Marine Wholesale & Warehouse Co. v. United States

• Decision Date: 15 May 2018
• Docket Number: Civil Action No. 17–1300 (BAH)
• Citation: 315 F.Supp.3d 498
• Parties: MARINE WHOLESALE & WAREHOUSE CO., Plaintiff, v. UNITED STATES of America, et al., Defendants.
• Court: U.S. District Court — District of Columbia

315 F.Supp.3d 498

MARINE WHOLESALE & WAREHOUSE CO., Plaintiff,

v.UNITED STATES of America, et al., Defendants.

Civil Action No. 17–1300 (BAH)

United States District Court, District of Columbia.

Signed May 15, 2018

John M. Peterson, Neville Peterson, LLP, New York, NY, for Plaintiff.

Ari David Kunofsky, U.S. Department of Justice, Melanie Dyani Hendry, U.S. Attorney's Office, Washington, DC, for Defendants.

MEMORANDUM OPINION

BERYL A. HOWELL, Chief JudgeThe plaintiff, Marine Wholesale & Warehouse Co. ("MWW"), has filed a three-count complaint against defendants the United States of America, the Alcohol and Tobacco Tax and Trade Bureau ("TTB"), and John J. Manfreda, in his official capacity as Administrator of the TTB, seeking "a declaratory judgment concerning whether MWW's TTB Tobacco Export Warehouse Proprietor's Permit, Alcohol Importer's Basic Permit, and Alcohol Wholesaler's Basic Permit automatically terminated in January 2013, and whether TTB properly warned MWW that continued operation of its facilities could lead to imposition of civil and criminal penalties." Am. Compl. ¶ 13, ECF No. 9.¹ The defendants have moved to dismiss the complaint based on lack of subject-matter jurisdiction, failure to state a claim upon which relief can be granted, and insufficient service of process. See Defs.' Mot. Dismiss ("Defs.' Mot.") at 1, ECF No. 14. For the reasons described below, this Court lacks subject-matter jurisdiction over the plaintiff's claims and, accordingly, the defendants' motion is granted.

I. BACKGROUND

The statutory framework governing the relevant permits is discussed first, followed by the details of the plaintiff's claims and the relevant litigation history in both this Court and the D.C. Circuit.

A. Statutory Framework

MWW's claims involve two types of permits: a tobacco export warehouse proprietor permit, issued under Title 26, Chapter 52 of the U.S. Code ("tobacco permit"), and basic permits for the importing and wholesaling of beverage alcohol, issued under the Federal Alcohol Administration Act ("FAAA"), 27 U.S.C. § 201 et seq. ("alcohol permits"). Am. Compl. ¶ 13.

1. Tobacco Export Warehouse Proprietor Permits

The tobacco permits are regulated under the Internal Revenue Code, which imposes on manufacturers and importers of tobacco products an excise tax on the domestic sale of such products. 26 U.S.C. § 5703(a)(1). Certain federal tax exemptions are available, including for an export warehouse proprietor, which is defined as "any person who operates" a "warehouse for the storage of tobacco products or cigarette papers or tubes or any processed tobacco, upon which the internal revenue tax has not been paid, for subsequent shipment to a foreign country ... or for consumption beyond the jurisdiction of the internal revenue laws of the United States."Id. § 5702(h)–(i). Export warehouse proprietors must operate with valid permits issued by the TTB. Id. §§ 5712–13. Without valid permits, export warehouse proprietors are liable for the unpaid excise taxes and penalties that would otherwise apply to the importation of such products. See id. §§ 5703(a)(2), 5704(b) – (d), 5761(c).

Export warehouse proprietors must apply for such permits "before commencing business as a manufacturer or importer of tobacco products or processed tobacco or as an export warehouse proprietor, and at such other time as the Secretary [of the Treasury] shall by regulation prescribe."

Id. § 5712. Pursuant to that authority, the TTB promulgated a regulation requiring export warehouse proprietors to submit new applications after certain changes in their stockholders and corporate ownership. Specifically, the pertinent regulation provides as follows:

Where the issuance, sale, or transfer of the stock of a corporation, operating as an export warehouse proprietor, results in a change in the identity of the principal stockholders exercising actual or legal control of the operations of the corporation, the corporate proprietor shall, within 30 days after the change occurs, make application for a new permit; otherwise, the present permit shall be automatically terminated at the expiration of such 30–day period .... If the application for a new permit is timely made, the present permit shall continue in effect pending final action with respect to such application.

27 C.F.R. § 44.107. Thus, if a permittee fails to notify the TTB of a change in "actual or legal control of the operations of the corporation," the permit automatically terminates by operation of law "within 30 days after the change occurs," and the permittee must submit an application for a new permit to continue operating as an export warehouse proprietor. Id. New permit applications "may be rejected and the permit denied if the Secretary, after notice and opportunity for hearing, finds that" certain conditions are present. 26 U.S.C. § 5712.² In addition, the TTB may suspend or revoke permits and may also order permit holders to show cause why their permits should not be suspended or revoked. Id. § 5713(b).

While the relevant TTB regulation "does not expressly provide for judicial review of a denied new permit application, the Internal Revenue Code authorizes refund actions." Gulf Coast Maritime Supply, Inc. v. United States ("Gulf Coast II "), 867 F.3d 123, 126 (D.C. Cir. 2017) (citing 26 U.S.C. § 7422 ). Such actions may be pursued only after "a claim for refund or credit has been duly filed with the Secretary" of the Treasury. 26 U.S.C. § 7422(a). Refund actions include not only claims regarding tax liability but also "issues that ‘hinge[ ] on precisely’ whether one is liable for taxes—such as an entity's entitlement to tax-exempt status." Gulf Coast II , 867 F.3d at 126 (alteration in original) (quoting Alexander v. "Americans United," Inc. , 416 U.S. 752, 762, 94 S.Ct. 2053, 40 L.Ed.2d 518 (1974) ).

2. Basic Permits for Importing and Wholesaling Beverage Alcohol

Permits issued by the TTB are also required in order to import or purchase alcoholic beverages for sale. See 27 U.S.C. §§ 203 – 04 ; 27 C.F.R. §§ 1.20 – 25. Unlike the tobacco permits, alcohol permits are not connected to tax exemptions. See generally 27 U.S.C. § 204(a). An alcohol permit may, "by order of the Secretary of the Treasury, after due notice and opportunity for hearing to the permittee," be "revoked," "suspended," or "annulled" in certain circumstances. See id. § 204(e).³ Alcohol permits "shall continue in effect until suspended, revoked, or annulled" as provided in that subsection. Id. § 204(g). In addition, like tobacco permits, alcohol permits automatically terminate upon the occurrence of certain conditions. Specifically, § 204(g) provides that:

(1) if leased, sold, or otherwise voluntarily transferred, the permit shall be automatically terminated thereupon, and (2) if transferred by operation of law or if actual or legal control of the permittee is acquired, directly or indirectly, whether by stock-ownership or in any other manner, by any person, then such permit shall be automatically terminated at the expiration of thirty days thereafter: Provided , That if within such thirty-day period application for a new basic permit is made by the transferee or permittee, respectively, then the outstanding basic permit shall continue in effect until such application is finally acted on by the Secretary of the Treasury.

Id. (emphasis in original). Notice and an opportunity for hearing are not required before the automatic termination of an alcohol permit; rather, a permittee may file an application for a new permit within thirty days of the change and await the Secretary's action on that new application. Id.

Section 204 also specifies the availability of and procedures for judicial review. If an application for a new permit is denied, or if a permit is suspended, revoked, or annulled, "the permittee or applicant for a permit" may appeal that decision by filing, within sixty days of the Secretary's order, "a written petition praying that the order of the Secretary be modified or set aside in whole or in part." Id. § 204(h). Such petition must be filed "in the court of appeals of the United States within any circuit wherein such person resides or has his principal place of business, or in the United States Court of Appeals for the District of Columbia." Id. The statute specifies that, "[u]pon the filing of such petition such court shall have exclusive jurisdiction to affirm, modify, or set aside such order, in whole or in part." Id.

3. Judicial Review

These statutory schemes recognize that the purpose of such permits is to "exclude undesirable persons from holding permits," Mid–Valley Distilling Corp. v. Decarlo , 161 F.2d 485, 488 (3d Cir. 1947) (discussing basic alcohol permits), by ensuring that the agencies know the identities of the individuals exercising actual or legal control over the permitted entities. Thus, as the D.C. Circuit has explained, these statutes and regulations "require[ ] full disclosure and good faith on the part of applicants for such privileges." Middlesboro Liquor & Wine Co. v. Berkshire , 133 F.2d 39, 41 (D.C. Cir. 1942). To this end, "[a]s to both alcohol and tobacco permits, the law establishes a process to ensure" that the TTB is "updated of any ownership changes," that a permit will "automatically terminate when an unreported ownership change occurs," and that a permittee may "seamlessly continu[e] operation, despite ownership changes," by timely submitting a new application reflecting the change in ownership. Gulf Coast II , 867 F.3d at 126. In addition, "[j]udicial review is available if a new permit is denied—a refund suit in the tobacco permit context, and an appeal to a circuit court in the alcohol permit context—and that review may include considering whether it was necessary to update TTB as to a change in ownership." Id. If a permittee fails to comply with these requirements, then "[u]nder both the tobacco and alcohol permit schemes, automatic termination is a distinctive means by...