Maritime Commission (FMC or Commission) alleging that the CPA's denial of its application constituted an unreasonable practice in violation of section 17 of the Shipping Act of 1916, 46 U.S.C. app. Sec. 816 (1982 & Supp. I 1983) (1916 Act), as well as undue prejudice against Petchem and an unreasonable preference in favor of Hvide in violation of section 16 of the 1916 Act. 46 U.S.C. app. Sec. 815 (1982 & Supp. I 1983). J.A. at 99. While these proceedings were pending before the Commission, Congress enacted the Shipping Act of 1984 (1984 Act), which contained provisions similar to those in the 1916 Act. In later pleadings and filings, Petchem broadened the scope of its complaint to include allegations of violations of sections 10(b)(11)-(12) and 10(d)(1) of the 1984 Act, 46 U.S.C. app. Sec. 1709(b) & (d) (Supp. II 1984). Thus the FMC's inquiry addressed both Petchem's qualifications for a non-exclusive franchise and the propriety of the CPA's franchise policy under the two Acts. 7 An administrative law judge (ALJ) initially heard the case. Following discovery and public hearings, the ALJ concluded that the Commission had jurisdiction over the dispute and that Petchem had standing to challenge the denial of the franchise before the FMC. On the merits, the ALJ determined that the Port Authority had violated the 1916 and 1984 Acts (collectively the Shipping Acts). Petchem, Inc. v. Canaveral Port Auth., 23 Shipping Reg. (P & F) 480 (1985) (ALJ Op.). Relying on the Commission's ruling in A.P. St. Philip, Inc. v. Atlantic Land & Improvement Co., 13 F.M.C. 166 (1969) (St. Philip ), the ALJ decided that Petchem's proof of an exclusive franchise arrangement had established a prima facie case of a violation of the Shipping Acts, thereby shifting the burden of justifying the arrangement as just, reasonable, and non-prejudicial to the Port Authority, which failed to meet it. 8 The ALJ concluded that the franchise constituted unjust prejudice not only against Petchem but also against any other commercial tug operator interested in serving the Cape Canaveral market. He also held that the CPA's denial of Petchem's application under a vague test of convenience and necessity was unreasonable. ALJ Op., 23 Shipping Reg. (P & F) at 499. The CPA and Hvide filed exceptions to the ALJ's decision. 9 The FMC upheld the ALJ's findings of jurisdiction but reversed on the merits. Petchem, Inc. v. Canaveral Port Auth., FMC No. 84-28, 23 Shipping Reg. (P & F) 974 (1986) (FMC Op.). The Commission agreed that it had jurisdiction on several grounds: the CPA provided terminal facilities to passenger cruise lines that engaged in common carriage as defined by the Shipping Acts, id. at 981-83; various provisions of the Shipping Acts plainly include carriers of passengers, or clearly protect passengers by prohibiting preferential or prejudicial treatment of any person, or can be read to protect the property of passengers, id. at 984; and the franchising of tug towing service constitutes the provision of terminal facilities, id. at 986-87 (citing St. Philip ). 10 In a concurring opinion, Commissioner Thomas F. Moakley expressed a contrary view. He argued that [i]t does not follow from the fact that the respondent Canaveral Port Authority is a marine terminal operator that all of its activities are, therefore, subject to regulation under the Shipping Act of 1984. Id. at 995 (footnotes omitted). He noted that in Bethlehem Steel Corp. v. Indiana Port Commission, 21 F.M.C. 629 (1979), the Commission had drawn a distinction between navigational and terminal services, and that this distinction between port functions resulted in a proper narrowing of the broad language of the St. Philip case, and concluded that [t]ug services fall neatly on the navigational side of such a dividing line and outside the scope of terminal services. Id. at 996 (footnote omitted). 11 On the merits, the Commission reversed the ALJ and upheld the Port Authority's action denying Petchem's application for a nonexclusive franchise. The Commission noted that in St. Philip and California Stevedore & Ballast Co. v. Stockton Port Dist., 7 F.M.C. 75 (1962) (Stockton Port ), it had found exclusive arrangements for tugging and stevedoring services to be prima facie unreasonable and must be justified by their proponents. FMC Op., 23 Shipping Reg. (P & F) at 988. Furthermore, in providing its justification, the Port Authority must meet a two-part standard: whether [its] decision was reasonable at the time it was made and, even if so, whether it was still reasonable in light of its subsequent effects. Id. (citing Agreement No. T-2598, 17 F.M.C. 286, 295 (1974)). Viewed from either perspective, the Commission concluded that the Port Authority offered sufficient justifications for its action. 12 Petchem petitions for review and asks this court to affirm the FMC's jurisdiction but to reverse on the merits. The Port Authority joined by Hvide, as intervenors, challenge the Commission's jurisdiction but support it on the merits.