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Liberty Global Logistics LLC v. United States Maritime Administration, Matsuda

United States District Court, E.D. New York

September 5, 2014



ERIC N. VITALIANO, District Judge.

Plaintiff Liberty Global Logistics ("Liberty") brings suit on behalf of itself and its affiliates against the United States Maritime Administration ("MarAd"), David T. Matsuda, U.S. Department of Transportation ("DOT"), Raymond H. LaHood and the United States seeking relief under the Administrative Procedure Act ("APA") and Freedom of Information Act ("FOIA"). Liberty principally alleges that MarAd acted arbitrarily and capriciously in awarding contracts to certain of Liberty's competitors and in approving the transfer of other contracts among these same competitors. Defendants have moved, pursuant to Rule 12(b)(1), to dismiss Liberty's APA claims, citing lack of standing, mootness, and other jurisdictional defects. Defendants have also moved to dismiss Liberty's FOIA claims as moot. For the reasons discussed below, the motion is granted in full.


MarAd, an agency within DOT, oversees the Maritime Security Program ("MSP"), a program authorized initially by the Maritime Security Act of 1996 and re-authorized in 2003 ("MSA 2003"). With the Persian Gulf War having exposed the virtual demise of America's sealift capacity, the maritime security program was enacted to ensure that militarily useful vessels are available to the United States government in the event of war or national emergency. Under the MSP, MarAd subsidizes approximately 60 privately-owned commercial vessels that are engaged in U.S.-foreign trade by entering into operating agreements ("OAs") with the vessel owners. Those agreements mandate a direct payment by the United States to the vessel owner of $3.1 million per year, which is intended, in part, to compensate owners for the increased cost of registering as a "United States-flag" vessel rather than a "foreign-flag" vessel. In exchange for the $3.1 million annual subsidy, the vessel owner agrees to ensure the vessel's availability to the military in the event of war or national emergency.

MSA 2003 adopted certain eligibility requirements for participation in MSP based on the vessel's type and ownership. With respect to ownership, MSA 2003 provided a four tier prioritization scheme of eligible ownership arrangements, listed here in descending order of priority: (1) a vessel owned and operated by a U.S. citizen as defined at 46 U.S.C. § 50501 (a "Section 2 citizen"); (2) a vessel owned by a Section 2 citizen but chartered to an entity eligible to document the vessel under the U.S. flag (a "documentation citizen"); (3) a vessel owned and operated by a defense contractor; and (4) a vessel owned by a documentation citizen but chartered to a Section 2 citizen. In general, while a Section 2 citizen is an entity owned and controlled by U.S. citizens, a documentation citizen is an entity organized in the U.S. and whose executive officers are U.S. citizens, but whose owners may not be U.S. citizens. With respect to vessel type, MSA 2003 also established a four-tier priority system for awarding OAs: first, to any eligible "tank vessel"; second, to any fleet vessel already participating in the program prior to 2003; third, to eligible vessels operated by a Section 2 citizen; and fourth, to any other eligible vessel.

Under MSA 2003, participating vessels are authorized to-and often do- transfer their OAs to other vessels eligible to participate in the program, subject to approval by the Secretary of Transportation and the Secretary of Defense. By regulation, MarAd requires that OAs be transferred only to persons "of the same or more restrictive U.S. citizen priority." 46 C.F.R. § 296.30(j). Further, in 2006, Congress modified MSA 2003 to provide that MarAd could not approve transfer of an OA to a non-Section 2 citizen unless there was not a Section 2 citizen with an eligible vessel interested in the OA. Additionally, by regulation, MarAd requires that any replacement vessel "must qualify with the same or with more military useful capability as the MSP vessel to be replaced." 46 C.F.R. § 296.30(c).

MSA 2003 authorized MSP only through fiscal year 2015. In 2013, Congress enacted the National Defense Authorization Act of 2013, 126 Stat. 1632 § 3508 ("NDAA"), which made certain changes to the MSP statutory scheme. First, NDAA required MarAd to extend all existing OAs through 2025. Second, NDAA eliminated the four-tier priority scheme for the award of new OAs, now giving priority to Section 2 citizens only "after consideration of military requirements." NDAA § 3508(c)(2). Finally, NDAA removed the restriction on the transfer of OAs to non-Section 2 citizens, requiring only that the transfer be to a person "that is eligible to enter into the operating agreement" subject to a determination by the Secretary of Transportation and Secretary of Defense that "the transfer is in the best interest of the United States." NDAA § 3508(e)(1). The 2014 NDAA did not contain any provisions pertaining to the maritime security program. See National Defense Authorization Act of 2014, H.R. 3304, Pub. L. 113-96 §§ 3501-04.

Liberty has been a participant in MSP since 2004. Specifically, in 2004 Liberty attempted to enroll two of its vessels in the MSP, and was ultimately awarded a single OA. Subsequent to its receipt of that OA, Liberty built additional vessels, allegedly of excellent military usefulness, for which it has been trying unsuccessfully to obtain operating agreements for many years. This lawsuit arises out of Liberty's inability to obtain additional OAs. In short, Liberty is a disgruntled suitor for government subsidies, and seeks judicial intervention.

In particular, Liberty seeks relief based on certain actions taken by MarAd in the period from 2007 through 2011 that Liberty alleges were arbitrary and capricious. Liberty asserts ten claims under the APA relating to the following alleged actions taken by MarAd: (I) approval of the transfer of OA #98 to American International Shipping LLC ("AIS") without a determination that AIS was a Section 2 citizen; (II) approval of Argent Marine Management ("Argent") as a Section 2 citizen based on an incorrect application of the citizenship standard; (III) awarding OA #108 to Argent; (IV) approval of the replacement of vessel Maersk Michigan with vessel Alliance Charleston under OA #108 without making the requisite finding of military capability; (V) approval of the replacement of vessel Patriot with vessel Ocean Freedom under OA #67 without making the requisite finding of military capability; (VI) approval of AIS as an "operator" within the meaning of MarAd's regulations; (VII) approval of Argent as an "operator" within the meaning of MarAd's regulations; (VIII) approval of Fidelio Limited Partnership ("Fidelio") as an "operator" within the meaning of MarAd's regulations; (IX) discontinuing the practice of publishing its decisions for public comment in favor of a "secretive" decision-making process; and (X) allowing Argent to revise a bid in secret. Liberty also interposes two claims under FOIA based on the following alleged actions: (XI) MarAd's failure to produce all documents covered by Liberty's FOIA request 12-022, and (XII) MarAd's failure to publish all of its decisions of precedential value.

Liberty's claims can be grouped into five categories: (1) MarAd's award of OA #108 to Argent, an entity with an allegedly lower priority citizenship classification than Liberty's vessels (Counts II, III, VII and X), (2) MarAd's approval of the transfer of OA #98 from Wallenius Lines Holding, Inc. ("Wallenius") to AIS, with Fidelio acting as an intermediary (Counts I, VI and VIII); (3) MarAd's approval of two replacement vessels without making the statutorily required determination regarding military usefulness (Counts IV and V); (4) MarAd's alleged decision in 2005 to stop publishing its opinions and its adoption of a "secretive" decision-making process (Count IX); and (5) MarAd's improper withholding of certain documents that Liberty requested pursuant to FOIA (Counts XI and XII). With respect to Liberty's ADA claims, MarAd argues principally that Liberty lacks standing. MarAd further contends that Liberty's APA claims have been mooted by the NDAA and that, pursuant to the Hobbs Act, the claims should have been brought initially in an appellate court. Finally, MarAd argues that Liberty's FOIA claims have been mooted by MarAd's production of the requested documents subsequent to Liberty's filing of the instant action.

Standard of Review

Plaintiffs bear the burden of demonstrating that subject matter jurisdiction exists. MLC Fishing, Inc. v. Velez, 667 F.3d 140, 141 (2d Cir. 2011). Standing is a federal jurisdictional issue, and a plaintiff must demonstrate standing for each claim and form of relief sought. Carver v. City of New York, 621 F.3d 221, 225 (2d Cir. 2010). In order to establish standing, a plaintiff must demonstrate "(1) that he suffered an injury-in-fact-an invasion of a legally protected interest which is (a) concrete and particularized and (b) actual or imminent, not conjectural or hypothetical; (2) that there was a causal connection between the injury and the conduct complained of; and (3) that it is likely, as opposed to merely speculative, that the injury will be redressed by a favorable decision." Id. (citations omitted). Where, as here, standing is challenged on the basis of the pleadings, the Court must "accept as true all material allegations of the complaint, and must construe the complaint in favor of the complaining party." Id.

The APA provides that "a person suffering a legal wrong because of agency action, or adversely affected or aggrieved by agency action within the meaning of a relevant statute, is entitled to judicial review thereof." 5 U.S.C. § 702. Under the APA, in order for a reviewing court to set aside an agency action, it must find that the agency's findings and conclusions are unlawful in some way. 5 U.S.C. § 706(2). Liberty contends that MarAd's determinations were "arbitrary, capricious, an abuse of discretion, or otherwise not in accordance with law" within the meaning of 5 U.S.C. § 706(2)(A).


A. APA ...

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