Opposition Brief — United States v. Williams

etd: a aS On oc a2w

Office-Supreme Cour, U.

BLLED

JUN 21 155)

RLES Eibios<

OCTOBER TERM, 1951

Ne 134

' 3 A/S J. LUDWIG MOWINCKELS REDERI et ai.

<1 ppellants

ISBRANDTSEN CO., INC.

Appellee

FEDERAL MARITIME BOARD ann UNITED STATES

DEPARTMENT OF AGRICULTURE

Intervenors

BRIEF OF A/S J. LUDWIG MOWINCKELS REDERI, ET AL.,

FILED UNDER RULE 7(3) IN OPPOSITION TO APPELLEE'S

MOTION TO DISMISS OR AFFIRM

ROSCOE H. HUPPER

* BURTON H. WHITE

Counsel for Carrier Appellants

27 William Street

New York City.

Dated: June 21, 1951.

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INDEX

Table of Cases

PAGE

Alabama Great Southern Railroad Co. v. United

PEMEGE. Det We ee RO bs ein ea ceca y) ka eestoeeeas 8

Atlantic & Gulf/West Coast etc. v. United States, 94

EG AO ond Coa 60 rab se iedes hence en 6

Florida v. United States, 282 U.S. 194 ............. 8

Inre Electric Bond & Share Co., 95 F. Supp. 492..... 6

National Labor Relations Board v. Denver etc., 19

De: Te OR A fk ea aks eee ate eee as 10

Niagara Hudson Corp. v. Leventritt, 340 U.S. 336. . 8

North Carolina v. United States, 325 U.S. 507 ...... 4

Radio Corporation of America, et al. v. United States,

RR WME 6 snes Pe Sedad howdribackanes 8

Swayne & Hoyt, Ltd. v. United States, 300 U.S. 297.. 7

United States v. Pierce Auto Lines, 327 U.S. 515.... 9

U.S. Nav. Co. v. Cunard S.S. Co., 284 U.S. 474...... 7

Universal Camera Corp. v. N. L. R. B., 340 U.S. 474.. 8,9

Table of Statutes, etc.

Shipping Act, 1916, 46 U. S. Code Sees. 801 et seq. .. 2, 3,5

Section 15, 46 U. S. Code, Sec. 814............. 3,7

Alexander Committee Report, H. R. Doe. 805, 63rd

Commneda, Boned TONG 6 oc 5s ns ccc inensccwenes 6

Merchant Marine Study and Investigation, Senate

Report 2494, 81st Congress, Second Session...... 6

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ae

eae ete

:

Supreme Court of the United States

OCTOBER TERM 1951

A/S J. Lupwie MowrncKkE ts Repert, Buack DiamMonp STEaM-

sHip CorPoraTiION, COMPAGNIE GENERALE TRANSATLANTIQUE,

ComraGNig Maritime BetGe, Cunarp Wuite Star, Ltp.,

DAMPSKIBSSELSKABET AF 1912 A/S, A/S DampskIBSSEL-

SKABET SveENDBORG, N.V. NEDERLANDSCH-AMERIKAANSCHE

StroomvaartT-Maatscuappis, Unirep States Lines Com-

PANY, WATERMAN STEAMSHIP CoRPORATION, KLLERMAN’S

Wuson Liye, Liv., and Soutn AtLantic STEAMSHIP LINE

Inc., as members of NortH ATLANTIC CONTINENTAL

Freignt ConreRENCE, and/or ConTINENTAL NortH AtT-

Lantic WrestBounp FREIGHT CONFERENCE,

Appellants,

v.

IsBRANDTSEN Co., INc.,

Appellee,

FeperaL Maritime Boarp and Unitep States DEPARTMENT

oF AGRICULTURE,

Intervenors.

Brief of A/S J. Ludwig Mowinckels Rederi, et al., Filed

under Rule 7(3) in Opposition to Appellee’s

Motion to Dismiss or

Appellee’s motion fails to evaluate the true situation

presented by the appeal papers, and is otherwise ill-con-

ceived. Its counsel recognizes that the Statutory Court

declined to decide the only question tendered by the com-

plaint—whether the Maritime Commission (now Federal

Maritime Board) had power under See. 15 of the Shipping

Act 1916 to approve the Conference agreements authorizing

use of the contract rate system. Nevertheless appellee is

content to avail of the confusion caused by the Court’s

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2

holding (on a volunteered substituted issue) that the rate

differential was ‘‘arbitrary’’ and therefore unjustly dis-

criminatory.

This is not a rate ease, and appellee is not a shipper.

Appellee is only a competing carrier, choosing not to exer-

cise its right to Conference membership, and indulging now

in a collateral attack on a determination made December 1,

1950 by the Federal Maritime Board under general pro-

visions of the Shipping Act. Said decision does not focus

on a mere difference in rates—but directs itself to the

broad provisions of that Act as they concern propriety

of the so-called contract rate system, which its decision

upheld.

Converting the case into a rate matter instead of dis-

posing of the broad issues tendered by the complaint as-

suredly cannot be satisfactory or beneficial to appellee in

the long run any more than to appellants. We also doubt

that the decision of the Statutory Court can be satisfactory

to the Department of Justice inasmuch as it is scarcely

supportable on any ground mentioned therein. If the

level of the rates (i.e., spread between contract and non-

contract rates) had been an issue, the matter would not

have been for determination by a Statutory Court, but

rather by the administrative body in the first instance, at

least.

Counsel for the Maritime Board moved the Court to

remand the ease to the Board so that the matter might be

dealt with further there if any further action were deemed

necessary. Appellants did not object to this procedure, but

while doubting its necessity nevertheless concurred in the

same if deemed necessary. The Statutory Court refused

the Board’s request.

The Department of Justice is further interested in the

subject-matter in a suit brought by it in the District Court

for New Jersey against members of the Far Kast Confer-

ence. In that litigation a petition for certiorari has been

‘ Dit ana RE is ay) eR

ia -—

2 Soe Foe Wg Sas

filed in this Court by those defendants under the title Far

East Conference, et al. v. United States and Federal Mari-

time Board, Docket , October Term 1951.

3

We believe that this matter, so important to the shipping

interests of this country and other countries in interna-

tional commerce, ought now to be reviewed by this Court

in the interest of all concerned.

Without denying the broad and important economie and

commercial effects of the Statutory Court’s decision, appel-

lee is for the moment content, and urges that it was merely

‘fa conventional application of the principles governing

judicial review of administrative action’’, leading to a sug-

gestion that the questions now presented are insubstan-

tial—this after a hard-fought litigation before the Court

and the Commission (Board) extending from the end of

October 1948.

The requirements of substantial justice in administra-

tive law cannot be so lightly put aside nor be satisfied by

mere formalism or dictionary definition. The spread be-

tween the contract and non-contract rate was known to be

‘“‘arbitrary’’ i.e. a discretionary difference, before the Court

referred the case to the Commission. The Court’s distor-

tion of one of the Board’s findings of faet (which, it cor-

rectly found, related to the method by which the rates were

determined) into a wholly unwarranted conclusion of legal

effect does not fit into appellee’s description. To the con-

trary, such approach would permit reviewing courts to

substitute their own views and draw their own conclusions

on matters requiring expert and technical treatment by

agencies charged with the responsibility of carrying out |

broad objectives of Congress—particularly broad as con- |

cerns our foreign maritime trade. |

PFE BL PAPI AE MONLY TON

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a

Appellee’s motion indicates that the finding in question

(‘‘arbitrary’’) related to the method by which the rates

were ‘‘constructed’’ or arrived at, rather than to their

effect. But the Shipping Act, 1916, concerns itself with

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So AL SR TEE OAPI SE lah RERTT NS A eR te AP AN al hE a a ape

4

effects and consequences. The question before the Mari-

time Commission, the Federal Maritime Board, and the

District Court was whether the proposed contract-rate

system—whatever the differential might be and however

arrived at—was violative of the standards set forth in the

Act, that is, whether it was unjustly discriminatory, retalia-

tory or detrimental to the commerce of the United States.

In evaluating the numerous factors which lie behind these

broad eriteria, both the Trial Examiner and the Board

found in favor of the defendant carriers’ position and

against the contentions of appellee.

Viewed as relating to method rather than as a conelu-

sion of legal or economic effect, the Examiner’s finding is

in no way inconsistent with his conclusions or those of the

Board. From the outset both the Examiner and the Board

were aware that the differential was ‘‘arbitrarily’’ fixed

in the sense that it represented a fixed percentage of the

base rate. Yet this fact alone could not have justified a

conclusion of unlawfulness. That same percentage had

been used for many vears. The responsibility entrusted

to the Board by Congress carries with it the duty of evaluat-

ing the economic consequences of such a rate differential

upon our merchant marine and foreign commerce. This

the District Court recognized when it originally remanded

the appellee to the Maritime Commission and the Commis-

sion, in turn, acknowledged its responsibility by conducting

a thorough investigation into all aspects of the subject.

Indeed, had the ageney failed to take the broad statutory

criteria into account in reaching its ultimate conclusions,

its order would have failed to conform to well settled law.

North Carolina v. United States, 325 U.S. 507, 512, 514-15.

Both the Examiner and the Board understood (appar-

ently the Court did not) that all ocean freight rates are in

fact and of necessity ‘‘arbitrary’’ in that they cannot be

computed on the basis of detailed and specified cost factors

distributed as to individual commodities, but are rather

fixed at such practical levels as will permit cargoes to

5)

move and vessels to operate. Ocean rates are almost as

fluid as the sea itself. The Examiner and the Board also

understood that under the system of absolute and unlimited

competition advocated by appellee the rate-making process

would become even more ‘‘arbitrary’’. The long and hard

history of the steamship industry plainly demonstrates

that in rate wars operating costs lose their significance.*

As already shown in appellant carriers’ jurisdictional

statement, the rate differentials were fixed upon the basis

of previous experience; they had been approved by the

Board and were entitled to a presumption of validity.

The Court failed, and seemed disinclined, to distinguish

between regulatory provisions governing ocean carriers in

the foreign trade and land regulations governing railroad

fares and charges, public utility rates, ete. In the latter

instances the effort is to relate the level of the rate to

matters of investment, valuation, reasonable return, ete.,

ete. Such rules or standards cannot be applied to foreign

water-borne commerce for obvious reasons. International

competition and potential regulation and controls by coun-

tries of origin, destination and varying ownership must

always be taken into account. This all greatly restricts and

limits the permissible impact of regulation upon the ocean

rate system. Ocean carriers of varying nations cooperate

as best they can according to the varying laws which may

control them. It is only when rates or practices of the

carriers appear to violate specific statutory proscriptions

(the Shipping Act, 1916, catalogues them fully) that ques-

tions arise for administrative determination. Conse-

quently the area for ocean carrier determination of rates

and rate practices is much broader than in land operations.

*Mr. Isbrandtsen testified that Macy’s make their prices by

putting a price tag on, which was what he did. His rates, as

pointed out by Mr. Andrews in language referred to by the Court

and as found by the Examiner, were fixed at a given percentage

less than those of competitors over whom his company had no

control.

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This very fact makes potential competition between ocean

earriers much keener and far more destructive in result,

while the advantages of inter-carrier self-regulation be-

come correspondingly more certain and apparent. This

is just as true now as in 1914. See Merchant Marine Study

and Investigation, Report 2494, Slst Congress, Second Sess.,

pp. 84-86 (1950), which brings up to date the findings and

doctrines ot the Alexander Committee Report, H. R. Doe.

805, 63rd Congress, Second Sess. (1914).

6

If the ‘‘finding of fact’’ relied upon by the Court should

be considered as relating to effect rather than to method,

the finding by such token would cease to be one of fact.

It would become a conclusion, due to be arrived at legiti-

mately only upon consideration by the experts of all the

factors, including those within the special knowledge of

the Board, as well as those specifically covered by or im-

plied from the record, within the entire scope of the Ship-

ping Act. See Atlantic & Gulf/West Coast, etc. v. United

States, 94 F. Supp. 138, 141: In re Electric Bond & Share

Co., 95 F. Supp. 492. Whether the effect of cireumstances,

present or predictable, is good or bad involves a matter of

opinion and conelusion and not a fact. Likewise, whether

the contract rate system here involved was unjustly dis-

eriminatory, retaliatory or detrimental to the commerce of

the United States is a matter of conclusion and not of fact.

Had the Court’s interpretation been correct, there would

have been posed not merely an inconsistency between the

Examiner’s finding and the Board’s conclusion, but also

an inconsistency between the Examiner’s own findings and

his own conclusions.

The major error in this ease lies not in any inconsistency

hetween the Trial Examiner’s finding of fact and _ his

ultimate conclusions, or those of the Board, but in the real

inconsisteney between such finding, as recognized by the

Court, and the Court’s own conclusion therefrom. This in-

volves more than a mere matter of definition; the Court’s

reasoning presents a complete non-sequitur. The Court

7

characterized as a ‘‘pivotal’’ or ‘‘basie’’ faet the Board’s

finding thet the spread between the rates was arbitrarily

determined. It then wrongly concluded that the Board had

found the rate differential arbitrary in effect and that the

Board was compelled to conclude that the contract rate

system was unjustly discriminatory and illegal under Sec-

tion 15 of the Shipping Act.

Such a holding was unwarranted, either by logic or by

the record viewed as a whole. The Court overlooked, or

refused to recognize, the real considerations upon which

the Board’s ultimate conclusions were premised, although

these were set cut at length in the report. Those con-

siderations involved a careful weighing of the interests

of shippers, carriers and the public in respect of rates,

competition, commercial requirements and economic stabil-

ity. They were of the character whieh this Court has

always held vital in cases of this type. Thus in U7. 8S. Nar.

Co. v. Cunard S.S. Co., 284 U.S. 474, this Court assumed as

true plaintiff’s allegation that ‘‘the disproportionately wide

spread [as high as 100% | of these differentials is wholly

arbitrary and unreasonable’’. Nevertheless, it refused to

accept the superficial arbitrariness of the differentials as

conclusive of their illegality, saying (p. 485):

‘*Whether a given agreement among such carriers

should be held to contravene the act may depend upon

a consideration of economic relations, of facets

peculiar to the business or its history, of competitive

conditions in respect of the shipping of foreign coun-

tries, and of other relevant circumstances, generally

unfamiliar to a judicial tribunal, but well understood

by an administrative body especially trained and

experienced in the intricate and technical facts and

usages of the shipping trade; and with which that

body, consequently, is better able to deal.”’

So also in Swayne & Hoyt, Ltd. v. U. S., 300 U.S. 297,

where this Court upheld the administrative determination

on the question of the legality of contract rates, it again

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Aten NS SST GMA 20

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emphasized the importance of these broad considerations

(p. 304):

‘Tn determining whether the present disermmina-

tion Was undue ov unreasonable the Secretary was

called upon to ascertain whether its effeet was to

exclude other carriers trom the traffic, and if so,

whether, as appellants urge, it operated to secure

stability of rates with consequent stability of service,

and, so far as either etfeet was found to ensue, to

weight the disadvantages of the former against the

advantages of the latter.”’

if the opinion of the Statutory Court is left uncorrected,

that could only be regarded as a reversal of the policy

dictated by those two cases, the only ones in the highest

court dir -etly involving contract rates.

The findings necessary to support any particular order

naturally vary with the statutory authority invoked and

‘he context of the situation. Alabama Great Southern

Railroad Co. v. United States, 340 U.S. 216, 228. In that

case, as here, no detailed findings of fact were required by

the applicable statute. The conclusions that the differentials

were ‘‘just and reasonable’? and ‘‘necessary and desirable

in the publie interest’? were held to be adequately supported

by the reeord when read as a whole. Florida v. U. S., 282

U.S. 194, cited for appellee as emphasizing the necessity

for findings, related to the Interstate Commerce Commis-

sion’s power .o preseribe rates—a_ situation absolutely

different from that here involved.

The appropriate judicial approach toward administra-

tive determinations is truly outlined in Niagara Hudson

Corp. v. Leventritt, 340 U.S. 336 and Radio Corporation

of America, et al., v. United States (not yet officially re-

ported) 19 Law Week 43387. Universal Camera Corp. v.

NOL. R. B., 340 U.S. 474, cited by appellee, does not mateh

the situation here presented. The Niagara Hudson and

Radio Corporation eases emphasized the special capacities

of administrative bodies for dealing with technical ques-

tions involving broad public consiterations. In the Uni-

versal Camera case the question .nvolved was as to the

weight of substantiating evidence, and the case held that

the findings of a Trial Examiner, who saw and heard the

witnesses, were entitled to appropriate weight. There

being no conflict in the evidence in the instant case as to the

method of arriving at the differential, the application of

the Universal Camera ease is not apparent. Further, in

that case the Supreme Court was careful to re-emphasize

the sound principle of the finality of administrative deter-

mination in conclusions of the character here involved,

saying (p. 488) :

‘*Nor was it intended to negative the function of

the Labor Board as one of those agencies presumably

equipped or informed by experience to deal with a

specialized field of knowledge, whose findings within

that field carry the authority of an expertness which

courts do not possess and therefore must respect.

Nor does it mean that even as to matters not requir-

ing expertise a court may displace the Board’s

choice between two fairly conflicting views, even

though the court would justifiably have made a dif-

ferent choice had the matter been before it de novo.

Congress has merely made it clear that a reviewing

court is not barred from setting aside a Board de-

cision when it cannot conscientiously find that the

evidence supporting that decision is substantial,

when viewed in the light that the record in its

entirety furnishes, including the body of evidence

opposed to the Board’s view.’’

The function of the reviewing court is also aptly defined

én

inU. S. v. Pierce Auto Lines, 327 U.S. 515 (cited by appel-

lee), where this Court said (page 536):

“The function of the reviewing court is much

more restricted. It is limited to ascertaining

whether there is warrant in the law and the facts

for what the Commission has done. Unless in some

specific respect there has been prejudicial departure

from requirements of the law or abuse of the Com-

mission’s discretion, the reviewing court is without

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10

authority to intervene. It cannot substitute its own

view concerning what should be done, whether with

reference to competitive considerations or others,

for the Commission’s judgment upon matters com-

mitted to its determination, if that has support in

the record and the applicable law.’’

See also National Labor Relations Board v. Denver, 19

Law Week, 4359, 4364 (June 4, 1951).

Substitution of mental gymnastics, or of definitions iso-

lated from sea-transport subject matter, for administrative

expertise in the consideration of broad questions of ship-

ping policy and related public interest would soon destroy

the usefulness of the Federal Maritime Board in carrying

out the policies set by Congress; and said Board’s ad-

ministrative process as a whole and its rather effective

policing thereunder would be robbed of their vitality.

The motion to dismiss or affirm should be denied and

the appeal upheld.

Respectfully submitted,

Roscor H. Hupperr,

Burton H. Write,

Counsel for Carrier-A ppellants.

27 William Street,

New York City,

June 21, 1951.

11

CERTIFICATE OF SERVICE

I hereby certify that the foregoing brief was served on

the parties hereto by mailing true copies thereof, postage

prepaid, on this 21st day of June, 1951, to the following

addresses :

Joun J. O'Connor, Ese.,

Attorney for Isbrandtsen Co., Inc.,

423 Washington Bldg.,

Washington 5, D. C.

WituiaM L. McGovern, Ese.,

Attorney for Isbrandtsen Co., Inc.,

1200 18th Street, N. W.,

Washington 6, D. C.

Tue Atrorney GeneraL

or THE Unitep States,

Department of Justice,

Washington, D. C.

Tue Secretary or Acricuttvure,

Washington, D. C.

Tue Feperat Maritime Boarp,

Department of Commerce,

Washington, D. C.

PHEGCEBEAHEHKASHPASE MCRAE CASECHTESEAMLEBDHABOLEE

Burton U. Wurre

CODY ROCYIING CL OC tm Co ero oO