Matson Navigation Co. v. U.S. Dep't of Transp.

Decision Date12 June 2020
Docket NumberCivil Action No. 18-2751 (RDM)
Citation466 F.Supp.3d 177
Parties MATSON NAVIGATION COMPANY, INC., Plaintiff, v. U.S. DEPARTMENT OF TRANSPORTATION, et al., Defendants, and APL Marine Services, Ltd., et al., Intervenor-Defendants.
CourtU.S. District Court — District of Columbia

Joshua M. Wesneski, Mark Andrew Perry, Gibson, Dunn & Crutcher, LLP, Washington, DC, Rachel S. Brass, Pro Hac Vice, Gibson, Dunn & Crutcher LLP, San Francisco, CA, for Plaintiff.

Joseph Evan Borson, Michael Hendry Baer, U.S. Department of Justice, Washington, DC, for Defendants.

AMENDED MEMORANDUM OPINION

RANDOLPH D. MOSS, United States District Judge

Plaintiff Matson Navigation Company, Inc. ("Matson") seeks review of Defendant Maritime Administration's ("MARAD") decisions approving the replacement of two vessels that operated under the Maritime Security Program ("MSP") with two other vessels—the APL Guam and the APL Saipan—operated by Intervenor-Defendants APL Marine Services, Ltd. and APL Maritime, Ltd. (together "APL"). Dkt. 1. (Compl.). Matson moves for summary judgment, arguing that an MSP contractor may replace a vessel operating under an MSP agreement with another vessel only if the replacement vessel "operate[s] exclusively in foreign commerce or ... in mixed foreign commerce and domestic trade allowed under a registry endorsement issued under [§] 12111 of [Title 42]." 46 U.S.C. § 53105(a) ; Dkt. 20 at 16; see also 46 U.S.C. § 53105(f). It asserts that MARAD's decisions permitting APL to replace existing MSP vessels with the APL Guam and the APL Saipan, which Matson asserts do not so operate, were therefore arbitrary, capricious, and an abuse of discretion under the Administrative Procedure Act ("APA"), 5 U.S.C. § 701 et seq. , and were otherwise contrary to law or unsupported by substantial evidence in the administrative record. Dkt. 1 at 23–28 (Compl. ¶¶ 121–54); Dkt. 20 at 24–25.

Defendant MARAD responds with a partial motion to dismiss and a cross-motion for summary judgment, Dkt. 24, and Intervenor-Defendant APL also cross-moves for summary judgment, Dkt. 21. MARAD first argues that this Court lacks subject-matter jurisdiction over MARAD's 2015 determination concerning the APL Guam because that decision was made, in part, pursuant to 46 U.S.C. § 50501, and the courts of appeals have exclusive jurisdiction under the Hobbs Act, 28 U.S.C. § 2342(3)(A), to review orders issued pursuant to § 50501. Dkt. 24-1 at 16–18. Second, MARAD and APL argue MARAD may approve the replacement of an MSP vessel with another vessel, so long as the new vessel is "operated ... in providing transportation in foreign commerce," 46 U.S.C. § 53102(b)(1), even if the vessel also operates in domestic trade. Dkt. 24-1 at 18–27. Because all agree that the APL Guam and the APL Saipan operate at least in part in foreign commerce, Defendants contend that MARAD correctly determined that the vessels were eligible for participation in the MSP as replacement vessels. Id.

First, the Court concludes that it has jurisdiction to consider only Plaintiff's challenge to the 2016 eligibility determination for the APL Saipan. Because MARAD's 2015 eligibility determination for the APL Guam turned, in part, on 46 U.S.C. § 50501, exclusive jurisdiction over that determination is vested in the courts of appeals, and this Court is without jurisdiction to review that order. Second, the Court concludes that it cannot discern the basis for MARAD's 2016 determination respecting the APL Saipan and, in particular, cannot discern whether the agency (1) construed the statute to permit an MSP contractor to replace an MSP vessel with another vessel, so long as that vessel operates at least in part in foreign commerce; (2) failed to consider the fact that the APL Saipan might not operate exclusively in foreign or mixed foreign and domestic trade due to its service to Saipan; or (3) concluded that the APL Saipan operates under a registry endorsement under 46 U.S.C. § 12111 that permits it to engage in trade between Saipan and the coastal United States. As a result, the agency either completely failed to explain its reasons for approving the replacement or entirely failed to consider an important aspect of the question before it and thus failed to comply with the APA. The Court will, accordingly, remand the matter to MARAD so that the agency can address in the first instance the important questions of statutory interpretation presented by this case and can set forth its reasoning in a manner that will permit judicial review, if appropriate. Finally, the Court will provide the parties the opportunity to provide additional factual and legal submissions addressing whether the remand should be with or without vacatur.

I. BACKGROUND
A. The Parties

Plaintiff Matson provides ocean freight carrier services from the U.S. west coast to various locations including Guam. AR 6, 179. APL is another shipping company that operates vessels in commerce between the U.S. mainland, Guam, and Saipan, among other locations. AR 83, 116, 179, 195. APL presently has nine vessels enrolled in the Maritime Security Fleet. AR 4, 60–61. MARAD is the agency responsible for the administration of the Maritime Security Program, including the approval of applications to replace vessels operating under MSP agreements with Secretary of Transportation. See 49 C.F.R. § 1.93(a).

B. Maritime Security Program (MSP)

In the Maritime Security Act of 1996, Pub. L. No. 104-239, 110 Stat. 3118, Congress provided for the establishment by "the Secretary of Transportation, in consultation with the Secretary of Defense" of "a fleet of active, commercially viable, militarily useful, privately owned vessels to meet national defense and other security requirements and maintain a United States presence in international commercial shipping." 46 U.S.C. § 53102(a). This Maritime Security Fleet "consist[s] of privately owned, United States-documented vessels for which there are in effect operating agreements." Id. Pursuant to this authority, the Secretary established the Maritime Security Program, see 46 U.S.C. §§ 53101 – 53111, and delegated its administration to the Maritime Administrator, who heads MARAD. See 49 C.F.R. § 1.93(a). Contractors must enter into "operating agreements" with MARAD that cover vessels subject to the Program. See 46 C.F.R. § 296.2 (defining "MSP [o]perating [a]greement" as "the assistance agreement between a Contractor and MARAD that provides for MSP payments"). Operating agreements are "effective only for 1 fiscal year" but are "renewable." 46 U.S.C. § 53104(a). The Secretary makes fixed payments to the contractors under the operating agreements. See 46 U.S.C. § 53106(a)(1)(A) (setting the annual payment for each vessel for fiscal years 2018, 2019, and 2020 at $5,000,000).

"A vessel is eligible to be included in the [Maritime Security] Fleet if," among other things, it "is operated ... in providing transportation in foreign commerce." 46 U.S.C. § 53102(b)(2). Before the passage of the National Defense Authorization Act for Fiscal Year 2018 ("NDAA"), Pub. L. No. 115-91 (2017), 131 Stat. 123 (codified at 46 U.S.C. § 35105(a)(2)), another section of the statute, 46 U.S.C. § 53105(a), provided that "[a]n operating agreement under this chapter shall require that ... the vessel ... shall be operated exclusively in foreign commerce or in mixed foreign commerce and domestic trade allowed under a registry endorsement issued under [§] 12111 of [the] title; and ... shall not otherwise be operated in coastwise trade." 46 U.S.C. § 53105(a). "[R]egistry endorsements" are available for vessels that meet certain eligibility conditions. See id. § 12111(a) (citing id. § 12103 (listing eligibility requirements)). "A vessel for which a registry endorsement is issued may engage in foreign trade or trade with Guam, American Samoa, Wake, Midway, or Kingman Reef," id. § 12111(b), which are all unincorporated territories of the United States.

The statute also provides a mechanism for replacing vessels subject to MSP agreements with new vessels. Under 46 U.S.C. § 53105(f), "[a] contractor may replace a vessel under an operating agreement with another vessel that is eligible to be included in the Fleet under section 53102(b), if the Secretary, in conjunction with the Secretary of Defense, approves the replacement of the vessel." The statute further specifies that, "[a]s a condition of receiving payment ... for a fiscal year for a vessel, the contractor for the vessel shall certify ... that the vessel has been and will be operated in accordance with paragraph (1) and (2) of [§] 53105(a) ... for at least 320 days in the fiscal year." 46 U.S.C. § 53106(b). It further provides that the Secretary

shall make a pro rata reduction in payment for each day less than 320 in a fiscal year that the vessel [covered by an operating agreement] is not operated in accordance with paragraph (1) and (2) of [§] 53105(a), as otherwise applicable with respect to such vessel, with days during which the vessel is drydocked or undergoing survey, inspection, or repair considered to be days on which the vessel is operated.

46 U.S.C. § 53106(d)(3). Finally, the statute requires the Secretary to terminate an operating agreement "[i]f the contractor ... materially fails to comply with the terms of the agreement," id. § 53104(c)(1). Before taking that action, however, the Secretary must "notify the contractor and provide a reasonable opportunity to comply with the operating agreement," and the contractor must "fail[ ] to achieve such compliance." Id.

C. MARAD's Approvals of APL Vessels

In January 2005, the Secretary entered into nine agreements with APL, permitting nine APL vessels to operate as part of the MSP. AR 60–61. Nearly ten years later, in December 2014, APL applied to MARAD for authorization to replace two of those vessels. AR 4–5. In January 2015 MARAD preliminarily approved the two unspecified replacement vessels, "provided they meet all MSP eligibility requirements."...

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2 cases
  • Matson Navigation Co. v. U.S. Dep't of Transp.
    • United States
    • U.S. District Court — District of Columbia
    • August 19, 2022
    ...See Matson II, 466 F.Supp.3d at 183. Approximately a decade later, APL applied to MARAD for authorization to replace two of those vessels. Id. MARAD obliged, approving APL's to replace the APL CYPRINE with the APL GUAM in October 2015 (the “2015 Approval Order”), Dkt. 1 at 14 (Compl. ¶ 69),......
  • Matson Navigation Co. v. U.S. Dep't of Transp.
    • United States
    • U.S. District Court — District of Columbia
    • August 4, 2022
    ...of the MSP. See Matson II, 466 F.Supp.3d at 183. In December 2014, APL applied to MARAD for authorization to replace two of those vessels. Id. On October 22, 2015, MARAD approved APL's application replace the APL Cyprine with the APL Guam in the MSP fleet (the “2015 Approval Order”). Dkt. 1......

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