Federal Maritime Board v. Isbrandtsen Company, Inc.

PETITIONER:Federal Maritime Board
RESPONDENT:Isbrandtsen Company, Inc.
LOCATION:Philadelphia Board of Public Education

DOCKET NO.: 73
DECIDED BY: Warren Court (1957-1958)
LOWER COURT: United States Court of Appeals for the District of Columbia Circuit

CITATION: 356 US 481 (1958)
ARGUED: Dec 11, 1957
DECIDED: May 19, 1958

Facts of the case

Question

  • Oral Argument – December 11, 1957 (Part 1)
  • Audio Transcription for Oral Argument – December 11, 1957 (Part 1) in Federal Maritime Board v. Isbrandtsen Company, Inc.

    Audio Transcription for Oral Argument – December 11, 1957 (Part 2) in Federal Maritime Board v. Isbrandtsen Company, Inc.

    Earl Warren:

    You may proceed Mr. Elman.

    Philip Elman:

    If the Court please.

    By way of further answer to Mr. Justice Frankfurter’s question as to the legality of a dual rate formula used by a single carrier, let me refer to the first case arising before the Shipping Board as to dual rate.

    In 1922, the Eden Mining Company case which is cited and quoted and discussed starting at page 51 of the government’s brief.

    That case arose and was decided by the Board not under Section 14, since Section 14 was not involved.

    That’s a collective retaliation section but under Section 16 and 17.

    And the Board found that a dual rate formula, when used by a single carrier, is illegal.

    And the Board said that it is evident that the purpose of Congress in enacting these provisions of the statute was to impose upon common carriers within the purview thereof, the duty of charging uniform rates to all shippers we’ve seen in a similar transportation service.

    The Board went on to refer the leading I.C.C. case, the Western Union Telegraphic Company case, 181 U.S., reading from the bottom of the page, but that principle of equality does forbid any difference in charge which is not based on difference in service and even when based upon difference of service must have some reasonable relation to the amount of difference.

    Now, we have undertaken to meet the argument on the other side that there’s been a consistent administrative construction of the Board here.

    The dual rate system is perfectly all right by showing as Judge Frank pointed out in his opinion for the three-judge District Court in the North Atlantic case.

    But the Board — the Board which really of course represents four successive agencies.

    First, the Shipping Board then the Secretary of Commerce then the Maritime Commission and now the Federal Maritime Board.

    Their decisions of every — have gone every which way on this and it wasn’t really until 1933, 17 years after the Shipping Act, you have the first case upholding a dual rate system when used by carriers.

    Earl Warren:

    What year was that did you say?

    Philip Elman:

    1933.

    That’s the Rowley case which is discussed in our brief immediately after the Eden case.

    That’s the secondary case.

    That — that is 1933, 17 years after the Act, far from a contemporaneous interpretation, inconsistent with the Eden case which I’ve mentioned.

    Now, I have — I said at the outset that we — we regard the order of the Board here which is under a — which is what’s on the review as being infected with areas of the law.

    We think that the Board applied an erroneous standard.

    The Board here conceded that the dual rate system was discriminatory, that it was monopolistic, conceded that it was — its purpose was anti-competitive to eliminate an independent — from business or to join a con — conference.

    The Board nevertheless said, those — that discrimination, that monopolistic feature is outweighed by the fact that it produces rate stability.

    It eliminates competition among carriers as to rates and stability of rate is a good thing and it’s a justification.

    Now, we find on our reading of the statute and our reading of the committee report that while Congress was concerned with rate stability and was anxious to maintain rate stability.

    It didn’t make an absolute dogma of rate stability.

    It permitted the Board in considering whether to approve conference agreements under Section 15, to consider whether such an agreement would be desirable, would produce stability.

    But that was an agreement among the carriers themselves as to what each one of them was charged.

    And — and Congress has said “Yes, the Board has the power to permit this car — conference carriers to form an association among themselves so they can fix their own rate, they can eliminate rate competition among each other.

    You can have stability to that extent.”

    Philip Elman:

    But Congress didn’t stop with Section 15.

    Congress put in the statute, Section 14 and Section 16 and 17 — 16 and 17 which are on — in the appendix to our brief 60 — pages 65 and 66, those provisions are taken from the Interstate Commerce Act.

    As this Court pointed out in the Cunard case and the Swayne & Hoyt case.

    Congress permitted the Board to suspend pro tanto the antitrust laws to the extent that it could approve these conference agreements fixing rates among themselves.

    But congress went further.

    It subjected these conferences to the — the restrictions of the Interstate Commerce Act.

    That was done in 16 and 17, 16 and 17 says that there shall be no discrimination between shippers, that’s the consequence of dual rate system.

    But specifically, Congress didn’t even stop with 16 and 17, Congress put in Section 14.

    Section 14 is cashed in terms of outright prohibitions.

    It prohibits in Section first the deferred rate — rebate system.

    Now, the deferred rebate system was the system which was then widely used prior to 1916.

    That was the system for eliminating competition.

    That was the system for producing rate stability.

    That was the system that would prevent rate wars to the extent that it was effective, you have a complete destruction, elimination of independent competition.

    Congress said “No, you –” to the Board, “you can’t approve that because in Section 15 the grant of power to the Board to approve conference agreements is specifically limited.”

    The Board is given no power to approve any agreement which is that it — which is unjustly discriminatory unfair as between carriers which operates the detrimental commerce of the United States or in violation of this Act.

    And to find out whether it’s in violation of the Act, you look to the whole Act.

    Not just Section 15, you look at 14 as well as 16 and 17.

    And if a — if an agreement is in violation of Section 14, the Board has no power to approve it.

    Now, Section 14, Second — prohibits a fighting ship, again a fighting ship is a device to deal with competition of independence.

    It produces rate stability.

    But certainly, if the Federal Maritime Board could not enter an order today saying that a fighting ship or a deferred rebate or the specific restraint mentioned in 14 Third, a refusal or a threat — or a threat of refuse of space accommodations, suppose it — suppose a conference came to the Board and offered to setup a system providing further deferred rebate, fighting ship or refusal of space accommodation.

    Could the Board use as the standard of law under Section 14, the proposition?

    Well, this will produce rate stability and we think that in this industry, competition isn’t a good thing and therefore we will permit it.

    The answer is Section 14 precludes the Board from taking in to consideration that standard.

    It’s a standard for approving agreements among the conference — conference carriers themselves.

    They can fix rates among each other but they can’t — they can’t agree also that they will go after an independent carrier who wishes to stay outside the conference and drive them in to the conference or drive them out of business.

    Now, Section 14 Third which has been the main provision in this case, prohibits retaliation against any shipper by refusing or threatening to refuse space accommodation when such are available, specific or resort to other discriminating or unfair methods.

    Now, Congress specifically outlawed these three things that were unused — used then, but it didn’t stop there, it flatly, sweepingly then every discriminating or unfair method which was used because such shipper has patronized any other carrier or has filed a complaint charging unfair treatment or for any other reason.

    So you have two catchall clauses here.

    Philip Elman:

    You’ve got a catchall clause condemning every method which is unfair and discriminating which is used to retaliate against the shippers who reserve the right to patronize carriers and retaliation is not merely for patronizing another carrier but for any other reason.

    Now, the Board has construed Section 14 and that — and these errors of law light the very threshold of it’s — of its report.

    The Board has construed Section 14 as if these two catchall clauses weren’t in there at all.

    I refer specifically to page 52 of its report where the Board said — after referring to the Swayne & Hoyt case and to the legislative material, Mr. Gardner has referred to.

    The Board says in — in support of the view that Congress intended in the Act to prohibit only those practices specifically condemned, we offer the following testimony of a witness on another bill which did not become a Shipping Act.

    The — the Board expresses the view that Section 14 Third covers only the specific practices and if I may finish the sentence Mr. —

    Earl Warren:

    You may —

    Philip Elman:

    — Chief Justice.

    Earl Warren:

    — please.

    Philip Elman:

    In page 58 — in page 58 of its report, referring to the meaning of the word “retaliation” and this is in the question of administrative expertise.

    The Board has no greater insight into the meaning of these words than others have.

    The Board says the word — quoting and relying on its prior opinion in the North Atlantic Freight Conference case, which was a case that came here in 1952.

    The Board adopts the view — that the higher rate cannot be said to be charged as a retaliation for patronizing any other carrier.

    It is charged because the shipper does not sign the contract regardless of whether or not he patronizes any other carrier.

    A non-signing shipper who does not patronize a north conference carrier is treated as harshly as a non-signing shipper who ships partially and exclusively with such a carrier.

    In other words, the — or for any other reason, is — is not given any concern of this — of the 50 pages of this report, more than 32 pages are devoted to discussion of law, discussion of Swayne & Hoyt case in which the Board takes out of context the footnote by Mr. Justice Stone referring to legislative history giving it a meaning it doesn’t bare.

    The Board has not quoted the statute.

    We think that there’s an error of law in leaving out of its consideration of these two catchall clauses.

    Under the Board’s construction if there were a flat refusal by conference carriers to — of space accommodations specifically outlawed under 14 Third.

    Nevertheless, it would be a violation of the statute if the refusal was not for patronizing another carrier but because they merely reserve the right to do so by failing to enter into an exclusive patronage of payment.

    That we say is an error of law requiring reversal of the Board’s order.

    Felix Frankfurter:

    Before you sit down Mr. Elman, I’d like to put to you this question, which will indicate you in my difficulty.

    Section 15 prohibits agreement, an enumerated category of agreement except that the Board may by order disprove, cancel or modify any agreement etcetera.

    Philip Elman:

    May I — may I — may I interrupt?

    Felix Frankfurter:

    But I haven’t put my question yet.

    Philip Elman:

    Well, I think you — you’re inaccurate in your statement in Section 15 because Section 15 in the first paragraph doesn’t prohibit anything.It merely requires conference —

    Felix Frankfurter:

    To file.

    Philip Elman:

    — carriers to file.

    It’s just for filing.

    It doesn’t prohibit it.

    Felix Frankfurter:

    Thank you very much.

    That’s quite correct, should file in this area.

    They can’t do this without going to the Board, that’s what I’m (Voice Overlap) —

    Philip Elman:

    They’ve got to file everything with the Board.

    Felix Frankfurter:

    That’s why (Voice Overlap) prohibit.

    They can’t do this of their own accord.

    They’ve got to go and file something.

    Philip Elman:

    File.

    Felix Frankfurter:

    Now, but it enumerates a category of a concerted action by ocean carriers and then the next paragraph says that it may disapprove, cancel, or modify or approve.

    Philip Elman:

    Right.

    Felix Frankfurter:

    Subject to, and you emphasized, if I may say so correctly or to be in violation of this Act.

    Now, what I want to put to you is this.

    The agreements which ocean carriers may file, deal with matters which if they were all out, it would seem to be nonsense for Congress to enumerate.

    The Interstate Commerce Act has no such provision whereby they’re authorized — they are required to file with specification such as controlling, regulating, preventing or destroying competition such as special raise, etcetera.

    Philip Elman:

    That’s a publicity requirement Mr. Justice (Voice Overlap) —

    Felix Frankfurter:

    I understand that.

    I quite — I understand that but I say the fact that the next paragraph authorizes the Board to pass on them presumably implies — you shake your head but (Voice Overlap) —

    Philip Elman:

    I shake my head because I disagree, sir.

    Because the next paragraph significantly begins the Board may —

    Felix Frankfurter:

    I understand that —

    Philip Elman:

    — by order to disapprove and then it goes on, if I may finish, and at the last sent — the last clause of that paragraph is, “and shall approve all other agreements.”

    The plain implication is the — an agreement which is invalid under the statute need not be disapproved by the Board because no Board action of disapproval is required under the statute.

    The statute makes it illegal not in the action of the Board so therefore the Board doesn’t have to do anything.

    Felix Frankfurter:

    You may be right, but all I’m saying is —

    Philip Elman:

    Well, I can only read the statute sir.

    Felix Frankfurter:

    All I say to you as I’m reading this statute and comparing with the Interstate Commerce Act.

    There is no such provision that you must file agreement on these subjects which are outlawed by general categories in the Interstate Commerce Act and here, you’ve got Section 1, anything pertaining to this subject you must file and then the Board made by order to disapprove, cancel or modify which at least is alternatively permitted to be read, the Board in its discretion considering the public interest and the nature of ocean shipping may then pass on it whether the general interest of the statute permit it.

    I’m not offering this as my conclusion.

    Philip Elman:

    May I offer an answer to it?

    Felix Frankfurter:

    Certainly, that’s why I’m putting the question.

    Philip Elman:

    The answer to that is that on that construction of Section 15 that the Board sits there to prove or disapprove of everything.

    Section 14 serves no function that if the Board — if the Board has the authority to just sit there and decide what’s the best interest of the shipping industry, or what’s in the best interest of an efficient merchant marine, Congress has given the Board an entirely free hand.

    They can do anything what they think is best.

    I think there might be some other objections but certainly it is a — a sufficient objection to such a construction of Section 15 that Congress enacted specific provision in Section 14 as to what the Board could not approve.

    Felix Frankfurter:

    I quite appreciate that and what I say to you is what I got out of your own argument, namely, that the limitation upon Board action in the second paragraph of 15 is not merely the specific enumeration but the comprehensive to be in violation of this Act, then you go to other provisions of the Act and where you have specific limitations.

    Of course they control.

    And so, we are thrown back as to the scope of the specific limitation, but I suggest to you, you can’t disregard the scope of 15.

    Philip Elman:

    We think that the statute has to be read together.

    Section 15 and Section 14 of course are parts of the same statute and not to be read (Inaudible).

    We think — we think that when the Congress specifically forbad all methods of retaliation which are discriminatory or unfair that —

    Felix Frankfurter:

    If you’re right about that then the whole question — the whole thing falls.There’s nothing more to be fixed.

    Philip Elman:

    Well.

    Felix Frankfurter:

    You’re maybe right.

    I’m not saying you’re not.

    Philip Elman:

    Well, if we — we think that —

    Felix Frankfurter:

    If all you have to do is to read that, if that’s what you — what you say, is all I have to do is to read that and that’s an end of the matter.

    Philip Elman:

    I — you —

    Felix Frankfurter:

    Is that right?

    Philip Elman:

    You read that.

    You read it in the context of the whole statute, read it in the context to the committee report, read it in the context to what this Court said as distinguished from its — its dicta in the Swayne & Hoyt case and we think that the answer is clear.

    Felix Frankfurter:

    All right.

    Philip Elman:

    Thank you.