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American Petroleum Tankers Parent, LLC v. United States

United States District Court, District Circuit

May 6, 2013

UNITED STATES OF AMERICA, et al., Defendants.



Plaintiff American Petroleum Tankers Parent, LLC, pursuant to the Administrative Procedure Act ("APA"), 5 U.S.C. 701 et seq., challenges the Maritime Administration's decision denying the Plaintiff's application for loan guarantees intended to allow the Plaintiff to refinance loans used to construct five petroleum tankers. Presently before the Court is the Defendants' [18] Motion to Dismiss the Supplemental Complaint. Upon consideration of the pleadings[1] and the relevant legal authorities, the Court finds the Plaintiff has standing to challenge the Maritime Administrator's denial of the applications, and that the Administrator's decision on an application for a loan guarantee is not committed to agency discretion and is thus reviewable by the Court. The Court further finds the Plaintiff has stated a claim challenging the Secretary of Transportation's order requiring the Administrator to refer applications to the Credit Council for a recommendation. However, the Plaintiff failed to state a claim for relief or establish the Court's subject matter jurisdiction with respect to its request that the current Maritime Administrator be recused from considering the Plaintiff's application if the case is remanded to the agency for further consideration. Accordingly, the Defendants' motion is GRANTED IN PART and DENIED IN PART.


American Petroleum Tankers Parent ("APT") is majority-owned by investment funds managed by affiliates of the Blackstone Group, L.P., a publicly traded private equity company. Suppl. Compl., ECF No. [14], § 2. APT owns five 49, 000 deadweight ton petroleum tankers, delivered to APT between January 2009 and December 2010. Id. at § 1. Each of the five vessels are U.S.-flagged and employed in the coastwise trade of the United States. Id. Two of the tankers have (unspecified) specially designed features approved by the United State Navy and are currently on charter to the Navy's Military Sealift Command. Id.

A. Title XI Loan Guarantee Program

Title XI of the Merchant Marine Act of 1936 authorizes the Administrator of the Maritime Administration, to guarantee loans intended to finance the construction, reconstruction, or reconditioning of vessels that, among other things, are designed principally for commercial use in the coastwise trade. 46 U.S.C. §§ 53702(a), 53706(a)(1)(A)(i).[2] Guarantees may also be issued for refinancing an existing obligation issued to finance the construction, reconstruction, or reconditioning of such vessels. Id. § 53706(a)(5). Applications for Title XI guarantees must be approved or denied within 270 days after the Administrator receives the signed application, though the applicant may request that the time for consideration be extended for up to two years from the date on which the application was received. Id. § 53703(a)(1), (2).

The statute sets forth a number criteria an application must satisfy in order to be eligible for a loan guarantee. The obligor must have "the ability, experience, financial resources, and other qualifications necessary for the adequate operation and maintenance of each vessel that will serve as security for the guarantee." 46 U.S.C. § 53707(a). The property for which the obligation will be executed must be "economically sound" in light of various factors, including "the market potential for employment of the vessel over the life of the guarantee, " and "projected revenues and expenses associated with employment of the vessel." Id. § 53708(a)(2), (3). The Administrator may employ a third party expert to analyze "risk factors associated with markets, technology, or financial structures." Id. § 53708(d).[3] The statute also provides that the Administrator must give priority to vessels that, among other things, are suitable for service as a naval auxiliary in the time of war or national emergency. 46 U.S.C. § 53706(c).

Pursuant to Department of Transportation Order 2301.1B, after the Maritime Administrator completes his review of the application, the application must be referred to the Department of Transportation Credit Council for review. Defs.' Ex. A § 9(a). The Credit Council is comprised of various officials within the Department of Transportation, including the General Counsel, the Federal Highway Administrator, the Federal Railroad Administrator, and the Maritime Administrator. Id. at § 5. In addition to setting the Department's credit policies and procedures, the Credit Council makes recommendation to agencies within the Department regarding applications for various credit assistance programs, including the Title XI loan program. Id. at §§ 3, 9(a). With respect to Title XI applications, the Credit Council provides "a recommendation regarding the financial viability of the proposed project and the merits of the requested credit assistance and its consistency with departmental credit policies." Id. at § 9(a). The Maritime Administrator is not bound by the Credit Council's recommendation, and ultimately approves or denies the application. Id.

B. Plaintiff's Title XI Application and Litigation History

APT submitted an application for a Title XI guarantee on August 30, 2010, seeking loan guarantees to refinance the $400 million debt incurred to construct the tankers owned by APT. Suppl. Compl. § 2. The Maritime Administration accepted APT's application as complete on December 2010. Id. As part of the review process, the Department of Transportation Credit Council makes a recommendation to the Maritime Administration regarding each application. Id. at § 3. The Plaintiff alleges that the Credit Council refused to consider its application in light of the fact the Plaintiff is owned by a private equity firm. Id.

Fearing that the Maritime Administration would not act on its application by the statutorily mandated two-year deadline, the Plaintiff filed suit in July 2012 seeking an emergency writ of mandamus to compel the Administrator to grant or deny the application by August 31, 2012. See generally Compl., ECF No. [1]. After an on-the-record conference call with the Court, the Defendants agreed to issue a decision on the Plaintiff's application by August 31, 2012. Jt. Stip., ECF No. [7]. The Plaintiff accordingly withdrew its motion for emergency relief. Id.

On July 28, 2013, the Plaintiff modified its application, in relevant part, to reduce the guarantee amount to $340 million. Suppl. Compl. § 5; Pl.'s Ex. B (8/1/12 Decision Ltr.) at 4. Two days later, the Administrator denied the Plaintiff's original application, acknowledging that it did not consider the July 28 revisions to the application, indicating a review of the amended application would require "a comprehensive financial analysis" that could not be completed by August 31. Pl.'s Ex. B at 4. The Administrator explained that the denial of the Plaintiff's original application was based on several factors: (1) "[the] project is not economically sound overall"; (2) it seeks refinancing for two particularly vulnerable vessels"; and (3) "it seeks to refinance at least three ships over one year old at the time of closing." Id. Additionally, the Administrator explained that "the amount of the project to be refinanced, ... if granted, would consume almost all of the remaining monies available for the ship financing program." Id.

Following the initial denial of the Plaintiff's application, the Administrator agreed to consider the Plaintiff's amended application. Jt. Mot. to Stay, ECF No. [9], § 9. The Administrator denied the amended application on November 9, 2012. Pl.'s Ex. C. In short, the Administrator explained that the amended application was denied because it "remains not economically sound overall, " "seeks refinancing of two particularly vulnerable vessels, " "seeks to refinance at last three ships over one year old, " and if granted, the guarantees sought by the Plaintiffs would "consume almost all of the remaining monies available for the ship financing program." Id. at 4.

The Plaintiff supplemented its complaint in this matter to reflect the denial of both its original and modified applications. See generally Suppl. Compl., ECF No. [14]. The first count of the supplemental complaint alleges that the Administrator's decision denying the Plaintiff's application was arbitrary, capricious, or otherwise contrary to law in violation of 5 U.S.C. § 706(2). Specifically, the Plaintiff challenges (1) the Administrator's consideration of the recommendation of the Credit Council; (2) the finding that the amended application is not economically sound; (3) the finding that the amended application does not warrant priority; and (4) the decision to deny the amended application in part because it would exhaust available funds. Suppl. Compl. §§ 102-07. The second count of the supplemental complaint seeks a "remedy for the Secretary's unlawful interference, " pursuant to the APA, namely

an order declaring that the DOT Credit Council has no lawful or valid function with respect to Title XI applications, directing the Secretary to cease and desist from interfering with the Administrator's performance of his ministerial and discretionary responsibilities regarding Title XI applications in general and APT's application in particular, and directing the Administrator... to cease and desist from submitting such applications to the DOT Credit Council and to grant or deny APT's application without regard to the opinions, objections, recommendations or authorization of the Credit Council.

Suppl. Compl. at 39. Finally, in the third count of the supplemental complaint, the Plaintiff alleges that "[p]ast interference by the Secretary... and the DOT Credit Council with the Administrator's performance... has so infected and prejudiced the deliberative process used by, and the judgment of, the incumbent Administrator that he is incapable of fairly assessing the merits of APT's Title XI application." Id. at § 115. The Plaintiff thus asks the Court to order the Administrator to recuse himself from consideration of the Plaintiff's application on remanded, and requiring a de novo review of the amended application by a new official within the Maritime Administration. Id. at 39-40. The Defendants now move to dismiss the first and third counts for lack of subject matter jurisdiction, the second count for failure to state a claim, and the third count on the alternative grounds of failure to state a claim.


The Defendants move to dismiss the supplemental complaint under Federal Rules of Civil Procedure 12(b)(6) and 12(b)(1). To survive a motion to dismiss pursuant to Rule 12(b)(1), the plaintiff bears the burden of establishing that the court has subject matter jurisdiction. Moms Against Mercury v. FDA, 483 F.3d 824, 828 (D.C. Cir. 2007). In determining whether there is jurisdiction, the Court may "consider the complaint supplemented by undisputed facts evidenced in the record, or the complaint supplemented by undisputed facts plus the court's resolution of disputed facts." Coal. for Underground Expansion v. Mineta, 333 F.3d 193, 198 (D.C. Cir. 2003) (citations omitted). "At the motion to dismiss stage, counseled complaints, as well as pro se complaints, are to be construed with sufficient liberality to afford all possible inferences favorable to the pleader on allegations of fact." Settles v. U.S. Parole Comm'n, 429 F.3d 1098, 1106 (D.C. Cir. 2005). "Although a court must accept as true all factual allegations contained in the complaint when reviewing a motion to dismiss pursuant to Rule ...

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