Clifford v. Pena

• Decision Date: 15 March 1996
• Docket Number: 95-5239 and 95-5240,Nos. 95-5238,s. 95-5238
• Citation: 77 F.3d 1414
• Parties: Arthur David CLIFFORD, et al., Appellants v. Federico F. PENA, Secretary, United States Department of Transportation, et al., Appellees.
• Court: U.S. Court of Appeals — District of Columbia Circuit

Page 1414

77 F.3d 1414

316 U.S.App.D.C. 235

Arthur David CLIFFORD, et al., Appellants v. Federico F. PENA, Secretary, United States Department of Transportation, et al., Appellees.

Nos. 95-5238, 95-5239 and 95-5240.

United States Court of Appeals District of Columbia Circuit.

Argued Feb. 12, 1996.

Decided March 15, 1996.

Appeals from the United States District Court for the District of Columbia (95cv00062), (95cv00848) and (95cv00849).

Ernest A. Cohen argued the cause for appellants. With him on the briefs were Richard S. Zuckerman, Leslie H. Wiesenfelder, Washington, DC, and J. Patrick Morris, Cleveland, OH. Edward M. Gleason, Jr., Sterling, VA entered an appearance.

Steve Frank, Attorney, U.S. Department of Justice, argued the cause for the federal appellees. With him on the brief were Frank W. Hunger, Assistant Attorney General, Douglas N. Letter, Litigation Counsel, and Eric H. Holder, Jr., United States Attorney, Washington, DC.

Robert T. Basseches, argued the cause for appellee American President Lines, Ltd. With him on the brief were John T. Rich and I. Michael Greenberger, Washington, DC.

Before: SENTELLE, RANDOLPH, and ROGERS, Circuit Judges.

Opinion for the court filed by Circuit Judge RANDOLPH.

RANDOLPH, Circuit Judge:

Three labor unions challenged the decision of the United States Maritime Administration permitting American President Lines, Ltd., to operate six new foreign-built vessels under foreign flag in its existing international shipping operations. The district court consolidated the actions and, on summary judgment, ruled in favor of the Maritime Administration and the company. In this appeal the unions dispute the Administration's authority to grant the "waiver" under § 804(b) of the Merchant Marine Act of 1936, 46 U.S.C. app. § 1222(b), and claim that in doing so, the Administration violated the Administrative Procedure Act, failed to give an adequate explanation of its decision and improperly supplemented the administrative record. The government not only opposes these contentions, but also challenges the unions' standing to sue and claims that in any event a court may not review the Administration's decision to grant a § 804(b) waiver.

I

Within a few years, ships built in America and manned by American crews are expected to disappear from international commerce. For most of this century, foreign shipyards have been charging considerably less than American shipyards; and the wages and benefits paid to foreign crews have been significantly lower than those paid to American crews. The federal government had been making up the difference through grant and loan programs. The Merchant Marine Act of 1936, 46 U.S.C. app. §§ 1101-1295g, provided domestic shipowners with a construction-differential subsidy--a CDS--in order to stimulate shipbuilding in American shipyards, and an operating-differential subsidy--an ODS--to offset the higher costs of using American crews. See Seatrain Shipbuilding Corp. v. Shell Oil Co., 444 U.S. 572, 573-76, 100 S.Ct. 800, 801-03, 63 L.Ed.2d 36 (1980). ODS contracts between ship operators and the Maritime Administration have terms of up to 20 years, and are generally limited to ships not more than 25 years old. 46 U.S.C. app. § 1175. In return for the subsidies, the operator must register the vessel under the U.S. flag; man the ship with an American crew; and not own or operate "any foreign-flag vessel which competes with any American-flag service determined ... to be essential" (46 U.S.C. app. § 1222(a)).

In 1981, President Reagan eliminated all funding for CDS and placed a moratorium on the awarding of new ODS contracts, policies continued to this day. As a result, no liners to be used in foreign commerce are currently being constructed in American shipyards; many ODS-subsidized ships now in operation are nearing the end of their useful lives; and ODS commitments making it economically feasible to man vessels with American crews are set to terminate--the last liner ODS contract will expire in 1998, the last bulk carrier ODS contract in 2001. The net effect is that if obsolete American-flag vessels are to be replaced at all, they will be replaced by foreign-built vessels, which are ineligible for ODS subsidies.

In 1993, American President Lines--"APL"--was operating 19 American-flag containerships on essential-service trade routes between Pacific coast ports in this country and Asia under an ODS contract due to expire on December 31, 1997. Before the expiration date, at least four of the company's subsidized vessels will have reached 25 years of age, the maximum ODS subsidy age. To remain competitive in the international shipping market, APL had to replace these vessels, which it described as too small and too expensive to operate. And so in July 1993, APL filed an application with the Maritime Administration requesting permission to operate six new foreign-flag vessels then under construction in foreign shipyards.

Acting pursuant to § 804(b) and finding "special circumstances" and "good cause," the Administration granted APL's application in 1994, on condition that, among other things, the company make the vessels available in case of a national emergency; that it not use any ODS payment for the benefit of any foreign interest; that it not scrap or reflag any of its existing American-flag vessels until October 1, 1995, and thereafter only with the Administration's permission; and that APL shall offer its new ships for inclusion in a new maritime support program if Congress enacts one.

Shortly before oral argument, APL informed us of some further developments. After the district court's decision upholding the grant of the waiver, the Administration approved APL's sale of six of its American-flag vessels to Matson Navigation Company, Inc. (an American-flag carrier engaged in the domestic trades) and reduced APL's minimum sailing requirements for its Pacific trade routes. APL had planned to replace five of its existing vessels with the new foreign-built ships the Administration authorized it to operate. Three of the ships sold to Matson were, according to APL, among the five destined for replacement. Of the remaining two, one did not belong to APL and will be returned to its owner when the charter expires on July 1, 1996. APL represents that it intends to operate the other vessel with an American crew through 1996 and possibly through 1997.

II

A

The government raises two preliminary issues. The first, dealing with the unions' standing to challenge the Maritime Administration's decision, is put to rest by Autolog Corp. v. Regan, 731 F.2d 25, 31 (D.C.Cir.1984). In ruling that a maritime union had standing to seek an injunction against a foreign carrier in order to prevent it from servicing a route reserved for American-flag vessels, we held in Autolog that the potential loss of American jobs was a sufficient injury to confer standing, that the injury was traceable to the foreign carrier's expansion, and that an injunction would redress the injury. The unions face the same sort of injury here. Overturning the Administration's decision is a necessary step in forestalling APL's replacement of its vessel with a foreign ship manned by foreign workers. To be sure, the unions would not wind up with much redress: APL's operating differential subsidy contract expires on December 31, 1997, unless Congress intervenes. But the limited nature of the relief does not destroy the unions' standing to seek it.

The second preliminary question is whether, as the government contends, Administration orders granting § 804(b) waivers are unreviewable because they are "committed to agency discretion by law" (5 U.S.C. § 701(a)(2)), and hence there is "no law to apply." Citizens to Preserve Overton Park, Inc. v. Volpe, 401 U.S. 402, 410, 91 S.Ct. 814, 820, 28 L.Ed.2d 136 (1971). The words of the statute appear unrestricted and undefined--"Under special circumstances and for good cause shown, the Secretary of Transportation may, in his discretion, waive the provisions of subsection (a) ... as to any contractor, for a specific period of time" (46 U.S.C. app. § 1222(b))--but over the years the Maritime Administration has supplied a list of factors to guide its § 804(b) judgment. See, e.g., Certain Bulk Operators, 25 Shipping Reg. (P & F) 1261, 1264 (Mar.Admin.1990). The agency's policies have thus provided standards rendering what might arguably be unreviewable agency action reviewable. See Padula v. Webster, 822 F.2d 97, 100 (D.C.Cir.1987). Our judgment in this regard is not inconsistent with Crowley Caribbean Transport, Inc. v. Pena, 37 F.3d 671 (D.C.Cir.1994). We there declined to review the Maritime Administration's determination that a § 804(b) waiver was unnecessary because this either was an advisory agency opinion, in which event no concrete injury existed, or it was an agency decision not to prosecute, in which event Heckler v. Chaney, 470 U.S. 821, 832, 105 S.Ct. 1649, 1656, 84 L.Ed.2d 714 (1985), precluded judicial review.

B

This brings us to the unions' claim that granting the waiver to APL was arbitrary and capricious. The Administration views § 804(...