FMC Judge Rejects Maher Terminals Lease Complaint

FMC Judge Rejects Maher Terminals Lease Complaint

Maher Terminals has failed to convince a Federal Maritime Commission administrative law judge that the Port Authority of New York and New Jersey violated the Shipping Act by granting a more favorable lease to competitor APM Terminals.

FMC Administrative Law Judge Erin M. Wirth dismissed Maher’s claim that the port authority discriminated against the terminal operator when the landlord agency signed separate leases with Maher and APMT in 2000 (Decision, Errata).

“There is no requirement that leases for different properties contain identical provisions,” Wirth’s decision said. The port authority “negotiated leases with both Maher and Maersk-APMT based on the particular facts and circumstances presented.”

Maher filed a complaint with the FMC in 2008, soon after the company was acquired by Deutsch Bank Americas Holding Co. during a period when several major terminals sold for what were considered extremely high multiples.

The terminal’s new owners told the FMC that Maher’s lease had higher rent, investment and throughput requirements, and security deposits than the lease the port authority had negotiated only months earlier for APM Terminals next door.

The port authority said it based the higher requirements for Maher on an assessment of the terminal operators’ relative creditworthiness and corporate guarantees.

It said APMT was backed by the Maersk corporate organization, and noted that its lease was negotiated when the port authority was trying to prevent Maersk Line from shifting its North Atlantic load center to another port.

Maher’s initial annual rent was $39,750 per acre, with a 2 percent annual escalator. APMT’s initial annual rent was $19,000 per acre, but the rent would have more than quadrupled if Maesk Line had left the port. APMT’s lease also contained stiff penalties if container volume from APM’s Maersk Line affiliate fell below annual thresholds. APMT missed those thresholds in 2008-10, raising its per-acre rent to $34,200 in 2010 and $32,300 in 2011.

“While there are differences in the leases that PANYNJ negotiated with Maersk-APM and Maher, those differences are based upon different risks presented and benefits received by each entity,” Wirth’s decision said. “Moreover, during these negotiations, PANYNJ was faced with a credible threat that Maersk-APM would leave the port for a competing offer in Baltimore.”

After Maher changed hands in 2007, the port authority raised the terminal’s security deposit from $1.5 million to $22 million and increased the company’s requirements for investments and capital improvements.

Wirth agreed with the port authority’s argument that the different treatment was justified, because APMT’s obligations were guaranteed by the Maersk organization. The port authority “had a legitimate reason to require different security deposit requirements from Maher than from Maersk-APM,” the administrative law judge said.

Contact Joseph Bonney at jbonney@joc.com and follow him on Twitter: @josephbonney.