Ammex, Inc. v. Cox

• Decision Date: 03 December 2003
• Docket Number: No. 01-2518.,No. 01-2392.,01-2392.,01-2518.
• Citation: 351 F.3d 697
• Parties: AMMEX, INC., Plaintiff-Appellant/Cross-Appellee, v. Michael A. COX, Defendant-Appellee/Cross-Appellant.
• Court: U.S. Court of Appeals — Sixth Circuit

351 F.3d 697

AMMEX, INC., Plaintiff-Appellant/Cross-Appellee, v. Michael A. COX, Defendant-Appellee/Cross-Appellant.

No. 01-2392.

No. 01-2518.

United States Court of Appeals, Sixth Circuit.

Argued: August 8, 2003.

Decided and Filed: December 3, 2003.

Pursuant to Sixth Circuit Rule 206

COPYRIGHT MATERIAL OMITTED

ARGUED: Craig L. John, DYKEMA GOSSETT, Bloomfield Hills, Michigan, for Appellant.

Tracy A. Sonneborn, (argued and briefed), Office of the Attorney General of Michigan Consumer Protection Division, Lansing, Michigan, for Appellee.

ON BRIEF: David D. Smyth III (briefed), William W. Koegel, Jr., Steptoe & Johnson, Washington, DC, Craig L. John (argued), Dykema Gossett, Bloomfield Hills, MI, for Appellant.

Before BATCHELDER and ROGERS, Circuit Judges; RUSSELL, District Judge.^*

OPINION

ROGERS, Circuit Judge.

The Attorney General of Michigan issued a Notice of Intended Action ("NIA") to Ammex, Inc. informing it that its advertising might result in the Attorney General filing an enforcement action under the Michigan Consumer Protection Act ("MCPA"). In response, Ammex sought a declaratory judgment against the Attorney General, asserting that the Attorney General could not enforce the MCPA against it because (1) federal law preempted the MCPA with respect to Ammex, and (2) any enforcement of the MCPA against Ammex would abrogate the restrictions placed upon states by the Commerce Clause. The district court eventually dismissed the action as moot based upon the Attorney General's withdrawal of the NIA. Both Ammex and the Attorney General appeal the district court's decision. Although the action was not technically mooted by events subsequent to the initiation of the action, we affirm the judgment of the district court because the action was not ripe.

FACTS

Ammex is a Michigan corporation that operates a United States Customs Class 9 bonded warehouse and duty-free store in Detroit, adjacent to the Ambassador Bridge to Canada. The Ammex store is "sterile" in that customers leaving Ammex's Ambassador Bridge store may only depart by roads that lead to Canada. In other words, goods sold in the Ammex store may only reach the United States after they have first been exported to Canada because the Ammex store is located beyond the "point-of-no-return" on the United States-Canadian border. At the Ambassador Bridge store, Ammex sells a wide array of duty-free merchandise, as well as gasoline and diesel fuel. At one point, Ammex's advertising claimed that its goods could be purchased with "no state tax, no federal tax." Ammex's sales of gasoline and diesel fuel and its advertising lie at the heart of this action.

Since January 1, 1994, Ammex has paid, under protest, Michigan state sales taxes and motor fuel taxes on its sales of motor fuel. Ammex, Inc. v. Dep't of Treasury, 237 Mich.App. 455, 603 N.W.2d 308, 311 (1999), cert. denied, 534 U.S. 827, 122 S.Ct. 67, 151 L.Ed.2d 34 (2001). Ammex filed an action seeking a refund of the state taxes that it paid under protest. Id. On September 14, 1999, the Michigan Court of Appeals concluded that Ammex was not entitled to a refund and that Michigan could levy state taxes on Ammex's sales of gasoline and diesel fuel. See id. In addition, the United States Customs Service ("Customs") determined in two letter rulings that Ammex could not sell gasoline or diesel fuel on a duty-free basis. See J.A. at 16E, 16J.

Two months after the state-court ruling, in November 1999, the Michigan Attorney General issued an NIA¹ to Ammex, alleging that Ammex falsely advertised that its goods could be purchased at the Ambassador Bridge store free of state and federal taxes. This claim of false advertisement was based on statements that Ammex published on its website to the effect that the "tax-free" nature of goods sold at the Ammex store resulted in significant savings to Ammex customers. The NIA pointed out that Ammex continued to publish these statements after it had learned from the letter rulings and the Michigan Court of Appeals decision that its sales of gasoline and diesel fuel were subject to both state and federal taxes. Further, the NIA noted that Ammex sold gasoline for prices as high as or higher than its competitors in the Detroit area, implying that, contrary to Ammex's advertising, Ammex customers were not reaping any savings on gasoline. Through the NIA the Attorney General provided Ammex with the opportunity to cease and desist its allegedly unlawful practices and invited Ammex to confer with the Attorney General. Finally, the NIA warned Ammex that unless Ammex submitted a formal assurance that it would discontinue the allegedly unlawful practice or the Attorney General determined that there was no cause for action, the Attorney General would be authorized to file a lawsuit under the MCPA, which lawsuit might result in an injunction and/or a $25,000 fine.

In February of 2000, in response to the NIA, Ammex filed the declaratory judgment action that is the subject of the present appeal. In its complaint Ammex alleged that the Attorney General was prevented from enforcing the MCPA because (1) federal law relating to duty-free stores preempts the MCPA (Count I); (2) any attempt to enforce the MCPA against Ammex would exceed the restrictions placed on the states by the Commerce Clause with regard to foreign commerce (Count II); and (3) any MCPA action against Ammex based on its Internet advertising would be contrary to the restrictions placed on the states by the Commerce Clause with regard to both foreign and interstate commerce (Count III).²

Meanwhile, Ammex was also challenging the letter rulings issued by Customs that determined that Ammex could not sell gasoline and diesel fuel on a duty-free basis. In August of 2000, the Court of International Trade ruled that the letter rulings were contrary to law and that Customs acted unlawfully by denying duty-free status to Ammex's sales of gasoline and diesel fuel based on the reasoning employed in the letter rulings. See Ammex, Inc. v. United States, 116 F.Supp.2d 1269, 1272-75 (CIT 2000) ("Ammex I"). On September 5, 2000, Customs authorized Ammex to sell gasoline and diesel fuel duty-free. Ammex, Inc. v. United States, 193 F.Supp.2d 1325, 1327 (CIT 2002), aff'd, 334 F.3d 1052 (Fed.Cir.2003) (Ammex II). Customs would later revoke the authorization letter, concluding that gasoline and diesel fuel could not be sold duty-free based upon a rationale different from that which supported the earlier letter rulings. Id. at 1054-55, 603 N.W.2d 308.³

The present action by Ammex against the Attorney General continued with the Attorney General's answering Ammex's complaint and filing a motion to dismiss. The motion to dismiss alleged that Ammex's complaint contained a number of jurisdictional defects. The district court eventually denied the Attorney General's motion to dismiss with regard to Counts I, II, and III.

At the close of discovery, the Attorney General filed with the district court a withdrawal of the NIA against Ammex. The withdrawal stated that the Attorney General would not reinstate the NIA, nor issue a new NIA with regard to Ammex's advertising, unless the following "changed circumstances" occurred:

1. A final judgment is entered in a tax case for tax periods including, or following, the issuance of the [Ammex I] decision in which it is determined that:

(a) State sales tax applies in connection with retail sales of items other than motor fuel by Ammex; OR

(b) State sales tax and/or state motor fuel taxes apply in connection with retail sales of motor fuel by Ammex.

OR

2. It is conclusively determined, whether by final administrative order (including appeal), judicial order (including appeal), or by federal legislation or treaty, or in any other conclusive manner, that Ammex may not sell motor fuel free of duty, notwithstanding the [Ammex I] decision [sic].

J.A. at 330-31. Based on the withdrawal, the Attorney General then filed a motion that asserted, inter alia, that the action was moot. A magistrate judge recommended that the court deny the motion to dismiss, but the Attorney General did not file objections to the recommendation.

After the magistrate judge issued his recommendation, Ammex and the Attorney General filed cross-motions for summary judgment, each addressing Counts I, II, and III of Ammex's complaint. At the hearing regarding the motions for summary judgment, the district court raised the mootness issue sua sponte. The district court determined that the Attorney General's withdrawal of the NIA mooted the action, and ordered the case dismissed. Both the Attorney General and Ammex have appealed the district court's decision to this court.

I. Ammex's Complaint Established the Existence of Subject Matter Jurisdiction.

Before we reach the issue of mootness, the Attorney General claims that this court does not have subject matter jurisdiction over Ammex's preemption claim. Although the Attorney General did not raise this question below, "the existence of federal jurisdiction may be questioned at any point in the course of litigation and ... parties cannot waive the requirement of subject matter jurisdiction." Riggs v. Island Creek Coal Co., 542 F.2d 339, 343 (6th Cir.1976). Contrary to the Attorney General's position, the district court did have federal subject matter jurisdiction over Ammex's claims. We review the existence of subject matter jurisdiction de novo. Ullmo v. Gilmour Acad., 273 F.3d 671, 680 (6th Cir.2001).

The Supreme Court's decision in Shaw v. Delta Air Lines, Inc. makes clear that a federal court has subject matter jurisdiction when a person seeks to enjoin state officials from enforcing a state regulation against the person on the ground that the regulation violates federal rights. See Shaw v. Delta Air Lines, Inc., 463 U.S. 85, 96 n. 14, 103 S.Ct. 2890, 77 L.Ed.2d 490 (1983); see also Verizon Md. Inc. v. Pub. Serv. Comm'n of Md., 535 U.S. 635, 642, 122 S.Ct. 1753, 152 L.Ed.2d 871 (...