Opinion ID: 418124
Heading Depth: 2
Heading Rank: 2

Heading: The Merits of BSA's Claims

Text: 18 Our review of the factual determinations behind the FMC's order denying BSA's requested relief is governed by the substantial evidence test because these determinations have been the subject of a hearing on the record. 10 See Administrative Procedure Act, 5 U.S.C. Sec. 706(2)(E) (1976). Substantial evidence is  'such relevant evidence as a reasonable mind might accept as adequate to support a conclusion.'  Consolo v. FMC, 383 U.S. 607, 620, 86 S.Ct. 1018, 1026, 16 L.Ed.2d 131 (1966) (quoting Consolidated Edison Co. v. NLRB, 305 U.S. 197, 229, 59 S.Ct. 206, 217, 83 L.Ed. 126 (1938)). The Supreme Court's classic delineation of substantial evidence bears repeating: something less than the weight of the evidence, and the possibility of drawing two inconsistent conclusions from the evidence does not prevent an administrative agency's finding from being supported by substantial evidence. Id. In assessing the existence of substantial evidence supporting the FMC's order we consider the ALJ's decision to be an important part of the record. See National Association of Recycling Industries v. FMC, 658 F.2d 816, 824 (D.C.Cir.1980). 19 The essence of BSA's complaint in this case is that due to the expansion of barge feeder service the first port rule no longer serves the purpose of the Container Royalty Program and that the Port of Boston is being harmed as a result. The royalties were intended to compensate ILA longshoremen for lost work opportunities caused by containerization. As long as containerized cargo destined for Boston was shipped directly to Boston the first port rule operated to compensate Boston longshoremen for the work they lost. Now, however, much of this cargo is unloaded first at the Port of New York and transshipped by barge to Boston. Under the first port rule royalties on this transshipped cargo are retained in New York and benefit longshoremen there. BSA's views this as unfair discrimination against the Port of Boston in violation of the following provisions of the shipping laws: sections 15, 16, 17, and 18 of the Shipping Act of 1916, 46 U.S.C. Secs. 814-817; section 8 of the Merchant Marine Act of 1920, 46 U.S.C. Sec. 867; and section 205 of the Merchant Marine Act of 1936, 46 U.S.C. Sec. 1115. BSA argues that the FMC should modify the rule to provide that, regardless of where or how collected, container royalties be allocated to the port of destination for import cargo and the port of embarkation for export cargo. 20 It is difficult to discern exactly how Rule 10 violates these various statutory provisions. Except for several references to section 15 of the Shipping Act of 1916, BSA largely presents its arguments in general terms and fails to explain the alleged violations with analysis of the relevant statutory language. Of the statutes allegedly violated, sections 15 and 16 of the Shipping Act of 1916 appear to have the most relevance to this dispute. Section 15 calls for the FMC to disapprove, cancel, or modify any agreement filed with it pursuant to that section which the FMC finds to be unjustly discriminatory or unfair as between carriers, shippers, or ports. 46 U.S.C. Sec. 814 (1976 & Supp. IV 1980) (emphasis added). Section 16 lists discriminatory acts prohibited by the shipping laws and includes in the list the giving of any undue or unreasonable preference or advantage to any ... locality. 46 U.S.C. Sec. 815 (1976) (emphasis added). 11 A review of cases in which the complaining party alleged unfair discrimination against a port breathes life into these provisions and raises doubt that Rule 10 causes such discrimination as contemplated by the shipping laws. 21 The court in Dart Containerline Co. v. FMC, 639 F.2d 808 (D.C.1981) considered a freight tariff filed by Dart which provided for container shipment of unmanufactured tobacco from the port of Wilmington, North Carolina to Europe at port-to-port rates. Dart offered no direct service from Wilmington to Europe; instead, it intended to carry the tobacco by truck from Wilmington to Norfolk, Virginia, at its own expense and then ship it from there to Europe. After the North Carolina Ports Authority filed a complaint challenging this tariff the FMC held that the tariff unlawfully diverted cargo away from Wilmington. The reviewing court found that there was substantial evidence to support the FMC's conclusion that the tariff violated section 16 of the Shipping Act of 1916 because the diverted cargo was naturally tributary to Wilmington and because the diversion was unreasonable. 12 Noting that Dart's plan would deprive[ ] Wilmington of geographic and inland rate advantages, the court approved the FMC's conclusion that competition which enhances productivity, and not competition resulting from artificial inducements to shippers, best serves shipping commerce. Id. at 818-19. 22 In Port of Houston Authority v. Lykes Bros. Steamship Co., 19 F.M.C. 192 (1976), the complainant Port of Houston Authority alleged that the pricing structures of twenty-eight carriers violated sections 16 and 17 of the Shipping Act of 1916 because they unfairly diverted cargo from Houston to Corpus Christi and Galveston. The cargo in question was cotton being exported internationally from Texas. The diversion of cargo from Houston allegedly occurred because the carriers absorbed certain costs otherwise chargeable to shippers at Corpus Christi and Galveston and passed these costs along to shippers at Houston. The resulting lower price for shippers using the Corpus Christi and Galveston ports allegedly harmed Houston's competitive position. The FMC noted that the complaining party in a section 22 complaint proceeding always has the burden of proof and held that it had to deny Houston's complaint for failure to meet this burden. Id. at 200. Houston had not shown that the costs absorbed by the carriers at the other two ports were properly chargeable to shippers. Stating that the Shipping Act did not require all carriers or ports to offer the same services, the FMC concluded that Houston had failed to prove the existence of any price differences that unfairly injured any party. Id. at 200-01. 23 The FMC heard another complaint alleging unfair discrimination against a port in Port of New York Authority v. AB SVENSKA AMERIKA LINIEN, 4 F.M.B. 202 (1953). The complaint centered on a $1.00 rate differential the respondent common carrier by water imposed on wood pulp transported into the Port of Newark as compared to wood pulp transported into other North Atlantic ports. The complainant showed that in the year after the carrier imposed the higher rate in Newark imports of wood pulp dropped about fifty percent there, while dropping only twenty-two percent at the neighboring Port of Philadelphia. The FMC stated that in order to prevail on a charge of unjust discrimination against a port the complainant had to prove (1) that the complaining port and the allegedly preferred port were competing against one another, (2) that the alleged discrimination was the proximate cause of injury to the complaining port, and (3) that such discrimination was undue or unreasonable. Id. at 205. It found the ports of Newark and Philadelphia to be in competition for the importation of wood pulp, but that the complainant had not proved that the rate differential was the proximate cause of the sharper drop in volume in Newark than in Philadelphia. The only evidence offered on the issue of proximate cause had been uncorroborated rumors that importers were avoiding Newark due to the differential. Consequently, the FMC dismissed the complaint for lack of proof of unfair discrimination. Id. at 208-09. 24 The primary objective of the shipping laws administered by the FMC is to protect the shipping industry's customers, not members of the industry. Council of North Atlantic Shipping Associations v. FMC, 672 F.2d at 191 (MacKinnon, J., concurring in part and dissenting in part). The cases discussed indicate that the prohibitions of unfair discrimination between ports serve this objective by ensuring fair competition in the industry. The court in Dart, for example, expressed concern for preserving Wilmington's natural advantages as a port for the export of tobacco and fostering competition that would enhance productivity. Dart, 639 F.2d at 818-19. Although the service Dart intended to offer might have benefitted tobacco shippers in the short run, in the long run Dart's artificial inducement could have seriously harmed the port at Wilmington and perhaps eliminated it as the naturally most cost efficient and convenient port for those shippers. Although unfair discrimination was not found, the other two cases also show that the focus is on shipping rates and artificial inducements which divert cargo from a port and in the long run could injure shippers and maritime commerce. 25 The alleged unfair discrimination against the Port of Boston which BSA complains of does not involve artificial inducements or other such aberrations in maritime commerce. This is demonstrated by the fact that under BSA's proposed alternative to Rule 10 container royalties would still be collected at the first port. BSA's proposal would have an internal effect only--the first port would now forward royalties collected to the port of destination--and would have absolutely no effect on the shippers who pay the royalties. Shippers would still pay the same dollar amount in royalties and would still pay it in New York on cargo transshipped to Boston. In collective bargaining negotiations the ILA has insisted upon the Rule because of its concern that under a different collection scheme a carrier could avoid the royalties by trucking containers to inland facilities near destination ports. 26 The internal nature of BSA's proposed solution suggests that its problem with Rule 10 should be considered during collective bargaining and that it is not the type of issue that the shipping laws were designed to address. This conclusion is reinforced by comparing this case with Council of North Atlantic Shipping Associations v. FMC, 672 F.2d 171 (D.C.Cir.), cert. denied, --- U.S. ----, 103 S.Ct. 69, 74 L.Ed.2d 69 (1982), a case which concerned the implementation by tariff of certain other provisions of the Rules on Containers. The FMC in that case adopted an ALJ's conclusion that the tariffs violated the shipping laws because, inter alia, they discriminated against certain categories of shippers. Specifically, the tariff treated an export shipper within fifty miles of a port who loaded a container at its own facility more favorably than a shipper whose container was loaded at a public warehouse or a shipper whose goods were consolidated in a container load. The ALJ held that these differences were not justified by differences in the transportation services provided by the steamship company, which in each case simply transports a sealed container aboard its vessel. Id. at 179 (footnote omitted). That the court of appeals remanded this case, over a strong dissent, for FMC reconsideration in light of intervening judicial decisions does not detract from its usefulness here. It shows that at least some of the Rules on Containers may indeed violate the shipping law prohibitions of unfair discrimination, but only when the alleged discrimination has a cognizable effect on shippers or maritime commerce. Such an effect is lacking when, as in the case before us, the alleged discrimination can be remedied without altering in any way the manner of imposing the costs on customers of the shipping industry. 27 BSA argues that the FMC imposed an improper burden of proof upon it and that its sole burden should have been to establish a prima facie case of unfair discrimination. We first note that FMC regulations place the burden of proof in complaint proceedings such as this upon the proponent of the order sought, in this case BSA. See 46 C.F.R. Sec. 5021.155 (1982). In the above discussed cases of alleged undue discrimination against a port the FMC consistently adhered to this allocation of the burden of proof. See, e.g., Port of Houston Authority v. Lykes Bros. Steamship Co., 19 F.M.C. at 200 (The burden of proof in a section 22 complaint proceeding is always upon the complainant.). More importantly, the record clearly shows that BSA has failed to establish even a prima facie case of unfair discrimination against the Port of Boston. Thus, the FMC's order should be affirmed regardless of which party properly had the ultimate burden of proof. 28 BSA and the FMC both agree that BSA must establish the three elements set forth in Port of New York Authority v. AB SVENSKA AMERIKA LINIEN, 4 F.M.B. at 205: (1) that the complaining port and the allegedly preferred port were in competition, (2) that the discrimination complained of was the proximate cause of injury to the complaining port, and (3) that such discrimination was unreasonable. Our review of the record indicates that, although the parties have agreed that the Ports of Boston and New York are in competition, BSA has failed to establish the second and third elements. 29 As to the second element, BSA states that the ALJ found that the Port of Boston suffered losses of $638,565.57 and $326,633.43 in container royalties solely as a direct result of Rule 10's failure to require that container royalties be forwarded to the port where the cargo is ultimately destined. It characterizes the ALJ's finding as a prima facie finding of discrimination and as a conclusion that BSA had established the second element of its case. BSA, however, reads too much into the ALJ's factual finding of the amount of container royalties attributable to the transshipped cargo in question. Although this finding indicates a showing of harm to the Port of Boston, it in no way suggests that BSA has established either discrimination or proximate cause. As to discrimination, aside from our conclusion that Rule 10 is not discriminatory in the sense contemplated by the shipping laws, the simple answer is that the first port rule applies to all Atlantic and Gulf ports. As to proximate cause, the FMC correctly stated that Boston's loss of container royalties to the Port of New York was a direct result of the barge feeder service, not Rule 10. The evidence in the record clearly shows that BSA never objected to the first port rule--and in fact continuously adopted and implemented it--until the barge feeder service expanded. This service, however, appears to have been a natural market reaction or evolution in cargo transport services stemming from containerization. In the absence of an allegation such as that of collusion between NYSA and the barge feeder services to redirect Boston-bound cargo through New York we cannot conclude that BSA has established the existence of any redressable discrimination. 30 With respect to the third element of BSA's requisite prima facie case, even if we were to assume that the operation of Rule 10 was discriminatory we would not consider such discrimination unfair or unreasonable. BSA relies heavily upon Volkswagenwerk Aktiengesellschaft v. FMC, 390 U.S. 261, 88 S.Ct. 929, 19 L.Ed.2d 1090 (1968), for the proposition that there has been unfair discrimination here because there is no longer a reasonable correlation between lost work opportunities caused by containerization and a rule intended to compensate therefor. Volkswagenwerk resembles this case in that it concerned the allocation among shipping industry employers of assessments for a fund to mitigate the impact of technological job displacement. It is, however, distinguishable--and more analogous to Council of North Atlantic Shipping Associations v. FMC, 672 F.2d 171,--in that it involves the implementation of these assessments and the resulting higher than usual rates imposed on shippers of automobiles. In its opinion the Court acknowledged the economic reality that most stevedoring contractors and terminal operators passed the assessment on to customers. Volkswagenwerk, 390 U.S. at 273, 88 S.Ct. at 936. Similarly, we recognize the same economic reality with respect to Rule 10. We find it distinguishable not so much because it is an internal agreement among employers, but because as fully implemented it does not have a cognizable effect on shippers or maritime commerce. 31 There is substantial evidence in the record to support the conclusion that Rule 10 satisfies the requirements set out in Volkswagenwerk and not met in that case. In his concurrence Justice Harlan advised the FMC to closely consider the language of section 16 of the Shipping Act of 1916--undue and unreasonable preference--in determining whether the burdens of accumulating the fund had been fairly allocated. Recognizing that there was no perfect way to allocate the costs, he stated that the analysis must leave room for the implementation of some uniform, practical, general rule of assessment even though it have some features that are less desirable than some alternative imperfect rule. Id. at 293, 88 S.Ct. at 946 (Harlan, J., concurring). He viewed the assessment allocation in Volkswagenwerk as problematic because it was not uniform and general but made special provision for automobiles. Id. The Court expressed similar sentiments in analyzing the allocation under section 17 of the Act when it required a reasonable correlation of benefits realized to burdens imposed. Volkswagenwerk, 390 U.S. at 282, 88 S.Ct. at 940 (majority opinion). 32 The ALJ in the instant case considered factors relevant to the issue of the unfairness or unreasonableness of the alleged discrimination and the record contains substantial evidence to support his conclusion that BSA has not established the third element of its prima facie case. The ALJ acknowledged that New York, due to its size and prominence, has been the bellwether in longshore collective bargaining, but reasonably concluded that New York did not dominate the negotiations leading to Rule 10. When it was a member of the shipping association CONASA, NYSA possessed forty percent of the vote. That this voting percentage did not amount to effective control is demonstrated by NYSA's withdrawal for failure to prevail within CONASA on certain labor issues. Although perhaps imperfect with respect to transshipments of imports destined for Boston, Rule 10 is clearly a uniform, practical, and reasonable rule as required by Volkswagenwerk. Recognizing that Rule 10 affects ports from Maine to the Gulf of Mexico, the ALJ adopted an appropriate macroeconomic approach and hesitated to change the Rule without information about the impact this would have on the other ports. BSA failed to present sufficiently detailed data about barge feeder services at other ports or about other services affecting Boston, such as one service from Canada, to enable us to conclude that Rule 10 no longer produces a reasonable correlation between the allocation of container royalties and job displacement caused by containerization. Its discussion of Boston's relatively high ratio of imports to exports perhaps discloses imperfection in the first port rule, but not imperfection of such magnitude that the rule can no longer be characterized as a reasonable method of allocating the burdens and benefits of the Container Royalty Program. 33 We reiterate that BSA's complaint seems to be a matter more appropriately addressed during labor negotiations than by the FMC or the courts. Indeed, other CONASA members appear to have been sympathetic and to have given BSA fair consideration when it raised the issue during the 1980 negotiations. The proposal's rejection after such consideration provides an indication that most shipping industry employers believe Rule 10 to continue to be the most reasonable rule in the circumstances. Having found substantial evidence in the record to support the FMC's conclusions and having carefully considered the applicability of the shipping laws, we conclude that Rule 10 does not unfairly discriminate against the Port of Boston. 34 Affirmed.