Goya De Puerto Rico Inc. v. Santiago

• Decision Date: 30 March 1999
• Docket Number: No. Civ. 96-2214CCC.,Civ. 96-2214CCC.
• Citation: 59 F.Supp.2d 274
• Parties: GOYA DE PUERTO RICO INC., Plaintiff, v. Neftali SANTIAGO, Individually and as Secretary of the Department of the Commonwealth of Puerto Rico, Defendant.
• Court: U.S. District Court — District of Puerto Rico

59 F.Supp.2d 274

GOYA DE PUERTO RICO INC., Plaintiff, v. Neftali SANTIAGO, Individually and as Secretary of the Department of the Commonwealth of Puerto Rico, Defendant.

No. Civ. 96-2214CCC.

United States District Court, D. Puerto Rico.

March 30, 1999.

Marta Quiñones-Zambrano, for plaintiff.

Roberto Ruiz-Comas, for defendant.

OPINION AND ORDER

CEREZO, District Judge.

This declaratory judgment action challenging the constitutionality of Articles IIIE(10)(i),¹ III(E)(11), IV(C)(1-5), VI, VIII(B) and IX(A)(B) contained in a regulation of the Puerto Rico Department of Agriculture is before us on an unopposed Motion for Summary Judgment filed by plaintiff Goya de Puerto Rico, Inc. (Goya) (docket entry 86).

After careful consideration of the exhibits and affidavits presented, the Court finds that Articles IV(C)(1-5), VIII(B) and IX(A)(B) are unconstitutional and that Article VI is in conflicts with federal law.

The following factual allegations are relevant to the resolution of the pending motion. Goya is a Puerto Rico corporation established since 1949. For the past twenty-five years, Goya has been both an Importer and canner of certain comestibles. It imports dry grains from various places including the Dominican Republic, Ecuador, Chile, Peru and Mexico. Pinto Beans, pink beans, navy beans, chick peas, roman beans, lima beans, pigeon peas ("Gandures"), red kidney beans, small white beans, black-eye beans, whole green beans, black beans and white kidney beans are among the dry grains that it imports to Puerto Rico. These, along with the pigeon peas, have been classified as "low-acid foods". Goya also buys and imports other low-acid foods (e.g. canned tomato paste from Chile and Ecuador; canned Guava shells, papaya chunks, grated coconut, coconut milk, coconut cream and Guava paste from the Dominican Republic; canned sardines from Peru; canned sliced, chunk and crushed pineapple from Thailand and the Philippines; and, canned codfish, octopus, sardines, squid and pimentos from Spain.)

The Food and Drug Administration (FDA) has adopted an extensive and detailed set of rules governing the manufacture of thermally processed low-acid foods that are placed in hermetically sealed containers. Under these regulations, all processors, both foreign and domestic, have to file with the FDA the processing information, including the conditions under which the manufacturer achieves commercial sterility ensuring that all microorganisms that pose a potential threat to the public have been eliminated. Under these regulations, foreign manufacturers that wish to conduct business within the United States have to register their establishments with the FDA. In return, they obtain a Food Establishment Registration Number (FCE). The FDA does not perform inspections on foreign facilities nor issues any kind of certificate attesting that the plant is in compliance with the laws and regulations administered by the FDA. The FDA does not, on its own initiative, inspect the Puerto Rican companies that import pigeon peas to the Island.

The Puerto Rico Department of Agriculture adopted a regulation known as Regulation Number Five that calls for the inspection and the exaction of an inspection fee on all pigeon peas imported either in dry or canned form. (Articles VIII(B) and IX(A)(B)). Article IV(C)(1-5) provides that the canning of imported pigeon peas shall be conducted under the direct supervision of a Department of Agriculture inspector.² The inspections are performed by the Puerto Rico Department of Agriculture personnel. They conduct only a review of the inventory of the canned pigeon peas and only check labels. Goya is then invoiced for those services. The cost of these inspections has to be paid to the Department by plaintiff. Failure to pay the inspection fees may lead to the suspension or cancellation of Goya's license to sell "gandures" in Puerto Rico. The Puerto Rico Department of Agriculture charged plaintiff one dollar per box of products. After Goya filed this lawsuit, the Department lowered that amount to twenty five cents per box.

Of all the grains imported by Goya, (either canned or in dry form) the only ones subject to the challenged inspection upon arrival to the Island are pigeon peas. Locally produced or grown pigeon peas are not subjected to the rigors of regulation number five or any other similar regulation.

Regulation number five (via article VI) also imposes certain labeling requirements to be met by importers. Every can of imported pigeon peas has to contain the name and address of both the canner and the importer. The name of the importer has to be preceded by the word or phrase "IMPORTER" or "IMPORTED BY" or "IMPORTED FOR". The word "IMPORTED" shall be printed in letters not smaller than a fourth of an inch in height. Also, every container of imported canned pigeon peas introduced or marketed in Puerto Rico must be identified with a label indicating in legible letters the name and address of the canner or person for whom the product has been canned in Puerto Rico and the name and address of the canner and of the importer.

A. Plaintiff's Challenge Under the Commerce Clause

Plaintiff contends that Articles IV(C)(1-5), VIIIB and IX(A)(B) violate the Commerce Clause of the United States Constitution based on its alleged discriminatory purpose and effect.

The Commerce Clause of the United States Constitution vests upon Congress the power to regulate commerce between the states and with foreign nations. Maine v. Taylor, 477 U.S. 131, 106 S.Ct. 2440, 2446, 91 L.Ed.2d 110 (1986). The main purpose of the Commerce Clause is to foster economic integration and prevent local interference with the flow of the nation's commerce. Trailer Marine Transport Corp. v. Rivera Vázquez, 977 F.2d 1, 8 (1st Cir.1992). However, that congressional authority has been interpreted to have a negative side to it. That "negative" or "dormant" aspect of the Commerce Clause prohibits States from advancing their own commercial interests by curtailing the movement of articles of commerce, either into or out of the state. Fort Gratiot Landfill v. Michigan Department of Natural Resources, 504 U.S. 353, 112 S.Ct. 2019, 2023, 119 L.Ed.2d 139 (1992). See e.g., New Energy Company of Indiana v. Limbach, 486 U.S. 269, 108 S.Ct. 1803, 1807, 100 L.Ed.2d 302 (1988). Albeit not a federated state, Puerto Rico is subject to the limitations imposed by the Commerce Clause. United Egg Producers v. Department of Agriculture, 77 F.3d 567, 569 (1st 1996).

Federal courts have commonly adopted a two prong test to resolve challenges to state regulation based on the Commerce Clause. Starlight Sugar v. Soto, 909 F.Supp. 853, 858 (D.P.R.1995). Under that analysis the court must first determine if the statute is discriminatory or not. Maine v. Taylor, supra, at 2447.

Statutes or state regulations that specifically impose taxes on out-of-state competitors have traditionally been considered discriminatory. West Lynn Creamery Inc. v. Healy, 512 U.S. 186, 114 S.Ct. 2205, 2211, 129 L.Ed.2d 157 (1994). Discrimination also exists when the statute gives economic protection to in-state entities at the expense of the out-of-state ones. Starlight Sugar v. Soto, supra. at 858. A statute can be deemed discriminatory based on either its purpose or effect. Bacchus Imports Ltd. v. Dias, 468 U.S. 263, 104 S.Ct. 3049, 3054, 82 L.Ed.2d 200 (1984).

Once it is determined by the trial court that the challenged statute discriminates against interstate commerce, a more stringent scrutiny is warranted. Starlight Sugar v. Soto, 114 F.3d 330, 331 (1st Cir. 1997). In those instances, the state has to meet two requirements. First, it must prove that the statute serves a legitimate local interest unrelated to economic protectionism and second, that such local interest cannot be served through non-discriminatory means. Davrod Corp. v. Coates, 971 F.2d 778, 787 (1st Cir.1992). If the challenged statute has a discriminatory purpose or effect the only remaining question is whether it somehow can be justified. Trailer Marine Transport Corp., supra, at 11.

A less demanding scrutiny is applied in those cases where the court concludes that the perused regulation is non-discriminatory in nature. In those instances a more lenient test is applied. Fireside Nissan, Inc. v. Fanning, 30 F.3d 206, 218 (1st Cir.1994). Under that analysis, the court balances the incidental effects that such statute imposes on interstate commerce against the benefits that it provides to the local interests. Starlight Sugar, supra., at 858. In sum, the burden upon interstate commerce cannot be excessive in comparison to the putative local benefits. Maine, supra, at 2447.

We find that Articles IV(C)(1-5), VIII(B) and IX(A)(B) contained in Regulation Number Five discriminate against interstate commerce. They facially discriminate against interstate commerce for they impose significant costs on pigeon pea importers which are not borne by their local counterparts. United Egg Producers, supra, at 571.³ Whereas Regulation Number Five calls for the Inspection of all "gandures" to be sold in Puerto Rico, in practice only those that are brought from abroad are inspected.⁴ The statute renders the locally produced pigeon peas immune to its requirements of inspection, supervision and attendance fee. In its effect, Regulation Number Five singles out imported "gandures" because of their place of origin and benefits the local producers by burdening their out-of-state competitors. However, the place of origin by itself, does not justify a discriminatory treatment of out of state goods. Used Tire International, Inc. v. Manuel Diaz Saldana, 155 F.3d 1 (1st Cir.1998) See also City of Philadelphia v. New Jersey, 437 U.S. 617, 98 S.Ct. 2531, 2537, 57 L.Ed.2d 475 (1978).

"Even according the regulation every presumption of validity, no reasonable conjecture can here overcome the calculated discrimination against foreign commerce." Hale v....