Menkes v. Department of Homeland Security

United States Court of Appeals

FOR THE DISTRICT OF COLUMBIA CIRCUIT

Argued April 10, 2007 Decided May 15, 2007

No. 05-5382

RICHARD J. MENKES,

APPELLANT

v.

DEPARTMENT OF HOMELAND SECURITY, ET AL.,

APPELLEES

Appeal from the United States District Court

for the District of Columbia

(No. 04cv01456)

Jonathan G. Axelrod argued the cause for appellant. On the

briefs were Edward M. Gleason, Jr. and Richard W. Gibson.

Megan L. Rose, Assistant U.S. Attorney, argued the cause

for appellees. With her on the brief were Jeffrey A. Taylor, U.S.

Attorney, and R. Craig Lawrence, Assistant U.S. Attorney.

Michael J. Ryan, Assistant U.S. Attorney, entered an

appearance.

Before: SENTELLE and BROWN, Circuit Judges, and

SILBERMAN, Senior Circuit Judge.

2

Opinion for the Court filed by Senior Circuit Judge

SILBERMAN.

SILBERMAN, Senior Circuit Judge: Richard J. Menkes, a

ship pilot who sued the Coast Guard, appeals from the district

court’s decision holding that the court lacked jurisdiction over

his APA claim and that his constitutional claims failed to state

a cause of action. We reverse and direct a remand to the agency.

I

Appellant is a licensed pilot registered by the Coast Guard

under the Great Lakes Pilotage Act of 1960. 46 U.S.C. §§ 9301

et seq. This case has its origin in a dispute between Menkes and

the St. Lawrence Seaway Pilots’ Association, a private business

organization composed of ship pilots who provide pilotage

service on the waters of the Great Lakes.

The Great Lakes Pilotage Act generally requires that U.S.

or Canadian registered pilots navigate certain types of vessels

through designated waters of the Great Lakes. Pursuant to the

Act, the President of the United States has designated three areas

in the Great Lakes where navigation by a registered pilot is

required: District One, District Two, and District Three. To

facilitate efficient pilotage in these designated areas, the Act

permits the Coast Guard to establish “pilotage pools,” which are

to be formed by “voluntary” associations of U.S. registered

3

pilots.1 The Coast Guard authorized the Association to form

such a pool in District One.

Menkes was a member of the Association and its pilotage

pool until he quit the Association in December 2000 due to

unexplained professional differences and mounting personal

animosity between Menkes and other members of the

Association. Previously, Menkes had written to Frank J. Flyntz,

the Coast Guard’s Director of Great Lakes Pilotage, to inform

him that he (Menkes) intended to quit the Association, but that

he wanted to continue service as a registered pilot in District

One and that he “maintain[ed] [his] right to be dispatched.”2

1

The relevant section reads in full:

(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.

2

In September 1998, over two years before leaving the Association,

Menkes applied to form a second pilotage pool in District One—i.e.,

in addition to the Association—consisting solely of himself.

Menkes’s application was denied in June 2000. Flyntz’s letter

informed Menkes that the controlling statute and regulations required

that pilotage pools have more than one member. In addition, Flyntz

noted the forty-year history of the Great Lakes Pilotage Act, in which

4

Flyntz responded, telling Menkes that his resignation from the

Association “has no effect on your status as a Registered Pilot,”

and “[t]herefore you will be placed on the St. Lawrence River

tour-de-role [i.e., pilotage assignment system] at the beginning

of the [2001 navigation] season.” Flyntz also noted that he

expected Menkes would continue to use the Association’s

infrastructure and equipment, and that in accordance with Coast

Guard regulations, see 46 C.F.R. § 401.340(a)-(c), Menkes

would execute a written authorization allowing the Association

to bill Menkes for services and require his compliance with the

Association’s rules and procedures.

In March of the following year, Flyntz wrote to the

Association President, Roger Paulus, in response to Paulus’s

letter concerning Menkes’s status for the 2001 navigation

season. Flyntz stated that “Captain Menkes will continue to

serve as a pilot on the St. Lawrence River tour-de-role,” and that

he would “be available for dispatch whether or not he belongs

to a pilotage pool.” He pointed out that “[a] pilotage pool is a

voluntary association of registered pilots,” (citing 46 U.S.C. §

9304 (emphasis in original)), and that “[t]here is no mandatory

requirement in statute or regulation that requires Great Lakes

registered pilots to belong to a pool in order to provide pilotage

service.” Flyntz further noted that Menkes’s “resignation from

the Association does not . . . provide any basis for the Coast

Guard to deny him the opportunity to continue to earn his

livelihood as a U.S. registered pilot,” (emphasis added) and that

Menkes had “a vested property right in his certificate of

registration” (emphasis added) that the Coast Guard could not

revoke merely because Menkes “does not belong to a pilotage

pool.” Flyntz went on to say: “Furthermore, . . . there is a

the Coast Guard had authorized only one pool for each of the three

pilotage districts. According to Flyntz, Menkes had failed to show

that a second pilotage pool was necessary in District One.

5

serious need for qualified pilots in District 1 and . . . the

Association has not physically provided adequate pilotage

service in accordance with 46 C.F.R. § 401.720(b).”3 That

section of the Coast Guard regulations permits the Director of

Great Lakes Pilotage to order a registered pilot to provide

pilotage service whenever an association cannot provide service

due to “physical or economic inability.” Then, invoking his

authority under Coast Guard regulations, including § 401.720,

Flyntz announced his decision to dispatch Menkes as “an

independent pilot” in District One. The Association appealed

Director Flyntz’s decision to J.P. High, the Coast Guard’s

Director of Waterways Management, who denied the appeal.

Thereafter, Paul M. Wasserman became Acting Director

(and subsequently Director) of Great Lakes Pilotage, and he

apparently had a somewhat different view. On December 29,

2003, Wasserman, responding to another Association enquiry

concerning Menkes’s status as an independent pilot in District

One, wrote to both Paulus and Menkes. Wasserman rejected the

Association’s argument that a “change in circumstances”

warranted a reversal of Flyntz’s 2001 decision to place Menkes

on the tour-de-role, noting that the Association was still not

providing adequate pilotage service. Wasserman affirmed

Flyntz’s determination from 2001 and renewed that

determination for the 2003 navigation season. But he wrote that

3

Section 401.720(b) reads in full:

(b) When pilotage service is not provided by the association

authorized under [the Act] because of a physical or economic

inability to do so, or when the Certificate of Authorization is

under suspension or revocation under § 401.335, the Director

may order any U.S. registered pilot to provide pilotage service.

46 C.F.R. § 401.720(b).

6

at the “end of the season, . . . my determination, and Captain

Menkes’ appointment as an independent pilot, will naturally

expire.” This statement is the first indication from the Coast

Guard that Menkes’s status as an independent pilot was on a

season-to-season basis. Wasserman added that he would

continue to evaluate the Association’s pilotage service in order

to determine whether independent pilots were needed for the

2004 navigation season.

Then, in January 2004, Wasserman responded to appellant’s

further letters, stating:

Your letters imply that your status as an independent pilot

in District One is a permanent circumstance. . . . [Y]ou were

appointed as an independent pilot on March 7, 2001,

because [Director Flyntz] found that the Association was

not able to provide adequate pilotage service at that

time. . . . Your status as an independent pilot has been

predicated on a determination by my office that an

extraordinary circumstance exists, which I have not made

for any future navigation seasons. Therefore, it would be

inappropriate for you to consider your status as an

independent pilot in District One to be a permanent

circumstance.

The Coast Guard, at that point, appears to have set forth two

modifications to its policy. Wasserman wrote (1) that Menkes’s

appointment expired on an annual basis and (2) that any new

appointment would depend on the Director’s determination, not

just that the Association has a “physical or economic inability”

to provide service, but also that “extraordinary circumstances”

exist necessitating the appointment of an independent pilot,

which seems to be a stricter standard.

7

Menkes appealed Wasserman’s decision to Assistant

Commandant T. H. Gilmour. Gilmour denied the appeal,

essentially reiterating Wasserman’s position. Gilmour noted,

however—rather suggestively—that “Captain Menkes is free to

apply to the SLSPA for membership in that association. He is

also free to apply to other pilotage associations within the Great

Lakes since he will have a valid license and a valid certificate of

registration as a U.S. registered pilot on the Great Lakes.” The

letter concluded by noting that the denial of Menkes’s appeal

“constitutes final agency action.”

Menkes filed suit in federal district court in August 2004

seeking, inter alia, reinstatement of his status as an independent

pilot and an order prohibiting defendants from requiring Menkes

“to become a member of the Association as a condition of

working.” Menkes’s complaint lists three claims—that the

Coast Guard’s action (1) violated his associational rights under

the First Amendment; (2) violated his Fifth Amendment right to

due process; and (3) was in violation of the APA. The district

court granted defendants’ motion to dismiss. See Menkes v.

Dep’t of Homeland Sec., 402 F. Supp. 2d 204, 210 (D.D.C.

2005).

The court addressed each of Menkes’s three claims in turn,

beginning with the APA challenge. Although recognizing that

there is a strong presumption of reviewability under the APA,

the court explained that APA review is not available if agency

action is “committed to agency discretion by law.” See 5 U.S.C.

§ 701(a)(2). A matter is committed to agency discretion when

there is a lack of judicially manageable standards to guide

meaningful review. Steenholdt v. F.A.A., 314 F.3d 633, 638

(D.C. Cir. 2003). The court reasoned that the regulations, by

specifically giving the Director sole authority to make

determinations about the need for non-association pilots, failed

to provide a judicially manageable standard by which to review

8

such a decision. Thus, whether additional pilots were

required—or, alternatively, whether the Association was

providing adequate pilotage service—were questions within the

unreviewable discretion of the agency.

The district court also disposed of Menkes’s constitutional

claims. With respect to Menkes’s First Amendment association

claim, the court concluded that “defendants do not require the

plaintiff to join the [Association] as a condition to employment,”

402 F. Supp. 2d at 209-10, noting that the Coast Guard had

allowed Menkes to serve as a pilot from 2001 to 2003 without

joining the Association. Because the only “prerequisite” to

Menkes’s employment was a determination by the Director that

the Association was not providing sufficient service, the court

decided that Menkes had failed to state a valid First Amendment

claim.

Turning to Menkes’s Fifth Amendment due process claim,

the court observed that a constitutionally protected property

interest in continued employment only arises when a plaintiff

can demonstrate a legitimate claim of entitlement to the benefit

in question, rather than a mere unilateral expectation, abstract

need, or desire to have the benefit. Id. at 210 (citing Bd. of

Regents v. Roth, 408 U.S. 564, 576 (1972)). Here Menkes had

no legitimate claim of entitlement because “the pertinent

statutes themselves do not expressly create an entitlement to the

authorization of working as an independent pilot in a district

with an approved pilotage pool.” Id. (emphasis added). The

court noted that the Great Lakes Pilotage Act and the Coast

Guard’s interpretation of the Act “caution against any reliance

upon working as an independent pilot by reiterating that the

Director must first determine that ‘extraordinary circumstances’

exist rendering independent pilots necessary.” Id. Thus,

according to the court, the Act does not secure any benefit for

9

Menkes and does not support any claim of entitlement to

continued status as an independent pilot.

II

Appellant’s APA argument—that the Coast Guard’s actions

are arbitrary and capricious and contrary to law—is based first

on the claim that the Coast Guard, without explanation, changed

its position by announcing that his appointment was on an

annual basis only. Wasserman’s position is, according to

appellant, in tension with Flyntz’s earlier statement that Menkes

had “a vested property right in his certificate of registration” and

that resignation from the Association did not “provide any basis

for the Coast Guard to deny [Menkes] the opportunity to earn

his livelihood as a U.S. registered pilot.” Appellant further

claims that the Coast Guard is rather obviously, if implicitly,

attempting to compel him to rejoin the Association in order to

gain work. That, too, is an unexplained change in position and,

according to appellant, is in conflict with the statute which

explicitly describes pools as “voluntary” associations.

Relying on his contention that the Coast Guard is seeking

to compel him to rejoin the Association, appellant contends that

the agency’s behavior not only violates the governing statute,

but it also violates his First Amendment right not to be forced to

join an expressive association as a condition of employment

with the government. (Although appellant asserts that the

Association takes part in various lobbying activities, he does not

indicate that he objects to any particular position of the

Association.) Finally, appellant argues that the Coast Guard has

violated his Fifth Amendment right to due process because the

agency has deprived him of a property interest—the right to

engage in piloting pursuant to his acknowledged property

10

interest in his registration—without any hearing, or, indeed,

without anything but a conclusory explanation.4

In response, the government raises a number of threshold

jurisdictional arguments. Frankly, we do not think them worth

a tinker’s damn. First, it is claimed that since appellant only

challenged the Coast Guard’s determination of his status for the

2004 season, which has long since concluded, there is no longer

a case or controversy for us to decide; the case is thus moot

because Menkes never requested assignment for subsequent

navigation seasons. That argument improperly assumes that the

Coast Guard is correct on a disputed issue—whether appellant’s

appointment had to be renewed annually. In any event,

appellant claims that the Coast Guard’s 2004 letter, reasonably

interpreted, indicated that he would not receive assignments in

future seasons unless he rejoined the Association. Therefore,

under his theory, further requests for work in 2005 and 2006

would have been futile.

Secondly, the government challenges our jurisdiction on the

ground that the 2003-2004 letters from Wasserman and Gilmour

were not “final agency action,” see 5 U.S.C. § 704; rather, the

letters simply informed Menkes of the pre-existing fact that his

appointment would expire at the end of the 2003 navigation

season. This argument would be unworthy of the

government—the letters reflected a changed position and quite

clearly constituted a final informal adjudication—even if

4

In addition, appellant raises a substantive due process claim. We

consider this argument insubstantial. The Coast Guard’s actions, even

if mistaken, do not amount to a “conscience shocking” abuse of

executive power that violates the substantive component of the Due

Process Clause. See County of Sacramento v. Lewis, 523 U.S. 833,

846-47 (1998).

11

Gilmore had not explicitly said, “[t]his denial of your appeal

constitutes final agency action.”

Finally, we turn to the argument that persuaded the district

court—that the Coast Guard’s action is unreviewable because,

under section 701(a)(2) of the APA, the Director’s decisions in

the case are “committed to agency discretion by law.” As we

noted, the district court thought it had no manageable standards

to allow it to review the Director’s decision not to order an

independent pilot to provide service pursuant to section

401.720(b) of the Coast Guard regulations. In other words, the

court apparently considered the Association’s “physical or

economic” ability to provide adequate pilotage service an

unbounded policy question. We disagree.

In the first place, appellant raises an anterior legal claim.

He argues that if the Coast Guard regulations are read to give a

preference to members of the Association, rather than treating

non-members who comply with the pool’s working rules equally

with members, see 46 C.F.R. § 401.340, the regulations would

then conflict with the controlling statute, which only allows for

pool formation by “voluntary” associations. It can hardly be

suggested that this legal question is not susceptible to judicial

review.

Moreover, even if the Coast Guard is entitled to prefer the

Association over non-member pilots when there is limited

demand, a court could still review the Director’s determination

with respect to the adequacy of the service provided by the

pool—i.e., whether the pool has the physical and economic

ability to provide sufficient service. Center for Auto Safety v.

Dole, 846 F.2d 1532, 1534 (D.C. Cir. 1988) (per curiam) (noting

that agency regulations may provide “law to apply”). We have

often held that standards similar to that set forth in section

401.720(b) are reviewable. See, e.g., Dickson v. Sec’y of

12

Defense, 68 F.3d 1396, 1401-03 (D.C. Cir. 1995) (reviewing

decision of military review board where board “may excuse

failure to file” if in the “interest of justice”); Marshall County

Health Care Auth. v. Shalala, 988 F.2d 1221, 1223-25 (D.C. Cir.

1993) (allowing review of agency decision to provide exceptions

“as the Secretary deems appropriate” because statutory scheme

provided sufficient standards to guide review). To be sure, the

Director might be entitled to a good deal of deference in

determining whether the pool was physically or economically

able to provide adequate service, but that does not mean the

Director could make such decisions unreasonably. For example,

it would be presumably arbitrary and capricious for the Coast

Guard to ignore an obvious unfilled demand for pilotage service,

or to change its standards for determining what level of service

is adequate without explanation. Also dubious would be a

refusal to appoint a pilot for reasons not mentioned in the

regulations, such as an effort to force the pilot to join the

Association.

III

It is not appropriate for us to decide appellant’s statutory

argument—that giving a preference to the Association conflicts

with the controlling statute’s use of “voluntary association”—at

this time. We cannot pass comfortably on that question because

we do not have a forthright agency interpretation of the statute.

Paradoxically, the government argues that we should give

deference to its interpretation under Chevron U.S.A., Inc. v.

Natural Resources Defense Council, Inc., 467 U.S. 837 (1984).

But putting aside the question raised by United States v. Mead

Corp., 533 U.S. 218 (2001)—whether an interpretation

advanced only in an informal adjudication is entitled to

deference—in this case we do not have an explicit agency

interpretation of either the statute or the regulation to evaluate.

To be sure, section 401.720(b) could be read to imply a

13

preference for the Association. The Wasserman and Gilmour

letters could also be read to suggest as much.5 But an

implication is not an agency interpretation, and we are

disinclined to tease out, from the welter of correspondence in

this case, an interpretation the agency itself has failed to offer.

The statutory question is potentially a difficult one. The Coast

Guard must come to grips with the meaning of the statute, and,

particularly, the meaning of the term “voluntary association.”

An agency interpretation is not only necessary to meet

appellant’s administrative law challenge, it is also essential, as

we will explain, to meet his constitutional claims.

Even assuming that the Act can be interpreted to allow the

Coast Guard to give a preference to pool members so long as the

Association has the physical and economic ability to meet

demand, the record is silent on whether that was so when

appellant was denied an appointment in 2004. Of course, this

was an informal adjudication, and it is common for the record to

be spare in such cases. See, e.g., Camp v. Pitts, 411 U.S. 138,

139-41 (1973). But here we have no indication that in 2004 the

situation had changed from earlier years when the pool could not

provide adequate service. Moreover, Director Wasserman’s use

of “extraordinary circumstances,” as we have noted, seems to be

an unexplained, stricter threshold for the appointment of non-

member pilots than the regulation’s text contemplates. Thus, if

the pool could not meet demand, and the Coast Guard was

simply seeking to compel Menkes to join the Association, that

decision might be thought in contravention of the Coast Guard’s

own regulations. In any event, the Coast Guard has offered no

5

In addition, the large price of Association membership, $60,000,

might suggest that members expect at least a preference in assignment;

on the other hand, the membership stake could reflect only an equity

interest in boats and equipment. The record does not tell us which is

the case.

14

explanation regarding the changed conditions from the 2003 to

2004 navigation season, and on remand it will be obliged to do

so.6

The district judge dismissed appellant’s constitutional

contentions for failure to state a claim. We think that was at

least premature. Menkes’s First Amendment claim depends on

the assumption that the Coast Guard was attempting to force him

to join the Association as a condition of employment. As we

understand his position, even granting a preference to pool

members would constitute such compulsion. Although he never

indicates what expressive conduct by the Association he finds

objectionable, he does argue that forcing him to join the

Association is a First Amendment violation. For this point, he

relies primarily on Abood v. Detroit Board of Education, 431

U.S. 209, 234-35 (1977). Abood stands for the proposition that

the government may not compel an employee to subsidize the

political (i.e., non-representational) speech of his or her labor

union—although, under previous Supreme Court case law,

compulsory union membership is permitted as a condition of

employment. Appellant seeks to extend the Abood principle to

his situation by arguing that the government cannot force him to

join an expressive, private organization as a condition of

employment with the government. Before grappling with this

First Amendment issue, however, we would like to see how the

Coast Guard responds to our remand order on appellant’s APA

claim. Conceivably, this question will be mooted.7

6

If the Coast Guard’s view of adequacy of supply changed in 2004, an

explanation would have to include specific comparisons.

7

Appellant’s prayer for relief asks, inter alia, that he be “ma[d]e

whole” for his lost employment opportunities, but it is unclear on what

basis he seeks such a remedy.

15

Finally, appellant’s Fifth Amendment due process claim

raises quite troublesome issues. It rests on the proposition that

Menkes had a property interest in his Coast Guard registration,

and also in his appointment as an independent pilot. The district

court, as we observed, rejected that notion out of hand, asserting

that the Act did not confer such an interest. But the Supreme

Court has recognized that a property interest in employment can

be created through informal understandings between an

institution and its employee. Perry v. Sinderman, 408 U.S. 593,

600-03 (1972). By analogy, it might be thought that appellant’s

registration as a pilot carried an entitlement to certain

appointments. After all, Director Flyntz’s March 2001 letter

explicitly referred to Menkes’s “property right in his registration

certificate” and suggested that right gave him “an opportunity to

continue to earn his livelihood.” And Flyntz never suggested

that Menkes’s appointment was year-to-year.8

Whether appellant had an entitlement to a pro rata share of

all pilotage assignments—or even such assignments as the pool

could not adequately meet—would depend on the nature of the

understandings reached between the Coast Guard and the pilots.

And if it were shown that appellant had a property interest in

such assignments as the pilotage pool could not meet, then he

would be entitled, under the Fifth Amendment, to a further

hearing to determine whether conditions constituting adequate

pilotage service actually existed. Again, this issue might well

be moot after remand, but we should note that if appellant

succeeded in establishing a constitutionally protected interest in

property, he would have an opportunity to challenge factual

8

Wasserman may have been attempting to unilaterally convert a

Sinderman case to a Roth case—i.e., from one in which there is an

understanding of permanent employment status to one in which the

employee has only a year-to-year expectancy.

16

determinations not normally present in deferential APA review

of informal adjudications.

IV

For the foregoing reasons, the judgment of the district court

is reversed and the decision of the Coast Guard is vacated. We

remand this matter to the district court with instructions to

remand the APA claim to the Coast Guard for further

proceedings consistent with this opinion. The district court

should retain jurisdiction over appellant’s constitutional claims,

but hold them in abeyance pending the Coast Guard’s response

to the remand.