Opposition Brief — Independent U. S. Tanker Owners Committee v. Skinner

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" SPANIOL, JR.

IN THE oa oa

Supreme Court of the United ——

OCTOBER TERM, 1989

INDEPENDENT U.S. TANKER OWNERS COMMITTEE, et al.,

Petitioners,

Vv.

SAMUEL K. SKINNER, SECRETARY OF THE UNITED STATES

DEPARTMENT OF TRANSPORTATION, et al.,

Respondents.

On Petition for a Writ of Certiorari to the

United States Court of Appeals

for the District of Columbia Circuit

BRIEF IN OPPOSITION FOR RESPONDENTS

ATLANTIC RICHFIELD COMPANY, BP OIL SHIPPING

COMPANY, USA, AND AMERICAN PETROFINA,

INCORPORATED

MICHAEL JOSEPH A. STEPHEN HUT, JR.

Tuomas L. Muis Counsel of Record

E. ALEX BLANTON PATRICK J. CAROME

Dre, Eis, Joseru & MILLs Teresa D. BAER

600 New Hampshire Ave., N.W. WILMER, CUTLER & PICKERING

Washington, D.C. 20037 2445 M Street, N.W.

(202) 944-3000 Washington, D.C. 20037

(202) 663-6000

Attorneys for Respondents

Atlantic Richfield Company and BP Oil Shipping Company, USA

Roy G. BOwMAN DANIEL JOSEPH, P.C.

RICHARD H. SALTSMAN JONATHAN S. SPAETH

Verner, Larrert, BERNHARD, AKIN, GuMP, STRAUSS, HAUER

McPHERSON & HAND & FELD

901 15th Street, N.W. 1333 New Hampshire Ave., N.W.

Suite 700 Suite 400

Washington, D.C. 20005 Washington, D.C. 20036

(202) 371-6000 (202) 887-4000

Attorneys for Respondent American Petrofina, Incorporated

March 5, 1990

Witeow - Erase Painting Co., Inc. - 789-0096 - WASHINGTON, D.C. 20001

QUESTIONS PRESENTED

1. Did the court of appeals correctly construe appro-

priations legislation when it held that, under the plain

meaning rule, the statute applied prospectively only and

did not invalidate a rule promulgated by the Maritime

Administration (“MarAd’) weeks before the enactment

of the legislation in question?

2. Did the court of appeals correctly hold that the

rule in question was not “arbitrary or capricious,” where

MarAd had fully explained the rule’s basis and pur-

pose, the ways in which it promoted the objectives of the

Merchant Marine Act, 1936, 46 U.S.C. app. § 1101, et

seq., and the reasons why it adopted the rule in prefer-

ence to proffered alternatives?

(i)

PARTIES TO THE PROCEEDING

The parties are correctly identified in the petition for

a writ of certiorari (page ii), except that the corporate

name of SPC Shipping Inc., an appellant in the court

of appeals and a respondent here, has been changed to

BP Oil Shipping Company, USA.

Pursuant to Rule 29.1, and consistent with their un-

derstanding of the purposes of the Rule, respondents set

forth those parents and subsidiaries of respondents with

outstanding securities that are in the hands of the public:

Atlantic Richfield Company

Agro Internacional, S. de R.L. de C.V.

Alyeska Pipeline Service Company

Arco Chemical Company

Badger Pipe Line Company

Black Lake Pipe Line Company

Blair Athol Coal Pty., Limited

Colonial Pipeline Company

Cook Inlet Pipe Line Company

Dixie Pipeline Company

East Texas Salt Water Disposal Company

85819 Canada Limited

Iricon Agency Ltd.

Kenai Pipe Line Company

Kuparuk Transportation Company

Kuparuk Transportation Capital Corporation

Logan Aluminum Inc.

Lyondell Petrochemical Company

Nihon Oxirane Company, Ltd.

Platte Pipe Line Company

Showa Arco Solar Far East PTE LDD

Showa Arco Solar KK

Tecumseh Pipe Line Company

Texas-New Mexico Pipe Line Company

iii

BP Oil Shipping Company, USA

Anadromous, Inc.

BP America Inc.

BP Australia Holdings Limited

BP Canada Inc.

BP Capital BV

BP Developments Australia Limited

BP Exploration ( Alaska) Inc.

BP Finance Australia Limited

BP France

BP North American Finance Corporation Inc.

BP Oil Company

BP Oil Distribution Limited

BP Overzee BV

BP Pipelines (Alaska) Inc.

The British Petroleum Company p.l.c.

Britoil p.l.c.

Hope Brook Gold Inc.

Lear Petroleum Corporation

Old Ben Coal Company

Service Station Holdings Inc.

The Standard Oil Company

Truckstops Corporation of America

Western Ground Rents Limited

American Petrofina, Incorporated

American Petrofina, Incorporated is majority owned,

through a series of affiliated holding companies, by

Petrofina S.A., a Belgian company whose stock is not

publicly traded in the United States.

TABLE OF CONTENTS

TABLE OF AUTHORITIES ......................... seiatibeslinngiiiy

STATEMENT OF THE CASE ..0uo0.020022.2..ee.ceecccsseceeeeee

REASONS FOR DENYING THE WRIT ..................

FUNDAMENTAL PRINCIPLES OF STAT-

UTORY CONSTRUCTION SUPPORT THE

HOLDING OF THE COURT OF APPEALS

THAT SECTION 505 APPLIES PROSPEC-

TIVELY ONLY, AND THAT DECISION DOES

NOT WARRANT REVIEW BY THIS COURT..

II.

The Plain Language of Section 505 Demon-

strates That the Statute Does Not Invalidate

Ge Te BE edssieen ee

. Even Assuming That Resort to Legislative

History Were Appropriate, the Legislative

History Makes Clear That the Statute Was

Intended To Apply Prospectively Only .......

The Decision Below Does Not in Any Way

Undercut Congressional Ability To Enact

Substantive Legislation Through Appropri-

ations Bills .. ainalinaticaskeuatied

THE COURT OF APPEALS’ DECISION NOT

TO SECOND-GUESS THE AGENCY’S DE-

TERMINATION ON A MATTER CLEARLY

COMMITTED TO AGENCY DISCRETION

WAS CORRECT AND PRESENTS NO ISSUE

WARRANTING THIS COURT’S REVIEW

COTE | cceviccrsesscvsteinesnasmennnns senhbabcigaaniaies

(v)

TABLE OF AUTHORITIES

Cases: Page

Alaska Bulk Carriers, Inc. v. Kreps, 595 F.2d 814

(D.C. Cir. 1979), rev'd, Seatrain Shipbuilding

Corp. v. Shell Oil Co., 444 U.S. 572 (1980) _...... 17

Allied Structural Steel v. Spannaus, 438 U.S. 234

fT RE Re eer tS AS, LESSEE aes 8

Bowen v. Georgetown University Hospital, 109

ey a Me I ee ee 8

Bowsher v. Synar, 478 U.S. 714 (1986) .. pala 13

Caminetti v. United States, 242 U.S. 470 (1917) — 7

Chevron U.S.A. v. National Resources Defense

Council, Inc., 467 U.S. 837 (1984)... 15

Energy Reserves Group, Inc. v. Kansas Power &

Light Co., 459 U.S. 400 (1983)... x

Garcia v. United States, 469 U.S. 70 (1984) _.. 10

Greene v. United States, 376 U.S. 149 (1964) .. -

Independent U.S. Tanker Owners Committee v.

Lewis, 690 F.2d 908 (D.C. Cir. 1982) es 3

Independent U.S. Tanker Owners Committee v.

Dole, 809 F.2d 847 (D.C. Cir.), cert. denied, 484

U.S. 819 (1987) ............ | 3,4

INS wv. Cardoza-Fonesca, 480 US. 421 (1987). 10

Motor Vehicle Manufacturers Association v. State

Farm Mutual Automobile Insurance Co., 463

U.S. 29 (1983) 15

National Treasury Employees Union v. Devine.

733 F.2d 114 (D.C. Cir. 1984) 13

Puerto Rico Maritime Shipping Authority v. Dole,

619 F. Supp. 312 (D.D.C. 1985), vacated as

moot, 825 F.2d 502 (D.C. Cir. 1987) 18

Schweggman Bros. v. Calvert Distillers Corp., 341

U.S. 384 (1981) 10

Seatrain Shipbuilding Corp. v. Shell Oil Co., 444

U.S. 572 (1980) 2, 3, 16, 17, 18

TVA v. Hill, 4837 U.S. 153 (1978) 8

Union Pacific Railroad v. Laramie Stock Yards

Co.. 231 U.S. 190 (1918) Q

United States v. Locke, 471 U.S. 84 (1985) 10

vii

TABLE OF AUTHORITIES—Continued

Page

United States v. Security Industrial Bank, 459

Ry Me tte al alecena mn eaandaaeebet 8

United States v. Sperry Corp., 110 S. Ct. 387

a aa ara etal ada ahcacesednabaliian 8

United States Marine International, Inc. v. Peter-

son, 518 F.2d 1070 (D.C. Cir. 1975), cert. de-

Ne Bit Ee ETI ccccstsecestsewtexteteeetentnnns 18

Statutes and Regulations:

Administrative Procedure Act, 5 U.S.C. § 553(d)

(3) 5

Merchant Marine Act, 1936, 46 U.S Cc. app. § 1101,

et seq. indi telstsiainscilehabaanaaane , i, 1

42 U.S.C. app. § 1101 2

gh SES EES eee ovens Noor 9

16 U.S.C. app. §§ 1151-1161 2

46 U.S.C. app. § 1156 * 2

16 U.S.C. app. § 1171 (a). 15, 17

16 U.S.C. app. § 1171 (a) (4) 18

16 U.S.C. app. § 1173 (a) ; ; 18

16 U.S.C. app. § 1223 18

Pub. L. No. 100-71, 101 Stat. 391, 471 (1987) 5, 7

16C F.R. § 276.3 9

15 Fed. Reg. 68,393 (1980) 3

18 Fed. Reg. 4408 (1983) 9

Legislative Materials:

H.R. ConFr. REP. No. 195, 100th Cong., lst Sess.

112 (1987) Ae ae eo Oe 12

H.R. Rep. No. 28, 100th Cong., lst Sess. 120-21,

REI a ate? Pee ee ARO ORT IOI 11,12

S. Rep. No. 48, 100th Cong., lst Sess. 164 (1987) 11

133 Cong. Rec. E3170 (daily ed. July 30, 1987)

(remarks of Rep. Regula) ....... 12, 14

133 Cong. Rec. H2792 (daily ed. July 8, 1987)

(remarks of Rep. Carr) ............... a 10

133 Cong. Rec. $9142 (daily ed. July 1, 1987)

(remarks of Sen. Hollings) ................ 10

viii

TABLE OF AUTHORITIES—Continued

133 Cong. Rec. $10,866 (daily ed. July 29, 1987)

(remarks of Sen. Mikulski) .................

“Statement of Administration Policy” (Apr. 15,

I a

Statement of the President Upon Signing H.R.

1827, 23 WEEKLY CoMP. PREs. Doc. 800 (July 20,

BORE RE £27 Pe Reel RN rp deen ia Bains es

peewee Semen BE, Te SG oo cccccccnccss.ss..

gs AY meee

Miscellaneous:

Devins, Regulation of Government Agencies

Through Limitation Riders, 1987 DUKE L.J. 456..

GAO, PRINCIPLES OF FEDERAL APPROPRIATIONS

LAW (ist ed. 1982)

Parnell, Congressional Interference m Agency En-

forcement: The IRS Experience, 89 YALE L.J.

1360 (1980) a ; eae: Pe

SUTHERLAND STATUTORY CONSTRUCTION (Sends

ith ed. 1984 & 1985)

Page

11,14

IN THE

Supreme Court of the United States

OCTOBER TERM, 1989

No. 89-1223

INDEPENDENT U.S. TANKER OWNERS COMMITTEE, et al.,

: Petitioners,

SAMUEL K. SKINNER, SECRETARY OF THE UNITED STATES

DEPARTMENT OF TRANSPORTATION, et al.,

Respondents.

On Petition for a Writ of Certiorari to the

United States Court of Appeals

for the District of Columbia Circuit

BRIEF IN OPPOSi TION FOR RESPONDENTS

ATLANTIC RICHFIELD COMPANY, BP OIL SHIPPING

COMPANY, USA, AND AMERICAN PETROFINA,

INCORPORATED

Respondents Atlantic Richfield Company, BP Oil Ship-

ping Company, USA, and American Petrofina, Incorpo-

rated respectfully request that this Court deny the peti-

tion for a writ of certiorari filed by petitioners Inde-

pendent U.S. Tanker Owners Committee, et al., seeking

review of the decision of the United States Court of Ap-

peals for the District of Columbia Circuit in this case.

STATEMENT OF THE CASE

This case concerns the lawfulness of a rule prom™!gated

by the Maritime Administration (“MarAd”’) pursuant to

its authority under the Merchant Marine Act, 1936 (the

“Act”), 46 U.S.C. app. $1101, et seg. To promote the

development of a strong, competitive merchant marine,

see 46 U.S.C. app. $1101, Title V of the Act, 46 U.S.C.

app. §§ 1151-1161, authorizes the Secretary of Transporta-

tion to pay a construction-differential subsidy (“CDS”)

of up to half of the cost of constructing a ship in the

United States for operation in the foreign trade. By

lowering the effective cost of American ship construction,

CDS is intended to permit American-built vessels to com-

pete successfully in the foreign trade with vessels built

abroad.

Because CDS-built vessels have a capital-cost advantage

over vessels built at unsubsidized domestic cost, Section

506 of the Act, 46 U.S.C. app. § 1156, requires the owner

of a CDS-built vessel, as a condition of receiving the

subsidy, to agree not to operate the vessel domestically.

Under Section 506, the Secretary may waive this con-

tractual restriction for periods not exceeding six months

per year in exchange for repayment of a pro rata portion

of the CDS paid for the vessel's construction. From 1977

through 1984, MarAd granted 43 such temporary waivers.

These requests for waiver were prompted, as MarAd

found, Pet. App. 52a-53a, by the collapse of opportunities

for CDS vessels in the world tanker market, and by the

simultaneous increased demand for such vessels to trans-

port Alaska North Slope crude oil in the domestic trade.

Virtually all of these waivers went to Very Large Crude

Carriers ‘(“VLCCs"), which MarAd considers the most

suitable ships to transport crude oil from Alaska to

Panama, for transshipment through the Canal to East and

Gulf Coast ports.

In Seatrain Shipbuilding Corp. v. Shell Oil Co., 444

U.S. 572 (1980), this Court unanimously held that MarAd

has authority under the Act to cance! a subsidized vessel's

domestic trading restrictions, and permit it to enter the

domestic trade on a permanent basis, on repayment of

the entire unamortized portion of its CDS with interest.’

ince 1980, MarAd has three times proposed a CDS pay-

back rule pursuant to the authority reaffirmed in Sea-

rain. Each time, the proposed rule has been subject to

gorous judicial scrutiny in the Court of Appeals for the

District of Columbia Circuit to assure conformity with

the Merchant Marine Act, 1936, and the Administrative

Procedure Act (“APA’’).

First, in 1980, MarAd adopted a rule establishing cri-

teria for granting requests for a permanent revocation of

domestic trading restrictions. 45 Fed. Reg. 68,393 (1980).

Pursuant to this rule, MarAd approved CDS repayment

by a VLCC, the BAY RIDGE. In Independent US.

Tanker Owners Committee v. Lewis, 690 F.2d 908, 917

(D.C. Cir. 1982), while reaffirming MarAd’s authority

to adopt such a rule, the court of appeals vacated the

rule, largely on the procedural ground that the rule lacked

a general statement of its basis and purpose.

Then, in 1985, the Secretary adopted a different CDS

payback rule, establishing a one-year period within which

any CDS-built tanker could repay unamortized CDS, with

interest, in exchange for revocation of its domestic trad-

ing restrictions. Pursuant to the 1985 rule, the owners of

the ARCO INDEPENDENCE, the ARCO SPIRIT, and

the BROOKLYN repaid CDS, and the vessels have since

been entitled to operate in the Alaska trade. However,

in Independent U.S. Tanker Owners Committee v. Dole,

809 F.2d 847 (D.C. Cir.), cert. denied, 484 U.S. 819

(1987) (“ITOC IT’), the court of appeals again set the

' The Court reasoned that such permanent entry is preferable to

the temporary waivers expressly available under Section 506 since

permanent entry does not pose the danger of a “supercompetitor”

moving back and forth between the domestic and foreign trades

and “skimming the cream” from both markets. /d. at 589. Rather,

it simply allows “a once subsidized vessel to enter the domestic

trade on « footing equal to that of vessels already in that trade.”

id. at 590

3 ¢

rule aside, on the ground that the Secretary's statement

of basis and purpose was inadequate. The court of ap-

peals required that the Secretary provide a fuller ex-

planation of how the rule advanced the purposes of the

Act and why alternatives were inadequate.’

Thereafter, on April 10, 1987, MarAd addressed the

shortcomings identified in /TOC 1] and proposed a third

rule (the “1987 rule,” at issue here) reaffirming that the

four VLCCs that had fully repaid CDS since Seatrain—

the ARCO SPIRIT, the ARCO INDEPENDENCE, the

BROOKLYN, and the BAY RIDGE—were released from

restrictions on domestic operations. Pet. App. 59a. On

June 19, 1987, after considering comments on the proposed

rule, MarAd promulgated the final rule. Pet. App. 49a.

In order to avoid the enormous disruption to domestic

commerce that would have occurred had the court of

appeals’ mandate issued before the 1987 rule became

effective, see note 2 supra, MarAd made the rule effective

immediately on publication on June 22, 1987. Pet. App.

104a-105a.

While MarAd was conducting these rulemaking pro-

ceedings, however, petitioners were lobbying Congress to

add a rider to an appropriations bill to derail the adoption

of the rule. Legislation that would have barred promul-

gation of the rule was adopted in the House of Repre-

sentatives, but defeated in the Senate, and legisla-

tion was not enacted before promulgation of the 1987

rule. On July 11, 1987, fully 19 days after the 1987 rule

took effect, compromise appropriations legislation contain-

ing, as Section 505, the forward-looking language of the

House bill was signed into law: “/njone of the funds

* The /TOC II court withheld its mandate for «ix months until

July 16, 1987. “to allow the Secretary to undertake further proceed.

ings to address the problems of the merchant marine trade.” and

“to avoid further disruptions in the domestic market.” 809 F 2d

at 855

appropriated .. . shall be used . . . to propose, promulgate,

or implement any rule or regulation” relating to CDS

repayment.”

On review commenced by the present petitioners, the

district court set the rule aside on grounds (1) that

Section 505 operated to invalidate the rule, and (2) that

the rule was inconsistent with the objectives of the Act,

not supported by record evidence, and thus arbitrary and

capricious.*

On appeal, the court of appeals reversed. The court of

appeals held that: (1) By its plain terms, Section 505

operated prospectively only and could not be read to in-

validate a rule promulgated weeks before its passage:

accordingly, no review of at-best ambiguous legislative

history was necessary. Pet. App. 17a-20a. Moreover,

and contrary to the district court’s view, MarAd was

not required to stay its hand merely because congres-

sional committees were considering an appropriations

bar, especially since one House of Congress had expressly

disapproved such a provision at the time MarAd prom-

ulgated the 1987 rule. Jd. at 1l6a-17a. (2) The 1987

rule was fully consistent with the purposes of the Act

and was supported by the record, and MarAd had ap

propriately considered available alternatives before adopt-

ing the 1987 rule, as required by the court of appeals

in [TOC IL*

* Pub. L. No. 100-71, 101 Stat. 391, 471 (1987) (emphasis added

*The district court also ruled that MarAd had not complied

with the 30-day notice requirement under the APA, 5 U.S.C. § 553

d)(3). Pet. App. 42a-45a. That ground, also reversed by the court

of appeals, is not pressed in the petition for writ of certiorari

* Pet. App. 10a-16a. The Court should be aware that on Febru-

ary 7, 1990, only one week after filing the petition for certiorari,

one of the petitioners, Overseas Shipholding Group, Inc., filed in

“the court of appeals a motion to recal] and modify the mandate

Respondents oppose the motion, which is sub judice, as without

merit.

REASONS FOR DENYING THE WRIT

Petitioners have not identified any of the reasons

specified in Rule 10 of the Court’s Rules that would

support review on certiorari. In fact, the petition pre-

sents ordinary and unexceptional questions of statutory

construction and review of agency action that are unde-

serving of further review. The court of appeals ap-

plied well-settled precedent to those questions and reached

a result that is indisputably correct.

IL FUNDAMENTAL PRINCIPLES OF STATUTORY

CONSTRUCTION SUPPORT THE HOLDING OF

THE COURT OF APPEALS THAT SECTION 505

APPLIES PROSPECTIVELY ONLY, AND THAT

DECISION DOES NOT WARRANT REVIEW BY

THIS COURT.

Contrary to petitioners’ contention, this case poses no

question as to “whether courts and executive agencies

must give effect to Congress’ substantive policy choices

expressed in appropriations legislation.”” Pet. 13. Re-

sondents have never disputed that appropriations legis-

lation, like all other statutes, must be given effect, and

the court of appeals did so here. But petitioners beg

the questions what effect appropriations legislation like

Section 505 must be given, and what “Congress’ sub-

stantive policy choices’’ may have been.

As respondents show below, poy faithfully applying

long-settled, basic principles of statutory construction and

this Court’s unambiguous precedents, the court of ap-

peals correctly held that Section 505, which Congress

passed and the President signed after MarAd had prom-

ulgated its rule, must be given prospective effect only

and did not operate retroactively to invalidate the 1987

rule. Review of that decision is clearly unwarranted

A. The Plain Language of Section 505 Demonstrates

That the Statute Does Not Invalidate the 1987 Rule.

At bottom, petitioners’ argument rests on the un-

founded notion that courts need not heed the plain, un-

ambiguous language of statutes. Indeed, petitioners be-

little the court of appeals for its adherence to “the literal

form of the act.” Pet. 11. Beyond dispute, however, the

first rule of statutory construction is that “‘{w]here

the language is plain and admits of no more than one

meaning the duty of interpretation does not arise and

the rules which are to aid doubtful meanings need no

discussion.’ ”’ *

As the court of appeals correctly concluded, the lan-

guage of Section 505 is plain on its face and is not

“susceptible to an alternative construction.” Pet. App.

19a. Section 505 provides that “[njone of the funds

appropriated .. . shall be used . . . to propose, promul-

gate, or implement any rule or regulation” relating to

full CDS repayment.” That language is unambiguously

forward-looking. Indeed, elementary rules of statutory

construction make clear that the use of the word “shal!”

means that the statute is to operate prospectively only.”

This construction is further confirmed by the long-

standing rule against the retroactive application of legis-

* 2A SUTHERLAND STATUTORY CONSTRUCTION § 46.01, at 73 (Sands

ith ed. 1984) (quoting Caminetti v. United States, 242 U.S. 470,

485 (1917)). Petitioners’ obvious dislike for the statute's “litera]”

meaning is an abrupt about-face from the position they asserted in

the court of appeals. In the court below, théy correctly described

the same plain meaning rule that they now disdain as a “basic

principle of statutory construction.” Joint Brief for Appellees at

16, Independent U.S. Tanker Owners Committee v. Skinner, 884

F 2d 587 (D.C. Cir. 1989)

’ Pub. L. No. 100-71, 101 Stat. 391, 471 (1987) (emphasis added

*See 1A SUTHERLAND STATUTORY CONSTRUCTION 692-93 (Sands

4th ed. 1985) (“(i)t is obvious that the word ‘shall,’ in itself, cannot

include’ the past”

lation. As this Court held long ago, “legislation must be

considered as addressed to the future, not to the past.” ’

Under this Court’s decisions, quoted and followed below,

see Pet. App. 18a, “retrospective operation will not be

given to a statute . . . unless such be ‘the unequivocal

and inflexible import of [its] terms... .’” This rule

has special force where, as here, restrictions on expendi-

tures of appropriated funds are concerned,"’ since once

money has been spent, it cannot be “unspent.”

Petitioners err when they urge that the statute, when

limited to its “literal” meaning, has no effect. To the

® Union Pac. R.R. v. Laramie Stock Yards Co., 231 U.S. 190, 199

(1913); see also Bowen v. Georgetown Univ. Hosp., 109 S. Ct. 468,

471 (1988); United States v. Security Indus. Bank, 459 U.S. 70, 79

(1982).

10 Greene v. United States, 376 U.S. 149, 160 (1964) (quoting

I’'nion Pac. R.R. Co. v. Laramie Stock Yards Uo., 231 U.S. 190, 199

1913 Thus, Congress may expressly provide for a statute to

operate retrospectively, as in United States v. Sperry Corp., 110

S (Ct. 387 (1989). a case that petitioners erroneously label “dis-

positive.” Pet. 12 n.7. Congress in no event made Section 505

expressly retroactive

In contrast to the situation in Sperry, moreover, applying Section

505 retroactively here would violate the due process clause because

it would have “an extremely narrow focus” and would be aimed at

a specific, identifiable economic group—the vessels that have re-

paid CDS. Allied Structural Steel v. Spannaus, 458 U.S. 234, 248

1978): see Energy Reserves Group, Inc. 1 Kansas Power €

Light Co 159 U.S. 400, 412 n 13 19R23 Avoidance of this con-

stitutional issue—and avoidance of the separation of powers prob-

lem, also pointed it to the court below, eee Parnell, Congressiona!

Inte rference ’ j JenCY Enf reemen? Ti - IRS Erperience, “Oo

YaLeE LJ. 1360. 1377-79 (1980 further supporta the statutor

r n of the irt of appeals

TVA Hull 1i37 U.S 153 190-91 1978 mngress wr

GC arnment Acs nt g ft Fre haa «enecifically stated that appr

poriations sitatutes and amendments to statutes are construed &

apr prospectivel r that is. from the date of enactment or

ther afarctive iates a — 2 «eneri fc ; GAO PRIN’ IPLES F

contrary, the court of appeals correctly ruled that, read

prospectively, the plain words of the statute have abund-

ant meaning. Pet. App. 19a-20a. The 1987 rule ex-

tends to only four vessels, although there were numerous

subsidized tankers (and non-tankers) that might have

repaid CDS under a more expansive CDS payback rule.

See 48 Fed. Reg. 4408, 4409-10 (1983). Thus, as the

court of appeals noted, “section 505 could well have been

intended to guard against the possibility that the De-

partment might change its mind and enter into repay-

ment arrangements with additional CDS vessels.” Pet.

App. 19a-20a."?

Petitioners also err in claiming that Section 505 pre-

cluded the affected vessels from operating in the domestic

trade because “further agency expenditure was needed

to implement the rule.” Pet. 11 n.6. To the contrary,

MarAd was not required to do anything at all to imple

ment the rule. Contrary to petitioners’ assertion, id.,

Section 506 of the Act, 46 U.S.C. app. § 1118, says noth-

ing about written CDS contract amendments: no such

amendments were necessary here.’* MarAd could, and

did, simply decide unilaterally not to enforce the do

mestice trading restrictions in the original CDS contracts,

'? Likewise, the statute's reference to the vessels that had repaid

CDS pursuant to the 1985 CDS payback rule has meaning when

applied prospectively. If the reviewing courts had set the rule aside

on any procedural or other ground curable by Mar Ad, then Section

505, during the period of its effectiveness, would likely have pre-

vented the agency from taking steps to re-promulgate the rule

following a court remand.

'® Even though they were not required to du so. when the vessel!

owners repaid CDS on the BROOKLYN, the ARCO SPIRIT. and

the ARCO INDEPENDENCE in 1985 and 1986, they entered into

written contract modifications with the United States. These modi-

fications acknowledged the repayments and deleted the domesti

trading restrictions, citing “46 C.F.R. § 276.3." the CDS pay back

rule as codified. Because the 1987 rule simply substituted for the

previous codification of the same 46 (.F.R. £2763. no further

contract modifications would have been needed in any event

in exchange for full CDS repayment. As the court of

appeals correctly held, “because payment from the three

VLCCs has already been received and because the tank-

ers have operated domestically since 1985, the rule af-

firms the right of the ARCO INDEPENDENCE, ARCO

SPIRIT, and BROOKLYN to remain in domestic com-

merce, and their contracts need not be amended to con-

firm this right.” Pet. App. 20a.

B. Even Assuming That Resort to Legislative History

Were Appropriate, the Legislative History Makes

Clear That the Statute Was Intended To Apply

Prospectively Only.

Because it found that there was “no ambiguity to be

resolved,” Pet. App. 20a, the court of appeals was also

correct in refusing to base its decision on the statute’s

legislative history. As this Court has repeatedly made

clear, “‘(rjesort to legislative history is only justified

where the face of the Act is inescapably ambiguous

..”™ But even if examination of legislative history

were appropriate here, the legislative history shows that

the statute was meant to apply prospectively only.”

'* Garcia v. United States, 469 U.S. 70, 76 n.2 (1984) (quoting

Schwegmann Bros. v. Calvert Distillers Corp., 341 U.S. 384, 395

1951) (Jackson, J., concurring)); INS v. Cardoza-Fonseca, 480

U.S. 421, 452-53 (1987) (Scalia, J., concurring) (“Judges interpret

laws rather than reconstruct legislators’ intentions. Where the lan-

guage of those laws is clear, we are not free to replace it with an

unenacted legislative intent.”) ; see also United States v. Locke. 471

U.S. 84, 95-96 (1985

'S In fact, the court of appeals did examine the legislative history

to support its conciusion that the statute operated prospectively

only. The court of appeals noted that even those legislators who

pelieved that Section 505 operated to preclude the affected veasels

from the domestic trade appear to have assumed that the legislation

would do so prospectively because (they thought) MarAd had yet

to take steps to implement the 1987 rule. Pet. App. 19a (citing 133

Cong. Rec. 89142 (‘daily ed. July 1, 1987 remarks of Sen

Hollings) ; 133 Cong. Rec. H2792 (daily ed. July 8, 1987) (remarks

To the extent that the legislative intent behind Section

505 can be divined at all,* it makes clear that Section

505 was a compromise. A provision containing the same

forward-looking language that was ultimately enacted

was originally considered and adopted by the House be-

fore the 1987 rule was promulgated.’ The Administra-

tion objected to the measure because, inter alia, it would

require the Treasury to refund more than $100 million

in repaid CDS to the vessel owners: and the Senate

Committee on Appropriations deleted the entire section

and reported a bill without it on May 1, 1987." Before

the House-Senate conference began the process of re

conciling the two bills, MarAd promulgated the 1987 rule

in final form with an immediate effective date. As the

court of appeals correctly observed, at that point “it

was by no means clear that the final version of the

appropriations bill would contain section 505 because

the Senate had already been persuaded to drop the sec-

tion from its version of the Supplemental Appropriations

Act.” Pet. App. 16a.

of Rep. Carr); 133 Cong. Rec. $10,866 (daily ed. July 29, 1987

remarks of Sen. Mikulski)). But, as the court of appeals properly

concluded, Pet. App. 19a, and as we have shown in Part I.A. supra,

those legislators were clearly mistaken in that view.

** As one commentator—upon whom petitioners themselves rely,

see Pet. 13—has noted, the legislative intent behind appropria-

tions riders (if any such “intent” even exists) is particularly diffi-

cult to discern and is not very meaningful in construing statutes.

Devins, Regulation of Government Agencies Through Limitation

Riders, 1987 DUKE L.J. 456, 457-58.

" See H.R. REP. No. 28, 100th Cong.. Ist Sess. 120-21, 145 (1987).

The provision was Section 506 of the House bil]

"See “Statement of Administration Policy” (Apr. 15, 1987),

contained in Appendix A ‘Administrative and Legislative Mate-

rials Relating to this Matter,” Item 15 (filed in the district court

Feb. 17, 1988

* See S. REP. No. 48, 100th Cong., Ist Sess. 164 (1927

Only after MarAd had promulgated and fully imple-

mented the 1987 rule did the conference even consider

(and then restore) the House language. But the prom-

ulgation of the rule dramatically altered the terms of

the legislative debate, because Section 505, as prospec-

tively written, no longer operated on the already-promul-

gated 1987 rule. Legislative proponents of permanent

CDS payback could now support the language in the

conference bill since, on its face, it would allow exist-

ing CDS payments to stand and would only prohibit

additional repayments in the future. The language of the

conference report mirrored the forward-looking language

of the original House report: “The House language re-

stored by the conference agreement prohibits . . . the

Maritime Administration from using funds .. . to pro-

pose, promulgate or implement any [CDS payback] rule

or regulation... .”*” There is no evidence in the

conference report that Congress harbored any intent

to alter the forward-looking nature of the provision.*"

Finally, the President’s signing statement—which goes

unmentioned in the petition for certiorari—confirms the

purely prospective nature of Section 505:

I have signed this bill into law based on the under-

standing that because this restriction on their au-

thority is not retroactive, it will have no effect on

essel owners who previously repaid their subsidies

pursuant to a CDS repayment rule published in the

Federal Register on June 22, 1987. Instead, this pro-

. 8 ° - on “7

sion of section 505 will affect only further repay-

{ ( NJ Pp N 5, 100th Cong st See 112 1°27

f “d ire af EP N 2s n 4 A Sess 12! -21 145

Th @ as a member + he r rence served h¢ je] hera

1 act na ne re re mm ¢ ’ 3 tna 1

5 Vas ed ) + os pe r 4 re ‘ "4 Re

ments by vessel owners. Were it otherwise, a restric-

tion on rulemaking in this area would cost the tax-

payers more than $100 million in payments to vessel

owners who have previously repaid their subsidies.”

In short, the legislative history fully supports the

court of appeals’ ruling that the plain words of Section

505 are to be given prospective effect only.

C. The Decision Below Does Not in Any Way Under-

cut Congressional Ability To Enact Substantive

Legislation Through Appropriations Bills.

In an effort to transform this aspect of the case into

something other than what it is—a garden-variety dis-

pute over the plain meaning of a statute—petitioners

reach out to complain that the court of appeals’ decision

will somehow impede congressional efforts to enact meas-

ures by means of the appropriations process. Pet. 13-14.

Petitioners appear to be asking the Court to articulate

different rules of construction for appropriations stat-

utes than for other statutes. Thus, according to peti-

tioners, and in marked contrast to the rules for constru-

ing other statutes, appropriations measures like Section

505 should not be read “literally”; rather, they should

be applied retroactively despite their plain meaning.

First of all, petitioners have made no effort to show—

nor could they show—that different rules of construction

are called for.“ There is plainly no reason to create any

22 Statement of the President Upon Signing H.R. 1827. 22 WEEKLY

CoMP. PRES. Doc. 800 (July 20, 1987) (emphasis added). This

Court has in the past recognized the significance of presidential

signing statements for interpreting statutes. See, e.g., Bowsher 1

Synar, 478 US. 714, 719 n.1 (1986).

28 They have not shown, for example, that the federal courts have

had any difficulty applying appropriations statutes. Indeed, the Court

of Appeals for the District of Columbia Circuit has demonstrated

that it is willing to construe appropriations statutes to invalidate

agency action whenever the plain statutory language supports that

result. See National Treasury Employees Union v. De: ine, 733 F 2d

special rules of construction for appropriations measures.

To the contrary, the very authority relied on by petition-

ers cogently points out the serious problems raised when

Congress uses appropriations bills to enact substantive

egislation, explaining that “the appropriations process

nay not be conducive to sound substantive policymaking”

because “appropriations are often acted on quickly, pro-

iding little opportunity for thoughtful deliberation of the

issues raised by such measures.” **

Moreover, while petitioners are surely correct that

ppropriations legislation may sometimes be useful to ad-

iress problems of an emergency nature, Pet. 13, tnere was

manifestly no emergency here. The 1987 rule did not

ange the status quo in any respect; three of the VLCCs

n question had been in the domestic trade since 1985, and

fourth had been operating there since 1980.” Peti-

ners note that “{flor over a decade . . . Congress

truggled with the authority and standards under which

Secretary may accept repayment of construction-

ferential subsidy.” Pet. 6. If so, then as the court of

ippeals observed, Pet. App. 21a, Congress had ample time

fore. during, and after passage of Section 505—had

really wished to do so—to enact substantive legislation

. , “er . - : :

miont nave xfended fo the CDS vesseis at issue

s + T+ isA + ‘ hal +h Qonr y , + ] , loti

ere i 1d no io SO in the appropriations iegisiatl

II. THE COURT OF APPEALS’ DECISION NOT TO

SECOND-GUESS THE AGENCY’S DETERMINA-

TION ON A MATTER CLEARLY COMMITTED TO

AGENCY DISCRETION WAS CORRECT AND PRE-

SENTS NO ISSUE WARRANTING THIS COURT'S

REVIEW.

The court of appeals’ holding that the 1987 rule was not

arbitrary and capricious was correct and fully in accord

with this Court’s precedents.” The court of appeals prop-

erly rejected petitioners’ argument that, instead of allow-

ing the affected VLCCs to pay back CDS and enter the

domestic trade, MarAd had no choice but to pay huge

operating subsidies—in excess of $20 million annually

($5 million per vessei, see Pet. App. at 76a)—that would

be necessary to enable those vessels to operate competi-

tively in the foreign trade. That holding presents no im-

portant question of law meriting this Court’s review.

Petitioners’ claims about operating subsidy are seri-

ously flawed. Petitioners now argue that the court of

appeals erred because the statute authorizing operating

subsidies, 46 U.S.C. app. §1171(a), is “mandatory.” Pet.

18. Petitioners further contend that in determining

whether operating subsidies were preferable to CDS pay-

back, MarAd was prohibited from giving any weight to

the factors it considered in rejecting operating subsidies

as an alternative.”

section so as to specifically abrogate the fina] rule.” but that “!tlhe

made no formal] attempt to do s . Of course, overturning

the rule would require the government to refund the approximat:

$100 million in subsidies that had been repaid under the rule, as t

President noted. See page 13 supra

27 See Cherron U.S.A. v. National Resources Defense |

Inc., 467 U.S. 837, 842-43 (1984): Motor Vehicle Mfrs. A

State Farm Mut. Auto. Ins. Co.. 463 U.S. 29. 423 (1982

28 In rejecting the operating subsidy alternative, MarAd p

to the “exorbitant” cost to the nited States

reductivn of incentives for efficient vessel operation. and ths

First, even if supportable, petitioners’ contention about

operating subsidies would not undermine MarAd’s conclu-

sions about the soundness of the 1987 rule. Petitioners

here focus on an extraordinarily small aspect of the policy

and evidentiary issues addressed by the agency. When

MarAd promulgated the 1987 rule, its statement of basis

and purpose first explained how the rule would foster a

“well-balanced fleet” by making vessels that were “most

suitable” for the Alaska-Panama route available for that

purpose. Pet. App. 69a-72a. The court of appeals found

that these agency conclusions were well supported in the

record. Pet. App. lla-12a. MarAd then explained at

length how the rule would promote the objectives other

than “suitab[ility]” set out in Section 101 of the Act.

Pet. App. 72a-86a, 95a-99a. MarAd concluded that the

rule would enhance the domestic fleet, and would have no )

negative effect on any of the other objectives, save employ- |

ment of seamen. MarAd concluded that there would be no

negative impact on the foreign fleet because, if the CDS

vessels in question could not operate in the domestic trade,

they would be laid up or scrapped. Pet. App. 74a-81a.

Thus, the appropriateness vel non of operating subsidies |

goes only to the foreign-fleet aspect of the issue before )

MarAd.

Second, the notion that the availability of operating

subsidy must always be the answer to the problems that

the affected VLCCs encounter in the foreign trade proves

far too much. Indeed, it is inconsistent with the very

premise of this Court’s decision in Seatrain, which con-

firmed the Secretary’s authority under the Act “to

approve full-repayment/permanent-release transactions.”

444 U.S. at 597. For the VLCC STUYVESANT in Sea-

train, as in the case of every VLCC CDS repayment, the

terproductive effect on United States efforts to remove anti- |

competitive trade practices by other governments that would flow .

from such massive open-ended subsidies. Pet. 18 (citing Pet. App.

76a).

provision of operating subsidies to promote the foreign

trade was a theoretically available alternative. But Sea-

train means that MarAd is free to reject that alternative

and to prefer permanent CDS payback. Adoption of peti-

tioners’ argument would consign to the dustheap both the

holding of Seatrain and the important authority it re-

affirms.

Third, petitioners’ claim that MarAd had an obligation

to consider operating subsidies as an alternative to the

1987 CDS payback rule rests on a false premise. Peti-

tioners assert that such an alternative should have been

adopted in order to avoid “the destructive consequences to

the coastwise fleet of the [VLCCs’] displacement into the

domestic trade... .” Pet. 17-18. MarAd, of course, found

that the effects of the rule on the domestic fleet as a whole

would be very positive. Pet.App. 8la-84a. The “destruc-

tive consequences” of which petitioners complain are noth-

ing more than the possible results of head-to-head compe-

tition between the VLCCs affected by the 1987 rule and

petitioners’ less efficient vessels. Petitioners may not like

that competition, but this Court in Seatrain made clear

that other vessels in the domestic fleet are not entitled to

any special regulatory protection from competition by the

VLCCs following CDS repayment.”

Finally, the statute does not even remotely impose a

“mandatory” obligation upon MarAd to grant a request

for operating subsidy, as petitioners seem to suggest.

Rather, the first sentence of Section 1171(a) of the Act

merely authorizes and directs the agency “to consider”

applications for operating subsidies. Here, of course,

29 444 U.S. at 589-90. As Judge Bazelon stated in his dissent in

Alaska Bulk Carriers, Inc. v. Kreps, 595 F.2d 814, 843 (D.C. Cir.

1979), reversed in Seatrain:

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 [a] whole, to protect Jones Act

operators from this type of competition. (footnote omitted)

(emphasis added).

MarAd has not failed to “consider” such applications, for

none was filed.” Moreover, far from providing that oper-

ating subsidies must be granted in all circumstances

where a subsidy would enable a vessel to compete in the

foreign trade, the statute expressly provides that “[n]Jo

such applications shall be approved . . . unless” the agency

makes several critical determinations, including that the

subsidy “is reasonably calculated to carry out effectively

the purposes and policies of [the Act].”** As the court

of appeals concluded, Pet. App 23a, the statutory frame-

work is one that obviously accords MarAd substantial dis-

cretion in determining whether to award operating sub-

sidies.**

Here, MarAd’s articulated concerns were surely rea-

sons that it could, in its discretion, properly consider in

80 The absence of such applications (and the absence of any au-

thority to award operating subsidy without them) is not surprising.

The Act imposes numerous restrictions on recipients of operating

subsidies. Section 805(a) of the Act, 46 U.S.C. app. § 1223, for

example, prohibits the payment of operating subsidy to an operator

(such as respondent Atlantic Richfield Company) with any affiliate

that operates vessels in the domestic trade without the Secretary’s

written permission. Requests for such permission are routinely op-

posed by existing domestic operators such as the present petitioners.

See, e.g., Puerto Rico Maritime Shipping Auth. v. Dole, 619 F. Supp.

312 (D.D.C. 1985), vacated as moot, 825 F.2d 502 (D.C. Cir. 1987).

31 46 U.S.C. app. § 1171(a) (4). Section 1173(a) of the Act, which

petitioners ignore, further provides that “[i]f the Secretary of

Transportation approves the application, he may enter into a con-

tract with the applicant for the payment of [operating sub-

sidies|....’’ (emphasis added).

32In the Seatrain case itself, this Court emphasized the Secre-

tary’s broad “discretion to administer the Act.” 444 U.S. at 573;

see also United States Marine Int'l, Inc. v. Peterson, 518 F.2d 1070,

1079 (D.C. Cir. 1975), cert. denied, 424 U.S. 912 (1976) (in oper-

ating subsidy determinations, agency “has broad discretionary au-

thority to deal with the ever changing technological and economic

conditions of the commercial shipping industry ....”). Petitioners

cite no case authority for their erroneous assertion that the award

of operating subsidy is mandatory.

concluding that massive operating subsidies would not be

an appropriate alternative to the 1987 CDS payback rule.

Petitioners’ assertion that cost is always an improper

consideration for MarAd (even when, in this era of fed-

eral budgetary constraints, the subsidy would amount

to more than $20 million per year) is untenable; it is

inconsistent with MarAd’s obligation to ensure that no

operating subsidy is awarded unless it is “reasonably

calculated to effectively” accomplish the purposes of the

Act. Determinations that such huge subsidies would

eliminate incentives for efficient operation of vessels and

might trigger counterproductive anti-competitive reac-

tions by other nations (including subsidies for competing

foreign-flag vessels that would directly undercut the very

effectiveness of the operating subsidy itself) likewise fall

well within the expert discretion of MarAd and the

Secretary.

COTICLUSION

For the foregoing reasons, the petition for a writ of

certiorari should be denied.

Respectfully submitted,

MICHAEL JOSEPH A. STEPHEN HUuTtT, Jr.

THOMAS L. MILLS Counsel of Record