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RAINBOW NAVIGATION, INC. v. DEPARTMENT OF THE NAVY

November 15, 1988

RAINBOW NAVIGATION, INC., et al., Plaintiffs,
v.
DEPARTMENT OF THE NAVY, et al., Defendants


Harold H. Greene, United States District Judge.


The opinion of the court was delivered by: GREENE

HAROLD H. GREENE, UNITED STATES DISTRICT JUDGE.

 This case, which involves shipping between the United States and Iceland, is now before this Court for the fourth time in three years. On the first three occasions, the Court concluded that the government's legal position was erroneous, its factual statements at odds with the facts, or both. As discussed below, with every negative ruling, the government devised yet new and different means for eliminating the plaintiff from the United States-Iceland trade. The Court now holds that the Executive's latest action has no more validity than its three previous efforts.

 I

 Plaintiff, Rainbow Navigation, Inc., is a United States shipping company which prior to the events described herein had carved out for itself a small niche in the military cargo trade between this country and Iceland. Rainbow's entry into this trade pierced what had until then been a monopoly of Icelandic shippers: *fn1" its vessel "Rainbow Hope," was the only non-Icelandic ship to participate in this trade, as no other American shippers had found it profitable to do so. The Republic of Iceland, a NATO ally of the United States, made urgent representations to the Department of State to bar Rainbow in an attempt to recapture the monopoly its vessels had previously enjoyed.

 In response to these pressures, the Secretary of the Navy made a finding in August 1985 that Rainbow's rates were "excessive and otherwise unreasonable" -- the only basis upon which that American company could lawfully be deprived of the right established by the Cargo Preference Act of 1904 *fn2" to carry American military cargo. The Secretary's finding of excessive pricing turned out, upon examination, to be fictitious and pretextual. Inquiry revealed, and the Court found, that the Navy's determination adverse to Rainbow was based not on freight rates -- which were no higher than those that had previously been charged *fn3" -- but on foreign policy, political, or geopolitical grounds. Rainbow Navigation, Inc. v. Department of the Navy, 620 F. Supp. 534, 540 (D.D.C. 1985) (Rainbow I). The Court of Appeals, in an opinion authored by then Judge Scalia, affirmed. Rainbow Navigation, Inc. v. Department of the Navy, 251 U.S. App. D.C. 257, 783 F.2d 1072 (D.C. Cir. 1986).

 Next, the Navy attempted another and different end run around the Cargo Preference Act. Under government regulations, military aircraft may be used under certain narrow circumstances in lieu of private commercial vessels to carry military cargo, and such aircraft now began to take over the Iceland-United States military cargo traffic, squeezing out Rainbow. *fn4" However, the regulations contain a presumption in favor of commercial carriage, and they stipulate that military aircraft may displace commercial carriers only if the aircraft "are available and not fully utilized." 48 C.F.R. ยง 47.101(b)(1).

 Once again, the legally necessary findings were promptly made. The Navy duly concluded, on the basis of sworn statements from officials, *fn5" that aircraft were not being flown to Iceland for the purpose of picking up military cargo; that, on the contrary, such aircraft were "available and not fully utilized;" and that therefore Rainbow's services could largely be dispensed with. Once again, the Secretary's determination and the sworn statements of his military and civilian subordinates were false.

 In fact, the number of military flights from Iceland to this country had sharply increased concurrently with the diversion of this cargo from Rainbow, and the Court found that the aircraft to carry the cargo had not been "available" but had been dispatched to Iceland for the specific purpose of carrying the freight in question. The Court held that the Navy had once again attempted unlawfully to deprive Rainbow its rights under the law. Memorandum Order dated October 17, 1986 (Rainbow II).

 That is where the matter stood when, on September 24, 1986, the United States and Iceland signed a treaty *fn6" regarding the military cargo in the United States-Iceland trade. *fn7" The treaty provides for a competition between the shipping companies of the two nations for that cargo. Following that competition, contract awards are to be made to one Icelandic company and one American company, the lowest bidder to receive for carriage sixty-five percent of the cargo, the next lowest bidder, which must be of the other country, to carry the remainder. A competition was conducted in 1987 according to these terms, without difficulty or complaint.

 However, the Navy thereafter announced plans to change the method by which the competition was to be held the following year, to Rainbow's detriment. *fn8" The Court once again enjoined the government's attempt to force Rainbow out of business, upon its conclusion that the method devised by the Navy following the 1987 competition violated the Icelandic treaty. Rainbow Navigation, Inc. v. Department of the Navy, 686 F. Supp. 354 (D.D.C. 1988) (Rainbow III). *fn9" That is where the matter stood when the most recent set of motions was filed. *fn10"

 II

 As indicated above, in 1987, following ratification of the treaty with Iceland, the Navy's Military Sealift Command held a competition that caused no controversy. However, in February 1988, the Sealift Command issued a different Request for Proposals (RFP) regarding the next Iceland cargo contract. Following the Court's decision in Rainbow III, the government recognized that this RFP did not conform the treaty as the Court had construed it, and it proposed to the Court yet another RFP which, while conforming to Rainbow III,11 includes a number of new provisions and conditions and eliminates some others. *fn12" Rainbow, supported by the International Organization of Masters, Mates and Pilots (maritime union), intervenor herein, *fn13" is challenging this new RFP, arguing that, in its eagerness to eliminate Rainbow, the government has once again overstepped the bounds of law, treaty, and prior undertaking. The Court agrees.

 In order to understand the current phase of the dispute between the parties, it is necessary to discuss the proceedings in the United States Senate in connection with the ratification of the Icelandic treaty. *fn14"

 The first question to be considered in that connection is a legal one -- what is the effect of representations made by the Executive Branch to the Senate? Although when this litigation was before the Court last Spring the government took the position that the representations made in connection with the treaty ratification proceedings were merely "precatory" and "non-binding," Rainbow III, supra, 686 F. Supp. at 357 n.17, this apparently is no longer the government's view. The Court rejected that position, *fn15" and the government now appears to disavow it, *fn16" stating that

 
. . . authoritative Executive branch representations concerning the meaning of a Treaty which form part of the basis upon which the Senate gives advice and consent are entitled to be accorded binding weight as a matter of domestic constitutional law, and the Executive branch fully accepts that it is bound by such statements . . . .

 Defendants' Reply Brief and Opposition to Plaintiff's Cross-Motion for Summary Judgment at 2 n.2.

 This Court has no doubt about the obligation of the Executive Branch to stand behind the representations made by its officials to the Senate committee having jurisdiction, and to comply with the conditions attached, formally or informally, by the Senate as part of its ratification. *fn17" Any other rule would undermine the authority of the Senate under Article 2 section 2 of the Constitution to concur or to fail to concur in treaties made by the Chief Executive. If, following ratification, the Executive could unilaterally change the meaning of a treaty as it had been presented to the Senate, the careful consideration the Senate gives to treaty language, purposes, and effect, would stand in constant peril of nullification by reinterpretation by Executive officials, high or low. *fn18"

 It is appropriate, then, to consider exactly what representations were made by the Executive Branch witnesses regarding the meaning and effect of the Iceland treaty, and what conditions or understandings were arrived at as part of the ratification process.

 The principal Executive Branch witnesses who testified before the Senate Committee on Foreign Relations on the Icelandic treaty were the Hon. Edward J. Derwinski, Counselor of the Department of State, and Rear Admiral Walter T. Piotti, Jr., Commander of the Navy's Military Sealift Command. *fn19" Senator Mathias asked the witnesses about the "current American flag carrier," i.e., Rainbow, *fn20" and whether any plans were in effect to "save harmless the current cargo carrier." Mr. Derwinski replied to this query with two assurances: (1) that carrier has been involved in a number of discussions with appropriate authorities, and (2) although the Department obviously could not provide in the treaty for ...


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