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SEA-LAND SERV. v. DOLE

April 1, 1986

SEA-LAND SERVICE, INC., Plaintiff,
v.
ELIZABETH HANFORD DOLE, et al., Defendants



The opinion of the court was delivered by: PARKER

 BARRINGTON D. PARKER, Senior District Judge:

 Plaintiff Sea-Land Service ("Sea-Land") brings this action under the Merchant Marine Act of 1936, 46 U.S.C. §§ 1101 et seq. (1982) ("Act"), challenging the grant of an Operating Differential Subsidy ("ODS") to one of its competitors, intervenor American President Lines ("President Lines" or "APL"). Named as defendants are the Secretary of Transportation, the Maritime Subsidy Board ("Subsidy Board" or "MSB") and two of the Board's members.

 Plaintiff maintains that ODS was granted President Lines for the operation of two foreign-built ships, notwithstanding the fact that the Subsidy Board, to which has been delegated the task of administering the Act, did not hold an evidentiary hearing as required by Section 605(c) of the Act, 46 U.S.C. § 1175(c), or make the requisite findings of fact under Section 601(a)(4), 46 U.S.C. § 1171(a)(4). Because of the failure to comply with these statutory requirements, Sea-Land asks this Court to declare the action taken by the Board invalid and to enjoin the award of ODS until the government complies with the mandated procedures.

 The parties have filed cross-motions for summary judgment and have ventilated the issues at oral argument. For the reasons set forth below, the Court grants the motions of defendants and intervenor President Lines for summary judgment.

 BACKGROUND

 Both plaintiff and intervenor operate vessels along the transpacific trade routes; however, while plaintiff operates unsubsidized, APL has been the beneficiary since 1978 of a 20-year ODS contract. Pursuant to that contract and the Act, APL receives a subsidy sufficient to equalize its operating costs with those of its foreign competitors. Such subsidies are granted under the Act when the Secretary of Transportation, through her delegate, finds that "the granting of the aid applied for is necessary to place the proposed operations of the vessel or vessels [of the applicant] on a parity with those of foreign competitors, and is reasonably calculated to carry out effectively the purposes and policy of th[e] Act." Section 601(a)(4). In making this finding, the Secretary is not required to hold an evidentiary hearing. However, where a trade route is already serviced by "existing service," the Act requires that, before additional subsidized service may be added to the route, affected parties must be given notice and the opportunity to air their objections in a public hearing. Section 605(c). The Secretary must then determine that the grant of an additional subsidy "is necessary . . . to provide adequate service by vessels of United States registry." Id.

 Plaintiff argues that the Subsidy Board did not follow the procedures mandated by Sections 601(a)(4) and 605(c) when it allowed APL to add to its subsidized fleet two foreign-built vessels acquired from Neptune Orient Lines ("NOL vessels"). Although ODS is normally granted only for the operation of U.S.-built vessels, special legislation enacted in 1984, Pub. L. No. 98-151, allowed APL and another ODS contractor to acquire an aggregate of six foreign-built vessels, which would then be deemed U.S.-built for purposes of the ODS program. Id. § 134. The legislation was designed to make up for a funding shortfall in another program under the Act which provides for the grant of Construction Differential Subsidies ("CDS(s)") designed to equalize the costs of U.S. and foreign construction of vessels. See 46 U.S.C. §§ 1151-1159.

 The Subsidy Board and APL take the position now, as they did when the latter's application for a subsidy for the NOL vessels was being considered, that the procedures required by Sections 601 and 605 were not called into play by APL's acquisition of the two vessels. Because the vessels served only to replace other ships taken out of APL's fleet, APL and the defendants maintain that no additional service was being subsidized. Rather, they contend that President Lines was merely performing its contractual duty to replace obsolete vessels according to the schedule incorporated into its ODS contract.

 Plaintiff challenged the Subsidy Board's determination that no hearing or findings were required before ODS for the NOL vessels could be awarded to APL by filing an application for reconsideration with the Board. Although it found the application to be untimely, the Board nevertheless considered it and rejected it as meritless. Thereupon, plaintiff petitioned the Secretary for review, which was denied. This suit followed.

 ANALYSIS

 I. Justiciability

 President Lines has challenged plaintiff's standing to assert a claim under Section 605(c), while defendants have argued that plaintiff cannot challenge the Board's findings under Section 601. Because the Court rules adversely to plaintiff on the merits, it need not examine the issues of standing and ...


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