Asco-Falcon II Shipping Co. v. United States

39 Cont. Cas. Fed. 76,731, 32 Fed. Cl. 595, 1994 U.S. Claims LEXIS 230, 1994 WL 709010
CourtUnited States Court of Federal Claims
DecidedDecember 21, 1994
DocketNo. 207-87C
StatusPublished
Cited by21 cases

This text of 39 Cont. Cas. Fed. 76,731 (Asco-Falcon II Shipping Co. v. United States) is published on Counsel Stack Legal Research, covering United States Court of Federal Claims primary law. Counsel Stack provides free access to over 12 million legal documents including statutes, case law, regulations, and constitutions.

Bluebook
Asco-Falcon II Shipping Co. v. United States, 39 Cont. Cas. Fed. 76,731, 32 Fed. Cl. 595, 1994 U.S. Claims LEXIS 230, 1994 WL 709010 (uscfc 1994).

Opinion

OPINION

REGINALD W. GIBSON, Judge:

INTRODUCTION

In this maritime subsidy case,1 plaintiffs [598]*598are three2 shipping companies who are seeking to recover approximately $5 million in damages for an alleged breach of contract. The contract upon which plaintiffs bring suit herein is an operating differential subsidy (ODS) agreement entered into between the United States and Equity Carriers, Inc., plaintiffs’ predecessor in interest. In that connection, plaintiffs allege that defendant breached its contractual duties by failing to act upon their application for an amendment to the ODS agreement for an unreasonably long time and by expeditiously granting the applications of other similarly situated shippers while simultaneously taking no timely action on plaintiffs’ application. In addition to opposing said allegations, the United States has also counter-claimed plaintiffs for amounts allegedly owed by them to the government under the Snyder Amendment.3 46 U.S.CApp. § 1184 (1988). Previously, in Asco-Falcon II Shipping Co., et al. v. United States, 18 Cl.Ct. 484 (1989), this court denied defendant’s motion to dismiss for lack of subject matter jurisdiction, premised on the alleged failure of plaintiffs to exhaust mandatory administrative remedies. Presently, this matter is before the court on Plaintiffs’ Motion for Summary Judgment, as well as Defendant’s Motion to Dismiss or in the Alternative for Summary Judgment. After careful consideration of the contentions and arguments of the parties as contained in the motions and briefs submitted to the court, we conclude that defendant’s motion to dismiss must be granted because the complaint fails to state a claim upon which relief can be granted. Therefore, plaintiffs’ motion for summary judgment must be denied. Moreover, we hold that defendant is entitled to judgment on its counterclaim as a matter of law based on the stipulated facts, and, accordingly, defendant’s motion for summary judgment on the counterclaim is granted.

FACTS

The facts relevant to the disposition of this matter were set out at length and in detail in our earlier opinion. Asco-Falcon, 18 Cl.Ct. at 486-90. However, for the convenience of the reader, we briefly summarize the material facts of this case.

Each of the three plaintiffs in this action is the operator of a U.S.-flag dry bulk cargo vessel of approximately 36,500 deadweight tons. Asco-Falcon II Shipping Co. (Asco) operates the Star of Texas; Equity Carriers I, Inc. (Equity I) operates the Pride of Texas; and Equity Carriers III, Inc. (Equity III) operates the Spirit of Texas. Collectively, these vessels are known as “the Texas Bulkers.” All three vessels were constructed, pursuant to contracts with the Maritime Administration (MarAd), with construction differential subsidies (CDS). These payments to the shipbuilder by the federal government are designed to cover the excess cost of construction in a U.S. shipyard as compared to comparable costs in a foreign shipyard, thereby encouraging the use of U.S. shipbuilders.

On October 6, 1978, Equity Carriers, Inc. (Equity Carriers), the original operator of the Texas Bulkers, entered into an operating differential subsidy agreement, known as Contract No. MA/MSB^39, for a 20-year term with the United States, represented by the Secretary of Commerce,4 acting by and [599]*599through MarAd’s Maritime Subsidy Board (MSB or the Board). Under said agreement, defendant agreed to compensate the vessel operator for the excess cost of, inter alia, operating the vessels under U.S. registry and with American crews over the estimated operating expenses if the vessels were under the registry of a foreign country whose vessels are substantial competitors of the vessels covered by the agreement. In exchange, the operator agreed to operate the covered vessels in an “essential service” for 335 days per calendar year. Pursuant to Article 1-2 of the ODS agreement, the essential service was defined as the “worldwide carriage of dry bulk cargoes in the foreign oceanborne commerce of the United States and in the carriage of such cargoes between foreign ports.” (Complaint If 25; Jt.Stip.Exh. # 91).

At the same time, the operator of the Texas Bulkers was restricted, under Article 1-2, from engaging in certain shipping activities. For example, the bulkers were prohibited from carrying cargoes subject to the cargo preference statutes of the United States5 (preference cargoes), which were normally only to be carried by unsubsidized U.S. vessels unless the agencies administering such statutes determined that a preference cargo would otherwise be allocated to a foreign flag vessel for carriage. Additionally, in Article 11-25, the ODS agreement provided that the agreement could be modified or amended “by mutual consent” of the parties. (Complaint 1131; Jt.Stip.Exh. # 91).

On June 14, 1979, a competitor of the plaintiffs, the Berger Group, was authorized by the MSB to operate, for a one-year experimental period, two subsidized tankers in the dry bulk preference trades while continuing to receive ODS. Shortly thereafter, on August 3,1979, Equity Carriers applied to Mar-Ad for an amendment to their ODS agreement. Specifically, they sought to modify the agreement so that the Texas Bulkers would be allowed to carry dry bulk preference cargoes. MarAd advised plaintiffs that no action would be taken on their application until the end of the one-year trial period with the Berger Group.

Between 1981 and 1982, while the application was pending, the Pride of Texas, the Star of Texas, and the Spirit of Texas were completed and delivered by the shipbuilder. Meanwhile, in August of 1981, Congress enacted the Snyder Amendment, amending the Merchant Marine Act to allow subsidized vessels to elect to operate in the preference trades, provided that the operator agreed to have ODS payments suspended and further agreed to repay a portion of the CDS payments used in the construction of the vessel. By the end of 1982, each of the three plaintiffs in this matter, or their predecessors, had elected to operate pursuant to the Snyder Amendment.

During this time frame, the Berger Group had initiated litigation contesting the manner in which the MSB had rendered its determination of the rates they were to receive in the transport of preference cargoes pursuant to the MSB’s 1979 authorization. On August 31, 1983, in response to a remand and order for reconsideration issued by the U.S. Court of Appeals for the District of Columbia Circuit, the MSB issued a tentative order allowing all six of the Berger Group vessels to carry dry bulk preference cargoes while continuing to receive ODS. The tentative order was adopted as a final opinion on December 23, 1983. In that final opinion, the MSB determined that the Snyder Amendment was not the exclusive means by which subsidized vessels could participate in the preference trades. Aeron Marine Shipping Co. v. United States, 695 F.2d 567 (1982).

As a consequence of these events, plaintiffs, on March 20, 1984, sought to revise their 1979 application for an amendment to the ODS agreement such that they could carry preference cargoes with ODS. In April and May of that year, the MSB gave permission for some subsidized vessel operators to carry military preference cargo without ODS.6 Again, plaintiffs revised their ap[600]

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Cite This Page — Counsel Stack

Bluebook (online)
39 Cont. Cas. Fed. 76,731, 32 Fed. Cl. 595, 1994 U.S. Claims LEXIS 230, 1994 WL 709010, Counsel Stack Legal Research, https://law.counselstack.com/opinion/asco-falcon-ii-shipping-co-v-united-states-uscfc-1994.