Court Opinion

ID: 6914024
Source: CourtListenerOpinion
Date Created: 2022-07-23 22:34:43.479774+00
Date Added: 2024-06-11T16:06:36.138465
License: Public Domain

WASHINGTON, Circuit Judge
(concurring) .
I fully concur in Judge Fahy’s opinion. However, certain additional observations may be made, with which both my colleagues agree, and which they have asked me to express on behalf of the court.
The crucial question on this appeal is of course whether Section 14, Third, of the Shipping Act of 19161 proscribes the type of contract here involved.
In the first place, it seems clear that in actual practice the contract system is being used to penalize a shipper because he has patronized another carrier, or at least reserved the right to do so. Is this “retaliation,” proscribed by the Act? Certainly there seems no reason to limit “retaliation” to the dictionary definitions of “returning like for like” or “evil for evil,” which have been selected by the Board. The very example used by the statute, boycotting for use of another carrier, is not “like for like,” nor are the boycotting carrier or group of carriers necessarily imbued with ideas of doing evil. But detriment to the independent shipper and the independent carrier plainly results.
Are these contracts, then, the sort of “discriminating or unfair methods” that the statute sought to anticipate? That the contract system comes within the literal meaning of this phrase is clear. As the Supreme Court observed in Swayne & Hoyt, Ltd. v. United States, 1937, 300 U.S. 297, 303, 57 S.Ct. 478, 81 L.Ed. 659, a contract system under which different prices are charged for the same transportation of identical cargoes to identical ports under identical circumstances is “prima facie discriminatory.” 2 Nevertheless, the Board *940urges that the literal meaning' of the statute should not be followed.
The Board’s basic contention is this: Since dual rate contracts were considered by Congress in its survey of shipping practices, the conspicuous absence of this device from the list of those specifically barred — deferred rebates, fighting ships, and boycotts — demonstrates an implied congressional endorsement of this device. Were the premise sound, the argument would have some merit. But the fact is- that the contracts examined by the Alexander Committee in 1913 were materially different from the contracts before us now. The 1913 contracts were bona fide requirements contracts. The sellers (carriers) undertook a firm obligation to provide space; both parties undertook firm obligations as to the price. And since the price was fixed for the term of the contract (usually 6 months), the price figure in the contract represented a hedge on the part of both parties against fluctuations in rates.3 In the contracts in suit the carriers’ commitment as to space is almost illusory,4 being a commitment to carry “so far as regular services are available.” The price aspect of the contract is in terms subject to increases. Thus, the two principal considerations normally given to a buyer (the shipper) under a requirements contract — guarantee of supply and guarantee of no rate increase— are here lacking.5 In their stead are two essentially penal provisions — the higher rate and the liquidated damage clause — both imposed to coerce shippers to refrain from using non-Conference carriers.6 .These differences are dispositive of the Board’s principal argument. Implied congressional approval of a bona fide requirements contract is no basis for exempting the contracts in this case from the plain meaning of “discriminating or unfair methods.” They must therefore be condemned.

. 39 Stat. 733, as amended, 46 U.S.C.A. | 812, subd. 3.

. It is urged that footnote 3 of the Court’s opinion in Swayne & Hoyt is some authority for exempting the contracts in this case from Section 14. Third. There are two answers to this argument. First, the Court was there concernedl not with a recommendation of the Alexander Committee but with an argument that had been addressed to the Committee. See H.R.Doc. No. 805, 63rd Cong.,. 2d Sess. 307 (1914). Second, and more significant, is the fact that the contracts *940considered in Swayne & Hoyt closely follow the outlines of the contracts reviewed by the Alexander Committee in 1913, which are materially different from the contracts in this case, see text infra. The contracts in Swayne & Hoyt contained a firm price agreement that could not be varied during the term of the contract. See Swayne & Hoyt v. United States, D.C.1936, 18 F.Supp. 25, 26.

. For the text of the contracts considered by the Alexander Committee, see Proceedings of the House Committee on the Merchant Marine and Fisheries, 62nd Cong., 2d Sess., Yol. 1, pp. 97, 120, 289 (1913). For the Committee’s summary of these contracts, see H.R.Doc. 805, suprá at 290-91. In most of these contracts the price term was fixed as against increases, but shippers were entitled to any decreases in the regular tariffs. In other contracts the price stated was binding on both sides. See Marx, International Shipping Cartels 202 (1953).

. See 1 Corbin, Contracts § 16 (1950).

. See, generally, Stockhausen, The Commercial and Anti-Trust Aspects of Term Requirements Contracts, 23 N.Y.U.L.Q. 412, 413 (1948).

. This is not to suggest that the liquidated damage clause would necessarily be unenforceable as a penalty, cf. Pacific Westbound Conference v. Leval & Co. (unreported) (Cir.Ct.Or.1951), cited in Marx, supra at 209, though it might be. See 5 Corbin, Contracts § 1054 (1951). It may be noted that compliance with the contracts used in 1913 was in many instances secured not by deferred rebates, see Proceedings, supra at 99, 204, 278, or by penalty clauses, id. at 96, but by threat of future boycotting, ibid., a device specifically condemned in Section 14, Third. The contracts in this case would substitute for this blunt weapon the more refined techniques of penalty rates and liquidated damage clauses. Thus, instead of a retaliatory device to enforce a bona fide requirements contract, there are now retaliatory contracts, enforced by methods of seemingly equal effectiveness.