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AMERICAN MARITIME ASSN. v. STANS

July 12, 1971

AMERICAN MARITIME ASSOCIATION, New York, New York, Plaintiff,
v.
Maurice H. STANS, individually, and as Secretary of Commerce, Washington, D.C., et al., Defendants and United States Lines, Inc., and Liner Council, American Institute of Merchant Shipping, Intervenors


Bryant, District Judge.


The opinion of the court was delivered by: BRYANT

BRYANT, District Judge.

 The complaint in this case seeks review of allegedly final agency action in the form of a letter written by defendant Gibson, Maritime Administrator, to the Commander of the Military Sea Transportation Service (hereinafter "MSTS") stating that the Maritime Administration (hereinafter "MARAD") would not oppose the charter to MSTS by intervenor -- defendant United States Lines (hereinafter "USL") of certain vessels built with construction differential subsidy pursuant to the provisions of Title V of the Merchant Marine Act, 1936, 46 U.S.C. § 1151 et seq. *fn1" Plaintiff, the American Maritime Association (hereinafter "AMA"), is an association of unsubsidized shipping companies, representing the largest grouping of independent unsubsidized carriers under the American flag. Defendants Gibson, Blackwell and Bowman are officials of the Maritime Administration and of the Maritime Subsidy Board (hereinafter "MSB"), which in turn carry out certain functions assigned to the Secretary of Commerce by the Merchant Marine Act of 1936, 46 U.S.C. § 1101 et seq. See Reorganization Plan No. 7 of 1961, 75 Stat. 840, and Reorganization Plan No. 21 of 1950, 64 Stat. 1273. Intervenor -- defendant Liner Council, American Institute of Merchant Shipping (hereinafter "AIMS") is an association of 12 steamship companies each of which receives subsidies under the Act.

 I

 The aim of the Merchant Marine Act, 1936, is the development of a Merchant Marine to carry the water borne domestic and foreign commerce of the United States and to serve as a naval and military auxiliary in time of war or national emergency, 46 U.S.C. § 1101. Title V of the Act provides for construction subsidy (hereinafter "C.D.S.") and title VI provides for operating subsidy (hereinafter "O.D.S."). Without such subsidies American shipping could not possibly be competitive with that of foreign nations, where costs are much lower.

 On July 1, 1969, AMA petitioned the Secretary of Commerce for the initiation of a rule making proceeding concerning various aspects of the grant of subsidies to ships which carry cargo by law reserved to American flag vessels. On December 3, 1969, MARAD caused to be published in the Federal Register a Notice of Fact-Finding Hearing, denominated Docket S-244, relative to AMA's proposed rules. The notice recited that

 
"[Notwithstanding] that section 4 of the Administrative Procedures [sic] Act, 5 U.S.C.A. 553, exempts subsidy programs from rule making, the Board, in the exercise of its discretion, will develop a fact record in a public hearing in order that it will be in a position to make a considered administrative review of the issues presented in the AMA petition." Complaint, Exhibit C.

 In the interim, on November 14, 1969, AMA filed a memorandum of law with MARAD/MSB (hereinafter "the Board") asserting that no statutory authority existed for long-term charters to MSTS of ships built with C.D.S. The issue raised in the memorandum was made the subject of a Supplemental Notice of Fact-Finding Hearing in Docket S-244 published in the Federal Register on April 4, 1970. Complaint, Exhibit G. The issue was deemed a question of law not dependent on any contested factual issue and a briefing schedule was established. Plaintiff filed its brief in the supplemental docket on May 1, 1970; answering briefs from AIMS and USL were filed on July 13 and July 15, respectively.

 Meanwhile, on June 3, 1970, MSTS issued a request for proposals to charter vessels for various time periods, renewable at the charterer's option for up to five years. Offerors were required to submit "evidence in the form of a MARAD written agreement that the offered ships will not be precluded from performing for MSTS for the charter period (including optional periods offered) by reason of MARAD prohibition." Intervenor USL's Cross-Motion for Summary Judgment, Exhibit 3. On June 4, USL submitted a bid to MSTS. On June 12, 1970, while the administrative proceeding was pending and before answering briefs had been filed, defendant Gibson, at the request of USL, wrote to the Commander of MSTS advising that the vessels offered by USL "will not be precluded from performing for MSTS for the charter period (including optional periods offered) by reason of MARAD prohibition." Complaint, Exhibit A. No mention was made by Mr. Gibson of the pendency of any rule making proceeding. On June 26, MSTS announced the award to USL of charters of 14 vessels, each of which had been built with the aid of C.D.S., for charter periods of three to twelve months, renewable at MSTS' option for extensions of three to five years. USL's Cross-Motion for Summary Judgment, Exhibit 4. Plaintiff instituted this action on July 13, 1970, and moved for summary judgment on October 9. On October 13, 1970, the Board issued its final decision in Supplemental Docket S-244 -- "Legality of Certain Charters to MSC of Vessels Built with Construction -- Differential Subsidy." *fn2" Intervenor AIMS' Motion for Summary Judgment, Attachment 3. That decision was adverse to plaintiff.

 The theory of the complaint and of plaintiff's motion for summary judgment is that the June 12 letter from defendant Gibson to the Commander of MSTS amounted to final and therefore reviewable action in the administrative proceeding. The complaint requests the court to reverse the approval of the charters, to command the defendants to withdraw the June 12 letter, and to dispose of the underlying controversy either by trial on the merits or by remanding the matter to the Board "for orderly hearing and decision in accordance with law."

 In view of the fact that we now have what is concededly the Board's final decision and opinion in the rule making proceeding which is the subject of this action, the court has concluded that it would be a sterile and wasteful exercise to review the case without reference to that decision. If the court were to determine that the June 12 letter was final action for purposes of review, the proper course would be to remand the matter to the Board for an orderly decision -- but we already know to a certainty what that decision and what its reasoning would be. This court clearly has jurisdiction to review final action of MARAD/MSB. Administrative Procedure Act, Section 10, 5 U.S.C. § 703; Pacific Far East Line, Inc. v. Federal Maritime Board, 107 U.S. App. D.C. 155, 275 F.2d 184, cert. den. 363 U.S. 827, 80 S. Ct. 1597, 4 L. Ed. 2d 1523 (1960). Though plaintiff has not chosen to amend its complaint to request review of the October 13 decision, plaintiff and each of the other parties have extensively briefed the merits of that decision and a great deal of time was devoted to it at oral argument. In the interests of judicial efficiency, the court deems the complaint amended to request review of the October 13 decision, F.R. Civ. P. 15(b).

 Because the court is in full agreement with plaintiff that defendant Gibson's action in writing the June 12 letter to MSTS constituted a gross deviation from acceptable administrative procedure, it is essential to note that Mr. Gibson was not a member of the MARAD/MSB panel that made the October 13 decision. Had he been a member, a troublesome question of the October 13 decision's invalidity per se would arise. Amos Treat & Co. v. Securities Exchange Commission, 113 U.S. App. D.C. 100, 306 F.2d 260 (1962).

 When in the initial Notice of Fact-Finding Hearing in Docket S-244, the Board announced that it would "develop a fact record in a public hearing, *fn3" "it chose to make the proceeding subject to the most rigorous requirements of the Administrative Procedure Act. *fn4" One of those requirements is that the decision of the agency be made on the basis of the record. A.P.A. § 7, 5 U.S.C. § 556(e). The supplemental notice of April 4 established that the proceeding involving the legality of charters of C.D.S. vessels to ...


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