Seatrain Shipbuilding Corporation v. Shell Oil Company

• Decision Date: 20 February 1980
• Docket Number: No. 78-1651,78-1651
• Citation: 63 L.Ed.2d 36,100 S.Ct. 800,444 U.S. 572
• Parties: SEATRAIN SHIPBUILDING CORPORATION et al., Petitioners, v. SHELL OIL COMPANY et al
• Court: U.S. Supreme Court

444 U.S. 572

100 S.Ct. 800

63 L.Ed.2d 36

SEATRAIN SHIPBUILDING CORPORATION et al., Petitioners,

v SHELL OIL COMPANY et al.

No. 78-1651.

Argued Nov. 28, 1979.

Decided Feb. 20, 1980.

Syllabus

Petitioner Seatrain Shipbuilding Corp. (Seatrain) received a construction-differential subsidy (CDS) under Title V of the Merchant Marine Act, 1936 (Act), to construct a supertanker, and, as required by § 506 of the Act, Seatrain and petitioner Polk Tanker Corp., the initial owner of the vessel, agreed to operate it exclusively in foreign trade except as otherwise authorized in § 506. When the vessel was completed, petitioners asked the Secretary of Commerce to terminate all restrictions on the vessel's operation in domestic trade in exchange for their fully secured note repaying in full the vessel's CDS. The Secretary granted their application. Thereafter, certain competitors in the domestic trade (respondents) brought suit in District Court seeking declaratory and injunctive relief prohibiting the Secretary from granting a permanent release from the § 506 foreign-trade-only requirement. The District Court held, inter alia, that the Secretary had the authority permanently to release vessels from trade restrictions imposed pursuant to § 506 in exchange for full CDS repayment, but remanded the case to the Secretary for consideration of the competitive consequences of granting the release in question. Apparently relying on Federal Rule of Civil Procedure 54(b), the court subsequently certified its decision as a "final judgment." The Court of Appeals reversed, concluding that by specifying certain exceptions to the foreign-trade-only requirement § 506 occupied the field and impliedly prohibited the Secretary from making any other exceptions under the Act's more general provisions.

Held:

1. The District Court's determination that the Secretary was empowered to waive permanently the restrictions required by § 506 was a "final decision" certifiable under Rule 54(b) and appealable to the Court of Appeals under 28 U.S.C. § 1291, and thus this Court has jurisdiction to hear the case. Although respondents' claim that the Secretary's waiver of § 506 restrictions as to petitioners' vessel was an abuse of discretion caused the District Court to remand to the agency for consideration of the economic consequences of granting the release, respondents' request for a general declaration that the Secretary lacks authority to grant a permanent release from § 506 restrictions under any circumstances was finally decided and meets the case-or-controversy requirement of Art. III of the Constitution. Pp. 579-584.

2. The Act empowers the Secretary to approve full-repayment/permanent-release transactions of the type at issue here. On the face of the statute, the Secretary's broad contracting powers and discretion to administer the Act seem to comprehend the authority to grant permanent releases. The specific exceptions to the foreign-trade-only requirement in § 506 speak only to temporary releases from that requirement, and nothing in § 506, or in any other provision of Title V of the Act, either expressly or implicitly addresses the issue of permanent revocation of a CDS contract. Furthermore, the legislative history does not demonstrate that Congress intended to rule out permanent releases of the type involved here, and the agency has consistently concluded that the Act permits such releases. Pp. 584-596.

194 U.S.App.D.C. 7, 595 F.2d 814, reversed and remanded.

Andrew J. Levander, Washington, D. C., for federal respondents supporting petitioners.

William E. McDaniels, Washington, D. C., for petitioners.

Amy Loeserman Klein and Stephen N. Shulman, Washington, D. C., for respondents.

Mr. Justice BRENNAN delivered the opinion of the Court.

In 1972, petitioner Seatrain Shipbuilding Corp. (Seatrain) received a construction-differential subsidy (CDS) of $27.2 million pursuant to Title V of the Merchant Marine Act, 1936, 49 Stat. 1995, as amended, 46 U.S.C. § 1151 et seq., to construct the 225,000-deadweight-ton supertanker Stuyvesant. As required by § 506 of the Act, 46 U.S.C. § 1156, Seatrain and its affiliate, petitioner Polk Tanker Corp., the initial owner of the Stuyvesant, agreed to operate the supertanker exclusively in the foreign trade except as otherwise authorized in that section. By the time the vessel was completed in 1977, however, petitioners wanted to operate it in the domestic trade. Accordingly, they asked the Secretary of Commerce permanently to lift all restrictions on the Stuyvesant § operation in domestic commerce in exchange for their fully secured, 20-year interest-bearing note repaying in full the vessel's CDS. The Secretary granted the application, accepted the promissory note, and deleted the applicable restrictions from the CDS contract. The primary question for decision is whether the Secretary of Commerce may terminate the restrictions imposed pursuant to § 506 when the owners of a vessel constructed with a CDS repay that subsidy in full. The District Court for the District of Columbia concluded that the Secretary had such authority, Shell Oil Co. v. Kreps, 445 F.Supp. 1128 (1977). The Court of Appeals for the District of Columbia Circuit disagreed and reversed. Alaska Bulk Carriers, Inc. v. Kreps, 194 U.S.App.D.C. 7, 595 F.2d 814 (1979). We granted certiorari. 442 U.S. 940, 99 S.Ct. 2880, 61 L.Ed.2d 309 (1979). We reverse.

I

The costs of constructing ships in American shipyards and manning them with American crews are higher than comparable costs in foreign ports. Accordingly, Congress has taken a number of steps to protect and support the United States' shipping and shipbuilding industries. The Jones Act, 46 U.S.C. § 883, has, since 1920, reserved the United States domestic trade exclusively for vessels built in this country and owned by its citizens.¹ The Merchant Marine Act, 1936, 46 U.S.C. § 1101 et seq., established a number of programs to help American vessels compete effectively in foreign trade with vessels constructed and staffed abroad. Specifically, Title V of that Act, 46 U.S.C. § 1151 et seq., authorizes the Secretary of Commerce to grant a CDS for up to 50% of the cost of constructing a ship in this country. The owners of vessels built with the subsidies are required by § 506, 46 U.S.C. § 1156,² to agree that they will operate only in for- eign trade unless they come within one of two explicit statutory exceptions. Neither exception may be invoked unless the owner remits to the Government an appropriate pro rata portion of the outstanding subsidy.

In 1969, petitioner Seatrain began constructing a series of supertankers at the former Brooklyn Navy Yard. The venture received substantial amounts of federal aid. By its completion, the Economic Development Administration (EDA) of the Department of Commerce had advanced $5 million as a direct loan and had guaranteed 90% of $82 million in loans from other sources to help finance modernization and operation of the Navy Yard facilities and a major on-the-job training program.³ Moreover, the Department granted a CDS for each of the four supertankers built by Seatrain,⁴ in addition to guaranteeing various construction loans.

The Stuyvesant was the third of the Seatrain tankers.⁵ In the mid-1970's, while it was under construction, demand for such vessels began to decline in the wake of the Arab oil embargo, increasing crude oil prices and the economic problems that ensued.⁶ By 1977, when the vessel was completed there was a significant oversupply of tankers on the world market and no opportunity in foreign trade for the fledgling Stuyvesant. Foreseeing this problem, the owners had begun to explore prospects for employing the vessel in the transportation of Alaskan crude from Valdez around Cape Horn to the Eastern United States and the Caribbean. This relatively new trade required sizeable tankers, and since the Jones Act restricted it to American-flag vessels ⁷ the demand remained high despite the abundance of otherwise suitable foreign vessels.

In mid-1977, petitioner Polk Tanker Corp. executed an agreement with Standard Oil of Ohio (SOHIO) for a 3-year charter of the Stuyvesant for use in the Alaskan trade. The agreement was conditioned upon Polk's obtaining from the Secretary of Commerce a release from the foreign-trade-only restriction imposed pursuant to § 506. This was obtained at the end of August ⁸ in the form of letters to Polk and Queensway Tankers, Inc., the proposed operator of the vessel. Those letters recited the findings upon which the agency based its decision. These were: (1) that there were no other opportunities for employment of the Stuyvesant, (2) that the SOHIO charter would strengthen the collateral securing obligations the Government had guaranteed, (3) that the charter might prevent default on those obligations, and (4) that failure to approve the proposal would jeopardize the continued operation of Seatrain.⁹

The complex closing of several transactions necessary to finance repayment of the CDS, refinance various other obligations, and transfer the Stuyvesant to new owners and operators was scheduled for September 23, 1977. On September 22, respondents, three competitors in the Alaskan trade, brought suit in the District Court for the District of Columbia against various Department of Commerce officials. The complaints sought declaratory and injunctive relief prohibiting the Secretary from granting a permanent release from the § 506 foreign-trade-only requirement.¹⁰ They argued (1) that the Secretary lacked authority to grant such a release and (2) that, even if the Secretary had authority to do so in certain cases, that authority should not have been exercised with regard to the Stuyvesant. In addition, they alleged violations of various procedural requirements of the Administrative Procedure Act and asserted that the Secretary was without power to accept a promissory note as repayment for the CDS. Petitioners Seatrain and...