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9/2/2008
On August 21, 2008, a U.S. district judge in Philadelphia ruled that ships that have some component parts assembled abroad but that are themselves built in U.S. shipyards are not disqualified from being considered “ U.S.-built” under the Jones Act, a law that requires that vessels used in U.S. internal commerce must be built in the United States.
Aker Philadelphia Shipyard, Inc. is building ten new tankers in Philadelphia. It sought a ruling from the Coast Guard, which administers compliance under the Jones Act, that the tankers would still be considered U.S.-built even though some particular modules would be assembled in South Korea, and then would be attached to the vessels in the United States.
The Coast Guard ruled that the tankers would be considered to have complied with the law and could therefore be used in U.S. internal commerce. It took the position that under the law and regulations, the assembly of the whole vessel must take place in the United States, not the assembly of each individual part.
Two U.S. shipyard labor unions, concerned that their members would lose work to foreign manufacturers of ship components, then sued the Coast Guard in U.S. District Court, contending that its ruling was arbitrary and capricious and contrary to the plain meaning of Coast Guard regulations.
General Dynamics NASSCO (a subsidiary of General Dynamics), the Firm’s client, was permitted to intervene on the Government’s side as a defendant, because it has sought and obtained rulings from the Coast Guard similar to those provided to Aker, and those rulings relate to ongoing work in its San Diego shipyard.
U.S. District Judge Gene E.K. Pratter of the Eastern District of Pennsylvania granted summary judgment for the defendants, thus upholding the position of the Firm’s client. Judge Pratter found that the Coast Guard regulation at issue was ambiguous but that the Coast Guard’s interpretation of the regulation was entitled to deference and that the interpretation was “neither plainly erroneous nor inconsistent with the regulation.” The judge also examined the legislative history and the purpose of the statute to bolster her conclusion.
The Coast Guard’s interpretation “is reasonable in terms of the text, history and purpose of the Jones Act,” the judge wrote.
The Firm’s team was led by Partner Elaine J. Goldenberg and Associate Matthew S. Hellman. The case is Philadelphia Metal Trades Council v. Allen, No. 07-145.
Practice Groups:
Litigation Department
Government Contracts
Defense & Aerospace
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