U.S. Shoe Corp. v. U.S.

Decision Date23 July 2002
Docket NumberNo. 98-1574.,98-1574.
Citation296 F.3d 1378
PartiesUNITED STATES SHOE CORPORATION, Plaintiff-Appellee, v. UNITED STATES, Defendant-Appellant.
CourtU.S. Court of Appeals — Federal Circuit

James S. O'Kelly, Barnes, Richardson & Colburn, of New York, New York, argued for plaintiff-appellee. With him on the brief were Harvey A. Isaacs and Robert T. Stack, Tompkins & Davidson, LLP, of New York, New York. Of counsel on the brief were Alan Goggins and Kevin J. Sullivan, Barnes, Richardson & Colburn.

Jeffrey A. Belkin, Trial Attorney, Commercial Litigation Branch, Civil Division, Department of Justice, of Washington, DC, argued for defendant-appellant. With him on the brief were Robert D. McCallum, Jr., Assistant Attorney General; David M. Cohen, Director; Jeanne E. Davidson, Deputy Director; and Todd M. Hughes, Assistant Director. Of counsel on the brief was Richard McManus, Office of the Chief Counsel, United States Customs Service, of Washington, DC. Of counsel was Lara Levinson, Attorney, Commercial Litigation Branch, Civil Division, Department of Justice, of Washington, DC.

John J. Galvin, Galvin & Mlawski, of New York, New York, for amicus curiae Arbon Steel & Service Co.

John M. Peterson, Neville Peterson LLP, of New York, New York, for amici curiae Totes Isotoner, Inc., et al. With him on the brief were George W. Thompson, Michael K. Tomenga, and Maria E. Celis.

Barry E. Cohen, Crowell & Moring LLP, of Washington, DC, for amicus curiae E.I. Du Pont de Nemours & Co.

Before MAYER, Chief Judge, RADER and BRYSON, Circuit Judges.

MAYER, Chief Judge.

The United States appeals the judgment of the Court of International Trade granting United States Shoe Corporation's motion for payment of interest on its refund of the Harbor Maintenance Tax. United States Shoe Corp. v. United States, 1998 WL 358950, 20 I.T.R.D. (BNA) 1703 (Ct. Int'l Trade 1998). Because the payment of interest is not mandated by statute or the Constitution, we reverse.

Background

The Harbor Maintenance Tax was enacted by Congress as part of the Water Resources Development Act of 1986. 26 U.S.C. §§ 4461-4462 (2000). It levied a 0.125 percent ad valorem tax on commercial cargo for any port use. Id. § 4461(b). In 1995, the Court of International Trade decided that the tax imposed on exports was unconstitutional because it violated the Export Clause's mandate that "[n]o Tax or Duty shall be laid on Articles exported from any State," U.S. Const. art. I, § 9, cl. 5. See United States Shoe Corp. v. United States, 907 F.Supp. 408 (Ct. Int'l Trade 1995). The court then decided that in addition to a refund of the tax payment, interest was due pursuant to 28 U.S.C. § 2411. United States Shoe Corp. v. United States, 1996 WL 61643, 20 C.I.T. 206 (Ct. Int'l Trade 1996). The award of interest was stayed until appellate proceedings on the constitutionality of the tax were complete.

On appeal, this court agreed that the tax was unconstitutional, United States Shoe Corp. v. United States, 114 F.3d 1564 (Fed.Cir.1997), and the Supreme Court affirmed, stating that the tax "is not a fair approximation of services, facilities, or benefits furnished to exporters, and therefore does not qualify as a permissible user fee," United States v. United States Shoe Corp., 523 U.S. 360, 363, 118 S.Ct. 1290, 140 L.Ed.2d 453 (1998). The stay on the payment of interest dissolved, and pursuant to its 1996 judgment, the Court of International Trade awarded U.S. Shoe interest. The United States asks that we reverse the judgment. We have jurisdiction pursuant to 28 U.S.C. § 1295(a)(5).

Discussion

We review statutory interpretation by the Court of International Trade without deference. Saarstahl AG v. United States, 78 F.3d 1539, 1542 (Fed.Cir. 1996). Constitutional interpretation is also a question of law, which we review de novo. Florida Sugar Mktg. & Terminal Ass'n, Inc. v. United States, 220 F.3d 1331, 1333 (Fed.Cir.2000). A court may fashion equitable remedies, but it may not abuse its discretion in doing so. Massie v. United States, 226 F.3d 1318, 1321 (Fed.Cir. 2000). An equitable remedy here must not be (1) clearly unreasonable, arbitrary or fanciful or (2) based on an erroneous conclusion of law. Institut Pasteur & Genetic Sys. Corp. v. Cambridge Biotech Corp., 186 F.3d 1356, 1369 (Fed. Cir.1999).

Interest may only be recovered in a suit against the government if there has been a clear and express waiver of sovereign immunity by contract or statute, or if interest is part of compensation required by the Constitution. Library of Congress v. Shaw, 478 U.S. 310, 311, 106 S.Ct. 2957, 92 L.Ed.2d 250 (1986); Boston Sand & Gravel Co. v. United States, 278 U.S. 41, 47, 49 S.Ct. 52, 73 L.Ed. 170 (1928). U.S. Shoe argues that interest is due on its payment of the Harbor Maintenance Tax under (1) statutory provisions providing for the payment of interest, (2) the Takings and Export Clauses of the Constitution, and (3) the discretionary power of a court to fashion equitable remedies.

I.

The government argues that the Court of International Trade erred in awarding U.S. Shoe interest because the United States has not expressly consented to such an award, relying on International Business Machines Corp. v. United States, 201 F.3d 1367, 1374 (Fed.Cir.2000). We agree. IBM looked to the statutes which waived immunity to pay interest and concluded that neither a tax related statute, 28 U.S.C. § 2411, nor customs related statutes, 28 U.S.C. § 2644 and 19 U.S.C. § 1505, permitted the award. Id.

First, 28 U.S.C. § 2411 provides: "In any judgment of any court rendered... for any overpayment in respect of any internal-revenue tax, interest shall be allowed... from the date of the payment...." IBM held that the Harbor Maintenance Tax statute, 26 U.S.C. § 4462, expressly prohibited the application of section 2411 because it is a tax law, and not a customs law. 201 F.3d at 1372. Section 4462(f)(1) states that "all administrative and enforcement provisions of customs laws and regulations shall apply ... as if such tax were a customs duty." "[A]dministration and enforcement" encompass the "assessment and collection of tax payments and issuance of refunds and interest on those refunds." 201 F.3d at 1372. Because section 2411 does not apply to refunds of the tax, id. at 1373, the Court of International Trade improperly awarded U.S. Shoe interest under it.

Second, 28 U.S.C. § 2644 provides for post-summons interest for claims that invoke the Court of International Trade's jurisdiction under 28 U.S.C. § 1581(a). For review under this subsection, a party must have filed a protest under section 515 of the Tariff Act of 1930. 28 U.S.C. § 1581(a) (2000). In IBM, section 1581(a) jurisdiction was not invoked because IBM did not file a customs protest; therefore section 2644 interest could not be awarded. 201 F.3d at 1374. Instead, jurisdiction in IBM arose under section 1581(i), the residual jurisdiction provision. Id. Likewise in this case, the Supreme Court held that jurisdiction was proper under section 1581(i), U.S. Shoe, 523 U.S. at 365, 118 S.Ct. 1290, thereby prohibiting an award of section 2644 interest.

Third, 19 U.S.C. § 1505 provides for prejudgment interest, and states in relevant part that "[i]nterest on excess moneys deposited shall accrue ... from the date the importer ... deposits estimated duties, fees, and interest ... to the date of liquidation or reliquidation of the applicable entry or reconciliation [of the imports]." 19 U.S.C. § 1505(c) (emphases added). IBM held that section 1505(c) does not apply to exports because it speaks only to imports and declined to rewrite the "Congressional enactment to make it fit a case for which it was clearly not intended." 201 F.3d at 1374.

U.S. Shoe and amicus argue that IBM's interpretation is too restrictive, and that section 1505(c) should apply to exports as well as imports. They rely by analogy on the Supreme Court's holding that review of the Harbor Maintenance Tax on exports could be heard under the Court of International Trade's jurisdictional statute, section 1581(i), referring only to imports: "True, § 1581(i) does not use the word `exports.' But that is hardly surprising in view of the Export Clause, which confines customs duties to imports." U.S. Shoe, 523 U.S. at 366, 118 S.Ct. 1290. U.S. Shoe urges that "exports" be read into section 1505(c) also. The Court, however, was reviewing the entire statute, and the tax on imports provided a sufficient basis for jurisdiction because the "HMT statute, although applied to exports here, does apply equally to imports." Id. We believe the Court's reasoning is sound for the purpose of establishing jurisdiction, but an insufficient basis upon which sovereign immunity may be waived in light of the "Supreme Court's mandate that Congress must expressly consent to an award of interest." IBM, 201 F.3d at 1374.

II.

The government also argues that the Constitution does not mandate the payment of prejudgment interest. We agree. The Harbor Maintenance Tax was not a taking, but a violation of the Export Clause, for which no prejudgment interest is due. If not granted by statute, the Supreme Court has held only the Fifth Amendment of the Constitution to mandate the payment of interest. Shaw, 478 U.S. at 317 n. 5, 106 S.Ct. 2957; Smyth v. United States, 302 U.S. 329, 353-54, 58 S.Ct. 248, 82 L.Ed. 294 (1937); Boston Sand & Gravel, 278 U.S. at 47, 49 S.Ct. 52. The Fifth Amendment states that private property shall not be "taken for public use, without just compensation." U.S. Const. amend. V. The principle that the "just compensation" language includes the payment of interest from the time of the taking is long standing. Seaboard Air Line Ry. Co. v. United States, 261 U.S. 299, 306, 43 S.Ct. 354, 67 L.Ed. 664 (1923) ("The requirement that `just compensation' shall be paid is comprehensive ... and no specific command to include interest is necessary when interest or its equivalent...

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