Pleasures of San Patricio, Inc. v. Mendez-Torres

• Decision Date: 22 February 2010
• Docket Number: No. 08-2388.,08-2388.
• Citation: 596 F.3d 1
• Parties: PLEASURES OF SAN PATRICIO, INC., Plaintiff, Appellant, Iván R. Rocafort, Plaintiff, v. Juan C. MÉNDEZ-TORRES; Departamento De Hacienda De Puerto Rico, Defendants, Appellees.
• Court: U.S. Court of Appeals — First Circuit

596 F.3d 1

PLEASURES OF SAN PATRICIO, INC., Plaintiff, Appellant Iván R. Rocafort, Plaintiff, v. Juan C. MÉNDEZ-TORRES; Departamento De Hacienda De Puerto Rico, Defendants, Appellees.

No. 08-2388.

United States Court of Appeals, First Circuit.

Heard November 4, 2009.

Decided February 22, 2010.

Frank E. Guerra-Pujol, for appellant.

Susana I. Peñagarícano-Brown, Assistant Solicitor General, Department of Justice, Commonwealth of Puerto Rico, with whom Irene S. Soroeta-Kodesh, Solicitor General, Leticia Casalduc-Rabell, Deputy Solicitor General, and Zaira Z. Girón-Anadón, Deputy Solicitor General, were on brief for appellees.

Before TORRUELLA, BALDOCK,^* and HOWARD, Circuit Judges.

BALDOCK, Circuit Judge.

Plaintiff Iván Rocafort is the president and primary shareholder of Plaintiff-Appellant Pleasures of San Patricio, Inc. (PSP), a tobacco and wine shop in Puerto Rico.¹ PSP regularly imports and sells little cigars made in the mainland United States and is the exclusive distributor of Cheyenne Little Cigars in Puerto Rico. The United States Department of the Treasury has classified little cigars as a different tobacco product from cigarettes. Section 2009 of the 1994 Puerto Rico Internal Revenue Code imposes an excise tax on cigarettes but not on little cigars. Prior to 2007, PSP had never been required to pay Puerto Rico's cigarette excise tax on its imported little cigars. In 2007, PSP ordered $40,000 worth of Cheyenne Little Cigars from a manufacturer in North Carolina. Defendant Secretary of the Puerto Rico Department of the Treasury, Juan Méndez-Torres, for the first time refused to release PSP's shipment of Cheyenne Little Cigars until PSP paid the cigarette excise tax. PSP alleges Defendant acted pursuant to Circular Letter of Internal Revenue No. 05-08 dated August 17, 2005 (Circular Letter) which PSP claims imposes Puerto Rico's cigarette tax only on little cigars produced in the United States.

In October 2007, PSP filed suit in Puerto Rico federal district court requesting "the immediate release of [PSP's] shipment of Cheyenne Little Cigars ...," "a permanent injunction against the selective and discriminatory imposition of the cigarette excise [tax] upon Cheyenne Little Cigars" and a declaration "that the excise tax of the 1994 Internal Revenue Code of Puerto Rico Section 2009 [is] not applicable to Cheyenne Little Cigars." PSP asserted Defendant's application of the cigarette excise tax solely to mainland-made little cigars constitutes unconstitutional interference with and discrimination against interstate commerce, in violation of the Commerce Clause, Article I, Section 8 of the United States Constitution.

The district court granted Defendant's motion to dismiss for lack of jurisdiction in August 2008. The district court concluded the Butler Act, 48 U.S.C. § 872, prevented it from hearing the suit because the Act prohibits the filing of suits in federal courts "`for the purpose of restraining the assessment or collection of any tax imposed by the laws of Puerto Rico.'" Pleasures of San Patricio, Inc. v. Méndez-Torres, Dkt. No. CIV. 07-1934CCC, 2008 WL 4191251, at *1 (D.P.R. Aug. 29, 2008) (quoting 48 U.S.C. § 872). The court was "firmly convinced that this is a prototypical Butler Act case as [PSP] is explicitly challenging the validity of a tax and [Defendant]'s authority to assess it." Id. Consequently, the district court declared it did not have jurisdiction to entertain the suit. Id. at *2. PSP's timely appeal to our Court followed.

At oral argument, counsel for both parties revealed that while this appeal was pending, PSP filed an action in a Commonwealth of Puerto Rico trial court and received a partial summary judgment, which was at that time on appeal to the Commonwealth appellate court. We, therefore, ordered both parties to file English translations of the proceedings and associated complaints, pleadings, motions and briefs in PSP's related case before the Commonwealth trial and appellate courts. Defendant responded to our order by filing 436 pages in no apparent order without a uniform page numbering system (some page numbers are handwritten, others are typed in various fonts and sizes, and some placed over the page's text). Defendant evidently thought it appropriate to divide the documents into six parts but failed to label any of these six parts. Defendant provides an "Addendum Index" which does not appear to correspond to what it actually filed. Looking at the first page and last page of each part, Part II allegedly contains pages 36 through 235; Part III allegedly contains pages 236 through 260; Part IV allegedly contains pages 54 through 123; Part V allegedly contains pages 124 through 226; and Part VI allegedly contains pages 180 through 226. As for pages 260 through 436, we are left to assume they are somewhere in those six parts; although, we have only been able to locate pages numbered through 338 scattered throughout the six parts because many of the pages lack page numbers altogether. Under 28 U.S.C. § 1291, we review the district court's final order of dismissal for lack of jurisdiction de novo. Murphy v. United States, 45 F.3d 520, 522 (1st Cir. 1995). In light of the proceedings in the Commonwealth courts, we suspect this case is moot. The parties' inadequate compliance with our order, however, prevents us from definitively reaching a conclusion as to mootness. Regardless, we can definitively conclude based upon the submissions that we lack subject matter jurisdiction pursuant to the Butler Act because Commonwealth of Puerto Rico courts have provided a plain, speedy, and efficient remedy. We, consequently, affirm the district court's dismissal for lack of jurisdiction.

I.

From what we can decipher, PSP apparently filed a lawsuit in the Commonwealth of Puerto Rico in February 2009, after the federal district court dismissed the instant case, against the Puerto Rico Department of the Treasury and Department of Justice challenging the Circular Letter, requesting an injunction, and demanding damages for the unlawful detention of its shipment. See Rocafort v. Dep't of the Treasury, No. EPE2009-0057 (Court of First Instance, Caguas Superior Court, filed February 20, 2009). PSP alleged Defendant Méndez-Torres implemented the Circular Letter in contravention of Puerto Rico's Small Business Administrative and Regulatory Flexibility Act (SBARFA), 3 L.P.R.A. §§ 2251-2262. The Court of First Instance granted partial summary judgment and entered a judgment in PSP's favor. The court considered whether Defendant Méndez-Torres acted in conformity with the SBARFA in issuing the Circular Letter and, if properly issued, whether the Circular Letter promulgates an invalid administrative interpretation of Section 2009 of the Internal Revenue Code. PSP does not appear to have raised Commerce Clause arguments before the Court of First Instance. Ultimately, the court concluded Defendant Méndez-Torres acted in contravention of the SBARFA in issuing the Circular Letter and relied upon an invalid regulatory interpretation in seizing the shipment of little cigars. The court, therefore, granted PSP's motion for partial summary judgment and ordered the Department of the Treasury to release the shipment immediately. Defendants then filed a petition for certiorari before the Commonwealth of Puerto Rico Appellate Court. See Rocafort v. Dep't of the Treasury, No. KLCE2009-01542, Petition for Certiorari (Appellate Court, Judicial Region of Caguas, filed October 26, 2009). That is the last documentation we have of this case in the Commonwealth courts. Neither party has supplemented the record pursuant to Fed. R.App. P. 28(j) to inform us whether the Appellate Court has granted the petition for certiorari, let alone whether it has affirmed the Court of First Instance's partial summary judgment in favor of PSP. The parties have also not informed us whether the Department of the Treasury has complied with the Court of First Instance's September 2009 order by releasing the shipment. As a result, we cannot conclusively determine that the Commonwealth proceedings render the case before us moot. We, therefore, proceed to determine whether the Butler Act deprives us of subject matter jurisdiction.

II.

The Butler Act states, in relevant part: "No suit for the purpose of restraining the assessment or collection of any tax imposed by the laws of Puerto Rico shall be maintained in the United States District Court for the District of Puerto Rico." 48 U.S.C. § 872. The Act is "a close analogue to the Tax Injunction Act (`TIA') applicable to Puerto Rico." Coors Brewing Co. v. Méndez-Torres, 562 F.3d 3, 13 (1st Cir.2009). "The two statutes employ different language (i.e. the [TIA] includes an express exception that the Butler Act lacks), but `have been construed in pari materia.'" United Parcel Serv., Inc. v. Flores-Galarza, 318 F.3d 323, 330 n. 11 (1st Cir.2003)(quoting Trailer Marine Transp. Corp. v. Rivera Vazquez, 977 F.2d 1, 5 (1st Cir.1992)). For this reason, we apply the Butler Act in the same manner as the TIA. Carrier Corp. v. Perez, 677 F.2d 162, 164 (1st Cir.1982). The TIA limits the jurisdiction of a federal court to entertain a suit seeking to enjoin the levying or collection of a state tax where "a plain, speedy and efficient remedy" exists in state court. Id. at 164; see also United Parcel Serv., 318 F.3d at 330 n. 11. Two conditions must, therefore, be satisfied before the Butler Act will deprive a federal court of jurisdiction: first, the suit must attempt to restrain the assessment or collection of a Puerto Rico tax; and second, local courts must provide the plaintiff a plain, speedy, and efficient remedy. Carrier, 677 F.2d at 164.

A.

As to the first condition, similar to the TIA, "[n]ot every statutory or regulatory obligation that may aid the Secretary [of the Treasury]'s ability to collect a tax is immune from attack in federal court by virtue of the Butler Act's jurisdictional bar."...