Ammex, Inc. v. McDowell
| Citation | 443 F.Supp.3d 863 |
| Decision Date | 06 March 2020 |
| Docket Number | Case No. 2:18-cv-10751 |
| Parties | AMMEX, INC., Plaintiff, v. Gary MCDOWELL, in his capacity as Director, Michigan Department of Agriculture & Rural Development, Defendant. |
| Court | U.S. District Court — Eastern District of Michigan |
Amy E. McCracken, Duane Morris LLP, Chicago, IL, J. Manly Parks, Duane, Morris, Philadelphia, PA, for Plaintiff.
Elizabeth A. Morrisseau, Danielle Allison-Yokom, Michigan Department of the Attorney General, Lansing, MI, for Defendant.
A law says gas stations in southeast Michigan, including Wayne County, must sell a lower-vapor gasoline during the summer. Ammex, Inc. operates a gas station in Wayne County. So the law appears to apply to Ammex.
But Ammex thinks appearances can be deceptive. It points out that its gas station is uniquely located within Wayne County: at the base of a bridge to Canada. Further, Ammex asserts that it sources gas from a foreign country (or a foreign trade zone), that it keeps the gas behind what federal customs laws deem the "exit point" from the United States, and that the cars that refuel at its station can only exit onto the bridge to Canada. In other words, for federal customs purposes, the gasoline never enters domestic commerce. Further, in Ammex's view, its gas station is within the exclusive jurisdiction of the United States Customs and Border Protection and the lower-vapor gasoline law was not promulgated by that federal agency.
For these and related reasons, Ammex believes that the law requiring it to sell lower-vapor gasoline in the summer cannot be enforced against it. The Michigan Department of Agriculture and Rural Development, the agency in Michigan tasked with enforcing the law, sees things differently. Ammex thus filed this declaratory-judgment action asking the Court to say who is correct. In this Court's opinion, MDARD has the better view. So the Court will GRANT its motion to dismiss.
To understand how this dispute came to be, and to appreciate the legal determinations made so far in this case on Ammex's earlier motion for preliminary injunction, it is necessary to say a bit about the role of the states under the Clean Air Act.
In 1970, dissatisfied "with earlier efforts at air pollution abatement," Congress made major changes to the Clean Air Act. Friends of the Earth v. Carey , 535 F.2d 165, 168–69 (2d Cir. 1976). In particular, Congress directed the Environmental Protection Agency to establish National Ambient Air Quality Standards. Train v. Nat. Res. Def. Council, Inc. , 421 U.S. 60, 65, 95 S.Ct. 1470, 43 L.Ed.2d 731 (1975). But Congress did not intend the EPA to battle air pollution alone; instead, it directed each state to submit a plan—known as a state implementation plan, or SIP—for implementing, maintaining, and enforcing the national air-quality standards. See id. ; 42 U.S.C. § 7410(a)(1). The states' implementation plans were subject to EPA approval, as were any post-approval changes to the plans. See N. Ohio Lung Ass'n v. E.P.A. , 572 F.2d 1143, 1147 (6th Cir. 1978). That is still true today. See 42 U.S.C. § 7410(k), (l ).
In 1990, Congress again made major changes to the Clean Air Act. For one, Congress set a national Reid vapor pressure (RVP) standard for gasoline. See 42 U.S.C. § 7545(h). In particular, Congress directed the EPA to promulgate regulations prohibiting anyone from selling—or even "dispens[ing]"—gasoline with an RVP higher than 9.0 pounds per square inch. See 42 U.S.C. § 7545(h)(1), (6). Congress prohibited a state from holding gasoline to a different RVP standard, see 42 U.S.C. § 7545(c)(4)(A)(ii), unless the EPA both found the state's RVP standard was "necessary" to meet national standards and approved the deviation as part of the state's implementation plan, see 42 U.S.C. § 7545(c)(4)(C)(i) ; 71 Fed. Reg. 46879, 46880 (Aug. 15, 2006).
In 2004, the EPA designated eight counties in southeast Michigan—including Wayne County—as not attaining the standards for ozone. 71 Fed. Reg. 46879, 46880 (Aug. 15, 2006). In this opinion, the Court will refer to the eight counties as "Southeast Michigan."
In response to the nonattainment designation, Michigan enacted House Bill 5508. (See ECF No. 18-33, PageID.536–542.) Section 10d of HB 5508 provided, "Beginning June 1 through September 15 of 2007 and for that period of time each subsequent year, the vapor pressure standard shall be 7.0 psi for dispensing facilities in Wayne [and seven other Southeast Michigan] counties." (ECF No. 18-33, PageID.542.)
And section 2(j) of HB 5508 defined "dispensing facility" as "a site used for gasoline refueling." (ECF No. 18-33, PageID.537.) (Sections 10d and 2(j) of HB 5508 are now found at Michigan Compiled Laws § 290.650d and § 290.642(m), respectively.)
As noted, the 1990 amendments to the Clean Air Act set a national 9.0 RVP standard for gasoline and prohibited states from setting a different standard unless the EPA found that a different standard was "necessary" and the EPA approved the deviation as part of the state's implementation plan. So Michigan asked the EPA to approve a revision to its state implementation plan to incorporate HB 5508. (See ECF No. 18-33, PageID.529.)
In 2007, the EPA granted Michigan's request. The EPA found that the 7.0 RVP standard was "necessary" to achieve the national air quality standard for ozone. 72 Fed. Reg. 4432, 4433 (Jan. 31, 2007) ; see also 71 Fed. Reg. 46879, 46881 (Aug. 15, 2006). And the EPA approved the provisions of HB 5508, including § 10d, as part of the Michigan's implementation plan. 72 Fed. Reg. 4432, 4434 (Jan. 31, 2007). The EPA further amended the Code of Federal Regulations to "incorporat[e] by reference" "House Bill 5508." Id. at 4435.
Ammex operates a gas station in Wayne County, one of the eight counties subject to § 10d of HB 5508. But the gas station is uniquely situated in Wayne County: it sits right before the Ambassador Bridge to Canada and those stopping at the station are, by the station's physical design, directed onto the bridge after refueling. (ECF No. 49, PageID.1207 ¶¶ 5, 35.) Indeed, the gas station is beyond what the United States Customs and Border Protection defines as the "exit point," i.e., the point where a person has "no practicable alternative" but to exit the United States and continue into Canada. See 19 C.F.R. § 19.35(d). Still, Ammex's customers fill their gas tanks within the confines of Wayne County, Michigan.
In the summer of 2012, the Michigan Department of Agriculture and Rural Development, the state agency tasked with enforcing § 10d of HB 5508, see HB 5508 § 9h, tested gasoline at Ammex's station and found that the gasoline's RVP was more than 7.0 psi. MDARD issued a stop-sale order and filed an enforcement suit in state court. Ammex and MDARD settled that dispute. And for the next five summers (through summer 2017), Ammex sold gas that complied with § 10d.
But in the months leading up to the summer of 2018, Ammex ran into a problem. Ammex's gas station is part of a duty-free store. That means that so long as Ammex complies with certain federal laws governing duty-free stores, an import duty is not imposed on the goods it sells and Ammex is able to sell its goods both duty-free and tax-free. See 19 U.S.C. § 1555(b)(8)(D), (E) ; Ammex, Inc. v. Dep't of Treasury , 272 Mich.App. 486, 726 N.W.2d 755, 766–69 (2006). And that means that the gas at Ammex's store is cheaper than gas at nearby stations. But to sell gas duty-free and tax-free, Ammex must obtain the gas from a foreign country or a foreign trade zone and keep the gas beyond the CBP-defined "exit point." In the months preceding the summer of 2018, Ammex's foreign source for 7.0 RVP fuel had a problem with one of its tanks; so it would not be able to supply Ammex with gas in the summer of 2018. While there were other sources of 7.0 RVP fuel (after all, every gas station in Southeast Michigan must sell 7.0 RVP fuel in the summer), those sources were not foreign.
So Ammex faced three undesirable choices. One option was to obtain 7.0 RVP fuel from a domestic source and forgo duty-free and tax-free status; this would have allowed Ammex to comply with § 10d but would have stripped Ammex of its competitive advantage and, possibly, cost Ammex its duty-free status entirely. A second option was to sell foreign-sourced fuel with an RVP higher than 7.0 psi; this would have allowed Ammex to maintain its competitive advantage (and not jeopardize its duty-free status) but would have risked an enforcement action by MDARD and a penalty of $10,000 for each day of non-compliance with § 10d. See HB 5508 §§ 5(4), 5(10), 9h(1)(e) (). A third option was to shut down the gas station for the summer and incur losses from not selling gasoline and from not selling the goods that people buy from the duty-free store when stopping for gas (after all, who can resist an Icee on a hot summer's day?).
Faced with these difficult options, Ammex filed this declaratory-judgment action against MDARD. Ammex asserted that application of Section 290.650d of the Michigan Compiled Laws —the place where HB 5508 § 10d is codified—to its gas station violated two provisions of the U.S. Constitution.
To be more specific, Ammex's complaint had two counts. Count I asserted that MDARD's enforcement of § 290.650d against Ammex, because it interfered with Ammex's ability to sell gasoline to those headed to Canada, violated the dormant Foreign Commerce Clause. (ECF No. 1, PageID.12–14.) Count II was pursuant to the Supremacy Clause: Ammex claimed that as applied to it, § 290.650d was preempted by federal laws...
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