Warren E. Burger: Now, we'll return to you, Mr. McDaniels.
William E. McDaniels: Thank you, Mr. Chief Justice, and may it please the Court. The Stuyvesant was the recipient under the Merchant Marine Act of 1936, so two kinds of financial assistance in its construction; one was a guaranteed loans in the amount of $30 million and the subsidy of $27.2 million which is designed to equalize the cost of between building that vessel and a domestic shipyard and what it would have cost to build that vessel in a foreign shipyard. And, as a result, the contract of CDS contained a provision required by Section 506 of the statute that the owner of the vessel shall agree to operate that vessel in the foreign trade except, incidentally, on the foreign travel and accept temporarily upon the consent of the Commission and with a limit of six months out of every year of its economic life. In each instance, a pro rata repayment of the subsidy would be required. Between the time that that contract was entered into in 1972 and 1977, all foreign trade opportunities for the vessel were nonexistent. The Arab oil embargo and the subsequent downswing in the international market had rendered there are no need for this vessel in the foreign trade. At the same time, however, there was a domestic market that had developed, the carriage of oil from Valdez, Alaska, at the end of the Alaska pipe line around to the west side of the Panama Canal for throughput to the east coast.
Potter Stewart: This was a -- obviously, a tanker.
William E. McDaniels: This is a tanker. Its' a 225,000-deadweightton tanker for the --
Potter Stewart: What does TT mean? I know what SS means and MV, but --
William E. McDaniels: Tanker -- the other T escapes me, but it's a -- VLCC is what the -- in the trade it's called a very large crude carrier and it -- perhaps steamship Tanker is the --
Potter Stewart: And what was its power?
William E. McDaniels: Its -- the speed, I'm not sure exactly. The speed, Your Honor --
Potter Stewart: Was it a diesel or --
William E. McDaniels: Yes.
Potter Stewart: -- a steamship or what?
William E. McDaniels: It was a diesel and it has a capacity of efficiently carrying the long haul that's required here from Valdez all the way down to the west coast of Panama because of its size and its --
William J. Brennan, Jr.: Are there many larger than that?
William E. McDaniels: No, there are not many larger. There are some in other registries of foreign vessels that are larger, but in terms of our vessels, there are not. The charter that the Stuyvesant was able to obtain from SOHIO was in the domestic trade and in order to meet that charter, the vessel would have to be freed of the restrictions in its contract which limited it to six months out of every year and then with the consent of the Commission. So that, in August of 1977, the Petitioners applied to the Secretary for permission to amend the contract, to delete the provisions, and to repay the subsidy which had been provided and that was approved on August 30, 1977 and the closing of the transaction which the approval formed the basis of a rather complicated sales --
Warren E. Burger: This happened when --
William E. McDaniels: Transaction of one of the vessels.
Warren E. Burger: This happened when, Mr. McDaniels, did the question obtained interest on the rebates arise.
William E. McDaniels: Well, the question of the interest in terms of the interest between the time that subsidy was originally granted and the time it was paid back was deemed by the Secretary in her initial decision not to be necessary to be paid back.
Warren E. Burger: So who -- then, next, how did that get into the case?
William E. McDaniels: It next got into the case, I guess, by the Court of Appeals. I think the Judge Bazelon indicated that he would require that to be paid back. Actually the -- and the Solicitor General has said in his papers here that the Secretary would now require that interest, in addition, to be paid back, the interest for that time period, but in terms of -- in the case, the original decision by the Secretary was not to require that interest and that decision was reaffirmed on the remand. So, at the moment, the interest has not been paid back. The pama -- the subsidy is being paid back in equal semiannual installments over the 20-year-economical life of the vessel, and the vessel has been in the trade since September 30, 1977. It has been working the trade since that time when the preliminary injunction sought here was denied. The c -- the authority that we rely upon, the Secretary relies upon --
Warren E. Burger: I suppose you wouldn't -- I suppose you wouldn't challenge the idea that the payment of interest might be a reasonable or sensible administrative decision.
William E. McDaniels: I suspect, Your Honor, that's a request that we would not refuse. If that was to be the position of the Secretary that, now, that would be required, our clients would acknowledge that. The Secretary did analyze the financial aspects of it in remand to show that it did not result in any competitive disadvantage to the Plaintiffs, but we would not quarrel with that requirement. The question of statutory interpretation, her power to make this amendment and to accept subsidy repayment involves the first instance of the language of the statute itself. And, Section 504 gives the power to contract in the CDS area and gives with it necessarily the power to amend and terminate. In addition, Section 207 of the Act specifically gives the Secretary powers to contract consistent with the purposes of the Merchant Marine Act of 1936 and specifically, further, to protect and to preserve or to improve a collateral position. We submit that the exercise of the power, if you look to the circumstances of this case, fully met each and every one of the purposes of the Act set forth in Section 101, as well as fully met a desire to preserve and protect and improve the Secretary's collateral position. It met the purposes of the Act because the shipyard was benefited by the ability to sell the vessel and to have financial commitments recognized. The vessel itself is a viable vessel, instead of going into layup, it's a viable vessel with American built, American owned, and operated by American crew available for any national need. The trade area itself was in need of further tonnage and still is. There was an under supply of this type of shipyard tonnage to carry the Alaskan oil and, therefore, the Secretary was able to address a need in the trade by permitting the domestic use of this tanker. Furthermore, her collateral position was protected. First of all, the Secretary will receive back $27.2 million that, obviously, would not otherwise have to be repaid since at the outset it was a direct subsidy grant. In addition, there are $28.6 million of the proceeds of the sale went immediately to discharge loans on -- which the Secretary guaranteed under EDA. So, $28.6 million went directly to discharge those guaranteed loans. In addition, the $30 million of Title 11 assistance which was guaranteed loans, which was increased to additional $30 million at the closing, received an improved collateral position because the vessel was a viable vessel in a trade earning charter rate. We submit, Your Honor, that this -- the statutory construction question is aided by the principle that the Secretary's interpretation would be given great weight if it is consistent with the purposes of the Act and should be accorded unless there are compelling indications that it's wrong, particularly whereas here, the Secretary's interpretation has been longstanding. It was first done in 1964 in the Grace Line decision. It's been consistently spoken about by the Secretary ever since, both in terms of other, although infrequent, applications for this relief and its messages to Congress. And it --
Potter Stewart: When you say infrequent, that's somewhere in here, that's only been done twice, I think.
William E. McDaniels: The first time was around --
Potter Stewart: Grace Line case and this case.
William E. McDaniels: Yes, there have been applications that have been -- three other applications, Your Honor, that have also received approval for this to be done, but are contingent upon, in two of them --
Potter Stewart: This litigation?
William E. McDaniels: No. They're contingent upon the Virgin Islands if that were to become part of the domestic trade, which it is not now then the particular vessels involved would be free of their restrictions. So it's contingent upon certain events happening in the future, but the principle has been recognized and accorded full value, but that's just --
Potter Stewart: So, it's actually been done only twice; in the Grace Line situation and in this case?
William E. McDaniels: Yes, and the three other times, it's been approved but --
Potter Stewart: Approved.
William E. McDaniels: Future events are contingent upon --
Potter Stewart: Initially approved?
William E. McDaniels: Yes. And, the power is well known in the industry. It's been spoken of before Congress by industry spokesman, as well as the legislators themselves and this particular power survived the amendment of the statute in 1970 and has been specifically been called to the attention of Congress twice in 1972 and again in 1978. And, I think the 1972 history is most important because in 1972 Congress specifically enacted positive legislation to facilitate the Secretary in granting trade release restrictions -- release the trade restrictions and repayment of the subsidy because it amended Title 11 to provide guaranteed financing. In the cases of an applicant who seeks to repay like $27.2 million to gain trade restriction release. As ultimately enacted, the bill was broadened to include financing of any repayment of subsidy, including the more common repayment pursuant to the temporary release authorized by Section 506, but it's clear that the Grace Line precedent was called to the attention of Congress. Congress not only did not disapprove of it but specifically granted positive legislation facilitating its exercise. Now, in light of these aspects and canons of statutory construction, there is not in this case any compelling indication, either in the language of the Act or its history or its purposes, that the Secretary's interpretation is wrong. The language which the Plaintiffs rely upon is Section 506 of the Act which provides for when a vessel can enter the domestic trade while it retains its subsidy. We submit that that section, by its very language, has no application to a vessel such as the Stuyvesant which has repaid its subsidy. There's nothing in that section that precludes the Secretary from exercising the power here, nor is there anything in the legislative history that suggests this action is contrary to the intent of the Act. In 1936, Senator Hugo Black, at that time, issued the report which formed the basis of the Act. His report to Congress indicated that the Secretary should have this power. Each of the framers of the statute indicated that the Secretary should have this power. And, the 1936 Act itself contained language which described this power in Section 506 wherein it indicated that the Secretary could do this upon her consent. The Plaintiffs and the Court of Appeals rely heavily on the 1938 legislative history wherein that descriptive language which I have described was removed from the statute. It was deleted. This, however, was done and the legislative history speaks only to it being done in the context of addressing a totally separate problem whether or not there would be required for any and all partial returns, any and all temporary returns the repayment of subsidy. The -- Chairman Kennedy, who presented the amendment, said that there was an ambiguity in the 1936 statute. The only ambiguity in that statute, upon analysis, is that it seem -- it appears to permit the subsidized vessel to return to the trade for a period of three months and not have to remit any pro rata share of the previous subsidy. This section was entirely rewritten in 1938 and, as rewritten, it makes the matter of trade restrictions a contractual term to which the owner shall agree. We submit to the Court there is nothing in the legislative history that suggests that that omission of the language was done with the intention of depriving the Secretary of the power she's exercised here. Not one word of such intent was -- is in the legislative history and, indeed, the people from the industry, who spoke about the amendment at the time, considered the amendment to increase the opportunity for competition between subsidized vessels and nonsubsidized vessels, rather than decreasing it.
William H. Rehnquist: Mr. McDaniels --
William E. McDaniels: Yes sir?
William H. Rehnquist: -- is the Merchant Marine Act of 1936 the b -- the original Act here?
William E. McDaniels: Yes. The -- prior to the Merchant Marine Act of 1936, subsidies for the foreign trade had been done indirectly by virtue of the mail subsidy route where that -- the Government would subsidize the carriage of mail and that was a problem because a carrier who could be carrying the mail with subsidy would also be involved in the domestic trade. That was found to be an inadequate and improper way of subsidizing vessels for the foreign trade. So, the concept of subsidy had existed before, but the particular construction, differential subsidy program, the direct outright grant began in 1936. And, I submit that this is actually the main focus of Congress throughout, was to prevent there being simultaneously a vessel that has a subsidy competing with vessels that do not have subsidies. That the only competition that was a concern to Congress was competition by a vessel which still retained its subsidy which -- with other vessels which had not been built with subsidy and --
Potter Stewart: Of course this vessel wouldn't exist without the subsidy, would it?
William E. McDaniels: Well, Your Honor, that's not necessarily so. The vessel could have been built without the subsidy. In fact, it was built with the subsidy. It may well be that it is a -- contained certain features that it would not have had other than a subsidy, but you could, in theory, build this vessel without subsidy.
Harry A. Blackmun: In theory but not economically.
William E. McDaniels: Well, there are vessels bigger than this that are built certainly in other countries and
Harry A. Blackmun: But not in American shipyards.
William E. McDaniels: No.
Harry A. Blackmun: That's the whole point.
William E. McDaniels: Correct. Well, the vessel, in terms of its economic burden, however, bears it now and that is to say, by virtue of requiring it of the repayment of subsidy, it stands in the same position as it would if it had made the decision to build the vessel, including the $27 million.
Potter Stewart: It's something like getting off a mortgage on a house. You couldn't own the house if they do not have the mortgage.
William E. McDaniels: No, but the difference, Your Honor, is, in terms of the problem of competition, it's just as if the vessel had been financed by a loan and that that loan is being paid off. As far as its competitive impact, it's as if this vessel, the original decision was to make a domestic vessel this size at this cost because that's the economic burden that the vessel carries at this time.
Warren E. Burger: As a matter of economics, business economics, is there situation in your view essentially the same as though that Chase Manhattan had financed by a lien on the ship the precise amount that was given by way of the subsidy here with conditions imposed by Chase Manhattan, as it would be in the lien, and now, they have exercised the right for an accelerated payoff? It's -- would you say, economically, the situation is the same?
William E. McDaniels: I would agree that the burden on the vessel is the same.
Warren E. Burger: I'm not asserting it. I'm asking your view of it on that.
William E. McDaniels: I do feel it's the same that the -- it's as if the vessel had been constructed with the aid of financing in the amount of $27.2 million instead of a subsidy because, in planning a charter rate for the vessel, it now must contemplate servicing that debt. So, it's the same as if, instead of having a subsidy in the first instance, there had been a loan in that amount which it now must consider when it services its debt.
Warren E. Burger: Quid pro quo for the subsidy are the conditions which the federal government attaches on it, going back into the history of our Merchant Marine, is that not so?
William E. McDaniels: That's correct. It's service in the foreign trade, and what that quid pro quo no longer applies, that is when the subsidy is paid back, the reason for the quid pro quo no longer exists either.
Byron R. White: But you don't -- if you had -- if you had borrowed from a private source, usually, a lease with a penalty, you can pay it off, you have the right to pay it off. Are you suggesting that you have the right to pay back the subsidy if the Secretary doesn't want you -- want it?
William E. McDaniels: No, you cannot. I thought the question was in terms of the economic burden of this vessel.
Byron R. White: No.
William E. McDaniels: Certainly, it's -- it would require the agreement of the Secretary to pay back the subsidy.
Byron R. White: Well, it's the Secretary who has to agree to accept it and also make these findings --
William E. McDaniels: Yes sir, that's correct.
Byron R. White: -- about this competitive impact?
William E. McDaniels: Under the District Court's opinion, the Secretary must consider --
Byron R. White: You don't contest that, do you?
William E. McDaniels: No, I do not. I think that one of the facts that you consider is competitive impact. That's not the only one because there are a number of others that are concerned to her protecting her collateral.
Byron R. White: The Secretary just can't say “by the way, I'd like to have that money back” and you just pay it. He has to make some findings.
William E. McDaniels: He does because his decision in that regard would be reviewable on whether it's arbitrary and capricious, and the findings would be related to the purposes of the Act and the purpose of the reason for making the repayment, protecting collateral, servicing a trade, making a viable vessel available for national emergency, and the competitive effect. That is one --
Byron R. White: But if it were a Chase loan, Chase could take the money and the borrower could pay it no matter what the competitive impact was.
William E. McDaniels: Yes, I understood that --
William H. Rehnquist: No, not without a provision for granting right for prepaying.
William E. McDaniels: Unless there was a prepayment or with or without payment. I understood the thrust of the Chief Justice's question to be whether or not the vessel competitively sits as if it had received on day one a $27.2 million loan from Chase Manhattan as opposed to a subsidy and, in that respect it is the same because it is re-servicing the repayment of that debt at the present time.
Warren E. Burger: My question was limited to the economic aspects. The Chase Manhattan hasn't any interest in preserving an independent merchant or a viable merchant marine which the Government has.
William E. McDaniels: I agree.
Warren E. Burger: That's the difference.
William E. McDaniels: Then I took --
Warren E. Burger: That's why the Secretary retains that control, is it not?
William E. McDaniels: It is and I took the Chief Justice's question to mean that you were concerned whether there was some benefit that the party receives that he wouldn't have received if he had had a loan in the first instance instead of a subsidy.
William H. Rehnquist: You think that if this -- if the par t-- if the recipient of the subsidy, tenders back the subsidy to the Secretary and the Secretary refuses the tender, that action could be refu -- reviewed under the Administrative Procedure Act as to whether it was arbitrary and capricious?
William E. McDaniels: I think that it could. I think that it would be a difficult burden for the person who is seeking the exercise of the discretionary authority to achieve the standard to reverse it, arbitrary and capricious I think it would be subject to review. In particular, the Secretary has now indicated that it will be promulgating rules setting out these factors for applications in the future. Now, I'd like to reserve a couple moments for rebuttal, if there are no any further questions at this time.
Warren E. Burger: Very well.
William E. McDaniels: Thank you.
Warren E. Burger: Mrs. Klein. You can lower the lectern there if you push with the handle.
Amy Loeserman Klein: Thank you. Mr. Chief Justice and may it please the Court. The Government commenced its jurisdictional argument by filing briefs in this Court which almost didn't address the issue of Rule 54 (b). The initial Government briefs on the jurisdiction were all addressed to the finality issue as that concept is understood under 28 U.S.C., 1291. In our reply briefs, we focus the argument on Rule 54 (b) because it was a Rule 54 (b) order that was entered by the District Court and because our complaint so clearly asked for relief more than the mere barring of the Stuyvesant. The Government initially made its final order argument purely on the supposition that the only relief that the Plaintiffs below had asked for was the barring of the Stuyvesant, and the Government said “you had two theories for that.” You had a theory that the -- there was no power to wave the Stuyvesant into the domestic trades and you had a theory that if there was power, the competitive effect was such that the power shouldn't be exercised. And, we said “no, that isn't our complaint. You've rewritten our complaint.” What our complaint said was that the Stuyvesant should not be in the domestic trades because the Secretary has no power and, for other reasons, they were claims of violations under the Administrative Procedure Act, but we also said that the Secretary has no power to waive any vessel built with subsidy into the domestic trades. And, we asked for a declaratory judgment to that effect and we asked for an injunction to that effect, and we referred in our complaint to the Bay Ridge which is the sister ship of the Stuyvesant, built by the same interests, nearing completion as to which we allege that if the power to waive the Section 506 bar were upheld for the Stuyvesant, that they would be a similar exercise for the Bay Ridge because the Bay Ridge was also built with subsidy. They were-- the same government collateral at risk. There was heavy government loan guarantees from the Economic Development Administration. And, we asked for an injunction barring the exercise of the waiver power for the Bay Ridge and for any other vessel ever built with construction differential subsidy.
Potter Stewart: You represent Alaska Bulk Carriers, Incorporated.
Amy Loeserman Klein: That's correct, and Trinidad.
Potter Stewart: And when you're talking about the complaint, you're talking about its complaint.
Amy Loeserman Klein: That's correct, sir. So that, not only is there a hypothetical of 15 or 16 ships in the wings, but there was an actuality one that was referred to in the complaint. And, as has already been made clear, these are huge vessels and one may be considered an equivalent perhaps of the 15 or 16 hypothetical in a different situation.
William H. Rehnquist: But would the theory that you advanced on behalf of the -- is it, what, Bay Ridge --
Amy Loeserman Klein: Yes.
William H. Rehnquist: -- be the s -- substantially the same as that which you advanced on behalf of the Stuyvesant?
Amy Loeserman Klein: So far as the waiver is concerned, yes, identical, that the Secretary --
William H. Rehnquist: Then it really wouldn't have been a necessarily a different claim, would it? Wouldn't it have been just a different theory?
Amy Loeserman Klein: No, it would not have been a different theory. What we said was that the Secretary had no power to waive the Section 506 bar, and the relief that we asked for was an injunction going against the Stuyvesant and an injunction going against the exercise of that waiver authority for any other vessel ever built with CDS.
William H. Rehnquist: Could one have been granted without -- could the injunction have been granted without the lesser included relief been -- having been granted?
Amy Loeserman Klein: An injunction could have been issued against the Stuyvesant for the reason of violation of the Administrative Procedure Act, which was also alleged in our complaint and eventually sustained by the District Court. That was the reason for the remand. The District Court found a violation of the Administrative Procedure Act. So, the Stuyvesant could have been barred for reasons going to issues involved in the remand, but the general injunction against waiver of the power for any vessel could only be granted upon the determination as to statutory authority and, that was the determination made by the District Court. So that once the District Court decided that the Secretary had the disputed authority, the issue as to our entitlement for an injunction, as to the Bay Ridge and all other vessels in that class was finally and irrevocably decided.
William H. Rehnquist: You could have gotten the result you wanted, but you couldn't have gotten it by the injunctive relief in a general injunction against the Secretary?
Amy Loeserman Klein: We could not have gotten the relief we sought, which was a declaratory judgment that the Secretary lacked the disputed authority. That was finally decided against us. The only thing we could have gotten was that the exercise of that authority with respect to the Stuyvesant was invalid. I think that we finally convinced the Government that our complaint said what we said it said instead of what they said it said because, on the reply briefs, the Government moved away from the claim -- from the contention that we only advance one claim for relief which was to bar the Stuyvesant, and the Government said that we had no right to ask for anything other than the barring of the Stuyvesant because we weren't presenting the judiciary with the case of controversy under Article 3. And, the reason for that was said to be that we were asking for something that wasn't concrete. That we had to wait as each vessel was waived into the fleet and we had to bring the same lawsuit and if we didn't get the vessel, the waiver set aside for some other reason, then and only then could we focus on the statutory authority. And, with respect, we think that the issue is a question of rightness, the case of controversy issue.
Potter Stewart: I don't know if you've mentioned in your oral argument but in your brief you rely fairly heavily also on the appealability of this district judge's order on the basis of the -- on the ground that it was a denial of an injunction.
Amy Loeserman Klein: Absolutely, 1292 (a)(1).
Potter Stewart: 1292 (a)(1) which is quite a different and alternative ground of 54.
Amy Loeserman Klein: That's correct. We think that it's -- it was clearly appealable under either one. It was a final denial of an injunction. Nothing that happened on remand could possibly have altered the decision below that we were not entitled to an injunction barring the waiver of any vessel built into C -- with CDS into the domestic merchant union.
Byron R. White: So you're saying there certainly was a controversy between you and the federal parties, although there may not have been a controversy between you and Seatrain.
Potter Stewart: Right.
Amy Loeserman Klein: That's correct.
Byron R. White: Which -- do you think there was a controversy between you and Seatrain on that second issue?
Amy Loeserman Klein: Well, we posed the waiver of the Bay Ridge --
Byron R. White: You really were asking for the injunction against the federal party --
Amy Loeserman Klein: But the injunction was asked against the Government, yes, sir.
Byron R. White: And so the -- and you're -- and all you need is to say it was a case of controversy between you and the federal party.
Amy Loeserman Klein: Unquestionably, yes.
William H. Rehnquist: But wouldn't it have been possible under the Administrative Procedure Act if the Secretary had come back and said “I've corrected whatever defects the District Court found” for the District Court to had -- nonetheless have enjoined the Secretary from doing what she proposed to do on the grounds that it would have been in violation of the Administrative Procedure Act for her to have done it?
Amy Loeserman Klein: Yes, we could have conceivably gotten an injunction against the Stuyvesant but we could not have gotten an injunction against the exercise, we couldn't have gotten our declaratory judgment that the Secretary lacked the power.
William H. Rehnquist: Because the Bay Ridge was still on the drawing board.
Amy Loeserman Klein: That's correct, but our complaint made very clear, pointed out, and it was a substantial part of our entire case that the mere exercise of the power, the mere -- or to say it, the mere affirmation of the power has an immediate impact upon us, upon our industry, upon the unsubsidized domestic merchant marine.
Byron R. White: So that whatever happened on remand, unless the District Court changed its mind, you are out of business on your injunction.
Amy Loeserman Klein: Well, that's correct. That's correct and we have -- we are in a totally different trade, as it were, that was our complaint. We are in a different trade. We have assets that are worth a different amount than they were before the Secretary said that she had the power. We have a whole different growth situation before the Secretary said that she had the power. And, I think a fair reading of our complaint will show that we were at least as much, or even more, concerned about the secretarial interpretation that, at any point in time, the Secretary could waive into the unsubsidized merchant marine into the domestic trade a -- vessels built with subsidy, at any time, sim -- merely by consenting to the repayment of the unamortized subsidy.
John Paul Stevens: Mrs. Klein, may I ask you two questions of the Shell Oil. Your argument doesn't necessarily apply to Shell, as I understand, because they have quite a different complaint.
Amy Loeserman Klein: That's correct.
John Paul Stevens: And, secondly, is it not correct that the appealability under 1292 (a) (1), the denial of an injunction theory, really boils down to the same question as appealability under 1291 because you must, even on that theory, assume that the injunction against the exercise of power is a broader form of relief than the injunction against the rescission of this particular deal?
Amy Loeserman Klein: It can be looked at that way, but there is also an argument that there was a separate right of appeal under 1292 (a) (1) irrespective of whether we were asking for more than one -- we had more than one claim for relief.
John Paul Stevens: You think even if they were precisely the same claims for relief, two different alternate theories of getting the same injunction, under 1292 (a) (1), you might get -- have appealability even though you wouldn't under 1291?
Amy Loeserman Klein: We think so --
John Paul Stevens: I see.
Amy Loeserman Klein: -- because, under 1292 (a) (1), we were finally denied an injunction as to this class of vessels and nothing can change that.
John Paul Stevens: Well then that's the broader point, that's what I --
Amy Loeserman Klein: Yes, that's correct.
John Paul Stevens: Alright.
Amy Loeserman Klein: Petitioners' statutory construction rests upon the conception that this statute establishes a quid pro quo relationship and that's the key. That's the theme that the statute carries out. If subsidy is retained, there is a restriction against trading -- domestic trading. Once subsidy is returned, it is said that the restriction dissolves. We think that that isn't what the statute says. While there is some quid pro quo relationship, it is not an open-ended quid pro quo relationship. The statute says that subsidy is given for operation in foreign trade. The statute has two exceptions to that; incidental domestic trading and domestic trading, purely domestic trading for no longer than six months. If those two exceptions -- if the vessel engages in those two exceptions, the vessel must return subsidy pro re nata, that is the extent of the quid pro quo relationship. The opportunity to engage in trading other than foreign is limited, but there is no open-ended statutory scheme whereby a vessel operator can decide to go into any trade other than the ones that he's -- that subsidy was given for merely by repaying subsidy. Now, Petitioners, in effect, acknowledge that. They don't say that “well, you can go into any incidental trade, for example, other than the enumerated four incidental trades.” They don't say you can go into domestic trade for eight months. They say there's only one other, one-third example where you can go into where the quid pro quo relationship is carried out. And, that third example is, they say, that if you return all the subsidy or the unamortized subsidy at any point during a vessel's life, then the restriction just dissolves. Now, the first two quid pro quo relationships are found directly in the statute. The third one is not found in the statute, but the Petitioners say that's okay. It should be implied into the statute and the reason it should be implied into the statute is because it carries out the quid pro quo theme, but the quid pro quo theme itself is a concoction, we submit, of petitioners. There is no general quid pro quo theme and, indeed, they acknowledge that. Moreover, the fact that there are two instances in which a vessel built with subsidy can engage in the in -- other than foreign trades upon a repayment of subsidy clearly doesn't imply this third quid pro quo relationship that the petitioners have concocted for the reason that it was the very category of instances that unquestionably was taken out of the Act in 1938 when the statute was rewritten. All parties here agree that the 1936 Act, the Act as originally enacted, had a Section 506 that might be interpreted as establishing precisely these three quid pro quo relationships, but in 1938, unquestionably, that third quid pro quo came out of the statute. Now petitioners here spend a lot of time on the 1936 Act, but the 1936 Act isn't the law anymore. It is the 1938 Amendment that's the law, and --
Potter Stewart: The Government's view is, as I remember, that the deletion of that third quid pro quo was inadvertence.
Amy Loeserman Klein: That's what they say. We have cited the legislative history chapter and verse to show it was not only an inadvertence. The section was rewritten at the request of the then Chairman of the Maritime Commission, Chairman Kennedy, Joseph Kennedy, who said “we find it confusing to have these two consents which we could give, one for unlimited operation for return of subsidy and another for temporary emergency,” we find that confusing, and take out this third instance, and that's exactly what the Congress -- that's exactly what the Congress did.
Potter Stewart: Hugo Black left the Senate between 1936 and 1938, didn't he? And, he had been the chairman of the committee or subcommittee in 1936.
Amy Loeserman Klein: That's right.
John Paul Stevens: Did Chairman Kennedy say the words to take out as their alternative?
Amy Loeserman Klein: He -- well, I suppose not.
John Paul Stevens: I think that's somewhere --
Amy Loeserman Klein: He said it's ambiguous and confusing. And then, he said how the sent -- how the section should be rewritten and, as rewritten, it was taken out.
John Paul Stevens: But he never said in words that a total rescission would be a bad idea, did he?
Potter Stewart: No.
Amy Loeserman Klein: He said “we find the two consents that we are empowered to give ambiguous and confusing and we want the section rewritten so that the total payout is taken out” and that's -- that was the language he proposed and that was the language that was enacted.
John Paul Stevens: But he -- you don't quote him as saying “we want the total payout taken out.”
Amy Loeserman Klein: No.
John Paul Stevens: No?
Amy Loeserman Klein: No. If I did, I overreached myself.
Byron R. White: Well, he -- did he submit a draft with it out?
Amy Loeserman Klein: Yes. He said “as the section is rewritten”--
Byron R. White: “And I want it --“
Amy Loeserman Klein: -- which is taken out.
Byron R. White: “And I want it rewritten as attached.”
Amy Loeserman Klein: As the section is rewritten. I can't be sure of that, no, Your Honor. He said --
Byron R. White: He submit a draft or didn't he?
Amy Loeserman Klein: I believe he did, but I can't be sure of that.
Byron R. White: Was the language out or was it in?
Amy Loeserman Klein: The -- when the amendment was introduced, the chairman of the committee said “this has been rewritten wholly in the light of the suggestions of the Maritime Commission.”
Byron R. White: Well, that infers that somebody besides the chairman had written it.
Amy Loeserman Klein: And he said “and largely in the words of the Maritime Commission.”
Byron R. White: Largely.
Amy Loeserman Klein: I think we have the exact quote in our brief --
Byron R. White: Two-thirds --
Amy Loeserman Klein: But, yes --
Byron R. White: Two-thirds at least. [Luaghter]
Amy Loeserman Klein: Yes.
John Paul Stevens: Mrs. Klein --
Amy Loeserman Klein: Yes?
John Paul Stevens: -- the Government also argues that if you just had a transaction authorized, the subsidy with the restriction on it, and didn't say anything, about one's -- one way or another, about rescinding the transaction, that the Government would have and pursuant to its general powers to make contracts and amend them and so forth, they'd have the power to, in effect, rescind this transaction. Would you agree with that? In other words, do you have to rely on the fact that the authority for the legislative history, plus, the authority for six months permission impliedly prohibits anything else, that's your argument, as I understand it?
Amy Loeserman Klein: No, I don't think we have to. I think we can rely just on the statute that says that you're supposed to have subsidy for the foreign trade and that's the only purpose for which you can give subsidy.
John Paul Stevens: Well, supposing you had a statute that just contemplated one transaction like the Chrysler proposal now or the -- this one vessel and Congress said “we'll give you a subsidy for this transaction, we'll authorize the subsidy for this transaction, provided there's a restriction on domestic commerce put in the contract” and that was all that was done and the contract was made pursuant to the statute, and nothing was said, one way or another, about rescinding it. Do you think the Secretary would have power to rescind such a contract?
Amy Loeserman Klein: No. I think that the carrying out of the legislative intent is that you take the subsidy and you fulfill the contract.
John Paul Stevens: And you -- it must be a permanent restriction.
Warren E. Burger: In other words, it's a permanent relationship.
Amy Loeserman Klein: So the lower court found after very extensive analysis, yes.
Warren E. Burger: Like the mark of Cain on this vessel.
Amy Loeserman Klein: That is true. That is what the vessel was built for. That is why the aids were extended.
Warren E. Burger: With the taxpayers' money.
Amy Loeserman Klein: With taxpayers' money.
Warren E. Burger: Yes.
Amy Loeserman Klein: Yes. Thank you.
Warren E. Burger: Very well, Mrs. Klein. Mr. Shulman.
Stephen N. Shulman: Mr. Chief Justice and may it please the Court. I would like to pick up one or two points with regard to the jurisdictional question that strike me as still hanging a little bit. One was that Mr. Justice White asked whether or not there was still a case or controversy or there would still be a case or controversy vis-à-vis Seatrain. And, previously to that, there had been questions raised as to what will happen if there were 15 or 16 ships in the wings, I believe, Mr. Justice Stevens raised that question. The important point to remember is that the Stuyvesant itself was standing in the wings because with the only relief that could be gotten, injunctively, given the District Court's order, what you will have was an injunction against the Stuyvesant then based upon the competitive conditions then and there could have been a new attempt, 30 days later, to put the Stuyvesant in again. So that, the Stuyvesant itself was waiting in the wings to be entered again into domestic trade when the petition -- when the respondents had been denied a permanent injunction. I would like also to advert to the point that Mr. Levander made suggesting that following a remand proceeding before the Department of Commerce, it would have been possible to question the standing of the -- what li -- then of the plaintiffs' to bring the action. And, I would say, one, it's a strange procedure indeed that if you are remanded for a determination of competitive impact and there's a finding of no competitive impact, you thereby lose your standing to attack or to review the finding of no competitive impact. And, quite apart from that, it is certainly true that a two-year-charter of the Shell ship is which what -- which is what happened, does not take care of 20 years of injury when the Stuyvesant is permanently waived. Now, the question came up, Mr. Chief Justice Burger raised the question about the similarity between this case and the Chase Manhattan Bank financing. And then, Mr. Justice White raised the point that you might be able to pay back the Chase Manhattan Bank and that Mr. Justice Rehnquist pointed out that you might need a prepayment requirement, but that the Secretary might not be able to be forced to take back CDS. Instead, the Secretary would have to make some findings before she could take back CDS. Now, the only place where there are any findings suggested at all that the Secretary might have to make is in the opinion of Judge Richie. The statute doesn't set forth any findings for the Secretary to make. The reason why the statute doesn't set forth any findings for the Secretary to make is because there never was a thought that there would be a permanent payback of CDS.
Byron R. White: What about temporary?
Stephen N. Shulman: There are findings to be made for a temporary. The finding is that it is necessary or appropriate to the purposes of the Act, and that is one of the reasons why Chairman Kennedy raised the question in 1938 with regard to the ambiguity because there was absolutely no standard suggested other than the three-month standard. Now, the -- finally, I would like to make this -- the point in response to Mr. Justice Stevens' question with respect to whether or not a one-time statute with a one-time contract with restrictions would be amendable by the contracting party to which Mrs. Klein answered “No, it would not be,” and I certainly want to endorse everything that Mrs. Klein says before this Court. But I would add one additional point, that the words of Title 506 -- Section 506 are not the purchaser. The words are “every owner.” The words are “every owner shall agree,” and the whole purpose of those words is that they jus -- they go on as Title goes on and, in fact, the Maritime Administration refers to this as a covenant running with the ship.
John Paul Stevens: Of course they did agree.
Stephen N. Shulman: What?
John Paul Stevens: They did agree. The owner did agree. The question is --
Stephen N. Shulman: Well, that's very --
John Paul Stevens: Whether they agree to do --
Stephen N. Shulman: That's a very interesting point, Mr. Justice Stevens. The fact of the matter is that the current owner did not agree in the face of the language which said “every owner must agree” because the Secretary removed it before that owner had to agree with it. This whole case is presented --
John Paul Stevens: This would boil down, Mr. Shulman, to whether or not Congress intended to protect your clients and other similarly situated from competition on the one hand, or from subsidized competition on the other?
Stephen N. Shulman: That would be an adequate way of expressing it Mr. Justice, but I don't think that that is a complete way of sug -- of expressing it because the whole issue with regard to CDS is foreign commerce. CDS has no meaning except for foreign commerce. It is not CDL, Construction Deferential Loan. It's talking about paying it back. It's the worst case of the tail wagging the dog. It is a subsidy. The Secretary of Commerce really doesn't want the subsidy back. What she wants is ships in foreign commerce. There --
Byron R. White: Yes, but ships aren't usable in foreign commerce, there can be at least temporary use in the domestic commerce.
Stephen N. Shulman: That's exactly correct, Your Honor.
Byron R. White: If there are some findings.
Stephen N. Shulman: That's exactly correct. That's precisely the balance that is drawn.
Byron R. White: In which event there has to be some refund of the subsidy?
Stephen N. Shulman: That's precisely correct and the reason for that is that you have a ship built for foreign commerce and there may be some incidental needs for it to participate in domestic commerce. One of those are the enumerated trades that are set forth in Title 506 and the other is a temporary transfer up to six months when the Secretary has made the necessary findings.
Byron R. White: And I suppose the Secretary could string temporary exemptions together as long as -- each time he made another finding.
Stephen N. Shulman: But you can only string the exemptions after a six-month hiatus.
Byron R. White: Yes.
Stephen N. Shulman: Right. That any time --
Warren E. Burger: Six months --
Stephen N. Shulman: That that --
Warren E. Burger: -- six months off, and six months on --
Stephen N. Shulman: That's correct.
Warren E. Burger: And six months off?
Stephen N. Shulman: That's correct.
Warren E. Burger: Indefinitely?
Stephen N. Shulman: The -- on the assumption that it did, in fact -- was necessary and appropriate to effectuate the purposes of the Act, and --
Warren E. Burger: If the proper findings were made.
Stephen N. Shulman: Yes.
Warren E. Burger: You could do that in definitely if the necessary findings were made, but those findings could be challenged in a judicial proceeding?
Stephen N. Shulman: I would expect so, Mr. Chief Justice, and it's also true that there is a world of difference between competing with a ship that is available in six-month units out of each year and competing with a ship that is available for the full year. They ser --
Warren E. Burger: In a sense, it would depend to some extent on which six months and what tanker market conditions were at the time, would it not?
Stephen N. Shulman: That question, Mr. Chief Justice, exactly explains why you deal in temporary transfers in this connection because six months is the kind of discrete unit as to which a rational judgment can be made. One of the things that came out of the remand proceedings was the statement by the Secretary of Commerce that you could not make a projection more than three years into the future. Now, that is some sort of basis on which to allow a ship to engage permanently in foreign trade. It also speaks to why there really are no standards in the Act because Congress never intended that there would be a transfer longer than a six-month period. There is only one provision in Section 509 which deals with the question of loans as this is -- attempts to be described here or which deals with the question of building for the domestic trade and that's Section 509 which allows the Secretary to make provision for building a ship and then sell it to the purchaser for 12.5% down or 25% down, depending upon what type of ship it is and Section 509 specifically says “no construction deferential subsidy shall be allowed.” With regard to construction deferential subsidy, Title V is perfectly clear that foreign commerce is the sole purpose of it. Section 501 establishes construction deferential subsidy in these words “to aid in the construction of a new vessel to be used in the foreign commerce of the United States." The Secretary of Commerce must determine before approving an application to “the plans and specifications call for a new vessel which will meet the requirements of the foreign commerce of the United States.” She has to determine “that the plans will aid in the promotion and development of such commerce” and Section 506, as I pointed out before, is a continuing prescription. It does not apply to the purchaser or the shipyard. It applies to every owner. It says “every owner shall agree,” not may agree. It applies to every vessel for which CDS has been paid, not “has been paid and has not been repaid.” It allows only the two indicated domestic uses, one incidental and two for six-month periods and it is the result of an amendment in 1938 at which time, Chairman Kennedy did submit a draft. Chairman Kennedy's draft was enacted and the words that Chairman Kennedy said to describe this were, “if the owner desires to engage in domestic trades other than those enumerated in this section he can do so only by receiving the consent of the Commission.” The consent for this service is limited to six months in any one year.
William H. Rehnquist: Is that what it is criticizing or was that what he wanted?
Stephen N. Shulman: I'm not sure that I have the qualification that -- to answer that question, Mr. Justice Rehnquist, that that was both the only ambiguity in the Act and the ambiguity that he said was being corrected. So, I think it was both what he was criticizing and what he wanted in the sense that he was observing the one ambiguity and he was suggesting the correction.
William H. Rehnquist: By another ambiguity.
Stephen N. Shulman: I don't find the section, since 1938, to contain any ambiguity. The only way that the section can contain an ambiguity is a way that is classically brought out by footnote 2 of the Government's reply brief which says that “a ship that has repaid the subsidy in full and, therefore, no longer enjoys the benefits of that subsidy” is simply not a vessel for which subsidy has been paid. If it sells like a ship which has been paid subsidy in order to repay subsidy, it is not a ship as to which subsidy has been paid, I don't know what ship it might be. There is no warrant in the statute. The statute is clear. There is no need to go to the legislative history and if the legislative history is going to consider it, it is clear that the statute advertently does what it does which is to confine any sort of domestic trade by CDS – sh -- built ships to two types, incidental in the enumerated services and six-month temporary transfers. Thank you very much.
Warren E. Burger: Mr. McDaniels.
William E. McDaniels: Yes, may it please the Court. I think that the statute clearly sets forth the kinds of findings that the Secretary must consider when it says in 207 that she may contract consistent with purposes of the Act, it's also set forth in 101, and to protect and preserve her collateral in which she did here. It would be an unreasonable interpretation of the statute to bind the Secretary where, in the one hand, you give her the power to invest $70 million of the taxpayers' money to say she can never react to the volatile trading circumstances that could concur in the maritime trade. She must have this flexibility. And, with respect to the 1938 history, Mr. Justice Stewart, the key there is this language that Mr. Kennedy proposed was set at the same time that he says we have no intent to change the original purpose of the section. The original purpose of the section was to remain the same. It clearly countenance the right to have permanent payback, and the fact that, since 1936 and 1938 and, clearly, since 1964, the unsubsidized carriers have realized that this possibility existed. They proposed -- the unsubsidized carriers proposed legislation to permanently ban forever a subsidized vessel from ever coming into the domestic trade. Congress has never done that. Congress has never passed that legislation. Instead, the statutory scheme permits a half of the life, 10 years of the vessel's life while subsidized, can be spent in direct competition with the subsidized vessels.
Warren E. Burger: About 10 years in these --
William E. McDaniels: Six-month period.
Warren E. Burger: Upon s --
William E. McDaniels: And that's more dangerous to their interest, frankly, because you could pick and choose as your foreign carrier the six months you want.
Warren E. Burger: Well --
William E. McDaniels: Here --
Warren E. Burger: If the Secretary --
William E. McDaniels: If She'll let you, exactly. But, in this case, we're committed as of domes -- we are now a Jones Act carrier, always have been, the same as they are, we are now committed to the domestic trade to take the ups and downs. They're still in business. We're still in business. They still have a market and we still have a market. There is no sense in any way, shape, or form in the history that there was to be freedom from competition from the vessel, only freedom from unfair competition.
Byron R. White: An unfair agreement in this – what -- why would you-- why are you saying you're locked in the domestic trade?
William E. McDaniels: Because the return of the subsidy makes us a vessel which --
Byron R. White: Well, it makes you free to go into domestic trade.
William E. McDaniels: Yes, but I can go -- we can go in the foreign trade as well, but we --
Byron R. White: Well, that's what – that -- but you indicated you couldn't.
William E. McDaniels: Well, we stand at equal f -- competitive footing with them. I -- I feel --
Byron R. White: Well, then you would -- you have your options and now you have -- you can sail on either trade.
William E. McDaniels: Exactly, but we cannot compete in the foreign trade with the benefit of subsidy. So, we're -- in terms of our trading options, the domestic trade has to be the first opportunity. We're not --
Byron R. White: You're locked into competing without a subsidy. That's --
William E. McDaniels: That's correct.
Byron R. White: Yes.
William E. McDaniels: Which, is a --
Byron R. White: Wherever in either trade.
John Paul Stevens: I take it, you're --
William H. Rehnquist: Would you -- will you say --
John Paul Stevens: You're locked in as a matter of economics. None of the domestic trade vessels are economically able to compete in the foreign trade, isn't it?
William E. McDaniels: That's correct.
John Paul Stevens: Without the subsidy.
William E. McDaniels: We cannot return to a subsidized state. We must compete on the par with the unsubsidized vessels.
William H. Rehnquist: And you say that's contrary to the declaration of Congress that the welfare of the country depends on a strong merchant marine.
William E. McDaniels: I -- consistent with it?
William H. Rehnquist: Yes.
William E. McDaniels: Absolutely consistent with it because the strong merchant marine would not have been served at this vessel and its capacities were put into dry dock and not available or you -- keeping of a viable vessel, American-built and owned, with an American crew is a primary goal of the Merchant Marine Act, particularly when it causes no adverse competitive effect to the unsubsidized carrier which is the situation here based on all the findings in the case.
Byron R. White: Well -- but, so, adverse competitive effect, I would be spending -- after spending quite a bit of money and effort -- I s -- litigating this case, they must think that it hurts them.
William E. McDaniels: Well, they must but, Your Honor, they are in the trade. They still have their charters. They're still doing business and there still is a need for further vessels in the trade. So, there has been a finding of no adverse competitive effect by this transaction.
Warren E. Burger: But their claim, in part at least, is that they should be free from competition from federally financed enterprises.
William E. McDaniels: And they are free from that in this case because --
Byron R. White: There's been a --
William E. McDaniels: You're no longer such a ship.
Warren E. Burger: Initially, it was federally financed.
William E. McDaniels: But we couldn't compete with them at that time, except by the statute.
Byron R. White: There's been an administrative finding but it's never been reviewed.
William E. McDaniels: I'm sorry?
Byron R. White: There's been an administrative finding of no competitive effect.
William E. McDaniels: Which has never been -- ever been --
Byron R. White: It's been here.
William E. McDaniels: Because the procedure was posted in, that's correct.
Potter Stewart: Well, the finding was “no competitive effect,” was it?
William E. McDaniels: It was a non -- a minimal competitive effect by the Secretary upon remand. Thank you.
Warren E. Burger: Thank you, counsel. The case is submitted.