Milecrest Corp. v. United States

Decision Date15 September 2017
Docket NumberCourt No. 17–00125,Slip Op. 17–125
Citation264 F.Supp.3d 1353
Parties MILECREST CORPORATION, Plaintiff, v. UNITED STATES and U.S. Customs & Border Protection, Defendants, and Duracell U.S. Operations, Inc., Defendant–Intervenor.
CourtU.S. Court of International Trade

264 F.Supp.3d 1353

MILECREST CORPORATION, Plaintiff,
v.
UNITED STATES and U.S. Customs & Border Protection, Defendants,
and
Duracell U.S. Operations, Inc., Defendant–Intervenor.

Slip Op. 17–125
Court No. 17–00125

United States Court of International Trade.

September 15, 2017


264 F.Supp.3d 1357

John M. Peterson, Russell A. Semmel, and Richard F. O'Neill, Neville Peterson LLP, of New York, N.Y., for Plaintiff Milecrest Corporation.

Alexander J. Vanderweide, Trial Attorney, Commercial Litigation Branch, Civil Division, U.S. Department of Justice, of New York, N.Y., for Defendants the United States and U.S. Customs and Border Protection. With him on the brief were Chad A. Readler, Acting Assistant Attorney General, Jeanne E. Davidson, Director, Reginald T. Blades, Jr., Assistant Director, and Tara K. Hogan, Assistant Director. Of counsel on the brief was Beth C. Brotman, Office of the Assistant Chief Counsel, International Trade Litigation, U.S. Customs and Border Protection, New York, N.Y.

Frances P. Hadfield, Crowell & Moring LLP, of New York, N.Y., and Robert N. Phillips and John Patrick Donohue, Reed Smith LLP, of San Francisco, CA and Philadelphia, PA, for Defendant–Intervenor Duracell U.S. Operations, Inc.

OPINION AND ORDER

Choe–Groves, Judge:

Milecrest Corporation ("Plaintiff") is a company engaged in the business of importing and distributing bulk-packaged gray market batteries bearing the "DURACELL" mark, a United States trademark currently owned by Duracell U.S. Operations, Inc. ("Duracell"). See First Amended Compl., July 25, 2017, ECF No. 78. Plaintiff brings this action pursuant to 28 U.S.C. § 1581(h) (2012)1 seeking judicial review of the decision made by U.S. Customs and Border Protection ("Customs") to grant Lever–Rule protection to Duracell, thereby restricting imports of certain gray market batteries bearing its trademark.2 See First Amended Compl. ¶ 1; see also U.S. Customs and Border Protection Grant of "Lever–Rule" Protection, 51 Cust. Bull. & Dec. No. 12 at 1 (Mar. 22, 2017).

Before the court is Duracell's motion to dismiss Plaintiff's amended complaint, which was filed to amend jurisdictional allegations in the original complaint. See Def.–Intervenor Duracell U.S. Operations, Inc.'s Mot. Dismiss, Aug. 8, 2017, ECF No.

264 F.Supp.3d 1358

92 ("Duracell Mot. Dismiss"). Pursuant to USCIT Rule 12(b)(1), Duracell argues that 28 U.S.C. § 1581(h) does not provide the court with jurisdiction in this action. See Duracell Mot. Dismiss 7–16, 28–31. Duracell also argues that Plaintiff's alternative basis for jurisdiction under 28 U.S.C. § 1581(i)(4) is not proper. See id. at 13–14. Pursuant to USCIT Rule 12(b)(6), Duracell argues that each count in Plaintiff's amended complaint fails to state a claim upon which relief may be granted. See id. at 16–28. The United States and Customs (collectively, "Government") join Duracell's request to dismiss Plaintiff's amended complaint. See Defs.' Resp. Def.–Intervenor's Mot. Dismiss 1–5, Aug. 9, 2017, ECF No. 94 ("Gov't's Resp."). Plaintiff filed a response in opposition to Duracell's motion arguing that the court has jurisdiction and that the claims for relief in this action were pleaded adequately in the amended complaint. See Pl.'s Resp. Opp'n Def.–Intervenor's Mot. Dismiss 4–28, Aug. 9, 2017, ECF No. 96 ("Pl.'s Resp."). Briefing on the motion to dismiss concluded with the filing of Duracell's reply. See Def.–Intervenor Duracell U.S. Operations, Inc.'s Reply Pl.'s Resp. Opp'n Mot. Dismiss, Aug. 11, 2017, ECF No. 101 ("Duracell Reply").

For the reasons explained below, the court denies Duracell's motion to dismiss for lack of jurisdiction and for failure to state a claim upon which relief can be granted.

BACKGROUND

The court presumes familiarity with the facts of this case as set forth in its previous opinion and order issued on July 17, 2017. See XYZ Corporation v. United States, 41 CIT ––––, Slip Op. 17–88, 253 F.Supp.3d 1257, 1265–72, 2017 WL 3105847,at *4–9 (July 17, 2017) ("Opinion and Order Denying Gov't's Mot. Dismiss").3 The court now recounts and supplements the facts that are relevant to decide Duracell's motion to dismiss.

A. Administrative Proceedings

Duracell is the United States trademark owner of the ‘DURACELL’ mark, which has been registered with the U.S. Patent and Trademark Office, U.S. Trademark Reg. No. 3,144,722, and recorded with Customs, CBP Recordation No. TMK 16–01135. Duracell filed an application with Customs on October 13, 2016 requesting Lever–Rule protection against gray market OEM bulk packaged batteries and foreign retail packaged batteries bearing Duracell's trademark. See Duracell Request for Lever–Rule Protection, Doc. 1, CBP000006–CBP000008 (Oct. 13, 2016) ("Duracell Lever–Rule Request").4 Duracell stated in its application that the OEM

264 F.Supp.3d 1359

bulk packaged batteries and foreign retail packaged batteries differ physically and materially from the battery products authorized by Duracell for sale or importation in the United States. See id. Duracell's Lever–Rule application was not made publicly available.

On January 25, 2017, Customs issued a notice in the U.S. Customs Bulletin and Decisions publication that it had received an application from Duracell seeking Lever–Rule protection "against importations of OEM bulk packaged batteries and foreign retail packaged batteries, intended for sale in countries outside the United States that bear the ‘DURACELL’ mark, U.S. Trademark Registration No. 3,144,722/CBP Recordation No. TMK 16–01135." U.S. Customs and Border Protection Receipt of Application for "Lever–Rule" Protection, 51 Cust. Bull. & Dec. No. 4 at 1 (Jan. 25, 2017). Customs' notice did not seek input from the public. See id.

By letter dated March 1, 2017, Customs informed Duracell that its application for Lever–Rule protection had been granted. See E-mail From Customs to Duracell re Signed Decision Granting Lever–Rule Protection, Doc. 9, CBP000033–CBP000035 (Mar. 1, 2017). Customs issued a second notice in the U.S. Customs Bulletin and Decisions publication on March 22, 2017, notifying the public that it had granted Duracell's application for Lever–Rule protection. See U.S. Customs and Border Protection Grant of "Lever–Rule" Protection, 51 Cust. Bull. & Dec. No. 12 at 1 (Mar. 22, 2017). The notice explained that "gray market Duracell battery products differ physically and materially from the Duracell battery products authorized for sale in the United States with respect to the following product characteristics: label warnings, consumer assistance information, product guarantees, and warranty coverage." Id. Customs declared that the importation of such batteries was restricted and subject to seizure and forfeiture, unless certain labeling requirements had been satisfied. See id. The Lever–Rule restrictions became effective when Customs published the Customs Bulletin notice indicating that Duracell's application had been granted. See 19 C.F.R. § 133.2(f) (providing that Lever–Rule restrictions take effect once Customs has made and issued a determination on the application for Lever–Rule protection).

Counsel for Plaintiff sent a letter to Customs on April 10, 2017 requesting that it reconsider its grant of Lever–Rule protection to Duracell.5 See First Amended Compl. Ex. C, July 25, 2017, ECF No. 78–1. The letter asserted that Customs' decision to grant Duracell Lever–Rule protection is the type of rule that is subject to the notice and comment rulemaking procedures required by the Administrative Procedure Act ("APA"). See id. The letter also claimed that Duracell was not entitled to Lever–Rule protection against bulk OEM batteries because these gray market products are not physically and materially different from batteries

264 F.Supp.3d 1360

that are sold by Duracell. See id. Counsel for Plaintiff requested that Customs withdraw its determination and solicit public comments regarding whether any Lever–Rule protection should be granted with respect to these gray market battery products. See id. Plaintiff alleges that Customs has declined to reconsider its decision to grant Lever–Rule protection to Duracell, see First Amended Compl. ¶ 30, but Customs has not issued a written decision in response to Plaintiff's letter requesting for reconsideration.

B. Proceedings Before the Court

Plaintiff commenced this action on May 19, 2017 to obtain judicial review of Customs' decision to grant Duracell Lever–Rule protection. See Summons, May 19, 2017, ECF No. 1. The complaint alleged that Customs' decision to grant Duracell Lever–Rule protection was: (1) null and void because Customs failed to observe notice and comment rulemaking requirements of the APA; (2) arbitrary, capricious, an abuse of discretion, or otherwise not in accordance with the law because Customs restricted the importation of gray market merchandise that is not materially and physically different from the batteries authorized by Duracell for importation or sale in the United States; and (3) arbitrary and capricious because the grant of Lever–Rule protection was impermissibly vague in describing the gray market...

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2 cases
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    ...party invoking jurisdiction must "allege sufficient facts to establish the court's jurisdiction," Milecrest Corp. v. United States , 41 CIT ––––, ––––, 264 F. Supp. 3d 1353, 1362 (2017) (citations omitted), and, therefore, "bears the burden of establishing it." Norsk Hydro Can., Inc. v. Uni......
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    ...the liberal pleading requirements of USCIT Rule 8(a)(1) and a motion to dismiss is improper. Cf. Milecrest Corp. v. United States, 41 CIT ––––, ––––, 264 F. Supp. 3d 1353, 1368 (2017). Taken together with USCIT Rule 8(f) that requires pleadings to be construed "so as to do justice," Goodluc......

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