The U.S. Court of Appeals for the District of Columbia Circuit recently heard oral arguments in Evergreen Shipping Agency (America) Corp. v. Federal Maritime Commission, Case No. 25-1104. The panel comprised Judges J. Michelle Childs, Harry T. Edwards and Douglas H. Ginsburg.
This marks the second time the Federal Maritime Commission's (FMC or Commission) application of its demurrage and detention interpretive rule has come before the D.C. Circuit – specifically, whether Evergreen's assessment of detention charges against the motor carrier TCW Inc. for days when port gates were closed and equipment could not be returned was reasonable under the Shipping Act and FMC's interpretive rule. In July 2024, the court granted the ocean carrier's petition challenging the FMC's determination that detention fees were unjust and unreasonable, finding that the FMC's decision was "arbitrary and capricious" under the Administrative Procedure Act (APA) because, the court concluded, the FMC's application of the interpretive rule had failed to consider "relevant factors" and did not give adequate reasoned explanations required by the APA and interpretive rule itself. The court remanded the matter back to the FMC to revisit its analysis. On remand, the FMC considered the case again and, with some modifications in light of the court's decision, again found that the charges were unjust and unreasonable. The instant second appeal to the D.C. Circuit followed.
The appeal, like the first, is largely procedural – challenging how the FMC reached its decision under the APA: whether the FMC's decision was based on "substantial evidence" and whether the FMC engaged in "reasoned decision making." Questioning from the panel was brisk and engaged. Evergreen's substantial evidence challenge faced probing questions, including whether Evergreen should have offered rebuttal evidence below if it had concerns with the evidence.
The FMC faced some probing by the panel on the FMC's reasoning and broader considerations, including the precedential impact of the decision, level of deference owed to the Commission's expertise and potential impact of the Ocean Shipping Reform Act of 2022 on future disputes.
The case will now proceed to decision before the D.C. Circuit. Holland & Knight will continue to monitor developments at the FMC and provide updates as they occur.
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