MSC Will Appeal FMC Default Decision Saying Claims are Without Merit

MSC appeals default decision
MSC vows to appeal default judgment saying shippers claims are without merit (file photo)

Published Jan 19, 2023 4:04 PM by The Maritime Executive

Mediterranean Shipping Company (MSC) is vowing to appeal the default decision and nearly $1 million awarded by an administrative law judge in a complaint filed with the Federal Maritime Commission by a Pennsylvania furniture importer. The carrier notes that the decision, which does not review the merits of the claims and is based on a procedural finding, is not effective until the full commission determines the matter.

Chief Administrative Law Judge Erin Wirth entered the initial decision in the case last week as a default against MSC after the company failed to produce key documents during the discovery phase of the proceeding. The shipper, MCS Industries of Pennsylvania had sought documents that were denied by MSC and a Swiss judge in a request under the Hague Convention that governs the release of evidence in cross-border complaints such as this case. MSC said it risked criminal sanctions if it provided the requested documents after it was also denied a request by the Swiss Federal Department of Justice and Police.

“MSC is disappointed with the initial decision,” the company said commenting on Judge Wirth’s default decision noting that MSC had sought diligently to persuade the FMC to invoke the procedures required to fully comply with both U.S. and Swiss law when producing documents. They cited stipulations under the Shipping Act that call for the U.S. State Department to work with Swiss officials in cases such as this to resolve the process for obtaining the information needed for the case. “MSC has proposed this process to the FMC as a means to resolve the discovery dispute and allow the case to be decided on the merits, and has received confirmation from the Swiss government that the agreed upon treaty procedures must be used.”

“By its terms, the decision does not address the merits of any of the claims against MSC, and MSC continues to believe that the claims are meritless,” the carrier asserted in its statement. “MCS Industries is seeking to hold MSC liable for not carrying cargo MCS never asked it to carry, and the decision to award it damages for harm it has never proved is in error.”

The shipper in its original complaint brought against both MSC and COSCO alleged that the companies colluded to artificially restrict capacity by blanking sailings citing factors such as port congestion and other factors outside their control. They alleged that the shipping lines' actions drove prices higher in the spot market and by denying service to shippers with contracts such as MCS they had to pay the high prices in the spot market to transport their containers. 

COSCO reached a confidential settlement with the shipper but MSC has repeatedly said the claims were without merit. MCS Industries refiled the complaint with the FMC against MSC focusing on the higher costs incurred due to the denial of service under the long-term freight contract. 
MSC in its statement repeated that it has investigated the matter and has concluded that MCS Industries’ difficulties with its cargo bookings arose from errors and communication issues between MCS Industries and third-party intermediaries, and not from any wrongdoing by MSC.  

Judge Wirth concluded that MSC was making selective disclosures during the discovery. While providing information on canceled sailing from Tianjin and Quingdao, the judge’s opinion said the carrier had not produced the documents and communications that would show why sailings were canceled.

The judge’s decision was served on January 13 and according to the rules, MSC may file exceptions to the decision within 22 days. The FMC would then take up the matter and review the decision.