A/S Ivarans Rederi v. United States

895 F.2d 1441, 283 U.S. App. D.C. 19, 1990 U.S. App. LEXIS 1687, 1990 WL 9858
CourtCourt of Appeals for the D.C. Circuit
DecidedFebruary 9, 1990
DocketNos. 88-1597, 89-1105
StatusPublished
Cited by8 cases

This text of 895 F.2d 1441 (A/S Ivarans Rederi v. United States) is published on Counsel Stack Legal Research, covering Court of Appeals for the D.C. Circuit primary law. Counsel Stack provides free access to over 12 million legal documents including statutes, case law, regulations, and constitutions.

Bluebook
A/S Ivarans Rederi v. United States, 895 F.2d 1441, 283 U.S. App. D.C. 19, 1990 U.S. App. LEXIS 1687, 1990 WL 9858 (D.C. Cir. 1990).

Opinion

Opinion for the Court filed by Circuit Judge SILBERMAN.

SILBERMAN, Circuit Judge:

A/S Ivarans Rederi (“Ivarans”) is a Norwegian steamship line that operates freight vessels between the United States Atlantic and Gulf coasts, the Caribbean, and parts of South America. Ivarans petitions this court to review a decision by the Federal Maritime Commission, the agency responsible for regulating the waterborne foreign commerce of the United States, to dismiss Ivarans’ complaint against the intervenors, who along with petitioner were parties to a revenue pooling agreement. Petitioner also challenges the FMC’s refusal to grant a stay pending the outcome of related litigation in Brazil. Although the FMC properly heard the dispute, we conclude that the Commission unreasonably construed the language of the pooling agreement. We therefore grant the petition for review and reverse the FMC’s dismissal of the complaint.

I.

Between 1960 and 1970, instability existed in the trade between the United States and Brazil because of conflicting laws on the allocation among shipping companies of exports destined for the United States Atlantic coast. The FMC, acting pursuant to its statutory duty under the Shipping Act of 1916 to review agreements among ocean carriers filed with the Commission, see 46 U.S.C.App. § 814 (1982),1 rejected the then-existing government-imposed allocation of cargo, particularly since those rules discriminated against third-flag carriers.2 In [21]*21March 1970, the United States and Brazil agreed to permit all the carriers in the trade to negotiate a revenue pooling agreement for the northbound commerce to the United States, subject to the FMC’s and Brazilian approval. Consequently, in 1972 the carriers in the trade3 signed Agreement No. 10027, which assigned a 20% pool share to the three third-flag carriers in the northbound trade; the American and Brazilian national flag carriers were allocated the remaining 80% pool share.

Under Agreement No. 10027, a carrier exceeding its allotted pool share in a given year — by earning more revenues than the percentage of the trade assigned to it — was required to pay a pool penalty, to be distributed to the other pool members, consisting of a portion of the overcarrier's excess revenues. And Article 5(a) of that agreement specified a minimum number of sailings from Brazil to United States Atlantic ports that pool members must maintain in a calendar year:

National Flag Lines:
Lloyd )
Netumar ) 80 sailings
Moore McCormack )
Non-National Flag Lines:
ELMA 12 sailings
Ivarans 15 sailings
Hopal 6 sailings

As is apparent, in 1972 the pooling agreement did not impose individual minimum sailing obligations for the three national flag carriers. Accompanying Agreement No. 10027, however, the national flag carriers negotiated a side contract, designated Agreement No. 10028, which divided their 80% revenue share and 80 minimum sailings requirement; the two Brazilian carriers, Lloyd and Netumar, took a 40% share and 40 sailings, and Moore McCormack, the sole American line, assumed the remainder. The FMC simultaneously approved both agreements.

In 1980, the carriers modified Agreement No. 10027 in several respects. Under the new version, approved and designated by the FMC as Agreement No. 10027-10 (the “Agreement”), the side contract between the national lines was incorporated into the main pooling agreement. In addition, the amended agreement reflected the addition of new carriers in the northbound trade. Under the modified Article 5(a), the minimum sailing requirements were delineated as follows:

National Flag Lines 80 sailings
Brazilian Flag:
Lloyd )
Netumar ) 40 sailings
United States Flag:
Moore McCormack )
Sea-Land4 ) 40 sailings
Non-National Flag Lines 28 sailings
ELMA )
Bottacchi ) 12 sailings
Ivarans ) 12 sailings
Hopal ) 4 sailings

The revenue shares were similarly divided under a new Article 2: ‘

No Less Than 80
National Flag Lines Percent
Brazilian Flag:
Lloyd )
Netumar ) 40 percent
United States Flag:
Moore McCormack )
[22]*22Sea-Land ) 40 percent
No More Than 20
Non-National Flag Lines Percent
ELMA )
Bottacchi ) 9.25 percent
Ivarans ) 9.25 percent
Hopal ) 1.50 percent

Article 6 of both the old and new Agreements deals wifh the consequences of a party’s or parties’ failure to attain the minimum annual sailings. Under section 6(a), the pool share of a party which did not maintain the minimum sailing requirements would be reduced in proportion to the reduction in minimum sailings; this sum would be proportionately distributed to the other members of the same national or non-national flag category.5 Section 6(e), however, provides for a more drastic remedy — suspension of the agreement — in certain situations:

In. the event that any party or any combination of parties exceeding l/3rd. of the total pool share for reasons of their own or in accordance with Article 11 [the force majeure provision] do not provide minimum number of sailings in accordance with Article 5 ..., the pool to be suspended for such duration and the pool to be resumed only when adequate service is again restored, (emphasis added)

In early 1982, Moore McCormack reduced the number of its sailings by dry-docking three of its ships to modify them for expanded capacity. Consequently, in November 1982, Ivarans notified the other members of the Agreement that Moore McCormack was unlikely to maintain its required 40 minimum sailings for 1982. And, therefore, Ivarans considered revenue pooling suspended for 1982, pursuant to Article 6(e), since Moore McCormack represented more than a third of the revenue pool. Moore McCormack in fact made only 34 or 35 sailings in 1982.

After several unsuccessful attempts to negotiate the dispute, the other parties to the Agreement filed a notice of arbitration under Article 13’s mandatory arbitration provision. A three-member arbitration panel then selected a Brazilian site for adjudication and declared that Brazilian law applied in interpreting the Agreement.6 In a split decision, the panel majority in December 1985 concluded that suspension of the pool was not warranted under the circumstances.

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895 F.2d 1441, 283 U.S. App. D.C. 19, 1990 U.S. App. LEXIS 1687, 1990 WL 9858, Counsel Stack Legal Research, https://law.counselstack.com/opinion/as-ivarans-rederi-v-united-states-cadc-1990.