Southwestern Sugar and Molasses Company v. River Terminals Corporation/Opinion of the Court

On September 24, 1944, the barge Peter B, carrying a cargo of molasses, sank in 30 feet of water at dockside in Texas City, Texas. Although the barge was eventually raised, the cargo, allegedly valued at some $26,000, was largely or totally lost.

Petitioner, Southwestern Sugar & Molasses Co., charterer of the barge and owner of the cargo, filed a libel against respondent, River Terminals Corporation, a water carrier certificated under Part III of the Interstate Commerce Act, 49 U.S.C. § 901 et seq., 49 U.S.C.A. § 901 et seq., seeking recovery of damages for the loss of cargo and for expenses occasioned in the raising and repair of the barge, which had been towed by respondent from Reserve, Louisiana, to Texas City and there berthed. The District Court first tried the issue of liability, separating the question of damages for subsequent determination, and held that the barge had sunk and the cargo had been lost as a result of respondent's negligence in the navigation or management of the tow and that respondent was liable for all damage to the cargo and for the cost of raising and repairing the barge. 153 F.Supp. 923.

Respondent appealed from the interlocutory decree adjudging liability, 28 U.S.C. § 1292(3), 28 U.S.C.A. § 1292(3), urging that the trial court had erred in holding (1) that petitioner had an interest in the Peter B sufficient to entitle it to maintain a libel for damage thereto, (2) that the sinking of the barge and loss of cargo were due to respondent's negligence, (3) that § 3 of the Harter Act did not establish respondent's freedom from liability as a matter of law, and (4) that certain provisions in tariffs filed by respondent with the Interstate Commerce Commission, which purported to release respondent from liability for its negligence, and which were assumed by the District Court to have been applicalbe to the transportation here involved, were invalid as a matter of law and constituted no defense to thelib el.

The Court of Appeals did not consider any of the first three claims of error, although if sustained they would wholly have disposed of the case. Instead, the court directed its attention to respondent's contention that the exculpatory clause in respondent's tariff, incorporated by reference in the bill of lading issued in connection with the transportation, must be given effect. The court concluded that because the clause was embodied in a tariff filed with the I.C.C. it could not in the first instance declare it invalid, but was bound to give it effect unless and until the Commission, after appropriate investigation, reached a contrary conclusion. Accordingly, it reversed the judgment of the District Court 'in order to afford * *  * (petitioner) reasonable opportunity to seek administrative action before the Commission to test the validity of the challenged provision, otherwise to give full effect to the exculpatory clause *  *  * .' 253 F.2d 922, 928.

Petitioner sought certiorari, contending that the refusal of the Court of Appeals to strike down the exculpatory clause as a matter of law was contrary to the decision of this Court in Bisso v. Inland Waterways Corporation, 349 U.S. 85, 75 S.Ct. 629, 99 L.Ed. 911, where it was held that a clause in a private contract of towage purporting altogether to exculpate the tug from liability for its own negligence was void as against public policy. We granted the writ. 358 U.S. 811, 79 S.Ct. 38, 3 L.Ed.2d 55.

At the outset, we hold that the Court of Appeals erred in ordering what was in substance a referral of the issue of the validity of the exculpatory clause to the Commission without first passing on the other claims of error tendered by respondent below. As we have noted, those other claims, if accepted, would have required a reversal of the judgment of the District Court and the entry of judgment for respondent. The case had been fully argued before the Court of Appeals, and those claims were plainly ripe for decision.

Under these circumstances, we think that sound and expeditious judicial administration should have led the Court of Appeals not to leave these issues undecided while a course was charted requiring the institution and litigation of an altogether separate proceeding before the I.C.C.-a proceeding which might well assume substantial dimensions-to test the sufficiency of only one of respondent's several defenses. If in consequence of findings made by the Commission in such a proceeding it should be determined that the excupat ory clause cannot be given effect, the Court of Appeals would then have to decide the very questions which it can now decide without the necessity for any collateral proceeding. Conversely, a present ruling on those other questions might entirely obviate the necessity for proceedings in the Commission which would further delay the final disposition of this already protracted litigation. We conclude, therefore, that the Court of Appeals should have passed upon those issues as to which the expert assistance of the I.C.C. is concededly not appropriate, before invoking the processes of the Commission.

Despite the fact that disposition of respondent's other claims by the Court of Appeals may ultimately render moot the question of the validity of the exculpatory clause as a defense in the circumstances of this case, we deem it appropriate now to review the holding of that court that the exculpatory clause was not void as a matter of law. Were the Court of Appeals on remand to decide the other questions tendered by respondent adversely to it, it would otherwise then be necessary for petitioner once more to seek review here on this very question. The issue is one of importance in the development of the law maritime, as to which we have large responsibilities, constitutionally conferred; it is squarely presented on the record before us; and the exigencies of this litigation clearly call for its resolution at this stage. Accordingly, to this question we now turn.

In Bisso (349 U.S. 85, 75 S.Ct. 632) this Court held that a towboat owner might not, as a defense to a suit alleging loss due to negligent towage, rely on a contractual provision which purported to exempt the towboat altogether from liability for negligent injury to its tow. There a barge, while being towed on the Mississippi River by a steam towboat under a private towage contract, was caused by the negligence of those operating the towboat to collide with a bridge pier and sink. The Court reviewed prior cases in the field, and concluded that the conflict of decision found in those cases should be resolved by declaring private contractual provisions of the kind there involved altogether void as contrary to 'public policy.' The Court relied on 'two main reasons' for its conclusion, (1) that such a rule was necessary 'to discourage negligence,' and (2) that the owner of the tow required protection from 'others who have power to drive hard bargains.' As was pointed out explicitly in a concurring opinion, the Court's decision was perforce reached without consideration of particularized economic and other factors relevant to the organization and operation of the tugboat industry.

Petitioner argues that Bisso is dispositive of this case, on the theory that an inherently illegal condition gains nothing from being filed as part of a tariff with the Commission. We think that this reasoning begs the true question here presented, which is whether considerations of public policy which may be called upon by courts to strike down private contractual arrangements between tug and tow are necessarily applicable to provisions of a tariff filed with, and subject to the pervasive regulatory authority of, an expert administrative body. In Bisso the clause struck down was part of a contract over the terms of which the I.C.C., the body primarily charged by Congress with the regulation of the terms and conditions upon which water carriers subject to its jurisdiction shall offer their services, had no control. In the present case the courts below have assumed, and petitioner does not challenge, the applicability to the transportation which resulted in loss to petitioner of a duly filed tariff containing this exculpatory clause.

In these circumstances we would be moving too fast were we automatically to extend the rule of Bisso to govern the present case. For all we know, it may be that the rate specified in the relevant tariff is computed on the understanding that the exculpatory clause shall apply to relieve the towboat owner of the expense of insuring itself against liability for damage caused tows by the negligence of its servants, and is a reasonable rate so computed. If that were so, it might be hard to say that public policy demands that the tow should at once have the benefit of a rate so computed and be able to repudiate the correlative obligation of procuring its own insurance with knowledge that the towboat may be required to respond in damages for any injury caused by its negligence despite agreement to the contrary. For so long as the towboat's rates are at all times subject to regulatory control, prospectively and by way of reparation, the possibility of an overreaching whereby the towboat is at once able to exact high rates and deny the liabilities which transportation at such rates might be found fairly to impose upon it can be aborted by the action of the I.C.C. The rule of Bisso (349 U.S. 85, 75 S.Ct. 633), however applicable where the towboat owner has the 'power to drive hard bargains,' may well call for modification when that power is effectively controlled by a pervasive regulatory scheme.

Further, it may be noted that the clause relied on in this case is by its terms restricted to the situation where shipments are transported in barges furnished by others than the towboat owner. Whatever may be the considerations involved in forbidding a towboat to contract for exemption from liability for negligence in other circumstances, it may be that different considerations apply when the towboat moves barges which are delivered to it loaded, so that it never has an opportunity adequately to inspect them below the waterline, and which, if defective, may create emergency situations where a small degree of negligence can readily lead to very substantial monetary loss. If the peculiar hazards involved in towing a barge supplied by the shipper are great, and the methods of guarding against those hazards uncertain, it may be that in an area where Congress has not, expressly or by fair implication, declared for a particular result, the federal courts should creatively exercise their responsibility for the development of the law maritime to fashion a particularized rule to deal with particularized circumstances.

We may assume that the question whether a clause of this kind offends against public policy is one appropriate ultimately for judicial rather than administrative resolution. But that does not mean that the courts must therefore deny themselves the enlightenment which may be had from a consideration of the relevant economic and other facts which the administrative agency charged with regulation of the transaction here involved is peculiarly well qui pped to marshal and initially to evaluate. As was said in Far East Conference v. United States, 342 U.S. 570, 574, 575, 72 S.Ct. 492, 494, 96 L.Ed. 576, this Court has frequently recognized and applied

' * *  * a principle, now firmly established, that in cases      raising issues of fact not within the conventional experience      of judges or cases requiring the exercise of administrative      discretion, agencies created by Congress for regulating the      subject matter should not be passed over. This is so even     though the facts after they have been appraised by      specialized competence serve as a premise for legal consequences to be      judicially defined. 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.'

We hold that the Court of Appeals correctly ruled that the exculpatory clause here at issue should not be struck down as a matter of law, and that the parties should be afforded a reasonable opportunity to obtain from the I.C.C., in an appropriate form of proceeding, a determination as to the particular circumstances of the tugboat industry which lend justification to this form of clause, if any there be, or which militate toward a rule wholly invalidating such provisions regardless of the fact that the carrier which seeks to invoke them is subject to prospective and retrospective rate regulation. 'Cases are not decided, nor the law appropriately understood, apart from an informed and particularized insight into the factual circumstances of the controversy under litigation.' Federal Maritime Board v. Isbrandtsen Co., 356 U.S. 481, 498, 78 S.Ct. 851, 861, 2 L.Ed.2d 926. This principle has particular force when the courts are asked to strike down on grounds of public policy a contractual arrangement on its face consensual.

The case is remanded to the Court of Appeals with instructions to pass upon the first three assignments of error specified by respondent in its appeal from the judgment of the District Court. Should resolution of those issues not dispose of the case, the Court of Appeals is directed to remand the case to the District Court with instructions to hold it in abeyance while the parties seek the views of the I.C.C., in any form of proceeding which that body may deem appropriate, as to the circumstances bearing on the validity of respondent's exculpatory clause in the context of this litigation, and for further proceedings consistent with this opinion.

It is so ordered.

Case remanded with instructions.

THE CHIEF JUSTICE, Mr. Justice BLACK and Mr. Justice DOUGLAS believe that the rule of law announced in Bisso should not be changed by the Interstate Commerce Commission, and would therefore reverse this judgment.