Volkswagenwerk Aktiengesellschaft v. Federal Maritime Commission/Dissent Douglas

Mr. Justice DOUGLAS, dissenting in part.

I believe the Court has misconstrued § 15 of the Shipping Act, 1916; and I fear that its erroneous construction will cause serious disruption in the process of collective bargaining in the maritime industry. If the tariff exacted from petitioner is discriminatory or unreasonable, §§ 16 and 17 of the Shipping Act provide a remedy. If it violates the antitrust laws, there is also a remedy, as I shall indicate. But to require the funding part of maritime collective bargaining agreements to receive prior approval from the Maritime Commission is to use a sledge hammer to fix a watch. I cannot read § 15 so as to attribute to Congress such a heavy-handed management of sensitive labor problems.

The collective bargaining agreement involved in this case, with its Mechanization and Modernization Fund (Mech Fund), cannot be evaluated properly without an understanding or maritime labor relations and technological developments in the shipping industry.

The history of maritime labor relations in this country has been punctuated with lengthy major strikes and continuous minor disruptions. The maritime industry has long been faced with problems of instability-economic and managerial. Employment for maritime workers is generally both irregular and insecure. That condition lies behind the large number of major strikes and work stoppages on our coasts.

Because the shipping industry is vitally important both to our national commerce and national defense, the Federal Government has maintained a special interest in trying to promote its growth and stability. The Shipping Act, 1916, is one example of this concern. With respect to maritime labor relations, however, the activities of the Federal Government were, until our entry into World War I, primarily devoted to laws protecting or disciplining seamen as individual workers. The war years saw the Government actively encouraging collective bargaining in the maritime industry, its efforts resulting by 1920 in a significant expansion of collective bargaining. There followed a general retrogression, with wages and working conditions reaching low levels. That condition prevailed until the highly disruptive and violent Pacific Coast strike of 1934.

That strike was the product of deepseated grievances of maritime employees regarding low wages and poor working conditions. The situation on the Atlantic Coast was not much better. Although an agreement was reached in late 1934 for Atlantic Coast Workers, labor relations remained unstable and work stoppages were rampant. On both coasts, intra-union and inter-union disagreements, coupled with employer-union hostility, made agreement highly difficult. Quickie strikes dotted the ports, and another general strike followed in 1936. On the Pacific Coast, the employers and the ILWU (which had achieved recognition after the 1934 strike) were in constant conflict through 1948, when still another general strike erupted. This period, from 1934 to 1948, has been aptly described as something like 'class warfare.' As one commentator put it:

'The ILWU (then a part of the AFL International     Longshoremen's Association) gained formal employer      recognition as a result of the general strike of 1934, which      followed years of exploitation and abuse of longshoremen by      their employers. The bitterness which had characterized the     industry carried over into the subsequent employer-union      relationship. The employers did their best to break the     union, and the union retaliated just as militantly. The years     which followed were among the stormiest in U.S. labor      history. Between 1934 and 1948, the West Coast had over 20     major port strikes, more than 300 days of coastwide strikes,      about 1,300 local 'job action' strikes, and about 250      arbitration awards.'

During the stormy 1930's, the Federal Government was greatly expanding its role in labor relations. The NIRA and NLRA greatly revied unionism among both seamen and longshoremen in addition to workers in other industries. Those Acts guaranteed the right of collective bargaining and offered a means for recognition of unions; the unions gained members and strength. And with stronger unions, collective bargaining became more widespread. But the explosive situation in the maritime industry was not solved by these general enactments, and Congress passed a series of laws to deal with the labor problems in that industry. First was the Merchant Marine Act, 1936, 49 Stat. 1985, creating a United States Maritime Commission to investigate conditions of seamen on ships and to determine minimum wage scales and working conditions on vessels that were receiving government subsidies. Despite the 1936 Act, labor relations did not improve significantly; and Congress in 1938 amended the Act, creating a Maritime Labor Board (MLB) with the duty of encouraging collective bargaining and assisting in the peaceful settlement of labor disputes through mediation. A provision of the 1938 amendment, § 1005, 52 Stat. 967, required all maritime employers to file with the MLB within 30 days a copy of every contract with any group of its employees covering wages, hours, rules, and working conditions. Any new contract or change in an existing contract also had to be filed with the Board. The contracts did not require approval by the Board, but were to be used to assist the Board in its mediation activities and in its promotion of peaceful settlement of labor disputes.

The Board was instructed in the 1938 Act to submit to Congress by 1940 its recommendations for establishing a permanent federal maritime labor policy ensuring stable labor relations. The Board in its 1940 report concluded that conditions in the industry were still uneasy, and recommended a permanent federal body with wide jurisdiction over questions of maritime labor-including representation and settlement of disputes. The 1938 Act provided that the Board was to be discontinued in 1941; but in 1940 Congress extended its life until mid-1942 to permit further studies by the Board and Congress. Nothing more was done until 1955 when Congress again turned its attention specifically to the problems of maritime labor relations. In the meantime, the MLB had expired. Although several bills were introduced providing for specialized federal control over maritime labor relations, no special machinery was established; and the maritime industry remains subject to the various provisions of federal labor laws.

In 1948 another general maritime strike rocked the Pacific Coast. Following that strike, which lasted about 100 days, there was a 'period of relative claim.' The 1948 strike had led to a change in employer leadership, a less hostile attitude on the part of the union leadership, and a consequent lessening of tension along the Pacific Coast. Both sides recognized that the reduction of strife was desirable since a substantial amount of traffic had been diverted from the Pacific Coast to other ports or to other means of transportation on account of chronic maritime labor difficulties and work stoppages. But despite the reduction in hostility between labor and management, solutions to problems were not readily forthcoming. Business was bad for the shipping companies-foreign competitors had cut heavily into the market, and a decline in business meant less work for both seamen and longshoremen. Modernization was sorely needed, but it was also greatly feared, for mechanization would cut out jobs. But without improved techniques and facilities, the employers could not regain a strong competitive position. In addition to lack of modern equipment, employers were further hampered by highly restrictive work rules that had been in effect since the 1930's, such as multiple handling, sling-load weight, and gangsize restrictions.

It is only against this background of chronic strikes and restrictive labor practices that the tremendous impact of the Mech Fund can be appreciated. That was the heard of the 1960-1961 settlement. As noted by one commentator intimately acquainted with the negotiations of the parties, '(t)his agreement did not spring full-blown from the brow of Zeus, of from the brain of Bridges.' Rather, '(t)he agreement, which was hammered out in 5 months of negotiations ending in October 1960, culminated 4 years of discussion between the PMA and the ILWU.'

Earnest bargaining began in 1957. PMA wanted to obtain a guarantee from the ILWU that strikes and work stoppages would not result from the introduction and use of mechanization and other labor-saving devices. In return, the union wanted it workers to share in the cost savings resulting from modernization, and desired assurances that changes in work methods would neither create unsafe working conditions nor accelerate the productivity required of individual workers. After two years of preliminary negotiations, an agreement was made in August 1959 which provided for a further study of the problems of mechanization and for the establishment by PMA of a fund of $1,500,000 for the benefit of union workers.

Negotiations beginning in May 1960 led to a 'Memorandum of Agreement on Mechanization and Modernization,' concluded in October 1960, and providing for a $29,000,000 trust fund to be financed by PMA. The fund was to consist of the $1,500,000 due under the 1959 agreement plus another $27,500,000 to be accumulated over a five-and-one-half-year period at the rate of $5,000,000 per year. The fund was to be used to protect longshoremen and marine clerks from the consequences of reduced employment caused by mechanization. The agreement was to enter into force upon approval by the members of PMA and the ILWU, and was to expire on July 1, 1966. The agreement also provided management with the relatively free rein it had sought to eliminate restrictive work practices. The former practice of multiple handling was eliminated, and the minimum size of a gang for loading and unloading operations was specified. The sling-load limit for loads was to remain unchanged if the manner of operation was the same as when the limit was first negotiated; otherwise, the employer could set the weight, provided that he acted 'within safe and practical limits and without speed up of the individual.'

Thus, the agreement satisfied the desire of employers to modernize and eliminate outmoded and restrictive work rules, and at the same time provided a measure of security for the workers whose jobs would be affected by the use of the new devices. The agreement, however, left open the question of how the employers' contributions of $5,000,000 a year would be raised. The question of a proper method of assessment had been discussed by the union and management during the preceding negotiations; several suggestions were offered by the parties. But in return for a commitment from the PMA members obligating themselves individually and collectively to the payment of the fund, the ILWU agreed to permit PMA to establish the method of payment.

PMA then set up a Work Improvement Fund Committee to determine the best method of raising the money. That Committee considered various bases for assessing contributions-man-hours of each employer, cargo tonnage, a combination of the two, cargo tonnage moving in containers, measurement of improvements in longshore productivity. The Committee majority recommended a cargo tonnage basis; its reasons for doing so were summarized by the court below as follows:

'The Committee recommended a formula based on cargo tonnage     as a 'rough-and-ready' way to divide the cost, admittedly      lacking the refinement of the productivity measurement method      but also lacking its infeasibility and avoiding the inequity      of the man-hour method whereby contributions are in inverse      proportion to benefits received. It considered that cargo     volume though not necessarily proportional was some indicator      of stevedoring activities and that administrative simplicity      was a cardinal consideration.

'The Committee recognized further that there were also  objectionable features of the tonnage formula but   considered these to be less weighty than the objections   inhering in the other formulae. It recommended that the  formula be reviewed to prevent the continuation of any   hardship or inequity that might develop.'

In recommending the tonnage formula, the Committee noted that the same system was used for assessing a part of PMA dues. It had also been the practice of PMA to use a tonnage formula for assessments allocating other types of labor costs, such as joint maintenance of dispatch halls and the payment of arbitrators' salaries. In fact, it appears that the ILWU had itself proposed a tonnage formula during the negotiations and asked that it be incorporated into the collective bargaining agreement; but PMA resisted this approach, apparently wishing to keep its options open and fearing that incorporation in the agreement might tend to commit the PMA to a fixed formula that would also be included in a future agreement. The tonnage formula recommended by the Committee was subsequently adopted by the PMA membership.

It was specifically provided in the agreement that each employer would abide by the formula adopted by the Association; and this promise to comply was the quid pro quo for the union's agreement not to write any particular formula into the contract or take part in the determination of the method of assessment. Thus the PMA decision on the method of assessment was part and parcel of the collective bargaining agreement. Indeed, the modernization plan was the heart of that agreement, and the subsequent assessment plan merely implemented the employers' duty under the collective bargaining agreement to establish a fund specifically marked to protect maritime workers against the far-reaching effects of modernization.

PMA treated the financing of the fund as an integral part of the collective bargaining process. The Committee established by PMA to recommend a funding formula was appointed by the negotiating committee which worked on the collective bargaining agreement; and the PMA membership ratified both the collective bargaining agreement and the funding formula at the same time.

It is not, I submit, possible, as a practical matter, to separate the Mech Fund provision in the collective bargaining agreement from the subsequent decision of the PMA membership concerning how the fund was to be raised. A collective bargaining agreement is the product of negotiations. How can negotiators sitting at a table arrive at an agreement if they know that a major part of it depends on the approval of the Federal Maritime Commission? How many months-or years-will it take to get approval? What will happen meanwhile? Will not the imposition of that kind of administrative supervision bring an end to, or at least partially paralyze, collective bargaining?

The Mech Fund is a labor expense. Increased labor costs normally are passed on at least in part by increased prices. When the Auto Workers were recently negotiating with General Motors for a guaranteed annual wage, what would have been the consequence if nothing could have been decided until a federal agency had determined whether the impact on prices or on the economy was proper? I can imagine a regime of total controls where such prior approval would be required. But we have no such regime at present; and I can see no possible justification for a judicially created one in the explosive maritime field. To meet the costs increased by any collective bargaining agreement, a company might have to raise its prices and pass at least part of the added cost on to the consumer. But this happens all the time in the maritime industry, as well as in other industries, and does not constitute rate fixing of the type at which the Shipping Act is aimed. There is nothing in the legislative history of the Shipping Act which suggests that § 15 gives the FMC the power or license to oversee labor negotiations. But that is the effect of what the Court does today when it decides that the employers' agreement here must be submitted to that body for approval.

My Brother HARLAN suggests that the assessment agreement can be distinguished from the collective bargaining agreement because '(t)he union was concerned that the question (of how the cost burden of the fund was to be allocated) receive some answer, but had no proper interest in which of the possible cost allocation plans was adopted * *  * .' (Ante, at 290.) But to argue that the union does not care from what source the PMA gets the money for the fund is both questionable and irrelevant, for such an approach ignores the fact that there are two parties to a collective bargaining agreement. The PMA members do care how they will be assessed $27,500,000 for a fund dedicated to the benefit of their employees. The Mech Fund was the key provision in the agreement, and without it there may well have been no agreement at all. The parties should not be expected to wait to settle their differences while the FMC decides under § 15 whether the employers' funding plan is in the public interest. Speedy resolution of labor disputes by collective bargaining has been the consistent federal policy.

The Solicitor General would have us atomize the collective bargaining agreement and treat the schedule of charges that create the fund as a mere 'side agreement.' But without the so-called 'side agreement' there would have been no collective bargaining agreement. And it must be remembered that § 15, if applicable, requires that an agreement be filed 'immediately with the Commission.' What would have to be filed is the entire agreement, not merely the proviso to which petitioner now objects. The Commission then must give notice and a hearing and 'disapprove, cancel or modify' the agreement. Which persons would be entitled to participate in the hearing presents an initial problem. Thereafter, what provisions would become the target in the hearing is conjectural. The target might be small or large. But certainly no collective bargaining agreement could become operative until its underpinning-the fund-was thoroughly litigated. Meanwhile years might pass as the contest wound its way slowly through various tribunals and the labor problems continued to fester.

This is what my Brother HARLAN overlooks when he suggests that advance approval of 'labor-related agreements' might be more desirable from the standpoint of facilitating collective bargaining than leaving open the question whether the agreement, or parts of it, would be subject to the antitrust laws. Presumably, he means that legal uncertainty concerning the possible vulnerability of certain provisions of an agreement to attack under the antitrust laws might stall negotiations or lead some association members to decline to cooperate in carrying out the agreement, fearing a trebledamage action. To be sure, the parties to a collective bargaining pact must frame their agreement to fit within the standards of the antitrust laws or any other governing statutes. But without a requirement of advance approval of the terms of the agreement, they remain free to bargain speedily. Frustration of the collective bargaining process comes not so much from the possibility that one or more provisions in a collective bargaining pact might be found illegal at some future date under the antitrust laws, or other statutes such as §§ 16 and 17 of the Shipping Act, but rather from the undue and possibly lengthy freezing or stultification of solutions to troublesome labor problems while an intimate part of the proposed agreement is sent to the FMC for approval.

With all respect, the Court's approach in requiring the funding plan to be submitted to the FMC for approval under § 15 of the Shipping Act will frustrate legitimate and speedy collective bargaining in the maritime industry. Neither the Court nor my Brother HARLAN is able to refer to any legislative history which indicates that Congress considered the Shipping Act to require the filing of labor agreements or provisions of those agreements under § 15. The Court instead takes the approach that the Shipping Act provisions were purposely drawn broad enough to encompass association agreements which have more than a de minimis effect on commerce. This rationale would require the filing of any collective bargaining provision agreed to by PMA members that raised labor costs beyond the point at which PMA members could be expected to absorb those costs without raising prices or charges.

The Court may well mean, as my Brother HARLAN suggests, that the 'obligation to collect the Mech Fund,' contained in the collective bargaining agreement, is not to be examined by the Commission on remand, but rather the question is to be limited to the 'propriety of the choice of the route to that objective.' But that misses the mark. My point is that the latter question is as much a part of the bargaining process as the former. Commission control over either question runs substantial risk of frustrating agreement by the parties on both issues, not to mention other matters in the collective bargaining pact. For example, if an allocation formula satisfactory to PMA members and to the Commission could not be devised, the fund might never be established, requiring perhaps other changes in the agreement, such as higher wages or continuance of some or all of the restrictive work rules.

If the present practice is an abuse, there is an existing remedy. This agreement between employers could of course be challenged in the courts as violative of the antitrust laws. Moreover, §§ 16 and 17 of the Shipping Act afford protection to foreign commerce in cases of undue discrimination or unreasonable practices affecting that commerce. While I cannot say that the Commission erred in finding no violation of § 16, I concur in a remand to the Commission for further findings under § 17. If the finding is for petitioner, there may be an incidental and after-the-fact effect on the provisions of the collective bargaining agreement. But it will not produce the paralyzing effect which will follow when prior approval is required. The application of §§ 16 and 17 in particular instances can indeed realistically be compared with enforcement of federal antitrust laws directed against specific practices.