Liberty Global Logistic LLC et al v. United States Maritime Administration et al

Filing 34

MEMORANDUM AND ORDER: For the foregoing reasons, Counts I -- VIII and Count X are dismissed because, pursuant to the Hobbs Act, those claims should have been brought in the first instance in the court of appeals of appropriate jurisdiction. In addit ion, even if this Court had jurisdiction over these claims, Counts I, IV, V, VI and VIII would be dismissed for want of the causation essential to standing. Further, Liberty also lacks standing to bringCount IX for the reasons discussed in Section II I, supra. Plaintiffs FOIA claims, Counts XI and XII, are also dismissed for the reasons discussed above.The Clerk of Court is directed to enter judgment in accordance with this Memorandum & Order and to close the case. Ordered by Judge Eric N. Vitaliano on 8/25/2014. (fwd for judgment) (Fernandez, Erica)

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FILED

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. IN CllRMS OFl'ICE

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U.S. DISTRICT COURT E.D.N.Y.

* SEP 5- 201~ *

STRICT COURT
UNITED ST ATES DI OF NEW YORK
EASTERN DISTRICT
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BROOKLYN OFFICE.

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LIBERTY MARITIME CORPO
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LIBERTY PRIDE CORPORATION, an
LIBERTY PROMISE CORPORATION,

MEMORANDUM & ORDER
13-cv-0399 (ENV) (JMA)

Plaintiff,
-againstUNITED ST ATES MARITIME
ADMINISTRATION; DAVID T. MATSUDA,
as United States Maritime Administrator;
UNITED STATED DEPARTMENT OF
TRANSPORTATION, RAYMOND H.
LAHOOD, as United States Secretary of
Transportation, and THE UNITED STATES
OF AMERICA,
Defendants.

x

-------------------------------------------------------------VITALIANO, D.J.,
Plaintiff Liberty Global Logistics ("Liberty") brings suit on behalf of itself
and its affiliates against the United States Maritime Administration ("MarAd"),
David T. Matsuda, U.S. Department of Transportation ("DOT"), Raymond H.
LaHood and the United States seeking relief under the Administrative Procedure
Act ("APA") and Freedom of Information Act ("FOIA"). Liberty principally
alleges that MarAd acted arbitrarily and capriciously in awarding contracts to
certain of Liberty's competitors and in approving the transfer of other contracts
among these same competitors. Defendants have moved, pursuant to Rule 12{b)(l),
to dismiss Liberty's APA claims, citing lack of standing, mootness, and other

oved to dismiss Liberty's FOIA
.
th motion is granted Ill full.
e reasons discussed below' e
claims as moot. For th

jurisdictional defects. Defendants have also m

Background
'th' DOT oversees the Maritime Security Program
Mar Ad, an agency WI m
•
.
. . . l b th M 'time Security Act of 1996 and
("MSP"), a program authorized m1tial y y e ar1
re-authorized in 2003 ("MSA 2003"). With the Persian Gulf War having exposed
the virtual demise of America's sealift capacity, the maritime security program was
enacted to ensure that militarily useful vessels are available to the United States
government in the event of war or national emergency. Under the MSP, MarAd
subsidizes approximately 60 privately-owned commercial vessels that are engaged in
U.S.-foreign trade by entering into operating agreements ("OAs") with the vessel
owners. Those agreements mandate a direct payment by the United States to the
vessel owner of $3.1 million per year, which is intended, in part, to compensate
owners for the increased cost of registering as a "United States-flag" vessel rather
than a "foreign-flag" vessel. In exchange for the $3.1 million annual subsidy, the
vessel owner agrees to ensure the vessel's availability to the military in the event of
war or national emergency.
MSA 2003 adopted certain eligibility requirements for participation in MSP
based on the vessel's type and ownership. With respect to ownership, MSA 2003
provided a four tier prioritization scheme of eligible ownership arrangements, listed
here in descending order of priority: (1) a vessel owned and operated by a U.S.
citizen as defined at 46 U.S.C. § 50501 (a "Section 2 citizen"); (2) a vessel owned by a
Section 2 citizen but chartered to an entity eligible to document the vessel under the

2

U.S. flag (a "documentation citizen"); (3) a vessel owned and operated by a defense
contractor; and (4) a vessel owned by a documentation citizen but chartered to a
Section 2 citizen. In general, while a Section 2 citizen is an entity owned and
controlled by U.S. citizens, a documentation citizen is an entity organized in the U.S.
and whose executive officers are U.S. citizens, but whose owners may not be U.S.
citizens. With respect to vessel type, MSA 2003 also established a four-tier priority
system for awarding OAs: first, to any eligible "tank vessel"; second, to any fleet
vessel already participating in the program prior to 2003; third, to eligible vessels
operated by a Section 2 citizen; and fourth, to any other eligible vessel.
Under MSA 2003, participating vessels are authorized to-and often dotransfer their OAs to other vessels eligible to participate in the program, subject to
approval by the Secretary of Transportation and the Secretary of Defense. By
regulation, MarAd requires that OAs be transferred only to persons "of the same or
more restrictive U.S. citizen priority." 46 C.F.R. § 296.30(j). Further, in 2006,
Congress modified MSA 2003 to provide that MarAd could not approve transfer of
an OA to a non-Section 2 citizen unless there was not a Section 2 citizen with an
eligible vessel interested in the OA. Additionally, by regulation, MarAd requires
that any replacement vessel "must qualify with the same or with more military
useful capability as the MSP vessel to be replaced." 46 C.F.R. § 296.30(c).
MSA 2003 authorized MSP only through fiscal year 2015. In 2013, Congress
enacted the National Defense Authorization Act of2013, 126 Stat. 1632 § 3508
("NDAA"}, which made certain changes to the MSP statutory scheme. First, NDAA
required MarAd to extend all existing OAs through 2025. Second, NDAA
3

eliminated the four-tier priority scheme for the award of new OAs, now giving
priority to Section 2 citizens only "after consideration of military requirements."
NDAA § 3508(c)(2). Finally, NDAA removed the restriction on the transfer of OAs
to non-Section 2 citizens, requiring only that the transfer be to a person "that is
eligible to enter into the operating agreement" subject to a determination by the
Secretary of Transportation and Secretary of Defense that "the transfer is in the
best interest of the United States." NDAA § 3508(e)(l). The 2014 NDAA did not
contain any provisions pertaining to the maritime security program. See National
Defense Authorization Act of2014, H.R. 3304, Pub. L. 113-96 §§ 3501-04.
Liberty has been a participant in MSP since 2004. Specifically, in 2004
Liberty attempted to enroll two of its vessels in the MSP, and was ultimately
awarded a single OA. Subsequent to its receipt of that OA, Liberty built additional
vessels, allegedly of excellent military usefulness, for which it has been trying
unsuccessfully to obtain operating agreements for many years. This lawsuit arises
out of Liberty's inability to obtain additional OAs. In short, Liberty is a disgruntled
suitor for government subsidies, and seeks judicial intervention.
In particular, Liberty seeks relief based on certain actions taken by MarAd in
the period from 2007 through 2011 that Liberty alleges were arbitrary and
capricious. Liberty asserts ten claims under the APA relating to the following
alleged actions taken by MarAd: (I) approval of the transfer of OA #98 to American
International Shipping LLC ("AIS") without a determination that AIS was a
Section 2 citizen; (II) approval of Argent Marine Management ("Argent") as a
4

Section 2 citizen based on an incorrect application of the citizenship standard; (IID
awarding OA #108 to Argent; (IV) approval of the replacement of vessel Maersk
Michigan with vessel Alliance Charleston under OA #108 without making the
requisite finding of military capability; (V) approval of the replacement of vessel
Patriot with vessel Ocean Freedom under OA #67 without making the requisite
finding of military capability; (VI) approval of AIS as an "operator" within the
meaning of MarAd's regulations; (VII) approval of Argent as an "operator" within
the meaning ofMarAd's regulations; (VIII) approval of Fidelio Limited Partnership
("Fidelio") as an "operator" within the meaning of MarAd's regulations; (IX)
discontinuing the practice of publishing its decisions for public comment in favor of
a "secretive" decision-making process; and (X) allowing Argent to revise a bid in
secret. Liberty also interposes two claims under FOIA based on the following
alleged actions: (XI) MarAd's failure to produce all documents covered by Liberty's
FOIA request 12-022, and (XII) MarAd's failure to publish all of its decisions of
precedential value.
Liberty's claims can be grouped into five categories: (1) MarAd's award of
OA #108 to Argent, an entity with an allegedly lower priority citizenship
classification than Liberty's vessels (Counts II, III, VII and X), (2) MarAd's
approval of the transfer ofOA #98 from Wallenius Lines Holding, Inc.
("Wallenius") to AIS, with Fidelio acting as an intermediary (Counts I, VI and
VIII); (3) MarAd's approval of two replacement vessels without making the
statutorily required determination regarding military usefulness (Counts IV and V);
5

(4) MarAd's alleged decision in 2005 to stop publishing its opinions and its adoption
of a "secretive" decision-making process (Count IX); and (5) MarAd's improper
withholding of certain documents that Liberty requested pursuant to FOIA (Counts
XI and XII). With respect to Liberty's ADA claims, MarAd argues principally that
Liberty lacks standing. MarAd further contends that Liberty's APA claims have
been mooted by the NDAA and that, pursuant to the Hobbs Act, the claims should
have been brought initially in an appellate court. Finally, MarAd argues that
Liberty's FOIA claims have been mooted by MarAd's production of the requested
documents subsequent to Liberty's filing of the instant action.
Standard of Review
Plaintiffs bear the burden of demonstrating that subject matter jurisdiction
exists. MLC Fishing, Inc. v. Velez, 667 F.3d 140, 141 (2d Cir. 2011). Standing is a
federal jurisdictional issue, and a plaintiff must demonstrate standing for each claim
and form of relief sought. Carver v. City ofNew York, 621 F.3d 221, 225 (2d Cir.
2010). In order to establish standing, a plaintiff must demonstrate "(1) that he
suffered an injury-in-fact-an invasion of a legally protected interest which is (a)
concrete and particularized and (b) actual or imminent, not conjectural or
hypothetical; (2) that there was a causal connection between the injury and the
conduct complained of; and (3) that it is likely, as opposed to merely speculative,
that the injury will be redressed by a favorable decision." Id. (citations omitted).
Where, as here, standing is challenged on the basis of the pleadings, the Court must
"accept as true all material allegations of the complaint, and must construe the

6

complaint in favor of the complaining party." Id.
The APA provides that "a person suffering a legal wrong because of agency
action, or adversely affected or aggrieved by agency action within the meaning of a
relevant statute, is entitled to judicial review thereof." 5 U.S.C. § 702. Under the
APA, in order for a reviewing court to set aside an agency action, it must find that
the agency's findings and conclusions are unlawful in some way. 5 U.S.C. § 706(2).
Liberty contends that MarAd's determinations were "arbitrary, capricious, an
abuse of discretion, or otherwise not in accordance with law" within the meaning of
5 U.S.C. § 706(2)(A).
Discussion
A. AP A Claims

I. Hobbs Act
Under the Administrative Orders Review Act-also known as the Hobbs
Act1-the court of appeals, in all jurisdictions except for the Federal Circuit, has
exclusive jurisdiction to "enjoin, set aside, suspend ... or to determine the validity
of" all "rules, regulations or final orders" that the Secretary of Transportation
issues "pursuant to" certain enumerated statutes. 28 U.S.C. §2343(3)(A). One such
enumerated statute is 46 U.S.C. § 50501, which sets forth the definition of Section 2
citizenship. MarAd contends, because of this provision, that Liberty's claims
related to Section 2 citizenship-Counts I-VIII and Count X-could have been
brought only in the court of appeals. Liberty, in opposition, contends that it is not
I

Not to be confused with the separate Hobbs Act dealing with robbery and
extortion. See 18 U.S.C. § 1951.

7

challenging any "rules, regulations or final orders," made pursuant to § 50501. To
the contrary, Liberty contends that MarAd awarded OA #108 "pursuant to" MSA
2003 (which is not an enumerated Hobbs Act statute), and that the statutory
definition of Section 2 citizenship contained in § 50501 is only tangentially connected
to the challenged action.
The few courts that have addressed this issue support the view advanced by
MarAd. Most notably, in Conoco, Inc. v. Skinner, 970 F.2d 1206 (3d Cir. 1992), the
plaintiff challenged regulations issued by MarAd and the Coast Guard which
related to Section 2 citizenship. The third circuit held that the Hobbs Act vested
exclusive jurisdiction for plaintiffs' challenges to both regulations in the court of
appeals, as "[t]he Hobbs Act should be liberally construed to allow exclusive
jurisdiction in the court of appeals." Id. at 1214. Indeed, "[a]bsent a firm indication
that Congress intended to locate initial APA review of agency action in the district
courts, [the Court should] not presume that Congress intended to depart from the
sound policy of placing initial AP A review in the courts of appeals." Florida Power
& Light Co. v. Lorion, 470 U.S. 729, 745 (1985). In Conoco, the court rejected

plaintiffs' argument that the subject Coast Guard regulation was issued "pursuant
to" vessel documentation laws rather than§ 50501, concluding that "[t]his reading
of 'pursuant to' is far too narrow." Conoco at 1214. In fact, the court noted that
"pursuant to" is commonly defined as "acting or done in consequence or in
prosecution (of anything); hence, agreeable, conformable; following; according."

Id. (citing Old Colony Trust Co. v. Commissioner of Internal Revenue, 301 U.S. 379
(1937)). Further, and critical to the instant case, the court held that "[e]ven if we

8

adopted a narrow view of 'pursuant to,' we could find exclusive jurisdiction on the
ground that the vessel documentation laws and section 2 are interrelated." Id.
Here, similarly, regardless of whether the Court concludes that Liberty's
APA claims originated under MSA 2003 or § 50501, it is clear that the central issue
is that of Section 2 citizenship, and that MSA 2003 and § 50501 are highly
interrelated. The crux of Liberty's complaint is, clearly, that it was improperly
passed over for certain OAs because MarAd incorrectly concluded that Argent and
AIS were proper Section 2 citizens. The adjudication of this claim would seem to
rest almost entirely on the reviewing court's evaluation of MarAd's interpretation
of the statutory Section 2 citizenship definition. It is an issue properly litigated in
the appropriate court of appeals. Plaintiff's attempt to re-cast its claims as arising
under MSA 2003 is unavailing. See Conoco at 1214; Energy Transportation Group,

Inc. v. Skinner, 752 F. Supp. 1, 36 (D.D.C. 1990) ("[Plaintiffl has attempted to
sidestep the jurisdictional bar by arguing it is not challenging the validity of
MarAd's determination, but rather is challenging the validity of MarAd's process in
reaching this determination. The Court believes this is a distinction without a
difference. To determine the validity of MarAd's citizenship determination, the
court of appeals must a fortiari determine the validity of the process used to make
that determination.") Bathed in this light, plainly, the Court lacks jurisdiction over
Count I through and including Count VIII as well as Count X, 2 all of which should

2

Count X is somewhat different from the other APA counts in that it challenges
the "secretive" method by which MarAd allegedly permitted Argent to revise its
bid for OA #108 rather than the award itself. Nevertheless, any inquiry into

9

have been brought initially in the court of appeals.
II.

Standing

The government contends that, in addition to being precluded from bringing
its claims in this Court due to the Hobbs Act, Liberty also lacks standing to pursue
Counts I - VIII and Count X for multiple reasons. Although, as discussed above,
the Court concludes that it lacks jurisdiction over these claims, in light of the
paucity of caselaw on the Hobbs Act issue, much less precedents from this Circuit,
the Court will also address the government's standing arguments.
a. Injurv-In-Fact
MarAd contends that Liberty lacks standing to assert its APA claims because
Liberty's "bare allegation" that "it was deprived of an opportunity to compete" for
certain OAs is insufficient to demonstrate a concrete, particularized injury. (Def.
Mem. of Law at 15.) According to MarAd, it would be pure speculation for the
Court to assume that Liberty would have received OA #98 or OA #108 in the
counter-factual circumstance in which the OAs were not awarded to the competitors
of Liberty to whom they were awarded. Contrary to MarAd's contention, however,
Liberty's allegations are sufficient to establish injury-in-fact at the pleading stage.
This is so because, under the "well-established concept of competitors' standing,"
the "loss of 'opportunity to compete equally"' is sufficient to establish standing.

Schulz v. Williams, 44 F.3d 48, 53 (2d Cir. 1994) (quoting Fulani v. League of Women
Count X would necessarily entail an analysis of whether OA #108 was
improvidently granted in light of Argent's citizenship status and, accordingly, is
part of the set of claims that Liberty should have pursued as an initial matter in
the court of appeals.

10

Voters Educ. Fund, 882 F.2d 621, 626 (2d Cir. 1989)). Here, Liberty has alleged that
it is a direct and current competitor to both Argent and AIS; that it was the owner
of highly qualified vessels that ranked higher than its competitors' vessels in the
MSA 2003 prioritization scheme; and that MarAd's allegedly improper
determinations with respect to the status of AIS, Argent and Fidelio cost Liberty the
opportunity to compete for contracts worth $3.1 million per year. These allegations,
accepted as true, satisfy the injury-in-fact prong of the standing inquiry. See Lee v.

Board of Governors of the Fed. Reserve Sys., 118 F.3d 905, 913 (2d Cir. 1997) ("(T]o
show competitor standing a plaintiff must show that he personally competes in the
same arena."); Kerm Inc. v. FCC, 353 F.3d 57, 59 (D.C.C. 2004) ("A party seeking to
establish standing on this basis must demonstrate that it is a direct and current
competitor whose bottom line may be adversely affected by the challenged
government action.")
b. Causation
MarAd next argues that, even assuming Liberty has established injury-infact, MarAd did not cause any of Liberty's injuries. MarAd pursues this argument
only with respect to Liberty's claims involving MarAd's approval of the OA #98
transfer and Mar Ad's approval of replacement vessels (Counts I, IV, V, VI, VIII)-not its claims involving MarAd's award of OA #108 to Argent. According to
MarAd, these transfers, despite being subject to MarAd's approval, were essentially
private transactions. As a consequence, the injury, if any to Liberty, was caused by
the private entities that initiated the transfers and vessel replacements, not by
MarAd. Liberty contends, on the other hand, that it is merely challenging MarAd's

11

approval of these private transactions, which was a necessary step in their
completion.
"(S]tanding is 'substantially more difficult to establish' in cases where 'the
plaintiff is not himself the object of the government action or inaction he
challenges."' Lee at 912 (quoting Lujan v. Defenders of Wildlife, 504 U.S. 555
(1992)). Although courts in this circuit have not directly addressed whether a
plaintiff has standing to challenge agency approvals under similar circumstances,
cases from other jurisdictions convincingly teach that a litigant in Liberty's shoes
cannot establish causation. In particular, a series of decisions in the D.C. Circuit
stand for the proposition that, where a plaintiff cannot demonstrate that his injury
would have been remedied in the absence of the government approval in question,
that plaintiff lacks standing. See Cherry v. FCC, 641 F.3d 494, 498 (D.C. Cir. 2011)
(no causation where plaintiff's "alleged injuries are not attributable to the
Commission's approval of the license assignments ... but rather to the judicial
foreclosure action before the New York court."); Microwave Acquisition Corp. v.

FCC, 145 F.3d 1410 (D.C. Cir. 1998); Am. W. Airlines, Inc. v. Burnley, 838 F.2d 1343
(D.C. Cir. 1988).
Here, Liberty's real gripe with respect to the transfer of OA #98 is not with
MarAd but with Wallenius, which decided to sell OA #98 to AIS, through Fidelio.
Notably, Liberty does not allege that Wallenius was ineligible to participate in the
MSP when it decided to transfer OA #98. Presumably, therefore, had MarAd not
approved this transfer, OA #98 would have simply remained with Wallenius, which
would have been free to retain OA #98 or to seek a new transferee ofWallenius's

12

choosing-not MarAd's. In other words, Liberty was operationally situated
identically regardless of whether MarAd approved the transfer of OA #98 or did
not, which is fatal to Liberty's claim that the approval Liberty challenges here
caused Liberty's injury. 3
Liberty's claims regarding MarAd's allegedly improper approval of
replacement vessels (Counts IV and V) suffer from the same defect. Liberty does
not allege that the vessels being replaced-the Maersk Michigan and the Patriotwere ineligible to participate in the MSP at the time of replacement. Derivatively,
had MarAd rejected the replacement applications, the relevant OAs would have still
remained with the vessel owners, who would have been free either to continue
operation of the existing vessels or to seek alternative replacement vessels. In either
instance, Liberty would be situated identically to its position following whatever
action MarAd took on the approval applications, which, in turn, indicates that the

3

In support of its causation argument Liberty relies heavily on District No. 1, Pac.
Coast Dist., Marine Eng'rs Beneficial Ass'n v. Maritime Admin, 215 F.3d 37, 40-41
(D.C. Cir. 2000), in which a union representing workers on maritime vessels
challenged MarAd's approval of the transfer of the registry of those vessels from
the United States to a foreign country. The court of appeals there rejected
Mar Ad's standing argument, concluding that the union's allegation that
MarAd's approval would cause the union adverse economic consequences
sufficiently "demonstrated both the injury in fact and the causation necessary to
give it constitutional standing." Id. at 41. Instructively, the injury in District I
was the loss of union jobs that would have resulted from the transfer itself. In
the absence of MarAd approval, the union would have retained its jobs and
suffered no injury. Id. Here, by contrast, in the absence of MarAd approval, OA
#98 would have remained with its prior owner-an entity other than Libertywhich would have left Liberty no better off. In other words, viewed with the
spotlight on the claimed injury, MarAd's action in the former case changed the
status quo but in this case it changed nothing.

13

approval itself did not cause any injury to Liberty. Hence, Counts I, IV, V, VI and
VIII must be dismissed for want of the causation essential to standing, in addition to
failing due to the Hobbs Act, as discussed in Section I, supra.

4

c. Redressability
MarAd contends that Liberty's APA claims are incapable of redress because
NDAA eliminated the four-tier citizenship priority scheme of MSA 2003 in favor of
a determination based primarily on military usefulness. As MarAd notes, Liberty
throughout its complaint emphasizes its status as a Section 2 citizen as the primary
reason why it should have been considered for OA #108. MarAd advances the view
that, because NDAA subsumed the statutory preference for Section 2 citizenship as
part of the newly created standard mandating considerations of military utility,
there is no reason to believe that Liberty would ultimately receive OA #108 should
the Court set aside MarAd's granting ofOA #108 to Argent and force MarAd to reissue it. This contention, which is essentially a repeat of MarAd's argument about
the injury-in-fact prong, is unavailing. As an initial matter, it is significant that
Liberty has alleged that it owns multiple ships of excellent military quality, which, it
alleges further, would be likely candidates for OA #108, should MarAd have to reissue it. More fundamentally, the cognizable constitutional injury of which Liberty
complains is the denial of the opportunity to compete for OA #108 when MarAd

4

Because, putting aside the Hobbs Act jurisdictional issue, the Court dismisses
these counts based on plaintiff's failure to adequately plead causation, the Court
declines to address MarAd's argument with respect to Counts IV and V that
determinations of military utility are committed to agency discretion by law and,
therefore, are unreviewable by the Court.

14

initially awarded it. Although it is certainly true that Liberty would not be
guaranteed to receive the subsidy should the Court invalidate its award to Argent,
Liberty would be guaranteed the opportunity to compete for that contract, which is
what matters.
d. Mootness
In an echo of its redressability argument, MarAd next argues that Liberty's
APA claims have been mooted by Congress's adoption ofNDAA. In particular,
MarAd notes that NDAA mandated the extension of all existing OAs-including OA
#108-through 2025. Because Liberty's claims are "based entirely on the old MSP
scheme," MarAd contends that Liberty seeks a judicial remedy contrary to an Act
of Congress. (Def. Mem. of Law at 20.)
Defendants' contention again is unavailing. First, it is important that NDAA
amended MSA 2003-it did not repeal it. Thus, Liberty is not suing under a statute
that has been entirely replaced. Moreover, as defendants note, NDAA mandated
that existing OAs be extended through 2025, it did not terminate and replace those
OAs. Nor did NDAA expressly enact the existing distribution of OAs or even
suggest the insulation of any MarAd OA determination from judicial review under
AP A. As a result, if MarAd improperly awarded OA #108 to Argent under the old
statutory scheme, the fact that NDAA extended that contract for an additional
decade does not moot any injury suffered by Liberty as a result of a past improper
award by MarAd. At bottom, Liberty's claims regarding OA #108 have not been
mooted by the amendatory effect of NDAA.
III.

APA Claims, Count IX

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Focusing on a secondary target, Liberty challenges MarAd's alleged reversal
of its policy of making available to the public "significant MSP actions." According
to Liberty, MarAd has not published a single MSP-related decision since 2005
despite regulations requiring it to publish any decisions that are "reasonably
expected to have precedential value." (Am. Compl. , , 75-76) (citing 49 C.F.R. §§
7.5(a)(2) & 7.7). MarAd retorts that Liberty lacks standing to assert this claim, and,
in any event, that the allegation is a generalized grievance which is not cognizable
under APA.
Liberty urges that it possesses standing based on the doctrine of
"informational standing." Yet, "to the extent that the concept of informational
standing has received any recognition, it has been limited to very specific statutory
contexts where a statutory provision has explicitly created a right to information."

Taylor v. Bernanke, 2013 U.S. Dist. LEXIS 128533, at *42 (E.D.N.Y. 2013). It is
noteworthy that no court in this circuit has ever found that a plaintiff successfully
pied informational standing. In other circuits, courts have held that, in order to
establish informational standing, a plaintiff must "(1) identify a statute that, on
plaintiff's reading, directly requires the defendant to disclose information that the
plaintiff has a right to obtain, (2) show that it has been denied the information to
which it is entitled, and (3) provide a credible claim that the information would be
helpful to it." WildEarth Guardians v. Salazar, 859 F. Supp. 2d 83, 92 (D.D.C. 2012).
Even courts that have acknowledged the principle of informational standing have
noted that it does "not extend to situations where the plaintiff's view of the statute
would not directly entitle it to the information it seeks." Id.

16

Assuming, arguendo, that the theoretical possibility of informational standing
was recognized in this circuit, Liberty has not established the requisite elements to
invoke it. Liberty certainly does identify regulations that it claims directly require
MarAd to disclose the information it seeks-namely 49 C.F.R. §§7.S(a)(2) and 7.7,
which require MarAd to publish decisions that are "reasonably expected to have
precedential value." However, Liberty fails thereafter to plead what else is required
to satisfy the informational standing inquiry because it has not demonstrated that it
has been denied any information to which it is entitled. That is so because Liberty
has not shown that MarAd actually issued any decisions post-2005 that had
precedential value--a prerequisite for publishing the opinions that explain them.
Although Liberty assumes that MarAd must have issued at least one such decision
in that timeframe, that naked assumption, standing alone, cannot carry the day.
The challenge is dismissed for want of standing. 5
IV.

FOIA Claims
a. CountXI

In Count XI, Liberty alleges that MarAd failed to produce certain documents
it requested pursuant to FOIA and that MarAd also failed to "properly assess and
utilize FOIA exemptions through repeated and flagrant overly broad redaction."
5

Given the Court dismisses Count IX on this basis, it does not reach MarAd
alternative argument that Liberty's allegations are too generalized to be
cognizable under the APA. Further, because its disposition is unnecessary to the
instant motion, the Court also declines to reach the issue raised by defendant for
the first time in its reply brief and discussed in plaintiff's sur-reply brief-that is,
whether Liberty is a "contractor" within the meaning of 46 C.F.R §296.SO(a)
such that Liberty would have had to file an administrative appeal with MarAd
prior to bringing its AP A claims.

17

•

(Am. Comp!. 1[ 293.) MarAd argues that the majority of Liberty's FOIA claims
have not been exhausted, and that the exhausted claims have been mooted by
Mar Ad's production of documents subsequent to the filing of the instant action. As
a consequence, MarAd asks that Liberty's claims be dismissed as moot, or, in the
alternative, that the Court grant summary judgment in favor of defendants.
Liberty replies, contrarily, that it did completely exhaust its requests, and, in any
event, complete exhaustion was unnecessary, given the likelihood that MarAd would
deny its request.
As alleged, Liberty filed a FOIA request with MarAd on December 5, 2011,
seeking a variety of documents that could serve as the basis for the instant
complaint. It sought materials related to MarAd's award of OA #108 to Argent.
Mar Ad acknowledged receipt of the FOIA request on December 7, 2011 and
assigned the request control number 12-022 ("FOIA 12-022"). Following a three
month period of inactivity and prompted by further inquiry from Liberty, MarAd
produced certain documents responsive to FOIA 12-022 on March 16, 2012. On
March 27, 2012 Liberty responded by letter to MarAd's March 16 production,
identifying an additional 15 documents that it believed to be responsive to FOIA 12022 that MarAd had failed to produce. Shortly thereafter, on April 11, 2012,
Liberty filed an official appeal with MarAd challenging certain redactions that
MarAd made in the March 16 production.
Throughout the summer and fall of2012, Liberty and MarAd corresponded
extensively about FOIA 12-022, with Liberty repeatedly complaining to MarAd
about both the contents and the speed of MarAd's production. Although MarAd

18

•
did produce some additional documents on September 20, 2012 and again on
January 3, 2013, those productions failed to satisfy Liberty. Further, on March 28,
2013 MarAd officially denied Liberty's April 11, 2012 appeal of the redactions made
in MarAd's March 16, 2012 production. Liberty now seeks review, demanding a
roll-back of the redactions made in MarAd's production, and also complains that
four of the 15 outstanding documents identified by Liberty in its March 27, 2012
letter remained unproduced at the time of the filing of this lawsuit.
"Consistent with its purpose to promote honest and open government, and to
assure the existence of an informed citizenry in order to hold the governors
accountable to the governed FOIA strongly favors a policy of disclosure." Brennan

Ctr. for Justice v. United States, 697 F.3d 184, 194 (2d Cir. 2012). FOIA requires the
government to disclose records unless the documents fall within one of the specified
statutory exemption, which, "[c)onsistent with FOIA's purposes ... are narrowly
construed." Id. "An agency withholding documents responsive to a FOIA request
bears the burden of proving the applicability of claimed exemptions." ACLU v.
DOJ, 681 F.3d 61, 69 (2d Cir. 2012). "Affidavits or declarations giving reasonably

detailed explanations why any withheld documents fall within an exemption are
sufficient to sustain the agency's burden." Id.
As a threshold matter, the parties disagree as to whether Liberty can advance
claims related to documents produced subsequent to March 16, 2012, because,
according to MarAd, Liberty only exhausted MarAd's official appeals process with
respect to the March 16 production. This argument is not a winning one. A review
of the many letters exchanged by the parties throughout 2012 and 2013 clearly

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indicates that (a) all of the documents Liberty requested before and after March 16,
2012 were responsive to FOIA 12-022, and (b) Liberty repeatedly raised with
MarAd throughout 2012 and 2013 the deficiencies that it perceived in Mar Ad's
production. Plaintiff further alleges-and the correspondence supports-that
MarAd frequently missed deadlines imposed by FOIA, sometimes responding to
Liberty months after deadlines had passed. Under these circumstances, MarAd's
contention that Liberty cannot seek judicial review because Liberty failed to fully
exhaust a certain formal administrative process with respect to a subset of its claims
falls flat. See Robert v. DOJ, 193 Fed. Appx. 8, 9 (2d Cir. 2006) ("FOIA provides
that request denials may be appealed to the heads of agencies ... and requesters are
required to exhaust this administrative remedy before turning to litigationalthough they may be deemed to have exhausted constructively if the agency fails to
make a timely response to the initial request.") Mackey v. Bd of Educ., 386 F.3d 158,
162 (2d Cir. 2004) (exhaustion not necessary where "failure to exhaust had been the
direct result of the [other party's] persistent and excessive untimeliness."). Liberty,
the Court finds, effectively exhausted all of its FOIA requests pursuant to which it
now alleges that MarAd has improperly withheld or redacted documents.
The Court next addresses Liberty's substantive allegations about improperly
withheld documents. The amended complaint identifies four documents responsive
to Liberty's FOIA request that it alleges MarAd improperly withheld: (1) MarAd's
January 13, 2009 approval to offer OA #108 to Ocean Shipholdings, Inc; (2)
MarAd's September 30, 2009 letter to Argent offering it OA #108; (3) a May 27,
2011 e-mail regarding the vessel Alliance Charleston; and (4) a July 14, 2011 letter

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from Argent to MarAd. (Am. Compl.

~

294). Critically, although MarAd's

production of these documents occurred later than Liberty would have preferred,
the parties agree that MarAd has now produced all four documents. (Def. Mem. of
Law at 40; PI. Mem. of Law at 54; Ex. 11). Notwithstanding, Liberty contends in its
opposition briefthat it has now identified additional documents that it believes have
been improperly withheld. Yet, those allegations are not properly before the Court
as those documents were not specifically identified in Liberty's amended complaint.
With respect to the grievances actually alleged in the amended complaint, those
grievances are moot and the claim is dismissed. Muset v. Ishimaru, 783 F. Supp. 2d
360, 372 (E.D.N.Y. 2011) ("Despite the delay, the documents that were the subject of
the FOIA request were produced by the IRS, albeit after this action was filed.
Therefore, [plaintiff's] claim for relief under FOIA became moot when he received
the requested documents.")
Liberty additionally complains that MarAd improperly redacted certain
documents, pointing specifically to a production MarAd made on September 20,
2012, which fully redacted 611 of the 736 pages. Further, of the 125 pages not fully
redacted, only 29 had any text other than the title. The documents from the
September 20 production were documents that MarAd received from Argent-upon
MarAd's request-that related to Argent's business operations. MarAd claims that
these documents contained information exempt from disclosure pursuant to FOIA
Exemption 4.
FOIA Exemption 4 protects "trade secrets and commercial or financial
information." 5 U.S.C. § 552(b)(4). Exemption 4 "applies if a tripartite test is

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.•

satisfied: (1) The information for which exemption is sought must be a trade secret
or commercial or financial in character; (2) it must be obtained from a person; and
(3) it must be privileged or confidential." Bloomberg, L.P. v. Bd. of Governors of the

Fed. Reserve Sys., 601F.3d143, 147 (2d Cir. 2010). MarAd contends that the
redacted documents meet all three requirements. First, the documents were clearly
"commercial" in character, as they pertain to a private company's business
operations. Second, the documents were obtained from a person, namely, Argent.
Third, the documents were "confidential" in that disclosure of the documents would
cause a "substantial harm to the competitive position of the person from whom the
information was obtained." Inner City Press v. Bd. of Governors of the Fed. Reserve

Sys., 463 F.3d 239, 244 (2d Cir. 2006).
Liberty does not dispute that the redacted documents meet these three
elements, but, instead, contends that MarAd produced unredacted versions of
similar documents (pertaining to a different company) pursuant to a different FOIA
request. According to Liberty, MarAd's "inconsistent" treatment of redactions is a
"hallmark of arbitrary agency conduct" and, therefore, renders application of
Exemption 4 inappropriate. However, Liberty identifies no Second Circuit case
law-and the Court is aware of none-supporting the argument that the
government must be deemed to have waived its right to redact confidential
information (of a third party) properly subject to FOIA Exemption 4 by failing to
redact other, allegedly similar, information in response to a FOIA request of an
unrelated party in an unrelated matter. Succinctly, Liberty has failed to refute (and
acknowledges the literal propriety of) MarAd's showing that the redactions were

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...

'

.......

appropriate under FOIA Exemption 4. 6 Consequently, Count XI is dismissed.
b. CountXII
Count XII alleges that MarAd failed to "publish or otherwise make publicly
available decisions of precedential value regarding its administration of the MSP
program." (Am. Com pl.~ 297.) MarAd's alleged failure to publish all of its
decisions awarding OAs, approving OA transfers and/or approving replacement
vessels violated, Liberty claims, 5 U.S.C. § 552(a)(2) and the agency's regulatory
authority, 49 C.F.R. §§7.3-7.5, 7.7. These provisions plainly require that MarAd
publish (1) opinions rendered in the adjudication of a case (5 U.S.C. § 552(a)(2)(A),
49 C.F.R. § 7.5(a)(l)), or (2) statements of policy adopted by the Department of
Transportation (5 U.S.C. 552(a)(2)(B), 49 C.F.R. § 7.5(a)(2)). At threshold, Liberty
fails to identify any "case" that was adjudicated by MarAd or any "statement of
policy" that MarAd failed to publish. In any event, given that MarAd has now
produced copies of all of its determinations (pursuant to Liberty's FOIA requests),
there is no further remedy that could be provided by the Court. Hence, Count XII
is academic and is dismissed as well.
Conclusion
For the foregoing reasons, Counts I - VIII and Count X are dismissed
because, pursuant to the Hobbs Act, those claims should have been brought in the
first instance in the court of appeals of appropriate jurisdiction. In addition, even if
this Court had jurisdiction over these claims, Counts I, IV, V, VI and VIII would be
6

Given this conclusion, the Court does not reach MarAd's alternative argument
that the redactions were also appropriate under Exemption 5.

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dismissed for want of the causation essential to standing.
Further, Liberty also lacks standing to bring Count IX for the reasons
discussed in Section III, supra.
Plaintiff's FOIA claims, Counts XI and XII, are also dismissed for the reasons
discussed above.
The Clerk of Court is directed to enter judgment in accordance with this
Memorandum & Order and to close the case.

SO ORDERED.
Dated:

Brooklyn, New York
August 25, 2014

s/Eric N. Vitaliano
_E_Rl_C_N_.V_I_T_A_L-.,.-I_A_N_O--~....- United States District Judge

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