Crowley Liner Services’ settlement this month of civil antitrust lawsuits with U.S. mainland-Puerto Rico shippers will only partially untangle a web of litigation that spun out of a federal investigation of price-fixing by domestic ocean carriers.
One loose end is the investigation, which became public April 17, 2008, when federal agents raided offices of Horizon Lines, Sea Star Line and Crowley and subpoenaed records from other ocean carriers in domestic markets restricted to U.S.-flag operators by the Jones Act.
Four former carrier officials — two from Horizon, two from Sea Star — were sentenced to prison last year after pleading guilty in U.S. District Court in Jacksonville, Fla., to antitrust violations or to hiding evidence. All agreed to cooperate with prosecutors, who said the investigation was continuing and involved other domestic shipping markets, including routes between the U.S. mainland and Hawaii, Guam and Alaska.
While the Justice Department has given no hint of how its investigation is progressing, the carriers and their lawyers have been deluged with at least 57 civil antitrust lawsuits claiming antitrust violations and seeking treble damages.
Most of the lawsuits have been consolidated into class actions in federal courts in San Juan, for the Puerto Rico cases, and Seattle, for those involving Hawaii and Guam. A single lawsuit has been filed in Alaska against Horizon and Totem Ocean Trailer Express.
Crowley, which is involved in only the Puerto Rico cases, said Jan. 15 it had agreed to settle with shippers for an undisclosed amount. The company denied antitrust violations, but said it settled to avoid costs of continued litigation. Horizon Lines, which operates in all the Jones Act trades, agreed last year to settle shippers’ claims in the Puerto Rico cases for $20 million.
The Crowley and Horizon settlements would cover cargo interests who directly purchased shipping services between 2002 and 2008 in the Puerto Rico trade, where each line has a nearly one-third market share. Carriers are fighting efforts by additional plaintiffs representing indirect purchasers of shipping services, such as companies whose cargo was booked through consolidators, to be included in the class action.
Two smaller Puerto Rico carriers, Sea Star and Trailer Bridge, have not agreed to settle the civil cases, which remain subject to court approval. Trailer Bridge, which apparently is not a target of the federal investigation, has asked to be dismissed from the case.
If U.S. District Judge Daniel R. Dominguez of San Juan gives preliminary approval to the settlement agreement, shippers will still have the right to opt out of the class action and pursue their own antitrust claims. Some large shippers have sent attorneys to court hearings to stay apprised of developments.
Separately from the lawsuits and federal investigation, the Puerto Rico Office of Monopolistic Affairs last fall opened its own investigation with a request for information and documents from carriers.
On the West Coast, Horizon and Matson Navigation won a court victory last August when U.S. District Judge Thomas Zilly of Seattle dismissed the class-action lawsuit involving the Hawaii and Guam trades, where both carriers operate. However, Zilly has given shipper plaintiffs until May 10 to amend and refile their lawsuit.
Zilly said the original lawsuit did not support its antitrust claims, and that the filed-rate doctrine shields carriers from antitrust lawsuits related to tariffs filed with the Surface Transportation Board. Carriers also have cited the filed-rate doctrine in the Puerto Rico litigation, but unlike in Hawaii and Guam, most Puerto Rico cargo moves under negotiated contracts.
The litigation has been costly to carriers. Horizon, which operates in all Jones Act trades and is a defendant in all of the civil lawsuits, said in filings with the Securities and Exchange Commission that through last Sept. 20 it had incurred $21.2 million in legal and professional fees.
Crowley said its decision to settle was based on “the high cost and burden of litigation, which is expected to continue for several more years.”
“This was a business decision to put the matter behind us as quickly as possible,” said Michael Roberts, Crowley’s senior vice president and general counsel. “We simply felt that it was in the best interests of our company, and our customers, to move beyond this dispute.”
Contact Joseph Bonney at email@example.com.