United States Court of Appeals,
Fifth Circuit.
Nos. 96-20582, 96-60154.
KIRBY CORPORATION, Plaintiff-Appellant,
v.
Federico F. PEÑA, Secretary of Transportation; Albert J. Herberger, Admiral, Defendants-Appellees,
Hvide Van Ommer I Hvide Van Ommeren Tankers I LLC; Hvide Van Ommer II Hvide Van Ommeren Tankers II LLC; Hvide Van Ommer III Hvide Van Ommeren Tankers III LLC; Hvide Van Ommer IV Hvide Van Ommeren Tankers IV LLC; Hvide Van Ommer V Hvide Van Ommeren Tankers V LLC, Intervenor Defendants-Appellees.
KIRBY CORPORATION, Petitioner,
UNITED STATES of America; United States Department of Transportation, Maritime Administration, Respondents,
Hvide Van Ommeren Tankers, I LLC; Hvide Van Ommeren Tankers, II LLC; Hvide Van Ommeren Tankers, III LLC; Hvide Van Ommeren Tankers, IV LLC; Hvide Van Ommeren Tankers, V LLC, Intervenors.
April 9, 1997.
Appeal from the United States District Court for the Southern District of Texas.
Petition for Review of the Decision of the United States Department of Transportation, Maritime Administration.
Before DAVIS and DUHÉ, Circuit Judges, and DOWD1, District Judge.
DUHÉ, Circuit Judge:
Petitioner-Appellant Kirby Corporation challenges a Maritime
Administration decision granting Title XI shipbuilding loan
guarantees to Intervenor-Respondents Hvide Van Ommeren Tankers,
1 District Judge of the Northern District of Ohio, sitting by designation.
1 LLC. Kirby appeals the district court's order dismissing its suit
for lack of jurisdiction, and also petitions this Court for direct
review. We affirm the district court's decision and dismiss the
petition.
BACKGROUND
I. FACTS
Title XI of the Merchant Marine Act of 1936, as amended, 46
U.S.C.App. §§ 1271-1280a, governs a federal loan guarantee program
administered by the Maritime Administration ("MarAd") and designed
to facilitate private investment in the construction of vessels and
to revitalize the American merchant marine. Under the current
statutory scheme, a shipowner finances vessel construction in the
private market by issuing bonds or other indebtedness backed by
federal guarantees supported by the full faith and credit of the
United States. 46 U.S.C.App. §§ 1274(a), 1273(d). To protect its
financial interests in the program, the federal government—after
approving a loan guarantee for a prospective vessel—acquires a
security interest in the vessel. 46 U.S.C.App. § 1273(b). If the
vessel owner subsequently defaults on the loan, the government may
either cure the default and assume the loan obligation or pay the
entire principal and interest due, 46 U.S.C.App. § 1275, and then
foreclose on its security interest in the vessel. 46 U.S.C.App. §
1275(c).
To qualify for a loan guarantee, a prospective vessel owner
must meet certain requirements specified by Title XI and the
accompanying MarAd regulations, see 46 U.S.C.App. § 1274(d)(1); 46
2 C.F.R. 298.10-298.14, including the requirement that a vessel owner
be a United States citizen, which the regulations define by
reference to section 2 of the Shipping Act of 1916, 46 U.S.C.App.
§ 802. See 46 C.F.R. 298.10. Pursuant to this definition, MarAd
must find that each prospective vessel is at least 75% owned and
controlled by United States citizens before guaranteeing a loan.
In May 1995, the Hvide Van Ommeren tanker companies
(collectively, "Hvide") applied for Title XI loan guarantees to
build five tankers to be used in the domestic coastwise trade.
Upon learning of Hvide's application, Kirby Corporation ("Kirby"),
a Houston-based company that owns and operates ocean-going tankers
in the domestic coastwise trade, registered objections to the
issuance of such guarantees with MarAd. Although MarAd has no
formal administrative or adjudicative process by which it considers
the comments of third parties, it nonetheless agreed to receive
Kirby's comments and objections. Apparently not persuaded by
Kirby's position, in February 1996, MarAd issued a "letter
commitment" to guarantee approximately $216 million in financing
for the Hvide tanker construction. In issuing this commitment,
MarAd concluded that Hvide met, inter alia, Title XI's citizenship
requirements. In March 1996, MarAd and Hvide closed the guarantee
transaction, and a $216 million guaranteed bond offering was sold
in the private market.
II. PROCEDURAL HISTORY
In January 1996—before MarAd issued a letter commitment to
Hvide—Kirby sought a declaratory judgment and temporary restraining
3 order in the United States District Court for the District of
Columbia. Kirby asked the district court to prohibit MarAd from
issuing the commitment to Hvide until the court could determine
whether MarAd's decision to issue a Title XI loan guarantee was
subject to judicial review. The district court denied Kirby's
request for injunctive relief, reasoning that Kirby had not
established that it was likely to succeed on the merits because 46
U.S.C.App. § 1273(e) precluded judicial review. Shortly
thereafter, Kirby voluntarily dismissed the District of Columbia
suit.
On February 23, 1996, Kirby filed another complaint, this time
in the United States District Court for the Southern District of
Texas, challenging the Hvide loan guarantees under the
Administrative Procedure Act, 5 U.S.C. § 701 et seq. Kirby argued
that MarAd's decision to issue the letter commitment was arbitrary,
capricious, an abuse of discretion, and contrary to law because the
Hvide tanker construction project was not economically sound and
because the Hvide companies did not meet the citizenship
requirements. The district court, however, concluded that
Congress, pursuant to § 1273(e), had foreclosed all judicial review
of Title XI loan guarantee decisions. It therefore dismissed the
suit for lack of subject matter jurisdiction. Kirby appeals that
decision.
While the complaint in the Southern District of Texas was
pending, Kirby also filed a petition for direct review in this
Court. This petition alleges jurisdiction under the Hobbs Act, 28
4 U.S.C. § 2341 et seq., and seeks a judgment reversing MarAd's
citizenship decision.
We consolidated the district court appeal with the Hobbs Act
ANALYSIS
I. PRECLUSION OF JUDICIAL REVIEW
The Administrative Procedure Act ("APA") confers a cause of
action upon persons "adversely affected or aggrieved by agency
action within the meaning of a relevant statute." 5 U.S.C. § 702.
Kirby, as a putative competitor of Hvide, contends that it was
adversely affected when MarAd issued Title XI loan guarantees for
the building of Hvide's vessels. It maintains that the Hvide
limited liability companies are not United States citizens eligible
to participate in the coastwise trade. It thus asks this Court to
set aside MarAd's loan guarantee decision as contrary to law. See
5 U.S.C. § 706(2)(A).
The APA, however, withdraws the cause of action if a statute
precludes judicial review or if agency action is committed to
agency discretion by law. 5 U.S.C. § 701(a). Because we believe
that both the text of § 1273(e) and the purpose of Title XI, as
evidenced by its legislative history, indicate that § 1273(e)
precludes judicial review, we affirm the district court's dismissal
of Kirby's suit and dismiss Kirby's petition for review.
A. The Presumption Favoring Judicial Review
There is a "strong presumption" that Congress intends there
to be judicial review of administrative agency action, see Bowen v.
5 Michigan Academy of Family Physicians, 476 U.S. 667, 670, 106 S.Ct.
2133, 2135, 90 L.Ed.2d 623 (1986), and the government bears a
"heavy burden" when arguing that Congress meant to prohibit all
judicial review. See Dunlop v. Bachowski, 421 U.S. 560, 567, 95
S.Ct. 1851, 1857, 44 L.Ed.2d 377 (1975). Indeed, "only upon a
showing of "clear and convincing evidence' of a contrary
legislative intent should the courts restrict access to judicial
review." Abbott Labs. v. Gardner, 387 U.S. 136, 141, 87 S.Ct.
1507, 1511, 18 L.Ed.2d 681 (1967).
Nevertheless, the presumption favoring judicial review, "like
all presumptions used in interpreting statutes, may be overcome by
specific language or specific legislative history that is a
reliable indicator of congressional intent." Block v. Community
Nutrition Inst., 467 U.S. 340, 349, 104 S.Ct. 2450, 2455, 81
L.Ed.2d 270 (1984). The presumption may also be overcome "by
inferences of intent drawn from the statutory scheme as a whole."
Bowen, 476 U.S. at 673 n. 4, 106 S.Ct. at 2137 n. 4. Further, the
Supreme Court has "never applied the "clear and convincing
evidence' standard" in a "strict evidentiary sense." Block, 467
U.S. at 350, 104 S.Ct. at 2456. Instead, the Court "has found the
standard met, and the presumption favoring judicial review
overcome, whenever the congressional intent to preclude judicial
review is "fairly discernible' in the statutory scheme." Id. at
351, 104 S.Ct. at 2456 (quoting Association of Data Processing
Serv. Orgs., Inc. v. Camp, 397 U.S. 150, 157, 90 S.Ct. 827, 832, 25
L.Ed.2d 184 (1970)).
6 Thus, to determine whether § 1273(e) precludes judicial
review, we look to the express language of that subsection, as well
as the structure of Title XI and its legislative history. See id.
at 345, 104 S.Ct. at 2453-54.
B. The Text of § 1273(e)
Section 1273(e) of Title XI provides, in pertinent part:
Any guarantee, or commitment to guarantee, made by the Secretary under this subchapter shall be conclusive evidence of the eligibility of the obligations for such guarantee, and the validity of any guarantee, or commitment to guarantee, so made shall be incontestable.
46 U.S.C.App. § 1273(e). The Government (and Hvide) argue that
this subsection precludes all judicial review. Kirby asserts,
however, that § 1273(e) bars only the government, as the issuer of
the loan guarantees, from disavowing liability for validly entered
loan commitments; i.e., Kirby contends that once the government
commits to guaranteeing a loan, § 1273(e) divests it of certain
defenses in a suit to enforce the loan guarantee.
Kirby presents two textual arguments in support of its
position. First, it maintains that the plain language of § 1273(e)
does not expressly preclude judicial review because that section
does not mention jurisdiction, courts, or judicial review. In
light of the well-known presumption favoring review of agency
action, Kirby insists that when Congress truly wishes to preclude
judicial review, it expresses its intent in clear and unequivocal
terms. See Lindahl v. Office of Personnel Management, 470 U.S.
768, 779-80, 105 S.Ct. 1620, 1627, 84 L.Ed.2d 674 (1985) ("[W]hen
Congress intends to bar judicial review altogether, it typically
7 employs language far more unambiguous and comprehensive than that
set forth in [the relevant statute]."); Dart v. United States, 848
F.2d 217, 221 (D.C.Cir.1988) ("If the wording of a preclusion
clause is less than absolute, the presumption of judicial review
also favors a particular category of plaintiffs' claims.").2 That
Congress did not mention judicial review in § 1273(e), Kirby
maintains, is strong textual evidence that Congress did not intend
to insulate MarAd's decisionmaking from judicial review. Moreover,
Kirby contends that even when the plain language of a statute does
appear to preclude judicial review, courts have found that only
some types of judicial review are barred. See, e.g., Lindahl, 470
U.S. at 771, 800, 105 S.Ct. at 1623, 1638 (holding that the
relevant statute barred review of factual determinations but
permitted review for alleged errors of law and procedure).
Kirby also maintains that § 1273(e), given its legal meaning,
bars only the government, as the issuer of the loan guarantees,
from revoking its loan guarantee commitments. Kirby derives this
interpretation by analogy to "incontestability" provisions found in
insurance contracts containing language similar to that found in §
1273(e). When construed as part of an insurance contract, an
incontestability clause precludes insurers, after a given period of
time, from invoking certain defenses to a suit on the policy by the
2 By way of contrast, Kirby cites to statutes containing provisions that explicitly bar judicial review. See, e.g., 38 U.S.C. § 511(a) (regarding veteran's benefits: "[T]he decision of the Secretary as to any such question shall be final and conclusive and may not be reviewed by any other official or by any court, whether by an action in the nature of mandamus or otherwise.").
8 insured. See 1A John A. Appleman & Jean Appleman, Insurance Law
and Practice § 311, at 306 (1981); see also Black's Law Dictionary
766 (6th ed.1990). Further, Title XI was initially a government
loan insurance program when Congress first enacted and amended the
predecessor to § 1273(e). Completing the analogy, Kirby thus
maintains that the incontestability clause found in § 1273(e) was
designed to bar only the government, as the insurer of the
shipbuilding loans, from revoking its insurance commitment.
Therefore, it was not designed, Kirby contends, to address
third-party challenges to loan guarantee decisions such as the one
Kirby has brought.
It is true that when Congress wishes to preclude judicial
review, it usually says so in clear and unequivocal terms.
Further, the incontestability provision found in § 1273(e) is so
similar to those provisions found in insurance contracts that
Congress may have adopted such a provision with insurance-related
incontestability clauses in mind, especially because Title XI began
as a government insurance program. Nevertheless, we are
unpersuaded by Kirby's textual argument.
First, the plain language of the statute evinces Congress's
intent to preclude judicial review. In its customary legal usage,
"conclusive evidence" means "[t]hat which is incontrovertible,
either because the law does not permit it to be contradicted, or
because it is so strong and convincing as to overbear all proof to
the contrary...." Black's Law Dictionary 290 (6th ed.1990).
Further, in addition to its meaning in connection with insurance
9 policies, "incontestable" means that which is "not subject to being
disputed, called into question, or controverted." Webster's Third
New International Dictionary 1145 (unabridged ed.1981). That
Congress may have patterned § 1273(e) after a clause typically
found in insurance contracts that prevents insurers from
disclaiming liability does not mean ipso facto that Congress
intended to prevent only the government, as the insurer of
shipbuilding loans, from disavowing such commitments. Nowhere does
the plain language of § 1273(e) suggest that loan guarantees are
incontestable only when challenged by the government.
We are also not persuaded by Kirby's citation to Lindahl or
other such cases holding that language appearing to bar judicial
review precludes only certain categories of agency determinations.
Those cases merely illustrate the presumption of reviewability, and
their holdings were based not only upon the text of the relevant
statute, but also upon congressional intent as determined by the
statutory schemes and legislative histories. See, e.g., Lindahl,
470 U.S. at 781-88, 105 S.Ct. at 1628-32 (analyzing extensively the
pertinent statutory scheme and legislative history); Bowen, 476
U.S. at 674-80, 106 S.Ct. at 2137-41 (same); Block, 467 U.S. at
341-43, 346-48, 104 S.Ct. at 2450-53, 2454-55 (same). Following
the analysis employed by the Supreme Court in these cases, we
conclude that § 1273(e) of Title XI precludes third-party
challenges to MarAd's loan guarantee decisions. This determination
is premised upon the plain language of § 1273(e), as well as the
legislative history and purpose of Title XI, to which we now turn.
10 C. The Legislative History and Structure of Title XI
Title XI of the Merchant Marine Act of 1936 was originally
enacted into law in 1938 as a ship mortgage insurance program and
was intended "to encourage the private sector to provide loans to
the shipping industry at low risk during the Depression." S.Rep.
No. 98-652 (1984), reprinted in 1984 U.S.C.C.A.N. 5426, 5426-27;
see also H.R.Rep. No. 83-1042 (1953), reprinted in 1953
U.S.C.C.A.N. 2433, 2434. During the program's first fifteen years,
however, Title XI proved relatively ineffective in attracting
private capital for shipbuilding. See H.R.Rep. No. 83-1042,
reprinted in 1953 U.S.C.C.A.N. 2433, 2434.
With its original goal—that of attracting private investment
to the shipbuilding industry—still in mind, Congress reacted to
private industry's sluggish response by amending the statute in
1953 and again in 1954. See H.R.Rep. No. 83-1042, reprinted in
1953 U.S.C.C.A.N. 2433; H.R.Rep. No. 83-2450 (1954), reprinted in
1954 U.S.C.C.A.N. 4011; see also S.Rep. No. 92-1137 (1972),
reprinted in 1972 U.S.C.C.A.N. 3851, 3864 (noting that only twelve
transactions were entered into during the period from 1938 to
1953). Changes to Title XI were necessary because private
investment had "been reluctant to undertake to any appreciable
extent the risks of lending money secured by ship mortgages"
because "of the inherent uncertainties in the business of operating
ships." H.R.Rep. No. 83-2450, reprinted in 1954 U.S.C.C.A.N. 4011,
4012. Congress thus sought to reduce the risks of lending money to
potential shipbuilders, and one way it did so was by enacting the
11 predecessor to § 1273(e).
Kirby agrees, as it must, that Congress intended to secure
private financing for shipbuilding in part by strengthening the
MarAd's loan insurance commitment from post hoc challenge. Kirby
argues, however, that a closer reading of the legislative history
supports its view that § 1273(e) serves to bar only the government
from disclaiming its commitments. To this end, Kirby notes that
the adoption of the predecessor to § 1273(e) was sparked by the
refusal of the Comptroller General to honor government subsidies
for the construction of three passenger liners, the United States,
the Constitution, and the Independence, on the grounds that the
companies building those liners had overcharged the government.
See George Horne, Commerce Department Drive Is On To Review U.S.
Merchant Marine, N.Y. Times, June 8, 1953, at 51; George Horne,
Ship Men Are Hopeful Congress Will End Subsidy Uncertainties, N.Y.
Times, Mar. 29, 1954, at 39. The Comptroller General's actions
"badly shattered" confidence among shipbuilders regarding
government subsidies, and ensured that "no line [would] build and
no bank [would] put money into" the building of merchant marine
vessels. U.S. Shipbuilding: Rough Weather Ahead, Newsweek, Mar.
1, 1954, at 64. Upon review of the legislative history and
contemporary news accounts, we agree with Kirby that the
predecessor to § 1273(e) was enacted in response to the Comptroller
General's actions in tying up MarAd's shipbuilding subsidies.
Despite our agreement with Kirby regarding the impetus behind
the passage of § 1273(e), we nevertheless differ with the
12 conclusion that Kirby draws from this history, viz., that because
the provision was enacted in response to the Comptroller General's
actions, it was designed to estop only the government, as the
issuer of loan insurance, from disclaiming its commitments, and
thus does not have any effect upon third-party challenges to the
loan guarantees such as the instant litigation.
The legislative history highlights our disagreement with Kirby
in three different ways. First, the statutory development of §
1273(e), as seen by the textual changes to that subsection,
illuminates Congress's intent to make MarAd's loan guarantees
certain and also to preclude challenge from third parties as well
as from the government. Second, the legislative history and
structure of Title XI in general and statements of the witnesses
who testified before the various legislative committees and
subcommittees considering the proposed amendments also reflect the
intent of Congress and industry participants to make the loan
commitments absolutely immune from challenge. Third, Kirby's
argument that § 1273(e) bars only the government from invalidating
MarAd's loan guarantees is weakened by a logical flaw: the
legislative history shows not that Congress intended to prevent
MarAd itself from backing out of its loan commitments (for such a
situation would directly correspond to Kirby's insurance analogy)
but that Congress was interested in preventing third parties, be it
the Comptroller General or putative competitors, from invalidating
MarAd's commitment.
1. The Textual Development of § 1273(e)
13 First, we turn to the statutory development of § 1273(e). As
originally enacted in 1953, that subsection provided:
Any contract or commitment of insurance entered into by the Secretary of Commerce under this title shall be final and conclusive and shall not be subject to avoidance by any officer, employee, or agent of the United States, except in case of fraud, duress, or mutual mistake of fact.
Pub.L. No. 83-288, § 3, 67 Stat. 627 (1953) (emphasis added). The
plain language of the 1953 provision, as evidence of Congress's
intent, is relatively clear. It shows that Congress was most
concerned that officers of the United States would attempt to avoid
insurance commitments entered into by the Secretary of Commerce.
In 1954, however, this provision was significantly broadened:
Any contract or commitment of insurance entered into by the Secretary of Commerce under the provisions of this title shall not be terminated, canceled, or otherwise revoked for any reason, except as provided in section 1105 of this title, and shall be conclusive evidence that the mortgage or loan complies fully with the provisions of this title and of the approval of the principal amount, interest rate, and all other terms of the mortgage or loan and of the mortgagor or borrower and of the mortgagee or lender; any contract or commitment of insurance so entered into shall be incontestable from the date as of which such contract or commitment is entered into, except for fraud, duress, or mutual mistake of fact.
Pub.L. No. 83-781, § 5, 68 Stat. 1267, 1274-75 (1954) (emphasis
added). By widening the scope of this provision, the 1954
amendment reflects Congress's intent to preclude all challenges to
MarAd's loan commitments. First, Congress replaced the 1953
phrase, "not subject to avoidance by ... the United States," with
much more comprehensive language in 1954: "any contract or
commitment of insurance so entered into shall be incontestable."
We cannot help but conclude that Congress, by deleting the
reference to the United States and substituting the more general
14 word, "incontestable," intended to prevent any party, and not just
the United States, from contesting the loan guarantees.
Second, Congress's intent to broaden the scope of § 1273(e)
can be gleaned from another 1954 amendment to that provision, which
added the following language: "Any contract or commitment of
insurance ... shall not be terminated, canceled, or otherwise
revoked for any reason, except as provided in section 1105 of this
title." Pub.L. No. 83-781, § 5, 68 Stat. 1274-75 (1954) (emphasis
added).3 The phrase, "any reason," is very broad, and it must be
given its logical meaning; it necessarily includes "any" challenge
to loan commitments, even those brought by third parties.4
The 1972 amendments to § 1273(e) also reflect Congress's
intent to immunize Title XI loan guarantees from challenge. That
provision, as amended in 1972, provided:
3 The exception permits cancellation of the insurance contract when the borrower defaults and the Secretary of Commerce elects to pay off the outstanding principal and interest. See Pub.L. No. 83- 781, § 5, 68 Stat. 1272-73 (amending section 1105(a) of the Merchant Marine Act of 1936). 4 Quoting selectively from the legislative history, Kirby insists that the 1954 amendment was not intended to substantively change the meaning of § 1273(e). See Private Financing of New Ship Construction: Hearings on S. 3219 Before a Subcomm. of the Comm. on Interstate and Foreign Commerce, 83d Cong. 132 (1954) ("This amendment, except the change which provides for terminating the insurance contract for special reasons, is not intended to change the substance of this subsection, but is intended to clarify it."). This quote, however, is not found in the Senate or House Committee Reports; instead, it is a quote from a letter written by marine industry officials regarding the proposed amendments. While we consider the views of private industry in analyzing the legislative history, we are not willing to give inordinate weight to a single statement and do not believe that a single phrase from an industry official can abrogate inferences drawn from amendments to the text of § 1273(e).
15 Any guarantee, or commitment to guarantee, made by the Secretary of Commerce under this title shall be conclusive evidence of the eligibility of the obligations for such guarantee, and the validity of any guarantee, or commitment to guarantee, so made shall be incontestable.
Pub.L. No. 92-507, § 3, 86 Stat. 910 (1972). The most important
amendment was the elimination of the language that allowed
challenges to MarAd's loan guarantees when such commitments were
marred by fraud, duress, or mutual mistake. By removing this
exception, Congress indicated that it intended to immunize
completely the loan guarantees from challenge, despite the presence
of fraud, duress, or mutual mistake. Viewed in conjunction with
the 1954 amendment to § 1273(e), Congress's intent is plain: it
sought to preclude MarAd's loan commitments from all challengers
and in all instances.
2. The Structure and History of Title XI
Second, we look to the structure and legislative history of
Title XI. It is clear from the Senate and House Committee Reports
accompanying the 1953 and 1954 amendments to Title XI that the
purpose of the Act is to encourage private investment in the
building of ships by abating the risk to lenders of a vessel
owner's default. See, e.g., H.R.Rep. No. 83-2450, reprinted in
1954 U.S.C.C.A.N. 4011, 4012; H.R.Rep. No. 83-1042, reprinted in
1953 U.S.C.C.A.N. 2433, 2434. In furtherance of this goal,
Congress took steps to ensure that government loan insurance would
always be honored by enacting the incontestability provision
currently found in § 1273(e) into law. Kirby's reading of this
provision is untenable because such an interpretation would allow
16 a third party to challenge—and delay or even invalidate—loan
guarantees in the same manner as did the Comptroller General in the
1950s. It is difficult to believe that it could have been
Congress's intent to prevent challenges by the Comptroller General
but to allow challenges by third-party competitors. From the point
of view of an investor, it makes little difference if the guarantee
is invalidated by the government or by a federal court in response
to a third-party complaint. A loan guarantee that could be
overturned at the behest of a competitor is not the low-risk
investment contemplated by Congress. Instead, as the Government
notes, it is a half-way measure that would offer little solace to
investors and would certainly not assuage investor confidence that
was shaken by the actions of the Comptroller General in the early
1950s. Congress recognized that there was a crisis arising from
the quickly-approaching obsolescence of the American merchant
fleet, and it thus took the admittedly drastic action of insulating
MarAd's loan guarantee determinations from review.
Further, the industry participants in the congressional
hearings also believed that the 1954 amendments—and in particular,
the predecessor to § 1273(e)—would have the effect of precluding
all challenges to the loan insurance contracts. The fact that the
industry officials and legislators may have been primarily
influenced by the actions of the Comptroller General does not mean
that Congress intended to preclude challenges by the government
only. Indeed, the industry representatives made it clear that
finality of the loan insurance was paramount, and that investment
17 was unlikely to occur without elimination of all uncertainty caused
by the potential for subsequent litigation and invalidation of such
insurance. As Mr. Rudolph S. Hecht, chairman of the board of the
Mississippi Shipping Co., noted:
... the investor can be induced to put his money into this kind of financing, which he has never done heretofore. But if you leave any uncertainly [sic] as to the finality of this thing, once the money is put out, then this bill will not work. The investors will not put up their money because that is the uncertainly [sic] that no investor will take, especially in the shipping industry, which is a feast and famine industry, as you well know.
Hearings on H.R. 8637, 83d Cong. 21 (1954). This concern was
amplified by Jerome S. Katzin, of Kuhn, Loeb & Co:
If there is the slightest doubt over the firmness of the Government's obligation on these insured mortgages, these securities cannot be sold at anything approaching the terms anticipated. We must assume that the Congress intends, and the language of the statute will clearly provide, for a firm Government obligation which is clear, definite, and unalterable.
Id. at 67. The situation created by Kirby's challenge to MarAd's
loan guarantees is exactly the situation the shipping industry
sought to prevent: a challenge to the certainty of the loan
guarantees. That members of the shipping industry made such
statements in response to the Comptroller General's challenge to
earlier government subsidies is ultimately not persuasive. The
investors and shipping industry officials were aware of a known
risk, and they sought to prevent its reoccurrence. It is illogical
to think that they would have allowed a similar, but perhaps
unknown, risk resulting in the same consequences, viz., the
invalidation of government loan obligations.
The 1972 amendments also support our belief that § 1273(e),
18 when viewed in conjunction with the overall scheme of Title XI,
precludes judicial review. Congress understood that some private
investors had not participated in Title XI's program because of the
complexities involved in receiving loan insurance, and it thus
amended Title XI from a loan insurance program to a loan guarantee
program. See Pub.L. No. 92-507, § 3, 86 Stat. 910 (1972) (codified
as amended at 46 U.S.C.App. § 1273(a)). The fact that Title XI is
no longer a loan insurance program cuts against Kirby's
insurance-derived definition of the language found in § 1273(e).
The 1972 amendments also included provisions requiring the
government—and not the lender—to take a security interest in the
vessel as collateral in the event of default. See Pub.L. No. 92-
507, § 3, 86 Stat. 910 (1972) (codified as amended at 46 U.S.C.App.
§§ 1273(b), 1275); see also S.Rep. No. 92-1137, reprinted in 1972
U.S.C.C.A.N. 3851, 3853, 3858, 3861; 46 U.S.C.App. §§ 1273(b),
1275. As such, private investors have no protection against a
vessel owner's default except for the government's guarantee. If
these guarantees could be invalidated in a subsequent judicial
proceeding, then investors—who have no security interest in the
vessel—would be left completely unprotected by Title XI. This
result would be at odds with the express intent of Congress.5
As the foregoing recitation of the legislative history has
demonstrated, the overarching purpose of Title XI is to attract
5 Although the loan insurance/guarantee program—with some version of § 1273(e)—has been in effect for over 40 years, Kirby points us to no case in which a court has assumed jurisdiction to consider the validity of MarAd's loan commitment decision.
19 private investment for the construction of vessels.6 Congress
sought to achieve this goal by minimizing the risk of default to
those investors, and the incontestability provision that was
adopted in 1953 and amended in 1954 and 1972 accords with the
purpose of Title XI, for it ensures that MarAd's decision to issue
loan guarantees is insulated from challenge, thereby further
minimizing the risk to investors.7
3. The Insurance Analogy
Finally, Kirby's insurance-derived meaning of § 1273(e) is
deeply flawed. When viewing the text of § 1273(e) without studying
the legislative history, Kirby's argument appears somewhat logical:
incontestability clauses are found in insurance contracts; they do
prevent insurers, after a certain period of time, from rescinding
a policy or denying a claim based upon, inter alia, a
misrepresentation by an insured; the provision found in § 1273(e)
6 It is true, as Kirby notes, that it is not Congress's intent to secure financing for any prospective vessel. The regulations require the vessel owners to be United States citizens, and the Act commands MarAd to evaluate the economic soundness of a particular project. These requirements were amplified by the 1984 amendments to Title XI, which were prompted by numerous defaults due to the "economic depression of the maritime industry." S.Rep. No. 98-652, reprinted in 1984 U.S.C.C.A.N. 5426, 5427. The 1984 amendments set forth "much stricter criteria for approving loan applications," and require the Secretary of Transportation, inter alia, to evaluate a loan applicant's economic soundness and the need for the prospective equipment in the particular trade. Id., reprinted in 1984 U.S.C.C.A.N. 5426, 5426, 5428. 7 In 1993, Congress deleted the citizenship requirement of Title XI, although MarAd's regulations still maintain such a requirement. This amendment will be discussed in greater detail when our focus turns to whether we have jurisdiction pursuant to the doctrine set forth in Leedom v. Kyne, 358 U.S. 184, 79 S.Ct. 180, 3 L.Ed.2d 210 (1958).
20 is similar to typical incontestability provisions found in
insurance contracts; Title XI began as a government loan insurance
program; and thus the incontestability provision is meant to bar
only the government from rescinding its insurance obligations under
Title XI. The problem with this argument is that the legislative
history confirms that Congress was not specifically concerned with
preventing MarAd, as the government agency that issued the loan
insurance, from rescinding its commitments. It was not MarAd, the
issuer of the loan insurance, that attempted to disclaim its loan
commitments in the early 1950s; instead it was the Comptroller
General, a legislative official and a non-party to the loan
insurance commitment, who attempted to invalidate MarAd's
obligation. In other words, the actions of the Comptroller General
were the actions of a third party attempting to undo an agreement
between MarAd and various shipbuilding companies. Kirby's lawsuit
is a third-party challenge in much the same way. The fact that
both the Comptroller General and the Maritime Administration are
part of the federal government is not enlightening. What is
instructive is that the Comptroller General, a non-party to the
loan-insurance transaction, attempted to undo such a commitment.
Or to put it another way: if we were to agree that Kirby could
challenge MarAd's loan guarantee and if we did set aside the loan
transaction as Kirby requests, our action in doing so would be
closely analogous to the Comptroller General's actions. Congress
21 sought to prevent this from reoccurring.8
In conclusion, we are convinced that it was Congress's clear
and convincing intent to preclude all challenges to Title XI loan
guarantees. This resolution is based not only upon the text of §
1273(e), but also upon the structure of Title XI and upon the
legislative history of the Act in general and § 1273(e) in
particular.
II. THE LEEDOM v. KYNE EXCEPTION
Although § 1273(e) of Title XI is a statutory bar to judicial
review, there is an implicit but narrow exception that permits
8 We are also unmoved by Kirby's contention that clauses similar to that found in § 1273(e) contained in other federal statutes were held to preclude only the government from disavowing its insurance commitments. See First Interstate Bank of Billings v. United States, 61 F.3d 876 (Fed.Cir.1995); Hicks v. United States, 65 F.2d 517 (4th Cir.1933); Carman v. Richardson, 357 F.Supp. 1148 (D.Vt.1973); Jay F. Zook, Inc. v. Brownstein, 237 F.Supp. 800 (N.D.Ohio 1965); Neuhard v. United States, 83 F.Supp. 911 (M.D.Pa.1949). Four of these cases concerned suits brought against the government to enforce an insurance contract, and they dealt with the government's efforts to avoid the contract despite the incontestability provision. The question whether a party other than the government could challenge the insurance commitment was not even at issue in any of those four cases. Further, the incontestability clause in each was not absolute like the one found in § 1273(e), and each allowed the government to challenge the insurance when there was fraud on the part of the insured. See First Interstate Bank, 61 F.3d at 877; Hicks, 65 F.2d at 519; Jay F. Zook, Inc., 237 F.Supp. at 806; Neuhard, 83 F.Supp. at 912. The fact that these cases analyzed the incontestability provisions in terms of the government's right to back out of its insurance commitments does not mean that incontestability provisions are applicable only as to the government.
In the fifth case, the district court did find jurisdiction over a third-party suit brought to block the issuance of federal loan guarantees under the Hill-Burton Act. Carman, 357 F.Supp. at 1159. In making such a determination, however, the court did not refer to or discuss the incontestability provision of that Act.
22 judicial intervention—even when the relevant statutory language
precludes jurisdiction—when an agency exceeds the scope of its
delegated authority or violates a clear statutory mandate. See,
e.g., Hanauer v. Reich, 82 F.3d 1304, 1307 (4th Cir.1996). This
exception finds its roots in Leedom v. Kyne, 358 U.S. 184, 79 S.Ct.
180, 3 L.Ed.2d 210 (1958).
In Kyne, the National Labor Relations Board undisputably
violated a statutory prohibition against placing professional
employees into a collective bargaining group with non-professional
employees. The president of a labor organization brought suit to
set aside the Board's action, but the Board contended that a
provision of the National Labor Relations Act ("NLRA") impliedly
precluded judicial review. In considering the issue, the Supreme
Court asked rhetorically whether the law, "apart from the review
provisions of the ... [NLRA]," affords a judicial remedy. Kyne,
358 U.S. at 188, 79 S.Ct. at 183 (internal quotations omitted).
Answering its own question, the Court stated, "We think the answer
surely must be yes. This suit is not one to "review,' in the sense
of that term as used in the [NLRA], a decision of the Board made
within its jurisdiction. Rather it is one to strike down an order
of the Board made in excess of its delegated powers and contrary to
a specific prohibition in the [NLRA]." Id.
The Courts of Appeals have only rarely exercised their
jurisdiction under Kyne, and have limited Kyne 's application to
situations in which an agency has exceeded its delegated powers or
"on its face" violated a statute. See, e.g., Dart v. United
23 States, 848 F.2d 217, 222 (D.C.Cir.1988); Russell v. National
Mediation Bd., 714 F.2d 1332, 1340 (5th Cir.1983) (stating that the
Kyne standard is "narrow and rarely successfully invoked"), cert.
denied, 467 U.S. 1204, 104 S.Ct. 2385, 81 L.Ed.2d 344 (1984);
McClendon v. Jackson Television, Inc., 603 F.2d 1174, 1177 (5th
Cir.1979) (noting that to invoke the Kyne test, the error must be
"of a summa or magna quality as contraposed to decisions which are
simply cum error" (internal quotations omitted)). Indeed, the
Supreme Court has also applied the Kyne exception only in limited
instances. See, e.g., Oestereich v. Selective Serv. Sys. Local Bd.
No. 11, 393 U.S. 233, 237-38, 89 S.Ct. 414, 416, 21 L.Ed.2d 402
(1968) ("We deal with conduct of a local [Selective Service] Board
that is basically lawless.... The case we decide today involves a
clear departure by the Board from its statutory mandate."). As the
Dart court noted, the exception allowing review of facial
violations must remain narrow, and "agency action allegedly "in
excess of authority' must not simply involve a dispute over
statutory interpretation or challenged findings of fact." Dart,
848 F.2d at 231. In short, judicial review is proper under the
rule set forth in Kyne, despite there being a statutory provision
prohibiting such review, because the agency's challenged action is
so contrary to the terms of the relevant statute that it
necessitates judicial review independent of the review provisions
of the relevant statute. See Kyne, 358 U.S. at 188, 79 S.Ct. at
183-84.
There are two independent reasons why the Kyne doctrine is
24 inapplicable to Kirby's challenge. First, in 1993, Congress
eliminated Title XI's provision requiring that prospective vessels
be owned by United States citizens, see Pub.L. No. 103-160, §
1356(3)(A), 107 Stat. 1813 (codified at 46 U.S.C.App. §
1274(a)(1)), although this requirement is still found in MarAd's
regulations. See 46 C.F.R. 298.10. MarAd therefore continues to
impose stricter requirements on the issuance of loan guarantees
than are required by law, and thus it cannot be said that MarAd
violated Title XI, on the grounds that Hvide is not a United States
citizen, by awarding such guarantees to Hvide.
Second, even if Title XI's citizenship requirement were still
in place, Kirby's challenge under Kyne would fail. Its assertion
that MarAd's decision to guarantee Hvide's loans is one that
"facially" violates Title XI or is in excess of its delegated
powers is not supported by Kyne, the case law interpreting it, or
the facts and circumstances of the instant case. The record
establishes that MarAd reviewed affidavits regarding the
citizenship of board members, executive officers, and controlling
stockholders, and analyzed numerous corporate documents. Only
after completing this investigation did MarAd find that the Hvide
limited liability companies satisfied the citizenship requirements.
Kirby challenge of MarAd's factual determinations is exactly the
sort not encompassed by the Kyne rule; Kirby seeks to review an
ordinary determination by MarAd, whereas the Kyne standard is to be
used for extraordinary situations. Kirby's disagreement with
MarAd's factual determination presents a situation opposite from
25 that foreseen in Dart. See 848 F.2d at 222-23, 231 (noting that a
court should not assume jurisdiction under Kyne when there is a
dispute over the factual findings only). Were Kirby's
interpretation of Kyne and its progeny correct, every alleged
competitor of a company receiving shipbuilding guarantees could
challenge MarAd's factual determinations despite the finality
language of § 1273(e).9
III. THE CITIZENSHIP DETERMINATION
Finally, Kirby argues that even if § 1273(e) precludes
judicial review of MarAd's decision to issue a loan guarantee under
Title XI, this Court must still address the independent question
whether MarAd's subsidiary citizenship determination is reviewable.
As noted previously, MarAd's regulations define citizenship by
reference to section 2 of the Shipping Act of 1916, 46 U.S.C.App.
§ 802. Under the Hobbs Act, the "court of appeals ... has
9 Nor are we persuaded that Colorado State Bank v. United States, 18 Cl.Ct. 611 (1989), aff'd without op., 904 F.2d 45 (Fed.Cir.1990), supports the contention that MarAd's action is reviewable under the Kyne exception. Kirby cites this case as an example of a situation in which an incontestability clause did not prevent a federal court from declaring a government loan guarantee void. We do not disagree with the general proposition that an incontestability provision, such as the one found in § 1273(e), would not bar judicial review if an agency "facially" violated a statute or acted outside of its delegated authority. Colorado State Bank is distinguishable, however, because in that case, agency action constituted error of such magnitude as to reach the narrow exception set forth in Kyne. In Colorado State Bank, although there was no fraud or misrepresentation, the loan guarantee process "made a farce of compliance with law and the procedures that had been promulgated to protect the interest of the United States." Id. at 630. Even if MarAd erred in its factual findings, its decision-making process culminating in its decision to guarantee Hvide's loans did not make a farce of the applicable law and procedures.
26 exclusive jurisdiction to enjoin, set aside, suspend (in whole or
in part), or to determine the validity of" a final order of the
Secretary of Transportation issued pursuant to, inter alia, section
2 of the Shipping Act of 1916. See 28 U.S.C. § 2342.
Although the Hobbs Act purports to give this Court
jurisdiction to review citizenship determinations made pursuant to
section 2 of the Shipping Act of 1916, it does not trump 46
U.S.C.App. § 1273(e), Title XI's more specific provision
prohibiting judicial review. It is a well known canon of statutory
construction that a specific statutory provision governs the
general. See Morales v. Trans World Airlines, Inc., 504 U.S. 374,
384, 112 S.Ct. 2031, 2037, 119 L.Ed.2d 157 (1992). The Hobbs Act
provides, as a general matter, that the courts of appeals are the
proper fora for challenges to, inter alia, orders issued pursuant
to section 2 of the Shipping Act of 1916. Section 1273(e) of Title
XI, however, makes it clear that Congress intended to preclude
judicial review of loan guarantee decisions. Because the
citizenship determination is so closely bound up with the loan
guarantee decision, we conclude that it was Congress's intent to
preclude judicial review for such a determination as well.
CONCLUSION
The Supreme Court has cautioned that " "judicial review of a
final agency action by an aggrieved person will not be cut off
unless there is persuasive reason to believe that such was the
purpose of Congress.' " Bowen, 476 U.S. at 670, 106 S.Ct. at 2135
(quoting Abbott Labs., 387 U.S. at 140, 87 S.Ct. at 1511). As the
27 foregoing analysis has shown, the text of 46 U.S.C.App. § 1273(e),
the structure of Title XI, and the legislative history of the Act
all evince Congress's intent to preclude judicial review of
decisions by MarAd to issue loan guarantees pursuant to Title XI of
the Merchant Marine Act of 1936.
Based on our analysis, we AFFIRM the district court's decision
dismissing for lack of jurisdiction and we DISMISS the petition for
direct review.