Almond Bros. Lumber Co. v. United States

• Decision Date: 19 April 2012
• Docket Number: Court No. 08-00036
• Parties: ALMOND BROS. LUMBER CO. et al. Plaintiffs, v. UNITED STATES and RON KIRK, UNITED STATES TRADE REPRESENTATIVE Defendants.
• Court: U.S. Court of International Trade

ALMOND BROS. LUMBER CO. et al. Plaintiffs,

v.UNITED STATES and RON KIRK, UNITED STATES TRADE REPRESENTATIVE Defendants.

Court No. 08-00036

UNITED STATES COURT OF INTERNATIONAL TRADE

Dated: April 19, 2012

Slip Op. 12- 51

Judge: Richard K. Eaton

OPINION

[Defendants' motion to dismiss granted.]

Saltman & Stevens, P.C. (Alan I. Saltman, Ruth G. Tiger, and Marisol Rojo) for plaintiffs.

Michael F. Hertz, Deputy Assistant Attorney General; Jeanne E. Davidson, Director, Franklin E. White, Jr., Assistant Director, United States Department of Justice, Commercial Litigation Branch, Civil Division (David S. Silverbrand); Office of the General Counsel, United States Trade Representative (J. Daniel Stirk); United States Customs and Border Protection (Andrew Jones), for defendants.

Eaton, Judge: Before the court, following remand from the United States Court of Appeals for the Federal Circuit, is the motion to dismiss of defendants the United States and the United States Trade Representative (the "USTR") (collectively, "defendants" or the "Government").

Plaintiffs' claims arise out of the 2006 Softwood Lumber Agreement between the governments of the United States and Canada, which was executed to settle ongoing disputes over the cross-border softwood lumber trade. See Softwood Lumber Agreement Between the Government of Canada and the Government of the United States of America, U.S.-Can., Sept. 12, 2006, available at http://www.ustr.gov/webfm_send/3254 (last visited April 2, 2012) ("SLA" or the "Agreement"). Plaintiffs, members of the domestic softwood lumber industry, challenge a term in the SLA that requires the Canadian Government to distribute $500 million only to those U.S. lumber producers that were members of the Coalition for Fair Lumber Imports (the "Coalition"). Plaintiffs are not members of the Coalition.

In Almond Bros. Lumber Co. et al. v. United States, 33 CIT __, Slip Op. 09-48 (May 30, 2009) ("Almond Bros. I"), in response to the defendants' motion, the court determined that it lacked jurisdiction to hear plaintiffs' claims under 28 U.S.C. § 1581(i) (2006), and dismissed this action. On appeal, the Federal Circuit reversed and held that plaintiffs' claims were within this Court's jurisdiction under section 1581(i), and remanded the case. Almond Bros. Lumber Co. v. United States, 651 F.3d 1343 (Fed. Cir. 2011). The court now considers the remaining grounds in defendants' motion to dismiss. In doing so, it holds that: (1) Count II of the Second Amended Complaint (the "Complaint") raises a non-justiciable political question; (2) the Complaint as a whole fails to state claims for which relief can be granted; and (3) defendants' motion to dismiss is granted.

BACKGROUND

The United States and Canada have been engaged in a dispute over the export practices of the Canadian softwood lumber industry for nearly three decades. The background of that conflict is set forth in this court's opinion in Almond Bros. I, as well as in the Federal Circuit's opinion in this case. See Almond Bros. I, 33 CIT at __, Slip. Op. 09-48 at 2-6; Almond Bros., 651 F.3d at 1344-48. The 2006 Softwood Lumber Agreement, the third such agreement between the United States and Canada since 1986,¹ is eighty-eight pages long and contains a number of provisions intended to settle the dispute and end litigation then pending in multiple forums, including this Court, North American Free Trade Agreement tribunals, and the World Trade Organization.

The litigation settled by the SLA arose from the Department of Commerce's determinations, in May 2002, that Canadian softwood lumber was (1) unlawfully subsidized and (2) being sold in the United States at less than fair value. See Certain Softwood Lumber Products from Canada, 67 Fed. Reg. 36,070 (Dep't of Commerce May 22, 2002) (notice of amended final determination and notice of countervailing duty order); Certain Softwood Lumber Products from Canada, 67 Fed. Reg. 36,068 (Dep't of Commerce May 22, 2002) (notice of amended final determination of sales at less than fair value and antidumping duty order).

The SLA was negotiated on behalf of the United States by the Office of the USTR, ² which is primarily responsible for developing international trade policy and negotiatinginternational trade agreements.³ See 19 U.S.C. §§ 2171, 2411 (2006). The Agreement generally resolved the softwood lumber conflict and its attendant lawsuits by requiring the United States to refund nearly $5 billion in antidumping and countervailing duty deposits collected on Canadian softwood lumber imports on or after May 22, 2002, and to refrain from imposing any further import measures on Canadian softwood lumber during the period that the SLA remained in force. SLA, arts. III-V. In addition, the Government and the private litigants, including the Executive Committee of the Coalition, consented to dismissal of all pending lawsuits and proceedings resulting from the softwood lumber trade dispute. SLA, annex 2A.

In exchange, Canada's primary commitment was to impose certain "Export Measures" on its softwood lumber products to correct the trade practices that the United States found unfair. These measures limit the volume of lumber exports from certain Canadian regions on a monthly basis and/or impose a charge on those exports. See SLA, art. VII. Specifically, pursuant to article VII of the Agreement, each softwood lumber producing Region⁴ in Canada has the option of imposing a charge or a combination of a charge and quota on softwood lumber products produced in the Region. SLA, art. VII, ¶ 1. Under "Option A," Canadian producers are required to pay Canada an "Export Charge," which is calculated as a percentage of the export price of the product. SLA art. VII, ¶ 3. The charge percentage increases as the export price decreases and, thus, is designed to discourage the exportation of softwood lumber into the United States at low prices. "Option B" is a hybrid of export quotas and charges. Exporters are subject to a monthlyquota limiting the number of units that can be exported to the United States to a percentage of "Expected U.S. Consumption" during each month. SLA, annex 7D. The quota percentage decreases as export price decreases, thereby limiting low-priced Canadian exports capable of competing with U.S. products. In addition, these exports are also subject to an "Export Charge" tied to the export price of the merchandise, albeit at lower rates than those charged under Option A. SLA, art. VII, ¶ 4.

Canada further agreed to distribute $1 billion from the returned cash deposits "in the following amounts: $US 500 million to the members of the Coalition for Fair Lumber Imports, $US 50 million to the binational industry council, and $US 450 million for meritorious initiatives." SLA, annex 2C, ¶ 5. The binational council was to be formed of "interested Persons in Canada and the United States," and its objectives include "strengthening the North American lumber industry by increasing the market for its products" and "building stronger cross-border partnerships and trust at all levels of the industry." SLA, annex 13. The "meritorious initiatives" include expenditures to promote undertakings in the United States related to, among other things, "educational and charitable causes in timber-reliant communities," "low income housing and disaster relief," and "educational and public interest projects addressing . . . forest management." See SLA art. XIII(A), ¶ 2.

Plaintiffs do not object to the SLA terms providing for Export Measures or the payment of funds to finance the meritorious initiatives or the binational council. Their claims arise, instead, solely from the requirement that Canada pay $500 million to the Coalition members, rather than to all members of the domestic softwood lumber industry (the "Distribution Term"). See SLA, annex 2C. According to plaintiffs, "[d]efendants' actions improperly singled out some companies within the domestic softwood lumber industry for preferential treatment and providedlittle or no benefit to the majority of domestic softwood lumber companies that were adversely affected by illegal dumping and subsidies of Canadian softwood lumber." Complaint ¶ 83.

DISCUSSION

In the Complaint, plaintiffs assert three claims⁵ arising from the Distribution Term of the SLA: (1) Count II alleges that defendants acted arbitrarily and contrary to law, in violation of the Administrative Procedures Act (the "APA"), 5 U.S.C. § 706(2) (2006), by negotiating a provision in the SLA that obligates Canada to make payment to members of the Coalition to the exclusion of other domestic softwood lumber producers; (2) Count III alleges that defendants violated the equal protection guarantee of the Fifth Amendment Due Process Clause by not requiring Canada to make payments to all members of the domestic softwood lumber industry; and (3) Count IV alleges that defendants impermissibly delegated to the Coalition their authority to determine how Canada's payments would be disbursed.

Defendants move to dismiss these claims for lack of subject matter jurisdiction, pursuant to USCIT R. 12(b)(1), on the grounds that they present non-justiciable political questions. Alternatively, defendants move to dismiss the Complaint in its entirety, pursuant to USCIT R. 12(b)(5), contending that, with respect to each count, the Complaint fails to state a claim for which relief can be granted.

I. Whether Plaintiffs' Claims Are Barred By the Political Question Doctrine

A. Political Question Doctrine

The political question doctrine is a product of the constitutional separation of powers, and bars the courts from reviewing the substance of policy decisions that the Constitution commits to the discretion of the legislative or executive branches of government. See Baker v. Carr, 369 U.S. 186, 211 (1962) ("[I]t is the relationship between the judiciary and the coordinate branches of the Federal Government, . . . which gives rise to the 'political question' [doctrine]."); ...