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FreightWaves explores the archives of American Shipper’s nearly 70-year-old collection of shipping and maritime publications to showcase interesting freight stories of long ago.
In this week’s edition, from the December 1986 issue, the Federal Maritime Commission put an end to a six-month legal battle with the conclusion that one party was trying to “bluff” its way into a contract.
FMC slams door on service contract complaint
After six months of legal haggling, the Federal Maritime Commission closed the door for good on a complaint brought by Container Distribution, Inc., a Los Angeles-based NVOCC, against Neptune Orient Line, Ltd. for allegedly refusing to enter into a service contract with the NVO.
A look at the record in the case convinced FMC administrative law judge Charles E. Morgan that Container Distribution was in effect trying to bluff its way into a service contract with NOL through its legal maneuvering at the Commission.
The FMC law judge took note of the fact that despite attempts by the agency to accommodate the complaining NVO, the firm failed to show up at a mid-July prehearing conference and also failed to respond to discovery requests. Judge Morgan, in effect, said that while NOL (as the defendant in the case) followed FMC legal procedures, Container Distribution’s failure to follow through on its complaint was simply nothing more than “an abuse of process.”
While not going through NOL’s long list of examples of how Container Distribution used the FMC forum as a tool to worm its way into a service contract, Judge Morgan noted “many” examples cited by the Singapore-based carrier to achieve such a result.
In late August, Container Distribution sought to have its complaint dismissed, but with the stipulation that the NVO would have the right to resurrect the action. This is where Judge Morgan drew the line. Container Distribution, he said, on the basis of its conduct in the case, “has forfeited any right it may have had to reinstitute its complaint.”
CDI’S tactics described
In a paper filed with the Commission, NOL attorneys Richard K. Bank and Eliot J. Halperin noted that “there were several contacts” between the two parties from the time the NVO requested a contract back in February 1986. It was further noted that CDI sent copies of all communications to NOL, including a March 12,1986, telex in which the NVO threatened the shipping line with an FMC proceeding, complaints to Congressional committees, and to various government officials.
How the case developed
The NOL attorneys summarized CDI’s conduct which shows various degrees of pressure, including negative press publicity. In the words of the NOL lawyers, here is how the whole case unfolded:
“On April 8,1986, CDI transmitted to NOL a ‘complaint’ which purported to begin a Commission proceeding. Assuming that document to be a valid complaint requiring NOL to spend effort and money to defend, in fear of FMC sanctions, CDI contacted NOL by letter of April 24 seeking to increase the pressure. CDI again sought a contract, resulting from NOL’s negative reply of May 7.
Upon learning from the Commission that its initial “complaint” was inadequate, CDI filed a corrected document April 28. Then on May 21, after the complaint was served on NOL, CDI’s representative telephoned NOL’s San Francisco office and said that NOL could avoid the already negative publicity in the press by entering into a contract with CDI because CDI would then withdraw its complaint. CDI’s representative even offered to visit NOL’s home office in Singapore. NOL again declined CDI’s request but agreed to inform NOL’s Singapore office of the desired visit. NOL confirmed this position by letter of May 23.
On May 24, CDI sent a letter to NOL, again agreeing to withdraw the complaint in exchange for a contract. CDI also requested a meeting in Singapore. CDI’s representative went to Singapore and met with NOL personnel on June 17. At the meeting, CDI was informed that NOL would not discuss the Commission case since it was in the hands of NOL’s lawyers. NOL also repeated a statement it had already made to CDI. CDI was told that NOL will always be willing to discuss and negotiate with any shipper concerning a service contract. When CDI proposed terms to NOL, NOL declined those terms based upon market conditions and business judgment.
CDI’s efforts did not end there, however, and CDI persisted in trying to persuade NOL to enter into a contract on the promise that CDI would withdraw its complaint. In a telephone conversation of August 12, the day before the prehearing conference (at the FMC) which CDI did not attend, CDI’s attorney offered to withdraw the complaint if NOL would agree to a contract. The reasons were again negative, and CDI then put NOL to the greatest expense that it could, without CDI having to do anything further: CDI forced NOL to attend the prehearing conference and reply to CDI’s discovery requests when CDI knew full well that it would not attend the conference and would not reply to NOL’s discovery requests.”
Referring to the above sequence of events, attorneys for NOL concluded: “CDI’s sole initial purpose was to frighten NOL into agreeing to a contract; and when the attempt failed, CDI’s objective was to force NOL to incur the maximum possible litigative costs without CDI having to incur any. As CDI’s actions demonstrate, CDI dragged this proceeding as long as it could, by instructing its attorney to continue seeking baseless postponements of the prehearing conference, without any intention to send its attorney to Washington, or to respond to NOL’s discovery requests.”
“Having engaged in abusive conduct toward the Commission and Respondent, and having misused Commission complaint procedures solely as a means of harassment, CDI has forfeited its right to reinstitute its complaint,” the NOL attorneys said. The FMC law judge apparently agreed with them for he put an end to the case by dismissing it “with prejudice,” which means CDI will not be permitted to have the case reopened.
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