# Pacific Far East Line, Inc. v. The United States > United States Court of Claims · May 10, 1968 · 394 F.2d 990 URL: https://www.frixlaw.com/law-library/cases/9453635 ## Case - **Full name:** PACIFIC FAR EAST LINE, INC. v. the UNITED STATES - **Court:** United States Court of Claims - **Decided:** May 10, 1968 - **Citations:** 394 F.2d 990; 184 Ct. Cl. 169; 1968 U.S. Ct. Cl. LEXIS 115 - **Precedential status:** Published - **Opinion:** Dissent by Nichols - **Judges:** Cowen, Laramore, Durfee, Davis, Collins, Skelton, Nichols - **Cited by:** 39 later opinions in the Frix Law Library ## Citator (automated) - No negative treatment found by the automated citator. That is not the same as a confirmation that the case is good law; read the citing cases. - Full citator and citing cases: https://www.frixlaw.com/law-library/cases/9453635 ## How later opinions describe it (automated extraction) - holding that “the same rules of law that govern private individuals” apply to the government when it enters into a contract. ## Opinion text NICHOLS, Judge (dissenting). I am compelled to dissent because I do not read the contract here involved as my brothers do. They say, if I understand them, that Article 11-16 read with Article 11-28 gave MARAD the “discretion” to say that a nonsubsidized voyage was competing with a subsidized voyage and so finding to bring it within the recapture accounting (or refuse to do so), to assure that recapture would reflect the financial results of the “competing” nonsubsidized service (or not do so, as seems desirable) and thus prevent erosion of the recap-turable profits by destructive competition. MARAD apparently was of the opinion that any voyage over the area of the subsidized route was competitive because it might “infringe retroactively or prospectively on the subsidized service.” (Finding 12d.). The Government, the commissioner, and the court all seem indeed to assume, further, that any other voyage by plaintiff’s vessels in the foreign commerce of the United States is competition with the subsidized vessels on Route 29, no matter where they go or what they carry. If I misunderstand the position I would be glad to be told. But observe, for example, the Government brief, p. 14: * * * * # * Accordingly, every subsidized operator contractually agrees to restrict all operations in the foreign commerce of the United States to [the subsidized voyages] * * * (Emphasis supplied.) And how does the operator make such an agreement? He does it, according to the Government “In clear and unambiguous language” in Article 11-16, the agreement not to compete except with MARAD consent. Thus the Government clearly says that if plaintiff operated an unsubsidized route from New York to Greenland, it would be in “competition” with the subsidized ships on Route 29 and would have to have MARAD consent or else cease and desist. Of course, I recognize that as a practical matter voyages by plaintiff’s ships in the Atlantic, the Mediterranean, or the Indian Ocean might be banned because in competition with, other subsidized American flag lines. The point is that considerations *1007 of real economic competition are here put aside. The word is simply a name for all operations in foreign commerce. The actual competitive impact only comes to be considered to establish whether MARAD should exercise its discretion under 11-16, which is to allow a competitive voyage to be made regardless of its competitive effect. Thus no voyage anywhere is outside the reach of its power, should it in its wisdom decide that the voyage should not be made, or should be made subject to conditions only. It seems obvious to me that an operation which is “incidental,” whatever that means, may or may not be competitive. If, e. g., it provides “reefer” (refrigeration) service when the subsidized ships have no “reefer” space, that is “incidental” but not competitive. Of course, you may say if there were no reefer service offered maybe shippers would export food on the subsidized ships preserved in other ways. More likely, however, they would resort to foreign “reefer” tonnage and the trade would be lost to American flag ships, both subsidized and unsubsidized. You may say all the lawyers in a town are in competition with all the doctors, because the more the people spend for doctors, the less they have for lawyers. I would hold an unsubsidized ship is in competition with one which is subsidized only if it offers to carry to the same port or a nearby one a class of cargo the subsidized ship is ready and able to carry, so the shipper has a choice which service to employ. As I understand it, subsidized “berth” liners are normally not suited to carry large quantities of bulk cargo although the Mariner class when procured had a limited bulk capacity. Therefore a supplemental service to accomplish a large bulk cargo movement, is not competitive either. The undisputed power of MARAD to prevent the carrier from operating in direct competition with itself or another subsidized carrier would seem ample to control the diversion of profits from re-capturable to nonrecapturable accounts by diversion of cargo, and no jockeying with the coverage of recapture accounting is needed. I do not think the possibility that an unsubsidized voyage will reduce recapture if subject to recapture accounting, suffices to make it “in competition.” Whatever an “incidental” service is, to me it includes supplemental or complementary services such as any carrier must offer to hold its customers and meet its competition. Such services are in support and not in competition and they may contribute to make the subsidized operation more profitable, whether or not profitable themselves. There may be instances of services which truly are both “incidental” and “competitive”, but it appears to me they would be infrequent. It would include cases where the service was complementary to the owner’s subsidized service but competitive with the subsidized service of another carrier. No competition such as this was found here; it was merely hypothesized arguendo. At times there may be cases where the harm from the competition would be measurable but not enough to justify stopping it in light of the basic objective of the Act, which after all is to keep the American flag on the ocean. What MARAD appears to me to have done is to stretch the prohibition against unauthorized competition to cover, in its discretion, practically anything the carrier might do, so that by conditioning its consent on subjection to recapture accounting in the case of on-route voyages, and split voyages when it so chooses, and exclusion likewise when it so chooses, it can manipulate the recapture accounting to make it produce the results it desires. I find it difficult to connect with any other rational policy the yoking up of the horse of Article 11-16 with the ox of Article 11-28, and the fine, resounding, but to me vague, guideline: “competitive impact/substantial involvement.” *1008 As I see it, MARAD was burdened with the duty to determine what voyages were “in competition” and in doing so it could, within reasonable limits, define the word, but not stretch it beyond all reason. When and only when it had reasonably determined that a voyage was “in competition” it was clothed with discretion whether or not to allow it to take place, or to impose conditions on its taking place. As the “reefer” voyages here involved, e. g., were noncompetitive before there was reefer space in the subsidized ships, by any reasonable definition, it could not prohibit them and therefore could not limit their allowance to conditions not otherwise authorized. As to what voyages were subject to recapture accounting, that was a separate issue to be resolved under different rules. In deciding what voyages were “incidental,” the agency had, not discretion to regulate, but something entirely different though often confused, the power to interpret a statutory provision stated in general terms, and intended for the agency to administer. Within limits, courts will accord such interpretations great weight. They must, however, be reasonable and be adhered to consistently. If an agency yaws and veers about, none of its interpretations have weight. No court, I suppose, would doubt that on-route voyages were incidental and off-route voyages not. The split voyages are where we are in trouble. Not only has MARAD shifted continually, but it has tried to find a basis for uncontrolled discretion on the alleged power to consent on conditions, which in the cases of noncompetitive voyages it did not have. It appears to me that the real question at issue here is one that MARAD and our commissioner have not come to grips with, at least not in any overt manner. No doubt it is a latent consideration in their minds. It is whether a subsidized carrier, fortunate enough to be realizing enough profit to create a “recapture position,” may in its discretion divert otherwise recapturable profits to maintain supplemental noncompetitive (in a real sense) services to hold as much business as possible in its hands, or whether MARAD in its discretion may limit such economic activity in order to maintain the recapturable fund at a high level. In this regard it may be noted that the policy of the basic legislation is that “It is necessary for the national defense and development of its foreign and domestic commerce that the United States shall have a merchant marine (a) sufficient to carry * * * a substantial portion of the water-borne export and import foreign commerce of the United States * * *” 46 U.S.C. § 1101 . It is common knowledge that, today, the portion so carried is at best not more than substantial. It would appear that the carrier’s position in this litigation will, to the extent it prevails, cause more vessels to be operated under the United States flag, while MARAD’s will add more of them to the mothball fleet. To that extent the policy of the Act favors the carrier. On the other hand, subsidy funds are already committed to the legislative purpose and recapture of them, though commendable, is an incidental benefit rather than an object of top priority. The answer, however, must be found in the text of the contract. It is assumed in this litigation that the carrier may operate on its route unsubsidized incidental services, except those barred as involving damaging competition. MARAD, not satisfied with its undisputed power to bar, seeks to manipulate its recapture accounting so as further to prevent depletion of the recapturable fund. I do not see what statute or contract provision gives it this power. To find it, one must read into contract clauses words that are not there, i. e., “incidental” must be read as meaning “in competition” and “in competition” read as meaning “incidental” though naturally their import is entirely different. If the framers of this contract meant such different words to mean the same thing one wonders why it did not *1009 occur to them to use the same words in both the clauses involved. It may be argued that to favor the carrier herein would leave MARAD defenseless against loss through uneconomic and wasteful operation of unsubsidized ships when it could not find direct competition. Considering, however, the limited scope and contingent nature of recapture accounting, it seems reasonable to suppose that the ordinary laws of supply and demand would compel prudent operation by maintaining most of the adverse consequences that imprudence may entail. If the Government wants more it should write a clause making its intention clear. Because of my views as stated above, I am unable to join the court in affirming the commissioner's findings and adopting his opinion as its own. --- Source: Frix Law Library, https://www.frixlaw.com/law-library/cases/9453635. Public record. Not legal advice.