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Marine Log

May 8, 2008

Puerto Rico trade lines face class action suit

Last month the offices of Puerto Rico trade Jones Act shipping lines were raided by federal agents investigating pricing practices in the trade.

Now they face a class action law suit in federal court where, it is claimed "plaintiffs and class member economic and treble damages are reasonably estimated in hundreds of millions of dollars.

Attorney Eric M. Quetglas-Jordan of the Quetglas Law Office, San Juan, Puerto Rico, filed the suit May 6 on behalf of La Esperanza Bus Line of Puerto Rico, naming as defendants Horizon Lines, Inc., Horizon Lines of Puerto Rico, Inc., Horizon Lines, LLC, Sea Star Line, LLC, Crowley Maritime Corporation, Crowley Liner Services, Inc. and Trailer Bridge, Inc.

In the complaint, filed in the San Juan office of the Puerto Rico District Court, the suit is described as an antitrust class action brought against the defendants for conspiring to fix the prices of shipping services to and from Puerto Rico and other noncontiguous Jones Act markets.

The complaint says that the plaintiff, La Esperanza Bus Line, is a business operating and principally located in San Juan, Puerto Rico. La Esperanza Bus line ships passenger buses to Puerto Rico from the United States using ocean freight services. During the class period, La Esperanza Bus Line shipped freight through Sea Star and Crowley Liner ocean freight shipping services.

The plaintiff, as a direct purchaser of shipping services from and to Puerto Rico from one or more of the defendants, is an appropriate plaintiff to pursue recovery for the injury sustained to its property or business as a result of the alleged antitrust conspiracy or combination, says the complaint.

La Esperanza seeks certification of a class consisting of all persons, corporations or other legal entities who purchased ocean liner freight shipping services from the defendants during the class period for shipments to and from Puerto Rico (Jones Act market). The Class period runs from at least April 2004 to the present.

The complaint says that on April 17, 2008, the FBI (at the direction of the United States Department of Justice's Antitrust Division) executed a search warrant and seized computers and other documents from the Defendant Horizon Lines as part of an antitrust investigation. Reports also indicate the FBI raided pursuant to a search warrant Crowley Liner and Sea Star's offices.

"In order to obtain a search warrant, a government official will execute an affidavit detailing the evidence supporting the issuance of a warrant. The affidavit must establish sufficient probable cause for issuance of a warrant by a federal court," states the complaint.

"Frequently," states the complaint, "search warrants result from information obtained from an amnesty applicant. Under the DOJ's antitrust amnesty program, the first conspirator toapply and obtain amnesty receives favorable treatment from the government with respect to potential criminal and civil prosecution. However, to be granted amnesty, the applicant must fully disclose the existence of a conspiracy and the extent of its participation. It is likely, though not certain, that there is an amnesty applicant involved in this matter."

The complaint says that "all defendants increased their prices during 2007 by approximately 9 percent. These increases were in addition to increases related to rising fuel prices. This trend of increasing prices started in 2004 after several prior years of decreasing prices. Indeed, Horizon's former CFO Mr. Urbania acknowledged during a conference call on the 2007 4th Quarter financial results, the prices increases have been sustained in a difficult economic environment because all competitors have shown good discipline on pricing."

The complaint also cites trends in bunker fuel surcharges and says that "since at least August 2007, the defendants have increased bunker fuel surcharges for containers and/or new vehicles in same amounts for at least shipments out of Jacksonville, Florida. In August 2007, the three defendants imposed a $420.00 bunker fuel for each container transported from Jacksonville, Florida to Puerto Rico. In November 2007, they increased the bunker fuel surcharge to $455.00. In December 2007, Sea Star increased the bunker fuel surcharge to $520 and both Crowley and Horizon increased the surcharge to $505. In January 2008, Crowley increased the bunker fuel surcharge to $520.00 which was then followed by Horizon. By the end of February 2008, these three defendants had all announced a bunker fuel surcharge of $520.00."

The complaint says that the defendants have also imposed the same per vehicle bunker fuel surcharges.

"Currently, all defendants charge approximately $210 per used vehicle. Though Crowley and Trailer Bridge use a different type of fuel than Horizon and Sea Star because they operate tug boats and barges rather than self propelled vessel, these parties were all charging approximately the same bunker fuel surcharge for shipments from Jacksonville to Puerto Rico," says the complaint.

The complaint says the alleged antitrust conspiracy injured the plaintiff and class members in substantially similar manner by eliminating, suppressing and/or reducing price competition in the Jones Act Puerto Rico market. The alleged antitrust conspiracy had the effect of raising, maintaining or otherwise stabilizing the prices for ocean liner freight services at a supra-competitive level.

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