# Petition — Baton Rouge Marine Contractors, Inc. v. Federal Maritime Commission

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## Record

- **Collection:** Supreme Court brief
- **Document type:** Petition
- **Published:** January 1, 1976
- **Citation:** 429 U.S. 868

## Text

f Supreme Court, U. &
f FILED

MAY 7% 1976

Leen eee

or act Maay , irnay
ICHAEL RODAK, JR., Cle

In the Been centened ciety tnsrinn Retest
Supreme Court of the United States
OCTOBER TERM, 1975

NO. 95-1622

BATON ROUGE MARINE CONTRACTORS, INC.,
Petitioner

versus

FEDERAw MARITIME COMMISSION and
UNITED STATES OF AMERICA,

Respondents

CARGILL, INC., Intervenor
Respondent

PETITION FOR A WRIT OF CERTIORARI TO
THE UNITED STATES COURT OF APPEALS
FOR THE DISTRICT OF COLUMBIA CIRCUIT

Terriberry, Carroll, Yancey &
Farrell

Benjamin W. Yancey

Edward S. Bagley

2141 ITM

New Orleans, Louisiana 70130

——————————————
A B Letter Service, Inc., 327 Chartres St., New Orleans, Lo. (504) 581-5555

INDEX

PAGE NO.
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5

TABLE OF AUTHORITIES

Carnation Co. v. Pacific Westbound Conference
383 US 213, 15 L. Ed. 2d 709, 86 S. Ct. 781

REE SSA een Te eee

FMC v. Seatrain Lines, 411 US 726, 36 L. Ed. 2d

GSD, FS B. Co. BTTD (BVTS) rcocceserscesecenccccsessosessesecces

FMC v. Aktiebolaget Svenska Amerika Linien,
390 US 238, 19 L. Ed. 2d 1071, 88 S.Ct. 1005

CREA INE EMIS POE NI

Greater Baton Rouge Port Commission v. United
States, 287 F. 2d 86 (CA, 5, 1961), reh’g den.

293 F, 2d 959, cert. den., 368 US 985 (1962)........

Greater Baton Rouge Port Commission v. Cargill,

Inc., 252 La. 718, 214 So. 2d 119 (1968)...........00

Port of Boston Marine Terminal Association v.
Boston Shipping Association, 410 F. 2d 419
(1970), reversed on other grounds, 400 US 62,

oe FE ee

Volkswagenwerk A.G. v. FMC, 390 US 261,

19 L. Ed. 2d 1090, 88 S. Ct. 929 (1968)...

Section 17 of the Shipping Act, 1916, 46 USCA 816,

Agreements Nos. 8225 and 8225-1, 5 FMB 648

PAGE NO.

IN THE SUPREME COURT OF THE UNITED STATES
OCTOBER TERM, 1975
NO.
BATON ROUGE MARINE CONTRACTORS, INC.,
Petitioner

versus

FEDERAL MARITIME COMMISSION and
UNITED STATES OF AMERICA,

Respondents
CARGILL, INC., Intervenor
Respondent

PETITION FOR A WRIT OF CERTIORARI TO THE
UNITED STATES COURT OF APPEALS FOR THE
DISTRICT OF COLUMBIA CIRCUIT

Now comes Baton Rouge Marine Contractors, Inc. and res-
pectfully petitions this Honorable Court to issue a writ of
certiorari to review the judgment of the United States Court
of Appeals for the District of Columbia Circuit entered in
this case, Docket No. 75-1108 (consolidated with Docket
No. 75-1018), on February 12, 1976.

OPINION BELOW

The opinion of the United States Court of Appeals for the

2

District of Columbia Circuit is unreported;' the report and
order of the Federal Maritime Commission is not officially
reported; an unofficial report containing the decision is cited
as 14 Shipping Regulation Reports 1373.”

QUESTIONS PRESENTED

The question presented here is whether the Federal Mari-
time Commission, in construing an agreement exempting
conduct of the parties to that agreement from the strictures
of the antitrust laws [under the license granted to such agree-
ments by Section 15 of the Shipping Act, 1916, 46 USCA
814], can interpret that agreement in a broad and expansive
manner thereby giving to the statute, Section 15, a narrow
and restrictive interpretation, under the decisions of this
Court and of the lower federal courts heretofore speaking on
this subject.

The interpretation of the agreement in suit by the Federal
Maritime Commission, approved by the Court of Appeals
below, permitted a change in incidence as to certain charges
assessed, under the cloak of the agreement, against third
parties and, as such, creates a direct conflict with the decision
of the Court of Appeals for the First Circuit in Port ej Ros-
ton Marine Terminal Association v. Boston Shipping Ass: +-
tion, 420 F.2d 419 (1970), reversed on other grounds, 4U%
US 62, 27 L. Ed. 2d 203 91, S. Ct. 203. The decision below.
further, is in conflict, as pointed out by the Court of Ap-
peals for the First Circuit in the Port of Boston Marine Ter-
minal Association case, supra, with the decision of this Court
in ! olkswagenwerk A.G. v. FMC, 390 US 261, 19 L.Ed. 2d

1. Appendix A, infra.
2. Appendix B, infra.

3

1090, 88 S. Ct. 929 (1968) and also cannot be reconciled
with the subsequent decision of this Court in FMC v. Sea-
train Lines, 411 US 726, 36 L. Ed. 2d 620, 93 S. Ct. 1773
(1973).

STATUTES INVOLVED

The statute which governs the issues presented here is
Section 15 of the Shipping Act, 1916, 46 USCA 814, enabl-
ing parties regulated by the Shipping Act to obtain exemp-
tion from the antitrust laws for agreements submitted to and
approved by the Federal Maritime Commission. The statute
is appended as Appendix C, infra.

STATEMENT OF THE CASE

Petitioner, Baton Rouge Marine Contractors, Inc. (herein-
after referred to as “BARMA”) is a contracting stevedore
hired to load vessels at the public grain elevator erected, at
Baton Rouge, Louisiana, by the Greater Baton Rouge Port
Commission (hereinafter referred to as ‘Port Commission’’).

The grain elevator was completed and leased by the Port
Commission to Cargill, Inc. (hereinafter referred to as ‘‘Car-
gill’’) in 1955 but the lease agreement was not submitted at
that time for approval by the predecessor agency of the
Federal Maritime Commission, i.e., the Federal Maritime
Board (the two agencies will be referred to hereinafter, for
convenience, simply as ““FMC”). One year later Cargill and
the Port Commission executed an amendment to the lease
which gave Cargill the right to appoint a subsidiary company
as the exclusive stevedore at the grain elevator and the only
such company entitled to participate in the loading of grain
aboard vessels calling at the elevator. The lease with its ex-
clusive stevedoring amendment became the subject of a

4

complaint filed by BARMA before the FMC. Hearings were
held and the FMC determined that the lease required its
approval under Section 15 of the Shipping Act, 1916, 46
USCA 814; the lease was approved but the exclusive steve-
doring amendment was disapproved under Section 15 as well
as under Section 17 of the Shipping Act, 1916, 46 USCA
816, Agreements Nos. 8225 and 8225-1, 5 FMB 648 (1959).
The Court of Appeals for the Fifth Circuit affirmed, Greater
Baton Rouge Port Commission v. United States, 287 F.2d 86
(CA, 5, 1961), reh’g den. 293 F.2d 959, cert. den., 368 US
985 (1962). Cargill under the lease exercises a monopoly on
the operation of grain elevators at Baton Rouge.*

From the time of the execution of the original lease in
1955 through the execution of the amendment, the proceed-
ings before the regulatory agency and before the Fifth Cir-
cuit, all culminating with the decision of the latter in 1961,
no grain elevator in the United States Gulf, the area with
which we are concerned here, imposed any form of charge
against stevedores operating at the elevator. The first time a
charge was so imposed against stevedores in the United States
Gulf was when one was instituted by Cargill at an elevator
owned and operated by it in the port of Houston, Texas.
This occurred in 1967, twelve years after the execution of
the lease of the Baton Rouge elevator, eleven years after the
attempted amendment of that lease by which Cargill sought
to regulate stevedoring at the elevator and six years follow-
ing the decision, in 1961,of the Court of Appeals for the
Fifth Circuit by which the litigation resulting in the dis-
approval of the lease amendment was terminated. Another

—r . a

3. Greater Baton Rouge Port Commission v. U.S., 287 F.2d 86 (CA,
5, 1961), reh. den. 293 F.2d 959, cert. den. 368 US 985, 7 L.Ed. 2d
523, 82 S. Ct. 600; Greater Bator: Rouge Port Commission v. Cargill,
Inc., 252 La. 718, 214 So.2d 119 (1968).

5

four years elapsed before Cargill, in 1971, first imposed
charges against stevedores operating at the Baton Rouge grain
elevator, which charges are the subject of this litigation.

On the institution of the charges by Cargill and its advices
that it would not load any ships served by BARMA, unless
BARMA agreed to the payment of those charges, a complaint
was filed by BARMA before the FMC giving rise to the pro-
ceedings which have progressed to the point of this petition.

ARGUMENT

The holding be!ow, toward which this petition is directed,
may be briefly stated in the language of the Court of Ap-
peals. As said by the Court, the underlying agency, the
Federal Maritime Commission, held “that the lease to Cargill
gave it a broad authority which embraces such a practice
(i.e., imposing a charge against stevedores seeking to serve the
vessels employ ing them) even though it was not specifically
foreseen’” and even though the charge was “unprecedented
at Baton Rouge”.

The important elements here are all outlined by this
language of the Court of Appeals. These are:

1.The lease did not in any terms give Cargill
authority to impose charges against steve-
dores. As pointed out by the Court (and by
the Commission) this “was not specifically
foreseen’; indeed such charges were “‘unpre-
cedented” when the lease was executed be-
tween the parties and approved by the FMC.

4. Decision of Court of Appeals, Appendix A, p. A-9.

5. Ibid, p. A-7.

6

2. Under the lease, a Section 15 agreement, it is
not necessary that the grant of authority be
specified but, on the contrary, under the broad
and general language, the parties may create
new and totally “unprecedented” charges
against third parties never before subject to any

charges.

We submit that the courts must choose between two pos-
sible interpretations of Section 15, i.e., either (a) a broad
interpretation of the statute under which exemptions from
the antitrust laws granted by approval of agreements there-
under are obtained only when the specific terms of the ex-
emptions are set forth in the agreements and, following
approval, such exemptions are narrowly construed, or, (b) an
interpretation under which the statute itself will be narrowly
construed and the agreements subject to it will be given a
substantial breadth of interpretation according antitrust
exemptions beyond their specific terms which exemptions
were “not specifically foreseen’’ and were “unprecedented”
at the time of approval.

The decisions of this Court and of the lower federal courts
prior to this case have dictated, emphatically and repeatedly,
that Section 15 must be broadly construed and the agree-
ments approved pursuant to its terms given a narrow inter-
pretation, thus limiting the scope of the antitrust exemptions

gained thereby. In its most recent decision on the statute,
this Court held:®

“* * * A broad reading of the third category
would conflict with our frequently expressed

6. FMC v. Seatrain Lines, 411 US 726, 36 L.Ed. 2d 620, 93 S.Ct.
1773 (1973).

view that exemptions from antitrust laws are
strictly construed. see, e.g., United States v.
McKesson & Robbins, Inc., 351 US 305, 316,
100 L.Ed. 1209, 76 S.Ct. 937 (1956), and that
‘[r]epeals of antitrust laws by implication from a
regulatory statute are strongly disfavored. and
have only been found in cases of plain repugnan-
cy between the antitrust and regulaiory pro-
visions’. United States v. Philadelphia National
Bank, 374 US 321,°350-351, 10 L. Ed. 2d 915,
83 S. Ct. 1715 (1963) (footnote omitted). As
we observed only recently, ‘[w]hen...relation-
ships are governed in the first instance by busi-
ness judgment and not regulatory coercion,
courts must be hesitant to c »nclude that Congress
intended to override the fundamental national
policies embodied in the antitrust laws’. Otter
Tail Power Co. v. United States, 410 US 366,
374, 35 L. Ed. 2d 359, 93 S.Ct. 1022 (1973).
See also Silver v. New York Stock Exchange, 373
US 341, 10 L. Ed. 2d 389, 83 S. Ct. 1246 (1963);
Pan American World Airways, Inc. v. United
States, 371 US 296, 9 L. Ed. 2d 325, 83 S. Ct.
476 (1963); California v. Federal Power Commis-
sion, 369 US 482, 8 L. Ed. 2d 54, 82 S. Ct. 901
(1962); United States v. Borden Co., 308 US 188,
84 L. Ed. 181, 60 S. Ct. 182 (1939). This prin-
ciple has led us to construe the Shipping Act as
conferring only a limited antitrust exemption”
in the light of the fact that ‘antitrust laws repre-
sent a fundamental national economic policy’.
Carnation Co. v. Pacific Westbound Conference,
383 US 213, 218, 219,15 L. Ed. 2d 709 (1966).”

(footnote omitted and emphasis added)

Similarly, this Court held that “once an antitrust violation
is established, this alone will normally constitute substantial
evidence that the agreement is ‘contrary to the public inter-
est’, unless other evidence in the record fairly detracts from
the weight of this factor.” Plainly no evidence was or could
have been adduced or considered by the FMC to outweigh
an undisclosed factor which by the decision of the FMC was
created by the use of “broad, expansive language’? which
granted “plenary rate authority” subject to ‘‘no conditions,
restrictions or qualifications.”®

The FMC, by construing this lease in such “broad, expan-
sive language’’, thereby took what was characterized by this
Court in Volkswagenwerk A. G. v. FMC,® as “an extremely
narrow view of a statute that uses expansive language’’ under
which ‘in deciding whether to approve an agreement, the
Commission is required under Section 15 to consider anti-
trust implications’. Certainly no such implications were or
could have been considered by the Commission at the time of

7. FMC v. Aktiebolaget Svenska Amerika Linien, 390 US 238, 19 L.
Ed. 2d 1071, 88 S. Ct. 1005 (1968). See also Carnation Co. v. Pacific
Westbound Conference, 383 US 213, 15 L. Ed. 2d 709, 86 S. Ct. 781
(1966) which noted that the purpose of the Congress would not ‘“‘be
frustrated by the application of the antitrust laws to the implementa-
tion of Conference agreements which had been subjected to public
scrutiny and examination by a governmental agency’. It certainly
would be frustrated here where the public, in its scrutiny, as well as
the governmental agency, would not have been apprised as to the scope
of the exemption until, more than a decade later, the ‘broad, expan-
sive language” was expanded by Cargill to encompass matters in no
manner contemplated (or ‘‘specifically foreseen”) by anyone [and, in-
deed, not even in existence] at the time of the approval.

8. Report of Federal Maritime Commission, Appendix B, infra, pp.
B-32-34.

9. 390 US 261, 19 L. Ed. 1090, 88 S. Ct. 929 (1968).

9

its approval of this agreement since ‘e scope of the agree-
ment and its antitrust implications (and exemptions) were
not set forth in the terms of the agreement.

A case which was for all purposes identical was considered
by the Court of Appeals for the First Circuit in Port of Bos-
ton Marine Terminal Association v. Boston Shipping Associa-
tion,’ where the court held:

“* * * Section 15 requires that ‘modifications
as well as the original agreement, receive the prior
approval of the Commission’. In Boston Shipping
the Commission,without any discussion of the
broad language of the act held that where, under
the already approved agreement, there was power
to fix charges, a change in incidence, as to who
was obligated to pay, was not a modification re-
quiring Section 15 filing and approval.

“In the light of the strictures expressed in VW,
supra, n. 1., this holding seems unsupportable.
While. with some consistency, it represented the
Commission’s past reading of the statute, the
Court in VW pointed to the ‘expansive language’
of Section 15 and the Commission’s ‘extremely
narrow view’, and specifically rejected the binding
effect of the Commission’s administrative con-
struction. 390 US 261, 272-73. Then referring to
the statute’s ‘literal provisions’ the Court spoke
of possible exceptions only in terms of a ‘de
minimis or routine character’, and stated that
even these must be defined by ‘appropriate ad-
ministrative proceedings’. 390 U.S. 261, 276.

10. 420 F. 2d 419 (1970), reversed on other grounds, 400 US
63, 27 L. Ed. 2d 203, 91 S. Ct. 203.

10

“Even this exception could not apply in the case
at bar. No administrative proceedings had been
held to establish guidelines under which modifi-
cations might be found ‘de minimis or routine’.
Administrative standards cannot be established
ex post facto. Cf. NLRB v Wyman-Gordon Co.,
1969, 394 U.S. 759; 5 USC § 553.

“We may add, for good measure, that a change
in incidence, as distinguished from a change in
rate, seems to us anything but routine. Even
less routine is an unjustifiable change. The Com-
mission expressly found this one ‘unjust and un-
reasonable’ to the extent that demurrage was to
be charged to the vessel even if the strike did not
commence until after the expiration of free time,
when the vessel’s obligation to make the goods
available had been fully performed. 10 FMC at
417-18. It would peculiarly violate Section 15’s
‘expansive language’ to hold that an unreasonable
modification could be rewritten nunc pro tunc
and saved in part.”

(footnotes omitted and emphasis added)

Just such a ‘change of incidence” was involved here; any
cost elements involved in the charge were shifted from Car-
gill to the stevedores serving vessels at the elevator.

This decision of the Court of Appeals for the District of
Columbia Circuit is in direct conflict with the prior decisions
of this Court and with the holding of the Court of Appeals
for the First Circuit in the Boston Varine Terminal Associa-
lion case.

11
CONCLUSION

The Court of Appeals and the FMC in this case have de-
parted from the established standards of construction of
Section 15 and of agreements approved by the agency there-
under in a manner which cannot be reconciled with the
decisions of this Court or the lower federal courts. The de-
cision is one which will only serve to create confusion in the
interpretation of agreements falling under that statute-which
cannot be permitted. The importance of the question pre-
sented is further emphasized by the fact that Section 15 ac-
cords immunity from the antitrust laws which “represent a
fundamental national economic policy”.""

We submit, for the foregoing reasons, that a writ of certio-
rari should be granted herein andthat the decision of the
court below should be reversed by this Court, to avoid direct
conflict between the circuits and with the decisions of this
Court in this important area of Federal law.

Respectfully submitted,

Benjamin W. Yancey

Edward S. Bagley
TERRIBERRY, CARROLL,
YANCEY & FARRELL

Of Counsel

11. Carnation Co. v. Pacific Westbound Conference, 383 US 213,
15 L. Ed. 2d 709, 86 S. Ct. 781 (1966).

12
A-1

CERTIFICATE O , Notice: This opinion is subject to formal revision before publication
. istniiaaee in the Federal Reporter or U.S. App. 1).C. Reports. Users are requested

to notify the Clerk of any formal errors in order that corrections may be
I, Benjamin W. Yancey, a member of the bar of this Court. made before the bound volumes go to pr

do hereby certify that I have this day served a copy of the
above and foregoing petition to respondents’ counsel of re- United States Court uf Apprals
cord, Thomas E. Kauper, Assistant Attorney General, and

Howard E. Shapiro and Robert J. Wiggers, Attorneys, Depart- a a a ee
ment of Justice and on Richard E. Hull, General Counsel,
Edward G. Gruis, Deputy General Counsel and Gordon M.
Shaw, Attorney, Federal Maritime Commission, and to coun- No. 75-1018
sel of record for intervenor below, Cargill, Incorporated,
Edward Schmeltzer, E. J. Sheppard and Cecilia E. Wirtz, by
mailing copies thereof, postage prepaid, to them at their
offices, Washington, D. C., on this 5th day of May, 1976.

CARGILL, INC., PETITIONERS
Vv.

FEDERAL MARITIME COMMISSION AND
UNITED STATES OF AMERICA, RESPONDENTS
BATON ROUGE MARINE CONTRACTORS, INC., INTERVENOR

Benjamin W. Yancey

No. 75-1108

BATON ROUGE MARINE CONTRACTORS, INC., PETITIONER
Vv.

FEDERAL MARITIME COMMISSION AND
UNITED STATES OF AMERICA, RESPONDENT
CARGILL, INC., INTERVENOR

Petitions for Review of an Order of the
Federal Maritime Commission

Argued November 4, 1975

Decided February 12, 1976

:
.
LLnL nn nnn nn ee Ce

A 2

Edward J. Sheppard, with whom Edward Schmeltzer
and Cecelia E. Wirtz, were on the brief for petitioner in
No. 75-1018 and intervenor in No. 75-1108.

Edward S. Bagley, for petitioner in No. 75-1108 and
intervenor in 75-1018.

Gordon M. Shaw, Attorney, Federal Maritime Commis-
sion, with whom James L. Pimper, General Counsel and
Edward G. Gruis, Deputy General Counsel, Federal Mari-
time Commission, were on the brief for respondent Fed-
eral Maritime Commission.

Robert J. Wiggers, Attorney, Department of Justice,
with whom Howard E. Shapiro, Attorney, Department of
Justice, was on the brief for respondent, United States
of America. Carl D. Lawsun, Attorney, Department of
Justice, also entered an appearance for respondent,
United States of America.

Before: LEVENTHAL, Circuit Judge, LUMBARD,* Senior
Circuit Judge for the Second Circuit and
WILKEY, Circuit Judge

Opinion for the Court filed by Circuit Judge LEVEN-
THAL.

LEVENTHAL, Circuit Judge: This appeal involves two
petitions for review, under 28 U.S.C. § 2342,’ of the
report and order of the Federal Maritime Commission
in Docket No. 71-29, issued January 7, 1975, which held
that the terminal operator for the Port of Baton Rouge

* Sitting by designation pursuant to 28 U.S.C. § 294(d)

'28 U.S.C. § 2342, as amended in 1966, gives the courts of
appeals exclusive jurisdiction over such final orders of the
Federal Maritime Commission as are made reviewable under
46 U.S.C. § 830.

A3

could institute charges against stevedores for the use of
terminal facilities and services but that its &-cents per
ton service and facility charge was unlawful under § 17
of the Shipping Act (Act', 46 U.S.C. § 816,° to the ex-
tent it was not reasonably related to the benefits accru-
ing to stevedores. The Commission remanded the pro-
ceeding to the Administrative Law Judge (ALJ: for a
determination of what would constitute a “proper alloca-
tion of services and facilities benefits to stevedores .. .
in order to arrive at a charge that can be properly as-
sessed against the stevedores” ‘J.A. 75). Commissioners
Barrett and Morse dissented on the ground that Cargill’s
allocation to the stevedores was sufficiently related to
benefits to pass muster under § 17.

In No. 75-1018, Cargill, Inc., the terminal operator,
maintains that its service and facility charge is reason-
ably related to the benefits provided to stevedores; that
the Commission applied a public utility ratemaking stand-
ard rather than the less exacting reasonableness standard
appropriate under $17; and that the Commission’s order
suspending the 8-cents charge pending further hearing
before the ALJ is, in effect. an interlocutory injunction
beyond its statutory power. In No. 75-1108, Baton
Rouge Marine Contractors, Inc. {Barma), a corporation
comprised of four stevedores, argues that Cargill’s

°46 U.S.C. § 816 provides in relevant part:

Every such carrier [by water in foreign commerce]
and every other person subject to this chapter shall estab-
lish, observe, and enforce just and reasonable regulations
and practices relating to or connected with the receiving,
handling, storing, or delivering of property. Whenever
the Commission finds that any such regulation or practice
is unjust or unreasonable it may determine, prescribe, and
order enforced a just and reasonable regulation or prac-
tice.

eS

AA
, ; ; ! A5
charge violates § 15 of the Act, 46 U.S.C. § 814," be- *. 7
cause it is a modification, without requisite specifie FMC i

lease agreement with the Greater Baton Rouge Port
approval. of Cargill’s underlying Commission-approved

Commission (Port); and violates £16 of the Act, 46

*46 U.S.C. § 814 provides in relevant part:

Every common carrier by water, or other person sub-
ject to this chapter, shall file immediately with the Com-
mission a true copy, or, if oral, a true and complete mem-
orandum, of every agreement with another such carrier
or other person subject to this chapter, or modification
or cancellation thereof, to which it may be a party or con-
form in whole or in part, fixing or regulating trunsporta-
tion rates or fares; giving or receiving special ratcs,
accommodations, or other special privileges or advan-
tazes; controlling, regulating, preventing, or destroying
competition; pooling or apportioning earnings, losses, or
traffic; allotting ports or restricting or otherwise regu-
lating the number and character of sailings between
ports; limiting or regulating in any way the volume or
character of freight or passenger traffic to be carried;
or in any manner providing for an exclusive, preferen-
tial, or cooperative working arrangement. The term
“agreement” in this section includes understandings, con-
ferences, and other arrangements.

The Commission shall by order, after notice and hear-
ing, disapprove, cancel or modify any agreement, or any
modification or cancellation thereof, whether or not pre-
viously approved by it, that it finds to be unjustly discrim-
inatory or unfair as between carriers, shippers, exporters,
importers, or ports, or between exporters from the United
States and their foreign competitors, or to operate to the
detriment of the commerce of the United States, or to be
contrary to the public interest, or to be in violation of
this chapter, and shall approve all other agreements,
modifications, or cancellations. No such agreement shall
be approved, nor shall continued approval be permitted
for any agrecment (1) between carriers not members of
the same conference or conferences of carriers serving
different trades that would otherwise be naturally com-
petitive, unless in the case of agreements between car-
riers, each carrier, or in the case of agreements between
conferences, each conference, retains the right of inde-
pendent action, or (2) in respect to any conference agree-

ment, which fails to provide reasonable and equal terms
and conditions for admission and readmission to con-
ference membership of other qualified carriers in the
trade, or fails to provide that any member may withdraw
from membership upon reasonable notice without penalty
for such withdrawal.

The Commission shall disapprove any such agreement,
after notice and hearing, on a finding of inadequate
policing of the obligations under it, or of failure or re-
fusal to adopt and maintain reasonable procedures for
promptly and fairly hearing and considering shippers’
requests and complaints.

Any agreement and any modification or cancellation
of any agreement not approved, or disapproved, by the
Commission shall be unlawful, and agreements, modific:-
tions, and cancellations shall be lawful enly when and as
long as approved by the Commission; before approval or
after disapproval it shall be unlawful to carry out in
whole or in part, directly or indirectly, any such agree-
ment, modification, or cancellation; except that tariff
rates, fares, and charges, and classifications, rules, and
regulations explanatory thereof (including changes in
special rates and charges covered by section 813a of this
title which do not involve a change in the spread between
such rates and charges and the rates and charges applic-
able to noncontract shippers) agreed upon by approved
conferences, and changes and amendments thereto, if
otherwise in accordance with law, shall be permitted ‘>
take effect without prior approval upon compliance with
the publication and filing requirements of section 817(b)
of this title and with the provisions of any rcgulatio: s
the Commission may adopt.

Every agreement, modification, or cancellation lawful
under this section, or permitted under secticn 813: of this
title, shall be excepted from the provisions of sections
1 to 11 and 15 of Title 15, and amendments and Acts
supplementary thereto.

A6

U.S.C. § 815,‘ because it creates illegal preferences and
privileges for Cargill through the use of Cargill’s wholly-
owned subsidiary, Rogers Terminal and Shipping Cor-
poration (Rogers), in competition with Barma at the
Baton Rouge facility. The Depariment of Justice (Anti-
trust Division), representing the United States as statu-
tory respondent, agrees with the Commission that Barma
has not proven a violation of §§ 15 or 16, but disputes
the Commission’s intimation that it would approve
under § 17 an allocation of the charges to the stevedore
going beyond express contract, custom, or actual use.

*46 U.S.C. § 815 provides 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 in-
directly—

First. To make or give any undue or unreasonable
preference or advantage to any particular person, locality,
or description of traffic in any respect whatsoever, or to
subject any particular person, locality, or description of
traffic to any undue or unreasonable prejudice or disad-
vantage in wny respect whatsoever: Provided, That
within thirty days after enactment of this Act, or within
thirty days after the effective date or the filing with the
Commission, whichever is later, of any conference freight
rate, rule, or regulation in the foreign commerce of the
United States, the Governor of any State, Commonwealth,
or possession of the United States may file a protest with
the Commission upon the ground that the rate, rule, or
regulation unjustly discriminates against that State, Com-
monwealth, or possession of the United States, in which
case the Commission shall issue an order to the confer-
ence to show cause why the rate, rule, or regulation
should not be set aside. Within one hundred and eighty
days from the date of the issuance of such order, the
Commission shall determine whether or not such rate,
rule, or regulation is unjustly discriminatory and issue
a final order either dismissing the protest, or setting
aside the rate, rule, or regulation.

AT

We affirm the Commission on all counts. Cargill’s
charge, while unprecedented at Baton Rouge, comes
within the broad authority conferred by its Commission-
approved lease with the Port and does not require spe-
cific approval under : 15. We reject Barma’s claim of a
per se violation of : 16 premised only on the fact that
Cargi.l also does business with its wholly-owned stevedore
Rogers, in the absence of proof of discriminatory prac-
tices. Finally, we find that the Commission acted within
its mandate under : 17; that its approach here in dis-
approving certain allocations to the stevedore is not
arbitrary or capricious; and that its order does not
prevent an interim levy by Cargili pending further
determination of what may properly be assessed against
the stevedore. We decline to consider the Justice De-
pariment’s contention because it was neither raised before
the Commission nor advanced by Barma in its petition
for review.

I. Background

By a lease agreement. the Port granted Cargill, as
lessee, “the exclusive right to operate hereunder a public
grain elevator within the Port Area.” The Cargill
facility opened in September, 1955, and Barma has
stevedored vessels there from its inception. In March,
1957, the Port and Cargill amended the lease agreement
so as to authorize Cargill to provide stevedoring services
and “to condition the loading or unloading of a vessel
upon the requirement that Cargill’s integrated stevedor-
ing service be used by such vessels.” The Commission’s
predecessor agency, the Federal Maritime Foard, an-
proved the basic lease, b*.. disapproved the exclusive
stevedoring amendment under £15 and as an “unreason-
able practice” under £17, Agreements Nos. 8225 and
8225-1, 5 F.M.B. 648, 655-56 (195°). The Court of
Appeals for the Fifth Circuit affirmed, Greater Baton
Rouge Port Commission v. United Slates, 287 F.2d &6

A8

(5th Cir. 1961), reh’y denied, 293 F.2d 959, cert. denied,
368 U.S. 985 (1962).

As to the dispute in question, on February 4, 1971,
Gargill informed Barma and all other stevedores using
its Baton Rouge facility that charges would be imposed
for use of services and facilities.° Several days later,
Cargill demanded that the stevedores sign an agreement
requiring payment of 5-cents per ton of grain handled
by Cargill and $50.00 per vessel to defray the cost of
cleaning the dock (J.A. 313).° Since Cargill indicated
it would not deliver grain to a vessel employing a non-
signing stevedore, Barma signed “under protest and
with full reservation of its rights” (J.A. 319-20). In-
formed by Barma of the stevedore charges, the General
Counsel of the Port wrote to Cargill asking that they
be postponed until their legality could be determined
(J.A. 303). The Port, however, made no formal com-
plaint and did not participate in the FMC proceeding. On
March 29, 1971, Barma filed a complaint with the Com-
mission resulting in the administrative actions under
review here.

II. Section 15

Barma claims that the action by Cargill represents a
wholly novel and unanticipated practice that constitutes
a modification of its agreement with the Port of Baton
Rouge, and hence under § 15 is not effective until ap-

* Cargill had not previously charged stevedores for the use
of terminal services and facilities at Baton Rouge, although
it had done so at the Port of Houston in 1967. Four other
Louisiana grain elevators had instituted such charges, al-
though Cargill’s main competitor, the public grain terminal
at New Orleans, had not done so.

* During the course of the administrative hearings, Cargill
informed the stevedores that the charge would be increased
to 8-cents per ton, effective 30 days after the date of a Com-
mission decision in Cargill’s favor, and this would include
the dock clean-up charge (J.A. 395).

PPT Te

OL

= ORR Oe POR

pr

A9

proved by FMC. FMC’s ruling rejecting this claim has
two aspects: (1) that the lease to Caigill gave it a
broad authority which embraces such a practice even
though it was not specifically foreseen; and ‘2) that
Cargill’s exercise of what it understood to be its au-
thority under the lease—even if it was wrong—was a
unilateral action, and not an “agreement” requiring
FMC approval.

We rejec: the FMC’s alternative ground, that Cargill's
action was a unilateral undertaking and not an “agree-
ment” subject to § 15, for this might open the door to
evasion of $15, through unilateral actions by one party
to an agreement and failure to protest by the other.’
However, we agree with the FMC that the lease between
the Port and Cargill can fairly be read to authorize
the termina! operator to seek a return on his capital
improvements by levying charges against those parties
reaping the benefit of his equipment. There is room for
deference to the agency on the interpretation of industry
agreements "—though, of course, less than is due for find-
ings of fact. The language of the lease is broad enough
to give Cargill the same charging authority in this re-
spect as any operator of such a terminal—subject, of
course, to FMC reguiatory authority, and subject to the

* Moreover, if Cargill enjoys unilateral authority to impose
novel charges without seeking prior approval under § 15, be-
cause any such unilateral course is not an “agreement” sub-
ject to that provision, the corollary is that there would be no
§ 15 immunity against antitrust actions, if, e.g., Barma or
the Department of Justice should bring an action charging
that Cargill and its stevedore subsidiary have entered into a
combination or contract in restraint of trade.

* United Gas Pipe Line Co. v. Memphis Light, Gas & Water
Division, 358 U.S. 103, 114 (1958); Gulf States Utilities Co.
v. FPC, U.S.App.D.C. . , 518 F.2d 450, 457
(1975) ; North Atlantic Westbound Freight Assn. v. FMC, 130
U.S.App.D.C. 122, 124, 397 F.2d 683, 685 (1968).

Al0

requirement that the charges be competitive (and not
cause a loss of business to any other port).* The FMC
approved the agreement by which the Port gave the lessee
this operating authority—and thenceforth the lessee made
individual decisions like any other operator within the
bounds of the lease. This is not a case of a fundamental
change in ratemaking methodology that gives a whole
new competitive direction to ratemaking authority. Con-
trast Pacific Westbound Conference v. FMC, 440 F.2d
1303 (5th Cir.), cert. denied, 404 U.S. 881 (1971) ($15
approval required for agreement between two ratemaking
conferences conferring mutual veto power over certain
rates).

Barma argues that Cargill and the FMC are barred
from relitigating the issue whether the underlying lease
agreement governs the relationships between Cargill and
stevedores because the Fifth Circuit answered this in
the negative in Greater Baton Rouge Port Commission v.
United States, supra. There is no merit to this res
judicata argument. The issue determined by the Fifth
Circuit was whether Cargill’s lease with the Port and an
attempted amendment to establish an exclusive stevedor-
ing arrangement were subject to §15; Cargill’s rate-
making power under the lease as to stevedores was simply
not at issue. The language quoted by Barma to the
effect that the amendment broadened the lease to reach
stevedores '’ must be viewed in the context of what was

* The lease required that Cargill “establish and enforce rea-
sonable rules and regulations in the operation of the leased

property”: “maintain and operate the same in an efficient
manner”; and “maintain and publish rates and charges for
the handling and storage of grain .. . on a competitive basis

to rates published for similar services at New Orleans and
other competitive Gulf Ports” (J.A. 294).

‘' The Port Commission and Cargill contend that Agree-
ment 8225-1 does fiot come within the purvi-w of Section
15 of the Shipping Act, and that these provisions merely

eae

All

actually decided; an exclusive stevedoring arrangement
would indeed have entailed a modification of the agree-
ment.

represent the exercise of the free right of managerial
judgment by the Commission as owner and Cargill as
operator of the property. But if Agreement 8225 comes
within Section 15, as we have held, then a fortiori Agree-
ment No. 8225-1, which broadens the lease to include
stevedores—clearly a maritime concern—comes within
Section 15.

287 F.2d at 94.

Barma also quotes the following language from the Federal |
Maritime Board’s opinion in the Greater Buton Rouge Port
Commission litigation, which was substantially incorporated
by the Fifth Circuit in its decision, id:

There is a complete separation of the function of the
elevator in delivering gfain and that of the vessel in re-
ceiving and stowing it. There is no physical connection
between vessel and elevator except mooring and guide
lines. The latter hold the spout which discharges the
grain into the hatch under control of the stevedore.
The elevator has completed delivery when the grain flows
out of the spout. All remaining functions are those of
the stevedore, who in effect takes over the ship’s opera-
tion for the time being. The elevator personnel perform
no function on the vessel; the stevedore personnel per-
form no services in the elevator or on the wharf. There
is, of course, necessity for cooperation between the two
groups as the stevedore must signal terminal personnel
in order to control the flow of grain.

Agreements Nos. 8225 and 8225-1, supra, 5 F.M.B. at 651.
This language is quoted out of context, for the issue addressed
is whether primary regulatory authority over Cargill’s ac-
tivities with respect to stevedoring rests with the Department
of Agriculture or the Federal Maritime Board. The deter-
mination that stevedoring is essentially a maritime matter
within the Board’s purview has no bearing on the issue in
this case—whether the terminal operator furnishes services
and facilities to the stevedore for which charges may be
assessed. The fact that stevedores may perform no services
on the leased premises does not mean that they do not derive
benefit from them.

Al2
Ill. Section 16

Barma claims that Cargill’s charges against it are a
per se violation of §16 because Cargill employs its
wholly-owned subsidiary, Rogers, as a competing steve-
dore. This was properly rejected by the Commission,
which reasoned that as long as Cargill’s terminal is open
to all stevedores and its charges are imposed equally
against all stevedores (including its subsidiary) there
is no “unreasonable preference or practice” under § 16.
Barma has made no showing that Cargill’s charges have
in fact harmed its competitive position vis-a-vis Rogers,
although Barma may have suffered some decline in
profits." While, as the Commission noted, the situation
in this case “could give rise to discriminatory prac-
tices” (J.A. 69), the record simply does ni support
Barma’s apprehension that Cargill intends by predator,
practices to drive it out of the Baton Rouge Port.

IV. Section 17

Regarding its authority under § 17 as extending to the
“practices” by a terminal operator of levying charges
against stevedores for services rendered by its grain
elevator, the Commission found Cargill’s 8-cents charge
against Barma an “unreasonable practice” to the extent
it relied on certain improper allocations.

It is true, as Cargill notes, that the FMC’s scope of
scrutiny under §17 is somewhat narrower than with
respect to common carriers by water in domestic and
foreign commerce. But under Volkswagenwerk v. FMC,

'! As the record presently stands, Barma has lost none of
its share of the stevedoring market at Baton Rouge and has
actually increased its share during the first six months of
the charge, primarily because Barma’s rates did not reflect the
new Cargill charge during this period (J.A. 17). On some oc-
casions, Cargill as charterer has chosen Barma rather than
Rogers to act as stevedore (J.A. 205).

“age

Al13

390 U.S. 261 (1968), the agency’s ambit of inquiry is
nonetheless substantial. The Supreme Court specifically
held that “even though the benefits received are clearly
substantial,” the “proper inquiry under § 17 is, in a word,
whether the charge levied is reasonably related to the
service rendered.” 390 U.S. at 282. See California v.
United States, 320 U.S. 577, 584-85 (1944). That was
the inquiry undertaken by the Commission in this case.

One can make the economic argument that there is no
difference in the long run whether the cost of the grain
elevator is charged to the stevedore rather than the ves-
sel, because the charges will be passed on to the party.
usually the vessel, employing the stevedore to load and
trim the vessel. In the long run, the stevedore’s charge
will be borne by the ultimate beneficiary of the services,
the consumer, regardless of whether the stevedore is em-

ployed by and paid in the first instance by the vessel or

shipper. But at least in the short run, different conse-
quences will attach to differences in the immediate inci-
dence of the charges, depending on the documents nego-
tiated and entered into by the parties prior to the impo-
sition of the new charges. Moreover, the separation out
and identification of the various charges may have a kind
of psychological spillover effect on the behavior of the
various parties, which the Commission can properly take
into account.

The Commission has taken the position, first stated in
Pacific Northwest Tidewater Elevators Ass’n, 11 F.M.C.
369, 388 (1968), that the contractual division of respon-
sibility between the buyer and seller of grain does not
control the proper allocation of terminal costs, and that
those costs should be distributed, to the extent possible,
in accordance with “actual use.” This analysis, however
primitive as a matter of economic theory, is in our
view a reasonable interpretation of the Commission’s
mandate under § 17.

Al4

Here the Commission has ruled that while the grain
terminal is rendering services to the stevedore, it is
an “unreasonable practice” under $17 to assess steve-
dores to the extent of 50% of the cost of the shipping
gallery,'* 100‘¢ of the costs of the grain dock and wharf,
$50 per vessel for dock clean-up, and $25,000 per year
for liaison service, because these charges do not reason-
ably relate to services now rendered to the stevedore
based on actual use. The Commission reasons that to the
exteiit benefits of increased efficiency are conferred by
the grain terminal beyond actual use by stevedores, the
attendant costs are properly assessable against the im-
mediate beneficiaries: the vessel, which can make more
trips because of the vastly shortened loading time, and the
shipper, who can have his grain loaded at greatly de-
creased cost per ton (J.A. 72).

Cargill says there is no evidence of such benefits to
the vessel or shipper, and that the only testimony is
that of its expert, Philip E. Linnekin. There are two
answers to this: (1) The cross-examination of Linnekin
brought out that he had not really made a quantitative
determination of benefits to the stevedore, and that he
Was in a sense relying on his general experience and eco-
nomic theory (J.A. 215-16); (2) The matter is one of
judgment in determining benefits under the so-called
Freas Formula, really an approach based on fairness
and benefits.’ The FMC has expertise and familiarity

'* Cargill’s expert first estimated that the stevedores should

bear 75°: of the cost of the gallery, then revised it to 50%
(J.A. 34).

‘The Freas Formula, developed by Howard G. Freas in
connection with Terminal Rate Strueture—California Ports,
3 U.S.M.C. 57 (1948), involves a two-step determination of
(1) total cost as divided by functional area, and (2) the ap-
propriate revenue item from each benefiting user of the
service or facility to produce a compensating revenue for
the marine terminal. As Cargill expert Linnekin testified,
“(i]t is important to note that while the method is called a

Ald

with the concepts, and so long as it gives its reasons
and the basis of its approach, the FMC is not to he
faulted because it did not put on an expert to make a
recital of its approach in the form of testimony.

Here Cargill did not file a petition for reconsidera-
tion,-or offer a witness to testify that the FMC's ap-
proach was unreasonable. While Cargill expert Linnekin
testified as to how he would recommend an allocation, as
a matter of his “judgment” (J.A. 364), he did not say
that this was the only allocation permissible under perti-
nent principles of regulatory economics.

The court does have a supervisory role—to assure that
the agency does not embark on a course that is arbitrary
or capricious. But the function of the reviewing court 1s
limited. We have no warrant for condemning the FMC's
approach here as unreasonable or arbitrary. The ulti-
mate questions involve judgment, and we cannot say that
FMC’s approach is without rationality, although were
the decision ours we might slice the pie differently.

Admittedly Cargill finds little solace in being able to
assess the shipper because Cargill is the shipper here.”
However, the Commission can insist on a proper alloca-
tion among the benefited parties, disregarding the happen-
stance that a given party may occupy several roles. if
the distribution of the benefit is such that the shipper is
properly assessable where there is no relationship be-
tween the terminal operator and the shipper, the same
allocation applies where they are one and the same. In
any case, Cargill’s dilemma is only in the short run, for

‘formula,’ it is not an immutable equation. Rather, it is a
set of principles which when combined with the judgment of
a trained analyst, provides a reasonable assessment of costs,
and a fair and reasonable allocation of those costs.” (J.A.

364).

'* Cargill owns approximately 90 to 95 percent of the grain
it handles at the Baton Rouge facility (J.A. 175-76).

Al6

if the ground rules are now clearly stated, it will be able
to recoup the charges assessable against the shipper by
getting more from the consignee in future transactions.
At the oral argument, it was said that at Baton Rouge
it is customary for the shippers to sell F.O.B. vessel
(J.A. 163), placing the responsibility on the consignee
to procure the vessel, but even if the documents are not
phrased in that form the actual cost of the supplies on
board the vessel is the dominant economic fact of life,
which determines how much the consignees will pay the
shippers for the grain itself.

The question of whether the Port’s reservation of
“dockage” precludes Cargill from charging “wharfage”
to the vessel is not before us.** The FMC would permit
charges associated with the shipping gallery allocable
to the stevedore to be assessed as “wharfage” against
the vessel (J.A. 73 & n.29). We need not consider what
the FMC would have done, and for what reasons, if it
had been confronted with a case where the Port prevented

** The lease provides that “[n]othing herein shall be con-
strued as prohibiting the Port from charging normal and
competitive dockage fees chargeable to ships using the facil-
ities; but wharfage fees chargeable against the grain shall not
be charged” (J.A. 296). The lease thus precludes Cargill from
charging “dockage,” defined by both the Port’s tariff and
the Commission’s regulations as a charge against the vessel
for tieing up at a dock or wharf, see J.A. 301; 46 C.F.R.
§ 533.6(d) (1) (1974). But it is silent on whether Cargill may
assess “wharfage” against the vessel. The Commission de-
fines “wharfage” as a charge “against the cargo or vessel on
all cargo passing or conveyed over, onto, or under wharves
.... for [its] use of [the] wharf,” see 46 C.F.R. § 533.6(d)
(2). While the Port’s tariff recognizes “wharfage” as a
charge separate and distinct from “dockage” and based upon
the movement of cargo over a facility rather than tieing up
there, it defines the term as “a charge against cargo,” see
J.A. 301. Whether this definition precludes such a charge
against the vessel should be addressed by the Commission.

AlT7

the terminal operator from levying any charge on the
vessel.

Cargill further claims that the Commission's order
prevents any assessment against the stevedore until the
ALJ on remand determines what constitutes a proper
allocation to the stevedore. While the Commission’s rul-
ing lacks clarity, we do not read it to say Cargill can-
not in the interim levy a charge against the stevedore
for “actual use” of the grain terminal. The Commis-
sion’s position at oral argument was that Cargill must
follow the usual procedures under the Commission’»
General Order 15, 46 C.F.R. § 533.3, and file a tariff
with charges based on an allocation consistent wit’ its
ruling. Here Cargill failed to file a tariff in the first
instance, which the Commission found to be an in-
dependent violation of section 17 (J.A. 75)—a ruling
endorsed by all five members of FMC, and not appeale'!
by Cargill. The Commission, far from preventing Cargill
from charging Barma, specifically ordered Cargill to
“file forthwith any and all charges and conditions within
the limits authorized by this decision which Cargill in-
tends to impose” id.

Cargill’s failure to file a tariff does not, in some
mysterious fashion, render improper the Commission dis-
position and remand. Picking up on the point raised by
Commissioners Barrett and Morse in their partial! dis-
sent, Cargill urges that the Commission in effect has
issued an interim injunction, a remedy it does not have
under this court’s ruling in Trans-Pacific Freight Con-
ference of Japan v. FMB, 112 US.App.D.C. 290, 302
F.2d 875 (1962). In that case, however, Judge Wash-
ington held that the Commission was not authorized under
$15 to issue a restraining order pendente lite where the
only justification advanced was a finding of irreparable
injury and there was no finding of a violation of the
Act. Trans-Pacific Freight Conference is inapposite here,

A 18

where the Commission is acting under $17 and has
found a violation of that provision, and where charges
cannot be levied forthwith in view of the terminal
operator’s failure to file a tariff. The Commission’s
course here seems clearly within its powers as outlined
by Justice Frankfurter in California v. United States,
320 U.S. 577, 582 (1944). There Justice Frankfurter
stated that on finding a violation of §§ 16 and 17, “the
Commission was charged by law with the duty of devising
appropriate means for their correction,” which included
issuance of “an order generally prohibiting further pref-
erential and unreasonable practices, leaving the parties
to translate such a generality into concreteness and to
devise their own remedies.” Thus, while under § 17 the
Commission “may” prescribe a “reasonable practice” as
a remedy for a $17 violation, under the California de-
cision it may declare the charges to be an “unreasonable
practice” and leave to Cargill the option in the first
instance of filing a tariff carrying charges consistent
with § 17 and the FMC’s ruling thereon.

At the oral argument there was some discussion of
the consequences of Cargill’s filing of a tariff for a 5-
cents charge subsequent to the issuance of the FMC
order under review. That is not a part of the record
and case before us.

The Department of Justice (Antitrust Division) claims
that the FMC went too far in the authorization of
charges to Barma. The Department says that charges
can only be based on (a) express contract with the
persons charged; (b) a custom at the port, possibly on
the theory that this gives rise to an implied contract;
or (c) actual use, in which case there is either another
kind of implied contract or a subjection to reasonable
tariff regulation."° And the Department says that the

1*The Justice Department agrees with the Commission’s
determination as to Cargill’s allocations to the stevedore for

Al9

benefits ascribed to use cannot be the kind of benefits
inherently accruing to a stevedore whose employees never
set foot on the dock, as an “incidental beneficiary.” In
rebuttal, FMC counsel puts it that even a stevedore whose
employees row to the vessel use the dock when they
attach to the spout on the dock.

Barma sought review only on the ground that Cargill’s
charges violated §§15 and 16." Cargill opposed the
FMC’s authority under § 17 to limit its charges against
stevedores. There was no appeal to this court by anyone
on the ground that, assuming §§15 and 16 to be in-
applicable, the FMC contravened § 17 because it did not
place sufficient limits on what might be charged to a
stevedore. The approach of the Antitrust Division was
neither presented to the FMC, nor made the subject of
a petition to review. We have no jurisdiction to rule
on its merits.

Affirmed.

the shipping gallery and dock clean-up and liaison service,
although for different reasons. As to the wharf and utility
allocations, it would expressly condition the charge on actual
use by the stevedore; as to overhead, it would require a re-
calculation to reflect the reduction in other charges to the
stevedore resulting from the Commission’s decision. Brief
for the United States of America at 12.

1* Whatever contention Barma may have previously made
that any charges against the stevedore would constitute an
“unreasonable practice” under § 17 was abandoned in this
appeal. Indeed, Barma filed a brief as intervenor in No.
75-1018, involving Cargill’s petition for review, endorsing
the Commission’s application of § 17.

B-1

FEDERAL MARITIME COMMISSION

SERVED
JANUARY 7, 1975
FEDERAL MARITIME COMMISSION

DOCKET NO. 71-29
BATON ROUGE MARINE CONTRACTORS, INC.
v.
CARGILL, INCORPORATED

Charges assessed and conditions imposed by respondent upon
all stevedores operating at its leased terminal facility do
not constitute a modification to an approved section 15
agreement for which further Commission approval is
required.

No unreasonable preference or privilege as contemplated by
section 16 First of the Shipping Act, 1916, resulted from
the imposition by respondent of charges and conditions
on all stevedores,including respondent’s subsidiary.

The relationship between a terminal operator and a wholly-
owned stevedore does not ipso facto render charges
assessed and conditions imposed equally on all stevedores
as unduly anticompetitive or discriminatory, especially in
the absence of proof of actual damage to the complain-

ant.

Assessement of charges and imposition of conditions upon
stevedores found not to be reasonably related to the
economic and commercial benefits derived by the steve-
dores, and thus to be an unjust and unreasonable practice
within the meaning of section 17 of the Shipping Act,
1916.

B-2

Failure to file new assessed charges and imposed conditions
in terminal tariff found to be an unjust and unreasonable
practice within the meaning of section 17 of the Shipping
Act, 1916.

The matter is remanded to the Administrative Law Judge
for resolution of the sole issue of achieving a proper
allocation formula with regard to actual benefits derived
by stevedores from use of terminal facilities and for
arriving at a proper charge against stevedores based there-

on.

Edward S. Bagley for Baton Rouge Marine Contractors,
Inc.

Edward Schmeltzer and E. J. Sheppard IV for Cargill,
Incorporated.

Donald J. Brunner, Margot Mazeau and Patricia E. Byrne
as Hearing Counsel.

REPORT

BY THE COMMISSION : (Helen Delich Bentley, Chairman,
and James V. Day, Vice Chair-
man. Ashton C. Barrett and
Clarence Morse, Commissioners,
concurring and dissenting. George
H. Hearn, Commissioner, concurr-
ing and dissenting.)

I. PROCEEDING

This proceeding arises from a complaint filed by Baton
Rouge Marine Contractors, Inc. (BARMA or complainant)
on March 29, 1971, alleging that Cargill, Inc. (Cargill or res-
pondent) has violated and continues to violate section 15,
16 and 17, Shipping Act, 1916 (the Act), by unilaterally
modifying a lease agreement between Cargill and the Greater
Baton Rouge Port Commission (Port), which agreement had

B-3

previously been approved by the Commission. The subject
modification allegedly imposed unlawful charges and con-
ditions upon stevedores conducting business at the marine
grain elevator at Port Allen (Baton Rouge), Louisiana, and
was not filed with the Commission. BARMA seeks a cease
and desist order.

Cargill denies any modification of the lease agreement,
unilateral or otherwise, or that it has violated the Act. Res-
pondent admits to having informed BARMA that it would
not deliver grain from the elevator to any vessel employ ing a
stevedore who had not agreed to certain proposed charges
and conditions, but maintains that such action was lawful,
proper and within the terms of its lease agreement. Hearing
Counsel intervened in the proceeding.

Hearings were held in New Orleans, Louisiana on Novem-
ber 30 and December 1, 2, and 3, 1971, and on April 24 and
25, 1972, in Washington, D.C.

In his Initial Decision served December 1, 1972, Adminis-
trative Law Judge Ashbrook P. Bryant concluded that the
charges assessed and the conditions imposed by Cargill upon
the stevedores as a prerequisite to loading grain on vessels
at Port Allen constitute a modification of the lease agreement
between Cargill and the Port previously approved by the
Federal Maritime Commission, and the execution of that
modification without prior filing with and approval by the
Federal Maritime Commission, and the execution of that
modification without prior filing with and approval by the
Commission violates section 15 of the Act. He also found
that the charges and conditions imposed by Cargill, with
minor exceptions, were not reasonably related to the econo-
mic or commercial benefit of the stevedore from the use of
facilities and services provided by the terminal, and thus
constitute unjust and unreasonable practices violative of
section 17 of the Act. Accordingly, the Administrative Law

B4

Judge found that Cargill should cease and desist from assess-
ing, charging and collecting the fees and charges and imposing
the regulations found to be unlawful.

As to the possible section 16 viol’ ‘ons, the Administrative
Law Judge found that the relationship between a terminal
operator and a wholly-owned stevedore does not in and of
itself render charges assessed and coaditions imposed equally
on all stevedores unlawful as unduly anti-competitive and dis-
criminatory, especially in the absence of proof of actual
damage to the complainant. While a substantial competitive
advantage may accrue to the parent-subsidiary combination
from the assessment of charges and imposition of conditions
on all stevedores, including the subsidiary, no unreasonable
preference or privilege of the type contemplated by section
16 First of the Act has been shown.

BARMA filed exceptions to the Initial Decision on Decem-
ber 15, 1972, as did Cargill and Hearing Counsel on Decem-
ber 18, 1972. All parties filed replies to exceptions on Janu-
ary 12, 1973. Oral argument was held on March 7, 1973.

Il. FACTS
Parties

BARMA, a Louisiana corporate entity, is equally held by
four contracting stevedores and/or steamship agents, T.
Smith & Son, Inc., Strachan Shipping Company, Atlantic &
Gulf Stevedores, Inc. and Texas Transport and Terminal
Co., Inc.

Cargill is incorporated in Delaware and with home offices
located in Minneapolis, Minnesota. It is engaged in selling,
loading, unloading, storing and delivering grain and related
commodities, exporting much of the grain through 12 ter-
minals it operates, including the Baton Rouge facility. At

i

’ B-5

Baton Rouge, Cargill is engaged in the business of furnishing
wharfage, dock, warehouse, or other terminal facilities in
connection with common carriers by water.

Rogers Terminal and Shipping Corporation (Rogers) is a
wholly-owned subsidiary of Cargill and operates as a general
cargo and grain stevedore company/steamship agent with
operative offices at Baton Rouge.

The Port owns the grain elevator herein discussed, and is a
regulatory agency of the State of Louisiana. The Port is
engaged in the business of furnishing wharfage, dock, ware-
house, or other terminal facilities in connection with com-
mon carriers by water.

History

In 1955, the Port leased the grain elevator and wharf at
Baton Rouge to Cargill. The four stevedore firms mentioned
earlier, following encouragement by the Port, and with the
assurances of Cargill that the elevator would remain open
competitively, formed BARMA to compete for stevedoring
operations at the grain facility.

in August 1956, Cargill replaced BARMA with Rogers,
its subsidiary, as sole stevedore on the grounds that
BARMA’s performance was deficient. Complainant was ad-
vised that it was no longer welcome at the elevator.

In March 1957, the Port and Cargill agreed that Rogers
should be the exclusive stevedore at the elevator. BARMA
refused to withdraw and protested the exclusive stevedore
arrangement which was provided for in the lease which the
Port and Cargill filed with the Federal Maritime Board

weneere

B-6
(Board) for approval.'

While the Board approved the original lease (Agreement
No. 8225), the amendment (Agreement No. 8225-1) was
found to ‘‘create in Cargill a monopoly over activities which
take place exclusively on the vessels and not on terminal
property” and to be “detrimental to the commerce of the
United States”, and that its operation would constitute an
unjust and unreasonable practice relating to the receiving,
handling and storing of property in violation of section 17 of
the Act.* The amendment was not approved. Accordingly,
BARMA continued to operate as stevedore at the terminal
on an “open’”’ basis.

The lease

The lease, a comprehensive and detailed contract covering
waterfront land and improvements, is for a term of 20 years
from September 7, 1955 to September 6, 1975, with options
to renew under certain conditions for additional periods of
10 years each. Cargill has the right to “‘have, hold, occupy,
possess and enjoy the leased premises” during the term and
any renewal periods “to the exclusion of all others save and
except those using said leased premises with the consent,

1. See Agreements Nos. 8225 and 8225-1, 5 F.M.B. 648 (1959). The
further agreement [8225-1] was as follows:

Cargill further is required to and agrees to provide and furnish
stevedoring services to vessels loading or unloading at the wharf,
it being recognized thet vessels loading or unloading should be in-
tegrated into the overall elevator operations so as to provide effici-
ent service, both to such vessels and to persons depositing commodi-
ties into the elevator. it is to be a reasonable rule and regulation
in the operation of the wharf which is part of the leased property,
for Cargill to condition the loading or unloading of a vessel upon
the requirement that Cargill's integrated stevedoring service be used
by such vessels.

2. Agreements Nos. 8225 and 8225-1, supra note 1.

B-7

express or implied, of lessee.”” The obligations of both lessor
and lessee with respect to repairs, renewals, maintenance,
replacement and restoration of the premises not reimbursed
through insurance proceeds are specified within the agree-
ment, and the rights and obligations of the parties are to be
integrated with the overall operations of the Port insofar as
is possible without violating the other provisions of the lease.
The leased facilities are to be maintained throughout the
period of the lease, or any extended period thereof, as a pub-
lic port facility.

Lessee agrees that it will establish and enforce reasonable
rules and regulations for the operation of the facility and will
maintain and operate it in an efficient manner and will
accept grain without “discrimination between persons desir-
ing to avail themselves of such facilities, as to rates and ser-
vices.” To the extent feasible, lessee agrees to give “‘prefer-
ence to this grain elevator over other grain elevators operated
by lessee in the Gulf area.” Further, lessee agrees to publish
rates and charges for the handling and storage of grain com-
petitive to those for similar services at New Orlear:: and other
competitive Gulf ports so as to insure a schedule of rates,
rules and regulations competitive and comparable to those
maintained in New Orleans and other competitive Gulf
ports.

So far as may be lawful, the Port agrees to give lessee
‘preferential privileges in and to the docks, wharves, roads,
and railroad facilities necessary or convenient to the effici-
ent and economical operation of the leased premises and the
business conducted therein and thereon.” The Port agrees
to give Cargill the most favorable rates for services and
facilities granted to any other person. The Port’s rates shall
be “competitive with, and not greater than rates for similar
services and privileges charged at other Gulf ports, including
but not limited to New Orleans, Louisiana; Galveston and
Houston, Texas.”’ Nothing contained in the lease shall be con-

——— -

B-8

strued as prohibiting the Port from charging normal and
competitive dockage fees chargeable to ships using the facili-
ties, but wharfage charges chargeable against the grain shall
not be charged by the Port. Cargill shall have the exclusive
right to operate a public grain elevator “‘as defined by law”
within the Port area and shall have right of first refusal on
any additional grain storage and handling facilities which the
Port may construct in the event that the present facilities
become inadequate, “‘on such terms and for such payments as
the Port is prepared to make to responsible third perse ~ in

good faith.”

As before stated, the Board refused to approve the Cargill/
Rogers exclusive stevedoring arrangement at Baton Rouge.
This decision was appealed; and the Court of Appeals affirm-
ed the Board’s decision.

In its report, the Board had described in some detail the
relationships among vessel, master, stevedore, and elevator.

The relation between vessel and stevedore involves
trust, reliance, and dependence on the skill, relia-
bility, and efficiency of the stevedore in the per-
formance of an important ship-operating function.
Under the form of grain charter used in the Gulf,
including Baton Rouge, the vessel owner appoints
the stevedore, except where by special provision
the right of appointing is given the charterer. In
all instances, the decision on all matters of loading
rests with the master, the vessel and her owners
are legally and contractually responsible for the
proper loading and seaworthiness of the vessel, and
they pay the cost of loading.

3.. See Greater Baton Rouge Port Commission v. United States, 287 F.
2d 86 (1961), cert. den. 368 U.S. 985.

B-9

There is a complete separation of the function of
the elevator in delivering grain and that of the
vessel in receiving and stowing it. There is no phys-
ical connection between vessel and elevator except
mooring and guide lines. The latter hold the spout
which discharges the grain into the hatch under
control of the stevedore. The elevator has comple-
ted delivery when the grain flows out of the spout.
All remaining functions are those of the stevedore,
who in effect takes over the ship’s operation for
the time being. The elevator personnel perform no
function on the vessel; the stevedore personnel
perform no services in the elevator or on the wharf.
There is, of course, necessity for cooperation be-
tween the two groups as the stevedores must signal
terminal personnel in order to control the flow of
grain. (p. 651)

The decision of responsibility and authority as defined by the
Court and the Board remain largely unaltered and are pre-
sently operative at Port Allen.

In New Orleans Steamship Assn. v. Bunge, Etc., 8 F.M.C.
687 (1965), an exclusive stevedoring arrangement was not
ruled on by the Commission because it was determined that
Bunge was not “an other person subject to the Act”, and
hence we had no jurisdiction. Subsequent to that decision,
the Department of Justice, Antitrust Division, instituted an
investigation into the exclusive stevedoring at Gulf grain
terminals. Consent decrees were entered against several eleva-
tors, including Bunge and another elevator located on the
Mississippi River below the Port of Baton Rouge, whereby
the defendant elevator owners were enjoined and restrained
from imposing “any requirement cr understanding that
stevedoring services of any particular person be utilized”
at the elevators by vessels loading there and from “denying or
otherwise restricting any person access to and the use of the
facilities at the terminal or dock of an elevator in order to

B-10

provide stevedoring services for loading at the elevator.”

The injunctions did not, however, prohibit the elevator
operator from establishing reasonable regulations for access
and use of the facilities if such regulations were applicable to

all.

In 1966 Cargill was served with a civil investigation de-
manded by the Justice Department concerning its elevator at
Port Arthur, Texas, and had not, in the interim period, im-
posed any restrictions on the stevedores at Baton Rouge.

ill feels that marine terminal elevators provide bene-
fits to stevedores for which the elevator should be compen-
sated. In 1967, when the Houston elevator opened, Cargill
instituted the stevedore agreement which has been in exis-
tence since that time. All of BARMA’s members except T.
Smith & Son, Inc., which does not operate at Houston,
signed the agreement without complaint.

In 1970, four other Louisiana grain terminals instituted
charges and agreements similar to the one at issue. Conse-
quently, Cargill, in a letter of February 4, 1971, and revised
February 10, 1971, informed BARMA and other stevedores
using its Baton Rouge facility of certain conditions the
stevedores must meet to use elevators. The basis agreement
now in force provides as follows:

The stevedore will provide sufficient crews of long-
shoremen so that the elevator may operate at
capacity. The stevedore will pay $100.00 per hour
if he fails to provide enough longshoremen. The
stevedore will post a $2,000.00 deposit to secure
this obligation, and Cargill will pay interest on the
deposit.

The stevedore will pay 5¢ per ton of grain handled
for services and facilities provided to it by Cargill,
and will pay $50.00 per vessel to defray the cost

-

B-11

of cleaning the grain dock. The stevedore will
a $1,500.00 deposit to secure these obligations.

The stevedore will adhere to federal equal employ-
ment guidelines and regulations.

The stevedore will use utmost care in his oper-
ations, will hold Cargill harmless from damages
caused by the stevedore’s operations, and will
provide evidence of adequate liability insurance
coverage by companies acceptable to Cargill.

The stevedore will provide adequate supervision for
his operations, which will be performed in a
“workmanlike” manner.

BARMA protested the agreement, but was advised by
Cargill that no vessels would be loaded unless the agreement
was executed. Accordingly, BARMA signed the agreement
under protest. BARMA and Rogers thereafter raised their
rates to compensate for the charges imposed by Cargill.

Cargill’s initial charges were 5¢a ton. During the course of
the hearings in this case, on December 17, 1971, Cargill
advised the stevedores that the 5¢ charge would be increased
to 8¢ per long ton, “effective 30 days after the date of the
Federal Maritime Commission’s decision in Docket 71-29. . .”

By letter of February 13, 1971, the Port protested the
proposed increase and requested Cargill to cancel or postpone
the increase until it could be considered and legally resolved.
While the Port did not intervene in the proceeding, its execu-
tive director testified that the Port considers Cargill’s action
in imposing “charges on vessels utilizing the facility oc the
stevedores hired by them to serve those vessels” as a viola-
tion of the lease agreeme:c, “detrimental to the Port of

B-12

Greater Baton Rouge”’, and tending to reestablish Rogers as
an exclusive stevedore through the manipulation of the
access charges and stevedoring rates. Since there are no
access charges at the Public Grain Elevator in New Orleans,
which is the primary competitor of the Baton Rouge Grain
Elevator, the Port Commission fears that the Cargill charges
against stevedores, which are being passed on to the vessel,
may render the Port noncompetitive; however, there is no
apparent substantiation of this fear.

III. INITIAL DECISION

The Administrative Law Judge initially looked to the law-
fulness of the charges and conditions imposed by Cargill.
Cargill’s position, as earlier stated, is that its actions are,
within the authority and powers granted to it under the
lease, completely legal and no modification of its section 15
agreement has been effected.

BARMA and Hearing Counsel urge that Agreement No.
8225 has been unlawfully modified by Cargill’s unilateral
action. The Administrative Law Judge, in his consideration
of the matter, reviewing the lease arrangement at Baton
Rouge, found “reasonable doubt’’ that the original lease
intended to and did clothe Cargill with authority tc impose
the charges and conditions it did.‘ In its brief, Cargill further
contends that, arguendo, even if its actions resulted in a

4. Cargill explains that the lease gives it only “preferential” and not
exclusive use of “the docks, wharves, roads, etc."’ only because of a
‘peculiarity’ of Louisiana law which prohibits a state body from
“leasing” certain waterfront facilities, such as docks, to any person.
Cargill asserts that in order to comply with this law and still give
terminal operators and others a maximum degree of contro! over
“premises for which they are paying’, the Port Commission has
adopted a concept of “privileged use’’, which, according to Cargill,
in every material respect is the same as a full lease.

B-13

modification of the agreement, since that modification was
unilateral (the Port having no part in the assessment of
charges and conditions upon the stevedores) and not “‘joint
or cooperative” as envisioned by section 15, such modifica-
tion would not be subject to section 15 and thus not need
Commission approval.

Hearing Counsel point out that there is no precise prece-
dent for a unilateral modification within the purview of
section 15, but that since section 15 agreements are not pri-
vate contracts between private parties, the Commission has
the duty to oversee such arrangements where they affect the
maritime industry. Hearing Counsel argue that the fact that
Cargill acted alone in imposing the charges and conditions
does not divest the Commission of its authority to consider
the import of the agreement.

The Administrative Law Judge determined that the Act
does not permit substantial changes in the effect of a section
15 agreement to be taken lightly. Since the Act is remedial
in this nature, any doubt should be resolved in favor of the
applicability of section 15, and any modification of such an
agreement except in unusually clear cases should be scruti-
nized by the Commission.

The Administrative Law Judge further observed that the
modification did introduce an element into the agreement
which was not contemplated at the time the lease was negoti-

ated and, accordingly, ruled that the charges and conditions _

contained in Cargill’s letcers of February 10 and December

17, 1971, constituted a modification of an approved agree- |

ment requiring section 15 approval.

The Administrative Law Judge, in viewing the Cargill/
Rogers relationship found a situation “fraught with potential

B-14

abuse”, but found no specific evidence on the record to sub-
stantiate charges of undue economic disadvantage to BARMA
or other stevedores and shippers. He found little doubt that
a substantial competitive and economic advantage would
accrue to the Cargill /Rogers arrangement from the imposition
of the charges herein considered, but, said the Administrative
Law Judge, it does not follow ipso facto that the charges and
conditions are unlawful since the charges and conditions are
imposed equally on all stevedores.” Accordingly, while the
Administrative Law Judge felt the potential anticompetitive
effect flowing from the parent-subsidiary relationship should
be reason enough to closely scrutinize its charges and con-
ditions for reasonableness, he found no proof of actual dam-
age to BARMA and no unreasonable preference or prejudice
resulting simply from the Cargill/Rogers relationship.

As the “crux” of the case, the Administrative Law Judge
addressed himself to the question as to whether the charges
and conditions imposed on stevedores by Cargill as a pre-
requisite to doing business at Baton Rouge may be fairly
and directly related to benefits derived from the use of the
terminals, facilities and services performed by Cargill.

The Administrative Law Judge felt that no violence would
be done to generally accepted principals of fairness if such
were the case to require BARMA and others to pay for the
benefits they receive.

5. Citing Pittston Stevedoring Corp. v. New Haven Terminal. inc, 13 F.
M.C. 33, 35 (1969).

6. Citing Lake Charles Harbor and Term. Dist. v. Port of Beaumont,
12 F.M.C. 244, 248 (1969); Phila. Ocean Traffic Bureau v. Export
S.S. Corp., 1 U.S.S.B.B. 538 (1936); Port of New York Authority
v. AB Svenska, et a/., 4 F.M.B. 202 (1953).

B-15

Cargill maintains that the charges and conditions are fair.
BARMA and Hearing Counsel contend that the facilities and
services for which charges and conditions are imposed are not
primarily for the benefit of stevedores, and hence, with a
minor exception, are unfair and unreasonable.

The Administrative Law Judge then proceeded to discuss
the Edwards-Differding Formula and the later Freas Formula
used for the determination and allocation of costs in marine
terminals in relation to the testimony of Philip E. Linnekin,
Cargill’s expert witness. Essentially, the Administrative Law
Judge, in sifting down the testimony, came to the conclusion
that the applicability of the Freas Formula can be affected
by the judgment of a trained analyst, by agreement, and/or
by custom and usage. To apply the Freas Formula, which
historically was applied to general cargo terminals allocating
costs between vessel and cargo, to cargo and stevedores, while
novel, does produce certain workable data, which the Admin-
istrative Law Judge referenced at length in his Initial De-
cision. Applying that date to formulate charges and con-
ditions and thereafter imposing these charges and conditions
upun stevedores is not unlawful, he found, provided the
charges and conditions are fair, reasonable and related to
facilities and services provided stevedores for their benefit.
As support for this position, the Administrative Law Judge
noted that several competitive grain elevators now assess
similar charges and conditions, and there is no evidence of
record that Baton Rouge has lost any vessels to the public
grain elevators at New Orleans, although that elevator does
not impose like charges and conditions.

The Administrative Law Judge discussed particular “bene-
fits” to stevedores including a shipping gallery and grain
dock. The shipping gallery is a “highly refined” mechanical

conveyor system for delivering grain from the elevator to the

as

B-16

vessel, without which it would take “scores of longshoremen
moving grain in bags” to convey equal amounts of grain. The
grain dock, a platform at the river end of the gallery, houses
the machinery and the spouts which bring the grain into a
position where it can be dumped into the vessel. Additional-
ly, water, toilets, telephones, utilities and dock clean-up and
liaison service are also benefits to the stevedores for which it
is contended they should pay. Additionally, the Linnekin
study allocates land rental charges to the stevedores.

The Administrative Law Judge then discussed each facility
and service and arrived at the following conclusions:

1. The shipping gallery. According to the rule enunicated
in Greater Baton Rouge Port Commission v. United States,
supra, note 3, the function and responsibility of the steve-
dore does not attach until the grain is discharged from the
loading spout over the hold of the vessel. The loading spout
can be equated with “ships tackle” or “point of rest”
wherein general cargo is considered delivered to the ship.
The speed of transit of the gallery is an advantage to the ele-
vator, not the stevedore. The Linnekin study allocated costs
initially at the rate of 75 percent of the gallery rental to the
stevedore, 25 percent to the cargo; then 50-50. The con-
structed charges under this theory appear duplicative of the
charges to the holders of warehouse receipts, and accordingly
the Administrative Law Judge found that the cost of the
shipping gallery is not shown to be a proper and reasonable

charge against the stevedores.

2. Grain dock-wharf. Linnekin states the wharf benefits
stevedores because it allows ingress and egress to and from
the vessel. However, the Administrative Law Judge found
that the vessel is the primary beneficiary of the wharf. How-
ever, the cost had been allocated 100 percent against the

B-17

stevedores. The wharf included the entire barge unloading
facility, pile clusters, the dust collection system, a multi-
platform structure, upper and lower catwalks and the spouts.
The Administrative Law Judge found that the barge unload-
ing facility is used strictly for Cargill's benefit, the pile
clusters are used exclusively by the vessels, and the dust
collection system is used to avoid grain dust explosions.

3. Water, toilets, telephones and utilities. These items total
$933.00 per year and include certain unsubstantiated
charges. Basically, the stevedores are being charged for a
Cargill-supplied sound powered telephone, fixtures, fuses,
bulks and labor and Cargill-furnished electricity for lighting
the wharf. Under Cargill’s tariff, the vessel is required to
furnish adequate lighting for night reception of cargo.

4. Dock clean-up and liaison service. These items were
allocated at four man-hours per day and costs thereof. The
Administrative Law judge found that the dock is cleaned
only sporadically and “liaison fees’’ of $25,000 a year are
unsubstantited.

5. Overhead expenses. These were allocated at 2.3 per-
cent to the stevedores. Such expenses included Cargill’s
overall terminal elevator administrative expenses (of which
16.88 percent was allocated to Baton Rouge), Minneapolis
branch office administrative expenses, management fees,
and New York office expenses.

The Administrative Law Judge summarized his findings as
follows:

On the basis of the record the costs allocated to stevedores

aie —

B-18

as the basis for the charges and conditions imposed by Car-
gill have not been shown to be reasonably related to use or
benefit to stevedores from services and facilities provided by
Cargill. The principal facilities upon which the charges and
conditions are sought to be justified by Cargill are the shipp-
ing gallery and the wharf. Neither facility is maintained and
operated principally for the benefit of stevedores. The con-
tention that the “‘benefit’’ to the stevedore from the shipping
gallery and the grain dock is the transportation of the grain
one thousand feet from the elevator to the vessel is not valid.
The stevedoring function and, hence this “benefit” to steve-
dores, does not begin, for all practical purposes, until the
grain is delivered at the end of the spout. The fact that the
mechanism of the shipping gallery permits more rapid de-
livery of the grain at the end of the spout benefits the cargo
and, perhaps, the vessel. It does not appreciably benefit the
stevedore. His function is to properly load the vessel with
grain “delivered” by the terminal at the end of the spout
over the hold. Cargill’s function is to make grain available for
loading the vessel by delivering it at that point. Without the
shipping gallery in its entirety, Cargill could not deliver the
grain from elevator to spout end. Also, the charge to steve-
dores for the shipping gallery duplicates the charge on hol-
ders of warehouse receipts for the same facility. No cost
allocable to the shipping gallery may properly be charged to
the stevedore.

Since the Port Commission, under the terms of the lease,
charges vessels for the use of the wharf though dockage
fees, no part of the cost of the wharf may properly be charg-
ed to stevedores. It does not appear that either the clean-up
charge or the liaison charge is justified on the basis of this
record. Nor is the allocation of overhead justified on the
basis of the record.

B-19

The Administrative Law Judge thereafter discussed the
four regulations Cargill has imposed upon the stevedores, to
wit: (1) requiring execution of an agreement that the steve-
dores will exercise “utmost care” in conducting their opera-
tions, coupled with a contractual indemnity agreement;
(2) insurance coverage in specified amounts written with
companies acceptable to Cargill’s reasonable satisfaction;
(3) $100.00 per hour liquidated damages for delays caused
by stevedores; and (4) deposits totaling $3500.00 to secure
payment of the charges. The Administrative Law Judge
found the standard of “utmost care’’ unreasonable and the
indemnity agreements unfair as against public policy. He
found the insurance requirement susceptible to abuse in that
Cargill must be “reasonably” satisfied as to which company
writes the policy. The $100.00 per hour liquidated damage
provision is a one-sided arrangement. The Administrative
Law Judge felt that BARMA was entitled to a reciprocal
clause. Lastly, he found the deposit of $1500.00 to secure
payment of the access and dock cleaning charge to be un-
reasonable and unsupported by facts; however, the $2000.00
deposit to secure payment of liquidated damages was found
to be reasonable, if Cargill posted a similar deposit for delays
it caused.

One argument raised by Hearing Counsel in its Answer and
rebutted by Cargill in its Reply was that Cargill’s failure to
_ file the subject charges and regulations in its terminal tariff
is violative of Section 17 of the Act. The Administrative Law
Judge did not address himself to this issue in the initial
decision, but we will consider it in our final determinations.

IV. EXCEPTIONS

Exceptions and replies were filed by all parties in the pro-

oe

B-20

BARMA excepts to the initial decision on the single
ground that it is in error as a matter of law, in that it fails
to hold that the compulsory imposition of the charges a-
gainst stevedores by Cargill in its dual role as a terminal
operator and stevedore is unlawful per se, is unduly anti-
competitive and discriminatory, constitutes an unreasonable
preference or privilege in violation of 16 First of the Act, and
is an unjust and unreasonable practice in violation of section
17 of the Act.

Complainant urges that because of the status of the Car-
gill/Rogers arrangement, it competes with BARMA and is
thus levying charges against competitors, an illegal, anti
competitive practice. BARMA calls the Cargili/Rogers re-
lationship a “sham”, urging that all that transpires is that
when Rogers pays the charges, money merely passes from
one pocket to the other. Complainant compares this case
to the Commission’s decision in California Stevedore &
Ballast Co., et al. v. Stockton Elevators,Inc.,’ (hereinafter
Stockton) and argues that Stockton demonstrates precisely
why Cargill’s scheme is unlawful: i.e., where a terminal
operator seeks to compete as a stevedore, either directly or
through a stevedore subsidiary, affiliate or subcontractor,
any compulsory charge imposed by it against competing
stevedores will be unlawful per se.

BARMA urges that the substantial competitive and econo-
mic advantage obtained by the Cargill/Rogers arrangement
constitutes actual damage to BARMA, and because Cargill
is capable of absorbing the cost, the practice will eventually
put BARMA out of business.

7. 8 F.M.C. 97 (1964).

B-21

Judge’s decision insofar as it finds that the charges and con-
ditions imposed by Cargill have no harmed BARMA, are
neither preferential nor discriminatory, and do not violate
section 16 of the Act. Cargill takes issue with that portion of
the initial decision which concludes that the charges and con-
ditions constitute an unfiled modification of a section 15
agreement and that they are unjust and unreasonable prac-
tices in violation of section 17 of the Act. Cargill argues that
the Administrative Law Judge erred in concluding that this
case is an extension of its previous litigation, and contends
that the two cases are not related at all.

Cargill essentially reargues its position that it acted uni-
laterally, and hence the charges it has established were not
instituted pursuant to an agreement between Cargill and the
Port. Respondent then cites several Commission cases where-
in it was held that we have no jurisdiction under section 15
over unilateral action.® Cargill urges that it has not modified
the initial lease agreement, and that a fair reading of the lease
indicates that the Port meant to transfer plenary power to
Cargill to deal with stevedores or any other third party at the

elevator.

Cargill maintains that lease disputes should be settled by
the parties and that the Commission should not act as an
umpire of section 15 agreements. As further support for its
arguments, Cargill cites Boston Shipping Assn. v. Port of
Boston Marine Terminal Ass’n.,? where the Commission held
certain joint activities, to wit: a change in allocation of a

8. See, Agreement No, T-2423 Between the Port of Seattle, Washing-
ton & Pacific Molasses Co., FMC Docket No. 70-35, 12 $.R.R. 221,
222 (1971); Agreement No. 9431, Hong Kong Tonnage Ceiling
Agreement, 10 F.M.C. 134, 140 (1966).

9. 10 F.M.C. 409 (1967).

B-22

charge by parties to an approved section 15 agreement, did
not constitute a new agreement or modification of the

existing agreement. Cargill maintains that the present case,
except for the joint activity, is identical, merely involving the
shift of a charge from one party to another.

“Cargill further argues that the Linnekin studies establish
that benefits do accrue to the stevedores, contrary to the
Administrative Law Judge’s findings that the costs are not
reasonably shown to be related to use or benefit to steve-
dores. Cargill calls this decision erroneous, stating that it
demonstrates a complete lack of understanding of the Freas
Formula and its use. Cargill urges that the Commission
decision in Rates and Practices of the Pacific Northwest
Tidewater Elevators Ass'n’? in which the Commission at page
390 of that decision adopted the standard suggested by Mr
Linnekin that the Freas Formula (that the loading operation
begins somewhere along the shipping gallery) should be con-
trolling, and that the Administrative Law Judge rejects this
holding without explanation." " Cargill urges reversal of this
portion of the initial decision.

10. 11 F.M.C. 369 (1968).

11. Cargill surmises the reason for the Administrative Law Judge's
rejection of the “controlling rule” is that the presiding Judge ap-
parently thought that Pacific Northwest Elevators, supra, note 10,
was inconsistent with the earlier court decision in Greater Baton
Rouge Port Commission, supra, note 3. The two decisions are in no
way inconsistent, says Cargill; Greater Baton Rouge Port Com-
mission simply found that the Federal Maritime Board had juris-
diction over marine terminal elevators. in the Pacific Northwest
Elevators case, seven years later, the FMC exercised this jurisdic-

B-23

Cargill cites several “glaring errors’’ in the initial decision

and discusses them as follows:

1. The Administrative Law Judge dismissed the “‘sub-
stantial testimony” that the stevedores benefit from the high
output and rapid speed of the elevator.

2. The cost allocated to the stevedores “appears to be
duplicative of the charges to holders of warehouse receipts”’;
Cargill does not find this on the record.

3. Acost item of $933 per annum for water, toilets, tele-
phones and utilities was not susceptible to verification from
underlying data. Cargill states its witness Pederson was
available for cross-examination.

4. There are no figures to substantiate the sum of $25,000
for liaison services. Cargill states that while it furnished no
figures, it did give testimony of its liaison functions and em-
ployed full time help in this capacity.

5. Lastly, Cargill says the initial decision rejects any allo-
cation for cost for overhead to stevedores, despite testimony
of two expert accountants.

In summation, Cargill requests reversal of the initial de-
cision and dismissal of the proceeding.

Hearing Counsel fully subscribe to the Administrative Law
Judge’s ultimate conclusions, except to strike and correct
certain statements of fact!? tisting them as follows:

1) Correct certain quoted language from the lease to

12. Such facts have been corrected herein, as necessary.

B-24

conform to the specific language of Articles 7, 10 and 17 of
the lease.

2) Modify the quoted conditions imposed by Cargill as
set forth earlier in this report to read as follows? ?

The stevedore will use utmost care in his operations,

... and will provide evidence of liability insurance

coverage with limits as follows:

Employers’ liability including coverage under
Federal Longshoremen’s and Harbor Workers
Compensation Act - $100,000;

Comprehensive general liability including automobile:
(i) bodily injury - $200,000 each person;
(ii) $500,000 each accident;
(iii) property damage - $500,000 each accident.

V. REPLIES TO EXCEPTIONS

BARMA replied to Cargill’s exceptions urging that Cargill
has a monopoly in the elevator pursuant to the section 15
agreement and that any actions taken under the agreement
are subject to the agreement. BARMA then rebuts Cargill’s
reference to the “unchallenged” rule of Boston Shipping,
supra, note 9, urging that the Commission is well aware that
the Court of Appeals for the First Circuit reversed the Com-

13. The original language in the initial decision did not specifically
state the limits and categories of insurance to be provided.

B-25
mission decision,'* and that the controlling theory in this
matter is represented by Volkswagenwerk v. F.M.C."*BAR-
MA urges again that Cargill’s charges and conditions are not
justified, and provide no benefit to the stevedore, and that,
contrary to Cargill’s contention, the decision in Rates and
Practices of Pacific Northwest Tidewater Elevators Ass’n.,
supra, note 10, is erroneous and not controlling.

Cargill replied to the exceptions of BARMA and Hearing
Counsel, urging that contrary to the position of BARMA,
a terminal operator affiliated with a stevedore operating at
that terminal may impose uniform charges against all steve-
dores operating at that terminal may impose uniform charges
against all stevedores operating at the terminal. To support

14. See Port of Boston Marine Terminal Ass‘n. v. Boston Shipping
Assn., 420 F.2d 419 (1st Cir. 1970). BARMA urges, inter alia,
that this case stands for the fact that modifications of section 15
agreement as well as the original agreement need Commission ap-
proval, quoting as follows:

. . Section 15 requires that “‘modifications’’, as well as
the original agreement, receive the prior approval of
the Commission. in Boston Shipping the Commission,
without any discussion of the broad language of the act
held that where, under the already approved agreement,
there was power to fix charges, a change in incidence, as
to who was obligated to pay, was not a modification re-
quiring Section 15 filing and approval. in the light of
the strictures expressed in VW, supra, n.1, this holding
seems unsupportable. While, with some consistency, it
represented the Commission's past reading of the statute,
the Court in VW pointed to the “expansive language”’ of
Section 15 and specifically rejected the binding effect
of the Commission’s administrative construction. 390
U.S. 261, 272-73. (BARMA’s emphasis).

15. 390 U.S. 261, 19 L.Ed. 2d 1090, 88 S. Ct. 929 (1968).

B-26

this premise Cargill again cites the Stockton Elevator case,”
urging that no evil results from its relationship with Rogers,

as Rogers is also assessed the charges and such charges are

reflected in Rogers’ tariff. Cargill then refutes BARMA’s

claims of antitrust monopoly, and urges that BARMA’s

claims of economic injury are speculative and should be dis-

missed, as found by the Administrative Law Judge.

Lastly, Cargill urges that BARMA’s attack upon the Linne-
kin study is improper and in error. Cargill agrees with Hear-
ing Counsel’s factual exceptions, but disagrees with Hearing
Counsel’s statement that the errors of the Administrative
Law Judge do “not vitiate the ultimate conclusions reached
by the Presiding Officer.” Concluding its reply, Cargill urges
rejection of BARMA’s exceptions.

Hearing Counsel replied to Cargill’s and BARMA’s excep-
tions and attempted to clarify the record.

Hearing Counsel first address themselves to complainant’s
exceptions wherein BARMA urged that the Administrative
Law Judge failed to find that where a terminal operator seeks
to compete as a stevedore either by itself or through a sub-
sidiary, any charges it assesses against competing stevedores
would be unlawful per se. Hearing Counsel state that the
Administrative Law Judge addressed himself to that point
and properly decided that charges of this type need not be
prohibited solely because one party against whom such
charges of this type need not be prohibited solely because
one party against whom such charges are assessed is a wholly-
owned subsidiary of the operator of the elevator.

Hearing Counsel then review complainant's argument con-

16. See also, Pittston Stevedoring Corp. v. New Haven Terminal, inc.
13 F.M.C. 33 (1969).

B-27

cerning the Stockton case, wherein BARMA urges the Com-
mission to impose a rule to prohibit any terminal operator
with a stevedore subsidiary from assessing any compulsory
charge, for any reason. Hearing Counsel say Stockton does
not support such a conclusion.’ “In Stockton, it was the am-
biguous tariff, not the terminal operator/stevedore combina-
tion, that was the unreasonable practice.

BARMA, say Hearing Counsel, has been attempting to
show an antitrust monopoly on Cargill’s part. However, say
Hearing Counsel, no facts have been adduced to prove this
point.

17. Stockton was an elevator operator which employed Jones as its
stevedoring subcontractor. It imposed a 15 cent noncompulsory
equipment rental charge on all stevedores operating at its eleva-
tor except Jones. Stockton would bill the vessel on the basis of
a flat charge which included all service rendered, the 15 cent
charge, and its profit. in at least one instance, the 15 cent charge
was not included in Stockton’s bill to the vessel. in holding the
charge violative of section 17, the Commission said:

We agree with respondent that the employment of one
stevedoring subcontractor in preference to another or

even to the exclusion of another does not necessarily
constitute an unreasonable regulation or practice under
section 17 .. .[citation omitted]. But that is not the
question here. The issue here does not concern who is

to be respondent's subcontractor, rather it is the dif-
ference in treatment accorded by respondent to Jones,

and to itself as a stevedore, on the one hand, as compared
with the treatment of complainants on the other. This
difference in treatment results from the imposition of

the rental charge upon complainants, but not upon Jones.
Moreover, it is not imposed by respondent acting as owner
and operator of the terminal upon respondent acting in the
capacity of a stevedore, in the same manner as it is imposed
upon complainants. (Emphasis added.)

B-28

Hearing Counsel then cite Commission precedent in simi-
lar matters as follows:

1. A terminal operator is entitled to a fair return on its
investment and may make a fair and nondiscriminatory
charge for the use of its facilities, citing Stockton;

2. Such a fair and nondiscriminatory charge may be as-
sessed against stevedores, provided such a charge is reasonab-
ly related to services rendered by the terminal operator to
or for the benefit of the stevedore, Crown Steel Sales, Inc.,
et al. v. Port of Chicago, 12 F.M.C. 353, 373 (1967); and
Pittston Stevedoring Corporation v. New Haven Terminal,
Inc., supra, note 5; and,

3. No discrimination results where charges are uniformly
applied, Boston Shipping Association v. Port of Boston
Marine Terminal, supra note 9; and Terminal Charges at
Norfolk, 1 U.S.S.B.B. 357, 358 (1935).

Hearing Counsel submit that the Administrative Law Judge
properly examined the evidence and applied the foregoing
standard.

Turning its attention to Cargill’s exceptions, Hearing
Counsel state that respondent, in citing several cases, misses
the point of the decision in these cases, which, contrary to
Cargill’s interpretation, were decided on the single issue that

no agreement was presented since one of the parties in each

proceeding had withdrawn.

18. Agreement No, T-2423 Between the Port of Seattle, Washington
and Pacific Molasses Co., supra note 8; /nter-American Freight
Conference - Cargo Pooling Agreements, 14 F.M.C, 58 (1970);
and Agreement No. 9431, Hong Kong Tonnage Ceiling Agree-
ment, supra note 8.

B-29

Hearing Counsel then argue that the Administrative Law
Judge correctly determined that the charges and conditions
constituted a modification of the section 15 agreement,
which modification had not been filed with the Commission
for approval.

Hearing Counsel take issue with Cargill’s statement that it
has plenary power to deal with stevedores and others. Steve-
dores, say Hearing Counsel, are hired by the vessel and sub-
ject to the master of the vessel. Further, the Port has prom-
ulgated rules for stevedores, and it is therefore illogical to
assume that the Port was transferring “‘plenary” powers to
Cargill to deal with stevedores.

Hearing Counsel then argue that in spite of Cargill’s urg-
ings, the Administrative Law Judge distinguished the cases in

lyi h "9 rather than Pacific North-
relying upon the proper cases ~ rather than Pacific North
west, supra, note 10, and properly rejected portions of Mr.
Linnekin’s testimony. Hearing Counsel find Mr. Linnekin’s
total testimony in the proceeding to be worthless.

Lastly, Hearing Counsel specifically refute Cargill’s five
specific errors as being without merit. Hearing Counsel, in
summation, find the exceptions of both complainant and
respondent erroneous, and urge their dismissal.

VI. ISSUES

The basic issues to be resolved by the Commission are as
follows:

19. Agreement Nos. 8225 and 8225-1, supra, note 1; Greater Baton
Rouge Port Commission v. U.S., supra note 3.

B-30
Section 15

Do the charges assessed and conditions imposed by Cargill
on the stevedores as a prerequisite to loading vessels at Port
Allen as set forth in Cargill’s letters of February 10 and
December 17, 1971, constitute a modificatior of the approv-
ed lease agreement between the Port and Ca: gill?

Section 16

1. Have Cargill’s actions resulted in actual damage to
BARMA?

2. Does the relationship between Cargill/Rogers ipso facto
render the charges and conditions imposed on all stevedores
equally unlawful as unduly anticompetitive and discrimina-
tory?

3. Has unreasonable preference or privilege as contem-
plated by section 16 First of the Act been established from
the charges and conditions imposed on all stevedores, includ-

ing Cargill’s subsidiary, Rogers, although substantial compe-
titive advantage exists in the Cargill/Rogers relationship?

Section 17

1. Are the following charges and conditions reasonably
related to economic or commercial benefits to stevedores
from the use of the facilities and services provided by Car-
gill:

(a) Eight cents per ton of grain handled for services and
facilities provided by Cargill;

(b) $100.00 per hour liquidated damages for failure to

B-31

provide sufficient crews of stevedores so that the
elevator may operate at capacity ;

.c) that stevedore will use “utmost care” in his opera-
tions;

(d) that stevedore will provide evidence of adequate in-

surance liability by companies acceptable to Cargill;
and

(e) that deposits totaling $3,500.00 will be posted by the
stevedore to secure payment of access, dock cleaning

fees and liquidated damages for delays?

2. Should Cargill be ordered to cease and desist from
those actions cited under the aforementioned issue found not

to be reasonably related to economic or commercial bene-
fits to stevedores?

3. Does the failure to file with the Commission notice of
new charges and conditions imposed upon stevedores in
Cargill’s tariff result in an unjust and unreasonable practice
in violation of section 17 of the Act?

Vil. CONCLUSIONS

Section 15

It is our opinion that the Administrative Law Judge erred
in finding that the charges and conditions imposed by Car-
gill’s letters of February 10 and December 17, 1971, consti-
tuted a modification of the Commission-approved lease
agreement between Cargill and the Port. Nowhere in the
lease is there any restriction on lessee’s granted authority to

B-32

establish and maintain rates for the handling and storage of
grain, saving only (a) lessee could not assess dockage charges,
that being reserved to the lessor, and (b) the rates for storage
and handling grain must be competitive and comparable with
rates at New Orleans and other competitive Gulf ports (Art.
10 of lease - Agreement FMC 8225).?%In all other respects,
relative to rates, rules, and regulations, Cargill was as free of
restrictions as it would have been had it owned the facilities.

The lease did not require identical rates. The lease requir-
ed only “competitive” rates, and, according to the record in
this case, the fact that grain has moved and is moving in
capacity volume via Baton Rouge is persuasive evidence that
the rates are competitive. Some or all of the rates could
even be higher than rates at New Orleans and other Gulf
ports and still be “competitive” if Baton Rouge were a more
efficient elevator, for it is the aggregate costs to the mer-
chant (inclusive of speed in loading, waiting time, distance
from the Gulf, dockage, etc.) which establish whether the
rates are competitive.

What was the extent and scope of the approval given to
this lease by the Federal Maritime Board in 1959? We take
official notice of our own records relating to that approval
action.2 ‘Our examination thereof discloses there are no con-

20. Article 10 of the lease also provides in part that the rates, rules,
and regulations shall be subject “to the approval of public regu-
latory bodies having jurisdiction thereof.”

21. Swift & Company v. Federal Maritime Commission, 306 F.2d
277 at 281 (D.C. Cir. 1962).

“| The Board must be given reasonable leeway in delineating
the scope of the agrzement and therefore the extent of its prior
approve!.”’

Trans-Pacific Freight Conference of Japan v. FMC, 314 F.2d 928
(9th Cir. 1963).

B-33

ditions, restrictions,or qualifications contained in the Board’s
order approving the lease, and no record indication of Board
consideration ever having been given to imposing conditions,
restrictions, or qualifications on lessee’s plenary power over
rates, rles, and regulations. The Federal Maritime Board
having approved plenary rate authority, this Commission may
not lawfully modify, reduce, or restrict that approval without
initiating and following the notice and hearing ++ dures
established by section 15, Shipping Act, 1916, and s.ccion 9,
Administrative Procedure Act.

The lease authorized lessee to establish any competitive
rates for storing and handling grain, and that authorization
was not restricted only to those rates or charges which may
have been in effect when the lease was adopted. This was a
long-term lease and the parties used broad, expansive lang-
uage in the grant of ratemaking authority, for conditions and
needs change with passing time. To have attempted to define
every conceivable item of use or service for which lessee was
free to assess charges or to make rules and regulations in this
long-term lease would have been difficult. 2 Instead, the
drafters wisely limited themselves to identifying only those

22. An incomplete list of services, facilities, and uses made available by
port elevators as indicated by terminal tariffs on file with this
Commission (Koppel Bulk Terminal Tariff No. 1, FMC-T No. 1;
North Pacific Grain Growers, Inc., Tariff No. 3) include the
following:

Receiving (elevation) from truck, rail cars, barge
Shipping to vessels, rail cars, barges, trucks
Weighing in Weighing out Cleaning

Storage Segregation Drying

Smutting Fumigation Treating for weevil
Blending Aeration Cooling

Binning Turning Sampling and inspection
Wharfage Dockage Line handling charges
Fresh water

(Footnote 22 - continued on next page)

B-34
things which the lessee was not permitted to do.

Cargill is operating under authority granted to it by and
within the limits of the approved lease. The charges assessed
by Cargill against stevedores constitute actions taken within
the lease authority and do not constitute either a modifi-
cation of the approved agreement or independent action by
Cargill taken outside its lease authority. Thus, the charges
and conditions imposed on the stevedores by the Cargill
letters do not require further approval by the Commission
under section 15. We, therefore, reverse those fingings of the
Administrative Law Judge with respect to the section 15
issue.

Section 16

With regard to the issue of actual damages to BARMA as
a result of imposition of the new charges and conditions, we
concur with the Administrative Law Judge. No evidence of
record has been presented to show actual damage to BARMA
as a result of the new charges and conditions.

We further concur with the Administrative Law Judge in
his finding that the relationship between Cargill and Rogers
did not in and of itself render unlawful the imposition of the
charges and conditions imposed equally upon all stevedores.
The record, while indicating that a situation exists that could

(Footnote 22 - Continued from previous page)
Rental of marine leg or sucker
Rental of spreaders and other equipment
Rental to stevedores of storage and office space
Electric power to vessel
Electric power to grain spreaders
Service and facilities charge

B-35

give rise to discriminatory practices, does net indicate that
any unlawful situation does in fact exist.22 The Commission
has long recognized the legality of terminal operators also
conducting stevedoring operations. So long as the Cargill/
Rogers relationship remains at arm’s length, Rogers pays to
Cargill the same eight cents per ton charges as BARMA and
other stevedores and no competitive advantage is given
Rogers over BARMA and its members, no unreasonable pre-
ference or privilege exists that would be violative of section
16 First of the Act.24

Reasonableness of Charges and Conditions

The primary issue before the Commission in this proceed-
ing is whether the charges and conditions imposed upon the
stevedores by Cargill are just and reasonable within the mean-
ing of the second paragraph of section 17 of the Act, which
provides:

23. The record establishes that Cargill has billed and collected the
charge in question both from BARMA and from Rogers. If, in
order for Cargill to realize a fair return from capacity use of the
facilities, Cargill requires, say, $100,000 revenue per year from
the assessment on stevedores, then it is obvious that Cargill must
collect the full charge per ton no matter who does the stevedoring.
Thus, this is not a situation where Rogers will receive a competi-
tive advantage for Rogers must pay the charges in order for Cargill
to be made whole. The factual situation here is quite unlike that
which existed in California Stevedore & Ballast Co. v. Stockton
Elevators, Inc., 8 F.M.C. 97 (1964), where the port elevator failed
to assess a charge against its “house’’ stevedore but did assess the
charge against all other stevedores.

24. Ballmill Lumber v. Port of New York Authority, 11 F.M.C. 494
(1968); 12 F.M.C. 29 (1968); 13 F.M.C. 262 (1970); Chr. Sa/vesen
& Co., Ltd. v. West Mich. Dock & Market Corp., 12 F.M.C. 135,
141 (1968).

B-36

Every such carrier and every other person subject
to this Act shall establish, observe, and enforce
just and reasonable regulations and practices re-
lating to or connected with the receiving, handling,
storing or delivery of property. Whenever the
Board finds that any such regulation or prac-
tice is unjust or unreasonable, it may determine,
prescribe, and order enforced a just and reasonable
regulation or practice.

Respondents, in the epesation of their grain terminal ele-
vators, are “other persons” within the meaning of i coction 17
and as that term is defined in section 1 of the Act.”

Furthermore, the term “‘practice’’ as used in section 17 of
the Act is associated with rates and charges. 26 We will thus
discuss each charge and condition separately.

1. The service and facilities charge.

As previously discussed, this charge is to be assessed at
eight cents per ton of grain handled for services and facili-
ties provided by Cargill. Respondent contends that this
charge is based upon the benefits derived by stevedores for
use of its facilities, for which it contends it should be reim-
bursed. We accept this basic contention. The question then
is whether the practices of respondent in its determination |
and allocation of costs are reasonable. We will examine only
the factors which were used to determine the charge as to
the reasonableness of each such factor. It therefore follows

25. California v. U.S., 320 U.S. 577 (1944).
26. /ntercoastal investigation, 1935, 1 U.S.S.B.B. 400, 432 (1935).

B-37

that if any one or all such underlying factors are found to be
unreasonably related to the benefits derived therefrom by
stevedores, then the practice of assessing charges based upon
those factors is itself unreasonable.?’ This finding would not
therefore preclude respondent from assessing a charge against
stevedores based upon those supplied services and facilities
that were found to be of actual benefit to stevedores.

The basis upon which Cargill seeks to assess the eight cents
per ton charge arises under the following services and facili-
ties provided: 1) the shipping gallery; 2) the grain dock-
wharf; 3) water, toilets, telephones and utilities; 4) dock
clean-up and liaison service; 5) overhead expenses? and
6) trimming machines.”

The specific description of each of the above services and
failicites has heretofore been discussed under our review of
the Administrative Law Judge’s initial decision. We will thus
only consider the underlying costs to Cargill of each item,
the allocation of any or all of that cost to stevedores, and
the reasonableness of such an allocation based upon the
actual benefits derived by stevedores from the use or avail-
ability of that service or facility.

First, we will look at the shipping gallery. Respondent
contends that one-half of the benefits derived by use of the
shipping gallery flow to the stevedores, the other half flowing
to the cargo. Past applications of the Freas Formula to grain

27. Transamerican Trailer Transport inc., et al. v. Federal Maritime
Commission, No. 24,019, slip opin. p. 14-15 (D.C. Cir., Jan. 28,
1974).

28. By its letter of December 17, 1971, respondent advised the steve-
dores of its intention to raise the initial five cents charge (now in
effect) to eight cents thirty days after the effective date of a decis-

(Footnote continued on next page)

B-38

costs of the shipping gallery to the cargo and one-half to the
vessel. The Commission has previously approved this alloca-
tion. Rates of Pacific Northwest Tidewater Flevators
Association, supra, note 10. There, as here, Linnekin con-
tended that the cargo benefits equally from the faster loading
and greater efficiency made possible by the gallery by lower-
ing the loading expenses. We concur with this contention.
The controversy arises, however, over the allocation of the

remaining full fifty percent to the stevedores.

The normal practice followed in past Commission proceed-
ings would allocate this latter fifty percent to the vessel.
Stevedores do not benefit from the speed and efficiency of
the shipping gallery to the same extent as does either the
cargo or the vessel under past applications of the Freas For-
mula. As stated above, the cargo benefits by incurring lower
loading expenses. The vessel benefits by having to spend
fewer days in port for loading operations, thus allowing it
to transport more shiploads over a shorter period of time.
But no such benefit can be equated to stevedores. In fact,
it can be argued that the speed and efficiency of the shipping
gallery works to the detriment of stevedores, providing
shorter working hours by fewer men and therefore less rev-
enues to the stevedores. We recognize that the costs associa-
ted with the use of the shipping gallery are allocable to those
who derive an economic and commercial benefit from the use
thereof. We do not,

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Source: Frix Law Library, https://www.frixlaw.com/law-library/documents/brief%3Amicro_IA40385003_2339%3A1. Public record. Not legal advice.