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MARINE TRANSP. SERVS. SEA-BARGE GROUP v. BUSEY

January 31, 1992

MARINE TRANSPORTATION SERVICES SEA-BARGE GROUP, INC., Plaintiff,
v.
JAMES BUSEY, Acting Secretary, U.S. Department of Transportation, UNITED STATES DEPARTMENT OF TRANSPORTATION, WILLIAM A. CREELMAN, Deputy Maritime Administrator, UNITED STATES MARITIME ADMINISTRATION, Defendants. PUERTO RICO MARITIME SHIPPING AUTHORITY, Plaintiff, v. JAMES BUSEY, Acting Secretary, U.S. Department of Transportation, UNITED STATES DEPARTMENT OF TRANSPORTATION, WILLIAM A. CREELMAN, Deputy Maritime Administrator, UNITED STATES MARITIME ADMINISTRATION, Defendants. SEA-LAND SERVICE, INC., Plaintiff, v. JAMES BUSEY, Acting Secretary, U.S. Department of Transportation, UNITED STATES DEPARTMENT OF TRANSPORTATION, WILLIAM A. CREELMAN, Deputy Maritime Administrator, UNITED STATES MARITIME ADMINISTRATION, Defendants.



The opinion of the court was delivered by: ROYCE C. LAMBERTH

 These cases come before the court on several motions and cross motions for summary judgment and the oppositions and replies thereto concerning the proper interpretation of Section 506 of the Merchant Marine Act of 1936, as amended, 46 U.S.C. § 1156 (1975 and Supp. 1991) ("Section 506"). On January 31, 1990, and as amended on February 28, 1990, the United States Maritime Administration ("MarAd") issued a Final Statutory Interpretation of the disputed provision in Section 506. Numerous parties are involved in the present litigation: plaintiff in the first case, Civil Action No. 89-2278, Marine Transportation Services Sea-Barge Group, Inc. ("Sea-Barge"), defendants James Busey, Acting Secretary of the Department of Transportation, the Department of Transportation, Deputy Maritime Administrator William A. Creelman, and MarAd (referred to collectively as "Federal Defendants"), intervenor/consolidated-plaintiff Sea-Land Service, Inc. ("Sea-Land"), and intervenor/consolidated-plaintiff Puerto Rico Maritime Shipping Authority ("PRMSA"). *fn1" All parties have filed motions or cross-motions for summary judgment concerning the Final Statutory Interpretation and, in some cases, several other directives, issued by MarAd.

 I. FACTS

 Sea-Barge operates ocean-going tugs and barges between ports in the United States (Miami and Jacksonville, Florida), and ports of Puerto Rico. The Department of Transportation is responsible, inter alia, for implementing the terms of the Merchant Marine Act. Some of the Department of Transportation's duties have been delegated to the MarAd.

 PRMSA is a common carrier operating vessels in the trade between ports on the United States Atlantic and Gulf Coasts, Puerto Rico, the Dominican Republic, the U.S. Virgin Islands, Haiti, and Trinidad.

 Sea-Land operates as a common carrier in international, foreign and domestic off-shore trades, including operations involving combined domestic and foreign cargos ("mixed-use voyages") that operate between the United States and Puerto Rico and foreign countries in the Caribbean. In March, 1988, Sea-Land bought three Lancer vessels *fn2" and PRMSA bought five Lancer vessels, at a United States Marshal's auction following the bankruptcy of United States Lines, Inc. The vessels had been built in the 1960's for United States Lines with the aid of construction differential subsidies ("CDS") pursuant to the Merchant Marine Act of 1936, 46 U.S.C. § 101 et seq. (1982) ("the Act").

 In a letter dated April 21, 1988, Sea-Land asked MarAd to confirm that Section 506 and the relevant CDS contractual provisions did not prohibit the operation of the Lancer vessels on following itinerary: Elizabeth, New Jersey to San Juan, Puerto Rico to Jacksonville, Florida to San Juan to Kingston, Jamaica to New Orleans, Louisiana to San Juan to Elizabeth. Sea-Land stated that at least one container of cargo (presumably the same one) would be carried from Elizabeth to Kingston and one container of cargo would be carried from Kingston to Elizabeth. *fn3" In addition, Sea-Land stated that the crew would be on "foreign articles" for the entire voyage. Administrative Record ("A.R."), at 1480. *fn4" By letter dated May 16, 1988 ("May 16 Letter"), MarAd approved the proposed itinerary as permissible using the Lancer vessels provided that Sea-Land: (1) carried one hundred long tons of cargo (five TEUs), "in the foreign commerce of the United States" for each such voyage; and (2) "advertised to offer cargo carriage between the U.S. and foreign ports and ardent effort shall be made to solicit and secure such cargoes." A.R. at 1482.

 Several interested parties questioned the May 16 Letter in letters written to MarAd. A.R. at 1484-91. In light of these letters, MarAd, on September 7, 1988, indicated that it would reconsider the informal advice given in the May 16 Letter and would receive comments on the issue from interested parties. A.R. at 1492-93. Interested parties in the Caribbean and Hawaiian trades became aware of the dispute and submitted informal comments through November of 1988. A.R. at 1368-1501.

 On June 6, 1989, MarAd issued a Final Opinion and Order for "Docket A-179" ("June 6 Opinion"), discussing the meaning of the "Fourth Exception" to Section 506. *fn5" A.R. at 1269-1334. The June 6 Opinion held that the term "may stop" means "may stop once" at a United States possession or territory either in the course of a foreign voyage or "once inbound and once outbound," *fn6" and that Sea-Land's itinerary consisted of several voyages. A.R. at 1288, 1308 and 1331. The June 6 Opinion also indicated that there was a need to establish guidelines on the cargo-mix issue. On June 12, 1989, MarAd published a notice in the Federal Register, 54 Fed. Reg. 24976, referring to the June 6 Opinion and inviting comments on the appropriate cargo-mix under the Fourth Exception of Section 506. MarAd stated that the reason it solicited comments was because:

 the owners and operators of CDS-built vessels need to know the scope of operations which will not jeopardize or breach their CDS contracts. The Jones Act vessel operators and owners need to know such scope so that they can make reasonable business decisions on their operations.

 On August 14, 1989, Sea-Barge filed suit in this court claiming that MarAd's failure to issue a rule that prohibits the carriage of more than 50 percent domestic cargo in the mixed Puerto Rican/Caribbean trades violated Section 506 of the Act. Complaint at para. 33. Sea-Barge asked the court to issue such a 50 percent interpretation or to order MarAd to do so. On September 27, 1989, this court issued an order dismissing Sea-Land and PRMSA as defendants in the Sea-Barge action and directing the Federal Defendants to file dispositive motions within thirty days unless MarAd agreed to issue an interim interpretation of Section 506 within that time frame. On October 27, 1989, MarAd issued its Interim Statutory Interpretation, A.R. at 721-775, which provided that:

 effective immediately for voyages for which cargo is not booked, but for all voyages no later than November 27, 1989, to be considered a bona fide voyage in foreign trade under the Fourth Exception of Section 506, each voyage of a CDS-built vessel may stop once inbound and once outbound at Puerto Rico and, at a maximum at any time during the voyage, carry domestic cargo equal to 75 percent of the total capacity of the vessel on each voyage. Operators involved in such service must report cargo carriage on a semiannual basis. Interested parties may submit their views on this interim interpretation until November 27, 1989. Marad will consider those views before issuing a final interpretation.

 AR at 775. The Interim Statutory Interpretation was published in the Federal Register as a proposed final rule and comments were invited. On January 31, 1990, MarAd issued its Final Statutory Interpretation, A.R. 308-35, which held:

 For the reasons set forth [in this Final Statutory Interpretation and] in the June 6, 1989 Opinion and Order, [and] the October 27, 1989 Interim Statutory Interpretation . . . MARAD concludes as its Final Statutory Interpretation the following:

 Effective on and after March 1, 1990, with respect to CDS-built container vessels carrying cargo between the U.S. mainland and foreign countries, via Puerto Rico, to be considered a bona fide voyage in the foreign trade under the Fourth Exception of Section 506, each voyage of a CDS-built vessel may stop only once inbound and once outbound at Puerto Rico, and, at a minimum, the vessel must carry foreign cargo equal to 25 percent of the total TEUs carried on the vessel on each voyage on a round trip basis. Operators involved in such service will be required to report cargo carriage on a quarterly basis.

 A.R. at 334-35. On February 28, 1990, MarAd issued an Addendum, A.R. 64a-71, which modified the Final Statutory Interpretation as follows:

 Effective on and after April 1, 1990, with respect to CDS-built container vessels carrying cargo between the U.S. mainland and foreign countries via Puerto Rico, to be considered a bona fide voyage in the foreign trade under the Fourth Exception of Section 506, each voyage of a CDS-built vessel may stop only once inbound and once outbound at Puerto Rico, and, at a minimum, the vessel must carry foreign cargo equal to 25 percent of the total TEUs carried on the vessel on a voyage basis. Failure to meet that level of carriage will result in a rebuttable presumption, that the voyage is not one in foreign trade. This rebuttal is effective in normal circumstances, but MARAD retains the right to assure that the carrier has taken sufficient steps to carry significant quantities of foreign cargo on each voyage in deciding whether the presumption has in fact been rebutted. The failure of quarterly results to achieve the required results can be excused only by MARAD finding that circumstances caused by force majeure precluded the operation of CDS-built vessels from otherwise meeting the 25 [percent] requirement. Operators involved in such service will be required to report cargo carriage on the same quarterly basis.

 A.R. at 71.

 On April 9, 1990, MarAd declined requests for review of the Final Statutory Interpretation or the Addendum. A.R. at 1-2.

 On April 25, 1990, Sea-Barge filed its Second Amended Complaint which seeks the following relief: (1) a declaration that CDS-built vessels may not be operated in the United States/Puerto Rico trade unless at least 50 percent of the cargo capacity of each vessel on each transit between two ports is reserved for cargo in the foreign trade of the United States; (2) a declaration that cargo of foreign origin or destination that is transshipped *fn7" by a CDS-built vessel between a port in the continental United States and a port in Puerto Rico be excluded from the calculation of foreign cargo necessary to meet the requirements of Section 506; (3) judgment that the Federal Defendants have violated the Administrative Procedure Act ("APA"); (4) an order that the Federal Defendants rescind the last paragraph of the June 6 Opinion which purports to authorize continued use of subsidized vessels in the United States/Puerto Rico trade; (5) a permanent injunction enjoining Federal Defendants from violating the Merchant Marine Act; and (6) other relief which the court deems appropriate.

 Sea-Barge then filed a motion for summary judgment which contained three requests. First Sea-Barge asked the court to find that Section 506 is clear on its face as a matter of law and that MarAd's Final Statutory Interpretation is arbitrary and capricious insofar as it finds that 75 percent of the capacity of any CDS vessel can be used to transport domestic cargo on the foreign trade routes discussed in the Final Statutory Interpretation. Sea-Barge Motion at 1-2. Second, Sea-Barge asked the court to issue an order declaring that the CDS vessels at issue in the disputed trade must carry foreign cargo amounting to at least 50 percent of its total domestic and foreign cargo at all times. Third, Sea-Barge asked that the court find that transshipped cargo should be deemed to be domestic cargo for purposes of Section 506.

 As intervenors, both Sea-Land and PRMSA individually cross-moved for summary judgment. *fn8" Sea-Land argued that it is entitled to summary judgment dismissing the Second Amended Complaint insofar as Section 506 does not support a construction that CDS-built vessels in the disputed trade must carry foreign cargo amounting to at least 50 percent of its total domestic and foreign cargo. Sea-Land also argued that Sea-Barge's claim that transshipped foreign cargo should be Created as "domestic" cargo was neither properly presented to nor decided by MarAd and is therefore not presently susceptible to judicial review. Similarly, PRMSA urged dismissal of Sea-Barge's Second Amended Complaint because Section 506 does not authorize MarAd to impose percentage limitations on domestic cargoes. PRMSA also argued that the Final Interpretation is arbitrary and capricious.

 On April 26, 1990, both Sea-Land and PRMSA filed independent actions which, as is explained above, have been consolidated with the first lawsuit. In its complaint, Sea-Land asks the court to: (1) declare that Federal Defendants have arbitrarily and capriciously interpreted Section 506 in violation of the APA; (2) enjoin the Federal Defendants from enforcing, and require them to rescind, the Final Statutory Interpretation and MarAd's determination of what constitutes a voyage in foreign trade; (3) enjoin Federal Defendants from issuing any other future statutory interpretations superimposing any numerical standard or other arbitrary and capricious standard on Section 506; (4) award Sea-Land costs and reasonable attorneys' fees; and (5) grant such other relief as the court deems appropriate.

 PRMSA asks the court, in its complaint, to: (1) issue an injunction requiring Federal Defendants to rescind the June 6 Opinion, the October 27 Letter, and the Final Statutory Interpretation; (2) declare that the Federal Defendants lack the authority to make the findings and issue the restrictions in those rulings; (3) declare that, by issuing those rulings, Federal Defendants exceeded their statutory authority and violated the APA's proscriptions against decisions issued without notice and opportunity for comment as well as arbitrary and capricious and not in accordance with law; and (4) grant such other relief as it deems appropriate.

 II. LEGAL STANDARD

 The language of Rule 56(c) of the Federal Rules of Civil Procedure indicates that summary judgment is appropriate when examination of the record as a whole reveals "no genuine issue as to any material fact and that the moving party is entitled to judgment as a matter of law." In examining the record, the court must view all inferences in the light most favorable to the non-moving party. Matsushita Elec. Industrial Co. v. Zenith Radio Corp., 475 U.S. 574, 587, 89 L. Ed. 2d 538, 106 S. Ct. 1348 (1986).

 The scope of a court's review of an agency's exercise of its rulemaking authority is limited. United Mineworkers of America, International Union v. Dole, 276 App. D.C. 248, 870 F.2d 662, 666 (D.C. Cir. 1989). Pursuant to Chevron, the court must first consider whether Congress manifested an "unambiguously expressed intent" that resolves the dispute of the statute's meaning. Abbott Laboratories v. Young, 287 App. D.C. 190, 920 F.2d 984, 987 (D.C. Cir. 1990), cert. denied sub nom. Abbott Laboratories v. Kessler, 116 L. Ed. 2d 49, 112 S. Ct. 76, . . .U.S. . . . (1991) ("Abbott Labs") (quoting Chevron U.S.A. Inc. v. Natural Resources Defense Council, Inc., 467 U.S. 837, 842-43, 81 L. Ed. 2d 694, 104 S. Ct. 2778 (1984)). The language of the statute in question is the best indication of congressional intent. Abbott Labs, 920 F.2d at 987. If the statute clearly speaks to the issue, then the reviewing court need not defer to the agency's interpretation because the court is in as good a position as agency to interpret and apply the statute. The court may also look to the statute's legislative history to determine whether Congress clearly addressed the issue. See id. at 988.

 On the other hand, if the language of the statute does not clearly address the issue at hand, the court must then proceed to the second step of Chevron and ask whether the agency's construction "falls within the bounds of reasonableness." Id. The court in Abbott Labs stated that "the 'reasonableness' of an agency's construction depends on the construction's 'fit' with the statutory language as well as its conformity to statutory purposes." Id. It is in this context that agencies are to ...


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