Kloosterboer Int'l Forwarding v. United States
| Docket Number | 3:21-cv-00198-SLG |
| Decision Date | 28 September 2021 |
| Parties | KLOOSTERBOER INTERNATIONAL FORWARDING LLC, et al., Plaintiffs, v. UNITED STATES OF AMERICA, et al., Defendants. |
| Court | U.S. District Court — District of Alaska |
Before the Court at Docket 4 is Plaintiffs Kloosterboer International Forwarding LLC and Alaska Reefer Management LLC's (collectively, “Plaintiffs”) Motion for Temporary Restraining Order and Preliminary Injunction. Defendants the United States of America, U.S. Department of Homeland Security, U.S. Customs and Border Protection (“CBP”), and Troy A. Miller, in his official capacity as the Acting Commissioner of CBP (collectively “Defendants”), responded in opposition at Docket 38, to which Plaintiffs replied at Docket 47. Oral argument was held on September 17, 2021. The Court has jurisdiction pursuant to 28 U.S.C. § 1331.
Kloosterboer International Forwarding LLC (“KIF”) is an Alaskan wholly-owned subsidiary of Alaska Reefer Management LLC (“ARM”).[1] KIF and ARM arrange transportation and related services for the movement of frozen seafood products in particular frozen pollock, from Alaska to the eastern United States on behalf of their customers.[2]
Since 2012, Plaintiffs' transportation route for the frozen seafood has been as follows:[3] After seafood products are harvested and processed at sea by American Seafood Company (“ASC”), the frozen products are stored in KIF's Dutch Harbor, Alaska cold storage facility. The U.S.-bound product is then loaded onto non-coastwise-qualified vessels (i.e., foreign-flagged vessels), which are procured by ARM for shipment of the product to the Port of Bayside in New Brunswick, Canada. On arrival at Bayside, the seafood is unloaded from the vessels and moved directly into KIF's Bayside cold storage facility. KIF then arranges with third-party trucking transportation services to deliver the product to Plaintiffs' customers in the eastern United States. Once the trailer trucks are loaded with product, they are driven directly onto a flat rail car on the Bayside Canadian Rail (“BCR”) rail trackage, a registered Canadian railroad. The BCR is approximately 100 feet in length and located entirely within the Port of Bayside. Each truck travels the length of the BCR and back-in other words from Point A to Point B then back to Point A. After a truck is driven off the BCR-at the same location it was driven onto the BCR-the truck proceeds directly to the Calais, Maine border crossing, where the driver submits a bill of lading to CBP and enters the United States. The frozen seafood products are then delivered to Plaintiffs' customers in the eastern United States. The Court refers to this transportation route as the “BCR Route.”
Prior to using the BCR route, beginning in late 2000, ASC itself transported the frozen seafood from Dutch Harbor to the Port of Bayside on foreign-flagged vessels, then eventually on to Calais, Maine by truck. Beginning in 2009, ASC contracted with ARM to provide the transportation of the product on that same route.[4] However, beginning in 2000 and continuing until 2012, when the product arrived at the Port of Bayside, it was first trucked away from the Port of Bayside to a rail terminal of the New Brunswick Southern Railway (“NBSR”). The NBSR carried the frozen seafood product to a separate rail terminal-not just back and forth like the BCR-over distances of approximately 34 and 91 miles, depending on the destination terminal.[5] The product then travelled by truck to the border crossing at Calais, Maine. The Court refers to this transportation route as the “NBSR Route.”
In 2017, CBP, the federal agency responsible for interpreting and enforcing the cabotage laws of the United States, began investigating Plaintiffs' BCR Route.[6]As a result of the investigation, CBP determined that Plaintiffs' route violated the Jones Act because, according to CBP, the BCR Route did not fall within an exemption to the Jones Act, known as the Third Proviso.[7] In August of this year, CBP began issuing numerous “Notices of Penalty” to KIF and other companies involved in the BCR Route supply chain-shippers, trucking firms, and storage facilities.[8] As of the date of the filing of Plaintiffs' Complaint, KIF had received Notices of Penalty totaling approximately $25 million, and other companies in Plaintiffs' supply chain had received Notices of Penalty totaling approximately $325 million.[9] After some discussions between Plaintiffs and CBP concerning the Notices of Penalty, Plaintiffs filed the instant action on September 2, 2021. In short, Plaintiffs assert that CBP's “shocking and unconstitutional overreach[]” by assessing penalties for purported Jones Act violations “has crippled” the shipment of frozen seafood from Dutch Harbor to the eastern United States because Plaintiffs and “other companies critical to shipping this seafood are now unable to, and will not, resume shipping” due to the potential for “additional massive penalties.”[10] Plaintiffs seek a temporary restraining order and preliminary injunction from this Court barring CBP from imposing further penalties on Plaintiffs and other companies in the supply chain during the pendency of this litigation.
The standard for obtaining a temporary restraining order is “substantially identical” to that for a preliminary injunction.[11] In Winter v. Natural Resources Defense Council, Inc., the United States Supreme Court held that plaintiffs seeking preliminary injunctive relief must establish that (1) they are likely to succeed on the merits; (2) they are likely to suffer irreparable harm in the absence of preliminary relief; (3) the balance of equities tips in their favor; and (4) a preliminary injunction is in the public interest.[12] Following Winter, the Ninth Circuit addressed the first element-the likelihood of success on the merits-and held that the Circuit's “serious questions” approach to preliminary injunctions was still valid “when applied as a part of the four-element Winter test.”[13] Accordingly, if a plaintiff shows “that there are ‘serious questions going to the merits'-a lesser showing than likelihood of success on the merits-then a preliminary injunction may still issue if the ‘balance of hardships tips sharply in the plaintiff's favor.'”[14] “Serious questions are ‘substantial, difficult, and doubtful,' as to make them a fair ground for litigation and thus for more deliberative investigation.”[15] They “need not promise a certainty of success, nor even present a probability of success, but must involve a ‘fair chance on the merits.'”[16]
All four Winter elements must still be satisfied under this approach, [17] but analyses of the last two elements-harm to the opposing party and consideration of the public interest-merge when the government is the opposing party.[18]Additionally, “[t]he first factor-likelihood of success on the merits-‘is the most important' factor.”[19] “If a movant fails to establish likelihood of success on the merits, [a court] need not consider the other factors.”[20]
Injunctive relief is an equitable remedy, and “[t]he essence of equity jurisdiction is the power of the court to fashion a remedy depending upon the necessities of the particular case.”[21]
In Count VI of their Complaint, Plaintiffs request that this Court invoke the “constitutional tolling doctrine” and enjoin CBP from collecting or imposing penalties during the pendency of this litigation. Plaintiffs rely primarily on Oklahoma Operating Co. v. Love, 252 U.S. 331 (1920), and United States v. Pacific Coast European Conference, 451 F.2d 712 (9th Cir. 1971).[22] According to Plaintiffs, “[u]nder the constitutional tolling doctrine, [they] are protected from non- compliance with statutory and regulatory provisions during the entire period they are judicially challenging the validity of penalties issued under those laws- regardless of the ultimate outcome of their challenge-provided they have raised substantial questions as to the constitutionality of CBP's actions.”[23] Primarily relying on United States v. Louisiana-Pacific Corp., 967 F.2d 1372 (9th Cir. 1992), Defendants respond that the Court should not apply constitutional tolling because Plaintiffs are not contesting the validity of the Jones Act; rather, they are contesting CBP's interpretation of the Act.[24] In short, while the parties seem to agree that the constitutional tolling doctrine exists, they dispute its applicability to the instant case.
In Love, the plaintiff challenged the constitutional validity of an Oklahoma “legislative order” that set laundry rates with no opportunity for judicial review, unless the plaintiff violated the order and contempt proceedings were initiated against it.[25] The Supreme Court held that “[o]bviously a judicial review beset by such deterrents does not satisfy the constitutional requirements” and determined that the plaintiff was entitled to a temporary injunction precluding the enforcement of penalties during the pendency of the litigation.[26] Similarly, in Pacific Coast European Conference, the defendants were challenging the constitutional validity of both the underlying statute, which had been recently enacted, and the order that gave rise to the penalties in that case.[27] The Ninth Circuit held that the “[d]efendants ought not to have to pay a statutory penalty for non-compliance with the [underlying statute] during the time they were judicially testing the validity of that” statute.[28]
Here in contrast, Plaintiffs' constitutional challenges are directed only at CBP's conduct-alleged violations of...
To continue reading
Request your trial