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LUKENS STEEL CO. v. KREPS

January 7, 1980

LUKENS STEEL COMPANY
v.
JUANITA M. KREPS, Secretary of Commerce, ROBERT T. HALL, Assistant Secretary of Commerce and PHOENIX STEEL CORPORATION



The opinion of the court was delivered by: LORD, III

I. INTRODUCTION

Plaintiff, Lukens Steel Company (Lukens), has sought review under § 10 of the Administrative Procedure Act, 5 U.S.C. §§ 701-6, of the decision of the Economic Development Administration (EDA) to guarantee ninety percent (or $ 29,039,400) of the rental obligation to be incurred by Phoenix Steel Corporation (Phoenix) under a proposed "leveraged lease" of capital equipment to be used in the modernization of its steel plate production facilities. *fn1" The EDA extended its offer of assistance to Phoenix pursuant to the Public Works and Economic Development Act (the Act), 42 U.S.C. § 3211 Et seq. and regulations promulgated under the Act for a program of assistance to the steel industry, 43 Fed.Reg. 16360 (April 18, 1978). Lukens contends that the EDA's approval of the lease guarantee was unlawful in that the EDA:

 
(1) violated the unfair competition provision of the Act, § 702 (42 U.S.C. § 3212);
 
(2) violated the 15% Contribution provision of EDA's regulations, 13 CFR § 306.14;
 
(3) erroneously concluded that Phoenix does not have access to normal markets and cannot generate needed funds internally; and
 
(4) erroneously concluded that Phoenix can reasonably be expected to repay the loan.

 This matter was previously before Judge Broderick on cross-motions for summary judgment. He denied the motions, remanding the matter for further consideration by the EDA. Lukens v. Kreps, 477 F. Supp. 444 (E.D.Pa.1979). Judge Broderick undertook a two-phase analysis of the EDA's action, first considering the EDA's interpretation of the unfair competition provision of the Act, § 702, and then reviewing the administrative record to determine whether the agency's actions, findings, and conclusions in connection with the challenged assistance to Phoenix were arbitrary, capricious, an abuse of discretion, or otherwise not in accordance with law. 477 F. Supp. at 450-51.

 Section 702 of the Act provides

 The EDA considers the requirements of § 702 to be met if proposed financial assistance will not result in an increase in aggregate steel production when measured against an historical peak production year. Judge Broderick found this interpretation of § 702 to be a reasonable one. 477 F. Supp. at 451-56.

 He went on to review the administrative record to determine whether the EDA's offer of assistance to Phoenix was arbitrary and capricious according to the test defined in Camp v. Pitts, 411 U.S. 138, 93 S. Ct. 1241, 36 L. Ed. 2d 106 (1973) and Citizens to Preserve Overton Park v. Volpe, 401 U.S. 402, 91 S. Ct. 814, 28 L. Ed. 2d 136 (1971). The EDA's actions were found not to be arbitrary and capricious, with two exceptions. The court remanded the matter to the EDA for further consideration of these two issues the fifteen percent equity contribution requirement, and the effect of one of the components of the project (specialty finishing equipment) on the production of stainless steel. The EDA reconsidered these two issues, and reaffirmed its decision to guarantee ninety percent of the rental cost to be incurred by Phoenix.

 Phoenix and the federal defendants have placed the new administrative record before us and seek summary judgment affirming the agency's decision. Lukens has filed a cross-motion for summary judgment raising, in addition to the equity contribution and stainless steel issues, the new argument that Phoenix may not receive federal assistance for the vacuum degassing equipment because the project has been completed with other funds. For the reasons discussed below, we will grant summary judgment for Phoenix and the federal defendants.

 II. STANDARD OF REVIEW

 Lukens has argued that the agency's actions on remand are "post hoc rationalizations" which the court must "view critically". This argument misconstrues Overton Park, supra, 401 U.S. at 420, 91 S. Ct. 814. In that case the Supreme Court ordered the matter remanded because, among other things, the agency had not rendered any explanation of its decision. Among the possible courses of action the Court outlined was the furnishing of such an explanation by the administrator. The question upon which the Court commented was the weight to be given an administrator's Non-contemporaneous explanation of action he had taken earlier, not the weight to be accorded a contemporaneous decision actually made on remand, when an agency undertakes to reconsider substantive issues. The circumstances of this case, however, are significantly different. Here, pursuant to the Court's remand order, the EDA undertook to consider the two remanded issues, and to do so in part on the basis of facts not before it earlier. The resulting agency determinations, embodied in new action memoranda (XVII A.R. 2923-33, 2976-86), *fn2" are not "post hoc ...


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