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Angelex Ltd. v. United States

United States District Court, District of Columbia

September 28, 2017

ANGELEX LTD., Plaintiff,
v.
UNITED STATES OF AMERICA Defendant.

          MEMORANDUM OPINION GRANTING DEFENDANT'S RENEWED MOTION FOR SUMMARY JUDGMENT; DENYING PLAINTIFF'S CROSS-MOTION FOR SUMMARY JUDGMENT; DENYING AS MOOT DEFENDANT'S MOTION TO STRIKE RE DOCUMENT NOS.: 38, 40, 42

          RUDOLPH CONTRERAS, UNITED STATES DISTRICT JUDGE.

         I. INTRODUCTION

         In April 2013, the United States Coast Guard (“Coast Guard”) performed a routine inspection aboard a foreign-flagged shipping vessel named the M/V ANTONIS G. PAPPADAKIS, which revealed potential criminal violations stemming from the unlawful disposal of oily bilge waste. Criminal charges were subsequently filed against the vessel's owner, its International Safety Management manager, and its Chief Engineer. While these charges were pending, the Coast Guard refused to reinstate a clearance that would allow the ship to return to sea unless a bond in the amount of $2.5 million dollars was posted and the parties agreed to certain other nonmonetary conditions. However, these demands were never met. Ultimately, both the owner and the International Safety Management manager were acquitted of the charges and the ship's departure clearance was finally granted in September 2013.

         In the present action, Plaintiff Angelex Ltd. (“Angelex”), the owner of the ship, has filed suit against Defendant the United States of America (the “Government”) under 33 U.S.C. § 1904(h), seeking compensation for losses incurred as a result of the nearly five-month delay of the vessel. In short, Angelex contends that the Coast Guard's acts and omissions, including its demand for a $2.5 million bond and other nonmonetary conditions, resulted in the unreasonable delay of the vessel, thus entitling Angelex to compensation. Pending now before the Court are the parties' cross-motions for summary judgment. See Def.'s Renewed Mot. Summ. J. (“Def.'s Renewed Mot.”), ECF No. 38; Pl.'s Cross-Mot. Summ. J. (“Pl.'s Cross-Mot.”), ECF No. 40. For the reasons stated below, the Court finds that the Government is entitled to summary judgment on all claims.

         II. BACKGROUND[1]

         Angelex is a foreign corporation registered in Malta and is the owner of the foreign-flagged vessel known as the M/V ANTONIS G. PAPPADAKIS (the “Pappadakis” or the “Vessel”). Def.'s Statement Material Facts (“Def.'s SMF”) ¶¶ 1, 3, ECF No. 22-2; Pl.'s Resp. SMF at 1. At all times relevant to the current action, Kassian Maritime Navigation Agency, Ltd. (“Kassian”), a Greek company, contracted with Angelex to serve as the International Safety Management manager (“ISM manager”) aboard the Pappadakis. Def.'s Resp. SMF ¶ 3. On April 14, 2013, the Pappadakis was on a long-term time charter to United Bulk Carriers International when it arrived at the Norfolk Southern terminal at the Port of Norfolk to load a shipment of coal. Def.'s SMF ¶ 5; Pl.'s Resp. SMF at 1; Def.'s Resp. SMF ¶ 4. The next day, officers from the United States Coast Guard (“Coast Guard”) conducted a routine Port State Control inspection onboard the ship. Def.'s SMF ¶ 15; Pl.'s Resp. SMF at 1. During the inspection, a member of the crew provided Coast Guard inspectors with a note and photographic evidence of a so-called “magic pipe, ” which was designed to bypass certain environmental safety features aboard the ship. Def.'s SMF ¶¶ 16, 18; Pl.'s Resp. SMF at 1. Specifically, this temporary modification was intended to bypass the ship's oily water separator such that oily bilge waste that accumulated aboard the Vessel would be pumped directly overboard without first having contaminants removed. Def.'s SMF ¶¶ 16, 18; Pl.'s Resp. SMF at 1. Given this information, the Coast Guard decided to conduct a wider investigation into the Vessel's compliance with the Act to Prevent Pollution from Ships (“APPS”). Def.'s SMF ¶ 20; Pl.'s Resp. SMF at 1.

         A. The Act to Prevent Pollution from Ships

         The APPS is a federal statute that implements an international maritime treaty called the International Convention for the Prevention of Pollution from Ships, commonly known as “MARPOL.” MARPOL aims “to achieve the complete elimination of intentional pollution of the marine environment by oil and other harmful substances and the minimization of accidental discharge of such substances.” See Wilmina Shipping AS v. U.S. Dep't of Homeland Sec. (Wilmina Shipping II), 934 F.Supp.2d 1, 6 (D.D.C. 2013) (quoting United States v. Pena, 684 F.3d 1137, 1142 (11th Cir. 2012)); see also 33 U.S.C. § 1901(a)(4). In furtherance of that goal, MARPOL requires that a vessel only discharge oily water at sea if special equipment is used to contain most of the oil and other contaminants and also requires that vessels record all oil transfers and discharges in an oil record book, which must be made available for a government to inspect. See Wilmina Shipping II, 934 F.Supp.2d at 6-7 (citing United States v. Ionia Mgmt., S.A., 555 F.3d 303, 306-07 (2d Cir. 2009)). MARPOL, however, is not self-executing. Each signatory nation must implement the treaty by establishing rules that, among other things, sanction ships that violate MARPOL's provisions. See id. at 6.

         In 1980, the United States enacted the APPS to implement MARPOL. The “APPS authorizes the Secretary [of the United States Department of Homeland Security (‘DHS')] to administer and enforce MARPOL and to issue regulations to implement the treaty's requirements.” Id. at 7 (citing 33 U.S.C. § 1903(a), (c)(1); 33 C.F.R. § 151.01 (2014); see also Watervale Marine Co. v. U.S. Dep't of Homeland Sec., 807 F.3d 325, 327 (D.C. Cir. 2015); United States v. Sanford Ltd., 880 F.Supp.2d 9, 11-12 (D.D.C. 2012). Under the APPS, “[i]t is unlawful to act in violation of the MARPOL Protocol . . . or the regulations issued thereunder.” 33 U.S.C. § 1907(a). One such regulation requires vessels over a certain tonnage to maintain an oil record book. See 33 C.F.R. § 151.25. This document must contain, among other things, an accurate record of discharges of bilge water and oily mixtures. See Id. at § 151.25(d). In addition, it must be made readily available for inspection at all reasonable times. See Id. at § 151.25(i). Anyone who knowingly maintains a false oil record book is guilty of a felony and may also be subject to civil liability. See, e.g., Sanford, 880 F.Supp.2d at 11 (individual defendants charged with seven felony counts under the APPS including maintaining a false oil record book); 33 U.S.C. § 1908(a) (“A person who knowingly violates the MARPOL Protocol . . . commits a class D felony.”); 33 U.S.C. § 1908(b) (setting forth the amount of fines that individuals must pay when found civilly liable for violations of MARPOL). If charged criminally, individuals can face possible fines up to $250, 000 while organizations can face fines up to $500, 000 for each violation.[2] See 18 U.S.C. § 3571(b)(3), (c)(3). And any ship that violates MARPOL, APPS, or the regulations promulgated thereunder is “liable in rem for any [criminal] fine . . . or civil penalty” that that might be assessed in those proceedings. 33 U.S.C. § 1908(d).

         Under the APPS, as well as certain other statutes, the Coast Guard is authorized to board and inspect vessels that are docked at U.S. ports to detect potential violations of the APPS, MARPOL, and other environmental laws. 33 C.F.R. § 151.23(a); see also 14 U.S.C. § 89 (authorizing Coast Guard officers to board and inspect ships at ports). Before departing a U.S. port, foreign-flagged ships must obtain a departure clearance from U.S. Customs and Border Protection (“CBP”). 46 U.S.C. § 60105(b). However, under 33 U.S.C. § 1908(e), if there is “reasonable cause” to suspect that “a ship, its owner, operator, or person in charge” may be subject to a fine or civil penalty under the APPS and the Coast Guard has requested that the departure clearance be withheld, CBP is obliged to withhold or revoke the clearance. See 33 U.S.C. § 1908(e); Watervale Marine Co., 807 F.3d at 330. Furthermore, federal officials are authorized to grant departure clearances for ships previously detained only “upon the filing of a bond or other surety satisfactory to the Secretary.” 33 U.S.C. § 1908(e). The D.C. Circuit has noted that this provision grants the Coast Guard “wide discretion” in setting the monetary amount of a bond and has further held that § 1908 authorizes the Coast Guard to condition the reinstatement of a departure clearance on other non-financial conditions as well. See Watervale Marine Co, 807 F.3d at 330.

         B. Withdrawal of the Pappadakis's Departure Clearance

         The expanded investigation of the Pappadakis revealed that the Vessel's oil record book contained no entries recording the direct discharge of oily bilge water overboard without being processed through the oily water separator. Def.'s SMF ¶ 21; Pl.'s Resp. SMF at 1. Yet, inspectors discovered that the ship's oily water separator was not even operable. Def.'s SMF ¶ 22-23; Pl.'s Resp. SMF at 1. Coast Guard officials continued to inspect the Pappadakis and interview crewmembers in the days that followed. Def.'s SMF ¶ 25; Pl.'s Resp. SMF at 1.

         On April 19, 2013, the Coast Guard completed its onboard investigation and no further investigation was ever conducted after that point. Def.'s SMF ¶ 63; Pl.'s Resp. SMF at 1; Def.'s Resp. SMF ¶ 16. That evening, in light of its findings, the Coast Guard sent a letter to Angelex and Kassian informing them that the Coast Guard had collected evidence “establishing reasonable grounds to believe” that the Pappadakis had violated MARPOL and APPS. Def.'s SMF ¶ 64; Pl.'s Resp. SMF at 1. Accordingly, the Coast Guard requested that CBP withhold the Pappadakis's departure clearance, but did not provide any information reasoning or factual predicate supporting its recommendation. Def.'s SMF ¶ 64; Pl.'s Resp. SMF at 1; Def.'s Resp. SMF ¶¶ 5, 7. Upon the Coast Guard's request, and without conducting its own investigation, CBP withdrew the Pappadakis's departure clearance. Def.'s Resp. SMF ¶ 5-6. However, the Coast Guard informed Angelex that it would request the departure clearance be reinstated “[w]hen adequate surety” was provided. Def.'s SMF ¶ 64; Pl.'s Resp. SMF at 1.

         Soon thereafter, Angelex and the Coast Guard began discussing the terms and conditions necessary to reinstate the Vessel's departure clearance. Def.'s SMF ¶ 65; Pl.'s Resp. SMF at 1. The Coast Guard sought both the posting of a monetary bond and the execution of a “Security Agreement” that imposed various non-financial conditions. Under the Security Agreement both Angelex and Kassian would be required to take the following actions:

. pay wages, housing and transportation costs, along with a per diem for those crew members deemed material witnesses that remained in the jurisdiction and facilitate their travel for court appearances;
. maintain the employment of the crew members that remained in the jurisdiction;
. encourage crew members to cooperate with investigators and refrain from taking disciplinary or other adverse actions against crewmembers who cooperate;
. hold the crew members' passports for safekeeping and notify the government if any crew member requested the return of his passport;
. arrange for repatriation of crew members once they left the United States;
. stipulate to the authenticity of documents and items seized from the vessel;[3]
. assist the Government in effecting service of process on crew members located outside the United States;
. waive objections to both in personam jurisdiction over themselves and waive in rem jurisdiction over the vessel; and
. authorize counsel to accept service of legal papers and enter an appearance in federal district court.

See Def.'s SMF ¶ 66; Pl.'s Resp. SMF at 1; Def.'s Mot., Ex. 7, ECF No. 22-8.

         The parties, however, did attempt to negotiate. According to Angelex, neither it nor Kassian could afford the bond amount that the Coast Guard was demanding and Angelex attempted to persuade the Coast Guard of this. See First Am. Compl. ¶¶ 41, 50, ECF No. 20; Pl.'s Cross-Mot., Exs. 3-4, ECF No. 40-5; see also Pl.'s Cross-Mot. at 7, ECF No. 40; Pl.'s Reply at 6, ECF No. 48. Additionally, Angelex represented to the Coast Guard that the Pappadakis was encumbered with a mortgage that exceeded the value of the Vessel. See Pl.'s Cross-Mot., Exs. 3-4. As a result of these factors, the negotiations between the parties appear to have largely centered on the bond amount. See Def.'s Supplemental Statement Material Facts (“Def.'s Supplemental SMF”) ¶¶ 149-157, ECF No. 38-2; Pl.'s Resp. SMF at 1; Pl.'s Cross-Mot., Exs. 3-4. Initially, the Coast Guard demanded a bond in the amount of $3 million. Def.'s Supplemental SMF ¶ 150; Pl.'s Resp. SMF at 1. Angelex counter-offered with a $174, 000 bond and later increased its offer to $500, 000 and then $775, 000. Def.'s Supplemental SMF ¶¶ 150, 152-53; Pl.'s Resp. SMF at 1. The Coast Guard, on the other hand, was only ever willing to reduce the bond amount to $2.5 million. Def.'s Supplemental SMF ¶ 154; Pl.'s Resp. SMF at 1. The Coast Guard insisted that unless Angelex and Kassian jointly and severally posted a $2.5 million bond, the Vessel was to remain in the district as security for potential criminal fines or penalties. Angelex would not agree and therefore the parties were at an impasse. Def.'s SMF ¶ 73; Pl.'s Resp. SMF at 1. As a result, the Coast Guard continued to withhold the ship's departure clearance.

         C. Litigation in the Fourth Circuit

         Unwilling or unable to meet the Coast Guard's demands, and with the Pappadakis unable to leave port, Angelex filed an emergency petition in the District Court for the Eastern District of Virginia seeking the reinstatement of the Pappadakis's departure clearance. See Angelex Ltd. v. United States, No. 13-237, 2013 WL 1934490, at *3 (May 8, 2013 E.D. Va.) (“Angelex I”). Senior District Judge Robert Doumar held a hearing on Angelex's emergency petition on May 6, 2013. Id. At one point during the hearing, the court took a recess to allow the parties to negotiate further. Id. The parties discussed and ultimately reached an agreement in principle. Id. Specifically, Angelex agreed that it would accept all of the non-financial conditions if the Coast Guard would be willing to accept a bond amount of just $1.5 million. See First Am. Compl. ¶¶ 56-58, ECF No. 20; Answer First Am. Compl. ¶ 58, ECF No. 21. But when the court reconvened, the Government informed the judge that Coast Guard headquarters had rejected the proposed agreement and refused to accept anything less than the $2.5 million bond it had previously offered. Angelex I, 2013 WL 1934490, at *3.

         Because the parties failed to reach an agreement, Judge Doumar was forced to rule on Angelex's emergency petition. After first finding that the court had subject matter jurisdiction to hear Angelex's emergency petition under both the Administrative Procedure Act (“APA”) and the court's admiralty jurisdiction, Judge Doumar ruled that the Coast Guard had abused its discretion in demanding a bond of $2.5 million and imposing other non-monetary conditions. Id. at *9. The court then entered an order setting a bond of $1.5 million with several specific non-monetary conditions. See id. at *10. The Government requested that the district court temporarily stay its order and simultaneously filed a notice of appeal requesting a stay from the U.S. Court of Appeals for the Fourth Circuit. See Angelex Ltd. v. United States, 723 F.3d 500, 505 (4th Cir. 2013) (“Angelex II”). The district court denied the motion to stay, but the Fourth Circuit granted it and implemented an expedited briefing schedule. See id.

         On appeal, the Government argued that the matter should be dismissed because the district court lacked subject-matter jurisdiction. See Id. But in its briefing, the Government suggested that the Coast Guard's decisions were not entirely unreviewable. Pl.'s Opp'n Mot. Dismiss, Ex. 3 at 4-7, ECF No. 8-3. Indeed, it emphasized that “Congress . . . authorized an after-the-fact remedy for obtaining compensation from the government.” Pl.'s Opp'n Mot. Dismiss, Ex. 3 at 7. Specifically, it noted that”[u]nder 33 U.S.C. § 1904(h), ‘[a] ship unreasonably detained or delayed by the Secretary acting under the authority of this Act [sic] is entitled to compensation for any loss or damage suffered thereby.'” Pl.'s Opp'n Mot. Dismiss, Ex. 3 at 7. Thus, according to the Government, “Congress [] did not leave vessel owners without recourse against unreasonable denials of clearance” because it “authorized an independent damages action, separate from the enforcement proceedings against the vessel.” Pl.'s Opp'n Mot. Dismiss, Ex. 3 at 7.

         The Fourth Circuit agreed that the district court lacked subject matter jurisdiction and reversed the district court's decision. See Angelex II, at 502. The Fourth Circuit held that the Coast Guard's position on the terms for the Pappadakis's release was unreviewable under the APA because the APA did not permit review of agency actions that are committed to agency discretion by law. See Id. at 506-09. It also agreed with the Government's argument ...


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