Court Opinion

ID: 7843528
Source: CourtListenerOpinion
Date Created: 2022-09-08 17:05:48.268339+00
Date Added: 2024-06-11T16:20:35.100431
License: Public Domain

LUMBARD, Circuit Judge,
dissenting:
I dissent.
This controversy is, in essence, a struggle for access to high-speed shore-mounted cranes located on the docks at Isla Grande, part of San Juan harbor, Puerto Rico. Intervenor Seatrain has sought, since 1975, “secondary use” of the cranes — that is, permission to use the cranes, at a fee, when such use would not interfere with the schedules of the owner of the cranes, Puerto Rico Maritime Shipping Authority (“PRMSA”). PRMSA refused such use, and the Puerto Rico Ports Authority (“PRPA”) therefore declined to assign Seatrain any berthing privileges at Isla Grande, on the ground that Seatrain’s vessels, which are containerized, cannot practicably be worked at Isla Grande without aid from the cranes. After hearings before an administrative law judge, the Federal Maritime Commission (“FMC”) found that PRMSA and PRPA, lessee and lessor respectively of the Isla Grande facilities, had effected unfiled agreements which were required to be filed, thus violating § 15 of the Shipping Act of 1916, 46 U.S.C. § 814. F.M.C. Docket No. 76-38. In a related proceeding, the Commission found that PRPA had given PRMSA an “unreasonable preference” by allowing PRMSA to exclude other carriers from Isla Grande by denying them access to the cranes, and that PRMSA in its capacity as terminal operator had shown “unreasonable preference” to PRMSA in its capacity *81as carrier; both PRPA and PRMSA were found to have violated § 16 of the Shipping Act of 1916, 46 U.S.C. § 815. F.M.C. Docket 76-41. Additionally, in the same proceeding, the FMC found that berthing arrangements at Isla Grande reflected a failure by PRPA and PRMSA to regulate loading and unloading operations there in a “just and reasonable” manner, thus violating § 17 of the Shipping Act, 46 U.S.C. § 816. The Commission ordered that PRMSA make its cranes available to Sea-train and that PRPA assign berthing space to Seatrain at Isla Grande.1
Today the majority holds that there was insufficient evidence .to support the FMC’s findings as to any of the violations by either of the parties. I dissent because on the record before us there is sufficient evidence to support the Commission’s findings with respect to each alleged violation of the Shipping Act, and because the relief ordered by the Commission was lawful and appropriate.
The PRPA is an instrumentality of the Commonwealth of Puerto Rico, created in 1942, which since the early 1950’s has developed the island’s ports on a “passive” plan. PRPA performs initial dredging, channel and harbor work, and stands ready to lease berths, adjacent wharves and back-up land on a long-term basis. But the lessee carriers are left to bear the cost of major improvements to the berthing areas — paving, road-building, fencing, lighting, and erection of storage facilities.
PRMSA, also an instrumentality of the Commonwealth, was formed by action of the legislature in 1974 as a publicly owned carrier. In 1974, PRMSA purchased all the Puerto Rican assets of all the carriers then serving the mainland-Puerto Rico trade.
One of the carriers bought out by PRMSA in 1974 was intervenor Seatrain. Seatrain had been leasing the berths at issue at Isla Grande since 1962. Seatrain’s pre-1974 leases with PRPA required Sea-train to grant secondary use privileges for its high-speed cranes — which it had bought and installed under the “passive port” policy — to other carriers. Title to these cranes was transferred to PRMSA in 1974 along with Seatrain’s other Puerto Rican assets.
In 1975, Seatrain decided to re-enter the mainland-Puerto Rico trade, and asked PRMSA to make available the Isla Grande cranes on a secondary use basis. PRMSA refused. Seatrain then asked PRPA to insist that PRMSA provide such secondary use. PRPA refused. Seatrain filed a complaint with the FMC, which conducted a preliminary investigation. Several FMC officials visited Puerto Rico in an attempt to negotiate an end to the dispute without resort to litigation. PRPA remained firm, offering Seatrain only a lease for certain unimproved berthing areas at Puerto Nuevo, another berthing area that is part of San Juan harbor. In order to use the Puerto Nuevo berths to unload its containerized cargo, Seatrain would have had to buy and install high-speed cranes similar to those at Isla Grande. In view of the relatively small scale of Seatrain’s Puerto Rican operations — Seatrain vessels call at a Puerto Rican port about once every two weeks — Sea-train considered such an investment economically unwise.

The Section 15 Violation

Section 15 of the Shipping Act of 1916 reads in pertinent part:
Every common carrier by water . shall file immediately with the Commission a true copy, or, if oral, a true and complete memorandum, of every agreement with another such carrier or other person subject to this chapter . to which it may be a party giving or receiving special rates, accommodations or other special privileges or advantages . . . allotting ports . or in any manner providing for an exclusive, preferential or cooperative working arrangement. The term “agreement” in this section includes understandings, conferences, and other arrangements.
46 U.S.C. § 814 (1976).
In Docket No. 76-38, the FMC found that Seatrain and PRPA had violated this sec*82tion from 1972 to 1974; and that PRPA and PRMSA had been in violation from 1974 to the time of decision. Only the latter finding is at issue in this appeal.
The FMC’s finding is based on the theory that, by restricting access to the high-speed cranes, PRPA and PRMSA forged an arrangement giving PRMSA de facto exclusive access to the docks in question at Isla Grande. There is no question but that such an agreement, if it existed, was required to be filed. There is no question but that PRPA and PRMSA are subject to section 15. The only issue for the court is the sufficiency of the evidence underlying the FMC’s theory that the actions of PRPA and PRMSA constituted a preferential berthing agreement.
In part the Commission’s conclusion rests on its empirical observation that no other carrier has made significant use of the Isla Grande berths since PRMSA took them over; and partly on the Commission’s conclusion that the docks, because of the way they were built, could not be used for the unloading of containerized cargo without shore-mounted cranes. In addition, the FMC relied on the fact that in May, 1976, PRPA and PRMSA filed with the FMC a draft agreement, numbered T-3308, which was withdrawn by the parties before the FMC took any action on it; and on the fact, as found by the administrative law judge, that the overlap of personnel and interests of the two entities justified treating PRPA and PRMSA as a single unit for some regulatory purposes. Since the majority, with respect to Docket Number 76-38, confined itself to saying that “it is not altogether clear that the Commission’s conclusion is supported by the evidence,” Maj.Op. at 73 n. 14, I take it that this court has not upset the FMC’s finding on this point.2
The majority reasons that, because PRMSA paid PRPA no money that can be identified as an extra charge for the alleged preferential rights, and because there is insufficient evidence to support the critical finding that Isla Grande is unusable by carriers without access to the cranes, the FMC’s finding of a section 15 violation must fail. It seems to me that there is nothing in the language or logic of the statute that requires that preferential berthing rights be charged for or paid for in order to trigger the filing requirement. The statute is concerned with ensuring public scrutiny of preferences, and the fact that a preference is free only reinforces the probability that it is anti-competitive or the result of collusion.
The majority points out that the Commission, in finding a section 15 violation in Docket No. 76-38, took official notice of its findings in Docket No. 76-411 that the cranes were indispensable to operations at Isla Grande. The majority characterizes the configuration of the Isla Grande docks as not a “technical or scientific fact” and I do not disagree. The official notice provision relied upon by the Commission is rather that portion of the FMC’s Rule 226, 46 C.F.R. 502.226, that allows official notice to be taken of “such matters as might be judicially noticed by the courts.” In United States v. Pierce Auto Lines, 327 U.S. 515, 528, 66 S.Ct. 687, 694, 90 L.Ed. 821 (1945), relied upon by the majority, the Court up-. held an order of the Interstate Commerce Commission in which the ICC had used evidence developed in one case in deciding another, related case. The Court pointed *83out that the parties and issues in the two proceedings were nearly identical, and that unless prejudice could be shown the orders were valid. Examples of such prejudice are restrictions on cross-examination or use by the Commission of “evidence bearing on one case which did not affect it and was presented in the other, and which appellees were given no opportunity to meet,” 327 U.S. at 528, 66 S.Ct. at 694. The Court reasoned that “large portions of the evidence applied as much to one application as to another. This was true, for example, of the proofs relating to traffic conditions, shipper demands, the need for faster service and mechanical refrigeration, and other items. In these circumstances it is difficult to see how appellees could have sustained substantial prejudice from the Commission’s consideration of the evidence upon matters as closely related as those in issue in these two proceedings.” Id. The FMC’s official notice in this case resembles the ICC’s in Pierce closely enough to be included within Pierce’s holding.
The majority argues that the question posed by the administrative law judge in Docket No. 76-41 was whether Seatrain’s vessels could practicably use the Isla Grande docks without the cranes, and not whether any carrier’s vessels could so use them. Thus, the majority concludes, the parties did not have the opportunity in Docket No. 76-41 to present evidence on the issue, making official notice in Docket No. 76-38 improper. In short, in the majority’s view the fact purportedly noticed in Docket No. 76-38 had not been found in Docket No. 76-41 at all.
The fatal flaw in the majority’s reasoning is that the statute does not require a finding by the Commission that the unfiled agreement between PRPA and PRMSA gave PRMSA exclusive berthing rights at Isla Grande. All it requires is that PRPA gave PRMSA preferential berthing rights. Thus, even if only Seatrain’s ships were prevented from using Isla Grande, the Commission’s findings would be legally sufficient to support a finding of violation of section 15. The majority does not dispute the fact that in Docket No. 76 — 41 it was established that Seatrain’s vessels could not practicably use Isla Grande without access to the shoreside cranes. Since this finding was tested in the crucible of adversary proceedings between the parties, the Commission was justified in noticing it in a related proceeding, and it is enough to support the Commission’s legal conclusion.
The majority’s reliance on the evidence regarding the ability of CAROL line ships to use Isla Grande is misplaced. Such evidence was indeed, as the majority concedes, “not without contradiction”, and we cannot reverse the FMC’s interpretation of the evidence without falling afoul of the rule that an administrative agency’s determination can withstand appellate review if supported by “substantial evidence.” Since there was evidence in the record that CAROL was told by PRMSA that its ships could not use Isla Grande because of the structural configuration of the berths, the majority’s attempt to argue that the CAROL negotiations prove that PRMSA was willing to make Isla Grande available to other carriers is unpersuasive.
The FMC also relied on a basis independent of the indispensability of the cranes in finding a violation of section 15. It found that PRPA and PRMSA had engaged in unfiled agreements with regard to back-up marshalling areas. As the majority points out, the legal issue is whether or not the marshalling area in question is “essential” to use of the berths, because the FMC’s precedents hold that agreements for the use of marshalling areas are subject to section 15’s filing requirements only if the area is “essential.” Agreement No. T-4 — Terminal Lease Agreement at Long Beach, California, 8 F.M.C. 521 (1965). The majority concludes that there is insufficient evidence in the record to support the FMC’s decision that this area is essential. I disagree.
It is true that Seatrain and PRMSA have said, both in communications prior to this litigation and in testimony, that in their view the marshalling area is not essential. But, in my view, Seatrain’s willingness to attempt to make do without the marshall*84ing area does not bind the FMC, which is still free to conclude that the area is “essential” within the meaning of the FMC’s own case law. Nor is it clear what additional evidence the Commission needs to have in the record beyond its recital of the location of the marshalling area and its proximity to the berths in question. On such facts, whether or not the marshalling area is essential must remain a judgment for the Commission with its maritime expertise to make, and I can see no easy way for a court to say that any marshalling area that is the most convenient to a berth is not also “essential” if the Commission so finds on what must be the unique facts of each case. It may be that the FMC would be expanding the reach of its case law in so finding. But there is nothing in the common law of administrative agencies or in the Shipping Act to prevent the FMC from adopting a broader definition of what is an “essential” marshalling area in 1980 than at the time of its first decisions in this area.
Finally, there is a second independent ground on which the FMC’s finding of section 15 violations should be sustained. Agreement T-3308 is, on its face, an agreement that required filing, since it contained explicit berthing preferences. PRMSA and PRPA admitted implementing parts of T-3308 that, they thought, did not need Commission approval, during the period when the application was pending. But FMC case law is clear that no part of an agreement required to be filed as a whole — including parts which, if independent, would not be subject to filing — may be implemented before approval of the whole. In the Matter of Agreement No. T-2455/2453, 18 F.M.C. 115 (1974).

Section 16 Violations

The FMC concluded that PRPA and PRMSA had violated section 16 by virtue of the “unreasonable preference” shown by PRPA to PRMSA in granting exclusive use of the Isla Grande berths, and that PRMSA had shown an unreasonable preference to itself.
Section 16 reads in relevant part:
It shall be unlawful for any common carrier by water, or other person subject to this chapter, either alone or in conjunction with any other person, directly or indirectly— First. To make or give any undue or unreasonable preference or advantage to any particular person . . . or to subject any particular person — to any undue or unreasonable prejudice .
46 U.S.C. § 815 (1976).
As the majority points out, typically a violation of section 16 involves a “triangular” relationship. A reviewing court can identify a violator (usually a terminal operator), a preferred party (one carrier) and a deferred party (another carrier). In finding that PRMSA violated section 16, the FMC reasoned that PRMSA functioned both as a terminal operator and as a carrier, and that in one role it had preferred itself in the other, to Seatrain’s detriment. The Commission’s case law has long recognized the possibility that a “preference of a carrier for itself in other capacities [for example, as a terminal operator] involves preferring, preferred and deferred parties.” Anglo-Canadian Shipping Co., Ltd. v. Mitsui Shipping Co., 4 F.M.B. 535, 542 (F.M.B.1955). See also McCabe, Hamilton & Renny Co., Ltd. v. C. Brewer Corp., 12 S.R.R. 877 (1972), F.M.C. Docket No. 70-14. Such a view is necessary to avoid the circumvention of section 16 by the purchase, by a terminal operator, of a carrier.
But the majority concludes that PRMSA has not functioned as a terminal operator because, first, it has not let other carriers use its terminal facilities; second, its own use of its terminal facilities does not make it a terminal operator; and, third, its control of the cranes does not constitute de facto control of the terminal. With the first and third of these conclusions I disagree. The question is not whether there has been actual use of PRMSA’s facilities by other carriers.
It is sufficient that PRMSA has held itself out as a terminal operator by offering such use, on any basis. Such an offer appears in the record, J.A. at 548. The Com*85mission’s view of PRMSA as a terminal operator by virtue of its de facto control over the terminal by virtue of its control of the cranes rests on the central finding in this proceeding, the indispensability of the cranes, and to this issue — on whose resolution the outcome of the findings of section 16 violations by both PRPA and PRMSA depends — I now turn.
Some basic facts about the Isla Grande facilities are not in dispute. The facilities are a public terminal. No valid preferential berthing agreement is in force covering them. Yet the PRPA, which has sole authority, acknowledges that it will not allow vessels to berth at Isla Grande unless they can feasibly be unloaded there. Furthermore, the Commission found, no containerized ships can feasibly be unloaded at Isla Grande without the help of the high-speed shore-side cranes. PRMSA exercises control over these cranes, and has refused to allow another carrier access to them. The PRPA has refused to order PRMSA to make the cranes available. In the Commission’s view, the result was that PRMSA exercised a de facto monopoly over the privilege of berthing at Isla Grande.
The issue reduces itself to whether or not the FMC record includes substantial evidence that there are no ships which could use Isla Grande without access to the shore-side cranes. The issue framed for the administrative law judge was whether or not Seatrain’s vessels, which are containerized and have no ship-mounted cranes, could use Isla Grande without the shore-mounted cranes. The majority does not question the sustainability of the FMC’s adoption of his finding that they could not. But the majority points out that the administrative law judge did not make findings that would cover the feasibility of non-containerized ships, or vessels with ship-mounted cranes, using Isla Grande without the aid of PRMSA’s cranes.
Like the majority, I lament the paucity of evidence in the record on this crucial point. But I do not believe that the majority’s speculation that there exist ships which could use Isla Grande without the shore-side cranes is a better basis for deciding this case than the admittedly thin record. It is clear from the record that Seatrain had no vessels which could use Isla Grande without access to the PRMSA cranes. The record also shows that when another carrier in the Puerto Rico-mainland trade wrote to PRMSA regarding use of the Isla Grande berths, it was told in writing that its vessels “cannot be served at this berth with shipboard gantrys.” Since the same letter admits that PRMSA was unaware of the structural characteristics of the vessels at issue, the letter can be read to mean that in PRMSA’s view no ship-mounted cranes could do the job. The administrative law judge found that the use of mobile shore-side cranes was impracticable because of the “bitts” and “dips” which indent the side of the berths. Thus in my view there was sufficient evidence for the FMC to conclude that no containerized vessels could use Isla Grande practicably without access to the shore-side rail-mounted cranes. It is certainly clear that PRMSA acted as if such use was impracticable, and the record is clear that insofar as any of the ships actually engaged in the Puerto Rico-mainland trade were concerned, such use was impracticable. The fact that ships never yet engaged in the Puerto Rico trade may exist elsewhere, or indeed may be developed in future, which can use Isla Grande without the shore-side cranes, and that the FMC did not investigate these possibilities, seems an insufficient reason for upsetting an administrative determination that is adequately based on the relevant facts as reflected in the record.
For similar reasons I am unconvinced by the majority’s argument that possible use of the Isla Grande facility by non-containerized vessels means that the FMC’s conclusion that the cranes are functionally indispensable is without basis. Isla Grande was converted into a containerized terminal in 1962. This proceeding involved carriers engaged in a containerized trade. The fact that it may be legally permissible for PRMSA to dismantle the crane rails and use Isla Grande as a breakbulk terminal is no more relevant than the possibility that *86five-masted sailing ships may be able to use Isla Grande without aid from the cranes. The FMC’s conclusion that the cranes are “indispensable” to feasible use of Isla Grande must be understood to mean economically as well' as structurally, and the Commission was not acting beyond its authority in confining its conclusions to those facts closest to reality.
The majority also argues that, assuming arguendo that the Commission’s finding on indispensability is upheld, the resulting preference was not “undue or -unreasonable.” The majority admits that a preferential berthing arrangement constitutes an “unreasonable” preference if other carriers are thereby foreclosed from securing adequate facilities. Yet the majority chooses to ignore the finding by the Commission that none of the alternate facilities offered to Seatrain by PRPA was adequate. J.A. at 542. So long as this finding remains undisturbed, it is hard to see how the Commission’s resulting conclusion that the preference was unreasonable can be struck down.

Section 17 Violations

Section 17 provides in relevant part that “[every] common carrier by water in foreign commerce” and every “other person subject to this chapter” shall “establish, observe, and enforce just and reasonable regulations and practices relating to or connected with the receiving, handling, storing, or delivering of property.” The FMC found that both PRPA and PRMSA had violated this section — PRMSA by its failure to grant other carriers secondary use privileges, and PRPA by its failure to require PRMSA to do so.
As a threshold matter, the majority holds PRMSA not subject to this section of the Act because it is neither a “common carrier by water in foreign commerce” nor an “other person subject to this chapter.” Obviously the Puerto Rico-mainland trade is not “foreign commerce.” The relevant portion of the definition of “other person” reads “any person, not included in the term ‘common carrier by water’, carrying on the business . . . furnishing . . . terminal facilities in connection with a common carrier by water.” Since the definition of “other person” thus seems to apply only to those not already included in the phrase “common carrier by water,” the majority concludes that PRMSA, which is obviously a common carrier by water, cannot be an “other person” as well. But the statutory language can just as well be read to mean “any person, [even though] not included in the term ‘common carrier by water’ . .” The majority goes on to argue that PRMSA has not in fact furnished terminal facilities; but, as I have pointed out above, PRMSA has held itself out as providing terminal facilities. Moreover, PRMSA’s unreasonable refusal to allow other carriers access to its facilities should not be allowed to insulate it from the regulated status of a terminal operator, when the statute is intended to prevent such unreasonable use. It makes no sense to me to read the statute to allow jurisdiction to be avoided by the very acts which the statute interdicts if jurisdiction is present. I would, therefore, hold PRMSA subject to the strictures of section 17.
The majority concedes that PRPA is subject to section 17.
In overturning the FMC’s determination that section 17’s mandate of “just and reasonable” regulations was violated by PRPA’s and PRMSA’s actions in restricting access to Isla Grande berths, the majority substitutes its own judgment for that of the Commission. In essence, the majority considers PRPA’s policy of fostering further development of Puerto Nuevo to be justification for locking carriers out of already developed facilities. But in holding that the FMC cannot find a section 17 violation based on another theory, the majority in effect rules that all a carrier or terminal operator need do to establish the justness and reasonableness of its practices is to offer a rationally related public policy goal. This is not the standard by which the Commission’s application of section 17 should be judged.
In the Commission’s own view, the essence of the situation was that Seatrain’s relatively small needs for port facilities in *87Puerto Rico would not justify the large investment Seatrain would have had to make to build a facility comparable to Isla Grande at Puerto Nuevo. Faced with PRPA’s and PRMSA’s refusal to allow secondary use, Seatrain might well leave the mainland-Puerto Rico trade entirely. Certainly the FMC was reasonable in concluding that such a result, with its consequent damage to competition, was less desirable than the speculative damage to the PRPA’s plan for the more extensive development of port facilities. It was unlikely in any event that the actions by PRMSA and PRPA would result in investment by Seatrain at Puerto Nuevo, because such investment would not have made economic sense. But in any case, it is not for a reviewing court to say that either view of the likely economic consequences was a view that had to be adopted by the Commission. Since either interpretation would have been reasonable and is supported by substantial evidence, we are bound to respect the discretionary choice made by the Commission.
Although the majority does not reach the question, it seems appropriate to consider the relief ordered by the Commission. The majority appears to be troubled by the fact that the FMC fashioned relief suited to the facts in the case before it, rather than establishing a blanket rule requiring secondary use at all ports and for all carriers. By contrast, the Commission’s restrained action appears appropriate to me. As indicated above, there are two conflicting policies and interests to be balanced — the port’s interest in fostering investment, and the national interest in fostering competition and efficient use of resources through the avoidance of duplication of large capital installations. On the facts before it, taking into account this intervenor’s level of berth usage, the Commission seems to me to have struck a balance well within the appropriate limits. Any provision for secondary use, whether allowed voluntarily or pursuant to an FMC order, could and would have included adequate provision for payments by the secondary user to the owner of the facilities, thus maintaining the investment incentive intact. The relief ordered by the Commission in this case’ could have been based on any one of the violations of the 1916 Act found by the FMC in the two proceedings. By finding every one of them infirm, factually or legally, the majority not only mistakenly interprets the record and the statute, but hamstrings the FMC’s efforts to secure efficient use of resources and sufficient competition in an industry that has suffered from inefficiency for too long.

. Seatrain has also filed a suit seeking $5 million in damages from PRPA and PRMSA based on the practices described by the FMC in its decisions.

. The FMC’s finding that PRPA and PRMSA are identical for some regulatory purposes because of overlap of personnel and interests is relevant not only to the issue of whether or not an unfiled agreement was carried out, but supports the Commission’s conclusion that any preference granted PRMSA by PRPA was “unreasonable”, and supports the Commission’s conclusion that PRPA failed to order PRMSA to establish “just and reasonable” regulations. Moreover, it undermines the majority’s view that the reason PRPA allowed PRMSA to refuse secondary use was PRPA’s desire to foster further development at Puerto Nuevo; given the identity of interest between the two instrumentalities of the Commonwealth, it would be just as reasonable to think that PRPA’s purpose may have been simply to ensure that PRMSA maintained its effective monopoly on the mainland-Puerto Rico containerized trade, despite Seatrain’s attempt to re-enter that trade and re-establish a competitive structure in the industry.