United States Court of Appeals Second Circuit.: No. 221. Docket 29854
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MADDOCK & MILLER, INC., Plaintiff-Appellant,
v.
UNITED STATES LINES, Defendant-Appellee, and
Mayer China Company, Fine China Associates, Inc., Bart
Miller (formerly known as Herbert W. Mueller), William P. C.
Adams, Schmid Bros. Inc., Paul A. Schmid, Shenango China
Company, Defendants.
No. 221.
Docket 29854.
United States Court of Appeals Second Circuit.
Argued January 12, 1966.
Decided March 31, 1966.
W. Harvey Mayer, New York City (Friedlander, Gaines & Ruttenberg,
New York City, on the brief), for plaintiff-appellant.
Louis J. Gusmano, New York City (James R. Campbell and Kirlin
Campbell & Keating, New York City, on the brief), for defendantappellee.
Before LUMBARD, Chief Judge, and MEDINA and KAUFMAN, Circuit
Judges.
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 forestall 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.
7
While 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).
10
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. The Supreme Court reversed, holding that the district court
should have retained jurisdiction over the Sherman Act claim and stayed not
dismissed the suit pending the outcome of the Commission's proceedings.
"The Far East and Cunard principles permit courts to subject activities which
are clearly unlawful under the Shipping Act to antitrust sanctions so long as the
courts refrain from taking action which might interfere with the Commission's
exercise of its lawful powers. * * * [those] principles only preclude courts from
awarding treble damages when the defendants' conduct is arguably lawful
under the Shipping Act." 86 S.Ct. at 786.
11
In the case at bar, the issue is not the typical one whether an unlawful practice
can be immunized by the Shipping Act but the converse whether an act
which might not violate the Sherman Act is unlawful under the Shipping Act
because it constitutes granting an illegal rebate in violation of the regulatory
statute. Because it does not appear that this agreement could come under any
protective umbrella of the Maritime Commission, a finding by a district court
that the agreement violated the Sherman Act would not seem to "interfere with
the Commission's exercise of its lawful powers," Carnation Co. v. Pacific
Westbound Conference, supra, if that were to be interpreted narrowly.
12
But reference to an administrative agency is not restricted to situations when the
agency has the power to immunize, as the subsequent history of the Far East
litigation demonstrated when the court held the agency was without power to
immunize the dual system of rates under attack. Federal Maritime Board v.
Isbrandtsen Co., 356 U.S. 481, 78 S.Ct. 851, 2 L.Ed.2d 926 (1958). As in that
case, investigation of the factual issues can often be handled best by the
administrative agency in the light of its extensive experience in dealing with the
industry. See United States Navigation Co. v. Cunard S.S. Co., supra; Jaffe,
Judicial Control of Administrative Act, 132-133. Whether the agreement to
change suppliers constituted a rebate is not dispositive of the Sherman Act
question but it may have an important bearing on the issue. The reasons we
assigned for deciding the rebate question in the third count should first be
passed upon by the Maritime Commission apply equally here. Although when
the administrative decision is on a matter as peripheral to the issue before the
court as it is in this case and when there are other defendants involved,
intervention by the Commission in the court proceedings may be more
advisable than an independent proceeding before the agency, we do not think
that the referral to the Maritime Commission was inappropriate. Therefore we
agree with the decision of the district court holding that the subject matter of
the first count lay within the primary jurisdiction of the FMC.
13
Carnation Co. v. Pacific Westbound Conference, supra, makes it clear,
however, that the dismissal of counts one and three against this defendant was
erroneous. Plaintiff seeks damages for past violations of both statutes.
Dismissal is only appropriate when it does not prejudice the plaintiff's right to a
full remedy, as when an injunction is sought against continuing conduct. "But a
treble damage action for past conduct cannot be easily reinstituted at a later
time. Such claims are subject to the Statute of Limitations and are likely to be
barred by the time the Commission acts. Therefore, we believe that the Court of
Appeals should have stayed the action instead of dismissing it." Carnation Co.,
supra, 86 S.Ct. at 787. We are satisfied that Carnation not only controls the
Sherman Act count in this case but also indicates that the third count should not
have been dismissed because Section 821 of the Shipping Act provides for full
reparations only if the complaint was filed with the Board within two years, a
period which expired March 1965. Therefore, we think the district court should
retain jurisdiction of the third count in order to ensure a full and adequate
remedy if the Commission determines that the defendant did violate the
Shipping Act.
14
The judgment of the district court dismissing the complaint against the
defendant United States Lines is reversed and the case is remanded for further
proceedings not inconsistent with this opinion.
Notes:
1
An appeal by Maddock & Miller from the stay against the other defendants was
dismissed by another panel of this court, October 4, 1965, because it was from
a non-final order
Although paragraph 28 under the third count alleges that the appellee received a
rebate, paragraph 27 incorporates the eighth and ninth paragraphs from the first
count which alleges that the United States Lines gave a rebate to the shippers.
The allegations of coercion in the first count will, of course, be relevant to
determining whether it was the seller or the buyer who had the economic power
necessary to extract a rebate and if it was exerted
According to the first count of the complaint:
"First: This action is brought pursuant to Sections 1, 13, 15 and 26 of Title 15 of
the United States Code * * *."
"Eighth: Nevertheless, defendants Fine China Associates, Inc., W. P. C. Adams,
Schmid Bros. Inc., Paul A. Schmid and Shenango China Company threatened
the defendant United States Lines that if United States Lines did not purchase
its chinaware through Fine China Associates, Inc., the aforementioned
defendants would take their shipping business elsewhere, and would induce
their affiliated companies to ship on lines other than United States Lines."
"Ninth: In or about the month of March, 1963, the defendant United States
Lines, in response to the afore-mentioned threats, agreed to purchase its
chinaware through Fine China Associates, Inc. despite the fact that by doing so
it would be violating Section 812 of the Shipping Act (Title 46, United States
Code) in that the resulting agreement constituted a deferred rebate to the
defendant Fine China Associates, Inc. and its affiliated companies, as the term
is defined in the aforesaid Section 812."
"Fourteenth: All of the foregoing acts constitute a conspiracy in restraint of
trade, are violative of the laws of the United States, as indicated, and are also
prohibited by Section 1 of Title 15 of the United States Code."
For these and other acts specified in the complaint the plaintiff sought recovery
"on the first cause of action, for triple damages in the amount of Seven Million
Five Hundred Thousand Dollars ($7,500,000)."
