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RAINBOW NAVIGATION, INC. v. DEPARTMENT OF THE NAVY

May 17, 1988

Rainbow Navigation, Inc., Plaintiff,
v.
Department Of the Navy, et al., Defendants


Harold H. Greene, United States District Judge.


The opinion of the court was delivered by: GREENE

I

 This is the third time that these parties have been before the Court with respect to similar controversies. *fn1"

 What had happened was that the Department of State, desirous of good relations with Iceland, an ally of the United States, gave in to entreaties from that nation for the recapture of the U.S. military cargo trade exclusively for Icelandic shipping interests. *fn2" The determinations, declarations, and representations made to the Court regarding Rainbow's allegedly excessive rates, it had turned out, not only were not borne out by the facts but were merely a pretext obscuring the real foreign policy purposes of our government.

 Since Rainbow was not in violation of the Cargo Preference Act, and was entitled under law to the benefits of the Act, the Court issued an injunction which required the restoration of that company's preference with respect to the carriage of U.S. military supplies between this country and Iceland in accordance with the Act. The Court of Appeals, in an opinion by then Judge Scalia, affirmed this Court's decision. Rainbow Navigation, Inc. v. Department of the Navy, 251 U.S. App. D.C. 257, 783 F.2d 1072 (D.C. Cir. 1986).

 While the issues regarding this Navy attempt to bypass the law were still in the courts, the Department engaged in yet a second subterfuge designed to elbow Rainbow out of the Icelandic trade. This time the Navy sought to dispense with Rainbow's services by a diversion of the cargo at issue to military aircraft. Government regulations provided that "the preferred method of transporting supplies for the Government is by commercial carriers," and that government aircraft may be used only "if . . . they are available and not fully utilized . . . ." 48 C.F.R. 47.101(b)(1). Once again, solemn declarations were submitted to the Court to the effect that all missions that carried cargo from Iceland to this country were scheduled there "for purposes other than the carriage of cargo back to the United States" and that "missions were not flown to [Iceland] for the purpose of picking up [such] cargo." This, too, was untrue.

 The evidence showed that, after the then lawsuit was filed, a sharp increase occurred in the number of flights from Iceland to this country, and a corresponding decrease in the amount of cargo carried by Rainbow. The Court ultimately concluded that the Navy had once again taken steps unlawfully to squeeze Rainbow out of the Icelandic trade. Memorandum Order dated October 17, 1986. *fn3" This brings us to the current phase of the litigation.

 II

 On September 24, 1986, the United States and Iceland signed a treaty, including a memorandum of understanding (MOU), *fn4" regarding the same military cargo route between the two countries that had been at issue previously. *fn5" That treaty provides for a competition between United States flag carriers and Icelandic shipping companies for the transport of military cargo between the two countries. The method by which the competition is to be carried out is described in the memorandum of understanding as follows:

 
Each competition shall result in contract awards to both an Icelandic shipping company and a United States flag carriers such that not to exceed 65 percent of the cargo shall be carried by the lowest bidder and the remainder shall be carried by the next lowest bidder of the other country. . . .

 Pursuant to the treaty and the MOU, a single competition was held in 1987 for the carriage of one year's worth of military cargo on the United States-Iceland route. Eimskip, an Icelandic concern, was the "lowest bidder," receiving 65%, and Rainbow took the remaining 35% as the "next lowest bidder." However, this year the Navy planned to change the process. Acting through the Military Sealift Command, *fn6" the Navy has announced that it intends to hold two separate competitions, separately priced -- one competition for the 65% of the cargo, the other, a separate competition, for the remaining 35% of the cargo. *fn7" Had Rainbow *fn8" not filed this action to stop the procurement as violative of the treaty, the MOU, and the Administrative Procedure Act, the Navy would have awarded contracts for the two portions of the cargo carriage on April 25, 1988. *fn9" However, since April 15, 1988, the Navy has been under a temporary restraining order enjoining it from proceeding with the 1988 procurement in the manner planned.

 III

 Before the Court can reach the substance of Rainbow's complaint, it must address the Navy's threshold defenses -- that Rainbow lacks standing to sue, that the Court has no jurisdiction, and that sovereign immunity bars the action. None of these defenses ...


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