Maher loses appeal of ruling on NY-NJ terminal rent

Maher loses appeal of ruling on NY-NJ terminal rent

A federal appeals court has handed Maher Terminals the latest in a series of setbacks to the company’s effort to lower its rent on the largest container terminal in the Port of New York and New Jersey.

The 3rd U.S. Circuit Court of Appeals rejected Maher’s claim that the Port Authority of New York and New Jersey violated the constitution by including a per-container fee in a company’s lease the company signed in 1990.

Maher argued that the fee violated the constitution’s tonnage clause, which prohibits a state from taxing vessels in port. The terminal operator claimed the fee on its landside operations necessarily would be passed along to vessels.

In a precedent-setting ruling, the Philadelphia-based 3rd Circuit said the constitutional prohibition of a tonnage tax on vessels could not be stretched to encompass Maher’s land-based terminal operation.

“As a landside marine terminal challenging the rent it owes under the lease, Maher is not a member of the class of plaintiffs that can state a claim under the tonnage clause ... Unlike a fee imposed on a vessel or the people on board, a fee imposed on Maher does not in and of itself impact a vessel’s ability to freely navigate in commerce,” the appeals court said.

The court said expanding the tonnage clause to include “landside entities” would open the door to constitutional claims by countless other companies, for example a restaurant that rents state property in a port and serves food to mariners.

“We doubt the [constitution’s] framers intended the tonnage clause to sweep so broadly as to transform these and other landlord-tenant disputes into constitutional questions,” the appeals court said.

One member of the three-judge appellate panel, Judge Kent Gordon, said the court interpreted the tonnage clause too narrowly. In a dissent, he wrote that the port authority “is indirectly taxing vessels, and thus the goods on those vessels, by moving the locus of its assessments … to the water’s edge.”.

All three appellate judges upheld the lower court’s dismissal of Maher’s claims that the lease agreement’s terms violated the River and Harbors Appropriations Act and the Water Resources Development Act.

Maher has waged a broad effort to reduce rent on its 445-acre terminal at Elizabeth, New Jersey. Last year, the Federal Maritime Commission affirmed a FMC administrative law judge who rejected Maher’s claim that the port authority violated the Shipping Act by granting a more favorable lease to competitor APM Terminals.

Deutsche Bank AG last year put Maher up for sale after writing down most of the reported $2.3 billion the German bank paid to buy the terminal operator in 2007. This year, Deutsche Bank sold Maher’s Prince Rupert, British Columbia, terminal to DP World for a reported C$580 million ($457 million).

Contact Joseph Bonney at joseph.bonney@ihs.com and follow him on Twitter: @JosephBonney.