Furie Operating Alaska, LLC v. U.S. Dep't of Homeland Sec.

• Decision Date: 15 April 2013
• Docket Number: 3:12-CV-00158 JWS
• Parties: FURIE OPERATING ALASKA, LLC, Plaintiff, v. U.S. DEPARTMENT OF HOMELAND SECURITY; SECRETARY OF HOMELAND SECURITY JANET NAPOLITANO, in her official capacity; U.S. CUSTOMS AND BORDER PROTECTION; and ACTING COMMISSIONER DAVID V. AGUILAR, in his official capacity, Defendants.
• Court: U.S. District Court — District of Alaska

FURIE OPERATING ALASKA, LLC, Plaintiff, v. U.S. DEPARTMENT OF HOMELAND SECURITY; SECRETARY OF

HOMELAND SECURITY JANET NAPOLITANO, in her official capacity;

U.S. CUSTOMS AND BORDER PROTECTION; and

ACTING COMMISSIONER DAVID V. AGUILAR, in his official capacity, Defendants.

3:12-CV-00158 JWS

UNITED STATES DISTRICT COURT DISTRICT OF ALASKA

Dated: April 15, 2013

ORDER AND OPINION

[Re: Motion at docket 24]

I. MOTION PRESENTED

At docket 24, defendant U.S. Department of Homeland Security ("DHS"), Secretary of Homeland Security Janet Napolitano, U.S. Customs and Border Protection ("CBP"), and CBP Acting Commissioner David Aguilar (collectively, the "Government" or "defendants") ask the court to dismiss plaintiff's complaint under Rules 12(b)(1) and (6) of the Federal Rules of Civil Procedure. The Government argues that the court lacks subject matter jurisdiction over the matter because there has been no final agency action and thus judicial review of CBP's $15 million sanction against plaintiff FurieOperating Alaska, LLC ("plaintiff" or "Furie") pursuant to the Administrative Procedure Act ("APA") is not available. Furie opposes the motion at docket 36. The Government's reply is at docket 32. Oral argument was not requested and would not assist the court.

II. BACKGROUND

The challenged agency action at issue relates to Furie's 2011 transportation of the jack-up rig Spartan 151 (the "Rig") from the Gulf of Mexico in Texas to Vancouver, British Columbia, using a foreign vessel and then from Vancouver to Cook Inlet, Alaska, using a U.S. vessel. Furie's use of a foreign vessel to transport the Rig implicates the Jones Act, specifically 46 U.S.C. § 55102(b), which provides that no "merchandise" can be transported by water between points in the United States to which the coastwise laws apply, either directly or via a foreign port, unless the vessel transporting the merchandise is one that is built in, documented under the laws of, and owned by citizens of the United States. The Jones Act does not define the term "merchandise" in detail, but it provides that the term includes valueless material or anything owned by federal, state or local governments.¹ The penalty for violating this U.S.-vessel requirement is forfeiture of the merchandise transported or, alternatively, a sanction in an amount equal to the value of the merchandise or the actual cost of the transportation of the merchandise, whichever is greater.²

The U.S.-vessel requirement can be waived by the DHS Secretary, but only if the Secretary "considers it necessary in the interest of national defense . . . ."³ Furie sought and received a waiver from then-Secretary Michael Chertoff in 2006 when Furie had planned to transport a different rig, the Tellus, to Alaska with the use of a foreign-owned vessel. The waiver for the Tellus rig transport was based on Furie's demonstration to DHS that there were no qualified U.S. vessels that could transport the Tellus rig aroundthe southern tip of Africa or South America (it was too large to pass through the Panama Canal) and the rig was needed in Alaska to help alleviate South Central Alaska's natural gas shortage, which was affecting defense-related facilities in Alaska. Furie ended up unable to transport the Tellus rig in 2006 because of repairs and legal disputes. In the meantime, the Tellus rig was sold to foreign interests, and Furie could no longer use it for its natural gas exploration in Alaska.

By 2010, Furie had made alternate plans, entering into a contract to use the Rig instead. It had also located a different vessel to transport the Rig to Alaska, but again the vessel was foreign-owned because the U.S. fleet did not include one capable of transporting the Rig. Furie requested that Secretary Napolitano reconfirm the Jones Act waiver that Secretary Chertoff had granted in 2006. When Furie did not get a response, it informed CBP of its intention to ship the Rig to Alaska with a foreign vessel based on the former waiver. CBP informed Furie that the waiver was no longer in affect and that it would need a new waiver or face penalties if it transported the Rig as planned.

Furie sought a new waiver from Secretary Napolitano but was denied in March of 2011. The denial was based on the fact that the Maritime Administration said U.S.-owned barges existed that could transport the Rig from Texas to Alaska. That information turned out to be wrong, and on March 22, 2011, the Maritime Administrator advised CBP that a U.S.-owned vessel was not available for the planned voyage. Furie anticipated that the waiver would be granted given the corrected information, and thus, in March of 2011 Furie had the Rig depart from Texas using a foreign-owned vessel for transportation.

In May of 2011, after not hearing from CBP on the matter, Furie asked Secretary Napolitano for a reconsideration of her denial of the waiver. It asked the Secretary for an expedited decision because the Rig was in route to Alaska and scheduled to arrive at the end of May. On May 20, 2011, Secretary Napolitano denied the request but indicated that DHS wanted to work with Furie to find an equitable way to allow transportation of the Rig to Cook Inlet. She indicated that CBP officials would beprepared to meet with Furie representatives to discuss possible mitigation of the Jones Act penalties that were likely to result if the Rig were offloaded in Alaska. A few days later, representatives for Furie discussed possible penalties with CBP official Glen Vereb. Vereb stated that CBP would not seize the Rig if it were transported to Alaska, but that it would pursue penalties based on Furie's violation of the Jones Act. Furie advocated for mitigated penalties by sending an email to CBP that set forth factors it believed justified mitigation, and the Rig was diverted to Vancouver while Furie awaited a resolution of the penalty matter.

After further negotiations and communications regarding penalty mitigation, in July of 2011, CBP official Allen Gina sent an email to Furie indicating that if the Rig were to complete its journey to Alaska, CBP would find that Furie violated the Jones Act, § 55102, because of its use of a foreign vessel to transport the Rig on a portion of the Rig's journey to Alaska. The email also stated that the penalty for such a violation was either forfeiture of the Rig or a penalty in the amount of the value of the Rig, which CBP valued at $46 million, or the cost of the transportation, which CBP stated was $9.2 million. Gina stated in the email that he would recommend that a mitigated penalty of $6.9 million be assessed against Furie, which represented 15 percent of what CBP believed was the value of the Rig.

On July 22, 2011, the Rig left Vancouver for Alaska, towed by a U.S. vessel. It arrived in Alaska a few weeks later. On October 13, 2011, CBP sent Furie a notice of violation based on the transport of the Rig from Texas to Alaska via in part a non-qualifying vessel. The notice assessed a penalty of $15 million, which it stated to be the full amount of the Rig's value. On December 12, 2011, Furie submitted a petition for mitigation, which CBP denied in January of 2012. In March of 2012, Furie submitted a supplemental petition for mitigation. CBP denied that request in May of 2012. On June 6, 2012, Furie informed CBP that it would file a request for reconsideration, but the next day CBP informed Furie that the regulations did not authorize a request forreconsideration and that if Furie did not pay the full $15 million by the next day, it would forward the matter for a collection action.

CBP sent a bill for $15 million to Furie on June 16, 2012. The bill indicated that payment was due within ten days. CBP sent another $15 million bill to Furie on June 30, 2012, which again noted that payment was due within ten days. On July 9, 2012, Furie submitted a request for reconsideration to CBP, but the next day CBP sent a letter to Furie stating that it would not consider the request to reconsider its decision. Furie asked that its request for reconsideration be forwarded to the Acting Commissioner of the CBP for his personal review, but that request was also denied. Furie received a third bill for the $15 million penalty on July 19, 2012. It did not pay the bill and filed this lawsuit.

The Government argues that CBP's assessment of a $15 million Jones Act penalty against Furie does not constitute "final agency action" reviewable under the APA. It argues that its assessment of the penalty is not final until CBP refers the matter to the Department of Justice and the Department of Justice accepts the referral and seeks to enforce the penalty in court, relying primarily on Nippon Miniature Bearing Corp. v. Weise.⁴ Furie argues that even though the Department of Justice would have to bring a debt collection action to enforce payment, CBP's decision to impose the $15 million penalty is final agency action at this point, because there are no further steps in the deliberative process and because a penalty does not need to be self-effectuating to be final, citing Sackett v. EPA.⁵

III. STANDARD OF REVIEW

This motion is properly considered under Federal Rule of Civil Procedure 12(b)(1) because the issue of whether agency action is final and thus eligible for judicialreview under the APA is a matter of sovereign immunity,⁶ which implicates the court's subject matter jurisdiction.⁷

In order to survive a defendant's motion to dismiss, a plaintiff has the burden of proving jurisdiction.⁸ "Unless the jurisdictional issue is inextricable from the merits of a case, the court may determine jurisdiction on a motion to dismiss for lack of jurisdiction under Rule 12(b)(1)."⁹ In such a situation, the court can consider evidence outside of the pleadings related to jurisdiction.¹⁰ If the defendants bring a facial attack on subject matter jurisdiction, the court assumes the factual allegations in the plaintiff's complaint are true and draws all reasonable inferences in the plaintiff's...