AMMEX, INC. v. GARY MCDOWELL, Director for the Michigan Department of Agriculture & Rural Development
No. 20-1250
UNITED STATES COURT OF APPEALS FOR THE SIXTH CIRCUIT
February 3, 2022
File Name: 22a0022p.06
RECOMMENDED FOR PUBLICATION
Pursuant to Sixth Circuit I.O.P. 32.1(b)
Appeal from the United States District Court for the Eastern District of Michigan at Detroit.
No. 2:18-cv-10751—Laurie J. Michelson, District Judge.
Argued: March 9, 2021
Decided and Filed: February 3, 2022
Before: GRIFFIN, WHITE, and BUSH, Circuit Judges.
COUNSEL
ARGUED: Leah A. Mintz, DUANE MORRIS LLP, Philadelphia, Pennsylvania, for Appellant. Elizabeth A. Morrisseau, OFFICE OF THE MICHIGAN ATTORNEY GENERAL, Lansing, Michigan, for Appellee. ON BRIEF: Leah A. Mintz, Robert M. Palumbos, DUANE MORRIS LLP, Philadelphia, Pennsylvania, for Appellant. Elizabeth A. Morrisseau, Danielle Allison-Yokom, OFFICE OF THE MICHIGAN ATTORNEY GENERAL, Lansing, Michigan, for Appellee.
WHITE, J., delivered the opinion of the court in which GRIFFIN and BUSH, JJ., joined. BUSH, J. (pg. 17), delivered a separate concurring opinion.
HELENE N. WHITE, Circuit Judge. Plaintiff-Appellant Ammex, Inc. (Ammex) appeals the district court‘s dismissal of its amended complaint. Ammex seeks to prevent Defendant-Appellee Michigan Department of Agriculture and Rural Development (MDARD) from enforcing a federal gasoline-volatility regulation against it, arguing that the regulation is inapplicable to export-only gas stations and conflicts with the customs statute that authorizes Ammex‘s duty-free status. For the reasons below, we AFFIRM.
I.
Ammex owns and operates a duty-free gas station that is located in Wayne County, Michigan, near the bridge to Canada, but positioned “beyond the exit point” for domestic commerce established by the United States Customs and Border Protection (CBP). This litigation began in 2012, when MDARD sought to enforce an Environmental Protection Agency (EPA) rule requiring gas stations in Wayne County to dispense low-pressure gasoline in the summer. MDARD, in conjunction with the EPA, implemented this rule to bring Southeast Michigan‘s ozone levels into compliance with the Clean Air Act. Because of its unique location and certain sales privileges granted to it by United States customs law, Ammex has resisted efforts to apply the rule to its gasoline sales.
This is the second time these parties have been to this court to dispute MDARD‘s enforcement of the rule against Ammex. We first addressed this dispute in 2019, when we determined that MDARD was enforcing federal regulatory law, and accordingly was not in violation of the Supremacy Clause or dormant Foreign Commerce Clause. We now review Ammex‘s
A.
We begin with a review of the environmental laws at issue in this case.1 In 1970, Congress amended the Clean Air Act (CAA) to direct the EPA to establish National Ambient Air Quality Standards (NAAQS) for certain air pollutants. See
In 1990, Congress again amended the CAA to, among other things, set a national Reid Vapor Pressure (RVP)2 standard of 9.0 pounds per square inch (psi) for gasoline sales during certain times of the year. See
In 2004, the EPA designated eight counties in southeast Michigan, including Wayne County, as “nonattainment” areas for the ozone national ambient air quality standards. Approval and Promulgation of Air Quality Implementation Plans; Michigan; Control of Gasoline Volatility, 71 Fed. Reg. 46879 (Aug. 15, 2006). In response, Michigan enacted House Bill 5508, which amended
Beginning June 1 through September 15 of 2007 and for that period of time each subsequent year, the vapor pressure standard shall be 7.0 psi for dispensing facilities in Wayne, Oakland, Macomb, Washtenaw, Livingston, Monroe, St. Clair, and Lenawee counties.
B.
Ammex operates a duty-free store and gas station at the foot of the Ambassador Bridge, which connects Detroit, Michigan to Windsor, Ontario. Although physically located in Wayne County, Michigan, Ammex is strategically placed at the base of the bridge, beyond a United States Customs “exit point” so that after filling up their gas tanks, consumers have “no practical alternative” but to merge onto the Bridge and exit the United States. See
Any merchandise subject to duty (including international travel merchandise), with the exception of perishable articles and explosive substantives other than firecrackers, may be entered for warehousing and be deposited in a bonded warehouse at the expense and risk of the owner[,] purchaser, importer, or consignee. Such merchandise may be withdrawn . . . for exportation to a foreign country . . . without the payment of duties thereon, or for transportation and rewarehousing at another port or elsewhere, or for transfer to another bonded warehouse at the same port[.]
Ammex began selling gasoline in the late 1990s and sells about 400,000 gallons of gasoline each month. In 2000, Ammex successfully sued CBP for the right to sell its gasoline and diesel fuel duty-free. Ammex, Inc. v. United States, 24 C.I.T. 851, 857 (Ct. Int‘l Trade 2000) (Ammex I). Ammex represents that it is the only store
C.
In the summer of 2012, MDARD tested Ammex‘s gasoline and found that it had an RVP that exceeded the Summer Fuel Law‘s 7.0 psi requirement. MDARD issued a stop-sale order preventing Ammex from selling the non-compliant gasoline. MDARD filed an action against Ammex in state court, and the parties eventually reached a settlement that (1) required Ammex to sell gasoline that complied with the 7.0 RVP standard between June 1 and September 15 of each year; and (2) provided that the state court retained jurisdiction to enforce the settlement agreement for three years. Ammex sold gasoline that complied with the Summer Fuel Law during the summers of 2013 through 2017.
In 2018, Ammex began having trouble sourcing conforming gasoline from a foreign source. Facing the prospect of either losing its duty-free status or paying significant daily fines to MDARD, Ammex petitioned the federal district court for an order enjoining MDARD from enforcing the Summer Fuel Law against it. Ammex alleged that MDARD‘s attempts to enforce the Summer Fuel Law, which it conceptualized as state law, violated both the dormant Foreign Commerce Clause and the Supremacy Clause.
The district court rejected Ammex‘s claims, finding that it had not shown a likelihood of success on the merits. This panel heard the appeal from that decision. Ammex II, 936 F.3d at 355. For different reasons, both the majority and the concurring judge agreed with the district court‘s disposition. Id. The majority held that the Summer Fuel Law is a federal law, and therefore Ammex was not likely to succeed on its claim that the Summer Fuel Law violated the dormant Foreign Commerce Clause or the Supremacy Clause. Id. at 362–63. The concurring judge, agreeing with the judgment only, would have held that the Summer Fuel Law is a state law but that it neither offends the dormant Foreign Commerce Clause nor is preempted by federal law. Id. at 363–72 (Bush, J., concurring in the judgment).
Back in the district court to litigate the merits of its claims, Ammex amended its complaint. It retained its Foreign Commerce Clause and Supremacy Clause arguments (Counts I and II) and added two more claims: (1) that even if the Summer Fuel Law is federal law, the law does not apply to Ammex‘s duty-free operations because fuel that is “for export only” is not subject to the regulation (Count III); and (2) that even if the Summer Fuel Law is a federal law, and even if it encompasses the store‘s duty-free activities, it is an environmental regulation that conflicts with a federal customs statute and must accordingly give way (Count IV).
MDARD filed a motion to dismiss under Rule 12(b)(6), which the district court granted. Addressing Ammex‘s original Foreign Commerce Clause and Supremacy Clause arguments, which Ammex did not amend in light of our 2019 decision, the district court dismissed them “for the reasons provided by this Court and the Court of Appeals.” Op. and Order Granting Def.‘s Mot. to Dismiss, R. 61, PID1447. Addressing Ammex‘s two new claims, the district court first held that the Summer Fuel Law unambiguously encompasses Ammex‘s fueling operations, and, even if the court were to look past the unambiguous text, Ammex has not plausibly alleged that the law does not apply to it. Addressing Ammex‘s second new claim, the district court found that the Summer Fuel Law does not conflict with federal customs law, and that both laws can and should be given effect.
Ammex timely appealed.
The court reviews de novo a district court‘s dismissal of a complaint for failure to state a claim under Rule 12(b)(6). Kottmyer v. Maas, 436 F.3d 684, 688 (6th Cir. 2006) (citation omitted). We view the complaint in the light most favorable to the plaintiff, accept all well-pleaded factual allegations as true, and look to see whether the complaint contains “sufficient factual matter, accepted as true, to ‘state a claim to relief that is plausible on its face.‘” Ashcroft v. Iqbal, 556 U.S. 662, 678 (2009) (quoting Bell Atl. Corp. v. Twombly, 550 U.S. 544, 570 (2007)). “A claim has facial plausibility when the plaintiff pleads factual content that allows the court to draw the reasonable inference that the defendant is liable for the misconduct alleged.” Id. (citing Twombly, 550 U.S. at 556).
A.
Ammex‘s amended complaint maintains its dormant Foreign Commerce Clause and Supremacy Clause claims (Counts I and II). We addressed, and rejected, the merits of those claims in Ammex‘s appeal of the district court‘s denial of a preliminary injunction. Ammex II, passim. Ammex maintained those claims in the amended complaint because the panel‘s prior ruling was not a final ruling on the merits and so it could “preserve them for further appeal.” Appellant‘s Br. at 19. Since the parties do not advance or develop any new arguments on either front, we hold that these arguments fail to state a claim for the reasons stated in our prior opinion. See Ammex II, passim.
B.
Ammex next argues that the Summer Fuel Law does not apply to its fueling activities regardless of whether it is a state or federal law (Count III). Ammex contends that, despite the text of the Summer Fuel Law applying to all “dispensing facilities” in “Wayne County,” a 1989 EPA notice of final rulemaking reveals that gas sold “for export only” is exempted from RVP standards like the Summer Fuel Law. Appellant‘s Br. at 30 (citing Volatility Regulations for Gasoline and Alcohol Blends Sold in Calendar Years 1989 & Beyond, 54 Fed. Reg. 11868, 11871 (Mar. 22, 1989) [hereinafter “1989 EPA Notice“]). The 1989 EPA Notice, in response to a commenter concerned about refiner liability for fuel destined to be shipped abroad, explains that
Because gasoline is defined in [
40 C.F.R. § 80.2(c) ] as “any fuel sold in any State,” gasoline which is exported is not covered by the volatility regulations. However, EPA will assume that all gasoline found in the United States is intended for domestic sale and thus subject to the RVP standards unless the product is clearly labeled as for export only, and the evidence supports this classification. The label should further clearly state that the product may not comply with Federal RVP standards. If such product enters the domestic market (e.g. is on route to or at a distribution facility that is supplying fuel domestically, or at a retail outlet or wholesale purchaser-consumer facility) and is found to exceed the applicable RVP standard, all parties will be presumed liable . . . .
1989 EPA Notice. The Notice additionally clarifies that the prohibited activities include “sell[ing], offer[ing] for sale, supply[ing], offer[ing] for supply, [] transport[ing], [and] . . . dispens[ing] gasoline with excessive volatility into motor vehicles.” Id. at 11872.
In Ammex‘s view, because its gas “never enters and is not sold in the domestic stream of commerce,” the Summer Fuel
The district court concluded that it need not evaluate the 1989 EPA Notice because the statute regulating dispensing facilities in Wayne County plainly and unambiguously applies to Ammex, a dispensing facility in Wayne County. The district court further concluded that were it necessary to reach beyond the Summer Fuel Law‘s text, the EPA‘s 1989 EPA Notice does not favor Ammex for two reasons: because (1) the EPA issued a letter in November 2019 [hereinafter “the 2019 EPA Letter“] interpreting both the 1989 EPA Notice and the Summer Fuel Law and informing Ammex3 that it considered the gas station to be “within the state of Michigan, and therefore [regulated by] federal volatility standards“; and (2) the 1989 Notice “ma[d]e it clear that it is a violation for any of the listed parties to dispense gasoline with excessive volatility into motor vehicles,” and “even restricting the analysis to the EPA‘s 1989 Notice, it is not plausible . . . that the refueling that occurs at Ammex [] is exempt from the RVP standards.” Id. at 1451–52 (quoting Reply to Resp. re Mot. to Dismiss, R. 58, PID 1404; 1989 EPA Notice).
We agree with the district court that it is not necessary to reach beyond the text of the Summer Fuel Law. It states:
Beginning June 1 through September 15 of 2007 and for that period of time each subsequent year, the vapor pressure standard shall be 7.0 psi for dispensing facilities in Wayne, Oakland, Macomb, Washtenaw, Livingston, Monroe, St. Clair, and Lenawee counties.
C.
1.
Ammex next argues that, even if its activities are within the scope of the Summer Fuel Law, the Summer Fuel Law cannot be enforced against Ammex because it is an environmental regulation that must yield to a federal customs statute
Ammex is correct that regulations that contain provisions “manifestly contrary” to statutes must “give way” at the point of conflict. See R.R. Ventures, Inc. v. Surface Transp. Bd., 299 F.3d 523, 549 (6th Cir. 2002) (noting a “clear conflict” between a transportation statute that “does not require the offeror to ‘accept’ the terms imposed by the [Surface Transportation Board] within a designated period of time” and an “implementing regulation [that] requires the offeror to accept or reject the terms within ten days“). However, the Summer Fuel Law does not conflict with the Warehousing Act as applied to Ammex through the Withdrawal Statute. The Summer Fuel Law provides that Ammex, as a “dispensing facilit[y] in Wayne[ County, Michigan],” shall only dispense gas of “7.0 psi” from “June 1 through September 15” of each year. See
it does not allow Ammex to sell “any merchandise“—it requires Ammex to sell a maximum of 7.0 RVP gasoline in the summer, rather than the 9.0 RVP gasoline Ammex would prefer to sell. Appellant‘s Br. at 15.
But “[a] close look at [Ammex‘s] best evidence of a potential conflict turns out to reveal no conflict at all,” Epic Sys. Corp. v. Lewis, 138 S. Ct. 1612, 1625 (2018), because Ammex‘s argument rests upon a fundamental misreading of
Ammex would like the statute to read: “Duty-free stores may sell, without restriction, any merchandise subject to duty.” See Appellant‘s Br. at 17 (summarizing the statute as giving “Ammex, as a duty-free store, the right to sell any merchandise subject to duty of every description.“) (internal citations omitted). But that is not what the statute says, and such an interpretation is only possible if the reader ignores several clauses within the text. The statute‘s first sentence explains that Ammex, as a duty-free store, may “enter[] for warehousing and [] deposit[ing] in a bonded warehouse” all “merchandise subject to duty,” except “perishable articles and explosive substances other than firecrackers,” at its own expense.
[Any] merchandise [subject to duty] may be withdrawn, at any time within 5 years from the date of importation, or such longer period of time as the Bureau of Customs and Border Protection may at its discretion permit upon proper request being filed and good cause shown, for consumption upon payment of the duties and charges accruing thereon at the rate of duty imposed by law upon such merchandise at the date of withdrawal; or may be withdrawn for exportation or for transportation and exportation to a foreign country, or for shipment or for transportation and shipment to [certain destinations], without the payment of duties thereon, or for transportation and rewarehousing at another port or elsewhere, or for transfer to another bonded warehouse at the same port; except that [certain other restrictions apply].
(internal citation omitted); see Abramski v. United States, 573 U.S. 169, 179 n.6 (2014) (we need “not interpret each [sentence] in [the] statute with blinders on, refusing to look at the [sentence‘s] function within the broader statutory context“).
Ammex relies heavily on a 2000 Court of International Trade (CIT) case, Ammex I. Ammex I involved Ammex‘s challenge to CBP‘s 1998 decision “that the activities of duty-free stores should not be extended to cover ‘unidentifiable fungible’ goods, such as gasoline and diesel fuel, when sold on a retail basis” because such merchandise “could not be subject to marking or other identification under
Ammex has repeatedly cited that final sentence in support of its argument that
Ammex I does not stand for the proposition that
2.
A final note. Even if we were to accept Ammex‘s insistence that the Withdrawal Statute grants it the positive right to sell, duty-free, “any merchandise subject to duty” “of every description,” Appellant‘s Br. at 17, it is not clear that 7.0 RVP gasoline should be considered merchandise distinct from 9.0 RVP gasoline under either the Withdrawal Statute or the Harmonized Tariff Schedule.
As to the Withdrawal Statute, the district court explained in its order denying Ammex‘s preliminary injunction:
As an initial matter, the Court does not understand
§ 1557(a)(1) to regulate at the level of granularity that Ammex thinks it does. Ammex reads§ 1557(a)(1) as not only permitting it to sell every good (other than perishables and explosives) but
every variety of every good. It is not enough that
§ 1557(a)(1) permits Ammex to sell gasoline, in Ammex‘s view the statute permits it to sell [7.0 RVP] gasoline. But the statute speaks of classes of goods (perishables)[,] not specific goods (strawberries)[,] let alone a specific variety of a specific good (California strawberries).. . .
A hypothetical leads to a similar reading of
§ 1557(a)(1) . If a statute said, “any vehicles, with the exception of military vehicles, may be sold at a car dealership,” no one would think that the statute authorizes car dealers to sell vehicles without legally-required safety features (e.g., airbags). See49 C.F.R. § 571.208 ;49 C.F.R. § 571.101 et seq . That is, if a car dealer sold cars without airbags, it would be no defense for the dealership to say, “but the law says that ‘any vehicles, with the exception of military vehicles, may be sold at a car dealership’ and cars without airbags are a type of vehicle.”Here, the Summer-Fuel Laws do not preclude Ammex from selling a good. It may sell gasoline. The Summer-Fuel Laws at most preclude Ammex from selling a variety of gasoline, namely gasoline with a RVP above 7.0 psi. Or,
viewed slightly differently, the Summer-Fuel Laws are like the airbags in the hypothetical, they ensure that a good meets a certain quality or safety standard. Either way, the Summer-Fuel Laws are not contrary to what Congress has said in § 1557(a)(1) .
Op. and Order Denying Pl.‘s Mot. for Prelim. Inj., R. 34, PID 914–15. The district court‘s observation and hypothetical are persuasive. Ammex responds to MDARD‘s version of this argument by reiterating that the CBP definition of “merchandise” is broad, as it encompasses “goods, wares, and chattels of every description.” Reply at 3 (quoting
III.
For the foregoing reasons, we AFFIRM the judgment of the district court.
CONCURRENCE
JOHN K. BUSH, Circuit Judge, concurring. I write separately because I would hold that the Summer Fuel Law is a state law for the reasons I set forth in Ammex II. See Ammex II, 936 F.3d at 365–369 (Bush, J., concurring in the judgment). However, our majority held that the Summer Fuel Law is a federal law. Id. at 362–63. Therefore, under our precedent, I agree with the majority‘s analysis and judgment here.
Notes
If a State or local or other governmental authority, incident to its jurisdiction over any airport, seaport, or other exit point facility, requires that a concession or other form of approval be obtained from that authority with respect to the operation of a duty-free sales enterprise under which merchandise is delivered to or through such facility for exportation, merchandise incident to such operation may not be withdrawn from a bonded warehouse and transferred to or through such facility unless the operator of the duty-free sales enterprise demonstrates to the Secretary that the concession or approval for the enterprise has been obtained.
But Ammex‘s concern is, once again, premised on a misunderstanding of the scope of