TANYA S. CHUTKAN, Judge.
Plaintiffs St. Lawrence Seaway Pilots Associations, Inc., Lakes Pilots Association, Inc., and Western Great Lakes Pilots Association, Inc. challenge the Coast Guard's final rule setting pilotage rates on the Great Lakes for 2014 (the "2014 Final Rate"). Great Lakes Pilotage Rates—2014 Annual Review and Adjustment, 79 Fed.Reg. 12084 (March 4, 2014). Plaintiffs allege the Coast Guard misapplied the regulatory formula by using incorrect inputs, resulting in unreasonably low rates, and seek review of the 2014 Final Rate under the Administrative Procedure Act ("APA"). The parties have each moved for summary judgment. For the reasons set forth below, the Court GRANTS Plaintiffs' motion for summary judgment, DENIES Defendant's motion for summary judgment, and orders supplemental briefing on the question of a proper remedy.
The Great Lakes Pilotage Act of 1960 requires foreign and American ships engaged in foreign trade traveling on the Great Lakes
Plaintiffs challenge the Coast Guard's application of that methodology in the 2014 Final Rate. This dispute centers specifically on step 2.A of the 7-step rulemaking methodology, "Determination of Target Rate of Compensation." To understand Plaintiffs' challenge to the Step 2.A calculation for the 2014 Final Rate, one must first understand how the Coast Guard set the rates in 2012 and 2013. Below are timelines for the establishment of the 2012, 2013, and 2014 rates.
As of December 2012, the Coast Guard had one daily aggregated rate which purportedly accounted for all of the benefits provided for in the AMOU contracts. Thus, it could slightly alter the way it calculated the target rate. Instead of multiplying the wage and benefit components into monthly figures, the Coast Guard simply took the daily rate and multiplied it by 270—representing the days in a nine-month shipping season. 78 Fed.Reg. at 13529. A consequence of this change was that holidays, weekends and bonus days were no longer accounted for in the formula. Compare 77 Fed.Reg. at 11761 (computing "monthly figures that represent actual working days and vacation, holiday, weekend, or bonus days" in 2012) with 78 Fed.Reg. at 13522 ("These aggregate rates combine, without separately identifying, the following inputs: Daily wage rate, vacation pay, pension plan contributions, and medical plan contributions" in 2013). The new methodology also changed the way the Coast Guard visually presented some of the steps of its calculation. 78 Fed.Reg. at 13522.
February 28, 2013: Coast Guard announced the final rate for 2013. The final rate would have been, on average, 16% lower than the 2012 rates. Id. at 13537. Concluding in its discretion
The Coast Guard disavowed the statement it had made on AMOU contract trends. It stated: "Our discussion is not a reflection on AMOU contract trends, but rather emphasizes that AMOU contract information, when factored into our Appendix A ratemaking methodology, could lead to a pilotage rate decrease, if not offset by the application of discretion under Step 7." 79 Fed.Reg. at 12086.
The Coast Guard also disputed the comments' assertions that it had misapplied the AMOU data. The Coast reiterated the accuracy of the data used to compute the 2014 proposed rule. Id. It explained that it declined to use the data from the November 2, 2012 Letter because the information "was marked `proprietary,' and therefore has not been and cannot be shared by the Coast Guard with the public." Id. Further, the Coast Guard cited the fact that the AMOU had apparently confirmed the accuracy of the AD in connection with the 2013 rate as justification for continuing to rely on that data. Id. (referencing the AMOU email at A.R. 139).
Finally, the Coast Guard rejected the updated AD because it included a "`season bonus' that the AMOU has not previously cited as part of its contracts, and that we do not recognize for purposes of Great Lakes pilotage compensation. 46 CFR 404.5(a)." 79 Fed.Reg. at 12086.
The final 2014 rate adopted the rate as it was proposed in August 2013, including the proposed discretionary increase.
On a motion for summary judgment in a suit seeking APA review, the standard under Fed. R. Civ. P. 56(a) does not apply. Coe v. McHugh, 968 F.Supp.2d 237, 239 (D.D.C.2013). Instead the court must decide as a matter of law "whether the agency action is supported by the administrative record and otherwise consistent with the APA standard of review." Id. at 240 (citing Richards v. INS, 554 F.2d 1173, 1177 & n. 28 (D.C.Cir.1977)).
Pursuant to the APA, the Court must set aside any agency action that is "arbitrary, capricious, an abuse of discretion, or otherwise not in accordance with law." 5 U.S.C. § 706(2). The Court's review is "highly deferential" and begins with a presumption that the agency's actions are valid. Envtl. Def. Fund, Inc. v. Costle, 657 F.2d 275, 283 (D.C.Cir.1981). The Court is "not empowered to substitute its judgment for that of the agency," Citizens to Preserve Overton Park, Inc. v. Volpe, 401 U.S. 402, 416, 91 S.Ct. 814, 28 L.Ed.2d 136 (1971), but instead must consider only "whether the agency acted within the scope of its legal authority, whether the agency has explained its decision, whether the facts on which the agency purports to have relied have some basis in the record, and whether the agency considered the relevant factors." Fulbright v. McHugh, No. 12-cv-01506, 67 F.Supp.3d 81, 89, 2014 WL 4424750, at *4 (D.D.C. Sept. 9, 2014) (citing Fund for Animals v. Babbitt, 903 F.Supp. 96, 105 (D.D.C. 1995)).
By the plain terms of the Coast Guard's own regulations, target pilot compensation is intended to "approximate[ ] the average annual compensation for first mates on U.S. Great Lakes vessels."
Plaintiffs here challenge as nefarious and conspiratorial most of the Coast Guard's decisions concerning pilotage rates in the last three years, but they focus primarily on two of the Coast Guard's decisions: use of the AD, and rejection of the Updated AD. The Court assesses whether these choices were reasonably made in furtherance of Step 2.A's goal: approximation of AMOU contract wages.
Plaintiffs challenge the Coast Guard's use of the AD instead of the CDD in 2014. The choice to use the AD instead of the CDD was first made in connection with the 2013 rate, but because the 2013 rate was not and is not challenged here, the Court need not engage in an analysis of whether that decision was reasonable and adequately supported.
In 2014, the Coast Guard could have utilized the CDD, or the Updated AD, or sought an entirely new source for the data, but instead adhered to its decision to use the AD because it was "provided and confirmed" by the AMOU. 79 Fed.Reg. at 12086. It made this decision despite comments from the AMOU and Plaintiffs claiming that the AD was not accurate. See supra Section I.iv.
When an agency's information is challenged, the agency is not always required to use new data, but must "provide a full analytical defense" and show that it is "conscious of the limits of" the data. Eagle-Picher Indus., Inc. v. E.P.A., 759 F.2d 905, 922 (D.C.Cir.1985); Ass'n of Oil Pipe Lines v. F.E.R.C., 83 F.3d 1424, 1433-35 (D.C.Cir.1996) (FERC's choice of index in setting pipeline rates was not arbitrary and capricious where record demonstrated "reasoned judgment in selecting" the "most suitable" index). Although courts will defer to the agency's choice of data when the agency was faced with competing data or models, Pub. Emps. for Envtl. Resp. v. U.S. Dep't of the Interior, 832 F.Supp.2d 5, 26 (D.D.C.2011), the agency's choice is arbitrary and capricious when "there is simply no rational relationship between the model and the known behavior of the items to which it is applied." Greater Yellowstone Coal. v. Kempthorne, 577 F.Supp.2d 183, 198 (D.D.C.2008) (National Park Service's Final Environmental Impact Statement, relating to snowmobiles in Yellowstone, was vacated as arbitrary because it relied on
The "analytical defense" the Coast Guard provided for its continued use of the AD was, effectively, that the AMOU had previously approved of that data. 79 Fed. Reg. at 12086. This justification might have been valid in 2013, when the Coast Guard received an email from the AMOU confirming that a table reflecting the AD was "acceptable" to the AMOU.
As a general matter, "an agency's interpretation of its own regulation is entitled to deference." Auer v. Robbins, 519 U.S. 452, 461, 117 S.Ct. 905, 137 L.Ed.2d 79 (1997). Auer deference is due when the agency's interpretation is not "plainly erroneous or inconsistent with the regulation." Id. The Court must ordinarily afford the Coast Guard's interpretation of its regulation "controlling weight" unless "an alternative reading is compelled by the regulation's plain language." Akiachak Native Cmty. v. Salazar, 935 F.Supp.2d 195, 208-09 (D.D.C.2013). However, this deference is due only when the regulation is ambiguous, there is no reason to suspect the interpretation does not reflect the agency's "fair and considered judgment," and the interpretation is "fairly supported" by the regulation.
These conditions are not met here. The regulation cited by the Coast Guard to exclude the season bonus from target compensation applies to the "recognition of expenses," which is an accounting of Plaintiffs' expenses for Step 1 of the process—not the disputed Step 2.A. 46 C.F.R. § 404.5; see also Def. Mem. at 2-3 ("Step 1 involves gathering financial information from the three voluntary pilot associations. This data includes recognizable expenses for each pilotage association"). The Coast Guard has summarily asserted that this section resolves the question of including season bonuses as part of pilot compensation, though that is not at all clear from the regulation. Even if the Court defers to the Coast Guard's argument that this regulation is applicable to calculation of compensation, not expenses, it cannot agree that excluding season bonuses is "fairly supported" by the regulation, Drake, 291 F.3d at 68, which provides for the inclusion of "medical, pension, and other benefits paid to pilots, or for the benefit of pilots." 46 C.F.R. § 404.5(a)(6). The Coast Guard has offered no explanation supporting its interpretation of "other benefits paid to pilots" to exclude holidays, weekends, and a season bonus.
The Coast Guard's interpretation of § 404.5(6) to exclude holidays, weekends, and the season bonus is particularly unconvincing because until publication of the 2013 rate, the Coast Guard had consistently included those elements of pay in calculating target compensation. As described above, one step in calculating the rate in 2012 was the multiplication of the daily wage rate into "monthly figures that represent actual working days and vacation, holiday, weekend, or bonus days." 77 Fed.Reg. at 11761 (emphasis added); see also A.R. 234 (Feb. 25, 2008 letter from AMOU to Lake Pilots Association Inc. indicating that part of the monthly multiplier of 54.5 includes 3 days for "additional days of pay for season bonus per month"). When an agency departs from its prior policies or practices, it must acknowledge and explain the departure. Columbia Broad. Sys., Inc. v. F.C.C., 454 F.2d 1018, 1027 (D.C.Cir.1971) ("the Commission's utter failure to come to grips with this problem constitutes an inexcusable departure from the essential requirement of reasoned decision making"); Ramaprakash v. F.A.A., 346 F.3d 1121, 1125 (D.C.Cir.2003). The Coast Guard gave no explanation for departing from its position of recognizing these extra days to not recognizing them. There is instead an assertion that no departure occurred. 79 Fed.Reg. at 12086. The Coast Guard's explanation for why it departed from its prior practice is inadequate, because it is supported by a single statement which "runs counter to the evidence before the agency." Motor Vehicle Mfrs. Ass'n of U.S., Inc. v. State Farm Mut. Auto. Ins. Co., 463 U.S. 29, 43, 103 S.Ct. 2856, 77 L.Ed.2d 443 (1983); see also Farmers Union Cent. Exch., Inc. v. F.E.R.C., 734 F.2d 1486, 1517 (D.C.Cir. 1984). As such the Court concludes that the 2014 Final Rate is arbitrary and capricious and must be set aside.
The typical remedy for an arbitrary and capricious agency action is to vacate the rule. Humane Socy' of the United States v. Jewell, 76 F.Supp.3d 69, No. 13-186, 2014 WL 7237702 (D.D.C. Dec. 19, 2014). In deciding whether to provide the typical remedy, the Court is guided by two factors: "the seriousness of the . . . deficiencies of the action" and "the disruptive consequences of vacatur." Heartland Reg'l Med. Ctr. v. Sebelius, 566 F.3d 193, 197 (D.C.Cir.2009)(alteration in original). Plaintiffs argue that the disruptive consequences here—reversion to the 2013 Rate, which is lower than the 2014 Rate—would be more prejudicial than leaving the too-low 2014 Rate in place. (Pl. Mem. 30). Plaintiffs also ask the Court to "make clear" that "pilots will be entitled to recover from shippers the difference between that new rate and the improper rate as of August 1, 2014." (Pl. Mem. 31). The only case on which Plaintiffs rely in support of the notion that the Court may preemptively adjudicate their right to seek refunds from a third party is not entirely on point, as it provided for a refund by the agency of improperly assessed fees. See Allied-Signal, Inc. v. N.R.C., 988 F.2d 146, 153 (D.C.Cir.1993). The Court is also mindful that its decision likely impacts the propriety and validity of the 2015 rate. Defendant does not address Plaintiffs' arguments concerning the proper remedy.
Although the Court could deem the Coast Guard's silence to be a concession that the requested relief is proper, Phrasavang v. Deutsche Bank, 656 F.Supp.2d 196, 201 (D.D.C.2009), the Court is not inclined to deviate from the typical remedy without the benefit of argument from all parties. The parties shall therefore file supplemental briefs addressing the issue of a proper remedy.
For the reasons set forth above, the Court concludes the 2014 Final Rate was arbitrary and capricious. Accordingly, Plaintiffs' motion for summary judgment is GRANTED and Defendant's cross-motion for summary judgment is DENIED. Plaintiffs shall file a brief addressing a proper remedy on April 17, 2015. Defendant shall file a response no later than May 8, 2015. Plaintiffs may reply by May 18, 2015. Plaintiffs' opening brief and Defendant's response shall each be limited to 15 pages. Plaintiffs' reply shall be no more than 8 pages.
A corresponding order will issue separately.
