OOCL Seeks to Overturn $45M Award Alleging FMC Process is Unconstitutional
Lawyers for Orient Overseas Container Line filed suit in U.S. District Court on May 5, challenging the Federal Maritime Commission’s adjudication process, alleging the internal process is unconstitutional and that the company, confronted by two claims, is in a situation that is “constitutionally untenable.” The suit came after the FMC’s administrative law judge awarded a $45 million judgment to bankrupt retailer Bed Bath & Beyond, and a picture frame and art supply company, Nielsen & Bainbridge, is also pursuing a denial of service claim against OOCL.
The complaints relate to services provided to shippers during the COVID-19 pandemic and the surge in shipping volumes that resulted from the pandemic. Bed Bath & Beyond, like many other shippers, has alleged that the carriers systematically denied them space despite their contracts and resold space on the spot market at higher prices. Bed Bath & Beyond alleges it was forced into large expenditures in an attempt to make up for the lack of contracted space and also incurred unreasonable detention and demurrage (D&D) fees.
OOCL is alleging in the new suit filed in U.S. District Court in Houston, Texas, that the complaints are a simple “breach of contract” dispute between two parties that should be heard in the courts. It is asking the court to grant declaratory and injunctive relief so that the company is “protected from having to further defend itself in these constitutionally-defective FMC proceedings.”
Using the complaint from Bed Bath & Beyond as an example, it says the complaint falls into two general categories, the space allocated and the price for the space, and the fees incurred. It asserts that the FMC “does not possess subject market jurisdiction over breach of contract claims,” and the Shipping Act that Bed Bath & Beyond relied on does not afford relief with respect to space allocation issues.
It takes apart the FMC finding, citing that OOCL reduced space allocations to all shippers by 17 percent in 2022, dismissing the claims of retaliation. It also dismisses the finding of an implied threat to Bed Bath & Beyond and says the author of the cited email testified that it was not the intent. OOCL also questions the FMC process, noting it was denied a motion to reopen discovery on certain aspects of the claims.
OOCL needs to respond to the FMC’s finding by May 15 and file an opposition brief by September 25. The full FMC can also review the judge’s finding. The lawyers said the second case, which is currently in discovery, runs on a parallel timeline, adding to the burden on OOCL.
It further asserts that the FMC system “violates the Constitution” because it is “insufficiently accountable to the head of the executive branch, the President.”
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OOCL is just one of six carriers that the bankruptcy estate for Bed Bath & Beyond filed claims against with the FMC. It claims that the retailer was unable to get merchandise into the country, and the higher shipping costs contributed to its ultimate bankruptcy and the closing of the stores. Other shippers, including big companies such as Samsung Electronics, and retailers QVC and Dollar General, as well as smaller manufacturers, also filed claims against carriers. Many of the smaller claims were settled, and the adjudication process is being used for many claims.
This case has the potential to disrupt the FMC’s established process, using its internal resources to investigate and resolve claims between shippers, truckers, and the carriers.