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Egan Marine Corp. v. Allen

July 26, 2010


The opinion of the court was delivered by: Honorable David H. Coar


Egan Marine Corporation ("EMC") seeks judicial review, pursuant to the Administrative Procedure Act, 5 U.S.C. § 701 et seq., of a $21,000 civil penalty assessed by the United States Coast Guard for six separate violations of tank-vessel-inspection regulations. The parties have filed cross motions for summary judgment. For the following reasons, the Coast Guard's motion is GRANTED and EMC's motion is DENIED.


"When reviewing a final administrative action by the Coast Guard, the court is limited to the evidence in the administrative record." Green v. United States Coast Guard, 642 F. Supp. 638, 641 (N.D. Ill. 1986); see also Little Co. of Mary Hosp. v. Sebelius, 587 F.3d 849, 856 (7th Cir. 2009) (substantial-evidence review limited to administrative record unless challenge to agency action cannot be evaluated without further factual development). Notwithstanding this well settled rule, EMC has submitted thirteen exhibits-consisting primarily of printouts from the Coast Guard's Port State Information Exchange website relating to the vessels at issue-that are not included in the administrative record. (See Dkt. Nos. 13, 31.) EMC does not even try to identify any applicable exception to the general rule that a district court's review of a final agency action is limited to the administrative record; nor does it offers any reason why it could not have presented these exhibits to the Coast Guard for consideration during the penalty hearing or appeal. Therefore, for present purposes, the facts of this case are those in the administrative record. EMC's factual assertions that cite only improper exhibits will be stricken unless another basis for them is patent in the administrative record.*fn1 Accordingly, the facts are as follows.

Preliminary Assessment of Civil Penalties

On February 5, 2004, Coast Guard marine inspector James D. Metza conducted an inspection of the Egan tank vessel identified as EMC 310. Upon reviewing the certificate of inspection ("COI") for EMC 310, Metza discovered that it had not been inspected for over two years. So when he returned to the Coast Guard Marine Safety Office ("MSO") in Chicago, Metza performed an evaluation of the tank vessel fleet owned and operated by EMC and discovered deficiencies with 13 vessels, including failure to conduct annual inspections. On February 17, 2004, the MSO sent EMC a letter in which it identified these deficiencies and asked EMC to explain what it intended to do to correct them. The MSO informed EMC that if it did not correct the deficiencies by March 17, 2004, the COI for each noncompliant vessel would be either suspended or revoked pursuant to 46 U.S.C. § 3313(b)(4). Daniel Egan, EMC's operations manager, provided the requested status update on February 24, 2004, without objecting to any of the cited deficiencies. Between February 24 and March 9, 2004, Daniel Egan spoke to Metza several times, both over the phone and in person, and assured him that the problems with EMC's barges were an "oversight on his part" and that he "would do everything humanly possible to resolve the situation."

On August 12, 2004, the Coast Guard Officer in Charge of Marine Inspection ("OCMI") at the MSO initiated civil-penalty proceedings against EMC for violations of Coast Guard tank-vessel-inspection regulations. Specifically, the OCMI charged EMC with ten violations of 46 C.F.R. § 31.10-17(a) for its failure to conduct annual or periodic inspections on ten individual tank vessels (EMC 309, 310, 404, 304, 332, 423, 472, 491, 494, and 506) and recommended a $5,000 penalty for each violation, for a total penalty of $50,000. The OCMI forwarded the case file to the Coast Guard Hearing Office. The case file, which is included in the administrative record, comprises a twenty-two page enforcement summary, providing details of each violation; sixteen exhibits, including Inspector Metza's statement of investigation, notes identifying the evidence of each violation, and the COIs for each of the vessels, showing the date of the last inspection for each vessel and the COI's expiration date; and correspondence between EMC and the MSO.

On December 9, 2004, Commander M.F. Thurber, the assigned hearing officer, issued EMC a preliminary assessment letter after conducting an initial review of the case file. In the letter, Thurber identified the alleged violations; the applicable Coast Guard regulations and procedure for civil-penalty cases, directing EMC to 33 C.F.R. § 1.07; the role of the hearing officer; and the maximum civil penalty of $325,000 that could be assessed for the cited violations. Thurber informed EMC that it had a right to examine the entire case file and provided EMC with a copy. Lastly, Thurber stated that based on a review of the case file, it appeared that violations did occur, for which a $75,000 total penalty was appropriate: a $5,000 penalty for nine of the ten vessels; and a $30,000 penalty for EMC 506, as it was a larger vessel warranting a larger penalty. However, she would not make a final decision until EMC had an opportunity to respond; she informed EMC that it had a right to make a written request for a hearing or submit written evidence in lieu of a hearing. There is no indication that Hearing Officer Thurber had any prior connection to the case.

On January 5, 2005, Thurber granted EMC's request for a thirty-day extension to respond to the violations alleged by Inspector Metza, pushing the deadline for a response to February 12, 2005. On February 11, EMC requested a hearing; in its letter, EMC alleged that the MSO had a standing problem with inaccurate recordkeeping and that its records were inaccurate in this case. On February 22, Thurber informed EMC that a hearing would be scheduled in Cleveland, Ohio, on or about April 27, 2005. On April 4, EMC informed the Coast Guard that it could not attend a hearing on that date, but that it would call to reschedule a hearing at the Coast Guard Hearing Office in Arlington, Virginia. EMC never rescheduled the hearing.

In the spring of 2005, Thurber retired from the Coast Guard, and a new hearing officer, L.J. McClelland, was assigned to EMC's case. There is no indication that McClelland had any prior connection to the case either. On June 21, 2005, McClelland sent a general notice letter to EMC, reminding it that it had not yet rescheduled a hearing and that the case would be extended to July 25, 2005, to allow EMC to do so. McClelland asked EMC to provide any documentation it had regarding its claims, since that could potentially eliminate some of the charges in advance of the hearing. On July 26, EMC informed the Coast Guard that a barge explosion on January 19, 2005 had strained its personnel resources and made it impossible for EMC to focus on the civil-penalty case. McClelland accordingly granted EMC another extension of time, until August 31, 2005, to respond to the general notice letter. On October 2-nearly two months late-EMC responded, stating that it would not provide any documentation regarding the MSO's allegedly inaccurate records until the hearing. Pursuant to EMC's request, McClelland contacted EMC's president, Dennis Egan, to inform him that the hearing would be held on November 16, 2005, in Cleveland, Ohio. When Dennis Egan said that he could not attend a hearing on that date, McClelland offered to hold the hearing in Arlington, Virginia, on a more convenient date. Although Dennis Egan said that he would contact the Coast Guard regarding that option, he never did.

On November 29, 2005, McClelland sought to supplement the case file with any information from the MSO that might support EMC's claims. The MSO responded on December 23, informing McClelland that EMC had missed the 2003 inspection cycle. The MSO provided the following inspections update on the ten cited tank vessels: (1) EMC 423 exploded on January 19, 2005, and was a total loss; (2) EMC 304, 310, 332, 472, and 494 had their COIs suspended or revoked by the OCMI due to missed annual inspections or expiration of the COI; (3) EMC 494 was issued a new COI after it was brought into compliance on August 25, 2005; (4) EMC 309 was inspected and cited for three deficiencies, and was out of service because EMC had not remedied the deficiencies; (5) EMC 303, 491, and 506 had been subsequently inspected and were in service. The MSO stated that all of the cited barges missed an annual inspection within the timeframe identified in the charge sheet. The MSO further stated that the burden of ensuring vessel inspections rests with the owner/operator of the tank vessels and that it was not the MSO's responsibility to prove that the annual inspections of the vessels were completed.

On January 9, 2006, Hearing Officer McClelland still had not heard from Dennis Egan, so she sent another general notice letter to EMC, extending the response date to February 10, 2006. She also informed EMC that, in the hope of narrowing the issues, she had sought clarification from the MSO regarding EMC's inspection claims, but that the MSO's response offered little conclusive information other than that EMC 423 had exploded. In the same letter, she explained the MSO's statements regarding a vessel owner's responsibilities, namely, that while it is a vessel owner's responsibility to ensure annual inspections, it is the Coast Guard's burden to prove the violations for which civil penalties are assessed. She further explained that the Coast Guard had presented evidence of violations, that EMC could seek to rebut that evidence, and that she remained open to any specific evidence EMC could produce to support its allegations that vessel inspections had been conducted by the Coast Guard but not recorded properly by the MSO. On February 9, 2006, the hearing was finally scheduled for March 14, 2006, in Arlington, Virginia. McClelland explained that, pursuant to 33 C.F.R. § 1.07-55, the hearing would be "informal in nature."

The Civil-Penalty Hearing

A verbatim record of the March 14, 2006 hearing was not created, as none was required by the regulations. But Hearing Officer McClelland prepared detailed notes on EMC's presentation, i.e., oral arguments by Dennis Egan and Robert Wondolowski, EMC's traffic manager, and eight accompanying exhibits. (They are compiled in the administrative record.) EMC did not request any Coast Guard witnesses, and none were present. Nor did EMC argue at the hearing that the Coast Guard had assessed penalties that were excessive, or against Commandant Instruction 16200.3A (the "Civil Penalty Guide"), or failed to take into account EMC's ability to pay; or that the civil-penalty process had denied EMC its due-process rights. Dennis ...

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