Court Opinion

ID: 7839195
Source: CourtListenerOpinion
Date Created: 2022-09-08 16:56:50.465856+00
Date Added: 2024-06-11T15:58:11.945377
License: Public Domain

BAZELON, Circuit Judge,
dissenting:
Although the majority gives a plausible account of the statutory framework governing this case, I am persuaded that nothing in the Merchant Marine Act precludes the Secretary from waiving domestic trading restrictions in return for total repayment of subsidy. In my view, the Secretary had ample authority to enter into the contractual modification at issue in this case, and in exercising that authority she did not abuse her discretion. I therefore respectfully dissent from the decision to reverse the district court.
I.
I cannot agree that the 1938 Amendments to the Merchant Marine Act of 1936 “unmistakeably manifested” 1 Congress’ intention to preclude total repayment of the construction differential subsidy in return for a permanent waiver of the domestic trading restrictions contained in § 506 of the Act. The Report of the House Committee on Merchant Marine and Fisheries observed that “[n]o fundamental change . has been effected” in § 506 by the 1938 Amendments.2 The original version of § 506 was part of Congress’ effort to strengthen the American built and operated “foreign-going” fleet through the creation of a “construction differential subsidy,” which replaced the much abused “ocean mail contract subsidy” program. One of the principal failures of the ocean mail subsidy was the diversion of subsidy payments from foreign to domestic service, providing the subsidized operators an unfair advantage over the unsubsidized, “Jones Act” operators.3
The 1936 Act eliminated much of the unfair competition by restricting the conditions under which a ship built with a construction subsidy could engage in the domestic trade. At the heart of the original § 506 was the requirement that owners of subsidized vessels must repay a portion of the construction differential subsidy corresponding to the remaining economic life of the vessel in order to engage in direct competition with the unsubsidized, Jones Act fleet.4
*34The remaining text of § 506, however, introduced a central ambiguity into the operation of the section, an ambiguity that led to the 1938 amendment.5 The original § 506 could be read to permit permanent waiver of the domestic trade restrictions, contingent on proportional repayment of subsidy, as well as “emergency” temporary waiver of restrictions without the need to pay back any of the construction differential subsidy. Alternatively, the section could be read to permit only temporary waivers, coupled with the requirement of payback.
As Judge Wilkey notes, the former is the more plausible interpretation of the original § 506.6 Accordingly, the “original purpose” of § 506 included the possibility of permanent waiver so long as the source of unfair competition, the previously granted construction differential subsidy, was eliminated. In contrast, the ability to secure emergency temporary waivers without the required payback of subsidy did provide operators of subsidized vessels a significant advantage over their Jones Act competitors. It therefore seems likely that Congress was addressing this latter situation when clarifying the “original purpose” of § 506. Congress clearly eliminated the temporary waiver advantage, since the amended § 506 clearly requires a payback of subsidy for even temporary transfers.
Nonetheless, it is undeniable that in eliminating the 3-month temporary transfer for which no subsidy need be repaid, Congress also eliminated from § 506 the language that appeared to authorize permanent transfer from foreign to domestic service. Despite its expressed intention not to alter the “original purpose” of the section, the House Report stated:
The section has been entirely rewritten in order to remove ambiguities arising from the method of describing the services other than foreign. ... If the vessel is used, with the consent of the Commission, in the domestic trade in services other than those enumerated, the obligations of the owner to repay part of the subsidy are clearly defined.7
The clearly defined obligation of the amended § 506 includes partial, but not permanent repayment of subsidy. Yet nowhere in the legislative history is there any indication that permanent waivers, apparently permissible under the 1936 Act, were expressly considered and eliminated in 1938.8
*35II.
In 1964, the Comptroller General issued his decision in Grace Line9 upholding the Secretary of Commerce’s authority to remove domestic trading restrictions in return for repayment of the unamortized construction differential subsidy. Although there are some factual differences between the present case and Grace Line, I do not believe that they are material to the question of the Secretary’s authority, since the action taken in Grace Line was not contemplated by the express language of § 506 any more clearly than the present action of the Secretary.
I find the Comptroller’s rationale in Grace Line questionable. The Comptroller’s reasoning began with the observation that ships built with subsidy would be permitted to engage in domestic activities without restriction once the subsidy had been fully depreciated. In the Comptroller’s view, this represented a congressional judgment that when the unfair advantage created by the subsidy terminated, the reasons for the restriction would expire, thus justifying unrestricted domestic trading by previously subsidized vessels. Applying the same reasoning to an “accelerated amortization” through repayment, the Comptroller concluded that the purpose of the restrictions would lapse upon repayment, and the Secretary could then permit domestic trading, consistent with the Act.
The difficulty with this argument is that the statute explicitly contemplates a subsidized ship entering unrestricted domestic trade after the economic life of the subsidized vessel had expired, without any further repayment of subsidy.10 In contrast, no such explicit provision governs “accelerated” amortization.
Although Grace Line thus does not stand as well-reasoned precedent, it is precedent nonetheless, and appellees argue that subsequent congressional actions represent ratification of at least the result in Grace Line.
In 1970, Congress enacted a number of amendments to the Merchant Marine Act designed to promote American ship-building for the foreign trade, but § 506 was left intact.11 However, Congress’ failure to amend § 506 under those circumstances cannot be viewed as a ratification of Grace Line, since the issue of transfer from the foreign to domestic trade was not germane to the principal focus of the Amendments.
A stronger case can be inferred from Congress’ amendment in 1972 of § 1104 of the Merchant Marine Act.12 As introduced, the new § 1104(a)(3) clearly contemplated the release of the domestic trading restrictions in return for full repayment of subsidy. The House Committee however, deleted the explicit reference to repayment in return for lifting the trading restrictions, observing:
In the entire history of the administration of the 1938 Act there has been only one instance where a construction-differential subsidy repayment, authorized by the Secretary under very special circumstances, could have called into play the provisions of this paragraph. Your committee questions the desirability of general legislation to deal with such an unusual situation and feels that Title XI assistance should be extended in all instances of subsidy repayments under Title V, so as to include the relatively frequent situ*36ation of repayments under the first sentence of section 506 of the Act. Your committee therefore has amended the legislation by deleting the language.13
There are three items of note in the quoted passage. First, Congress showed a clear awareness of the Grace Line precedent. Second, by characterizing the purpose of the language so as “to include” partial repayments, Congress intended that other types of repayment might occur.14 Finally, Congress indicated that the enactment of § 1104(a)(3) was not, in its view, an alteration of Title V. Thus, whether or not such repayments were intended must be gauged by the Act as it stood prior to 1972. But in judging what restrictions Title V imposed prior to 1972, we must take into account Congress’ awareness of Grace Line as an interpretation of Title V.
I have little doubt that in enacting the 1972 Amendments the House Committee clearly contemplated the use of § 1104(a)(3) loans for precisely the sort of repayment of subsidy at issue in Grace Line and here, albeit with the expectation that full repayment would be rare. There is no note of disapproval in the House Committee’s discussion of Grace Line. A fortiori, the House Committee must have believed the Secretary had the authority to accept repayment in return for waiving domestic trading restrictions, and that Title V posed no barrier to such an arrangement.
III.
This result is perfectly consistent not only with the overall purposes of the Act (fostering the development of a U.S.-flag, U.S.built merchant marine) but is equally consistent with the purpose of the trading restrictions imposed by § 506. Unlike the temporary transfers, a permanent transfer does not allow the vessel’s operator to take advantage both of the benefits of subsidy in foreign trading, and the protection of the Jones Act in domestic trading. Full repayment of subsidy irrevocably places the transferred vessel on the same footing as all other ships in the Jones Act fleet, without affording an unfair advantage to the previously subsidized operator.15 The only conceivable harm to the Jones Act operators is an increase in competition from an additional U.S.-flag, U.S.-built vessel. I do not believe it is the purpose of § 506 in particular, or the Merchant Marine Act as whole, to protect Jones Act operators from this type of competition.16
The fact that the 92nd Congress thought that § 506 did not preclude removal of *37domestic trading restrictions in return for full repayment does not conclusively end our inquiry. Although the views of subsequent Congresses are entitled to significant weight, NLRB v. Bell Aerospace Co., 416 U.S. 267, 275, 94 S.Ct. 1757, 40 L.Ed.2d 134 (1974), where the intent of the enacting Congress is unmistakable, it is the latter that controls, unless expressly overriden by the positive act of a later Congress. International Brotherhood of Teamsters v. United States, 431 U.S. 324, 354 n. 39, 97 S.Ct. 1843, 52 L.Ed.2d 396 (1977). The difficulty posed by this case is, on the one hand, the original intent is not unmistakable (as in Teamsters) but, on the other hand, the intention of the later Congress was not embodied in legislation directly affecting the ambiguous provision, that is, Title V.
Although the matter is not free from doubt, I would affirm the decision of the district court, subject to the qualification expressed in note 15, supra.17 My conclusion is buttressed by the language in both §§ 501 and 504 of the Act, 46 U.S.C. §§ 1151 and 1154 (1970), that “[t]he contract of sale shall not restrict the lawful or proper use or operation of the vessel, except to the extent expressly required by law.” (Emphasis added.) Taking all the relevant guides to interpretation together, I cannot say that the Secretary’s interpretation is unreasonable. See Udall v. Tallman, 380 U.S. 1, 16-18, 85 S.Ct. 792, 13 L.Ed.2d 616 (1965), nor that there are “compelling indications” that her interpretation is wrong, see E. I. du Pont de Nemours & Co. v. Collins, 432 U.S. 46, 54-55, 97 S.Ct. 2229, 53 L.Ed.2d 100 (1977); Columbia Broadcasting System, Inc. v. Democratic National Committee, 412 U.S. 94, 121-22, 93 S.Ct. 2080, 36 L.Ed.2d 772 (1973).
Despite the statement of counsel for the Secretary at oral argument, I do not believe the question of whether the Secretary must make a finding of necessity for a full repayment is relevant to the Secretary’s authority to accept such repayment, since full repayment is not expressly covered by § 506.18 A finding of need is mandated by § 506 for partial repayment and temporary transfer. This is consistent with a concern that subsidized carriers not take unfair advantage of unsubsidized carriers simply to skim off the most lucrative domestic trade and return at will to foreign service. In contrast, full repayment places the formerly subsidized carrier on an equal footing with the other vessels in the Jones Act fleet, and the possibilities of abuse are thereby eliminated. Nonetheless, the Secretary cannot arbitrarily agree to accept repayment, but rather must provide a reasoned basis for that action. The circumstances of this case provide ample support for the Secretary’s discretionary decision to accept repayment.

. Majority Op. at 22 of 194 U.S.App.D.C., at 829 of 595 F.2d.

. H.R.Rep.No.2168, 75th Cong., 3d Sess. 21 (1938).

. See, Preliminary Report of the Special Committee of the Senate to Investigate Air Mail and Ocean Mail contracts. S.Rep.No.898, 74th Cong., 1st Sess. 1933.

. P.L. 74-835, 49 Stat. 1999 (1936), the original § 506 provided inter alia:
It shall be unlawful to operate any vessel, for the construction of which any subsidy has been paid pursuant to this title, other than exclusively in foreign trade, or on a round-the-world voyage or a round voyage from the west coast of the United States to a European port or ports or a round voyage from the Atlantic coast to the Orient which includes intercoastal ports of the United States, or on a voyage in foreign trade on which the vessel may stop at an island possession or island territory of the United States, unless the owner of such vessel shall receive the written consent of the Commission so to operate and prior to such operation shall agree to pay to the Commission, upon such terms and conditions as the Commission may prescribe, an amount which bears the same proportion to the construction subsidy theretofore paid or agreed to be paid (excluding cost of national-defense features as hereinbefore provided), as the remaining economic life of the vessel *34bears to its entire economic life. If an emergency arises which, in the opinion of the Commission, warrants the temporary transfer of a vessel, for the construction of which any subsidy has been paid pursuant to this title, to service other than exclusive operation in foreign trade, the Commission may permit such transfer: Provided, That no operating differential subsidy shall be paid during the duration of such temporary or emergency period, and such period shall not exceed three months.

. See note 3, supra.

. Majority Op. at 19 of 194 U.S.App.D.C., at 826 of 595 F.2d.

. H.R.Rep.No.2168, supra, note 2, at 21 (emphasis added).

. Compare Majority Op. at 21 of 194 U.S.App.D.C., at 828 of 595 F.2d. The discussion of the amendment to § 506 was sparse. In addition to the above-discussed House Report, reference to the amendment was limited to: 1) a brief similar comment in the Senate Report, S.Rep.No.1618, 75th Cong., 3d Sess. 12-13 (1938), quoted in pertinent part in Majority Op. at 21 n.52 of 194 U.S.App.D.C., at 828 n.52 of 595 F.2d; 2) the comment of Maritime Commission Chairman Joseph P. Kennedy in introducing the 1938 Amendments, see Amending Merchant Marine Act, 1936, hearings on H.R. 8532 before the House Committee on Merchant Marine and Fisheries, 75th Cong., 2d Sess. 8 (1938) quoted in Majority Op. at 25-27; and 3) the testimony of E. M. Bull (president of an unsubsidized carrier), id. at 251-258; John T. Corbett (representing the Brotherhood of Locomotive Engineers), id. at 571-72; and Edgar F. Luckenbach (president of an unsubsidized carrier), id. at 105-06. Although none of the comments can be fairly characterized as resolving the question before this court, it is instructive that the comments of the unsubsidized operators, Bull and Luckenbach, generally criticized the amendments as extending rather than restricting the right of subsidized operators to compete with the unsubsidized vessels. The failure of these witnesses to comment favorably on the apparent elimination of the right to transfer permanently may be some indication that eliminating the permanent waiver was not intended. Alternatively, their failure to address permanent transfer may suggest that the pros*35pect of a permanent waiver accompanied by repayment of subsidy was not viewed as a threat to domestic, unsubsidized carriers. It is clear from the testimony that the principal concern of the unsubsidized operators was the ability of subsidized ships to move back and forth between foreign and domestic service, enjoying the benefits of subsidy on their foreign voyages and entering the domestic service only on the choicest routes and occasions. Permanent transfer does not pose similar problems.

. 44 Comp.Gen. 180 (1964).

. P.L. 88-225, 77 Stat. 469 (1963), 46 U.S.C. § 1125 (note) (1970), amended the basis for computing the amount of subsidy to be repayed pursuant to § 506. Application of that formula yields a zero repayment once the subsidy has been fully depreciated.

. Merchant Marine Act of 1970, P.L. 91 — 469, 84 Stat. 1018 (1970).

. Federal Ship Financing Act of 1972, P.L. 92-507, 86 Stat. 909 (1972).

. H.R.Rep.No.72-688, 92d Cong., 1st Sess. 9-10 (1971).

. Admittedly, the fact that full repayment was contemplated by the 1972 amendments is not in itself sufficient to establish congressional approval of removing domestic trading restrictions in return for that repayment. There are other reasons why an operator might seek to repay the subsidy. For example, the operator might seek the right to engage in foreign-to-foreign, rather than foreign-to-U.S. trade, with the attendant relief from U.S. flag requirements. Alternatively, repayment of subsidy would make the operator eligible to secure financing of up to 87‘/2% of the cost of the vessel.

. To the extent that the Secretary did not require a repayment of subsidy with interest, the owners of the Stuyvesant did receive an unfair advantage. Accordingly, I would modify the decision of the district court to require the amount of repayment to include interest on the subsidy.

. This raises an interesting question of appellants’ standing to challenge the Secretary’s decisión. The issue of standing is not addressed in Judge Wilkey’s opinion. I take it that the only “injury in fact” which appellants can allege is the harm from additional competition. Although I believe this is an adequate basis for appellants’ standing, see Ass’n of Data Processing Organizations, Inc. v. Camp, 397 U.S. 150, 90 S.ct. 827, 25 L.Ed.2d 184 (1970), it demonstrates that appellants are concerned primarily with insulating their vessels from competition. Although the nation’s merchant marine policy does shield domestic carriers from competition by foreign built vessels, as well as from unfair competition by subsidized vessels, it was not intended to limit the competition among American built, unsubsidized vessels. Appellant Shell argues that “[pjersons planning to construct unsubsidized vessels must be able to assess future vessel supply in the legislatively protected domestic market.” Reply Br. for Shell at 3. This mischaracterizes the protection created by the Jones Act and § 506, since the builder of an unsubsidized vessel has no way of knowing how many other unsubsidized vessels might be built in the future.

. Assuming that § 506 does not preclude full repayment of subsidy in return for removing domestic trading restrictions, I believe the Secretary has the authority, pursuant to § 207 of the Act, 46 U.S.C. § 1117 (1970) to amend the contract to remove the domestic trading restrictions. The Secretary has recognized that her discretion to do so is not unlimited, see the Secretary’s proposed rule, Construction-Differential Subsidy Repayment, Total Repayment Policy, 43 Fed.Reg. 51045 (1978) (to be codified in 46 C.F.R. § 276.3), and must be exercised consistent with the overall purposes of the Act.

. Compare Majority Op. at 15-16 of 194 U.S.App.D.C., at 822-823 of 595 F.2d.