Shipping Act of 1984 Preemption Affirmed in Vehicle Carrier Antitrust Litigation

Shipping Act of 1984 Preemption Affirmed in Vehicle Carrier Antitrust Litigation

Introduction

The case titled In Re: Vehicle Carrier Services Antitrust Litigation involves plaintiffs alleging that ocean common carriers engaged in anti-competitive practices, specifically price-fixing and capacity reduction, in violation of federal antitrust laws and various state laws. The plaintiffs, categorized as Direct Purchase Plaintiffs (DPPs) and Indirect Purchase Plaintiffs (IPPs), sought relief under the Sherman and Clayton Acts. The defendants, who are ocean common carriers, contended that their actions were protected under the Shipping Act of 1984, which precludes private antitrust litigation for certain regulated activities. The United States Court of Appeals for the Third Circuit affirmed the District Court's dismissal of the plaintiffs' claims, emphasizing the preemptive scope of the Shipping Act.

Summary of the Judgment

The Third Circuit Court reviewed the plaintiffs' claims that ocean common carriers engaged in unlawful price-fixing and capacity reduction agreements. The plaintiffs argued that these actions violated the Sherman and Clayton Acts. However, the defendants invoked the Shipping Act of 1984, which provides federal antitrust immunity for certain agreements filed with the Federal Maritime Commission (FMC). The District Court dismissed the plaintiffs' federal and state claims, a decision that the appellate court affirmed. The court held that the Shipping Act preempts private antitrust lawsuits related to the conduct in question, thereby barring the plaintiffs from obtaining relief under the Sherman and Clayton Acts.

Analysis

Precedents Cited

The court referenced several key precedents to support its decision:

  • Connelly v. Lane Constr. Corp. (3d Cir. 2016): Established that facts in motions to dismiss are assumed true.
  • Hazard v. Pacific Maritime Co. (1966): Emphasized that only filed rate-making agreements receive antitrust immunity under the Shipping Act of 1916.
  • Ashcroft v. Iqbal (U.S. 2009): Set the standard for pleading sufficient factual matter to state a plausible claim.
  • Burtch v. Milberg Factors, Inc. (3d Cir. 2011): Highlighted the appropriate review standard for motions to dismiss.
  • Chevron U.S.A. Inc. v. Nat. Res. Def. Council, Inc. (1984): Established the Chevron deference framework.
  • FARINA v. NOKIA INC. (3d Cir. 2010): Reinforced the Shipping Act's preemption over state laws in maritime commerce.

Legal Reasoning

The court's primary legal reasoning centered on the Shipping Act of 1984, which establishes a federal framework regulating ocean common carriers. The Act grants immunity from federal antitrust laws for agreements filed with the FMC, aiming to create a level playing field for U.S.-flag vessels against foreign competitors. Specifically:

  • Immunity Provision: Under 46 U.S.C. § 40307(a), agreements filed with the FMC are immune from federal antitrust laws. Additionally, § 40307(d) bars recovery of damages and injunctions under the Clayton Act for conduct prohibited by the Shipping Act.
  • Preemption Doctrine: The Act preempts state law claims that would interfere with its regulatory scheme. The court determined that allowing state antitrust claims would undermine Congress's intent to centralize regulation under the Shipping Act and the FMC.
  • Scope of Agreements: The plaintiffs' allegations involved unfiled, and therefore prohibited, agreements. Operating under such agreements is a violation under the Shipping Act, which consequently disallows private antitrust remedies.
  • Agency Interpretation: The court dismissed the plaintiffs' reliance on an FMC Commissioner's remarks as they were not official agency positions, thus negating any Chevron deference.

Impact

This judgment reinforces the supremacy of the Shipping Act of 1984 in regulating maritime commerce, particularly concerning antitrust matters. Key implications include:

  • Limitation on Private Litigation: Private parties cannot seek remedies under federal antitrust laws for conduct already regulated and preempted by the Shipping Act.
  • Centralized Regulation: The decision upholds the FMC's exclusive authority to oversee and enforce regulations related to ocean common carriers, ensuring a uniform regulatory framework.
  • Barrier Against State Claims: State law claims that conflict with the Shipping Act are barred, preventing a fragmented regulatory approach and avoiding "parallel jurisdiction."
  • Encouragement of Compliance: Ocean common carriers are incentivized to comply with the Shipping Act and file necessary agreements with the FMC to benefit from antitrust immunity.

Complex Concepts Simplified

Preemption Doctrine

Preemption occurs when federal law overrides or displaces state law. In this case, the Shipping Act of 1984, a federal statute, preempts state antitrust laws related to the regulated activities of ocean common carriers.

Shipping Act of 1984

This Act regulates ocean common carriers, providing a federal framework to ensure competitive neutrality between U.S. and foreign carriers. It grants immunity from antitrust laws for certain agreements filed with the FMC, thereby centralizing oversight and enforcement.

Federal Maritime Commission (FMC)

The FMC is the federal agency responsible for regulating international ocean transportation for the U.S. It reviews and approves carrier agreements, ensuring they comply with the Shipping Act and promoting fair competition.

Direct Purchase Plaintiffs (DPPs) vs. Indirect Purchase Plaintiffs (IPPs)

DPPs are parties that directly engage with carriers to purchase services, while IPPs benefit indirectly by receiving transported goods through these services. Both groups alleged that carriers engaged in anti-competitive practices affecting their business.

Conclusion

The Third Circuit's affirmation underscores the comprehensive scope of the Shipping Act of 1984 in regulating the maritime transportation sector. By preempting both federal antitrust laws and state claims, the Act centralizes regulatory oversight under the FMC, ensuring uniformity and preventing fragmented legal challenges. This decision highlights the judiciary's role in upholding congressional intent to streamline regulation and protect U.S.-flag carriers from competitive disadvantages. Stakeholders in the maritime industry must navigate within the boundaries set by the Shipping Act, recognizing the limited avenues for private litigation in antitrust matters governed by federal statutes.

Case Details

Year: 2017
Court: UNITED STATES COURT OF APPEALS FOR THE THIRD CIRCUIT

Judge(s)

Patty Shwartz

Attorney(S)

Kit Pierson Christopher J. Cormier David A. Young Cohen Milstein Sellers & Toll PLLC 1100 New York Avenue, N.W. Suite 500 West Washington, D.C. 20005 Robert N. Kaplan Richard J. Kilsheimer [ARGUED] Gregory K. Arenson Joshua H. Saltzman Kaplan Fox & Kilsheimer LLP 850 Third Avenue, 14th Floor New York, NY 10022 Steven A. Kanner Michael J. Freed Michael E. Moskovitz Freed Kanner London & Millen LLC 2201 Waukegan Road, Suite 130 Bannockburn, IL 60015 Lewis H. Goldfarb McElroy, Deutsch, Mulvaney & Carpenter, LLP 1300 Mount Kemble Avenue P.O. Box 2075 Morristown, NJ 07962 Solomon B. Cera C. Andrew Dirksen Cera LLP 595 Market Street, Suite 2300 San Francisco, CA 94105 Joseph C. Kohn Douglas A. Abrahams William E. Hoese Kohn Swift & Graf, P.C. One South Broad Street, Suite 2100 Philadelphia, PA 19107 Lee Albert Gregory B. Linkh Glancy Prongay & Murray LLP 122 East 42nd Street, Suite 2920 New York, NY 10168 Gregory P. Hansel Randall B. Weill Michael Kaplan Jonathan G. Mermin Michael S. Smith Preti, Flaherty, Beliveau & Pachios LLP One City Center P.O. Box 9546 Portland, ME 04112 Eugene A. Spector Jeffrey J. Corrigan Jay S. Cohen Rachel E. Kopp Spector Roseman Kodroff & Willis, P.C. 1818 Market Street, Suite 2500 Philadelphia, PA 19103 W. Joseph Bruckner Heidi M. Silton Lockridge Grindal Nausen P.L.L.P. 100 Washington Avenue South, Suite 2200 Minneapolis, MN 55401 Vincent J. Esades Heins Mills & Olson, P.L.C. 310 Clifton Avenue Minneapolis, MN 55403 Joseph J. DePalma Katrina Carroll Steven J. Greenfogel Lite DePalma Greenberg, LLC 570 Broad Street, Suite 1201 Newark, NJ 07102 Edward D. Greenberg David K. Monroe GKG Law, P.C. 1055 Thomas Jefferson Street, N.W. Suite 500 Washington, D.C. 20007 Benjamin Bianco Gregory A. Frank Frank LLP 275 Madison Avenue, Suite 705 New York, NY 10016 Counsel for Appellants Cargo Agents, Inc., International Transport Management Corp., and Manaco International Forwarders, Inc. Peter S. Pearlman Cohn Lifland Pearlman Herrmann & Knopf LLP Park 80 Plaza West-One 250 Pehle Avenue, Suite 401 Saddle Brook, NJ 07663 Jonathon W. Cuneo Joel Davidow Katherine Van Dyck Daniel Cohen Cuneo Gilbert & LaDuca, LLP 507 C Street N.E. Washington, D.C. 20002 Benjamin David Elga Cuneo Gilbert & LaDuca, LLP 16 Court Street, Suite 1012 Brooklyn, NY 11241 Don Barrett David McMullan Brian Herrington Barrett Law Group, P.A. 404 Court Square P.O. Box 927 Lexington, MS 39095 Shawn M. Raiter Paul A. Sand Larson King, LLP 2800 Wells Fargo Place 30 East Seventh Street St. Paul, MN 55101 Dewitt Lovelace Valerie Nettles Lovelace & Associates, P.A. Suite 200 12870 U.S. Highway 98 West Miramar Beach, FL 32550 Gerard V. Mantese David Hansma Brendan Frey Mantese Honigman Rossman & Williamson, P.C. 1361 East Big Beaver Road Troy, MI 48083 Ben F. Pierce Gore Pratt & Associates 1871 The Alameda, Suite 425 San Jose, CA 95126 Charles Barrett Charles Barrett, P.C. 6518 Highway 100, Suite 210 Nashville, TN 37205 Thomas P. Thrash Thrash Law Firm, P.A. 1101 Garland Street Little Rock, AR 72201 Armand Derfner Derfner, Altman, & Wilborn 575 King Street, Suite B Charleston, SC 29403 Counsel for Appellants Martens Cars of Washington, Inc, Hudson Charleston Acquisition, LLC, d/b/a Hudson Nissan, John O'Neill Johnson Toyota, LLC, Hudson Gastonia Acquisition, LLC, HC Acquisition, LLC, d/b/a Toyota of Bristol, Desert European Motorcard, Ltd, Hodges Imported Cars, Inc., d/b/a Hodges Subaru, Scotland Car Yard Enterprises d/b/a San Rafael Mitsubishi, Hartley Buick/GMC Truck, Inc., d/b/a Hartley Honda, Panama City Automotive Group, Inc, d/b/a John Lee Nissan and Empire Nissan of Santa Rosa Warren T. Burns [ARGUED] Daniel H. Charest Will Thompson E. Lawrence Vincent Burns Charest LLP 500 North Akard, Suite 2810 Dallas, TX 75201 Hollis Salzman Bernard Persky Meegan Hollywood Robins Kaplan LLP 601 Lexington Avenue, Suite 3400 New York, NY 10022 Joseph W. Cotchett Steven N. Williams Cotchett, Pitre & McCarthy, LLP San Francisco Airport Office Center 840 Malcolm Road, Suite 200 Burlingame, CA 94010 James E. Cecchi Carella, Byrne, Cecchi, Olstein, Brody & Agnello, P.C. 5 Becker Farm Road Roseland, NJ 07068 Counsel for Appellant End Payor Plaintiffs Eric R. Breslin Duane Morris LLP One Riverfront Plaza 1037 Raymond Boulevard, Suite 1800 Newark, NJ 07102 Wayne A. Mack J. Manly Parks Andrew Sperl Duane Morris LLP 30 South 17th Street Philadelphia, PA 19103 Counsel for Appellant Truck and Equipment Dealer Plaintiffs John R. Fornaciari Robert M. Disch Baker & Hostetler LLP 1050 Connecticut Avenue, N.W. Suite 1100 Washington, D.C. 20036 Counsel for Appellees Nippon Yusen Kabushiki Kaisha and NYK Line North America Inc. James L. Cooper Anne P. Davis Adam M. Pergament Arnold & Porter LLP 601 Massachusetts Avenue, N.W. Washington, D.C. 20001 Robert B. Yoshitomi Eric C. Jeffrey Nixon Peabody LLP 799 New York Avenue, N.W. Washington, D.C. 20001 Counsel for Mitsui O.S.K. Lines, Ltd., Mitsui O.S.K. Bulk Shipping (U.S.A.), LLC, World Logistics Service (U.S.A.) Inc., and Nissan Motor Car Carrier Co., Ltd. Mark W. Nelson [ARGUED] Jeremy Calsyn Cleary Gottlieb Steen & Hamilton LLP 2000 Pennsylvania Avenue, N.W. Washington, D.C. 20006 Counsel for Appellees Kawasaki Kisen Kaisha, Ltd. and "K" Line America, Inc. Roberto A. Rivera-Soto [ARGUED] Jason A. Leckerman Ballard Spahr LLP 210 Lake Drive East Suite 200 Cherry Hill, NJ 08002 Benjamin F. Holt Hogan Lovells US LLP 555 Thirteenth Street, N.W. Washington, D.C. 20004 Counsel for Appellees Wallenius Wilhelmsen Logistics AS, Wallenius Wilhelmsen Logistics America LLC, and EUKOR Car Carriers, Inc. Steven F. Cherry Brian C. Smith Wilmer, Cutler, Pickering, Hale & Dorr LLP 1875 Pennsylvania Avenue, N.W. Washington, D.C. 20006 Counsel for Appellees Compañía Sud Americana de Vapores, S.A. and CSAV Agency, LLC Jeffrey F. Lawrence Wayne Rohde Cozen O'Connor PC 1200 Nineteenth Street, N.W. Washington, D.C. 20036 Melissa H. Maxman Cohen & Gresser LLP 1707 L Street, N.W., Suite 550 Washington, D.C. 20036 Counsel for Höegh Autoliners AS and Höegh Autoliners, Inc. Renata B. Hesse James J. Fredricks Sean Sandoloski United States Department of Justice Antitrust Division 950 Pennsylvania Ave., N.W. Room 3224 Washington, DC 20530 Counsel for Amicus Curiae United States of America Tyler J. Wood William H. Shakely Joel F. Graham Federal Maritime Commission 800 North Capitol Street, N.W. Washington, DC 20573 Counsel for Amicus Curiae Federal Maritime Commission

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