Polyweave Packaging, Inc. v. Buttigieg
| Decision Date | 01 September 2021 |
| Docket Number | Civil Action 4:21-CV-00054-JHM |
| Parties | POLYWEAVE PACKAGING, INC. PLAINTIFF v. PETER PAUL MONTGOMERY BUTTIGIEG, in his official capacity as Secretary of Transportation DEFENDANT |
| Court | U.S. District Court — Western District of Kentucky |
This matter is before the Court on Plaintiff's Motion for Preliminary Injunction [DN 6] and Defendant's Motion to Dismiss. [DN 17]. Fully briefed, this matter is ripe for decision. For the following reasons, Defendant's Motion to Dismiss is GRANTED. Plaintiff's Motion for Preliminary Injunction is DENIED.
This case concerns the lawfulness of the Secretary of Transportation's rescission of 49 C.F.R. §§ 5.53-5.111 from the Code of Federal Regulations.
Polyweave Packaging, the plaintiff in this case, is a hazardous materials packaging company in Madisonville, Kentucky. [DN 1 ¶ 23]. It is regulated by the Pipeline & Hazardous Materials Safety Administration (“PHMSA”), a subdivision of the Department of Transportation (“DOT”). [Id. at ¶ 45]. PHMSA initiated a regulatory enforcement action against Polyweave in April 2015. [Id. at ¶¶ 23, 46]. After an investigation and administrative proceedings, PHMSA issued a final order assessing a significant civil penalty against Polyweave in July 2020. [Id. at ¶ 54]. Polyweave is currently appealing that decision through administrative channels. [Id. at ¶ 56].
In late 2019, the then-President of the United States issued Executive Order 13892. [Id. at ¶ 7]. The Executive Order outlined transparency and due process guidelines for federal agency enforcement actions. See Exec. Order 13892, 84 Fed. Reg. 55239 (Oct. 9, 2019). As relevant here, it required “each agency that conducts civil administrative inspections” to publish rules of agency procedure within 120 days and follow those rules in subsequent enforcement actions. 84 Fed. Reg. at 55241.
The Transportation Secretary (“Secretary”), complying with the executive order, published DOT's rules of agency procedure later in the year. [DN 1 ¶ 10]; see 84 Fed. Reg. 71714 (Dec. 27, 2019). The published rules had four parts. The fourth part, title “Subpart D, ” is at issue here. Subpart D was titled “Enforcement Procedures.” 84 Fed. Reg. at 71718. It listed thirty rules of DOT enforcement procedure. The rules lay out DOT enforcement policies, 49 C.F.R. § 5.59 (rescinded), explain how DOT will initiate investigations, Id. at §§ 5.61 (rescinded), 5.63 (rescinded), and provide guidelines for DOT personnel in managing settlements, Id. at §§ 5.93 (rescinded), 5.95 (rescinded). The purpose for Subpart D, according to the Secretary, was to “clarify the procedural requirements governing enforcement actions initiated by DOT . . . .” 84 Fed. Reg. at 71715. DOT had already adopted the procedures at the time of publication. Id. at 71716 () (emphasis added). Yet the Secretary published the procedures to comply with the executive order. Id.
The Secretary did not engage in notice-and-comment rulemaking before publishing Subpart D. The Secretary stated notice-and-comment rulemaking was unnecessary because “[t]his final rule merely incorporates existing internal procedures applicable to the Department's administrative procedures.” Id. at 71716.
On January 20, 2021, the new President of the United States revoked Executive Order 13892 through a new executive order. [DN 1 at ¶ 15]; see Exec. Order 13992, 86 Fed. Reg. 7049 (Jan. 20, 2021). The new executive order commanded agencies to “promptly take steps to rescind any order, rules, regulations, guidelines, or policies . . . implementing or enforcing” the prior executive order. 86 Fed. Reg. at 7049.
In response to the new executive order, the Secretary rescinded Subpart D in its entirety. The Secretary determined that “[m]any of the policies and procedures” in Subpart D “were prompted by executive orders that have since been revoked.” 86 Fed Reg. 17292, 17292 (Apr. 2, 2021). The Secretary decided to rescind the remaining policies because they were “duplicative of existing procedures contained in internal departmental procedural directives, ” and did not need to be published in the Code of Federal Regulations to be effective. Id. at 17293. He rescinded Subpart D without notice-and-comment rulemaking. That rescission gives rise to this litigation.
Soon after the Secretary rescinded Subpart D, Polyweave sued to reinstate it. It asserts the Secretary unlawfully rescinded Subpart D for three reasons. Substantively, Polyweave claims the rescission was (a) was arbitrary and capricious because it failed to explain several important limits, see 5 U.S.C. § 706(2)(A), and (b) failed to consider Polyweave's reliance interest. [DN 1 ¶ 64(b)- (j)]. Procedurally, Polyweave maintains the Secretary needed to, but did not, engage in notice-and-comment rulemaking. [Id. at ¶ 64(a)]. The gist of Polyweave's allegations is that Subpart D, despite its label as a rule of agency procedure, provided several substantive rights to companies targeted in DOT enforcement proceedings. Polyweave believes the Secretary erred when he failed to account for, explain, or justify the rescission of those substantive rights in the final rule rescinding Subpart D.
49 C.F.R. § 5.83 is the primary “substantive” right Polyweave relies on as its source of harm. When effective, § 5.83 stated:
It is the Department's policy that each responsible OA or component of OST will voluntarily follow in its civil enforcement actions the principle articulated in Brady v. Maryland, in which the Supreme Court held that the Due Process Clause of the Fifth Amendment requires disclosure of exculpatory evidence ‘material to guilt or punishment' known to the government but unknown to the defendant in criminal cases. Adopting the ‘Brady rule' and making affirmative disclosures of exculpatory evidence in all enforcement actions will contribute to the Department's goal of open and fair investigations and administrative enforcement proceedings. This policy requires the agency's adversarial personnel to disclose materially exculpatory evidence in the agency's possession to the representatives of the regulated entity whose conduct is the subject of the enforcement action. These affirmative disclosures should include any material evidence known to the Department's adversarial personnel that may be favorable to the regulated entity in the enforcement action-including evidence that tends to negate or diminish the party's responsibility for a violation or that could be relied upon to reduce the potential fine or other penalties. The regulated entity need not request such favorable information; it should be disclosed as a matter of course. Agency counsel should recommend appropriate remedies to DOT decision makers where a Brady rule violation has occurred, using the factors identified by courts when applying the Brady rule in the criminal context.
Although Polyweave devotes much of its argument to the “substantive” rights provided in § 5.83, its Complaint lists a host of additional “substantive” rights in various C.F.R. provisions; rights that the Secretary allegedly unlawfully rescinded when he rescinded those provisions. [DN 1 ¶ 33].
Polyweave's Complaint seeks an injunction against the Secretary's rescission of Subpart D and a declaratory judgment that the Secretary could not lawfully rescind the substantive protections provided in its regulations. [Id. at ¶¶ 62-81]. Polyweave immediately moved for a preliminary injunction. [DN 6].
The Secretary responded to Polyweave's Complaint and motion for preliminary injunction by filing a competing motion to dismiss. [See DN 17]. The Secretary claims a host of jurisdictional defects prevent the Court from addressing the merits of Polyweave's claims: (1) Polyweave lacks Article III standing, (2) the Court of Appeals has exclusive jurisdiction, and (3) Subpart D's rescission is a matter of unreviewable agency discretion. Because the jurisdictional questions are a prerequisite to the Court reaching the substance of Polyweave's motion for a preliminary injunction, the Court will address the motion to dismiss first.
The Secretary asserts the Court must dismiss this case for three reasons: (1) Polyweave lacks standing, (2) this Court lacks subject matter jurisdiction, and (3) the Secretary's action is an unreviewable decision outside the scope of the Administrative Procedure Act (“APA”). The Court need only address the Secretary's first argument to resolve this case.
Article III of the Constitution extends the judicial power to all “cases” and “controversies.” U.S. Const. Art. III, § 2. “For there to be a case or controversy under Article III, the plaintiff must have a ‘personal stake' in the case-in other words, standing.” TransUnion LLC v. Ramirez, 141 S.Ct. 2190, 2203 (2021) (quoting Raines v. Byrd, 521 U.S. 811, 819 (1997)). Article III standing requires a plaintiff to show “(i) that he suffered an injury in fact that is concrete, particularized, and actual or imminent; (ii) that the injury was likely caused by the defendant; and (iii) that the injury would likely be redressed by judicial relief.” TransUnion, 141 S.Ct. at 2203. As the party invoking federal jurisdiction, Polyweave bears the burden of establishing standing. Lujan v. Defenders of Wildlife, 504 U.S. 555, 561 (1992).
The Secretary mainly argues that Polyweave fails the first standing requirement: no injury-in-fact. An injury-in-fact must...
To continue reading
Request your trial