Opposition Brief — American President Lines, Ltd. v. Zachry-Dillingham

Siege Gourt, U.S.

UN 2 1988

No. 87-1761 | #05 & SPNion aR,

Serena

IN THE

Supreme Canut of the United States

OCTOBER TERM, 1987

AMERICAN PRESIDENT LINES, LTD.,

Petitioner

ws

ZACHRY-DILLINGHAM, A JOINT VENTURE,

Respondent

On Writ of Certiorari to the Court of Appeals

for the Fourth Supreme Judicial District

San Antonio, Texas

BRIEF IN OPPOSITION

Of Counsel:

GROCE, LOCKE & HEBDON THOMAS H. CROFTS, JR.

A Professional Corporation 2000 Frost Bank Tower

2000 Frost Bank Tower San Antonio, Texas 78205

San Antonio, Texas 78205 (512) 225-3031

(512) 225-3031 Attorney for Respondent,

Zachry-Dillingham,

A Joint Venture

WILSON - Epes PRINTING Co., INC. - 789-O096 » WASHINGTON, D.C. 20001

QUESTIONS PRESENTED

The only questions are:

(1)

whether the Texas intermediate court incorrectly

held that the Shipping Act (including the “filed

rate doctrine’) does not preempt redress (pro-

vided by state fraud law and deceptive practice

statutes) against a carrier for inducing a shipping

commitment by knowingly misrepresenting that

the quoted rate would be made effective by filing

new tariffs with the Federal Maritime Commis-

sion; and

whether the alleged state court action is preempted

by general federal maritime law.

wee

—e

LIST OF PARTIES

1. American President Lines, Ltd.

2. Zachry-Dillingham, a Joint Venture.*

* Zachry-Dillingham, a Joint Venture, is composed of H. B.

Zachry Company, a Delaware corporation, and Dillingham Con-

struction International, Inc., a Nevada corporation.

TABLE OF CONTENTS

Page

Sob eg 650) TP fo. 4) yy 4 | ra ane , i

a BS” 5 |. , EARS a nea easels il

TABLE OF AUTHORITIES ...........0............ Seuite naan iv

STATEMENT OF JURISDICTION ...... aa 1

STATUTORY PROVISIONS INVOLVED ............... 1

STATEMENT OF THE CASE .................0...0000000000.... 2

REASONS FOR DENYING PETITION FOR WRIT

reo lla abla eaaablient eee 5

I. Redress for inducing a shipping commitment

through fraudulent and statutorily deceptive

representations that new tariffs would be filed

is properly a matter of state law not preempted

by the Shipping Act (including the ‘“‘filed rate

doctrine’) ....... De eh AR EE OL Rip Teea 5

A. Since the state law claim is not for misrep-

resentation of the “proper freight rate to be

charged,” the lower court’s decision is not

in conflict with circuit court decisions 5

B. After analyzing the criteria for determining

federal preemption, the lower court cor-

rectly concluded that Congress did not in-

tend for the Shipping Act’s tariff regulation

to preempt state law redress for the conduct

a censiasialel ae aceancieeas ; &

C. The lower court’s holding is not contrary to

decisions of this Court ............. en oe. 11

II. Zachry-Dillingham’s state action is not pre-

empted by general maritime law .......0000000000.... 15

CONCLUSION ....... Liiceaeb esi - Sibi eicieibaasanl. cup. apo 16

(iil)

iv

TABLE OF AUTHORITIES

Cases: Page

Aero Trucking, Inc. v. Regal Tube Co., 594 F.2d

619 (7th Cir. 1979) ......... ascoicaaetaee take dghiiesionescokebiadl 6, 9, 10

Arkansas Louisiana Gas Co. v. Hall, 453 U.S. 571

i). | SRD PERRO RS e sk oo SN een rE 12, 14

Askew v. American Waterways Operators, Inc.,

411 U.S. 325, 36 L.Ed.2d 280 (1973) ................. 15

Atchison, Topeka & Santa Fe Railway Co. v.

Bouziden, 307 F.2d 230 (10th Cir. 1962)........ 7

Brown v. American Transfer & Storage Co., 601

S.W.2d 931 (Tex.), cert. denied, 449 U.S. 1015

I sit sciecsccateanictassenucGostccilclin ete aahatesatacnicaieiacsseesionents 8, 9, 10

Carnation Co. v. Pacific Westbound Conference,

383 U.S. 213, 15 L.Ed.2d 709 (1966) ................ 12

Chicago and North Western Transportation Co.

v. Kalo Brick & Tile Co., 450 U.S. 311 (1981)... 12,13

Chick Kam Choo v. Exxon Corp., 817 F.2d 307

(5th Cir.), cert. granted, U.S. ——, 98

Oe I nade enemas 16

Consolidated Freightways Corp. v. Terry Tuck,

Inc., 612 F.2d 465 (9th Cir.), cert. denied, 447

ey Se ae er am acmanebbemeseenass 7

Florida Lime & Avocado Growers, Inc. v. Paul,

373 U.S. 132, 10 L.Ed.2d 248 (1963) ................. 8

Illinois Central Gulf Railroad Co. v. Golden Tri-

angle Wholesale Gas Co., 586 F.2d 588 (5th Cir.

I Taree aseaaieeaakeaenats mk emeaunenaabanemnames 7

Inter-Island Steam Navigation Co. v. Hawaii, 305

U.S. 206, 63 LE. 180 (1968) .............._........ 12

Keogh v. Chicago and Northwestern Railway

Ee Be a Os eee 12, 13

Missouri Pacific Railroad Co. v. Rutledge Oil Co.,

66s F248 G67 (Gh Cie. 1982) ............................. 7

Offshore Logistics, Inc. v. Tallentire, 477 USS.

, Me Em & Bes Ba. | Beene 16

Oil, Chem. & Atomic Workers, Int’l Union v. Mobil

Oil Corp., 426 U.S. 407, 48 L.Ed.2d 736 (1976).. 16

Paulson v. Greyhound Lines, Inc., 804 F.2d 506

Ce Cy ROP ditdieseeens PEON L RT TS eT 7

<

Vv

TABLE OF AUTHORITIES—Continued

Page

Roco Worldwide, Inc. v. Constellation Navigation,

OG FOR Dee COR Ga, BOE occ 3

Romero v. International Term. Operating Co.,

358 U.S. 354, 3 L.Ed.2d 368 (1959) ...................... 15

Silkwood v. Kerr-McGee Corp., 464 U.S. 238, 78

Ree es ED eo 8

Smith v. Baldwin, 611 S.W.2d 611 (Tex. 1980).... 9

Square D Co. v. Niagra Frontier Tariff Bureau,

Inc., 467 U.S. 409, 90 L.Ed.2d 413 (1986)........ 12, 13

United States Navigation Co. v. Cunard S.S. Co.,

284 U.S. 474, 76 L.Ed. 408 (1982) .................... 12

Woods v. Littleton, 554 S.W.2d 662 (Tex. 1977).. 9

Other Authorities:

Se a ERS rset ee ee 1

Se Mia a 1

es ee cece nc 9,13

coo UR 8 i PB ecarernenapemninee 9

Tex. Bus. & Com. Code § 17.46 (a) _......0.00..0oo 2

Tex. Bus. & Com. Code § 17.46(b) (5) (7) (9) (11)

Ce Cee) Oe date a oe 2

Tex. Bus. & Com. Code § 17.50(a) (1) (3) _...00..... 2

Tex. Bus. & Com. Code § 17.50(b) (1)-.....-...-- Z

H.R. Rep. No. 53, 98th Cong., reprinted in 1984

U.S. Code Cong. and Ad. News 183-84 _............. 11

IN THE

Supreme Court of the United States

OCTOBER TERM, 1987

AMERICAN PRESIDENT LINES, LTD..

Petitioner

v.

ZACHRY-DILLINGHAM, A JOINT VENTURE,

Respondent

On Writ of Certiorari to the Court of Appeals

for the Fourth Supreme Judicial District

San Antonio, Texas

BRIEF IN OPPOSITION

STATEMENT OF JURISDICTION

Petitioner American President Lines, Ltd. incorrectly

cited 28 U.S.C. § 1254/1) as a source of jurisdiction.

That statute concerns appeals by writ of certiorari from

federal courts of appeal. Jurisdiction is conferred, how-

ever, by 28 U.S.C. § 1257({3), which governs review of

state court decisions by writ of certiorari.

STATUTORY PROVISIONS INVOLVED

In addition to the Shipping Act of 1916, cited by Peti-

tioner, the following provisions of the Texas Deceptive

Trade Practices—Consumer Protection Act (as amended

and as in effect in 1982) are involved: Tex. Bus. & Com.

2

Code § 17.46(a); §17.46(b) (5), (7), (9), (11), (12),

(14), (19), and (23); $17.50(a)(1) and (3); § 17.50

(b) (1). These statutes are set forth in Appendix A.

STATEMENT OF THE CASE

The lower court’s opinion, which is appended to the

Petition for Writ of Certiorari, correctly describes this

summary judgment case, but Petitioner’s Statement of

the Case is inaccurate and incomplete. Contrary to Peti-

tioner’s opening paragraph, this dispute does not concern

misrepresentation of “the freight rate to be charged.”

tespondent’s pertinent liability allegation is that fraud

and statutory deception, in the form of Petitioner’s know-

ing misrepresentation that new tariffs would be filed,

induced a shipping commitment that otherwise would not

have been made. Respondent’s other claims of breach of

contract and negligence have no role in this review be-

cause the lower court resolved them in Petitioner’s favor.

For the purpose of constructing a major USAID proj-

ect, Zachry-Dillingham needed to ship heavy construction

equipment and other supplies to Colombo, Sri Lanka.

Zachry-Dillingham’s retention of a freight forwarder

(WTS of Houston, Inc.) to make rate studies led to

negotiations with Petitioner American President Lines,

Ltd. (hereafter APL). APL made oral and written rep-

resentations “guaranteeing” that, prior to the time for

shipment, APL would file with the Federal Maritime

Commission new tariffs necessary to validate the quoted

rate. Under the Shipping Act, the new tariffs would have

become effective immediately upon publication and filing.

In reliance on those representations, Zachry-Dillingham

committed its plans and schedule to ship with APL.

Timely arrival of the equipment and supplies in Sri

Lanka was critical to Zachry-Dillingham’s performance

of the USAID contract. As the shipping date approached,

_ APL informed Zachry-Dillingham that the new tariff fil-

ing had been delayed but that it would be effective “by

3

the end of the following week.” Nevertheless, APL did

not file the new tariffs before shipment or at any time.

APL demanded payment of the pre-existing tariff rate

when the shipment reached Sri Lanka, and, under pro-

test, Zachry-Dillingham paid the demand in order to meet

its construction obligation. The Federal Maritime Com-

mission’s District Director later observed that APL’s

failure to amend the tariffs did not appear to be the

result of inadvertence, noting also APL’s unwillingness

to participate in an administrative waiver proceeding

that the Shipping Act authorizes to implement inadver-

tently late-filed tariff amendments.' The Director’s deci-

sion, on which the United States District Judge partially

based the remand to state court, is set out in Appendix

B.

In its state court suit, Zachry-Dillingnam pleaded,

among other things, that it committed the arrangements

to ship with APL because of APL’s representations guar-

anteeing a new tariff filing and that APL’s misrepresenta-

tions to induce that commitment constituted fraud and

violation of specified deceptive trade practice statutes.

The Texas deceptive trade practice statutes (Appendix A)

provide a private remedy in damages for certain know-

ing deception, misrepresentations, misleading statements

concerning price reductions, false advertising and uncon-

scionable conduct.

APL’s petition for removal asserted that Zachry-

Dillingham’s action was based on federal maritime law

that was within the exclusive jurisdiction of federal

courts. In granting Zachry-Dillingham’s motion to re-

mand, the United States District Judge ruled otherwise,

emphasizing that the Federal Maritime Commission had

previously denied jurisdiction over the controversy. In

1 The opinion in Roco Worldwide, Inc. v. Constellation Navigation,

660 F.2d 992 (4th Cir. 1981), contains a practical discussion of the

utility of the Shipping Act’s 180-day post-shipment grace period

to correct inadvertent clerical error.

4

concluding that civil litigation arpeared to be the only

recourse, the Commission’s Director had noted, prior to

the initiation of Zachry-Dillingham’s suit, that there did

not appear to be a violation of the Shipping Act and that

administrative resolution was not appropriate since ‘“‘no

error or inadvertence in filing appears to have occurred

and APL is not willing to enter such a proceeding at

this time.” (Appendix B).

APL’s motion for summary judgment in state court

was based on the same argument previously urged as the

ground for removal. In reversing the trial court’s sum-

mary judgment that Zachry-Dillingham take nothing, the

Texas court of appeals held that the Shipping Act pre-

empted Zachry-Dillingham’s alternative theories of breach

of contract and negligence but not the fraud and statu-

tory counts:

The Shipping Act’s tariff filing requirements empha-

size the rights of shippers. There is no evidence of

congressional intent to grant immunity to carriers

for their fraudulent acts. The grant of immunity

from the Texas DTPA would provide carriers with a

shield whose existence is not directly related to the

accomplishment of the purpose of the tariff filing re-

quirements. Immunity from the Texas DTPA is not

necessary to the accomplishment of any congressional

objective expressed by the Shipping Act.

Both the language of the Shipping Act and its

legislative history, indicate that it was intended to

prevent unfair discrimination against shippers, not

to create a defense to unfair competition by carriers.

The Shipping Act and the Texas law are comple-

mentary. Enforcement of a tariff in circumstances

where there is collusion between a shipper and

earrier would work to the unfair detriment of the

shipper, while enforcement of the Texas law pro-

hibiting fraud and unfair business practices fosters

competition by protecting the shipper against unfair

business practices of a carrier. 739 S.W.2d 420, 423

5

(Tex. App. San Antonio 1987, writ den’d) (Pe-

tition Appendix 7a).

There is neither claim nor indication that Zachry-

Dillingham’s suit is in furtherance of collusion or a

scheme to consummate a rebate of the pre-existing tariff

charges.

APL repeatedly characterizes this case as a dispute

over the “rate to be charged.” That is not the case at

all. During negotiations all parties were aware of the

pre-existing tariffs; the dispute is over fraudulent state-

ments that new tariffs would be filed. Moreover, since

APL did not file the new tariffs, Zachry-Dillingham does

not contest its obligation under the “rate filed doctrine”

to pay for shipping at the pre-existing rate. This dispute

eenters on Zachry-Dillingham’s claim that APL’s fraud

and deception, based on APL’s guarantee that new tariffs

would be filed, caused Zachry-Dillingham to commit to a

detrimental shipping situation that, but for the fraud

and deception, it would not have done.

REASONS FOR DENYING PETITION

FOR WRIT OF CERTIORARI

I. Redress for inducing a shipping commitment through

fraudulent and statutorily deceptive representations

that new tariffs would be filed is properly a matter of

state law not preempted by the Shipping Act (includ-

ing the “filed rate doctrine”)

A. Since the state law claim is not for misrepresenta-

tion of the “proper freight rate to be charged,”

the lower court’s decision is not in conflict with cir-

cuit court decisions.

APL’s unwillingness to acknowledge the controlling

feature of Zachry-Dillingham’s claim leads to APL’s mis-

placed reliance on purported conflict that does not exist.

As the lower court wrote:

6

Plaintiff [Zachry-Dillingham] alleged that defendant

was guilty of common law fraud by inducing plain-

tiff to enter into the shipping contract through false

representation that (1) it would file new tariffs... .

Plaintiff also alleged that defendant’s misrepresenta-

tions constituted a violation of . . . the Texas Decep-

tive Trade Practices Act. 739 S.W.2d 420, 421 (Tex.

App.—San Antonio 1987, writ den’d) (Petition Ap-

pendix 3a).

The state law claim in question is obviously not based on

mere variance between a quoted “rate to be charged” and

applicable tariffs. On the other hand, APL’s circuit court

decisions (Interstate Commerce Act cases) concerned mis-

representations of the “rate to be charged,” which were

equivalent to representations that existing tariffs were

something other than what they actually were. Because

of that paramount distinction, APL’s suggestion that a

conflict needs resolution has no validity.

In the case cited for direct conflict, Aero Trucking,

Inc. v. Regal Tube Co., 594 F.2d 619 (7th Cir. 1979),

a shipper defended a carrier’s suit to collect freight deten-

tion tariffs, contending that the carrier should be estop-

ped for having induced the transaction with a fraudulent

representation that such charges would not be made. 7d.

at 621. The court properly rejected the defensive conten-

tion for the reason indicated in APL’s Petition:

The short answer to this contention is, as it is in

all undercharge cases, that the applicable tariffs are

by law incorporated into the contract between ship-

per and carrier. Since the shipper is presumed to

have knowledge of the applicable tariff rates, Regal

cannot rely on Aero’s statement that no detention

charges would be assessed.

594 F.2d at 622. The essence of Aero Trucking, like the

other circuit court decisions clustered on page 6 of APL’s

Petition, is that the “filed rate doctrine” carries with it

constructive knowledge of ‘and implied agreement to pay

7

in accordance with) tariffs effective at the time of ship-

ping—regardless of the price the carrier represented and

regardless of whether the shipper had actual knowledge

of filed tariffs.2 Clearly, Congress’ intent to_establish a

predictable, non-discriminatory uniform rate structure

could never be accomplished if the effective tariff were

subject to avoidance at the will of a carrier. Thus, al-

though the results are consistently recognized to be harsh,

these circuit courts correctly concluded that enforcement

of effective tariffs cannot be defeated (on theories of

fraud, estoppel, breach of contract or anything else) by

carrier misconduct in representing that the shipping

costs would be measured on some basis other than filed

tariffs.

The present case is a world apart. Unlike the others,

Zachry-Dillingham does not contend that the transaction

was induced by representations that non-tariff rates

would govern and does not seek to avoid the obligation

imposed by filed tariffs, of which it had not only con-

structive but also actual knowledge. The consequence of

APL’s existing tariffs was the very focus of Zachry-

Dillingham’s negotiations with APL, and, indeed, it was

misrepresentations that those tariffs would be changed

that gave rise to this controversy. None of the decisions

2 Four of the circuit cases cited on page 6 of APL’s Petition

(for supposed indirect conflict) involved similar unsuccessful at-

tempts to defend a carrier’s suit to collect ‘tariffs: Illinois Central

Gulf Railroad Co. v. Golden Triangle Wholesale Gas Co., 586 F.2d

588 (5th Cir. 1978); Missouri Pacific Railroad Co. v. Rutledge Oil

Co., 669 F.2d 557 (8th Cir. 1982); Consolidated Freightways Corp.

v. Terry Tuck, Inc., 612 F.2d 465 (9th Cir.), cert. denied, 447 U.S.

907 (1980); Atchison, Topeka & Santa Fe Railway Co. v. Bouziden,

307 F.2d 230 (10th Cir. 1962). The fifth, Paulson v. Greyhound

Lines, Inc., 804 F.2d 506 (8th Cir. 1986), involved a shipper’s suit

for damages resulting from late delivery, in which the shipper

contended that the transaction was induced by the carrier’s guaran-

tee of delivery within a time certain. Paulson lost because Grey-

hound’s published tariff forebade time-of-delivery guarantees.

Zachry-Dillingham has no quarrel with the inapposite holdings for

which those decisions are cited by APL.

8

offered by APL precludes application of state consumer

law to protect against misrepresentations that existing

tariffs would be amended and to remedy the effect of

being bound to a shipping commitment that, but for that

kind of fraudulent conduct, would not have occurred. It

is one thing to say that a filed tariff sets the exclusive

shipping charge, but quite another to say that the exclu-

sivity of tariff charges can be used successfully as both

a sword of fraud and a shield from responsibility. This

is the precise reasoning of the Texas court of appeals

against whom the writ is sought.

B. After analyzing the criteria for determining fed-

eral preemption, the lower court correctly concluded

that Congress did not intend for the Shipping Act’s

tariff regulation to preempt state law redress for

the conduct in question.

This Court has held that, in the absence of congres-

sional declaration of preemptive intent, state law is pre-

empted only when Congress indicates an intent to occupy

a given field or when state law actually conflicts with

federal law. Silkwood v. Kerr-McGee Corp., 464 U.S.

238, 78 L. Ed. 2d 448, 452 (1984). Preemption to the

extent of conflict arises when compliance with both state

and federal laws is a “physical impossibility” or when

the state law “stands as an obstacle to the accomplish-

ment and execution of the full purposes and objectives

of Congress.” See Florida Lime & Avocado Growers,

Inc. v. Paul, 373 U.S. 132, 10 L. Ed. 2d 248, 256-57

(1963). This Court has applied a strong presumption

against federal preemption, particularly when the state

is exercising its police power through the legislation in

question. See id. at 256. Because the Texas deceptive

trade practice statutes represent an exercise of state

police powers, the strong presumption applies in this

ease. See Brown v. American Transfer & Storage Co.,

9

601 S.W.2d 931, 938 (Tex.), cert. denied, 449 U.S. 1015

(1980) .°

It is undisputed that the Shipping Act does not ex-

pressly preempt state law. Moreover, there is no lan-

guage in the Shipping Act remotely indicative of a con-

gressional intent to prohibit Texas from exercising police

power to protect its citizens against the kind of fraud

and deception allegedly perpetrated by APL. As the

lower court correctly reasoned, the overriding emphasis

of the Shipping Act is on the contractual responsibilities

and liabilities of carriers and shippers, particularly the

relationship between filed tariffs and charges for trans-

porting property and persons by water. Decisions like Aero

Trucking, supra, may properly rest on Congress’ creation

of uniform rules to govern the tariff-charge relation-

ship, but the Shipping Act evinces no intent to eliminate

state law recourse for fraud of another realm, that is,

fraud that does not adversely impact the exclusivity of

tariff-filed charges. See 46 U.S.C. §§ 801, 812-17. In an

analogous setting, the Supreme Court of Texas held that

the Carmack Amendment to the Interstate Commerce

Act did not preempt the deceptive practice statutes with

respect to misrepresentations occurring before formation

of the shipping contract. See Brown v. American Trans-

fer & Storage Co., supra, at 938.

3 The broad purpose of these statutes is to provide consumers

with protection from deceptive, false, misleading business practices

including unconscionable actions and breach of warranty. See Tex.

Bus. & Com. Code Ann. § 17.44 (Vernon 1987). In addition, the

Texas Legislature sought “to provide consumers [with] a cause of

action for deceptive trade practices without the burden of proof

and numerous defenses encountered in a common-law fraud or

breach of warranty suit. (Citations omitted).” Smith v. Baldwin,

611 S.W.2d 611, 616 (Tex. 1980). Furthermore, the possibility of

additional damages for a knowing violation of the statutes creates

an incentive for individual consumers to seek redress for deceptive

practices and also acts as a deterrent to such conduct. See Woods

v. Littleton, 554 S.W.2d 662, 670-71 (Tex. 1977).

as

10

Other than imposing penalties for providing discrimi-

natory services at less than the tariff rate, the Shipping

Act does not purport to regulate the general liability of

a common carrier such as APL. See 46 U.S.C. $§ 801,

812, 814-17. There is nothing in the Shipping Act or in

the decisions construing it suggesting that uniformity was

sought with respect to legal liability for fraud and decep-

tive practice preliminary to the function of the tariff-

charge relationship. Cf. Brown, supra, at 938. Unlike

the Aero Trucking situation, state law liability for the

fraudulent and deceptive conduct alleged against APL

would not intrude upon any goal or purpose of the Ship-

ping Act. Specifically, if Zachry-Dillingham prevails in

its state action, the Shipping Act’s tariff-charge rela-

tionship would remain inviolate, but protection left to

the police powers of the states would be afforded. For

those reasons, both the federal district court and the

Federal Maritime Commission refused to exercise juris-

diction over this controversy.

Nowhere does Texas remedial law purport to regulate

the shipping industry or the rates to be charged for

shipping goods. Texas law is implicated in the relation-

ship between a shipper and a carrier only if one of the

parties engages in conduct that would be actionable on

the part of anyone else similarly situated. Contrary to

APL’s thinly-veiled assertion on page 12 of its Petition,

liability under the statutes would not effectively “re-

quire a carrier to charge a rate different from the rate

in the published tariff: .. .” The statutes merely prevent

deceptive or unconscionable conduct from unjustly enrich-

ing a carrier or anyone else. In this respect, the stat-

utes foster, rather than conflict with, the aim of the

Shipping Act to:

enable American carriers and shippers to conduct in-

ternational ocean commerce transportation in a

stable, efficient and competitive manner within a fair

trade environment in which malpractices can be

found and punished.

11

H.R. Rep. No. 53, 98th Cong., reprinted in 1984 USS.

Code Cong. and Ad. News 183-84. It is thus certainly

clear that Texas law sought to be implemented here does

not frustrate Congress’ purpose in enacting the Shipping

Act. It would not be impossible for a carrier to comply

with both Texas law and the Shipping Act’s tariff-filing

system. In this instance, APL could have either re-

frained from representing that new tariffs would be filed

or filed the new tariffs as promised.

APL’s position is so grossly inequitable and overreach-

ing that it cannot possibly represent congressional intent.

According to APL, the actually filed tariff is the end-all

point for any discussion of the legal relationship between

a shipper and a carrier. Under its theory, a carrier has

carte blanche to misrepresent that a new tariff will be

filed to match a rate quotation better than competitors’

tariffs. After obtaining business in a fraudulent manner,

a carrier is supposedly fully protected by the Shipping

Act from state law liability even though it lifted no

finger to file the new tariff. In essence, APL argues that

Congress has bestowed upon carriers an absolute im-

munity to fraudulently induce contracts because nothing

in the Shipping Act prevents it or punishes for its ac-

complishment. Contrary to APL’s thesis, the Shipping

Act does not preempt private remedy for this kind of

fraud, and the states may impose liability for it against

a carrier just as they can against everyone else. The

Texas court of appeals correctly and forcefully rejected

APL’s “immunity” arguments.

C. The lower court’s holding is not contrary to deci-

sions of this Court.

APL’s “filed rate doctrine” argument is fragmented in

parts I and III of the Petition, both of which mention

decisions of this Court said to be dispositive on the same

subject. In this section of its brief, Zachry-Dillingham

will dispel APL’s notion that the following decisions of

12

this Court compel a contrary result: Keogh v. Chicago

and Northwestern Railway Co., 260 U.S. 156, 163

(1922); Square D Co. v. Niagra Frontier Tariff Bu-

reau, Inc., 467 U.S. 409, 90 L.Ed.2d 413 (1986);

Chicago and North Western Transportation Co. v. Kalo

Brick & Tile Co., 450 U.S. 311 (1981); Arkansas Louisi-

ana Gas Co. v. Hall, 453 U.S. 571 (1981).

Emphasizing that the Shipping Act was modeled after

the Interstate Commerce Act, this Court held that “Con-

gress intended that the two Acts, each in its own field,

should have like interpretation, application and effect.”

United States Navigation Co. v. Cunard S.S. Co., 284

U.S. 474, 76 L. Ed. 408, 412 (1932), quoted in Inter-

Island Steam Navigation Co. v. Hawaii, 305 U.S. 306, 83

L. Ed. 189, 194 (1938) (Shipping Act did not preempt

Hawaiian regulation imposing fee on common carrier by

water). On that basis, APL contends in Parts I and III

of its Petition that this Court’s Interstate Commerce Act

decisions in Keogh v. Chicago and Northwestern Railway

Co., supra, and Square-D Co. v. Niagra Frontier Tariff

Bureau, Ine., supra, demonstrate federal preemption for

the fraud and deception made the basis of Zachry-

Dillingham’s state action. APL is wrong.

The issues posed in Square D were whether Keogh

precluded anti-trust penalty damages and, if so, whether

the preclusion should remain viable. 7d. at 420. In an-

swering affirmative to both questions, the Court charac-

terized Keogh as establishing an anti-trust no-injury

rule based on the Interstate Commerce Commission’s ap-

proval of the tariffs in question, rather than a rule of

preemptive immunity from federal anti-trust laws. See

id. at 422, 425. In Square D, the Court retained the

Keogh rule because Congress had reenacted the appli-

cable laws without change subsequent to the Keogh in-

terpretation. Jd. at 425. Recognizing the narrow appli-

cation of the Keogh rule, the court impliedly reaffirmed

Carnation Co. v. Pacific Westbound Conference, 383 U.S.

—_———— ee

13

213, 15 L.Ed.2d 709 (1966), noting that, in the absence

of Commission rate approval, “rate making activities are

not immunized from antitrust scrutiny simply because

they occur in a regulated industry.” Jd. at 425.

APL couches its argument on the following excerpt

from Keogh: “the rights as defined by the tariff can-

not be varied or enlarged by either contract or tort of

the carrier.” See Petition at 5. Aside from the limited

imprimatur given Keogh in Square D, the simple fact

of the matter is that Zachry-Dillingham’s state court ac-

tion does not seek to enlarge rights defined by the tariff.

Moreover, differences between the Interstate Commerce

Act and the Shipping Act make clear that the Keogh

rationale does not apply here. The Federal Maritime

Commission does not establish just and reasonable rates.

See 46 U.S.C. $$ 815-17. In Square D, this Court noted:

Indeed, the Shipping Act gives the Federal Maritime

Commission far more limited authority over rates

than the Interstate Commerce Act gives the Inter-

state Commerce Commission. See 760 F.2d, at 1863

- (“Although the [Federal Maritime Commission] can

and does take effects on competition into account in

approving conference agreements under 46 U.S.C.

§ 814 [46 U.S.C.S. § 814], . .. the Shipping Act

does not give the Commission any mandate to regu-

late rate competition and, indeed, the statutory

scheme was designed to minimize the role of the

FMC in this regard”’).

Td. at 425 (n.29).

This court’s decision in Chicago & North Western

Transportation Co. v. Kalo Brick & Tile Co., supra, in-

volved a tort action for damages caused by cessation of

rail service. See id. at 264. That common law action was

held preempted because not only had the Interstate Com-

merce Commission approved the cessation, but the ICC

had already considered every issue being raised in the

state court action. See id. at 270-71. Thus, not only was

14

cessation specifically regulated by federal law, but also

it had actually been litigated by a federal administra-

tive agency. See id. at 270. Here, there is no such specific

regulation, and not only did the Federal Maritime Com-

mission expressly decline to exercise jurisdiction, but the

Federal District Judge ruled that Zachry-Dillingham’s

suit did not belong in federal court.

Arkansas Louisiana Gas Co. v. Hall, supra, is a Fed-

eral Energy Regulatory Commission case. In a state

breach of contract suit, a seller of gas sought to enforce

contractual payment of sums at odds with its own tariffs.

This Court held that the state law “breach of contract”

action was preempted by the Commission’s authority over

rates through tariff-filing requirements. That decision

does not undermine the validity of the lower court’s opin-

ion in the present case, because the lower court similarly

ruled that Zachry-Dillingham’s breach of contract action

was preempted by the Shipping Act.

APL apparently relies on Hall because this Court dis-

missed as a factor the seller’s contention that the pur-

chaser’s fraudulent failure to disclose other purchases

prevented the seller from obtaining a higher permissible

rate. Again, difference in the roles of the two Com-

missions is critical. In Hall, this Court rejected the pur-

chaser’s non-disclosure as a factor partly because whether

the Federal Energy Regulatory Commission would have

approved a higher rate was purely a matter of specula-

tion. Important to that decision was the Court’s recogni-

tion that the Commission had the right to fix rates when

new schedules are proposed by the regulated party. See

id. at 863. There is no comparable provision in the Ship-

ping Act; in fact, the new tariffs promised by APL would

have been effective upon filing. Since Zachry-Dillingham’s

action is based on the regulated party’s fraud and decep-

tion in not filing new tariffs, the facts are so far removed

from those in Hall that the fraud question reserved in

Hall is clearly not presented by this case.

he ereeeeennnenieeniieuiaial

15

II. Zachry-Dillingham’s state action is not preempted by

general maritime law.

In the lower courts, APL never identified the manner

in which the Texas law in question excessively burdens

or irreconcilably conflicts with maritime law. In es-

sence, APL’s motion for summary judgment and appel-

late briefs globally invoked “maritime law” and “ad-

miralty jurisdiction” as creating absolute bars. APL’s

argument in its Petition is but a shade or phase of the

“filed rate doctrine.”

APL’s position is contrary to decades of Supreme

Court decisions. “To claim that all enforced rights to

matters maritime are rooted in federal law is a destruc-

tive over-simplification of the highly intricate interplay

of the States and National Government in their regula-

tion of maritime commerce.” Romero v. International

Term. Operating Co., 358 U.S. 354, 3 L.Ed.2d 368

(1959). There are very few areas where federal and

state regulation overlap more than in maritime matters.

States have been permitted to use police powers to enact

laws on virtually every aspect of maritime laws. See id.

at 383.

Accordingly, it is well established that states may en-

act laws, pursuant to police powers, on a “wide-scope”

of maritime matters without impermissibly intruding

upon federal regulation of admiralty or maritime mat-

ters. See Askew v. American Waterways Operators, Inc.,

411 U.S. 325, 36 L.Ed.2d 280, 289 (1973); Romero,

supra at 382. When discussing the narrow preemptive

effect of maritime Jaw, Justice Potter Stewart once

stated:

It is unnecessary here to delineate the “wide scope”

within which the States may legislate about things

maritime. To refute the notion that the high seas

are a species of federal enclave, it is sufficient to point

out that the Court has found state legislation pre-

empted only when the nature of the problem required

the application of a uniform rule or when the state

law unduly hampered maritime commerce. ... The

Court has never struck down a state law on the

16

ground that the States are jurisdictionally incum-

petent to legislate over matters that occur within

the ocean “territory.” (Citations omitted) (emphasis

by Justice Stewart).

Oil, Chem. & Atomic Workers, Int’l Union v. Mobil Oil

Corp., 426 U.S. 407, 48 L.Ed.2d 736, 755 (1976)

(Stewart, J. dissenting).

APL’s reliance on Offshore Logistics, Inc. v. Tallentire,

477 U.S. 207, 91 L.Ed.2d 174 (1986) is not at all

persuasive. The holding in Tallentire was based on de-

tailed expression of congressional intent, contained in the

Death on the High Seas Act, to occupy the field of litiga-

tion over wrongful death on the high seas. There is noth-

ing comparable in the Shipping Act, and APL points to

no other maritime law requiring a “uniform” resolution

of this dispute. The question pending in Chick Kam Choo

v. Exxon Corp., No. 87-505, appears to involve an obvious

clash between a well-defined rule of maritime forum non

conveniens and a state open-forum statute. See Chick

Kam Choo v. Exxon Corp., 817 F.2d 307 (5th Cir.), cert.

granted, USS. , 48 L.Ed.2d 369 (1987). With

respect to the present case, there are no laws in conflict.

CONCLUSION

APL’s Petition for Writ of Certiorari should be de-

nied. The Texas court of appeals did not err in holding

that redress for the conduct in question is not preempted

by the Shipping Act or maritime law. The lower court’s

decision is clearly not contrary to the rulings of this

Court. Respectfully submitted,

Of Counsel:

GROCE, LOCKE & HEBDON THOMAS H. CRoFTs, JR.

A Professional Corporation 2000 Frost Bank Tower

2000 Frost Bank Tower San Antonio, Texas 78205

San Antonio, Texas 78205 (512) 225-3031

(512) 225-3031 Attorney for Respondent,

Zachry-Dillingham,

A Joint Venture

la

APPENDIX A

TEXAS BUSINESS AND COMMERCE CODE

§ 17.46. Deceptive Trade Practices Unlawful

(a) False, misleading, or deceptive acts or practices

in the conduct of any trade or commerce are hereby de-

clared unlawful and are subject to action by the con-

sumer protection division under Sections 17.47, 17.58,

17.60, and 17.61 of this code.

(b) Except as provided in Subsection (d) of this sec-

tion, the term “false, misleading, or deceptive acts or

practices” includes, but is not limited to, the following

acts: ...

(5) representing that goods or services have

sponsorship, approval, characteristics, ingredients,

uses, benefits, or quantities which they do not have

or that a person has a sponsorship, approval, status,

affiliation, or connection which he does not;...

(7) representing that goods or services are of a

particular standard, quality, or grade, or that goods

are of a particular style or model, if they are of

another;...

(9) advertising goods or services with intent not

to sell them as advertised; ...

(11) making false or misleading statements of

fact concerning the reasons for, existence of, or

amount of price reductions;

(12) representing that an agreement confers or

involves rights, remedies, or obligations which it

does not have or involve, or which are prohibited by

law;...

(14) misrepresenting the authority of a salesman,

representative or agent to negotiate the final terms

of a consumer transaction;...

2a

(19) representing that a guarantee or warranty

confers or involves rights or remedies which it does

not have or involve, provided, however, that nothing

in this subchapter shall be construed to expand the

implied warranty of merchantability as defined in

Sections 2.314 through 2.318 of the Business & Com-

merce Code to involve obligations in excess of those

which are appropriate to the goods;...

(23) the failure to disclose information concern-

ing goods or services which was known at the time

of the transaction if such failure to disclose such

information was intended to induce the consumer

into a transaction into which the consumer would not

have entered had the information been disclosed; .. .

$17.50. Relief for Consumers

(a) A consumer may maintain an action where any

of the following constitute a producing cause of actual

damages:

(1) the use or employment by any person of a

false, misleading, or deceptive act or practice that

is specifically enumerated in a subdivision of Subsec-

tion (b) of Section 17.46 of this subchapter; .. .

(3) any unconscionable action or course of action

by any person;...

(b) In a suit filed under this section, each consumer

who prevails may obtain:

(1) the amount of actual damages found by the

trier of fact. In addition the court shall award two

times that portion of the actual damages that does

not exceed $1,000. If the trier of fact finds that the

conduct of the defendant was committed knowingly,

the trier of fact may award not more than three

times the amount of actual damages in excess of

$1,000;...

3a

APPENDIX B

FEDERAL MARITIME COMMISSION

P.O. Box 30550

New Orleans, La. 70190

GULF DISTRICT

January 31, 1983

In Reply

Refer To: 73-INC-1-174

Mr. Jim Shaw

WTS of Houston, Inc.

2050 North Loop West, Suite 100

Houston, Texas 77018

Dear Mr. Shaw:

After review of the correspondence you furnished, it ap-

pears that the basic dispute between WTS of Houston,

Ine. and American President Lines (APL) seems to fall

upon a lack of clear communication between the for-

warder and carrier.

Inasmuch as we would like to be of assistance in this

matter there does not appear to be a violation of the

Shipping Act, 1916 on which a formal complaint might

be successfully lodged. Nor does there appear to be re-

course available under CFR 502.91 et seg. for special

docket application since no error or inadvertence in filing

appears to have occurred and -APL is not willing to

enter such a proceeding at this time. The only recourse

apparently available is through civil suit for resolution

of this dispute.

We regret we cannot be of further assistance in this

matter, however if you have any further questions, please

contact Gulf District Investigator Jules Johnson at (504)

589-6662.

Sincerely,

GEORGE B. HARRY

Director, Gulf District