Maddock & Miller, Inc. v. United States Lines

365 F.2d 98
Court of Appeals for the Second Circuit·Decided March 31, 1966·No. No. 221, Docket 29854·Published·Cited by 7 cases

Opinion

LUMBARD, Chief Judge:

Maddock & Miller, Inc., appeals from a dismissal of that portion of its complaint which claimed damages from the United States Lines. The district court’s action was based on its belief that primary jurisdiction was vested in the Federal Maritime Commission. Although we agree with the district court that the claims were within the primary jurisdiction of the Commission, we hold that the court should have retained jurisdiction over the action and stayed its proceedings. We therefore reverse the order dismissing plaintiff’s claims against this defendant.

The basis of plaintiff’s complaint is the claim that certain of its competitors and customers conspired unlawfully to deprive it of business in violation of the Sherman Act, 15 U.S.C. § 1 and the Shipping Act, 46 U.S.C. § 812. Part of the scheme alleged is that United States Lines, bowing to illegal pressure and coercion, switched its purchases of chinaware from plaintiff to defendant Fine China Associates, Inc., in order to fore[100]*100stall the other defendants from carrying out a threat to employ different shipping facilities to transport the chinaware they manufactured.

The complaint asserts three independent causes of action. The first count, against appellee United States Lines and seven other defendants, in the main charged violations of the Sherman Act. The second count alleged violations of the Sherman Act by all the defendants except the United States Lines. The third count, naming only the United States Lines, charged that it received a rebate in violation of the Shipping Act.

The district court held that the issue presented by the Shipping Act was within the primary jurisdiction of the Federal Maritime Commission and that the questions arising under the Sherman Act were also cognizable in the first instance by that agency since they originated in conduct which was subject, at least in part, to the regulatory scheme administered by the Commission. Therefore, it dismissed both counts against the United States Lines and stayed the actions against the other defendants pending the outcome of proceedings before the Commission.1

“ ‘Primary jurisdiction’ * * * applies where a claim is originally cognizable in the courts, and comes into play whenever enforcement of the claim requires the resolution of issues which, under a regulatory scheme, have been placed within the special competence of an administrative body; in such a case the judicial process is suspended pending referral of such issues to the administrative body for its views.” United States v. Western Pacific R. R. Co., 352 U.S. 59, 63-64, 77 S.Ct. 161, 165, 1 L.Ed.2d 126 (1956).

A determination of whether a carrier’s purchase of supplies from a shipper solely in order to retain the shipper’s business constitutes a rebate, as alleged in the third count, calls for consideration by the agency entrusted with the administration of the regulatory scheme devised by the Congress.2 Although this question is not so clearly a matter requiring administrative expertise as the determination of whether a rate is “unreasonable,” Texas and Pacific Ry. v. Abilene Cotton Oil Co., 204 U.S. 426, 27 S.Ct. 350, 51 L.Ed. 553 (1907), it still is more than a matter of mere interpretation of an issue “solely of law.” See Great Northern Ry. v. Merchants Elevator Co., 259 U.S. 285, 42 S.Ct. 477, 66 L.Ed. 943 (1922). Resolution of this issue may well depend on an appraisal of the economic effect upon the carrier’s shipping rates of the price paid for the tied supplies; this in turn may require an inquiry into the profit earned on the chinaware and whether it significantly alters the cost of shipping on the line. Such an inquiry can best be made by the Commission. Furthermore, a determination that a carrier’s agreement to purchase supplies from a shipper constitutes a rebate might have widespread impact upon the whole regulatory scheme. Conceivably, such agreements would then become subject to the Shipping Act’s registration provisions and to the regulatory supervision of the Commission over tariffs. The feasibility of such an expansion of the Commission’s activities is a matter which should be decided in the first instance by the agency charged with the administration of the statute. Therefore, we agree with the district court that the third count stated a claim within the primary jurisdiction of the Federal Maritime Commission.

[101]*101While not entirely free from doubt, it would appear that the first count charges a violation of the Sherman Act,3 and not of the Shipping Act. Although the plaintiff asserts that the United States Lines’ activities violated § 812, that allegation is merely incidental to the Sherman Act claim since triple damages are sought not only against the other defendants but also from the United States Lines. Appellant apparently seeks to hold the carrier liable as a party to an agreement in restraint of trade even though conceding that the carrier “consented” only under threat and irrespective of whether the carrier’s agreement was a rebate.

Unlike the third count, therefore, which involved merely the allocation of decision making between two bodies with concurrent jurisdiction to apply the same law, this count involves two overlapping statutory schemes, both of which may be applicable to a situation where the Commission is without authority to enforce one of them — the antitrust laws.

Courts should defer to the appropriate administrative agency in such a situation when “protection of the integrity of a regulatory scheme” is involved. Far East Conference v. United States, 342 U.S. 570, 72 S.Ct. 492, 96 L.Ed. 576 (1952); United States Navigation Co. v. Cunard Steamship Co., 284 U.S. 474, 52 S.Ct. 247, 76 L.Ed. 408 (1932).

Protection of the regulatory scheme ordinarily has required referral to an agency when the Shipping Act or some other statute might immunize activities which would otherwise be unlawful under the Sherman Act, e. g., Far East Conference v. United States, supra; Carnation Co. v. Pacific Westbound Conference, 383 U.S. 213, 86 S.Ct. 781, 15 L.Ed.2d 709 (March 1, 1966), modified, 383 U.S. 932, 86 S.Ct. 781, 15 L.Ed.2d 851 (March 8, 1966). In the Carnation case a shipper charged that carriers had entered a price fixing agreement, in violation of the Sherman Act, which was not immunized by the Shipping Act because of failure to comply with its provisions. The FMC intervened to assert its primary jurisdiction, noting that it had already begun an investigation into that very matter. The Court of Appeals affirmed the dismissal of the district court.

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Maddock & Miller, Inc. v. United States Lines, 365 F.2d 98 (2d Cir. 1966).

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