Fifth Circuit Affirms Coast Guard Determination that Dredge Complies With Jones Act: What Does “U.S. Built” Mean?

Diamond Services Corporation v. Curtin Maritime Corp., U.S. et al., 2024 WL 1648002, 2024 U.S. App. LEXIS 9318 (5th Cir. April 17, 2024).

            The eponymous Jones Act addresses more than the statutory right of a seaman to sue the employer for negligence. It was the first codification of statutory U.S. law and besides the negligence remedy of seamen, it codified the laws with respect to cabbotage (coast-wise trade laws) and documentation of vessels under U.S. flag including dredges. It is often referred to more appropriately as the Merchant Marine Act of 1920.

            Recently, on April 4, 2024, we reported an opinion of the U.S. Court of Appeals (The Vikings Are Coming, The Vikings Are Coming!)[1] which also addressed the coastwise trade laws. To have two opinions on these laws from the same federal Circuit Court of Appeals is, well, almost like a tsunami.

            The Merchant Marine Act limits the use of dredges in the U.S. to those which are “built in the U.S.”[2] Prior to its construction,[3] Curtin sought a preliminary opinion from the U.S. Coast Guard whether a vessel “constructed of steel at a shipyard in the United States” but whose “vessel's spuds and crane would be removed from a foreign vessel and installed after being shipped to the United States.”[4] The Director of the National Vessel Documentation Center issued a determination that the vessel would be considered U.S. built and would qualify for a coast-wise trade endorsement as the vessel “’ remain[s] a complete and intact vessel and [would] be fully capable of operating as a vessel without the spuds and crane.’”[5]

            Diamond sued in federal court in Houston under the APA against Curtin, the Port of Houston and several federal entities.[6] Curtin and the Port of Houston filed to dismiss the claim under FRCP 12 (b)(1) and 12 (b)(6) asserting that Diamond lacked standing to sue them and failure to state a claim.[7] Diamond filed for Summary Judgment against Curtin, the Port and the federal defendants which also moved for Summary Judgment.[8] The magistrate recommended that the motions of Curtin and the Port be granted and for Summary Judgment for the government entities.[9] The trial judge adopted the recommendation in full.[10]

            The appellate panel first addressed whether Diamond had standing to sue Curtin under the APA and held that it did not.[11] It has standing to sue the federal defendants but not a competitor unless “’[its] injury is traceable to the defendant and a ruling would likely redress it.’”[12] It has cited no authority to sue a competitor under the APA. The dismissal of Curtin was affirmed.[13]

            Next, the panel addressed the claim against the federal defendants which asked the court to defer to the Coast Guard’s interpretation of the regulation.[14] Relying on the Supreme Court’s most recent opinion on deference to an agency’s interpretation of a regulation (Auer Deference)[15] the court must exhaust all statutory interpretative tools of construction and find a regulation genuinely ambiguous and may it defer to the agency interpretation which must still be “reasonable.”[16]

            The panel found the regulation is ambiguous as to whether the crane is a part of the superstructure of the vessel.[17] The next question is whether the interpretation of the Coast Guard is “reasonable.”[18] The Coast Guard’s review criteria differentiates between structural and non-structural parts.[19] Deckhouses and pilothouses are superstructure though not part of the hull, nonetheless, the vessel could not function as a “’means of transportation on water.’”[20] The crane on this vessel can be removed without affecting the vessel’s function as a vessel.”[21]

            Finally, the court undertook an independent analysis of whether the agency’s interpretation should be given controlling weight. This requires a three-step inquiry: “”1) was actually made by the agency; (2) implicates the agency's substantive expertise; and (3) reflects fair and considered judgment.’’[22] First, the determination was the official position of the agency. Second, it was based on the agency’s administrative knowledge and experience. Finally, it was not a “convenient litigating position” nor a new interpretation which was a surprise.[23]

            The district court’s judgment in favor of the government defendants was affirmed.

[1] See https://www.loyolacurrent.com/blog/the-vikings-are-coming

[2] Diamond Services, 2024 WL 1648002 at *1.

[3] Id. at *2; The dredge was to be used for work to widen the Houston Ship Channel. Diamond Services did not bid on nor did it object to the award of the contract to Curtin.

[4] Id.

[5] Id.

[6] Department of Homeland Security; National Vessel Documentation Center; United States Coast Guard; United States of America; Commandant Linda L. Fagan, and the United States Coast Guard.

[7] Id. at *3

[8] Diamond Services, 2024 WL 1648002 at *3.

[9] Id.

[10] Id.; Diamond Servs. Corp. v. Curtin Mar. Corp., 2023 WL 2634046 (S.D. Tex. Mar. 22, 2023).

[11] Id.; Diamond did not appeal the dismissal of the Port of Houston thus waived that issue on appeal.

[12] Diamond Services, 2024 WL 1648002 at *3.

[13] Id.

[14] Id.

[15] Kisor v. Wilkie, 139 S. Ct. 2400 (2019).

[16] Diamond Services, 2024 WL 1648002 at 3*

[17] Id. at *5.

[18] Id.

[19] Id.

[20] Id.

[21] Diamond Services, 2024 WL 1648002 at 6*.

[22] Id. at *6.

[23] Id. at *7.