Opinion ID: 206190
Heading Depth: 2
Heading Rank: 2

Heading: Statutory Interpretation of Voluntary Association

Text: Menkes does not claim that the Coast Guard violated the APA when it issued the Agency Decision on Remand without first engaging in notice-and-comment rulemaking. And for good reason. The Supreme Court has made it clear that the fact that [an] Agency ... reache[s an] interpretation through means less formal than `notice and comment' rulemaking does not automatically deprive that interpretation of the judicial deference otherwise its due. Barnhart v. Walton, 535 U.S. 212, 221, 122 S.Ct. 1265, 152 L.Ed.2d 330 (2002) (citation omitted). Menkes's sole objection here is that the Coast Guard's interpretation of the term voluntary association in 46 U.S.C. § 9304 is manifestly at odds with the terms of the GLPA and thus arbitrary and capricious under the APA. In addressing Menkes's claim, we must first determine whether the agency's interpretation of the statuteincluding its construction of voluntary association and its explanation of an association's responsibilities vis-à-vis the Coast Guard and independent pilotsdeserves Chevron deference. Menkes does not contest the applicability of Chevron. Appellant's Br. at 16 ( Chevron ... controls the Court's review of an administrative agency decision.). Nevertheless, in light of the concerns raised by the court in Menkes II, 486 F.3d at 1313-14, we are constrained to address the degree of deference due, if any, to the Coast Guard's construction and application of the statute. Under Chevron, if a court determines Congress has not directly addressed the precise question at issue, the court does not simply impose its own construction on the statute, as would be necessary in the absence of an administrative interpretation. Rather, if the statute is silent or ambiguous with respect to the specific issue, the question for the court is whether the agency's answer is based on a permissible construction of the statute. The power of an administrative agency to administer a congressionally created... program necessarily requires the formulation of policy and the making of rules to fill any gap left, implicitly or explicitly, by Congress. If Congress has explicitly left a gap for the agency to fill, there is an express delegation of authority to the agency to elucidate a specific provision of the statute by regulation. Such legislative regulations are given controlling weight unless they are arbitrary, capricious, or manifestly contrary to the statute. Sometimes the legislative delegation to an agency on a particular question is implicit rather than explicit. In such a case, a court may not substitute its own construction of a statutory provision for a reasonable interpretation made by the administrator of an agency. Chevron, 467 U.S. at 843-44, 104 S.Ct. 2778 (ellipsis in original) (footnotes and quotation omitted). The statute at issue here states that (a) The Secretary may authorize the formation of a pool by a voluntary association of United States registered pilots to provide for efficient dispatching of vessels and rendering of pilotage services. (b) For pilotage pools, the Secretary may (1) limit the number of the pools; (2) prescribe regulations for their operation and administration; (3) prescribe a uniform system of accounts; (4) perform audits and inspections; and (5) require coordination on a reciprocal basis with similar pool arrangements authorized by the appropriate agency of Canada. 46 U.S.C. § 9304. The statute does not directly address the precise questions at issue in this case. However, there is no doubt that the statute provides an express delegation of authority to the agency to elucidate the terms of § 9304. It is also clear that the Coast Guard acted pursuant to this congressionally delegated authority in adopting regulations governing pilotage on the Great Lakes and in amplifying its interpretation of the statute in its Agency Decision on Remand. Therefore, the Secretary's regulations and the Agency Decision on Remand are legislative regulations [that must be] given controlling weight unless they are arbitrary, capricious, or manifestly contrary to the statute. It does not matter that the Agency Decision on Remand in which the Coast Guard amplified its position on the meaning of voluntary associations and explained the rights of unaffiliated, independent pilotsis a judgment rendered in an adjudication rather than in a rulemaking procedure. The Supreme Court has explained that [ Chevron ] Step Two deference ... comes into play when an agency has acted within the area in which Congress has authorized it to act, and the action at issue was taken pursuant to congressionally delegated authority to make law and with the intent on the part of the agency to act with the force of law. [ United States v. Mead Corp., 533 U.S. 218, 226-27 [121 S.Ct. 2164, 150 L.Ed.2d 292] (2001)]. As Mead explains, [i]t is fair to assume generally that Congress contemplates administrative action with the effect of law when it provides for a relatively formal administrative procedure tending to foster the fairness and deliberation that should underlie a pronouncement of such force. Id. at 230 [121 S.Ct. 2164]. The absence of rulemaking or adjudicatory procedures is not dispositive, however, for the Court has sometimes found reasons for Chevron deference even when no such administrative formality was required and none was afforded. Id. at 231 [121 S.Ct. 2164]. HARRY T. EDWARDS & LINDA A. ELLIOTT, FEDERAL STANDARDS OF REVIEWREVIEW OF DISTRICT COURT DECISIONS AND AGENCY ACTIONS 152 (2007). Menkes's arguments fall far short of showing that the Coast Guard's interpretation of 46 U.S.C. § 9304 is manifestly contrary to the statute or otherwise arbitrary and capricious. First, the Coast Guard was acting pursuant to an express delegation from Congress. The GLPA specifically allows the Coast Guard to authorize the formation of a pool by a voluntary association of United States registered pilots. 46 U.S.C. § 9304. And the statutory mandate gives the Coast Guard the explicit authority to set parameters for voluntary associations. See id. § 9304(b). Second, the Coast Guard's Agency Decision on Remand addresses interstitial questions, see Walton, 535 U.S. at 222, 122 S.Ct. 1265, that are bound up with the administration of the Coast Guard's scheme of regulating pilotage on the Great Lakes. If the Coast Guard had adopted Menkes's proposal that independent pilots must be dispatched on equal terms with members of voluntary associations, this could have incentivized other member pilotslike Menkesto resign their association membership because they could receive the benefit of being dispatched without the burden of paying for an equity stake in a voluntary association. See Letter from Richard J. Menkes to Paul M. Wasserman, Acting Director of Great Lakes Pilotage (July 8, 2003), reprinted in J.A. 98 (explaining Menkes's position that [i]f five pilots are called for in the rates, I would be entitled to one fifth of all U.S. dispatches; if the number of pilots called for is six, then I would get one sixth of all U.S. dispatches, and so on). This could have impacted myriad aspects of the regulatory scheme, 46 C.F.R. § 401.300 et seq., including the Coast Guard's discretion to determine[] that a pool is necessary for the efficient dispatching of vessels and the providing of pilotage services in the area concerned, id. § 401.320(a). After all, if an association had to dispatch every willing, nonmember registered pilot, this could affect the Coast Guard's calculus of whether the formation of a pool in a particular district would be efficient. In sum, the potential ramifications of the agency's decision confirm that these are precisely the sort of complex, interstitial questions that the Coast Guard deserves deference to address. See Mylan Labs., Inc. v. Thompson, 389 F.3d 1272, 1280 (D.C.Cir.2004) (according Chevron deference to FDA letter due to complexity of the statutory regime under which the FDA operates, the FDA's expertise [and] the careful craft of the scheme it devised to reconcile the various statutory provisions). Furthermore, the Coast Guard's interpretation, as clarified in the Agency Decision On Remand, reflects a longstanding agency policy. The Coast Guard explained that the policy dates back to around 1975, Agency Decision on Remand at 9, J.A. 287, and Menkes has provided no evidence to the contrary. In fact, in a letter sent by Menkes in 1978, he acknowledged that [i]t is my understanding that the Great Lakes Pilotage System allowed only licensed pilots who were members of the designated pilot association ... to operate vessels unless an appropriate waiver has been obtained for such pilotage. Even waivers, to the best of my knowledge, do not allow pilots who were former members of the association without any affiliation, to pilot vessels in the Great Lakes System. Letter from Richard J. Menkes to George R. Skuggen, Director, Great Lakes Pilotage Staff (Mar. 27, 1978), reprinted in J.A. 144. Although, as noted above, F.J. Flyntz arguably voiced a different view in his 2001 letter authorizing Menkes to be dispatched, Flyntz's determination was appealed by the SLSPA. On appeal, Flyntz's disputed decision was modified by his superior, J.P. High, the Coast Guard's Director of Waterways Management, who upheld the decision solely on the ground that Menkes could be dispatched because the SLSPA was not providing adequate pilotage service. See Letter from J.P. High, Director of Waterways Mgmt., to Mark Ruge, Preston, Gates, Ellis & Rouvelas, Meeds LLP at 2-3 (May 22, 2001), J.A. 126-27. High did not adopt Flyntz's interpretation of the GLPA. Because High's construction of the statute displaced Flyntz's, it is evident that Flyntz's interpretation was never controlling. It is highly significant here that the agency's interpretation is one of long standing. Walton, 535 U.S. at 221, 122 S.Ct. 1265. And it does not matter that the Coast Guard reached its interpretation through means less formal than `notice and comment' rulemaking, id., especially when Menkes has not challenged the method used by the agency to amplify its regulations. Benkelman Tel. Co. v. FCC, 220 F.3d 601, 607 n. 10 (D.C.Cir.2000) (finding argument that agency violated APA by failing to utilize notice-and-comment rulemaking waived). Surely, the Coast Guard's enunciation of the aforecited statutory interpretations and rules has the force of law, Mead, 533 U.S. at 232, 121 S.Ct. 2164, especially given the instruction from this court to the agency to come to grips with the meaning of the statute. Menkes II, 486 F.3d at 1314. The court's remand order did not instruct the agency to conduct notice-and-comment rulemaking or a formal adjudication, nor did Menkes request either procedure. In these circumstances, we think it is clear under Mead and Walton that Chevron applies. And not only does the deferential Chevron framework apply to the Coast Guard's interpretation of 46 U.S.C. § 9304, but, to the extent that the Coast Guard's Agency Decision on Remand reflects the agency's interpretation of its own regulationshere, 46 C.F.R §§ 401.300, 401.720(b)it deserves even greater deference. See Thomas Jefferson Univ. v. Shalala, 512 U.S. 504, 512, 114 S.Ct. 2381, 129 L.Ed.2d 405 (1994); see also Chase Bank USA, N.A. v. McCoy, ___ U.S. ___, 131 S.Ct. 871, 880-82, 178 L.Ed.2d 716 (2011) (deferring to agency's interpretation of its own regulation, advanced in legal brief, because the interpretation... is consistent with the regulatory text). Applying the Chevron framework, we conclude that the Coast Guard's policy is easily upheld. Chevron Step One requires that we examine[] the statute de novo in order to determine `whether Congress has directly spoken to the precise question at issue.' Eagle Broad. Grp., Ltd. v. FCC, 563 F.3d 543, 550 (D.C.Cir.2009) (quoting Chevron, 467 U.S. at 842, 104 S.Ct. 2778). It is not clear from the text of 46 U.S.C. § 9304 whether a voluntary association can decide to dispatch only its members, for the term voluntary association is undefined. Nor are there any hints in the GLPA's limited legislative history as to how Congress wished to resolve this question. See H.R.REP. No. 86-1666 (1960), reprinted in 1960 U.S.C.C.A.N. 2481. Congress thus did not definitively answer the question at issue. Menkes's argument that an association cannot be voluntary if membership is a necessary precondition for employment is a non-sequitur. Moving on to Chevron Step Two, we are obliged to defer to the agency's interpretation if it is based on a permissible construction of the statute. Chevron, 467 U.S. at 843, 104 S.Ct. 2778; see also NetCoalition v. SEC, 615 F.3d 525, 533 (D.C.Cir.2010) (noting that we accept the agency's interpretation of the statute as long as it is reasonable). The Coast Guard contends that its position is in furtherance of the public interest because it removes the Director [of Great Lakes Pilotage] from day to day involvement in the operation of the pilotage pools and allows him to focus on oversight of the Great Lakes pilotage operations. It also allows the pilots' associations that traditionally have brought organization and efficiency to the provision of pilotage service to apply their expertise to the operation of the pool. And it promotes the availability of the necessary infrastructure for safe and efficient pilotage such as pilot boats, and office functions including billing. It promotes retention of pilots, by giving the pilots in the association some control over decisions that will affect the financial health of the pilots, the pilots' association and other entities that may provide infrastructure support to the pilots. Agency Decision on Remand at 15, J.A. 293. These justifications are reasonable, and Menkes does not question them. In sum, we have no trouble concluding that the Coast Guard's interpretations of the statute and its implementing regulations are neither manifestly contrary to the statute nor arbitrary and capricious.