Am. Great Lakes Ports Ass'n v. Zukunft, Civil Action No.: 16–1019 (RC)
Decision Date | 03 November 2017 |
Docket Number | Civil Action No.: 16–1019 (RC) |
Citation | 296 F.Supp.3d 27 |
Parties | AMERICAN GREAT LAKES PORTS ASSOCIATION, et al., Plaintiffs, v. Admiral Paul F. ZUKUNFT, Commandant, United States Coast Guard, et al., Defendants. |
Court | U.S. District Court — District of Columbia |
Charles Jonathan Benner, Thompson Coburn LLP, Washington, DC, for Plaintiffs.
Jeremy S. Simon, U.S. Attorney's Office for the District of Columbia, Washington, DC, for Defendants.
GRANTING IN PART AND DENYING IN PART PLAINTIFFS' MOTION FOR SUMMARY JUDGMENT; GRANTING IN PART AND DENYING IN PART DEFENDANTS' MOTIONS FOR SUMMARY JUDGMENT
In 2016, the Coast Guard promulgated new rules for calculating the rates that international shippers must pay American maritime pilots on the waters of the Great Lakes. Throughout the notice-and-comment process, Plaintiffs—representatives of the international shipping community—criticized the proposed rules in a variety of ways. After having their comments largely rejected, the shippers sued the Coast Guard in this Court under the Administrative Procedure Act, 5 U.S.C. §§ 500 et seq . All the parties have now moved for summary judgment on Plaintiffs' claims. For the various reasons explained below, the Court grants in part and denies Plaintiffs' motion for summary judgment.
With limited exceptions, all foreign vessels1 operating in the Great Lakes and some of their connecting waters (collectively "the Great Lakes") must employ a registered Canadian or American maritime pilot to aid in navigation. 46 U.S.C. § 9302(a)(1). In 1960, Congress enacted the Great Lakes Pilotage Act ("GLPA"), which authorized the United States Coast Guard ("Coast Guard") to "form[ ] ... a pool ... of United States authorized pilots to provide for efficient dispatching of vessels and rendering of pilotage services" in the waters of the Great Lakes. Id. §§ 9301(2), 9304(a). Thus, pilots on the Great Lakes are organized into private associations certified by the Coast Guard, which operate in three separate geographical districts.2 See Great Lakes Pilotage Rates—2016 Annual Review and Changes to Methodology, 81 Fed. Reg. 11,908, 11,910 (Mar. 7, 2016). The Coast Guard is responsible for setting "standards of competency" for registered American pilots and prescribes "rates and charges for pilotage services, giving consideration to the public interest and the cost of providing the services." 46 U.S.C. § 9303(a), (f). Thus, the Coast Guard determines the base pilotage rates that foreign vessels must pay to hire American maritime pilots to navigate the Great Lakes and reviews and adjusts these rates annually. See id.
In September 2015, the Coast Guard issued a Notice of Proposed Rulemaking ("NPRM") informing the public that the Coast Guard sought to "revis[e] the current methodology by which the Coast Guard sets base rates for U.S. pilotage service" and to set pilotage rates for the 2016 shipping season using that new methodology. Great Lakes Pilotage Rates—2016 Annual Review and Changes to Mehodology, 80 Fed. Reg. 54,484, 54,484 (Sept. 10, 2015). The reasons for the methodology change were twofold. First, the Coast Guard explained that "over many years both pilots and industry have identified certain methodology issues that they believe significantly distort[ed] ratemaking calculations." Id. In particular, "[p]ilot associations believe[d] those distortions result[ed] in low rates that contributed to their difficulty in retaining pilots and attracting applicant pilots." Id. Second, a methodology change was required because certain data that the Coast Guard previously relied upon would no longer be available. See id. Before 2016, the Coast Guard's pilotage rate-setting methodology relied, in part, on union compensation data for merchant marine masters and mates.3 81 Fed. Reg. at 11,908; see also St. Lawrence Seaway Pilots Ass'n, Inc. v. United States Coast Guard , 85 F.Supp.3d 197, 204–05 (D.D.C. 2015). According to the Coast Guard, "only one union's contract data [was] ever [ ] made available to the Coast Guard," but that union "now regards th[e] data as proprietary and [would] no longer disclose it to the Coast Guard." 80 Fed. Reg. at 54,484. Consequently, "the Coast Guard no longer ha[d] access to the detailed breakdown of compensation calculation that [its] [former] methodology [once] relie[d] on." Id. Thus, as a result of the previous complaints from pilots and industry concerning the old methodology combined with the future unavailability of pilot compensation data, the Coast Guard decided to change its methodology.
The final pilotage rate-setting methodology adopted by the Coast Guard was largely the same as the rule that it had proposed in September 2015. See 81 Fed. Reg. at 11,942. The Coast Guard developed this methodology based on a set of recommendations made by the Great Lakes Pilotage Advisory Committee ("GLPAC").
See id. at 11,911. The GLPAC is a committee created by statute whose purpose is to assist the Coast Guard in formulating pilotage rates and policies.4 See 46 U.S.C. § 9307(a). When the Coast Guard engages in those functions, the Coast Guard is required to consider the GLPAC's recommendations, id. at § 9307(d)(2), and in this instance, the Coast Guard accorded the GLPAC's recommendations significant weight, see 81 Fed. Reg. at 11,911.
In concept, the revised methodology is rather straightforward. The Coast Guard seeks to set hourly pilotage rates that will be sufficient to cover pilotage associations' expenses and also provide a modest rate of return. To do this, the Coast Guard first estimates the expenses that it expects the pilotage associations will incur, including expenses associated with pilot compensation, in the upcoming season. It then adds a return on investment based on high-grade corporate securities. Viewed together, the expenses and the return on investment, represent the target revenue amount that the Coast Guard is hoping the pilotage associations will achieve. To come up with an hourly pilotage rate sufficient to meet this goal, the Coast Guard divides the target revenue by an estimate of the number of hours it expects the associations will work. The Coast Guard can then adjust this rate on an ad hoc basis under "supportable circumstances." The Coast Guard has broken out this methodology into the following eight steps:
On May 31, 2016, the American Great Lakes Ports Association, a not-for-profit organization representing the interests of commercial ports and port users in the United States, and several other organizations in the shipping industry sued the Coast Guard under the Administrative Procedure Act ("APA"), claiming that the new methodology and 2016 pilotage rates were arbitrary and capricious in various respects. See Compl. at 4–5, 20, ECF No. 1. Thereafter, the three Great Lakes pilotage associations ("Pilots") moved to intervene as defendants. Pilots Ass'ns Mot. Intervene Supp. Defs., ECF No. 6. The Court granted the pilotage...
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