Sea-Land Service, Inc. v. Dole

596 F. Supp. 1143, 1984 U.S. Dist. LEXIS 15515
CourtDistrict Court, District of Columbia
DecidedJune 26, 1984
DocketCiv. A. Nos. 83-0929, 83-0972
StatusPublished

This text of 596 F. Supp. 1143 (Sea-Land Service, Inc. v. Dole) is published on Counsel Stack Legal Research, covering District Court, District of Columbia primary law. Counsel Stack provides free access to over 12 million legal documents including statutes, case law, regulations, and constitutions.

Bluebook
Sea-Land Service, Inc. v. Dole, 596 F. Supp. 1143, 1984 U.S. Dist. LEXIS 15515 (D.D.C. 1984).

Opinion

MEMORANDUM

OBERDORFER, District Judge.

On June 29, 1983, the Court granted summary judgment for the plaintiffs in these consolidated cases and declared an amended order of the Secretary of Transportation to be arbitrary, capricious, an abuse of discretion, and contrary to law. Both the Secretary of Transportation and defendant-intervenor American President Lines, Ltd. (“APL”) have moved to alter and/or amend that judgment on various grounds. The motions will be denied in an accompanying order.

At issue is a decision of the Secretary of Transportation authorizing APL to carry certain cargo between Dutch Harbor, Alaska, and Vancouver, British Columbia. The facts have already been summarized in the Court’s memorandum of June 29, 1983, which is attached as an exhibit. Nevertheless, the complexity of the legal and factual issues raised in the motions to alter and/or amend warrant a brief restatement.

I.

As our Court of Appeals has recently noted, Congress has enacted several stat[1145]*1145utes to protect American competitors in the merchant marine market. Sea-Land Service, Inc. v. Dole, 723 F.2d 975, 976 (D.C. Cir.1983). Under the Merchant Marine Act of 1936, ch. 858, 49 Stat. 1985 (codified as amended at 46 U.S.C. §§ 1101-1295g (1976 & Supp. V 1981)), the federal government subsidizes the construction and operation of certain American-flag vessels so they can compete, in foreign trade with foreign ships whose labor and operating costs are considerably lower. Conversely, the Merchant Marine Act of 1920, ch. 250, 41 Stat. 999 (codified as amended at 46 U.S.C. § 883 (1976 & Supp. V 1981)) (the “Jones Act”) protects American competitors in domestic trade between points in the United States by excluding foreign vessels from such carriage. A complex regulatory framework has been developed under these statutes not only to protect the American merchant fleet from lower cost foreign competition, but also to protect the unsubsidized domestic American merchant fleet from lower cost subsidized American competition. The latter concern is embodied in Sections 506 and 605(a) of the Merchant Marine Act of 1936, 46 U.S.C. §§ 1156 & 1175(a). Section 605(a) provides that:

[n]o operating differential subsidy shall be paid for the operation of any vessel on a voyage on which it engages in coast-wise or intercoastal trade.

46 U.S.C. § 1175(a). Section 506 requires that owners of subsidized American vessels agree that their ships will be operated exclusively in foreign trade or on a round the world voyage. 46 U.S.C. § 1156.

On January 31, 1983, Secretary of Transportation Drew Lewis issued a brief opinion and order that on its face was inconsistent with the statutory provisions noted above. The order, which reversed a contrary decision of the Maritime Subsidy Board, authorized APL, a subsidized American line, to carry cargo between Dutch Harbor, Alaska, and Vancouver, British Columbia. Under the order, the cargo carried between these ports could originate in or be destined for points in the United States Pacific Northwest (“USPNW”), with connection to Vancouver by rail. It is not contested that all current cargo service between the USPNW and Dutch Harbor and other proximate Aleutian ports is conducted exclusively by unsubsidized American lines such as the plaintiffs in these cases. It is also undisputed that competition by a subsidized American line in the Dutch Harbor-USPNW trade could have a devastating effect on the business of the unsubsidized American carriers.

Faced with this threat by the Secretary’s January 31, 1983 decision, plaintiffs petitioned the Secretary for reconsideration, and when no response appeared to be forthcoming, filed these lawsuits.1 The complaints asserted that the Secretary’s January 31, 1983, decision embodied improper interpretations of both APL’s Operating Differential Subsidy (“ODS”) agreement and the Merchant Marine Act of 1936.

While the suits were pending, but before summary judgment motions became ripe, the new Secretary of Transportation, Elizabeth Dole, issued an opinion and order granting in part and denying in part plaintiffs’ motions for reconsideration. Opinion and Order of May 31,1983. In the January 31, 1983, decision, Secretary Lewis had interpreted a phrase in APL’s longstanding ODS agreement which limited APL to “overseas carriage.” Although trade between the USPNW and Dutch Harbor via Vancouver would clearly be “coastwise” (i.e., domestic) trade within the meaning of the Merchant Marine Act of 1936, Secretary Lewis concluded that it would also be “overseas” trade within the meaning of the ODS contract because it was “transoceanic carriage ... over the 1700-plus nautical miles between the foreign port of Vancouver and the domestic port of Dutch Harbor.” Decision and Order of January 31, 1983, at 3. Secretary Lewis failed to explain, however, how such carriage could be [1146]*1146squared with the Merchant Marine Act of 1936.

Secretary Dole’s opinion on reconsideration embraced Secretary Lewis’s novel interpretation of the ODS contract, but also added lengthy discussion explaining why carriage of cargo from Dutch Harbor to Vancouver for transshipment to the USPNW would not violate the provisions of the Merchant Marine Act of 1936 that barred subsidized shippers from coastwise trade. In that portion of the May 31, 1983, opinion, Secretary Dole concluded that the term “coastwise trade” in 46 U.S.C. § 1175(a) did indeed mean domestic trade, even though the term “overseas trade” in the ODS agreement did not mean foreign trade. Nevertheless, she concluded that APL could still carry cargo from Dutch Harbor to Vancouver and then transship it by rail to points in the United States. She reasoned that 46 U.S.C. § 1175(a), in barring subsidized shippers from coastwise (i.e., domestic) trade, was really intended by Congress only to bar subsidized shippers from that portion of the domestic market that was protected from foreign competition by the Jones Act, 46 U.S.C. § 883 (1976 & Supp. V 1981). She then interpreted the third proviso of the Jones Act2 as creating the possibility that foreign ships could carry cargo between Dutch Harbor and the USPNW via Vancouver. Opinion and Order of May 31, 1984, at 15. Since foreign shippers might compete in the future with unsubsidized American lines in the Vancouver-Dutch Harbor trade, the Secretary reasoned, subsidized American carriers should be able to compete with unsubsidized American lines on that route as well.

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596 F. Supp. 1143, 1984 U.S. Dist. LEXIS 15515, Counsel Stack Legal Research, https://law.counselstack.com/opinion/sea-land-service-inc-v-dole-dcd-1984.