USCA1 Opinion
United States Court of Appeals
For the First Circuit
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No. 95-1643
PUERTO RICO MARITIME SHIPPING AUTHORITY,
Petitioner,
v.
FEDERAL MARITIME COMMISSION
and
UNITED STATES OF AMERICA
Respondents.
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STANLEY HECHT
Intervenor.
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PETITION FOR REVIEW OF AN ORDER OF
THE FEDERAL MARITIME COMMISSION
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Before
Lynch, Circuit Judge,
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Campbell, Senior Circuit Judge,
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and Watson,* Senior Judge.
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Amy Loeserman Klein, with whom Jenkens & Gilchrist was on
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brief, for petitioner Puerto Rico Maritime Shipping Authority.
Carol J. Neustadt, Attorney, Federal Maritime Commission,
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with whom Robert D. Bourgoin, General Counsel, and C. Douglass
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Miller, Attorney, Federal Maritime Commission, and Anne K.
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Bingaman, Assistant Attorney General, John J. Powers III and
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*Of the U.S. Court of International Trade, sitting by
designation.
Robert J. Wiggers, Attorneys, U.S. Department of Justice, were on
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brief, for respondents Federal Maritime Commission and United
States of America.
Rick A. Rude for intervenor Stanley Hecht.
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Nathan J. Bayer, with whom Torbjorn B. Sjogren and Sher &
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Blackwell were on brief, for amici curiae United States Atlantic
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and Gulf/Southeastern Caribbean Conference, United States
Atlantic and Gulf Hispaniola Steamship Freight Association, Latin
American Shipping Service Association, Venezuelan American
Maritime Association and the Credit Agreement.
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February 6, 1996
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LYNCH, Circuit Judge. May the Federal Maritime
LYNCH, Circuit Judge.
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Commission, in exercising its administrative lawmaking
function, excuse a party from paying sums awarded against it
by a final judgment entered by a U.S. District Court and
affirmed on appeal? We preserve harmony between the two
systems of law and respect for judgments entered by the
courts by concluding, on the facts of this case, that the
party was not free before the agency to seek to undo the
court judgment. Accordingly, we reverse the FMC's
determination that Save-On Shipping (SOS) need not pay the
attorneys' fees and costs awarded to Puerto Rico Maritime
Shipping Authority (PRMSA) by the United States District
Court for the Southern District of Florida and by the United
States Court of Appeals for the Eleventh Circuit. To the
extent that the FMC's order is prospective and does not
involve sums awarded by the judgment entered, we affirm.
PRMSA carried four shipments of frozen food and
other items to San Juan, Puerto Rico for SOS. When SOS
refused to pay about $11,000 of PRMSA's bill, PRMSA began an
action against SOS in the federal court in Florida seeking
the unpaid freight charges, interest, collection costs and
attorneys' fees pursuant to the terms of PRMSA's bill of
lading to SOS.1 Jurisdiction was under the maritime and
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1. PRMSA's lawsuit in federal district court was filed by an
agent of PRMSA, Puerto Rico Marine Management, Inc. (PRMMI),
and the judgment in the federal court action ran in favor of
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admiralty jurisdiction of the federal courts, 28 U.S.C.
1333. The bill of lading, which employed language found in a
bill of lading tariff filed with the FMC, provided that:
[t]he shipper, consignee, holder hereof, and owners
of the goods shall be jointly and severally liable
to Carrier for the payment of all freight,
demurrage, General Average and other charges,
including, but not limited to court costs, expenses
and reasonable attorney's fees incurred in
collecting sums due Carrier.
SOS moved for summary judgment; PRMSA filed a cross motion.
SOS lost on both motions. The court awarded PRMSA the unpaid
freight, attorneys' fees and costs, enforcing the terms of
the bill of lading.
SOS moved for reconsideration and then for a stay
of the district court proceeding while SOS pursued a
complaint (FMC Docket No. 92-12) it had filed (after losing
the summary judgment motions) before the FMC. That
administrative complaint challenged, inter alia, the
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attorneys' fees provision of the tariff upon which the bill
of lading was based, but did not directly challenge the
attorneys' fees awarded on the four shipments at issue in the
federal court action. It asserted that the attorneys' fees
tariff provision was unreasonable under sections 17 and 18(a)
of the Shipping Act of 1916, 46 U.S.C. app. 816 and 817(a)
(the 1916 Act), and section 2 of the Intercoastal Shipping
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PRMMI. Because the distinction between PRMSA and PRMMI is
unimportant to the disposition of this petition, this opinion
refers only to PRMSA.
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Act of 1933, 46 U.S.C. app. 844 (the 1933 Act). It
involved seven shipments on which PRMSA had not sought
freight collection in the court action. Because the
shipments had occurred two years prior to the filing of the
administrative complaint, SOS sought only prospective relief
in the form of cease and desist orders. SOS's motion for a
stay of the district court proceedings was the first time
that SOS argued before the district court that the attorneys'
fees provision might be illegal or unreasonable and thus
unenforceable because it was unilateral. The motion for a
stay did not argue that the district court lacked
jurisdiction over the attorneys' fees issue. Rather,
recognizing that primary jurisdiction is a rule of
"deference" and not of jurisdiction, it argued that primary
jurisdiction was in the FMC. The district court denied both
of SOS's motions.
SOS appealed the judgment to the United States
Court of Appeals for the Eleventh Circuit and moved to stay
the appellate proceedings or, in the alternative, to refer
the case to the FMC under the doctrine of primary
jurisdiction. The Eleventh Circuit denied the motion for
stay. It later affirmed the district court, without opinion,
and denied the motion for referral as moot. PRMSA was
eventually awarded attorneys' fees and costs of approximately
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$100,000. The parties do not identify any further appeals
taken by SOS in the federal court action pertinent here.
Having lost in federal court, SOS filed a second
complaint before the FMC (FMC Docket No. 93-21) directly
challenging the attorneys' fees awarded on the four shipments
that were at issue in the Eleventh Circuit. This
administrative complaint also alleged that the tariff and
bill of lading language concerning attorneys' fees and costs
was unlawful and unreasonable. It sought reparations
pursuant to section 22(a) of the 1916 Act, 46 U.S.C. app.
821(a), in the amount of attorneys' fees that were granted by
the federal court. The FMC eventually consolidated FMC
Docket No. 92-12 and FMC Docket No. 93-21 on the attorneys'
fees issue.
The FMC agreed with SOS on the attorneys' fees
issue. The FMC held that because the bill of lading tariff
provision was unilateral (allowing the carrier, but not the
shipper, to recover fees and costs), it was in conflict with
an FMC decision, West Gulf Maritime Ass'n v. Galveston, 22
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F.M.C. 101 (1979), and the provision was unjust and
unreasonable. It granted SOS's relief in both FMC Docket No.
92-12 and FMC Docket No. 93-21. In so doing, it decided
three issues of relevance here. It first rejected PRMSA's
argument that claim preclusion barred the reparations claim
in FMC Docket No. 93-21 as to the four shipments involved in
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the court action. It next ordered PRMSA to pay back as
reparations in FMC Docket No. 93-21 any amount PRMSA
collected in attorneys' fees pursuant to the federal court
judgment. It also granted SOS's motion for summary judgment
in FMC Docket No. 92-12 seeking a cease and desist order
preventing PRMSA from publication and attempted enforcement
of the provisions of FMC-F-No. 10 (the bill of lading tariff)
and its bill of lading allowing for costs, expenses, and
attorneys' fees.
PRMSA has petitioned here for review of the FMC's
order. The FMC and the United States are respondents;
Stanley Hecht, president of SOS, has appeared as an
intervenor.2 In its petition, PRMSA presses the claim
preclusion argument it made before the FMC. It also claims
that the FMC's decision on the merits of the attorneys' fees
issue was error.
Because the question of claim preclusion is purely
a matter of law within the expertise of the federal courts
and is not a question within the particular expertise of the
FMC, our review of that issue is plenary. Cf. Dion v.
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Secretary of Health and Human Servs., 823 F.2d 669, 673 (1st
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Cir. 1987). We also note the doctrine that "[j]udgments
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2. PRMSA's suit in the district court was filed against both
SOS and Stanley Hecht. Midway through the litigation, SOS
represented that it had gone out of business, and the
litigation was carried on only in the name of Stanley Hecht.
In this opinion, "SOS" designates both parties.
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within the powers vested in courts by the Judiciary Article
of the Constitution may not lawfully be revised, overturned
or refused faith and credit by another Department of
Government." Chicago & Southern Air Lines, Inc. v. Waterman
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S.S. Corp., 333 U.S. 103, 113 (1948). Because we believe
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that FMC Docket No. 93-21 was barred under principles of
claim preclusion, we reverse the FMC's order with respect to
FMC Docket No. 93-21 including its order granting reparations
of the amount of attorneys' fees collected by PRMSA pursuant
to the federal court action. We do not, however, believe
that FMC Docket No. 92-12 was barred and, in light of our
deferential review of the FMC's construction of a statute it
administers, see Chevron U.S.A., Inc. v. Natural Resources
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Defense Council, 467 U.S. 837 (1984), we affirm the FMC's
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order in that case.
1. FMC Docket No. 93-21: The Reparations Claim.
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Since the identity of the parties and the existence of a
final judgment on the merits are not in dispute, the parties
have focussed on whether there was sufficient identity
between the causes of action actually litigated in the
federal court action and the claim for reparations before the
FMC. We do not enter the fray, as do the parties, for under
the principle of claim preclusion, "'a final judgment on the
merits of an action precludes the parties or their privies
from relitigating issues that were or could have been raised
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in that action.'" Manego v. Orleans Bd. of Trade, 773 F.2d
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1, 5 (1st Cir. 1985) (quoting Allen v. McCurry, 449 U.S. 90,
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94 (1980) (emphasis supplied)), cert. denied, 475 U.S. 1084
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(1986); accord Kelly v. Merrill Lynch, Pierce, Fenner &
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Smith, Inc., 985 F.2d 1067, 1070 (11th Cir.), cert. denied,
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114 S. Ct. 600 (1993).
The claims of unreasonableness, and hence,
illegality, of the attorneys' fees provision in the bill of
lading could have been raised as an affirmative defense in
the action over which the district court plainly had
jurisdiction. Although SOS could have raised
unreasonableness as an affirmative defense and requested the
district court to stay the action and refer the question to
the FMC as a matter of primary jurisdiction, see Holt Marine
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Terminal, Inc. v. United States Lines, 472 F. Supp. 487, 489
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(S.D.N.Y. 1978); cf. P.R. Maritime Shipping Auth. v. Valley
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Freight Sys., 856 F.2d 546, 549 (3d Cir. 1988) (referral to
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Interstate Commerce Commission), the decision to refer was
within the discretion of the federal court. Valley Freight
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Sys., 856 F.2d at 549. The doctrine of primary jurisdiction
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does not implicate the subject matter jurisdiction of the
federal court. Id.
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Normally, this would be the end of the matter.
Under the transactional approach of the Restatement (Second)
of Judgments 24 (1980) applicable here, see Manego, 773
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F.2d at 5; see also Wallis v. Justice Oaks II, Ltd. (In re
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Justice Oaks II, Ltd.), 898 F.2d 1544, 1551 (11th Cir.)
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(applying Restatement's transactional approach), cert.
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denied, 498 U.S. 959 (1990), defendants can no more split
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defenses arising out of the same transaction or occurrence
than plaintiffs can split claims. Even if SOS's reparations
claim before the FMC is characterized as a counterclaim
rather than an affirmative defense, it would not be a
separate cause of action. The reparations claim, which is
based on the very same four shipments at issue in the federal
court collection action, clearly arose out of the same
transaction or occurrence and virtually all of the facts
necessary to the reparations claim would have formed the
basis of a defense to the collection action. Cf. Pirela v.
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Village of North Aurora, 935 F.2d 909, 912 (7th Cir.), cert.
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denied, 502 U.S. 983 (1991).
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Indeed, the required joinder of compulsory
counterclaims, see Fed. R. Civ. P. 13(a) and Restatement
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(Second) of Judgments 22, is designed to prevent parties
from hiding behind formal distinctions between defenses and
counterclaims. Under usual circumstances, SOS's reparations
claim would be a compulsory counterclaim and SOS's failure to
assert it in the federal court action would have barred it
from bringing it in a subsequent action. See id.
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The FMC urges that those usual rules should not
apply, relying on the opinion in Government of Guam v.
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American President Lines, 28 F.3d 142 (D.C. Cir. 1994). That
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case held that there is no express or implied cause of action
in federal district courts over reparations claims brought
under either the 1916 Act or the 1933 Act.3 The argument
goes that SOS cannot be barred from pursuing a reparations
action that could not have been brought in the federal
district court. That argument begs the question. The issue
here is whether principles of claim preclusion bar the
assertion of a claim before an agency which is based on a
legal theory that could have been raised by way of defense to
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3. In Government of Guam the shippers first initiated an
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action before the FMC against carriers for reparations for
rates alleged to be unlawful under the 1916 and 1933 Acts.
The shippers later filed a virtually identical claim in
federal court which the court dismissed. The D.C. Circuit
affirmed the dismissal. The shippers conceded that the FMC
had the task of resolving the merits of the dispute, 28 F.3d
at 144, and there was no private cause of action expressly
provided in the 1916 and 1933 Acts for a shipper to challenge
a carrier's rates in federal court. The shippers sought to
continue the court action in order to preserve ultimate
claims of a class, claims which the FMC could not hear, and
argued there was an implied cause of action. The D.C.
Circuit declined to imply a cause of action.
In contrast, here, the carrier had a cause of
action that was properly before the federal court. There is
little reason to think the Government of Guam court intended
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to resolve a dispute of the sort faced on the facts here.
Indeed, in a separate part of the opinion, the Government of
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Guam court declined to give the shippers relief from the
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consequences of their failure to have raised certain legal
theories in the district court. Id. at 149-50.
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the district court claim and which, if it had been raised,
could have provided the same relief.
A defendant is barred from relitigating a defense
which was available in a prior action by making it the basis
of a claim that would "nullify the initial judgment or would
impair rights established in the initial action."
Restatement (Second) of Judgments 22(2)(b). A defendant's
failure to raise such a defense precludes the defendant from
seeking restitution of the amount that may have been awarded
to the plaintiff in the first action. Id. cmt. b & f, illus.
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2, 3, 9. The reparations action SOS seeks in this case is
precisely the type of restitutionary remedy that, under this
rule, is barred. Were SOS to be allowed a reparations
remedy, the district court's award of attorneys' fees would
be rendered totally meaningless and there would be a
concomitant waste of judicial resources. We hold that SOS's
claim for reparations before the FMC is barred.
The policies of economy, efficiency, repose and
fairness underlying the claim preclusion doctrine are best
served by holding SOS to the consequences of its actions and
inactions. Under the facts of this case, SOS had a full and
fair opportunity to litigate the attorneys' fees issue before
the district court.4 Although it had an opportunity to do
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4. A defendant must, of course, have a full and fair
opportunity to raise the claim in the first action. In the
analogous situation of plaintiffs' claim splitting, for
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so, SOS neither raised the reparations claim before the
federal court nor argued that there was no jurisdiction over
the attorneys' fees issue. SOS, as a result, gains no
benefit from any jurisdictional competency or "formal
barrier" exception to the doctrine of claim preclusion. Cf.
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Restatement (Second) of Judgments 26(1)(c). Further, the
Government of Guam outcome was not supported by precedent in
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the Eleventh Circuit nor is it binding on that circuit.
Indeed, the FMC itself has in the past taken the position
that federal courts have concurrent jurisdiction over
reparations claims brought under section 22 of the 1916 Act
and that a reparations counterclaim could be raised in
federal district court. See Interconex, Inc. v. Federal
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Maritime Comm'n, 572 F.2d 27, 30 (2d Cir. 1978).
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There is virtually no practical difference between
the relief SOS could have received before the district court
and what it sought before the FMC. The legal theory -- the
unreasonableness of the unilateral attorneys' fees provision
-- was available to SOS in the district court action. The
extent of the relief sought -- relief from payment of the
attorneys' fees -- was available in the district court.
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example, the Restatement recognizes that the first court must
have been competent to adjudicate the claim. See
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Restatement (Second) of Judgments 26(1)(c); see also id.
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22(2) (claim preclusion over counterclaims is limited to
claims that the defendant "may [have] interpose[d]" as a
counterclaim in the first action).
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The purely formal distinctions on which FMC and
intervenor uneasily rest have met with considerable hostility
when used as attempts to avoid claim preclusion. For example,
parties who have failed to raise fraud and forgery defenses
in state court actions have been barred from bringing RICO
claims in federal court based on allegations of fraud and
forgery even where jurisdiction over the RICO claim may have
been exclusively federal. See, e.g., Henry v. Farmer City
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State Bank, 808 F.2d 1228, 1236-37 (7th Cir. 1986); cf.,
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also, Pirela, 935 F.2d at 912. The underlying rationale is
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that claim preclusion applies if the formal barriers did not
prevent the party from a full and fair opportunity in the
first action to litigate the substance of the legal theory
advanced and remedy sought in the second action.
Finally, the results reached here with respect to
the reparations action are not outweighed by concerns over
the 1916 and 1933 Acts' statutory scheme. Cf., e.g., United
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States v. American Heart Research Found., Inc., 996 F.2d 7,
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11 (1st Cir. 1993) (claim-splitting limitation relaxed where
applying it would frustrate a statutory objective). A
different factual setting might more strongly involve the
policies behind the 1916 and 1933 Acts, but this is basically
an action between two private parties over who will bear the
costs and fees of the collection action here. In order to
collect $11,000 in freight charges, an amount SOS says it has
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now paid and does not dispute, PRMSA was forced to spend over
$100,000 in attorneys' fees. That Congress may have
preferred that the FMC decide questions of the reasonableness
of attorneys' fees provisions in carrier tariffs does not
justify upsetting the strong policy of honoring final
judgments entered by federal courts. Cf. Plaut v.
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Spendthrift Farm, Inc., 115 S. Ct. 1447 (1995) (retroactive
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legislation which reverses a judgment within the power vested
by the courts is unconstitutional as a violation of
separation of powers). Nor does it excuse compliance by
litigating parties with general rules of federal claim
preclusion.
SOS had a range of actions available, which it
chose not to follow, that would have accommodated the
interests of both the judicial and administrative systems.
Before SOS was sued, it could have paid PRMSA's bill and the
fees and then brought an action before the FMC for
reparations. Alternatively, once sued, SOS could have
asserted an affirmative defense of illegality and/or brought
a reparations counterclaim in district court and sought a
ruling on the question of whether there was subject matter
jurisdiction over the reparations counterclaim. It could
also have brought a timely action in the FMC and it could
have asked in a timely fashion for a stay of the district
court action or a primary jurisdiction referral. It could
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also have asked the district court to make its decision
without prejudice to pursuing the reparations claim before
the FMC. See Restatement (Second) of Judgments 26(1)(b).
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On these particular facts and equities,5 the FMC's
decision that SOS was free to avoid claim preclusion and thus
the federal court judgment against it on the four shipments
for costs and attorneys' fees is, we believe, in error and is
reversed.
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5. The result reached here coincides with the results
reached in Delta Traffic Serv., Inc. v. Georgia-Pacific
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Corp., 936 F.2d 64 (2d Cir. 1991), which addressed the
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jurisdictional relationship between the federal courts and
the Interstate Commerce Commission (ICC) over rate
reasonableness issues. In that case, the Second Circuit
denied requests to remand the case to the district court to
assert rate reasonableness defenses that were not raised in
the district court, but stated that Georgia-Pacific could
nevertheless continue to pursue a reparation action based on
rate unreasonableness before the ICC. See id. at 66. In
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Georgia-Pacific, however, Georgia-Pacific requested a stay of
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the district court action and a referral to the ICC
"[c]oincident with the service of its answer" in the federal
action. Id. at 65. Moreover, the rate reasonableness issue
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was pending before the ICC before judgment entered in the
federal court action. Aware of the ICC action, the Second
Circuit carefully limited the scope of its decision, which
may have restricted any claim preclusive effects it might
otherwise have had. Id. at 66; see 18 Charles A. Wright et
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al., Federal Practice and Procedure 4413 (1981). Georgia-
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Pacific does not stand for the proposition that a party may
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collaterally attack a federal court's final judgment by
raising before an agency a claim based on a defense that
could have been, but was not, raised in the federal court.
Indeed, in a similar case the Second Circuit had earlier
refused to undermine a federal district court judgment based
on a rate unreasonableness defense raised for the first time
on appeal. See Delta Traffic Service, Inc. v. Appco Paper &
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Plastics Corp., 931 F.2d 5, 7 (2d Cir. 1991).
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2. FMC Docket No. 92-12: Cease and Desist Orders.
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The issues raised by the appeal from the other administrative
complaint are different, as is the outcome. As PRMSA states
in its brief, the seven shipments at issue in FMC Docket No.
92-12 were never part of the federal court action brought by
PRMSA. Even if these seven shipments arose out of the same
transaction or occurrence (which is unclear on the record
before us), as they must for PRMSA successfully to assert
claim preclusion, the bar would work against PRMSA. PRMSA
would then have split its claim and would be barred from
suing on the seven shipments. A defendant has no obligation
to raise affirmative defenses to claims that have not been
brought against it. Cf. Restatement (Second) of Judgments
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22 cmt. b.
The pertinent statutes are silent on the merits of
whether the attorneys' fee provision in PRMSA's tariff and
bill of lading was unreasonable because it was unilateral.
We defer to the expertise of the FMC on the issue. See
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Chevron, 467 U.S. at 842-43. Section 18(a) of the 1916 Act
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provides that carriers will enforce "just and reasonable"
tariffs and practices relating thereto. 46 U.S.C. app.
817(a). The FMC, which administers the 1916 Act, is charged
with deciding whether a carrier's tariff and bill of lading
is "just and reasonable." In light of the fact that these
provisions are ubiquitous and shippers have no meaningful
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ability to avoid the provision, the FMC held that the
attorneys' fees and costs provision was not just and
reasonable under a prior analogous FMC decision, West Gulf
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Maritime Ass'n v. Galveston, 22 F.M.C. 101 (1979) (holding
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unreasonable under section 17 of the 1916 Act an attorneys'
fees provision that allowed a terminal operator, but not a
user, to collect attorneys' fees). We recognize that, West
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Gulf notwithstanding, two of the FMC's commissioners
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dissented from the decision at issue here and that the
question of unreasonableness of the attorneys' fees provision
is by no means free from doubt. But the FMC's construction
of the statute appears to be permissible. See Chevron, 467
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U.S. at 842-43. We therefore affirm the FMC's order insofar
as it relates to FMC Docket No. 92-12.
Conclusion
The judgment of the FMC is reversed in part,
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affirmed in part, and remanded with directions that the FMC
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dismiss FMC Docket No. 93-21 and modify its order in
accordance with this opinion. Parties to bear their own
costs on appeal. It is so ordered.
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