DHX loses appeal over Hawaii rates

DHX loses appeal over Hawaii rates A San Francisco appeals court has denied a petition by the freight forwarder DHX Inc. for a review of a U.S. Surface Transportation Board decision that questioned the reasonableness of certain rates and practices of Matson Navigation Co. and Sea-Land Services, now Horizon Lines, on their services between Hawaii and the U.S. mainland.
   The case had its roots in a dispute about rates offered by the carriers for “overflow” cargo, but had evolved into a more general dispute about freight rates offered to different shippers.
   The court explained that Matson and Horizon tailored rates not only to compete with each other, but also to attract profitable traffic away from freight forwarders who consolidate traffic.
   To attract and keep large shippers like Home Depot that could provide a steady flow of full containers, the ocean carriers began offering them volume rates with “overflow provisions” — a lower rate on partially filled containers.
   The STB found that when DHX recognized that lower rates were being charged for partially filled containers that were part of a larger shipment under Matson and Horizon’s overflow provisions, it began offering service to large shippers such as Home Depot.
   It would “unpack the full containers, redistribute their contents, and repack them in order to create more overflow containers than the shippers themselves would have tendered had they dealt directly with the water carriers, thereby resulting in a larger number of containers subject to the lesser overflow rates.
   “According to Matson, at one point upwards of 98 percent of its revenues for overflow traffic was coming from freight forwarders rather than from the regular direct shippers that the overflow provisions were designed to accommodate,” the court noted.
   The carriers took actions designed to induce full-containerload shippers to begin dealing directly with them again.
   DHX then filed a complaint with the STB in October 1999 challenging the reasonableness of rates and practices of Matson and Horizon.
   The court said an amended complaint by DHX filed in April 2002 “in essence argued that any rate charged to DHX was unreasonable if it exceeded the rate charged to another customer.” DHX sought more than $19 million in damages.
   In May 2002 STB issued a decision granting a motion by Horizon for partial dismissal.
   DHX also filed a civil complaint against Horizon in federal district court in August 2002, asserting a claim for rate discrimination. That was dismissed in January 2003, with the court holding that the only relief available to DHX would be under the Interstate Commerce Act as determined by the STB.
   In December 2004, the STB denied DHX’s remaining claims against Matson and Horizon, saying DHX had not demonstrated the carriers had engaged in unreasonable practices.
   In a decision released Thursday, the Ninth Circuit said “the core of DHX’s claims is that Matson and Horizon unlawfully discriminated by not giving DHX identical rates to those offered to direct FCL shippers such as Home Deport or Sears. Contrary to DHX’s assertion, we conclude that Congress did not intend to retain a private cause of action against water carriers for discrimination” when it passed the law that set up the Surface Transportation Board and revised the Interstate Commerce Act.'
   The Ninth Circuit said, “it was also not arbitrary, capricious, an abuse of discretion or contrary to law for the STB to conclude that DHX had not shown that it was subjected to unreasonable rates or practices.”
   It contended, “DHX has mistakenly equated discriminatory pricing with unreasonableness. Rates can be discriminatory without being unreasonable, or unreasonable without being discriminatory. Reasonableness denotes a range, rather than a single fixed point.”
   The court said DHX’s challenge to the STB’s decisions on rates of ocean carriers “is not within the narrow category of cases in which we are empowered to override the agency’s knowledgeable exercise of its authority over the reasonableness of rates and related practices in a regulated industry.
   “We hold that the STB’s decisions denying DHX’s complaint challenging the reasonableness of certain rates and practices of Matson and Horizon were not arbitrary, capricious, an abuse of discretion, or unsupported by substantial evidence. We also conclude that the STB’s decisions are in accordance with law.”