St. Lawrence Seaway Pilots Ass'n, Inc. v. U.S. Coast Guard

Decision Date27 March 2015
Docket NumberCivil Action No. 14–cv–392 TSC
Citation85 F.Supp.3d 197
PartiesSt. Lawrence Seaway Pilots Association, Inc., et al., Plaintiffs, v. United States Coast Guard, Defendant.
CourtU.S. District Court — District of Columbia

John Longstreth, K & L Gates LLP, Washington, DC, for Plaintiffs.

Fred Elmore Haynes, Javier M. Guzman, U.S. Attorney's Office, Washington, DC, for Defendant.

MEMORANDUM OPINION

Tanya S. Chutkan, Judge

Plaintiffs St. Lawrence Seaway Pilots Associations, Inc., Lakes Pilots Association, Inc., and Western Great Lakes Pilots Association, Inc. challenge the Coast Guard's final rule setting pilotage rates on the Great Lakes for 2014 (the 2014 Final Rate”). Great Lakes Pilotage Rates—2014 Annual Review and Adjustment, 79 Fed.Reg. 12084 (March 4, 2014). Plaintiffs allege the Coast Guard misapplied the regulatory formula by using incorrect inputs, resulting in unreasonably low rates, and seek review of the 2014 Final Rate under the Administrative Procedure Act (“APA”). The parties have each moved for summary judgment. For the reasons set forth below, the Court GRANTS Plaintiffs' motion for summary judgment, DENIES Defendant's motion for summary judgment, and orders supplemental briefing on the question of a proper remedy.

I. BACKGROUND

The Great Lakes Pilotage Act of 1960 requires foreign and American ships engaged in foreign trade traveling on the Great Lakes1 to hire an American or Canadian pilot to provide navigational services. 46 U.S.C. §§ 9301 et seq. ; see also Lake Pilots Ass'n, Inc. v. U.S. Coast Guard, 257 F.Supp.2d 148, 151–52 (D.D.C.2003). The Secretary of Transportation has delegated to the Coast Guard's Director of the Great Lakes Pilotage Office the authority to set rates the pilots may charge for their services, 46 U.S.C. § 9303(f). The statute does not provide a formula or method for setting these rates. Instead the Coast Guard adopted, through notice and comment rulemaking, a methodology for calculating the rate which is now codified at 46 C.F.R. § 404.5 and the appendices to that section.

Plaintiffs challenge the Coast Guard's application of that methodology in the 2014 Final Rate. This dispute centers specifically on step 2.A of the 7–step rulemaking methodology, “Determination of Target Rate of Compensation.” To understand Plaintiffs' challenge to the Step 2.A calculation for the 2014 Final Rate, one must first understand how the Coast Guard set the rates in 2012 and 2013. Below are timelines for the establishment of the 2012, 2013, and 2014 rates.

i. The 2012 Rate

February 28, 2012: Coast Guard announced the rate for 2012. 2012 Rates for Pilotage on the Great Lakes, 77 Fed.Reg. 11752 (Feb. 28, 2012). In computing the 2012 rate the Coast Guard used the pay rates contained in the union contracts between the American Maritime Officers Union (“AMOU”) and companies engaged in shipping on the Great Lakes. See, e.g., id. at 11760. The contracts provided for payment of a daily wage. The Coast Guard then multiplied the daily wage by either 54.5 days or 49.5 days2 in order to generate “monthly figures that represent actual working days and vacation, holiday, weekend, or bonus days.” Id. By creating a monthly figure representing approximately 50 days of wages, the formula accounted for payment of vacations, holidays, weekends, and bonus days. A similar calculation was performed on other components of compensation—e.g., employer contributions to 401K plans, pensions, and insurance. Id. These wage and benefits components were aggregated into one annual target compensation rate for a nine-month shipping season: $220,861 in undesignated waters and $301,005 in designated waters. Id. at 11761–62.

ii. The 2013 Proposed Rate

August 1, 2012: Coast Guard published notice of proposed rulemaking to set the 2013 rate. Great Lakes Pilotage Rates—2013 Annual Review and Adjustment, 77 Fed.Reg. 45549 (Aug. 1, 2012) (the 2013 Proposed Rate). To calculate the 2013 Proposed Rate, the Coast Guard used a daily rate (applicable to Agreement A only) which was lower than the daily rate used in 2012. Compare 77 Fed.Reg. at 11761 (2012 daily rate of $287.09)with 77 Fed.Reg. at 45545 (2013 proposed daily rate of $270.61). The Coast Guard also accounted for a pension plan contribution of $0.00, and halved the amount of the medical insurance contribution. 77 Fed.Reg. at 45546. These changes resulted in proposed target compensation rates lower than the 2012 rate: $212,094 in undesignated waters and $293,302 in designated waters. 77 Fed.Reg. at 45545–46.

1. The Coast Guard Received Comments Criticizing its Proposed 2013 Rate

August 14, 2012: Coast Guard received email from AMOU with a chart of the “pension plan and medical plan contributions” for 2012, 2013, 2014, and 2015. (A.R. 103).

September 24, 2012: Coast Guard received letter from the Lake Pilots Association, Inc. stating that the “daily rate” for Agreement A effective August 1, 2013 was $295.94 and set forth the planned increases for 2014 and 2015. (A.R. 107).

September 25, 2012: AMOU sent letter to Coast Guard with Agreement A daily rates in 2013, 2014 and 2015. (A.R. 108).3 See also Great Lakes Pilotage Rates—2013 Annual Review and Adjustment, 78 Fed.Reg. 13521, 13522 (Feb. 28, 2013) (summarizing comments).

2. The Coast Guard Received Aggregated Data which did not Include Season Bonuses

Exact date unknown, after September 25, 2012: Coast Guard “reached out to AMOU to inquire if the contract that [the Coast Guard] had used was superseded.” 78 Fed.Reg. at 13522.

November 2, 2012: AMOU provided the correct daily wage rates as well as the correct medical and pension plan contributions. (A.R. 131) (filed under seal) (the Nov. 2 Letter”). The letter included an annotation that the information was “strictly confidential” and could not be made public without AMOU's consent. Id.

November 15, 2012: AMOU submitted two letters to the Coast Guard providing “the correct daily aggregate rates” for Agreement A effective as of August 1, 2013, August 1, 2014, and August 1, 2015. (A.R. 132–33). One letter included “the daily wage rate, vacation pay, pension plan contributions and medical plan contributions” and the other excluded vacation pay (Id. ).

December 5, 2012: AMOU provided the aggregate rates for Agreement B. (A.R. 134–134'4 ).5 Again, one of the Dec. 5 Letters included vacation pay and one did not. (Id. ).6 None of the Aggregated Data (“AD”) includes a season bonus, holiday or weekend pay.

December 17, 2012: AMOU confirmed that a table containing the AD is “acceptable” for publication. (A.R. 135 (filed under seal); 137–141).

As of December 2012, the Coast Guard had one daily aggregated rate which purportedly accounted for all of the benefits provided for in the AMOU contracts. Thus, it could slightly alter the way it calculated the target rate. Instead of multiplying the wage and benefit components into monthly figures, the Coast Guard simply took the daily rate and multiplied it by 270—representing the days in a nine-month shipping season. 78 Fed.Reg. at 13529. A consequence of this change was that holidays, weekends and bonus days were no longer accounted for in the formula. Compare 77 Fed.Reg. at 11761 (computing “monthly figures that represent actual working days and vacation, holiday, weekend, or bonus days” in 2012) with 78 Fed.Reg. at 13522 (“These aggregate rates combine, without separately identifying, the following inputs: Daily wage rate, vacation pay, pension plan contributions, and medical plan contributions” in 2013). The new methodology also changed the way the Coast Guard visually presented some of the steps of its calculation. 78 Fed.Reg. at 13522.

3. The Coast Guard Finalized the 2013 Rate Using Aggregated Data Exclusive of Season Bonuses

February 28, 2013: Coast Guard announced the final rate for 2013. The final rate would have been, on average, 16% lower than the 2012 rates. Id. at 13537. Concluding in its discretion7 that a 16% rate decrease could “jeopardize the ability of the three pilotage associations to provide safe, dependable service,” the Coast Guard exercised its discretion to adjust the rates for an average 1.87% increase over the 2012 Rate. Id. at 13524, 13536. In the announcement of the final 2013 rate the Coast Guard also responded to the comments it received that its proposed rate was wrong, and explained the changes to the data it was using. See supra Section I.ii.2.

iii. The 2014 Proposed Rate

August 8, 2013: The Coast Guard announced a notice of proposed rulemaking for the 2014 rate. Great Lakes Pilotage Rates—2014 Annual Review and Adjustment, 78 Fed.Reg. 48374 (Aug. 8, 2013). The 2014 Proposed Rate again relied on the AD (which stated there would be a 3% increase in the daily wage over the 2013 wage). (A.R. 132–134'). The 2014 proposed target compensation rate was $163,860 for undesignated waters and $225,000 for designated waters and, taken through the full calculation, would have resulted “in an average 10.74 percent rate decrease” from the 2013 Final Rate. 78 Fed.Reg. at 48376, 48382. The Coast Guard stated that the rate decrease was a “result of recent downward changes to [AMOU] contracts.” Id. at 48376 ; see also id. at 48389 (“This decrease is not due to increased efficiencies in pilotage services but rather a result of recent significant downward adjustments to AMOU contracts”). The Coast Guard again proposed exercising its discretion to adjust the proposed 2014 rates for a 2.5% increase from the 2013 Final Rate. Id. at 48376.

iv. Comments to the 2014 Proposed Rate

October 4, 2013: a comment from the AMOU provided revised AD, which included holidays, weekends, and a season bonus in the aggregated daily rate. (A.R. 217–18). The Coast Guard received comments asserting that the Coast Guard “incorrectly interpreted or misapplied AMOU contract data” and disputing the Coast Guard's statement that “recent AMOU contracts are marked by ‘downward changes,’ and pointed out that AMOU contracts actually increase wages over a 5–year period.” 79 Fed.Reg. at...

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