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SEABULK TRANSMARINE I, INC. v. DOLE

October 9, 1986

SEABULK TRANSMARINE I, INC., et al., Plaintiffs,
v.
ELIZABETH H. DOLE, et al., Defendants



The opinion of the court was delivered by: JACKSON

 This is an action by corporate operators of U.S. flag vessels, specially designed to transport corrosive liquid chemicals in bulk in foreign commerce, to review and set aside a decision of the Maritime Subsidy Board ("Board"), a subdivision of the Maritime Administration of the Department of Transportation, to deny them a subsidy for an additional crew member aboard the vessels. Subsidies are discretionary with the Board under the Merchant Marine Act of 1936 (the "Act"), as amended, 46 U.S.C. §§ 1101-1295 (1982).

 Plaintiffs allege that the Board's decision is arbitrary, capricious, an abuse of its discretion, and otherwise not in accord with law, in violation of the Administrative Procedure Act ("APA"), 5 U.S.C. § 706 (1982). They pray that the Board be ordered to subsidize their addition of a 17th crew member to the current complement of 16 presently authorized for subsidy by contracts made by plaintiffs' predecessors with the Board in October, 1978. Defendants Secretary of Transportation and various subordinate officials of the Maritime Administration ("defendants") have moved to dismiss the complaint on the ground that the subsidies authorized by the Act are, as noted, committed thereby to agency discretion which was, in the circumstances of this case, properly exercised, and that the Board correctly found, in December, 1981, that it lacked the authority to modify the contracts to provide for an additional subsidy.

 In support of their motion defendants have filed with the Court what they represent to be the administrative record to be reviewed, from which, however, they have redacted certain portions they claim to be privileged as being expressions of the "deliberative process" which need not be revealed. Plaintiffs have, in the meantime, filed a motion to compel production of the redacted materials, specifically, two Maritime Administration staff memoranda dated March 6 and 10, 1981, which, plaintiffs say, they have divined to have recommended in favor of the subsidy, and defendants have countered with a motion for a protective order. In addition, both sides have filed motions for summary judgment. For the reasons hereinafter set forth the Court will deny defendants' motions to dismiss and for summary judgment, grant in part and deny in part plaintiffs' motion to compel and defendants' motion for a protective order, grant plaintiffs' summary judgment motion in part, and remand to the Board for further proceedings.

 I.

 The adverse agency decision of which plaintiffs seek review is an order of the Maritime Subsidy Board of December 30, 1981, denying an appeal from the Board's earlier refusal to increase the operating differential subsidy for the crews of plaintiffs' vessels to defray the cost of adding a single deck engineer to assist in the maintenance of complex chemical-handling equipment not found on earlier models of similar vessels intended for the carriage of less baneful cargoes. Defendants assert, however, that judicial review of the denial is improper, because the Board's action is "committed to agency discretion by law" within the meaning of section 701(a)(2) of the APA.

 Neither the original Merchant Marine Act of 1936 nor the 1970 amendments contain an express preclusion of judicial review of the Board's subsidy decisions; any such intent on the part of Congress would therefore have to be implied. In the absence of a clear showing of legislative intent to the contrary, federal courts generally have jurisdiction to review any agency action. See Califano v. Sanders, 430 U.S. 99, 105, 51 L. Ed. 2d 192, 97 S. Ct. 980 (1977) (jurisdiction to be found under 28 U.S.C. § 1331 (1982)); see also Abbott Laboratories v. Gardner, 387 U.S. 136, 140-41, 18 L. Ed. 2d 681, 87 S. Ct. 1507 (1967); Citizens to Preserve Overton Park v. Volpe, 401 U.S. 402, 410, 28 L. Ed. 2d 136, 91 S. Ct. 814 (1971). And the APA's "committed-to-agency-discretion-by-law" exception, in particular, is to be construed very narrowly, applying only "in those rare instances where 'statutes are drawn in such broad terms that in a given case there is no law to apply.'" Overton Park, 401 U.S. at 410 (quoting S. Rep. No. 752, 79th Cong., 1st Sess. 26 (1945)).

 Congress undoubtedly did intend the Board to possess and to exercise considerable discretion with respect to the subsidies available to the U.S. maritime industry under the Act. Section 207 of the Act authorizes the Board and the Secretary of Transportation to "enter into such contracts . . . and . . . make such disbursements as may, in its or his discretion, be necessary to carry on the activities authorized" by the Act. 46 U.S.C. § 1117. See also S. Rep. No. 713, 74th Cong., 1st Sess. 4 (1935); H.R. Rep. No. 1277, 74th Cong., 1st Sess. 2 (1935); Seatrain Shipbuilding Corp. v. Shell Oil Co., 444 U.S. 572, 585, 63 L. Ed. 2d 36, 100 S. Ct. 800 (1980). Thus, in American President Lines v. Federal Maritime Bd., 112 F. Supp. 346 (D.D.C. 1953), the court declared that "the granting or withholding of a subsidy is clearly committed by law to agency discretion," id. at 348, holding judicial review of an award of subsidies to the plaintiff's competitors to be limited to whether the Board had complied with the procedural requirements of the Act.

 A distinction is drawn, however, between pre-construction Board decisions to grant or withhold an operating subsidy, and subsequent actions taken after an operator's own funds have been committed to the enterprise and a contract made. In Moore-McCormack Lines, Inc. v. United States, 188 Ct. Cl. 644, 413 F.2d 568 (1969), the Court of Claims reviewed the legislative history of the Merchant Marine Act and concluded that Congress had contemplated such a dichotomy:

 
We surmise that the reason for [the] lack of interest in court review of determinations of construction differential and of the initial operating differential was that it was thought that neither decision would put the shipowner in a vise. In each instance he could protect himself by refusing to enter into a contract on that basis, choosing to build his ship abroad or to take his vessel to foreign registry; in neither case would he be bound by any agreement prior to the determination of the amount of subsidy to be allowed, and he could make his election freely after that administrative decision was made known. Everyone seemed to realize, however, that there had to be some means for adjusting the continuing operating subsidy to meet changed conditions, and all were sensitive to the possibility of unfairness to the contract-bound operators through arbitrary agency redetermination of the annual operating differential.

 Id. 413 F.2d at 577. The court concluded that:

 
The history of the Merchant Marine Act bolsters the conclusion that no implied preclusion-of-review should be read into the subsidy sections . . . . The Congress did appear to reject the idea of full determination by the courts of these complex subsidy awards, but it also seemed to contemplate that the judiciary would be available to remedy, at the very least, "abuse of discretion" or "gross abuse of discretion."

 Id. See also Pacific Far East Line, Inc. v. Federal Maritime Bd., 107 U.S. App. D.C. 155, 275 F.2d 184 (D.C. Cir.), cert. denied, 363 U.S. 827, 4 L. Ed. 2d 1523, 80 S. Ct. 1597 (1960). This Court is likewise of the opinion that the Board's refusal to reconsider the amount of an operating differential subsidy when good cause is shown by the operators is subject to review for abuse of discretion, no matter how much autonomy the Board may have at the beginning of a subsidized venture.

 In its original denial of plaintiffs' request for an additional subsidy, in late April, 1981, the Board stated simply that it believed itself to be without authority "to reconsider the manning determination" made earlier by the parties prior to entry into the contracts of October, 1978. In its order denying plaintiffs' appeal, the Board was more explicit. It stated that § 603(c)(1)(A)(i), 46 U.S.C. § 1173(c)(1)(A)(i), added by amendment to the Act in 1970, precluded payment of an operating differential subsidy for crew members who had been found "prior to the award" of a contract for a ship construction differential subsidy (as plaintiffs here also received) to be unnecessary for the efficient and economical operation of such vessel. *fn1" Citing to two portions of the legislative history of the 1970 amendments which indicated an intent to end the practice of post-construction haggling between vessel operators and the Board as to a ship's proper complement, the Board concluded that Congress had henceforth prohibited any upward adjustment in subsidizable ship's company once the initial complement had been agreed to, whether or not the Board might be sympathetic to it. *fn2" According to the Board, an operator is expected at his peril to calculate accurately in advance the ship's complement he will need to man the vessel being built with ...


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