New Case from Ninth Circuit – American Cargo Transport, Inc. v. U.S.A.

How can you make a Defendant change its position, but lose a lawsuit? Sue the federal government. A new case from the Ninth Circuit Court of Appeals. It isn't an admiralty case, but is an interesting case relating to intra-governmental disputes and civil remedies. The case is American Cargo Transport, Inc. v. U.S.A, and the original opinion can be found here. This appeal centers around federal cargo shipping preferences related to the United States government's Food for Peace program. Specifically, we consider whether the government's changed position with respect to the administrative process governing international food aid shipments moots this appeal and whether the government is nonetheless subject to money damages for failing to comply with those requirements. The facts are interesting and I've pasted them below: Under Title II of the Food for Peace program, 7 U.S.C.§ 1721, Congress authorized USAID to distribute food aid worldwide to countries in need and to "promote economic and community development." Id. Shipping food overseas is not a simple matter from a regulatory point of view, as the process implicates multiple agricultural, shipping, and other laws and regulations. To transport food to foreign countries, USAID works with organizations that receive bids directly from cargo carriers that transport the food shipments. See id. § 1722. The Cargo Preference Act of 1954 ("CPA"), 46 U.S.C. § 55305(b), provides that USAID must take steps to ensure that fifty percent of the gross tonnage of commodities under Title II are transported on U.S.-flag vessels "to the extent those vessels are available at fair and reasonable rates." Id. Where agricultural commodities, like the vegetable oil at issue here, are involved,the Food Security Act ("FSA") requires an additional twentyfive percent of the gross tonnage be shipped on U.S.-flag vessels, see 46 U.S.C. § 55314(a)(1), raising the minimum to seventy-five percent. The cargo preference regulation relevant to this case provides that "each full shipload of cargo" must be shipped on a U.S.-flag vessel, unless MARAD agrees with USAID that (a) such "vessels are not available at fair and reasonable rates," or (b) there is a "substantially valid reason" for using a foreign-flag vessel. 46 C.F.R. § 381.5. In February 2005, two freight forwarders for eligible organizations issued solicitations for ocean transportation of Title II food aid-specifically, 5,660 metric tons of vegetable oil- from Texas to multiple port destinations in India. These solicitations provided that the "lowest responsive offeror meeting the mandatory requirements of the solicitations" would receive the bid. Maersk Sea-Land ("Maersk") offered to transport a portion of the vegetable oil for $125 per metric ton, and ACT offered to transport the full shipload for $520 per metric ton. Both offers were Priority 1 ("P1") bids, or bids for transport on U.S.-flag vessels. USAID recommended that the organizations award the contract for the partial shipment to Maersk. USAID recommended awarding the remainder of the vegetable oil shipment to Priority 2 and 3 bids-those involving either partial or full shipment on a foreign-flag vessel- because ACT had not offered to transport less than a full shipload and there were no other offers from P1 vessels. ACT claims that the vessel offered by Maersk was not actually a P1 vessel (i.e., not a U.S.-flag vessel), and that if USAID had sought MARAD's concurrence, as USAID was required to do under 46 C.F.R. § 381.5, it would have discovered that fact and recommended acceptance of ACT's bid. Under USAID's interpretation of § 381.5, the agency was not required to seek MARAD's concurrence. MARAD viewed the process differently, claiming that USAID needed MARAD's concurrence because ACT offered to carry a full shipload of cargo. Ah, the perils of having two governmental positions (the USAID contracting process and the MARAD shipping law enforcement process) at play. In the midst of litigation, the federal agencies agreed to have the Department of Justice resolve the conflicting positions. It took some time, but it eventually chose MARAD's position. So, the government agreed with ACT's position which then mooted ACT's lawsuit. And, there was no waiver of sovereign immunity so ACT could not obtain money damages AND the government prevailed and was substantially justified in its legal position, so ACT couldn't get attorney's fees. Hope they got the contract when it was re-bid.

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