Cannakorp, Inc. v. United States

• Decision Date: 11 July 2017
• Docket Number: Slip Op. 17–83,Court No. 17–00092
• Citation: 234 F.Supp.3d 1345
• Parties: CANNAKORP, INC., Plaintiff, v. UNITED STATES, Defendant.
• Court: U.S. Court of International Trade

234 F.Supp.3d 1345

CANNAKORP, INC., Plaintiff,

v.UNITED STATES, Defendant.

Slip Op. 17–83

Court No. 17–00092

United States Court of International Trade.

July 11, 2017

Kristin H. Mowry , Mowry & Grimson, PLLC, of Washington, D.C., for plaintiff. With her on the brief were Jeffrey S. Grimson and Jill A. Cramer of Mowry & Grimson, PLLC, of Washington, D.C., and William M. Jay and Andrew Kim , Goodwin Proctor LLP, of Washington, D.C.

Guy Eddon , Trial Attorney, Civil Division, Commercial Litigation Branch, U.S. Department of Justice, of New York, NY, for defendant. With him on the brief were Chad A. Readler , Acting Assistant Attorney General, Patricia M. McCarthy , Assistant Director, and Aimee Lee , Senior Trial Counsel. Of Counsel on the brief was Alexandra Khrebtukova, Office of Chief Counsel, International Trade Litigation, U.S. Customs and Border Protection.

MEMORANDUM AND ORDER

Barnett, Judge:

CannaKorp, Inc. ("CannaKorp" or "Plaintiff") brings this action against the United States ("Defendant") to challenge a pre-importation ruling issued by U.S. Customs and Border Protection ("Customs" or "CBP"). See Compl., ECF No. 2. Defendant moves to dismiss the complaint for lack of subject matter jurisdiction and failure to state a claim pursuant to Rules 12(b)(1) and 12(b)(6) of the Rules of the United States Court of International Trade ("USCIT"). See Def.'s Mot. to Dismiss and Def.'s Mem. in Supp. of its Mot. to Dismiss ("Def.'s Mot."), ECF No. 17. Plaintiff opposes this motion. See Pl.'s Resp. to Def.'s Mot. to Dismiss ("Pl.'s Resp."), ECF No. 18. For the reasons discussed below, the court grants Defendant's motion to dismiss for lack of subject matter jurisdiction and dismisses this case.¹

BACKGROUND

In April 2016, CannaKorp requested a pre-importation ruling from CBP regarding its "single-use, pod-based cannabis vaporizer system known as the CannaCloud." Compl. ¶¶ 1, 24–25. In its ruling request, CannaKorp sought to "establish that importation of the CannaCloud is lawful under the Controlled Substances Act [ ("CSA") ]," 21 U.S.C. §§ 801 et seq. , because it fell within the ambit of the CSA's exemption provision, 21 U.S.C. § 863(f)(1).² Compl., Ex. 3 at 1, ECF No. 2–1; see also Compl. ¶¶ 26–30. On March 24, 2017, CBP issued a ruling that the "[CannaCloud] is not exempted from the prohibition on the importation of drug paraphernalia set forth in 21 U.S.C. § 863(a) and may not be legally imported into the United States because the exemption set forth in 21 U.S.C. § 863(f)(1) does not apply." Compl., Ex. 1 at 5, ECF No. 2–1. On April 27, 2017 CannaKorp filed a complaint seeking judicial review of this Customs ruling. See Compl. Plaintiff invokes jurisdiction pursuant to 28 U.S.C. § 1581(h),³ alleging that without pre-importation review, CannaKorp "would experience irreparable harm ... through disruption of supplier relationships, lost business opportunities, and reputational harm [that] threatens the complete failure of CannaKorp's business." Compl., ¶¶ 7, 3–11. Plaintiff further alleges that CBP's ruling was "arbitrary, capricious, an abuse of discretion and otherwise not in accordance with law," Compl. ¶ 53, 57, 60, and asks the court to (i) order expedited consideration and briefing; (ii) declare CBP's ruling unlawful; (iii) "declare that the CannaCloud is not restricted merchandise" because it is exempted from the CSA pursuant to 21 U.S.C. § 863 ; (iv) order any other relief deemed just and proper; and (v) award CannaKorp and attorney's fees and costs pursuant to 28 U.S.C. § 2412(d), id. ¶ 61. Defendant has moved to dismiss the complaint for lack of subject matter jurisdiction and failure to state a claim upon which relief can be granted. See Def.'s Mot. Plaintiff opposes this motion. See Pl.'s Resp.

SUBJECT MATTER JURISDICTION

To adjudicate a case, a court must have subject-matter jurisdiction over the claims presented. See Steel Co. v. Citizens for a Better Env't , 523 U.S. 83, 94–95, 118 S.Ct. 1003, 140 L.Ed.2d 210 (1998). "[W]hen a federal court concludes that it lacks subject-matter jurisdiction, the court must dismiss the complaint in its entirety." Arbaugh v. Y & H Corp. , 546 U.S. 500, 514, 126 S.Ct. 1235, 163 L.Ed.2d 1097 (2006).

A plaintiff bears the burden of establishing subject-matter jurisdiction. See Norsk Hydro Can., Inc. v. United States , 472 F.3d 1347, 1355 (Fed. Cir. 2006). When reviewing a motion to dismiss for lack of subject matter jurisdiction, the court proceeds according to whether the motion "challenges the sufficiency of the pleadings or controverts the factual allegations made in the pleadings." H & H Wholesale Servs., Inc. v. United States , 30 CIT 689, 691, 437 F.Supp.2d 1335, 1339 (2006). When the motion challenges the sufficiency of the pleadings, the court assumes that the allegations within the complaint are true. Id. When, as here, "the motion controverts factual allegations supporting the [c]omplaint, ‘the allegations in the complaint are not controlling,’ and ‘are subject to fact-finding by the [trial] court.’ " Id. at 692, 437 F.Supp.2d at 1339 (quoting Cedars–Sinai Medical Ctr. v. Watkins , 11 F.3d 1573, 1583–84 (Fed. Cir. 1993) ) (alterations added). Cf. Power–One Inc. v. United States , 23 CIT 959, 962, 83 F.Supp.2d 1300, 1303 n.9 (1999) (when a party "challenges the actual existence of subject matter jurisdiction," the "allegations in Plaintiffs' Complaint are not controlling, and only uncontroverted factual allegations are accepted as true").

Pursuant to subsection 1581(h),

The Court of International Trade shall have exclusive jurisdiction of any civil action commenced to review, prior to the importation of the goods involved, a ruling issued by the Secretary of the Treasury, ... relating to ... restricted merchandise, ... or similar matters, but only if the party commencing the civil action demonstrates to the court that he would be irreparably harmed unless given an opportunity to obtain judicial review prior to such importation.

28 U.S.C. § 1581(h).

A plaintiff must show that it has met four requirements to establish jurisdiction under subsection (h): "1) review must be sought prior to importation; 2) review sought must be for a ruling; 3) the ruling must relate to certain subject matter; and 4) the importer must show that irreparable harm will result unless judicial review prior to importation is obtained." Am. Frozen Food Inst., Inc. v. United States , 18 CIT 565, 569, 855 F.Supp. 388, 393 (1994) (supplying the requirements); 28 U.S.C. § 2639(b) (supplying the burden of proof); see also Heartland By–Prods . , Inc. v. United States , 31 CIT 1711, 1719, 521 F.Supp.2d 1386, 1393 (2007), rev'd on other grounds , 568 F.3d 1360 (Fed. Cir. 2009) ("The heightened burden of having to demonstrate irreparable harm under § 1581(h) provides grounds for jurisdiction over disputes that might otherwise be considered speculative or not ripe for review. It is precisely this distinction that makes jurisdiction under § 1581(h) extraordinary.") (citations omitted). Only the fourth prong of the jurisdictional criteria, irreparable harm, is at issue here. See Def.'s Mot. at 4, 5; Pl.'s Resp. at 5.

LEGAL FRAMEWORK FOR IRREPARABLE HARM

The "standard for proving irreparable harm [in a § 1581(h) case] is essentially identical to that used to determine irreparable injury in cases where injunctive relief is sought." Connor v. United States , 24 CIT 195, 199 (2000) (citation omitted). Plaintiff must demonstrate, with clear and convincing evidence, that "the harm is highly probable." Id. at 196–97 (citing Waits v. Frito–Lay, Inc. , 978 F.2d 1093, 1105 (9th Cir. 1992) ). Cf. Thyssen Steel Co. v. United States , 13 CIT 323, 326, 712 F.Supp. 202, 204 (1989) (court denied claim of irreparable harm where plaintiff relied solely on an affidavit); Holford USA Ltd. v. United States , 19 CIT 1486, 1491–92, 912 F.Supp. 555, 559–60 (1995) (affidavits and letters proffering relevant facts and contract terms constituted sufficient evidence supporting claim of irreparable harm).

"Irreparable harm is that which ‘cannot receive reasonable redress in a court of law.’ " Connor , 24 CIT at 197 (quoting Manufacture de Machines du Haut–Rhin v. Von Rabb , 6 CIT 60, 64, 569 F.Supp. 877, 881–82 (1983) ). "In evaluating that harm, the court must consider ‘the magnitude of the injury, the immediacy of the injury, and the inadequacy of future corrective relief.’ " Shree Rama Enter. v. United States , 21 CIT 1165, 1167, 983 F.Supp. 192, 194 (1997) (quoting Queen's Flowers de Colombia v. United States , 20 CIT 1122, 1125, 947 F.Supp. 503, 506 (1996). Of these three factors, "immediacy [of the injury] and the inadequacy of future corrective relief" may be weighed more heavily than magnitude of harm. Nat'l Juice Prods. Ass'n v. United States , 10 CIT 48, 53, 628 F.Supp. 978, 984 (1986) (citations omitted).

Critically, irreparable harm may not be speculative, see Am. Inst. for Imported Steel, Inc. v. United States , 8 CIT 314, 318, 600 F.Supp. 204, 209 (1984), or determined by surmise, Elkem Metals Co. v. United States , 25 CIT 186, 192, 135 F.Supp.2d 1324, 1331 (2001) (citation omitted). "It is not enough to establish ‘a mere possibility of injury, even where prospective injury is great. A presently existing, actual threat must be shown.’ " Shree Rama , 21 CIT at 1167, 983 F.Supp. at 194–95 (quoting Zenith Radio Corp. v. United States , 710 F.2d 806, 809 (1983) ).

Economic harm, or injury to the business, may constitute irreparable harm when "the loss threatens the very existence of the movant's business," Wisc. Gas Co. v. Fed. Energy Regulatory Comm'n , 758 F.2d 669, 674 (DC. Cir. 1985) (citing Wash. Metro. Area Transit Comm'n v. Holiday Tours, Inc. , 559 F.2d 841, 843 n. 2 (D.C. Cir. 1977) ), and is otherwise noncompensable, Kwo Lee, Inc. v. United States , 38 CIT ––––, ––––, 24 F.Supp.3d 1322, 1327 (2014) ( "Financial loss alone—compensable with monetary damages—is not irreparable") (citing Sampson v. Murray , 415 U.S....