Dantzler, Inc. v. S2 Services Puerto Rico, LLCDantzler, Inc. v. S2 Services Puerto Rico, LLC
In the end, their appeals reduce to a question of standing over which we have jurisdiction in these appeals from the denial of immunity. See Asociación De Subscripción Conjunta Del Seguro De Responsabilidad Obligatorio v. Flores Galarza, 484 F.3d 1, 20 n.22 (1st Cir. 2007). For the following reasons, we find that Dantzler has failed to establish its constitutional standing to sue PRPA, Rapiscan, and S2, and thus we vacate the district court‘s order and remand for dismissаl on jurisdictional grounds.
I. Background
Because these appeals follow from a decision on motions to dismiss, we draw the facts from Dantzler‘s amended complaint and any documents incorporated by reference therein. See Katz v. Pershing, LLC, 672 F.3d 64, 69 (1st Cir. 2012).
A. Factual Background
On February 18, 2008, the Puerto Rico legislature enacted Act No. 12 of 2008 (“Act 12“), which called for improved safety procedures in Puerto Rico‘s ports.
On February 16, 2011, PRPA and the Puerto Rico Treasury Department executed a “Memorandum of Understanding” (“MOU“) in which PRPA acknowledged that “it [was] not the government instrumentality with the proper legal jurisdiction and authority to intervene as of right” in the “well known” practice of concealing items in cargo containers “to аvoid -- among other reasons -- paying the applicable excise or other related taxes.” The authority to inspect cargo containers upon their arrival in Puerto Rico inhered in the Puerto Rico Treasury Department “as one of its powers in furtherance of its goal to collect taxes.” However, the MOU recalled that on August 2, 2007, PRPA and the Treasury Department had signed a multi-party agreement with other Puerto Rico agencies and instrumentalities whereby they “agreed to cooperate in order to implement Puerto Rico‘s tax laws.”1 Because
Subsequently, on September 2, 2011, PRPA approved Regulation 8067,2 which enabled PRPA to “implement a fast[-]track method of inspecting inbound [c]argo [c]ontainers which will detect undisclosed taxable goods, as well as increase port security in the Port of San Juan, while preserving a free flow of commerce and the efficient movement of cargo.” To recover the heightened costs associated with the scanning program incurred by PRPA, Regulation 8067 established a system of “Enhanced Security Fees” (“ESFs“), which were assessed by PRPA on ocean freight carriers or their agents arriving and unloading cargo in the Port of San Juan (in addition to existing fees already charged for use of the port).3 Dantzler alleges, without any substantiation, that the defendants “forced ocean carriers . . . into becoming [d]efendants’ [ESF]
On October 16, 2013, a federal court found the ESFs unconstitutional “as applied to shipping operators that neither use nor have the privilege of using PRPA scanning facilities,” because the imposition of such fees on those entities violated the Commerce Clause. Cámara de Mercadeo, Industria, y Distribución de Alimentos v. Vázquez, No. 11-1978, 2013 WL 5652076, at *12, *14 (D.P.R. Oct. 16, 2013). The court also enjoined PRPA from collecting ESFs from “shipping operators [whose cargo is] not being scannеd pursuant to Regulation No. 8067.” Id. at *15.4 We upheld these rulings as well as the constitutionality of PRPA‘s scanning program as applied to shipping operators who have access to the scanning service. See Trailer Bridge, 797 F.3d at 143, 145. PRPA, through S2 and Rapiscan, allegedly continued to assess ESFs on shippers that imported cargo that was not containerized, on shippers which did not have access to scanning stations, and on shippers whose cargo was not scanned at all.
Pursuant to Regulation 8067, the authorization for using the scanning program would end on June 30, 2014, “unless [the]
PRPA, Rapiscan, and S2 have jointly “collected and derived economic benefit from the [ESFs],” which has caused Dantzler to “sustain[] substantial and continuing economic losses in total amounts . . . reasonably believed to be in excess of $150,000,000.00.”
B. Procedural History
On April 5, 2017, Dantzler sued PRPA, Rapiscan, and S2 in the United States District Court for the District of Puerto Rico “seeking disgorgement of unlawfully collected scanning fees on shipments imported through the maritime port of San Juan.” Subsequently, on August 30, 2017, it amended its complaint, seeking
On December 19, 2017, Rapiscan and S2 filed a motion to dismiss the amended complaint for lack of subject-matter jurisdiction and failure to state a claim under
On May 23, 2018, PRPA also moved to dismiss the amended complaint for lack of subject-matter jurisdiction, failure to state a claim, and failure to join a required party under
First, the district court rejected PRPA, Rapiscan, and S2‘s standing argument, concluding that Dantzler had successfully established that it met the constitutional requirements for standing. Id. at 242. Specifically, the court found that, while the ESFs were imposed on oceаn freight carriers, the carriers “collected those fees” from Dantzler, and thus, Dantzler was, “[a]t [a] minimum, . . . allegedly injured indirectly by the government regulation,” and that injury was “fairly traceable” to PRPA, Rapiscan, and S2. Id. at 241-42.
Next, the district court also found that PRPA was not entitled to sovereign immunity because it was not “an arm of the state.” Id. at 243. It concluded that, although the structural indicators used to determine whether Puerto Rico intended PRPA to be an arm of the state “point[ed] in different directions,” id., because PRPA failed to demonstrate that Puerto Rico “would bе liable for a judgment against PRPA in this case,” or that “the
Finally, the district court determined that Rapiscan and S2 were not entitled to qualified immunity because they were “not individual people, and therefore [were] not government ‘officials‘” for purposes of the qualified immunity analysis. Id. at 253. In making its determination, the court adopted the Sixth Circuit Court of Appeals‘s position that “private corporations are not public officials” and cannot be еntitled to qualified immunity. Id. at 252 (citing Hammons v. Norfolk S. Corp., 156 F.3d 701, 706 n.9 (6th Cir. 1998)).
On October 19, 2018, Rapiscan and S2 timely appealed the partial denial of their motion to dismiss based on standing and qualified immunity. PRPA similarly filed a notice of appeal seeking review of the district court‘s denial based on standing and sovereign immunity.
II. Discussion
PRPA, Rapiscan, and S2 have a threshold argument in common: they assert that Dantzler‘s claims must be dismissed for lack of subject matter jurisdiction because Dantzler fails to satisfy the standing requirements of Article III of the United States Constitution to challenge the ESFs. “[B]ecause standing
A. Article III Standing Principles
“[N]o principle is more fundamental to the judiciary‘s proper role in our system of government than the constitutional limitation of federal-court jurisdiction to actual cases or controversies.” Massachusetts v. U.S. Dep‘t of Health & Human Servs., 923 F.3d 209, 221 (1st Cir. 2019) (alteration in original) (quoting DaimlerChrysler Corp. v. Cuno, 547 U.S. 332, 341 (2006)). To “assure[] respect” for this limitation, Hochendoner, 823 F.3d at 731, “plaintiffs must ‘establish that they have standing to sue,‘” U.S. Dep‘t of Health & Human Servs., 923 F.3d at 221 (quoting Raines v. Byrd, 521 U.S. 811, 818 (1997)).
“The existence vel non of standing is a legal question and, therefore, engenders de novo review.” Me. People‘s All. & Nat. Res. Def. Council v. Mallinckrodt, Inc., 471 F.3d 277, 283 (1st Cir. 2006); see also ITyX Solutions AG v. Kodak Alaris, Inc., 952 F.3d 1, 9 (1st Cir. 2020). PRPA, Rapiscan, and S2‘s challenge
Furthermore, the “irreducible constitutional minimum” of standing entails three elements. Spokeo, Inc. v. Robins, 136 S. Ct. 1540, 1547 (2016); Pérez-Kudzma, 940 F.3d at 144-45. A plaintiff must establish “(1) an injury in fact which is ‘concrete and particularized’ and ‘actual or imminent, not conjectural or hypothetical,’ (2) that the injury is ‘fairly traceable to the challenged action,’ and (3) that it is ‘likely . . . that the injury will be redressed by a favorable decision.‘” U.S. Dep‘t of Health & Human Servs., 923 F.3d at 221-22 (quoting Lujan, 504 U.S. at 560).
The “traceability” or causation element “requires the plaintiff to show a sufficiently direct causal connection between the challenged action and the identified harm.” Id. That connection “cannot be overly attenuated.” Id. (quoting Donahue v. City of Bos., 304 F.3d 110, 115 (1st Cir. 2002)). “[C]ausation is absent if the injury stems from the independent action of a third party,” id. at 71-72, so long as the injury is not the product of that third рarty‘s “coercive effect,” Wine & Spirits Retailers, Inc. v. Rhode Island, 418 F.3d 36, 45 (1st Cir. 2005) (quoting Bennett v. Spear, 520 U.S. 154, 169 (1997)).
Finally, the redressability element of standing requires that the plaintiff allege “that a favorable resolution of [its] claim would likely redress the professed injury.” Katz, 672 F.3d at 72. This means that it cannot be merely speculative that, if
Against this background, we now consider whether Dantzler has standing to bring its claims against PRPA, Rapiscan, and S2.
B. Article III Standing for Claims Against PRPA
Dantzler posits that it has constitutional standing because it was among the “class of clearly foreseeable shippers” who were “harmed in their individual capacities by improper charges” and it satisfies all the requirements for standing. Specifically, Dantzler argues that (1) its injury does not deal with the regulation of ocean freight carriers but instead with the direct losses it suffered as a result of paying the ESFs, which caused an economic harm of approximately $150 million; (2) it has shown that PRPA‘s conduct “was a substantial factor in producing” its injury, and even an attenuated causal chain may satisfy Article III‘s standing requirements; and (3) its injury is redressable through a monetary award.
We are unconvinced by Dantzler‘s argument and instead agree with PRPA that Dantzler hаs failed to set forth allegations in its complaint that are sufficient to establish its Article III standing.
Dantzler fails to plausibly allege that PRPA‘s assessment and collection of ESFs from third parties not before the court -- i.e., the ocean freight carriers -- directly cаused its injury. See id. at 77-78. The Supreme Court has cautioned against courts finding that a plaintiff‘s injury is fairly traceable to a defendant‘s conduct where the plaintiff alleges a
Dantzler alleged in its amended complaint the following:
According to Regulation 8067, the оcean carriers or their agents[] must pay PRPA the [ESFs] to recover the costs incurred by PRPA in the scanning program. Ocean carriers and their agents, in turn, collected [ESFs] from shippers like named Plaintiffs and putative class members who import cargo through the maritime ports of San Juan. Thus, in furtherance of their scheme, Defendants, Rapiscan, S2 Services and
[] PRPA purposely forced ocean carriers and their agents into becoming Defendants’ [ESF] collection agents.
But Dantzler‘s allegation “is nothing more than a bare hypothesis that [ocean freight carriers] possibly might push this aspect of [their] operational costs onto [Dantzler].” Katz, 672 F.3d at 77. Under the regulation, ocean freight carriers had to pay PRPA the ESFs, but neither the regulation nor PRPA controlled the ocean freight carriers’ relationships with their customers, such as Dantzler. Dantzler does not otherwise plausibly allege that ocean freight carriers were forced by PRPA (or Rapiscan and S2) to collect the ESFs from Dantzler (or anyone else). See Ashcroft v. Iqbal, 556 U.S. 662, 678 (2009). Nor does Dantzler plausibly allege that PRPA coerсed the ocean freight carriers to collect the ESFs from Dantzler. See Wine & Spirits Retailers, Inc., 418 F.3d at 45.
The complaint does not describe Dantzler‘s injury “in terms specific enough to indicate that it will result from” PRPA‘s imposition of ESFs on ocean freight carriers rather than from a “multitude of other factors.” Pérez-Kudzma, 940 F.3d at 145. As a result, Dantzler fails to demonstrate how PRPA imposing ESFs on a third party caused the injury of which it complains. This case is therefore very similar to Ammex, Inc. v. United States, 367 F.3d 530 (6th Cir. 2004), which held that a gas station did not
While this is dispositive of Dantzler‘s standing argument, we also address the redressability requirement, as these two elements “hinge on the response” of the ocean freight carriers -- the party charged the ESFs. See Lujan, 504 U.S. at 562 (finding that “causation and redressability ordinarily hinge on the response of the regulated (оr regulable) third party to the government action or inaction“).
For much the same reason there is no causation, Dantzler fails to successfully allege redressability. Although Dantzler need not demonstrate that its entire injury will be redressed by a favorable judgment, it must show that the court can fashion a remedy that will at least lessen its injury. Antilles Cement Corp. v. Fortuño, 670 F.3d 310, 318 (1st Cir. 2012); see also Simon, 426 U.S. at 43-46 (requiring that plaintiffs show it is likely, rather than speculative, that their injury will be redressed). The complaint in this case seeks predominantly
Accordingly, Dantzler has failed to satisfy the constitutional standing requirements with respect to its Commerce Clause and Puerto Rico law claims against PRPA.6
For substantially the same reasons as we find that Dantzler lacked standing to assert its claims against PRPA, we hold that Dantzler similarly fails to set forth allegations in its complaint that are sufficient to establish its constitutional standing to sue Rapiscan and S2. Additionally, we emphasize the limited role that Rapiscan and S2 play in the alleged scheme. Rapiscan and S2 simply provide the scanning services for containerized cargo that arrives at the Port of San Juan pursuant to a contract with PRPA. Rapiscan and S2 are not involved in the assessment or collection of the ESFs. Indeed, the complaint alleges that ocean freight carriers paid those fees exclusively to PRPA.
Consequently, Dantzler does not plausibly allege that its injury resulted from Rapiscan and S2‘s actual scanning of cargo or from accepting payment from PRPA for its scanning services,
Likewise, with respect to Dantzler‘s claims against Rapiscan and S2, redressability not only depends on the conduct of the ocean freight carriers who are not parties to this case, but the injunctive and declaratory relief Dantzler seeks, if granted against Rapiscan and S2, would have absolutely no effect to remedy the alleged injury because it is PRPA who imposes the fees Dantzler alleges are being cоllected from it.7 And since “a federal court [can] act only to redress injury that fairly can be traced to the challenged action of the defendant, and not injury that results from the independent action of some third party not before the
We need not go further. We agree with PRPA, Rapiscan, and S2 that Dantzler has failed to set forth allegations in its complaint that are sufficient to establish its Article III standing. We therefore conclude that Dantzler cannot assert its claims against the defendants.
III. Conclusion
For the foregoing reasons, we vacate the district court‘s order and partial judgment and remand for dismissal on jurisdictional grounds. The parties shall bear their own costs.
Vacated and Remanded.