Shippers, freight forwarders and transportation Intermediaries shipping by ocean between the continental U.S. and Puerto Rico may be recovering part of their shipping costs paid in a partial settlement of an antitrust case involving Jones Act carriers.
Why?
The carriage of goods by sea to or from the continental United States, its non contiguous states, territories or possessions, including Puerto Rico, is governed by the Jones Act, 46 U.S.C. § 55102. Accordingly, only vessels wholly owned by citizens of the United States may provide any part of the transportation of merchandise by water, between Puerto Rico and the continental United States. Beginning in 2002, ocean transportation of cargo between Puerto Rico and the continental United States was provided only by four companies, Horizon Lines, LLC, Sea Star Line, LLC, Crowley Maritime Corporation and Trailer Bridge,Inc.
A grand jury sitting in Jacksonville, Florida, convened around February 2008, to investigate possible federal antitrust violations in connection with transportation of goods by sea between the continental United States and Puerto Rico. On or about April 17, 2008, the F.B.I. executed search warrants on the premises of Horizon LLC, Sea Star, Crowley Liner and Trailer Bridge.
On Oct. 20, 2008, Peter Baci of Jacksonville, Florida, pleaded guilty, in the U.S. District Court for his role in a conspiracy to suppress and eliminate competition in the coastal water freight transportation services between the continental United States and Puerto Rico by agreeing to allocate customers, agreeing to rig bids submitted to government and commercial buyers, and agreeing to fix the prices of rates, surcharges, and other fees charged to customers. Three months later, Baci was sentenced to serve 48 months in jail and to pay a $20,000 criminal fine. This is the longest jail sentence ever imposed for a single antitrust charge. Related antitrust charges remain pending against three other shipping executives: R. Kevin Gill and Gregory Glova, of Charlotte, North Carolina; and Gabriel Serra, of San Juan, Puerto Rico. A related obstruction of justice charge is also pending against a fifth shipping executive, Alexander Chisholm, of Jacksonville.
A number of civil class action suits alleging a conspiracy to violate Section 1 of the Sherman Act were filed against:
- Horizon Lines, Inc.
- Horizon Lines of Puerto Rico, Inc.
- Horizon Lines, LLC
- Sea Star Line, LLC
- Crowley Maritime Corporation
- Crowley Liner Services, Inc.
- Trailer Bridge, Inc.
These cases were consolidated in the United States District Court for the District of Puerto Rico, where the litigation is pending. In Re: Perto Rican Cabotage Antitrust Litigaiton MDL 1960.
On July 8, 2009 (PDF), plaintiffs filed a motion seeking preliminary approval of a settlement reached between the Class Action Representatives and the Horizon Line Companies. Under the proposed settlement $ 20 million would be paid into the settlement fund. Any class member who is a party to a Transportation Service Agreement with Horizon would have the option to elect, in lieu of receiving a cash payment, a freeze of the then existing contract base rates for two years.
The other defendants have objected and the judge, who must approve this settlement, has now scheduled a settlement mediation between plaintiffs and the other defendants for later this fall. Counsel for the Class Members are Hollis L. Salzman and Kellie Lerner of Labaton Sucharow LLP.
