The opinion of the court was delivered by: WALSH
The Deputy Attorney General on November 24, 1959, authorized and directed that evidence of possible indictable criminal offenses which may have been committed in the ocean shipping industry be presented to a grand jury in the District of Columbia. The letter of the Deputy Attorney General reads in part as follows:
'The Department is informed that violations of the federal anti-trust laws, the Shipping Act of 1916, and other federal statutes may have occurred and may still be occurring in connection with the activities and conduct of certain persons, firms, corporations, associations, organizations, and others engaged in the carriage of goods by water and in the forwarding, brokering and warehousing of goods carried by water.'
Numerous subpoenas duces tecum were issued by the Clerk of the Court on December 29, 1959, and on other dates, directing more than 150 shipping firms, etc., to produce certain documents for use of the Grand Jury.
Approximately 60 of those served with these subpoenas filed motions to quash. Supporting memoranda were filed by many of the movants, as well as by the Government.
Oral argument was had on March 7, 1960, and leave was granted certain movants to file memoranda concerning alleged new matters argued there, and the Government was subsequently permitted to file reply memoranda thereto. On April 8, 1960, certain movants moved the Court for leave to file reply memoranda to the Government's memoranda of March 25, 1960. The Court granted the motion and all of the memoranda, exhibits, etc., have now been submitted.
While the Government claims that the grand jury inquiry need not be preceded by any definition whatever of the crimes to be investigated or the persons against whom an accusation is sought, In re Grand Jury Proceedings, D.C.E.D.Penn. 1933, 4 F.Supp. 283 (see Court's discussion relating to this matter, infra), in its memorandum filed on February 8, 1960, the Government reviewed certain of the facts surrounding the challenged subpoenas so as to inform the Court of the nature of the grand jury inquiry. As set forth therein, the activities under investigation, at least initially, are identified as the 'Far East Trade,' the 'Cotton Trade,' and the 'African Trade.'
With respect to the Far East Trade, the shipping lines of several nations over the years have formed a number of shipping conferences (voluntary associations of ocean carriers) covering cargoes shipped between the Orient and the United States. In most cases, the agreements under which these conferences operate are filed with, and approved by, the Federal Maritime Board2a pursuant to the Shipping Act of 1916, 46 U.S.C.A. § 801 et seq. However, as noted in Federal Maritime Board v. Isbrandtsen Co., 1956, 356 U.S. 481, 78 S. Ct. 851, 2 L. Ed. 2d 926, some shipping lines refuse to join these conferences and do not adhere to the rates fixed by the conferences for certain products, and in fact, charge rates sufficiently lower than the conference rates such that rate wars may occur. As noted in the Isbrandtsen case, the conference carriers attempt to fight the competition by adopting certain practices which may be anti- competitive. The Government claims that during the time the Isbrandtsen case was pending in the Courts, the conference there involved opened rates (that is, abandoned Board authorized joint rate setting activities) on certain commodities and so represented to the Board that they were open. However, the Government claims contrary to their representations to the Board, they secretly and concertedly fixed rates on many of the so-called open rate items and may have conspired to conceal such agreements from the Board. The Government also claims that conference carriers attempted to foreclose competition of nonconference members through an exclusive patronage or dual rate system. The Government allegedly substantiates these claims with letters, etc.
With respect to the Ensenada trade, some Japanese lines have recently obtained a large share of the cotton shipments by offering favorable rates and accepting payment upon delivery in Japan in Japanese currency. The Pacific Westbound Conference (PWC) tried to meet the competition and as a result a rate war became a real possibility. However, an agreement was entered into by PWC and the Japanese lines in the summer of 1958. This agreement is claimed by the Government to be designed to equalize Ensenada to Japan rates with California-to-Japan rates and to prevent entry of competitors by prohibiting agents of the signatory lines from also representing any nonsignatory lines.
As to the Ensenada cotton shipped to Europe, competition in that trade apparently hurt the members of the Association of West india Trans-Atlantic steamship Lines (Witass) and the Pacific Coast European Conference (PCE). A new conference, the Ensenada/European Conference (E/EC) was formed (presumably of PCE members). The E/EC allegedly instituted a deferred rebate system and a 'fighting rate' for the Ensenada-to-Europe trade designed to eliminate the Wallenius Line as an effective competitor.
This would presumably, if successful, permit the rates for Ensenada-to-Europe to be equalized with California-to-Europe rates.
The Government also claims that he Guaymas cotton trade has resulted in activities which bear investigation. At that port the States Marine Lines and others have entered into an agreement with Japanese lines, after threats were allegedly made by the former to slash rates. The Government quotes from a letter sent by an official of States Marine Lines to the effect that the Guaymas Association, covering Guaymas to Japan cotton trade, is contrary to that of a 'competitive program'.
Competition over the Guaymas to Europe cotton trade apparently resulted in the establishment by Witass of a Mexico-Pacific Subcommittee in San Francisco, which instituted a 'fighting rate' deferred rebate system to eliminate the competition of Wallenius Lines in that trade.
With respect to both the Ensenada and Guaymas cotton trade, the Government suggests that certain United States grown cotton may be shipped by rail to Mexico for transshipment overseas from these Mexican ports, but this is denied by movants involved in the cotton trade.
A new service entered the African Trade in 1958, operating under the style 'Baron Line' and using Japanese vessels chartered to United States Navigation company. It is claimed by the Government that certain of the movants here organized a program of 'fighting rates' or selectively reducing rates on important commodities in that trade, with the intent to 'freeze out' competitors. A committee was purportedly formed to supervise the rate reduction programs and 'kill off' the Baron Line.
The first question to be treated here is whether the grand jury has jurisdiction over the subject matter under investigation.
As already noted, the matter was referred to the grand jury by the Deputy Attorney General, who in turn had been forwarded certain material by the House Antitrust Subcommittee for possible grand jury action. The extensive transcript of the Congressional hearings has been reviewed in some detail. 'Monopoly Problems in Regulated Industries,' Hearings before the Antitrust Subcommittee (Subcommittee No. 5) of the Committee on the Judiciary, House of Representatives, 86th Congress, 1st Session, pp. 1-5656 (1959).
The Government asserts that until an accusation has been lodged no challenge to the subject matter jurisdiction of the grand jury may be entertained. There are a number of cases favoring the Government's position which lend themselves to extensive quoting. In the main they attribute an almost unlimited power and independence to the grand jury in its essential functions. Adherents of this view would make exceptions only in rare instances. However, there is also authority for the view that the courts may and should exercise supervisory authority over the grand jury in certain instances. The main difference in the views appears to be that the former is perhaps more liberal in the construction of the powers and independence of the grand jury.
Recent cases according broad powers and independence to grand juries are: In re April 1956 Term Grand Jury, 7 Cir., 1956, 239 F.2d 263; United States v. United States District Court, 4 Cir., 1956, 238 F.2d 713.
Most courts taking this position cite the cases of Blair v. United States, 1919, 250 U.S. 273, 39 S.ct. 468, 63 L.ed. 979; Hale v. Henkel, 1905, 201 U.S. 43, 26 S. Ct. 370, 50 L. Ed. 652, and Hendricks v. United States, 1912, 223 U.S. 178, 32 S. Ct. 313, 56 L. Ed. 394, among their authorities.
The position of the Supreme Court on the matter is perhaps best summarized in the Blair case, wherein it was held that witnesses were not entitled to take exception to the jurisdiction of the grand jury as to the subject matter under investigation (250 U.S. 273, 39 S. Ct. 471):
'* * * It is a grand inquest, a body with powers of investigation and inquisition, the scope of whose inquiries is not to be limited narrowly by questions of propriety or forecasts of the probable result of the investigation, or by doubts whether any particular individual will be found properly subject to an accusation of crime. As has been said before, the identity of the offender, and the precise nature of the offense, if there be one, normally are developed at the conclusion of the grand jury's labors, not at the beginning.
'And, for the same reasons, witnesses are not entitled to take exception to the jurisdiction of the grand jury or the court over the particular subject- matter that is under investigation. In truth it is, in the ordinary case no concern of one summoned as a witness whether the offense is within the jurisdiction of the court or not. At least, the court and grand jury have authority and jurisdiction to investigate the facts in order to determine the question whether the facts show a case within their jurisdiction.'
Judge Hand is among those who attribute almost unlimited authority to the grand jury over its functions. In re Kittle, C.C.S.D.N.Y.1910, 180 F. 946.
As noted earlier, this is not to say that instances do not arise where the courts may find reason to inquire into purposes of or control the course of a grand jury investigation. For instance, in the case of In re National Window Glass Workers, D.C.N.D.Ohio 1922, 287 F. 219, 225, cited by the Movant, it was held that a 'supervisory duty, not only exists, but is imposed upon the court, to see that its grand jury and its process are not abused, or used for purposes of oppression and injustice.' The court there went on to determine that the problem comes down to the question of what is an abuse of process and whether one existed in that case. While the court did not go on to define an abuse of process, it found that an abuse existed in that the dominating object of the investigation was to examine witnesses in advance of trial, and to procure evidence for use in the trial of the same parties who were defendants on an indictment pending in another United States District Court. However, even there the court found a need for only 'limited interference' with the grand jury investigation. The subpoenas were vacated; but in effect, the investigation was merely suspended pending the outcome of the case in the other jurisdiction, or pending certain other specified action by the Government.
A review of all the facts and allegations of the movants here fails to bring to light any showing of an abuse of process by the grand jury involving the subject matter under investigation. Or, as the court in Application of Radio Corp. of America, D.C.S.D.N.Y.1952, 13 F.R.D. 167, 172, stated: 'All in all, this is not one of those rare cases where the Court should exercise its power to deny process to the Grand Jury.'
A determination of the subject matter to be investigated is considered to be an essential function of a grand jury and whether any intrusion upon that function is characterized as a 'rare instance' denying process to, or the exercise of a supervisory duty over, the grand jury, such intrusion does not appear warranted in this case except as hereinafter specifically set forth.
Certain movants allege that 'while jurisdictional grounds of objection may be referred to at the time of any indictment, it seems clear that under the circumstances of the present case where no proper indictment could be brought against the movants, the Court should inquire into and decide the jurisdictional question at the outset in order to avoid the tremendous burdens which would be imposed upon these movants if the investigation were allowed to proceed.' (Emphasis supplied.)
An answer to that argument may be that in most, if not all, instances these jurisdictional questions are premature.
Judge Kirkland of this Court in In re Investigation of World arrangements etc., D.C.D.C.1952, 13 F.R.D. 280, 287, was faced with a similar question in a case that was in the same posture as the present case, i.e., there was a challenge of the subject matter jurisdiction at the grand jury stage, and he determined that the motions to quash were premature (with one exception, which is mentioned later).
The challenge here, with respect to jurisdiction over the subject matter, is also held to be premature. For instance, it would be sheer speculation for this Court to predict the outcome of the grand jury's deliberations and to conclude that it cannot return any indictment which the Court cannot recognize. Nor, must this Court predict that any indictment will follow from this inquiry.
Movants rely heavily on the case of United States v. Alaska S.C. Co., D.C.W.D.Wash.1952, 110 F.Supp. 104, where the District Court found that the Federal Maritime Board had primary jurisdiction of the controversy. However, while the court's ruling in that case resulted in a dismissal of an indictment, it is obvious that the ruling occurred at a different stage in the proceedings.
This leads the Court to consider the next and related question: whether primary jurisdiction in the Federal Maritime Board bars the pending inquiry.
As noted earlier, a letter from the Deputy Attorney General directing the presentation of evidence of possible criminal offenses to a grand jury, stated that the Department of Justice had been 'informed that violations of the federal antitrust laws, the Shipping Act of 1916, and other federal statutes may have occurred and may still be occurring.'
Although the Congressional hearings were relatively lengthy, additional hearings on the shipping industry have been held by the same subcommittee. Congressional Record, Vol. 106, No. 84, May 9, 1960, p. D. 392.
The movants allege that inasmuch as the case of Federal Maritime Board v. Isbrandtsen Co., supra, restated the proposition that the Maritime Board's primary jurisdiction precludes the United States from proceeding with antitrust proceedings in certain cases, that case is controlling here and precludes the grand jury from proceeding with its inquiry.
However, the Isbrandtsen case obviously did not state that the Board's primary jurisdiction precludes a grand jury inquiry. The Court did, however, interpret the cases of United States Navigation Co. v. Cunard, 1932, 284 U.S. 474, 52 S. Ct. 247, 76 L. Ed. 408 and Far East Conference v. United States, 1952, 342 U.S. 570, 72 S. Ct. 492, 96 L. Ed. 576 to mean that 'the courts, while retaining the final authority to expound the statute (the Shipping Act), should avail themselves of the aid implicit in the agency's superiority in gathering the relevant facts and in marshalling them into a meaningful pattern * * *.' (356 U.S. 481, 78 S. Ct. 861) As noted by the Supreme Court in the Far East case (342 U.S. 570, 72 S. Ct. 494), 'Uniformity and consistency in the regulation of business entrusted to a particular agency are secured, and the limited functions of review by the judiciary are more rationally exercised, by preliminary resort for ascertaining and interpreting the circumstances underlying legal issues to agencies that are better equipped than courts by specialization, by insight gained through experience, and by more flexible procedure.'
As also noted in 3 Davis 'Administrative Law Treatise,' Sec. 1901-1909, a determination by a court that an agency has primary jurisdiction does not necessarily mean that the court will refrain from deciding the case before it; it may mean only that the court will postpone its action on the case before it until after the agency has made a designated determination. Yet, the movants here would have this Court forecast that any action coming before it later would be dismissed on the ground, at least, of primary jurisdiction.
Much of the movant's arguments urging their motions on the basis of primary jurisdiction is based on the assumption that there is only involved in this investigation matters under the jurisdiction of the Board as provided in the Shipping Act. This dismisses the possibility, suggested in The Deputy Attorney General's letter cited earlier, of the violation of the antitrust laws
and other statutes, and it also dismisses the possibility that the subpoenaed records here may furnish a 'vital link in the chain of evidence indicating violations of antitrust (and other federal) laws by others.'
However, it does not appear that the Shipping Act wholly supersedes the antitrust laws as they pertain to the shipping industry. For instance, while the Sherman Act prohibits monopoly and attempts to monopolize, the Shipping Act appears only to prohibit, in sections 14, 15, and 16, the means by which monopoly may be achieved; the Sherman Act permits the Government and private persons preliminary injunctive relief against threatened or actual antitrust practices; the Shipping Act appears to offer no comparable remedy; and, the sanctions of the Sherman Act appear broader in that denial of the use of the Panama Canal may be applied, for instance, for certain violations, etc., (15 U.S.C.A. § 31).
Therefore, on the basis of the discussion throughout this section, the Court refuses to accept the movants' arguments urging their motions to quash on the basis that the antitrust laws are wholly superseded by the Shipping Act.
The Government has made the allegation here that the statute of limitations may run against the alleged violations while the matter is pending before the Maritime Board if the primary jurisdiction argument is permitted to postpone the instant inquiry.
This is a claim which deserves consideration. As noted in Riss & Co. v. Association of American Railroads, D.C.D.C.1959, 170 F.Supp. 354, 369, certiorari denied 1959, 361 U.S. 804, 80 S. Ct. 108, 4 L. Ed. 2d 57, wherein a motion to dismiss a complaint in a civil antitrust suit under the Interstate Commerce act, 49 U.S.C.A. § 5b (9) with respect of the prospect of referring the matter to the Interstate Commerce Commission, it was observed that 'It would thus seem that a reasonable time before the ...