Rack Room Shoes, Skiz Imports LLC v. United States

• Decision Date: 15 February 2012
• Docket Number: Slip Op. 12–18.Court No. 07–00404.
• Citation: 821 F.Supp.2d 1341,34 ITRD 1189
• Parties: RACK ROOM SHOES, SKIZ Imports LLC, and Forever 21, Incorporated, Plaintiffs, v. UNITED STATES, Defendant.
• Court: U.S. Court of International Trade

34 ITRD 1189

821 F.Supp.2d 1341

RACK ROOM SHOES, SKIZ Imports LLC, and Forever 21, Incorporated, Plaintiffs,

v.UNITED STATES, Defendant.

Slip Op. 12–18.Court No. 07–00404.

United States Court of International Trade.

Feb. 15, 2012.

John M. Peterson, George W. Thompson, Maria E. Celis, Russell A. Semmel, and Richard F. O'Neill, Neville Peterson LLP, of New York, NY, for the Plaintiff, Rack Room Shoes.

Michael T. Cone, McCullough Ginsberg Montano & Partners LLP, of New York, NY, for the Plaintiff, SKIZ Imports LLC.

Damon V. Pike, The Pike Law Firm P.C., of Decatur, GA, for the Plaintiff, Forever 21, Inc. Reginald T. Blades, Jr., Assistant Director, Commercial Litigation Branch, Civil Division, United States Department of Justice, of Washington, DC, argued for the Defendant. With him on the briefs were Tony West, Assistant Attorney General; Jeanne E. Davidson, Director; and Aimee Lee, Trial Attorney. Of counsel on the briefs were, Yelena Slepak, Office of Assistant Chief Counsel, International Trade Litigation, United States Customs and Border Protection, and Leigh Bacon, Office of the General Counsel, United States Trade Representative.Before: DONALD C. POGUE, Chief Judge, JANE A. RESTANI, Judge, JUDITH M. BARZILAY, Sr. Judge.

OPINION

POGUE, Chief Judge:

In this action, Plaintiff Rack Room Shoes and other United States importers assert that certain glove, footwear and apparel tariffs violate the Equal Protection Clause of the Constitution. U.S. Const. amend. XIV, § 1, cl. 2. Specifically, Plaintiffs argue that because the Harmonized Tariff Schedule of the United States (“HTSUS”) uses the gender and age of intended users of certain imported products to distinguish between tariff rates, and because those tariff rates are not equal, the HTSUS therefore unconstitutionally discriminates on the basis of gender and/or age.¹ The government moves to dismiss for failure to state a claim.

Because we conclude that the Plaintiffs' complaints do not plausibly show an invidious governmental intent to discriminate, as further explained below, we grant the government's motion.

We have jurisdiction pursuant to 28 U.S.C. § 1581(i)(1).

BACKGROUND

Specific HTSUS provisions that Plaintiffs challenge were previously addressed in Totes–Isotoner Corp. v. United States, 594 F.3d 1346, 1358 (Fed.Cir.2010) (“ Totes III ”), cert. denied, ––– U.S. ––––, 131 S.Ct. 92, 178 L.Ed.2d 28 (2010), affirming this court's decision in Totes–Isotoner Corp. v. United States, 32 CIT 739, 569 F.Supp.2d 1315 (2008) (“ Totes I ”), and the court's denial of Plaintiff's motion for rehearing, Totes–Isotoner Corp. v. United States, 32 CIT 1172, 580 F.Supp.2d 1371 (2008) (“ Totes II ”).²

In the Totes line of cases, we rejected Totes' argument that merely pleading the existence of a gender-based classification in the HTSUS “suffices to establish an inference of unconstitutional discrimination.” Totes II, 580 F.Supp.2d at 1378. Accordingly, we dismissed Plaintiff's complaint for failure to state a claim under the pleading standard set forth by the Supreme Court in Bell Atlantic Corp. v. Twombly, 550 U.S. 544, 127 S.Ct. 1955, 167 L.Ed.2d 929 (2007) (“ Twombly ”).³ Totes I, 569 F.Supp.2d at 1328; Totes II, 580 F.Supp.2d at 1380.

In affirming, the Court of Appeals held that the HTSUS provisions at issue were not facially discriminatory. Totes III, 594 F.3d at 1358; see also id. at 1359 (Prost, J., concurring) (“[T]he disputed tariff classification is not facially discriminatory.”). HTSUS gender references are to the principal or chief use of products by one sex or another. This is different from the use of a suspect classification that requires people to be treated differently depending on their sex. Thus, the HTSUS gender references do not support an inference that the classifications have a discriminatory purpose. There is nothing “objectively invidious” about the tariff provisions' reference to gender. See Bray v. Alexandria Women's Health Clinic, 506 U.S. 263, 270, 113 S.Ct. 753, 122 L.Ed.2d 34 (1993).

The Court of Appeals also extended its analysis to conclude that an allegation of disparate impact in the tariff/tax context is also insufficient to provide a basis for a plausible claim of discriminatory purpose.⁴ Totes III, 594 F.3d at 1357–58 (“[W]e think that in the area of taxation and tariffs, something more than disparate impact is required to establish a purpose to discriminate for the purposes of pleading an equal protection violation .... the mere existence of disparate impact does not establish impermissible discrimination.”).⁵ After recognizing that all schemes of taxation necessarily contain some inherent discriminatory impact, the Appeals Court held that “[i]n the area of customs duties, even more than in the area of taxation, it is hazardous to infer discriminatory purpose from discriminatory impact.” Totes III, 594 F.3d at 1358.

Following the Supreme Court's denial of writ of certiorari in Totes III, we allowed the current Plaintiffs to re-file their complaints, consolidating them into three test cases: Rack Room Shoes v. United States (07–00404) and its member cases SKIZ Imports LLC v. United States (11–00074), and Forever 21, Inc. v. United States, (11–00075). Plaintiffs in these test cases assert additional facts which they claim are sufficient to state a claim of governmental intent to discriminate.

DISCUSSION

The precise issue now presented by the government's motion is whether Plaintiffs' Amended Complaints, stripped of their legal conclusions, contain sufficient facts to render plausible a claim of governmental intent to discriminate by way of the tariff rates at issue. Totes III, 594 F.3d at 1354–55; Twombly, 550 U.S. at 555–56, 127 S.Ct. 1955; Iqbal, 129 S.Ct. at 1950.⁶

As noted above, the Court of Appeals held that the challenged provisions of the HTSUS are not facially discriminatory. Totes III, 594 F.3d at 1358. In addition, in the context of tariffs, an allegation of disparate impact is also insufficient to ground a discrimination claim. Id. at 1356.⁷ It thus follows that Plaintiffs' allegation in the Amended Complaints that the identified tariff rates are facially discriminatory and disproportionately affect differently gendered or aged users is also insufficient to render plausible an inference of invidious discrimination.⁸

Therefore, Plaintiffs must now allege sufficient additional facts to make plausible their claim that Congress intended to discriminate between male and female users—or between older and younger users—in the provisions of the HTSUS. Totes III, 594 F.3d at 1358. To move forward on their claim, Plaintiffs must sufficiently plead “ ‘[a]n invidious discriminatory purpose [, which] may often be inferred from the totality of the relevant facts;’ ” however, agency action “will not be held unconstitutional solely because it results in a [disparate] impact.” Id. at 1356 (internal citation omitted); see also City of Mobile v. Bolden, 446 U.S. 55, 66, 100 S.Ct. 1490, 64 L.Ed.2d 47 (1980) (proof of purposeful discrimination is necessary to an Equal Protection violation).

Plaintiffs concede that discriminatory purpose “implies more than intent as volition or intent as awareness of consequences.” Rack Room Shoes Mem. Opp'n Def.'s Mot. Dismiss at 14, ECF No. 24 (“Rack Room Shoes Response”). Rather, discriminatory purpose in this particular context arises only when Congress selects or reaffirms a particular course of action “because of” and not merely “in spite of,” its adverse effects upon an identifiable group. Personnel Administrator of Massachusetts v. Feeney, 442 U.S. 256, 279, 99 S.Ct. 2282, 60 L.Ed.2d 870 (1979). Plaintiffs must show that “the legislature was motivated by discriminatory intent, rather than by other, lawful action.” Rack Room Shoes Response at 11 n. 10. Accordingly, we review the additional factual allegations Plaintiffs add to their Amended Complaints to determine whether those allegations support a plausible inference of governmental intent to discriminate based on the relevant tariff provisions' adverse effects upon an identifiable sex or age group.

The Amended Complaints contain two such additional allegations. First, Plaintiffs allege that “Congress intended to discriminate by directing and implementing classifications based on gender when it could have used other non-gender factors to distinguish or to separate merchandise for duty assessment purposes, or could have used non-tariff measures to effectuate governmental purposes other than raising revenue.” Rack Room Shoes Am. Compl. at ¶ 31. Plaintiffs argue that because Congress “has at its disposal a virtually infinite number of ways to impose ... customs duties” and instead chose to differentiate between products by gender or age, it therefore must have intended to discriminate between gender and age groups. Rack Room Shoes Response at 16.

Plaintiffs' assertion, however, adds nothing to the claim, already rejected in Totes III, that the use of gender in tariff classifications evidences a discriminatory purpose. Rather, it simply re-asserts Plaintiffs' rejected claim that the tariff classifications at issue are facially discriminatory. Moreover, Plaintiffs' claim that Congress could have used other means is an allegation built only upon the language of the provision, raising nothing in the way of further facts, and indeed nothing in terms of discriminatory intent. As such, these conclusory assertions do not rise to the level of factual plausibility required by Twombly and Iqbal.

Second, Plaintiffs cite the U.S. Tariff Commission's Tariff Classification Study of 1960 ⁹ for the proposition that certain age and gender distinctions within the HTSUS are of “questionable” economic justification. ¹⁰ This commentary on the merits of the distinctions between the proposed tariff rates is, at most, a critique of the precursors to the tariff provisions being challenged here and does not indicate Congressional intent in any manner. Cf. Matrixx...