Warren T. Burns, a partner at the Dallas-based law firm Burns Charest, which has represented shippers, said the decision was inconsistent with the position taken by the Federal Maritime Commission and U.S. Department of Justice.
The U.S. 3rd Circuit Court of Appeals upheld this week a dismissal by a lower court of a civil lawsuit by shippers against shipping companies that operate roll-on/roll-off (ro-ro) vessels, which transport trucks and cars.
The shippers alleged the carriers “entered into agreements to fix prices and reduce capacity in violation of federal antitrust laws and various state laws.”
In a decision handed down Wednesday, the 3rd Circuit said the shipping companies are common carriers regulated by the Shipping Act of 1984, and because “the Act both precludes private plaintiffs from seeking relief under the federal antitrust laws for such conduct and preempts the state law claims under circumstances like those presented here, the District Court correctly dismissed the complaints.”
In September 2012, law enforcement agencies raided the offices of defendants named in the lawsuit in connection with antitrust investigations, and several defendants thereafter pleaded guilty to antitrust violations based on price-fixing, allocating customers, and rigging bids for vehicle carrier services to and from the United States and elsewhere.
According to a series of press releases issued by the U.S. Department of Justice, between 2014 and 2016, four shipping companies – NYK, “K” Line, CSAV and Wallenius Wilhelmsen – have all paid over $230 million in criminal fines after being charged with conspiring for more than a decade to fix prices, rig bids and allocate customers. In addition, eight executives were charged for their participation in the conspiracy and at least four were given prison terms.
Several of those companies paid fines to the Federal Maritime Commission to resolve allegations of acting in concert with competitors in the ro-ro business without filing an agreement at the FMC. NYK paid $1.25 million and “K” Line paid $1.1 million in December 2013.
Warren T. Burns, a partner at the Dallas-based law firm Burns Charest, which has represented shippers, said none of the criminal fines levied by the Department of Justice or the FMC are earmarked for consumers or businesses.
The civil complaint ruled on by the 3rd Circuit this week “was the only outlet to get money back into the hands of people who were injured, and as a result, we were very disappointed by the 3rd Circuit panel’s decision,” Burns said.
In addition, Burns said the decision was inconsistent with the positions taken by both the FMC and the Department of Justice. “We’re looking at our options now, but we will be seeking review” before either the 3rd Circuit sitting en banc or appealing the case to the U.S. Supreme Court, he said.
There were two principal issues at stake before the 3rd Circuit, according to Burns.
The first was whether federal claims were subsumed by the Shipping Act, and he said it was not surprising that the court held they were.
But Burns said a claim that was unique to “indirect purchasers” of the transportation was whether state laws were preempted by the shipping law.
The lawsuit had two groups of plaintiffs:
• “Direct purchaser plaintiffs,” such as vehicle manufacturers that purchase transportation directly from the shipping companies that transport cars and trucks;
• And “indirect purchaser plaintiffs,” such as automobile dealers, truck dealers or individual vehicle buyers.
The indirect purchasers asserted antitrust, consumer fraud and unjust enrichment claims under state law.
Burns said that both the FMC and Department of Justice took strong positions that state laws were not preempted by the Shipping Act.
“Notwithstanding the federal government coming in with that position, the 3rd Circuit found they were preempted,” from the state law antitrust claims of the indirect purchasers, he said.
In its decision, the 3rd Circuit said, “To subject the carriers to potential state antitrust liability would essentially undo Congress’s work in expanding antitrust immunity and undermine its efforts to assist U.S.-flag ships avoid a competitive disadvantage.”
The court also said the indirect consumer protection and unjust enrichment claims were preempted, writing, “While these state laws reflect the exercise of traditional police powers, applying them here would allow the states to impose rules in an area Congress has historically regulated: maritime commerce. It would also thwart Congress’s goal of ensuring uniform regulation of ocean common carriers’ business practices.”
There is also a pending complaint by indirect shippers against various car carrier companies including NYK, MOL, “K” Line, Eukor, Wallenius Wilhelmsen, CSAV, Höegh Autoliners and Nissan Motor Carriers at the FMC asking for reparations because of violations of the Shipping Act.
3rd Circ. upholds dismissal of complaint against ro-ro carriers
