This matter is before the Court on plaintiffs' motions for summary judgment; the federal defendants' motion to dismiss or, in the alternative, for summary judgment;
and the motion of defendant American President Lines, Inc. ("APL") for summary judgment. Although "findings of fact and conclusions of law are unnecessary on decisions of motions under Rule 12 or 56," see Fed. R. Civ. P. 52(a), the Court nonetheless sets forth its analysis.
Plaintiffs are three labor unions that represent certain classes of U.S. merchant marine employees, and several members thereof. Plaintiffs challenge the decision of the Maritime Administrator ("Administrator") to permit APL, a United States corporation engaged in the business of international shipping, to operate six new foreign-built C11 vessels under foreign flag, and thus staffed by foreign crews, as being in violation of the Merchant Marine Act of 1936, 46 U.S.C. §§ 1101 et seq. ("Act"), the Administrative Procedure Act, 5 U.S.C. § 706 ("APA"), and the Due Process Clause of the Fifth Amendment.
APL receives a government subsidy known as an operating differential subsidy ("ODS"), which is intended to help U.S. operators meet foreign competition by covering the higher costs of operating vessels under U.S. flag, which, because of higher U.S. labor costs, typically exceed those of operating a vessel under foreign flag. See 46 U.S.C. app. § 1171. To facilitate the ODS program, § 804(a) of the Act prohibits a recipient of an ODS from operating any foreign-flag vessel which competes with any U.S.-flag service in an "essential service." 46 U.S.C. app. § 1222(a). Section 804(b), however, creates an exception to this general prohibition:
Under special circumstances and for good cause shown, the Secretary of Transportation may, in his discretion, waive the provisions of subsection (a) of this section as to any contractor, for a specific period of time.
Id. § 1222(b). Thus, absent a § 804(b) waiver, APL may not operate the six C11 vessels under foreign flag on the "essential" trade routes for which they are intended.
On July 16, 1993, APL applied to the Administrator for a § 804(b) waiver, requesting permission to operate the C11 vessels under foreign flag in an essential service, until December 31, 1997 -- the expiration date of APL's ODS contract. On August 27, 1993, the Administrator, as a matter of discretion, published notice of APL's application in the Federal Register. 58 Fed. Reg. 45371-72 (1993). Plaintiff Seafarers International Union of North America--Pacific District ("SIU-PD") was the only plaintiff to file timely comments thereon.
SIU-PD objected to the granting of the waiver on the grounds that: (1) a waiver would be contrary to the intent and the purpose of the Act, and, in particular, to the purpose of § 804; and (2) the requirements of "special circumstances" and "good cause" under § 804(b) should be restrictively interpreted, and thus result in a denial of APL's application.
The Administrator postponed action on APL's application while maritime revitalization legislation was pending before Congress -- legislation which, if passed, would have effected an overhaul of the current law governing the maritime industry. After it became apparent that such legislation would not be enacted during the 103d Congress, on October 13, 1994, APL filed a request for a decision on its application.
On November 15, 1994, the Administrator granted APL's § 804(b) application, adopting an October 24, 1994, recommendation prepared by the Director of the Maritime Administration's ("MarAd") Office of Subsidy and Insurance as the final decision. In brief, the Administrator found that special circumstances and good cause existed, and imposed certain conditions on the waiver. Plaintiffs seek to have the decision of the Administrator vacated and remanded.
Defendants contend that plaintiffs lack standing to challenge the Administrator's decision. To establish standing, plaintiffs must allege facts sufficient to show: (1) that they have suffered some actual or threatened injury; (2) that the injury is fairly traceable to defendants' conduct; and (3) that a favorable court decision is likely to redress the injury. Valley Forge Christian College v. Americans United for Separation of Church and State, Inc., 454 U.S. 464, 102 S. Ct. 752, 758, 70 L. Ed. 2d 700 (1982).
Defendants argue that plaintiffs' alleged injury -- loss of employment -- is speculative and insufficiently imminent because APL may not scrap or withdraw its existing ships from service without MarAd's permission, which APL has not yet sought to do. However, APL has made clear its intent to seek such permission around October or December of 1995,
and the Administrator's decision strongly indicates that at least some of these requests will be granted.
The record further indicates that some of APL's technologically outmoded or soon-to-be overage vessels will be withdrawn from service prior to the expiration of their economic lives in 1996 and 1998, and replaced with the foreign-flag C11 vessels. Thus, although the expiration of APL's ODS contract (and the lack of any new maritime legislation) will inevitably lead to some loss of employment for plaintiffs' members, the Administrator's action will move forward the date on which jobs will be lost. The Court finds that this accelerated unemployment date is sufficient to establish injury.
This accelerated unemployment date is fairly traceable to the Administrator's decision, and would be remedied by a court decision vacating the Administrator's decision. Although defendants are correct that the Court is powerless to address the broader problems facing the merchant marine industry, the relief sought by plaintiffs -- vacating the agency decision -- would provide redress for the specific injury defined above. Accordingly, defendants' motion to dismiss for lack of standing is denied.
II. Alleged Violations of the APA
Both plaintiffs and defendants move for summary judgment on plaintiffs' APA claims. Summary judgment may be granted only if the pleadings and evidence "show that there is no genuine issue as to any material fact and that the moving party is entitled to a judgment as a matter of law." Fed. R. Civ. P. 56(c). Because the issues raised by the present motions concern only questions of law, this matter is appropriate for resolution on summary judgment.
Under the APA, the "the task of the reviewing court is to apply the appropriate APA standard of review, 5 U.S.C. § 706, to the agency decision based on the record the agency presents to the reviewing court." Florida Power & Light Co. v. Lorion, 470 U.S. 729, 105 S. Ct. 1598, 1607, 84 L. Ed. 2d 643 (1985). The agency action in this case is an informal adjudication. The Court will set it aside only if it is "'arbitrary, capricious, an abuse of discretion, or otherwise not in accordance with law' or if the action failed to meet statutory, procedural, or constitutional requirements."
Citizens To Preserve Overton Park, Inc. v. Volpe, 401 U.S. 402, 91 S. Ct. 814, 822, 28 L. Ed. 2d 136 (1971) (citing 5 U.S.C. § 706(2)(A),(B),(C),(D)). This standard is highly deferential. See, e.g., Motor Vehicle Mfrs. Ass'n, Inc. v. State Farm Mut. Auto. Ins. Co., 463 U.S. 29, 103 S. Ct. 2856, 2866, 77 L. Ed. 2d 443 (1983).
A. Statutory Interpretation
Plaintiffs assert that the Administrator's interpretation of the "special circumstances" and "good cause" requirements of § 804(b) violates the authorizing statute and consequently the APA's requirement that agency action be "in accordance with law." See 5 U.S.C. § 706(2)(A). Specifically, plaintiffs contend that the Administrator's interpretation of § 804(b) is contrary to one of the Act's purposes, that of promoting the ownership and operation of U.S.-flag ships by U.S. citizens.
When a court reviews an agency's interpretation of a statute, the court first must determine whether Congress has spoken directly on the precise question at issue, either on the face of the statute or in the legislative history. See Chevron, U.S.A., Inc. v. Natural Resources Defense Council, 467 U.S. 837, 104 S. Ct. 2778, 2781, 81 L. Ed. 2d 694 (1984). "If the statute is silent or ambiguous with respect to the specific issue, the question for the court is whether the agency's answer is based on a permissible construction of the statute." Id. at 2782. Section 804(b) is silent on the meaning of the terms "special circumstances" and "good cause." Additionally, the parties have not been able to point to any legislative history that sheds light on these terms, nor has the Court been able to find any. Therefore, the Court proceeds to the second stage of the Chevron inquiry, whether the Administrator's construction of § 804(b) is a reasonable one. The Court finds that it is.
MarAd has determined that the "special circumstances" and "good cause" requirements of § 804 call for the agency to exercise its discretion "consistent with the declaration of the policy of the Act [ 46 U.S.C. § 1101]." The declaration of policy section may be summarized as supporting the following goals: (1) provision of shipping services adequate to support domestic and foreign water-borne commerce of the United States; (2) support of a national defense when necessary; (3) ownership and operation under U.S. flag by trained U.S. personnel; and (4) maintenance of a modernized and well-equipped merchant marine competitive with that of foreign nations. See 46 U.S.C. § 1101. The purpose of § 804 in particular is to prevent ODS recipients from diverting their subsidies to foreign-flag vessels that compete with U.S.-flag vessels. Certain Bulk Operators, 25 Shipping Reg. (P & F) 1261, 1264 (MA 1990).
To these ends, the agency has formulated a nonexhaustive list of issues that should be considered to determine whether "special circumstances" and "good cause" exist:
(1) . . . a special circumstance exists where (a) the proposed foreign-flag vessel use will not adversely affect subsidy payments or the subsidized service, and (b) the Applicant would suffer a hardship if the prohibition is enforced, and (2) . . . good cause is shown (a) if the proposed vessel use will have an insignificant effect on American-flag service, (b) if ownership operation of the vessels under the United States registry by citizens is not practicable, and (c) there is an insufficiency of American-flag vessels of the right type to serve the purpose. Other special circumstances and good cause may exist.