A win out of, not in, court
This dispute centered around federal cargo shipping preferences related to the U.S. government's Food for Peace program. (America Cargo Transport Inc. v. United States of America. 9th Circuit. Nos. 08-35010, 08-35276. Nov. 5.)
The government ended up agreeing with the shipping company that initiated the lawsuit, but the company failed in its attempt to sue the government for monetary damages or to collect attorney's fees and costs.
Under Title II of the Food for Peace program, the Agency for International Development (USAID) is authorized to distribute food to countries in need and to 'promote economic and community development.' To transport food, USAID works with organizations that receive bids directly from cargo carriers.
The Cargo Preference Act of 1954 provides that USAID must take steps to ensure that half of the commodities moving under Title II are transported on U.S.-flag vessels 'to the extent those vessels are available at fair and reasonable rates.'
Where agricultural commodities like the vegetable oil at issue here are involved, another law, the Food Security Act, requires an additional 25 percent of the gross tonnage be shipped on U.S.-flag vessels, raising the minimum to 75 percent.
The cargo preference regulation relevant in this case provides that 'each full shipload of cargo' must be shipped on a U.S.-flag vessel, unless the Maritime Administration 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.
In February 2005, two freight forwarders for eligible organizations issued solicitations for ocean transportation of 5,660 metric tons of vegetable oil from Texas to several ports in India. The solicitations provided that the 'lowest responsive offer meeting the mandatory requirements' would receive the bid.
Maersk offered to transport a portion of the vegetable oil for $125 per metric ton; America Cargo Transport (ACT) offered to transport the full shipload for $520 per metric ton. Both offers were bids for transport on U.S.-flag vessels.
USAID recommended the organizations award the contract for the partial shipment to Maersk, and have the remainder of the vegetable oil be carried either partially or fully on foreign-flag vessels because ACT had not offered to transport less than a full shipload and there were no other offers from U.S.-flag operators.
ACT sued the federal government, naming both USAID and MarAd. It alleged a violation of federal cargo preference laws. It requested injunctive and declaratory relief as well as damages for unjust enrichment. It also moved for attorney's fees and costs under the Equal Access to Justice Act.
ACT claimed the vessel Maersk offered was not actually a U.S.-flag vessel, and that if USAID had sought MarAd's concurrence, it would have discovered that fact and recommended accepting ACT's bid. ACT said USAID was required to seek MarAd's concurrence, but USAID said it was not. MarAd viewed the process differently, saying USAID did need MarAd's concurrence because ACT offered to carry a full shipload of cargo.
In April 2006, the district court stayed the proceedings to allow the Justice Department to reconcile the conflict between the federal agencies. The court extended the stay through October 2006, but the stay expired prior to a resolution of the dispute between USAID and MarAd.
Almost a year later, in its motion for summary judgment, the government advised the district court that the dispute between USAID and MarAd had been resolved in favor of MarAd, and that it was taking the same position as ACT.
The district court granted the government's motion for summary judgment, finding ACT's claims for injunctive and declaratory relief moot because the government had adopted ACT's position. It also dismissed ACT's claims for unjust enrichment and money damages, concluding the government had not waived its sovereign immunity under the Suits in Admiralty Act (SAA). It also denied ACT's motion for attorney's fees and costs.
ACT appealed the decision.
The 9th Circuit agreed the case was moot, though it noted courts are 'understandably reluctant to declare a case moot based on the defendant's voluntary cessation of the challenged activity.'
But the appellate court said where there is no reasonable expectation that the alleged violation will recur and that interim relief or events have eradicated the effects of the alleged violation, a case is moot.
ACT argued on appeal that its claims were not moot because the government has not met the heavy burden of showing that it would not repeat the 'same illegal conduct' in the future.
But the 9th Circuit said the argument was unavailing. The government was faced with conflicting agency interpretations and resolved the interpretive dispute in favor of MarAd. The government's approach mirrored ACT's claims, and thus, the court said, this mooted any need for declaratory relief.
'Because the shipment at issue has already been completed ' the ship has in this case literally sailed ' ACT's claim for injunctive relief is moot as well,' it wrote.
ACT sought monetary damages, alleging its bid was 'wrongly rejected by USAID in favor of substantially lower bids submitted by foreign-flagged carriers.' The district court dismissed this claim on the grounds that the United States has not waived its sovereign immunity in this case, and the 9th Circuit agreed, saying the dispute here did not fall within the exception to sovereign immunity in the SAA.
The 9th Circuit explained that as a general rule, the United States is immune from suit save as it consents to be sued. The terms of its consent to be sued in any court define that court's jurisdiction to entertain the suit. Under the Suits in Admiralty, waiver of sovereign immunity applies only where a private party would be liable under admiralty law for the same conduct. In this case, ACT's alleged injury was that USAID wrongly rejected its bid in violation of the federal laws governing cargo preference and food safety.
But the court said those laws ' the Cargo Preference Act and the Food Security Act ' regulate only the conduct of the government. Because a private party could not be liable under either of those two laws, the statutory waiver does not apply.
The 9th Circuit also said the district court appropriately denied ACT's claim for attorney's fees and costs based on the determination it was not a 'prevailing party.' It said ACT did not qualify as a prevailing party because its regulatory victory was the result of the government's voluntary behavior, not judicial action.