Opinion ID: 295297
Heading Depth: 2
Heading Rank: 2

Heading: The Pacific Coast European Conference and Origins of the Current Controversy

Text: 10 Pacific Coast European Conference is composed of numerous foreign and domestic shipping lines operating between ports on the United States Pacific Coast and ports in Europe. It was established in 1937 pursuant to an agreement approved by the Federal Maritime Commission under Section 15 of the Shipping Act of 1916. Under the self-policing provisions of this agreement, the determination of guilt for infractions and the penalties assessed therefor were left to a three-fourths vote of the membership present at a duly called meeting, with the accused line casting no vote. No procedures were set forth in the agreement giving the accused line access to the evidence to be used against it, or allowing the accused to rebut or explain the evidence, and there was no guarantee of an original or appellate hearing before a disinterested and impartial tribunal on either the matter of guilt or the assessment of penalties. 11 On 13 March 1967 counsel for the Conference recommended that the above procedures be changed to include 'fairness' provisions consonant with our States decision, which had been handed down less than two weeks before. Under the conference agreement, all major changes had to be approved unanimously by the members before adoption, and at a meeting in June 1967 attended by 21 of the 22 conference memgers, including States Marine, all 21 voted for adoption. However, shortly thereafter States Marine withdrew its affirmative vote; still later Weyerhauser Lines, the absent member, cast a negative vote on the proposal. Thus no changes were made to self-policing provisions of the Agreement. 12 In August 1967 the comptroller of the Conference informed the chairman of the results of an investigation that he had conducted which indicated that States Marine had paid rebates to certain shippers in violation of the conference agreement. The chairman formally notified States Marine of the charges. But rather than submit to adjudication of its guilt or innocence under the procedure set out in the conference agreement, States Marine countered with a complaint to the Federal Maritime Commission alleging that the Congerence's self-policing system was illegal under States. At about the same time, it sought and was granted a temporary restraining order and preliminary injunction from a United States District Court preventing the Conference from proceeding with any self-policing action against it. On the Conference's motion to set aside the preliminary injunction, the two parties stipulated that the Conference could rpoceed with its self-policing action, but was restrained from attempting to collect any penalty assessed. 13 During the pendency of the Federal Maritime Commission's action the possibility of settlement between States Marine and the Conference was explored. Upon failure of these efforts States Marine Resigned from the Congerence, effective 1 December 1967. Thereafter, pursuant to the self-policing provisions then in effect, the Conference found States Marine guilty of violating the conference agreement and assessed a fine of $130,000.00. 14 II. The Commission Decision Holding Conference Self-policing Procedures 'Legally Defective' Prior to Formal Approval by the Conference and the Commission 15 In June 1968 the Commission rendered its decision 13 that the Conference's selfpolicing system was indeed illegal under States, as had been argued by States Marine in this action brought by States Marine. The Commission ordered the Conference to cease and desist from further action under the existing self-policing system until appropriate amendments were made and approved by the Commission. The Conference's assessment was thus held void. But in voiding it the Commission said, 'This does not mean, however, that the Conference has lost its right of action against States Marine for alleged wrongdoing prior to its resignation from the Conference.' 16 The Conference contends that the Commission was wrong in this decision. It argues that our States decision was self-executing, and the Conference's duty of compliance was operative at once independent of any further approval under the Shipping Act. It is urged that nowhere in States is there the slightest hint that an agreement which leaves open the procedures to be followed must be struck down when the explicit procedures required by the principles of States are in fact permitted and are followed to the letter. And, in support of this proposition, the Conference notes that unfairness was obvious in the provisions of the conference agreement under consideration in States, and emphasizes the fact that in defining what constitutes fairness in the context of shipping conference self-regulation, we said the 'self-regulatory process must provide specific realistic guarantees.' 14 In other words, the Conference deems significant the fact that we never said explicitly that these guarantees must be reduced to writing and approved by the Commission. 17 To accept this argument would be to say that the Commission must review the self-policing actions of the conferences on an individual case-by-case basis to be sure that the accused lines received fairness of treatment in accordance with the principles of the States decision. This is a wholly unpalatable result, not at all in accordance with our reasoning in States. 18 First, in that decision we specifically rejected the suggestion that the fairness of conference self-policing action be reviewed by the Commission on a case-by-case basis. We said, 'Section 15 authorizes the Commission to 'disapprove, cancel, or modify any agreement, not to sit in judgment of the day-to-day operations carried out under that agreement.    15 Second, 'to place the Commission in the role of an on-going appellate panel, intimately involving it in a case-by-case review of the conferences' Neutral Body system would hardly be consistent with Congress' intent that the conferences engage in self-regulation.' 16 Third, to hold as the Conference urges would be inconsistent with our previous holding in Outward Continental North Pacific Freight Conference v. Federal Maritime Commission 17 that the Commission under Section 15 has the statutory obligation to require specific (and fair) self-policing procedures in conference agreements. 19 States, then, was not self-executing in the manner urged by the Conference, but rather required affirmative action by the conferences amending the agreements filed with the Federal Maritime Commission to embody self-policing provisions which conformed to the principles of States, if none already existed. We therefore affirm the Federal Maritime Commission's decision in No. 22,407. 20 III. The Commission Decision Holding a Conference Agreement Amendment, Incorporating Procedural Rules Required by a United States Court of Appeals Decision and Approved by the Commission, Valid and Effective as to an Ex-Member's Violations Incurred While a Member 21 We next proceed to consideration of the Commission's second decision, from which States Marine, not the Conference, appeals. 22 In October 1968 the Conference submitted an amendment incorporating the fair hearing principles of States for Commission approval. This was approved in November. But prior to this approval, the Conference submitted a further amendment to the self-policing provisions of the conference agreement which would allow the Conference 'to investigate and prosecute pursuant to those provisions (i.e., the new fair hearing provisions), any alleged breaches brought to its attention at any time after March 8, 1967,' the date of our States decision. This was in presumed implementation of the Commission's language in its June 1968 decision, quoted p. 2536, supra. 23 States Marine protested to the Commission this last amendment, but, after due investigation, the Commission approved it under Section 15 of the Shipping Act. Approval became effective in July 1969. 18 24 Before this court States Marine has not argued that the Conference may not have a right of action against it based upon its conduct while a member of the Conference. It concedes that liability for breaches of the conference agreement would 'survive resignation and be court enforceable.' But against any application of the new fair hearing procedures to previous substantive offenses States Marine argues 25 ( 1) that approval of retroactive application of the new fair hearing procedures amounts to unlawful retroactive approval under Section 15, and further, 26 ( 2) that such approval makes it answerable to the Conference's charges 'under a private penal system prescribed by a contract to which States Marine was not a party.' 27 A. Alleged 'Retroactive' Approval Under the Shipping Act 28 The first question raised by States Marine lends itself to a three-pronged analysis, directed to determining if approval of retroactive application of the Conference's new self-policing provisions offends either, first, any of the express terms of the Shipping Act, as amended; or, second, the Congress' intent in enacting the Shipping Act and its amendments as manifested in the legislative histories thereof; or, third, any other public policy relevant to these questions. 29 The only provision of the Shipping Act here relevant is Section 15, which was totally rewritten by the legislature in the amendments to the Act of 1961. States Marine argues that the terms of this Section as interpreted in Carnation Company v. Pacific Westbound Conference, 19 River Plate and Brazil Conferences v. Pressed Steel Car Co., 20 Mediterranean Pools Investigation, 21 Agreements T-2108 and T-2108-A, 22 and Agreement T-2138 23 prohibit the Commission from approving retroactive application of the new fair hearing provisions adopted by the Conference. Specific reliance is placed upon the following language from Carnation, where the Supreme Court said: 30 Although the Commission can approve prospective operation under agreements which have been implemented without approval, respondents concede that the Commission has no power to validate pre-approval implementation of such agreements. 24 31 Reliance is also placed upon the following language of the Federal Maritime Commission in Mediterranean Pools: 32 Section 15 clearly prohibits approval of an agreement or any modification or extension thereof which bears an effective date earlier than the date of our approval. 25 33 We agree wholeheartedly with the proposition that the terms of Section 15 prohibit the Commission from ratifying conduct of the conferences which has transpired prior to the date of the Commission's actual approval of the agreements. That is settled law as amply demonstrated by the case law cited above. But also, that is not the situation here: In approving retroactive application of the Conference's new fair hearing procedures, the Commission was not deciding a substantive question of legality or illegality by ratifying or condemning past conduct, but instead was merely providing a legitimate procedure by which member lines' past misconduct (already so defined by substantive provisions) could be fairly tried and penalized. 34 We are not dealing here with substantive provisions of the agreement which in any way make punishable conduct heretofore not punishable. The right of action against violations of the type allegedly committed by States Marine was given the Conference by provisions of the agreement which were in effect from the beginning of States Marine's membership. And this was conceded by States Marine. The provisions which were allowed to be applied retroactively by the Commission were strictly procedural in nature and were in fact designed to guarantee the accused a fair hearing-- something it was not guaranteed before. 35 From our review of the legislative history of the Shipping Act, and in particular Section 15, it is clear that Congress never considered what the effect would be on the conference self-policing systems if the courts of this country forced them to adopt fairer hearing procedures in order to maintain the numerous advantages of self-regulation, e.g., their exemption from the United States' antitrust laws. However, it is clear that Congress did intend for the conferences effectively to police themselves. 26 It is also clear that effective self-policing cannot take place if the conferences are left in a procedural no-man's-land in prosecuting charges brought against member lines in the interval between the time of our States decision and the time new self-policing procedures are approved by the Commission. Moreover, it would be violative of the principles of our States decision to permit the conferences to continue to prosecute charges brought in this interval according to their former deficient procedures. 36 We can perceive no relevant public policy which would be offended by allowing the new fair hearing procedures adopted by the Conference to be applied to offenses committed at a time prior to their adoption. Even in our own criminal law, where the rights of the accused are jealously protected, application of purely procedural changes to crimes committed prior to their adoption has been upheld. And this has been true in some instances where the procedural changes have operated to the limited disadvantage of the accused. 27 If it does not offend public policy or the Constitution to apply procedural changes in this way retroactively in a criminal case-- where, as we pointed out previously, a higher standard of due process or fairness than that necessary in a shipping conference self-policing forum need apply-- it is difficult to see how retroactive application of procedural changes in the latter could be objectionable. In our view this is especially true where, as here, the procedural changes are designed to give the accused a fairer hearing than that to which it would have dures. 37 Accordingly, we find that it is not at all inconsistent with the express terms of the Shipping Act as amended, the congressional intent in enacting the statute, or any relevant public policy to permit the Conference to apply its fairer self-policing hearing procedures retroactively to the investigation and prosecution of any offenses brought to its attention after the date of our decision in States. 38 B. Effect of Resignation of States Marine Prior to Adoption of the Conferences' New Fair Hearing Procedures 39 Secondly, petitioner States Marine contends that even if retroactive application of these procedural changes is valid under Section 15, they cannot be applied to it since it resigned from the Conference prior to their adoption and thus did not agree to be subject to these new provisions of the conference agreement. 40 We think that the petitioner protests too much. The record shows that when counsel for the Conference recommended new procedures in line with our States decision, States Marine voted for their adoption; it then withdrew its vote pending further consideration of the matter and later submitted more detailed proposals which it considered more protective of the accused's rights. It only withdrew from the Conference when negotiations between them on the charges that the Conference had brought against it broke down. And at that, States Marine's resignation came pending the outcome of an investigation instituted upon its own complaint to the Commission that the self-policing provisions of the Conference then in effect were unfair. Now it seeks to avoid prosecution under procedures which all parties agree meet the fairness standards of States-- standards which States Marine so ardently advocated a short while ago. 41 But even apart from this, States Marine's protests do not survive analysis. Conferences, by the explicit terms of Section 15, are commanded to police effectively their agreements or risk having them disapproved. States Marine would have conferences enforce their charges against members who resign before new self-policing procedures can be adopted, not in the conference's self-policing forum, but in the 'courts' on a breach of contract basis. This offers too easy an out, and does violence to the whole rationale behind the creation of these shipping conferences. 42 Too easy, because obviously a conference member line accepts as part of the conference agreement not only the self-policing provisions specifically written in, but also any applicable laws affecting such provisions as declared by any competent court duly seized of the issue. When this court in the States decision in 1967, a proceeding initiated by petitioner States Marine itself, declared the specific procedural requirements of the Conferences' self-policing provisions insufficient under due process standards, this court in effect told the Conference members what the fair hearing standards must be and directed the Conferences to proceed with the formalities of adoption and approval by the Commission. As the Commission held, before a valid hearing on the charges against States Marine could be had, the formal process of adopting the new procedural rules had to be complied with, the prime reason for this being so that the accused, States Marine, would have detailed chapter and verse of the procedural rules under which it was being tried. This temporary hiatus did not give States Marine grounds on which to escape the jurisdiction of the Conference established by an agreement freely entered into by States Marine, albeit an agreement subsequently modified by judicial decision (to which States Marine was a party) and Conference and Commission action implementing that judicial mandate. 43 To permit the stultifying effect of resignation, as urged by States Marine, would emasculate the whole shipping conference concept. The congressional theory is that their regulation is best accomplished internally. Within legislatively defined limits the conferences make the rules and they enforce the rules, hopefully more swiftly, more expertly, and just as fairly as the courts would. To permit an individual line, by exercising an option of resignation, to escape conference action and toss the entire internal disciplinary problem into the lap of the courts of some country would negate completely the conference system's effectiveness. 44