LAKES PILOTS ASSOCIATION, INC. Plaintiff, vs. UNITED STATES COAST GUARD Defendant.
No. 2:11-cv-15462
UNITED STATES DISTRICT COURT EASTERN DISTRICT OF MICHIGAN SOUTHERN DIVISION
September 30, 2013
Hon. Gerald E. Rosen
Doc # 33 Filed 09/30/13 Pg 1 of 33 Pg ID 3303
I. INTRODUCTION
This Administrative Procedures Act (APA) matter requires navigating a combination of the Great Lakes Pilotage Act, agreements between the United States and Canada, and an administrative record to determine whether the United States Coast Guard violated the APA when it ordered the Lakes Pilots Association, Inc. (LPA) to repay close to $200,000.00 to the shipping industry for its alleged overbilling practices. Before this Court are the parties’ cross-motions for summary judgment. Having reviewed the parties’ briefs in support of and in opposition to the respective motions, the accompanying exhibits, and the administrative record, the Court finds that the relevant facts, allegations, and legal arguments are
II. FACTUAL AND PROCEDURAL BACKGROUND
A. Statutory and Regulatory Background
1. The Great Lakes Pilotage Act
In 1960, one year after the Saint Lawrence Seaway opened the Great Lakes to international shipping, Congress enacted the Great Lakes Pilotage Act (GLPA or Act) in order to regulate the manner in which commercial ships are piloted while navigating through the Great Lakes, their connecting and tributary waters, the Saint Lawrence River and adjacent port areas. See
In order “to provide the efficient dispatching of vessels and rendering of pilotage services,” the GLPA authorizes “the formation of a pool by a voluntary association of United States registered pilots.”
The GLPA also permits the Secretary to enter into agreements with Canada in order “[t]o provide for a coordinated system of pilotage service on the Great Lakes.”
Initially, the United States and Canada equally shared piloting responsibility for the Canal. (A.R. 002876). This changed sometime in the 1970s, when Canadian pilots took over exclusive responsibility for piloting through the Canal. The current MOA, which is retroactive to January 18, 1977, added two provisions to effectuate this change. First, the MOA designated the Canal as “Canadian pilots only.” (Id. at 002902). Second, it expanded the definition of the Canal to include all waters extending in a one-mile arc from the Canal‘s northern (Port Weller) and southern (Port Colborne) approaches. (See, e.g., id. at 002898) (“In the southern approach, within an arc drawn one mile to the southward of the outer light on the western breakwater at Port Colborne.“). Accordingly, the MOA provides that only Canadian pilots are to navigate both through the Canal and in its northern and southern approaches.
2. Applicable Coast Guard Regulations and LPA‘s Actions Under These Regulations
Coast Guard regulations set the exact rates, charges and fees pilots may charge for their services, and provide a dispute resolution process for disputed fees. See, e.g.,
a. 46 C.F.R. § 401.428 -- Mandatory “Change Points”
Coast Guard regulations mandate compulsory periods of rest and require pilots to switch at certain “change points.”
Since 1968, the regulations mandate that vessels change pilots at 10 specific change points across the Great Lakes: (a) Snell Lock; (b) Cape Vincent; (c) Port Weller; (d) Lock No. 7, Welland Canal;2 (e) Detroit/Windsor, other than assignments originating or terminating at a point on the Detroit River; (f) Port Huron/Sarnia; (g) Detour; (h) Gros Cap; (i) Chicago with respect to assignments originating at Detour or Port Huron/Sarnia; and (j) Duluth/Superior and Fort William/Port Arthur with respect to assignments originating at Gros Cap. 46 C.F.R. § 401.50 (1968). An example of an in-bound vessel traveling from Cape Vincent -- the western mouth of the St. Lawrence Seaway on Lake Ontario -- to Detroit illustrates the effect of the GLPA and the Coast Guard‘s change point regulation as written: (1) the vessel travels from Cape Vincent across Lake Ontario; (2) at Port Weller, the vessel changes pilots and a Canadian pilots the vessel south through the Canal; and (3) at Lock No. 7, inside the middle of the Canal, the vessel again change pilots, who then pilots the vessel to Detroit.
The problem with this scheme, however, is that it does not account for the MOA in effect since 1977 making the Canal the exclusive territory for Canadian
b. 46 C.F.R. § 401.420 -- Charges for Cancelation, delay or interruption in rendition of services
Separately, vessels may incur additional pilotage charges when, “for the convenience of the ship,” a pilot is retained during a period of interruption, if a pilot is detained on board a vessel after the end of a pilot‘s assignment, or if a vessel‘s departure of movage is delayed.
Under LPA‘s Working Rules, a pilot transferring from one station to another “shall have the option of taking six (6) hours rest.” (A.R. 002835-36). If this is not possible, a pilot is “provided with a driver for transfer.” (Id. at 002836). LPA claims that due to an increase in shipping traffic4 and a reduction of the number of pilots, pilots regularly hired drivers in 2006 and 2007 to take them to vessels. (Id. at 000085). In so doing, pilots rested en route in lieu of resting upon arrival. (Id.). Each such “transportation” charge ranged from $40 to $150. (Id. at 000003a).
LPA argues this practice facilitated the flow of safe commerce, which was a “‘win-win’ situation for Great Lakes pilotage” because “[f]or the relatively small cost of the driver . . . a ship avoids a six-hour delay and the pilot obtains his rest during the drive. Because ship delays cost a ship owner thousands if not tens of thousands of dollars, [hiring a driver] is a sensible, common-sense way to address
B. The Dispute Between the Parties
On July 20, 2006, the Coast Guard notified the LPA that a vessel had disputed three overcarriage charges relating to pilots who boarded within the Canal at Port Colborne and not at the arc. (Id. at 000982). As set forth in this notification, the Coast Guard treated this dispute as a request for the Director to issue an advisory opinion on the propriety of the charges. (Id.; see
The Coast Guard issued three determinations -- set forth below in more detail for each particular issue -- concerning LPA‘s billing practices. On February 3, 2009, Rajiv Khandpur (Khandpur), issued the Coast Guard‘s initial agency determination. (A.R. 000090-108; 000134-49). Khandpur revisited this decision on May 24, 2011, making no material change to the two issues presently before this Court. (Id. at 000109-11). On June 22, 2011, LPA timely appealed Khandpur‘s decision to Khandpur‘s supervisor, D.A. Goward (Goward). (Id. at 00061-89). Goward issued the Coast Guard‘s Final Decision on October 21, 2011, denying the LPA‘s appeal with respect to the overcarriage and transportation charge issues. (Id. at 000001-5). Accordingly, Goward found that the LPA must “repay industry the $192,882.50 that was inappropriately charged during the 2006
1. Overcarriage Issue
a. Initial Decisions
The Coast Guard‘s February 3, 2009 initial agency decision responded directly to submissions by the LPA contending that the overcarriage charges were proper. (See id. at 000171-190). Khandpur first admitted that “the regulation then in effect incorrectly listed the ‘pilot change point’ as a lock on the Welland Canal.” (Id. at 000092). He also noted that “[w]ith the latest change to the applicable regulations and the Pilotage Office‘s clarification to the LPA that billing for overcarriage in Port Colborne is impermissible, any confusion has now been resolved.” (Id. at 000093) (emphasis added).
Next, Khandpur found that “pilots have always actually exchanged their responsibilities for vessels coming from and going to the Welland Canal within Port Colborne or in the Port Colborne anchorage. The most common point at which pilots wait to take charge of approaching vessels is at the ‘park bench’ near the southern end of the Welland Canal. The pilot boat picks up the oncoming pilot near that bench, and then transports the pilot to the vessel while still underway. Once the pilots have completed their turnover procedures, the pilot boat transports the disembarking pilot to an appropriate point ashore, usually near that same park
In rejecting the LPA‘s contention that its overcarriage fees were proper, Khandpur noted that “[t]he purpose of the regulatory provisions concerning additional charges for overcarriage is to cover cases when a pilot must be carried beyond the normal change point to another enumerated change point because making a change at the regular point would be dangerous or impractical.” (Id. at 000093). This would include, according to Khandpur, “weather or other conditions,” but “[t]his rationale for charging an additional fee for overcarriage simply does not apply within the Port Colborne area.” (Id.). “Moreover,” continued Khandpur, ”
Finally, Khandpur acknowledged the LPA‘s contention that it believed the Pilotage Office had tacitly approved the practice because it had not “clarified the appropriate change point in the Spring of 2006, when the pilots first began to submit source forces indicating that they were billing industry for this overcarriage fee.” (Id.) Had it done so, LPA “would have immediately terminated this practice.” (Id.). Khandpur also noted the LPA‘s position that “industry, which was paying the bills presented to it without protest, apparently did not find the practice improper or excessive.” (Id.) Instead of addressing these points, however, Khandpur found that “the Coast Guard had valid reasons . . . for not clarifying its position as soon as the Pilotage Office became aware of the practice, the practical effect of this over billing was to disadvantage industry. . . . In my decision, I will attempt to balance the equities and interests of all concerned.” (Id.). Accordingly, Khandpur found that the LPA had no legal basis for charging these fees, but “[i]n the interests of resolving this entire matter,” ordered that the LPA only repay fifty-
On May 24, 2011, Khandpur issued what he termed his “final determination,” reducing the total amount of repayment -- but not with respect to the overcarriage issue. (Id. at 000109-111). Khandpur again emphasized that “in reaching [his] decision in the matter, [he] ha[d] taken into account the possible confusion that may have existed regarding the applicable pilot change point during the 2006 and 2007 seasons, as well as LPA‘s representation that they will no longer charge for over-carriage in such circumstances.” (Id. at 000110) (emphasis added).
b. Final Decision
Upholding Khandpur‘s initial determination, Goward stated that “because the applicable regulation (
Finally, Goward found “it regrettable” that Khandpur only authorized a fifty-percent reimbursement, stating that LPA should “consider[] itself quite fortunate to have been able to retain half of these unauthorized charges.” (Id.). Goward therefore affirmed Khandpur‘s finding, but corrected an error in tabulating the total amount of overcarriage charges to $114,022.50. (Id. at 000003).
a. Initial Decision
In finding that LPA improperly billed $78,585 for the 2006 and 2007 shipping seasons in “transportation” charges, Khandpur found that Coast Guard regulations only authorize such “travel expenses” in two specific circumstances. (Id. at 000095). First, the regulations permit travel expenses “where the pilot has commenced traveling to undertake an assignment and the assignment is subsequently canceled.” (Id.) (citing
b. Final Decision
As with the overcarriage issue, Goward upheld Khandpur‘s determination concerning the transportation charges. (Id. at 000003a-4a). First, Goward found that “LPA fails to acknowledge in its appeal . . . that routine transportation costs are already factored into the rate the LPA charges industry for pilotage services.” (Id. at 000003a) (emphasis omitted). He did not, however, provide any
A. Summary Judgment Standard
This case is governed by the standards for judicial review of final agency action as prescribed under the APA,
“An agency‘s decision is arbitrary and capricious when the agency has: relied on factors which Congress had not intended it to consider, entirely failed to consider an important aspect of the problem, offered an explanation for its decision that runs counter to the evidence before the agency, or is so implausible that it could not be ascribed to a difference in view or the product of agency expertise.” Kentucky Riverkeeper, Inc. v. Rowlette, 714 F.3d 402, 407 (6th Cir. 2013) (quoting Nat‘l Ass‘n of Home Builders v. Defenders of Wildlife, 551 U.S. 644, 658 (2007)). Agency action is “not in accordance with the law” when it is in conflict with the language of the statute relied upon by the agency. City of Cleveland v. Ohio, 508 F.3d 827, 838 (6th Cir. 2007).
“The focal point for judicial review should be the administrative record already in existence, not some new record made initially in the reviewing court.” Kroger Co. v. Reg‘l Airport Auth. of Louisville & Jefferson Cnty., 286 F.3d 382, 387 (6th Cir. 2002) (internal quotation marks and citation omitted). “If the record before the agency does not support the agency action, if the agency has not considered all relevant factors, or if the reviewing court simply cannot evaluate the challenged agency action on the basis of the record before it, the proper course, except in rare circumstances, is to remand to the agency for additional investigation or explanation.” Florida Power & Light Co. v. Lorion, 470 U.S. 729, 743-44 (1985).
B. Violation of the Administrative Procedure Act (Count I)
LPA asserts that the Coast Guard‘s Final Decision violates the APA with respect to both its overcarriage and transportation charges. To the overcarriage issue, LPA argues that it is arbitrary and capricious, and is not in accordance with the law. As to the transportation charges, LPA claims that it is arbitrary and capricious. Each are addressed in turn.
1. Overcarriage Issue
a. Was the Coast Guard‘s Final Decision arbitrary and capricious?
While this Court does not take deference to the Coast Guard‘s interpretation of its own regulations lightly, remand is appropriate to evaluate this interpretation in light of facts not in the administrative record. In its Final Decision, the Coast Guard advances seemingly contradictory reasons for justifying its overcarriage decision. First, the Final Decision rejects the LPA‘s argument that the MOA moved the Change Point to the arc. The Coast Guard argues, consistent with the
The factual record regarding whether the MOA effectuated an alteration in the Change Point, however, is not sufficiently before this Court. Surprisingly, there is nothing in the administrative record discussing how the Coast Guard interpreted the application of the MOA prior to the administrative review in this matter. LPA proffered some evidence that other entities claim the Change Point is located along the arc, such as nautical charts and other pilotage documents. (See A.R. 000002, 000029). And there is no doubt that the LPA‘s Canadian counterpart considers the Change Point to be “along the 1 mile radius line from the Port Colborne piers . . . [because the MOA] stipulates that the Welland canal is solely a Canadian Region and therefore only (sic) Canadian pilot could have the conduct of
This is the extent to which the administrative record discusses this issue.7 In Reply, LPA proffered such evidence for the first time. Attaching an affidavit from the Pilotage Office‘s Director at the time the MOA was agreed upon, the LPA asserts that: (1) it was “fully understood that the arc -- which was the line of demarcation between the Welland Canal and Lake Erie -- was the new change point,” (2) the “regulation was no longer operative because Lock 7 was located in the Welland Canal;” and (3) the change “was made with the knowledge and agreement of all parties, including the American and Canadian regulators, the pilots from both countries, and the shipping industry, . . . under the explicit direction of the MOA.” (Ex. 1 to Plf‘s Reply, Dkt. # 25, at 18-19).
The Coast Guard objects to this affidavit, noting that it was not presented below and that it was obtained without compliance with regulations governing
Given the dearth of evidence concerning how the MOA affected change points after 1977 (when the pilotage services in the Canal became exclusively Canadian), remand is appropriate in this circumstance. It is not this Court‘s intention to “convert judicial review of agency action into a ping-pong game where remand would be an idle and useless formality.” Rabbers v. Comm‘r Social Sec. Admin., 582 F.3d 647, 654 (6th Cir. 2009) (citation omitted). That said, the Court cannot determine whether the Final Decision‘s holding that the MOA only changed the Canal‘s boundary without modifying the Change Point is arbitrary and capricious without some evidence of how the parties viewed the MOA after 1977.8 Accordingly, the “proper remedy . . . [is to] remand to the agency for additional investigation or explanation, because ‘[t]he reviewing court is not generally empowered to conduct a de novo inquiry into the matter being reviewed and to
Second, the Final Decision finds that “the scheme envisioned for change points in the Code of Federal Regulations is that change points are general geographic areas in which a pilot‘s assignment begins or ends, not specific points in the water.” (A.R. 000001). There is support for this interpretation, as all locations listed in
b. Was the Coast Guard‘s Final Decision contrary to law?
LPA additionally argues that the Final Decision is contrary to law because the MOA trumps the regulatory scheme. “Once the Canadians took over all pilotage in the Canal,” argues LPA, “American pilots could no longer change at Lock 7 and the regulation‘s designation of Lock 7 became simply wrong.” (Plf‘s Mtn., Dkt. # 17, at 25). In essence, Plaintiff asserts that the MOA had the effect of shifting the Change Point from Lock 7 inside the Canal to the southern arc just outside Port Colborne. Therefore, according to the LPA, it was justified in
In rejecting this argument, the Final Decision correctly notes that “the MOA‘s language does not recognize a ‘designated change point’ on eastern Lake Erie. . . . Rather, the MOA identifies the geographic constraints of the Welland Canal in the context of defining the boundaries of District 2.” (A.R. 000001a). And, as the Coast Guard points out in its papers, LPA‘s argument for why the MOA had the effect of modifying the Change Point is akin to having its cake and eating it too. (See Def‘s Reply, Dkt. # 26, at 1-2). On the one hand, LPA essentially argues that the regulatory scheme is defunct because American pilots cannot change inside the MOA‘s definition of the Canal. On the other hand, LPA charged vessels for overcarriage when it changed U.S. pilots inside the Canal.
The parties do not dispute that as an international executive agreement, the MOA carries the force of law. See, e.g, American Ins. Ass‘n v. Garamendi, 539 U.S. 396, 415 (2003); Owner-Operator Indep. Drivers Ass‘n v. US Dep‘t of Transp., 724 F.3d 230 (D.C. Cir. 2013); Dep‘t of Defense v. FLRA, 685 F.2d 641, 648 (D.C. Cir. 1982). Instead, they dispute whether the MOA provides LPA with a private right of action to essentially enforce the MOA. In the context of interpreting treaties to provide private rights of action, the Sixth Circuit has noted that some treaties expressly provide for private rights of action and some do not.
“Self-executing treaties” are those treaties which do not require domestic legislation to give them the full force of law. Such treaties can create private rights enforceable in court. On the other hand, “non-self-executing” treaties do require domestic legislation to have the force of law. For a non-self-executing treaty, any private claim must be based on a violation of the domestic law implementing the provisions of that treaty. In other words, federal courts are bound to give effect to international law and to international agreements, except that a ‘non-self-executing’ agreement will not be given effect as law in the absence of necessary authority.
Id. (internal citations and quotations omitted). Accordingly, courts must “look to the express terms of the treaty, and then to ‘the treaty as a whole’ to determine whether it evidences an intent to be self-executing and to create a private right of action.” Id.
LPA argues that its cause of action here rests not under the GLPA or the MOA, but rather under the APA. In support, the LPA cites a variety of cases examining the “otherwise not in accordance with law” provision of
Neither the LPA nor the Coast Guard, however, presented cases analogous to the present situation: whether an international agreement expressly authorized by a statute --
2. Transportation Charges
The crux of the Final Decision‘s reasoning as to why LPA‘s transportation charges were inappropriate is that such costs are “already factored into the rate the LPA charges industry for pilotage services.” (A.R. 000003a) (emphasis omitted). Such expenses, as Khandpur put it, are just part of the cost of doing business. LPA takes issue with this, asserting that it does “not demonstrate how this had been done, or how it would make sense to ‘factor into the rate’ costs that the pilots had
Remand is appropriate on this issue as well. Under the Coast Guard‘s regulations, LPA is only authorized to bill travel expenses in three circumstances: (1) if a pilot‘s services are canceled, delayed, or interrupted (
Second, the LPA put forth evidence indicating that the Director had orally authorized the transportation charges. (A.R. 000033). The Final Decision discounted this, reasoning it was “highly unlikely that the Director would authorize a separate charge to cover LPA‘s already accounted-for transportation expenses. Absent something in writing from the Director to the LPA authorizing what would amount to double-billing for transportation fees, I am unconvinced that such
The administrative record is silent with respect to whether these transportation charges were built into 2006 and 2007 rate structures. Though the Coast Guard points out that the regulatory scheme “does not provide for direct 1:1 reimbursement of transportation costs [and rather] sets basic rates that are based, in part on prior transportation costs,” (Def‘s Mtn., Dkt. # 24, at 27) (citing
In 2003, the Director authorized the LPA to add surcharges for “transportation, hotels and subsistence when a pilot is retained for the convenience of a vessel.” (A.R. 000049). Here, LPA added charges not at the end of a pilot‘s service, but at the beginning. Both this charge, and the charge at issue in 2003, were designed around convenience. There is nothing in the administrative record indicating that such charges in 2003 were not part of the regular rate, but that they somehow were in 2006.10 Indeed, a review of the regulatory scheme indicates that
Without these facts, the Final Decision‘s reasoning for dismissing Gallagher‘s affidavit crumbles. The Coast Guard argues that the Director implicitly contradicts this affidavit, noting that it was the Director who initially raised the issue of the impropriety of the transportation charges in the first place. (See A.R. 000371) (Director‘s declaration in April 2007 to the Coast Guard Investigative Service concluding that the “practice of billing transportation on nearly every invoice was not accidental, but likely an intentional act in violation of the provisions of
For all of the foregoing reasons,
IT IS HEREBY ORDERED that the parties’ respective cross-motions for summary judgment [Dkt. ## 17 and 24] are DENIED.
IT IS FURTHER ORDERED that this matter is REMANDED to Defendant for further consideration consistent with this Opinion.
IT IS SO ORDERED.
Dated: September 30, 2013
s/Gerald E. Rosen
GERALD E. ROSEN
CHIEF, U.S. DISTRICT COURT
I hereby certify that a copy of the foregoing document was mailed to the attorneys of record on this date, September 30, 2013, by electronic and/or ordinary mail.
s/Julie Owens
Case Manager, 313-234-5135