ROBERT GORDON, APPELLEE v. ERIC H. HOLDER, JR., IN HIS OFFICIAL CAPACITY AS ATTORNEY GENERAL OF THE UNITED STATES, ET AL., APPELLANTS
No. 12-5031
United States Court of Appeals FOR THE DISTRICT OF COLUMBIA CIRCUIT
Argued October 22, 2012 Decided June 28, 2013
Consolidated with 12-5051 Appeals from the United States District Court for the District of Columbia (No. 1:10-cv-01092)
Linda Singer was on the brief for amicus curiae City of New York in support of appellants/cross-appellees.
Scott A. Sinder was on the brief for amicus curiae National Association of Convenience Stores, et al. in support of appellants/cross-appellees.
Aaron M. Streett argued the cause for appellee/cross-appellant . With him on the briefs were R. Stan Mortenson and Sara E. Kropf. Richard P. Sobiecki entered an appearance.
Before: GRIFFITH and KAVANAUGH, Circuit Judges, and SENTELLE, Senior Circuit Judge.
Opinion for the court filed by Circuit Judge GRIFFITH.
Opinion concurring in the judgment in part and dissenting in part filed by Circuit Judge KAVANAUGH.
Opinion concurring in part and concurring in the judgment filed by Senior Circuit Judge SENTELLE.
GRIFFITH, Circuit Judge: Robert Gordon owns a business that sold tobacco products across state lines. In the district court, Gordon sought a preliminary injunction against the enforcement of provisions of the Prevent All Cigarette Trafficking Act (PACT Act) that require him to pay state and local taxes and ban him from sending his products through the U.S. mail. Gordon argues that the tax provisions violate the Due Process Clause and the Tenth Amendment and that the
The district court enjoined the enforcement of the tax provisions on due process grounds, but otherwise dismissed Gordon‘s claims. The government appeals the preliminary injunction, and Gordon cross-appeals the district court‘s dismissal of, and refusal to grant a preliminary injunction for, his remaining claims. For the reasons set forth below, we affirm the district court‘s decision in its entirety.
I
A
In most states, the liability for sales and use taxes falls primarily on the buyer. U.S. Government Accountability Office, GAO-03-714T, Internet Cigarette Sales: Limited Compliance and Enforcement of the Jenkins Act Result in Loss of State Tax Revenue 3 (2003) (hereinafter GAO Report); WALTER HELLERSTEIN, STATE TAXATION ¶ 12.01 (3d ed. 2012). States require retailers to collect applicable taxes from resident buyers and remit the receipts to the state. STEVEN MAGUIRE, CONGRESSIONAL RESEARCH SERV., STATE TAXATION OF INTERNET TRANSACTIONS 1 (2013). A state may not, however, impose such an obligation on a retailer with whom the state lacks minimum contacts. See Quill Corp. v. North Dakota, 504 U.S. 298 (1992).1 This means that most
More than a half century has elapsed since the passage of the Jenkins Act, and as the Internet has made it easier for consumers to order tobacco products from out-of-state sellers, it has become more difficult for states and localities to collect taxes on these transactions. H.R. Rep. No. 111-117, at 18-19 (2009); see also GAO Report, supra, at 8, 12-13. Remote purchasing also makes it easier for parties to evade age restrictions and otherwise traffic in cigarettes illegally.
The Dormant Commerce Clause “nexus” test may be more demanding than the Due Process Clause “minimum contacts” test, see id. at 313, 317-18, but it is not at issue in this case because Gordon challenges a federal statute.
My concurring colleague criticizes this footnote as “gratuitous.” Post, at 1 (Sentelle, J., concurring). I disclaim any attempt to opine on the effect of the Dormant Commerce Clause, which, as my colleague correctly points out, is not at issue in this case. I include this incontrovertible description of the Supreme Court‘s Dormant Commerce Clause doctrine only to clarify that the Due Process Clause is not the only provision that restricts a state‘s power to tax out-of-state retailers.
The PACT Act is “aimed primarily at combating three evils: tobacco sales to minors, [illicit] cigarette trafficking, and circumvention of state taxation requirements.” Gordon v. Holder (Gordon I), 632 F.3d 722, 723 (D.C. Cir. 2011). It does so by restricting “delivery sales” of cigarettes and smokeless tobacco products. A delivery sale is any sale in which either the purchase or the delivery does not occur face-to-face.
B
According to his complaint, Robert Gordon ran a business selling tobacco products in the Alleghany Territory of the Seneca Nation of Indians, located in western New York. After starting his business in 2002, Gordon accepted orders in person, over the phone, and occasionally online. At the height of his business, Gordon took in two million dollars in revenue every month. Ninety-five percent of that revenue came from
Gordon asserts that his business has suffered under the PACT Act. Until recently, Gordon has enjoyed the protection of a Western District of New York preliminary injunction against the enforcement of the tax provisions,2 but the mail ban has taken its toll. The major private carriers — Federal Express, United Parcel Service, and DHL — also refuse to deliver tobacco products, leaving Gordon with only more expensive couriers. On May 30, 2013, while this appeal was pending, Gordon notified the court that he has found it necessary to close his business.
C
Gordon‘s case has been before us already. Gordon v. Holder (Gordon I), 632 F.3d 722 (D.C. Cir. 2011). On June 28, 2010, the day before the PACT Act took effect, Gordon filed a complaint alleging that the tax provisions and the mail ban are unconstitutional and sought a preliminary injunction against
We remanded Gordon‘s motion to the district court to consider the factors a plaintiff must demonstrate to obtain a preliminary injunction. Gordon I, 632 F.3d at 726. On remand, the district court enjoined the tax provisions on due process grounds, but dismissed for failure to state a claim Gordon‘s Tenth Amendment challenge to the tax provisions and his due process and equal protection challenge to the mail ban. See Gordon v. Holder, 826 F. Supp. 2d 279 (D.D.C. 2011). Both parties appealed.
We have jurisdiction to review the resolution of Gordon‘s motion for a preliminary injunction under
As we explained in Gordon I, “‘[a] plaintiff seeking a preliminary injunction must establish that he is likely to succeed on the merits, that he is likely to suffer irreparable harm in the absence of preliminary relief, that the balance of the equities tips in his favor, and that an injunction is in the public interest.‘” 632 F.3d at 724 (quoting Winter v. Natural Res. Def. Council, 555 U.S. 7, 20 (2008)). We review the “district court‘s weighing of the four preliminary injunction factors and its ultimate decision to issue or deny such relief for abuse of discretion.” Davis v. Pension Benefit Guar. Corp., 571 F.3d 1288, 1291 (D.C. Cir. 2009). We review the district court‘s legal conclusions de novo and its findings of fact for clear error. In re Navy Chaplaincy, 697 F.3d 1171, 1178 (D.C. Cir. 2012). But, as the Supreme Court admonished in Ashcroft v. ACLU, where “the underlying constitutional question is close” we must “uphold the injunction and remand for trial on the merits.” Ashcroft v. ACLU, 542 U.S. 656, 664-65 (2004); see also Red Earth LLC v. United States, 657 F.3d 138, 145 (2d Cir. 2011) (per curiam) (“Because the district court reached a reasonable conclusion on a close question of law, there is no need for us to decide the merits at this preliminary stage.“). Under Ashcroft, if the district court‘s analysis of the preliminary injunction factors reflects a reasonable conclusion about a close question of constitutional law, and contains no other legal error, then we must send the case back to the district court with the preliminary injunction intact. We must refrain from resolving novel and difficult constitutional questions, leaving them to be
post, at 1 (Sentelle, J., concurring), free to revisit our holding that the case is currently an Article III case or controversy.
The government and dissent argue that Ashcroft‘s gloss on the standard of review applies only to preliminary injunctions based on the First Amendment, when the government bears a special burden to justify the challenged law with a compelling governmental interest. Appellants’ Reply Br. 16 n.9 (citing Gonzales v. O Centro Espirita Beneficente Uniao do Vegetal, 546 U.S. 418, 429-30 (2006)). We disagree. The Ashcroft Court expressly derived its deferential approach “from established standards of appellate review” set out in Walters v. National Association of Radiation Survivors — a case involving a preliminary injunction based, like the one here, on the Due Process Clause. Ashcroft, 542 U.S. at 664 (quoting Walters, 473 U.S. 305, 336 (1985) (O‘Connor, J., concurring)). Our sister circuits have also applied Ashcroft‘s standard of review to preliminary injunctions based on due process challenges. See Red Earth, 657 F.3d at 145 (applying Ashcroft to an identical due process challenge to the PACT Act); Reproductive Health Serv. of Planned Parenthood of St. Louis Region v. Nixon, 428 F.3d 1139, 1145 (8th Cir. 2005) (applying Ashcroft to a constitutional challenge to an abortion regulation). In fact, we find no case expressly limiting Ashcroft‘s command to First Amendment challenges. To be sure, Ashcroft was a First Amendment case, and certain features of the Court‘s analysis naturally have no bearing outside the First Amendment context. For example, the Court affirmed the district court‘s conclusion that the plaintiff was likely to succeed on the merits because the government had not met its special First Amendment burden to justify the challenged restrictions on speech with a compelling governmental interest. See Gonzales, 546 U.S. at 429 (describing Ashcroft). But the Ashcroft Court‘s description of our standard of review is not so restricted. It reflects the
We conclude that the district court did not abuse its discretion by entering a preliminary injunction.
A
We begin with the district court‘s assessment of Gordon‘s likelihood of success on the merits, which is left untouched by the closure of Gordon‘s business. The district court held that Gordon is likely to succeed on the merits of his due process challenge. Gordon, 826 F. Supp. 2d at 293. Because we find the underlying constitutional questions to be close, we affirm the district court‘s conclusion. See Ashcroft, 542 U.S. at 664-65.4
1
Although it is well-settled that the Due Process Clause requires minimum contacts between the taxing sovereign and the taxed entity, see Miller Bros. Co. v. Maryland, 347 U.S. 340, 342, 344-45 (1954), this appeal presents a unique twist on that principle: with which sovereign must the taxed entity possess minimum contacts when there is one sovereign that defines and benefits from the tax obligation (in this case, the state or local government), and another that imposes and
For its part, the government argues that the Act is constitutional because Gordon has minimum contacts with the federal government, the sovereign that imposed and will enforce his tax obligations. The government correctly points out that this is not the first time a seller has challenged Congress‘s power to oblige participants in interstate commerce to comply with state-defined duties. The Supreme Court has twice upheld federal laws against similar challenges — one to the Ashurst-Sumners Act and one to the Webb-Kenyon Act. See Ky. Whip & Collar Co. v. Ill. Cent. Ry. Co., 299 U.S. 334 (1937); James Clark Distilling Co. v. W. Maryland Ry. Co., 242 U.S. 311 (1917). The Ashurst-Sumners Act made “it unlawful knowingly to transport in interstate or foreign commerce goods made by convict labor into any State where the goods are intended to be received, possessed, sold, or used in violation of its laws.” Kentucky Whip & Collar Co., 299 U.S. at 343. The Webb-Kenyon Act prohibited “the transportation in interstate commerce of all liquor ‘intended . . . to be received, possessed, sold, or in any manner used . . . in violation of any law of” the destination state. James Clark Distilling Co., 242 U.S. at 321. In both cases, the Supreme Court deemed it irrelevant that the states defined the companies’ legal duties because the “will” behind the two laws was Congress‘s, not the states‘. Ky. Whip & Collar Co., 299 U.S. at 347-52; James Clark Distilling Co., 242 U.S. at 326. The “will” behind the PACT Act is also Congress‘s, so the government argues that these precedents require us to
The government‘s argument overlooks an important distinction: The challenges to the federal statutes at issue in James Clark Distilling Company and Kentucky Whip & Collar Company were brought under the Commerce Clause; unlike Gordon‘s challenge, they raised no issue of minimum contacts under the Due Process Clause.6 See James Clark Distilling
The government and the dissent, post, at 2-3 (Kavanaugh, J., dissenting), identify several other federal statutes that subject out-of-state sellers to state regulation. These statutes likewise have never been scrutinized under the Due Process Clause. The one
exception is the Jenkins Act, which a three judge district court once upheld against a due process challenge. See Consumer Mail Order Ass‘n of Am. v. McGrath, 94 F. Supp. 705 (D.D.C. 1950). But that Act is distinguishable because the federal government imposed, defined, and enforced the duty, rather than incorporating a duty created by state law. See
All of these federal laws are distinguishable from the PACT Act for an additional reason: the state laws they incorporate do not impose a duty to collect taxes; they regulate commercial activity instead. The Court has long held that mere contact through the U.S. mail provides the “minimum contact” required for a state to assert regulatory, as distinguished from taxation, jurisdiction. See Travelers Health Ass‘n v. Virginia ex rel. State Corp. Comm‘n, 339 U.S. 643, 646-50 (1950). For that reason, the laws cited by the government and the dissent arguably satisfy the Due Process Clause even if Gordon is correct that the Clause requires minimum contacts between the seller and the state or locality.
Sensitive to the distinctions between the Due Process and Commerce Clauses, Gordon argues that the answer to this question is found in the principles set out in Quill Corp. v. North Dakota, 504 U.S. 298 (1992). In Quill, an out-of-state mail-order catalogue business challenged a state law that compelled “every person who engages in regular or systematic solicitation of a consumer market in” North Dakota to collect use taxes from its customers and remit them to the state. Id. at 302-03 (internal quotation marks omitted). Even though Quill was a Delaware corporation with no physical presence in North Dakota, the state statute required the company to collect North Dakota use taxes because it engaged in “regular or systematic solicitation” in the state, as defined by the statute. Id. (internal quotation marks omitted). Quill challenged the law under the Due Process and Commerce Clauses. Id. at 303-04. Before addressing these separate challenges, the Court discussed the differences between the clauses as they relate to the state‘s power to regulate an entity located in another state. Id. at 305-06. In dicta, the Court explained: “While Congress . . . may authorize state actions that burden interstate commerce, it does not similarly have the power to authorize violations of the Due Process Clause.” Id. at 305 (internal citations omitted). Then, the Court set out the fundamental rule that the Due Process Clause requires minimum contacts between the taxing sovereign and the taxed entity. Id. at 306. Taken together, Gordon argues, the legal principles set forth in Quill prohibit Congress from imposing state or local taxes on out-of-state sellers who lack minimum contacts with the state or locality.
Even the government concedes that, after Quill, Congress may not authorize a state to impose the duty to collect state use taxes on delivery sellers lacking minimum contacts with the
Finding no conclusive precedent, we turn to first principles and there find support for Gordon‘s argument that due process requires minimum contacts with the state or local government that defines the tax.7 At its most basic level, “[t]he
i
We demand “minimum connections” because a taxation regime that does not rest on “minimum connections” lacks democratic legitimacy. See Quill, 504 U.S. at 312 (“[T]he due process nexus analysis requires that we ask whether an individual‘s connections with a State are substantial enough to legitimate the State‘s exercise of power over him.“). The government would have us ignore the role of state and local governments in subjecting Gordon to their own tax laws, but it seems to me that the powers the states wield as a result of the PACT Act implicate the democratic principles that undergird the Due Process Clause.8
of Congress‘s novel exercise of its commerce power); Regents of Univ. of Cal. v. Bakke, 438 U.S. 265, 299 (1978) (Powell, J.) (“In expounding the Constitution, the Court‘s role is to discern principles sufficiently absolute to give them roots throughout the community and continuity over significant periods of time, and to lift them above the level of the pragmatic political judgments of a particular time and place.” (internal quotation marks omitted)).
only looking for guidance about how to apply the old one. Our precedent tells us to look for minimum contacts. But with which sovereign? Never before have there been two potential answers to this question, as there are in this case. As I have weighed the answers, it has been helpful to me to understand why we require minimum contacts to begin with.
These principles give strength to Gordon‘s argument that even a federal duty to comply with state and local tax laws may transgress due process limits on the taxation power. True enough, Gordon possesses minimum contacts with the federal government that will enforce his duty, but should we not also
ii
Another “simple but controlling question” to test the lawfulness of an exercise of taxation power is “whether the state has given anything for which it can ask return.” See Nat‘l Bellas Hess v. Dep‘t of Revenue, 386 U.S. 753, 756 (1967) (internal quotation marks omitted); see also Quill, 504 U.S. at 306. Cf. New York ex rel. Cohn v. Graves, 300 U.S. 308, 313 (1937) (“Enjoyment of the privileges of residence in the state and the attendant right to invoke the protection of its laws are inseparable from responsibility for sharing the costs of government.“). In order to protect this principle of just exchange, we uphold “the power of a state to impose liability on an out-of-state seller to collect a local use tax [when] the out-of-state seller was plainly accorded the protections and services of the taxing state.” Nat‘l Bellas Hess, 386 U.S. at 757. When minimum contacts with the state or locality are present, the taxed party receives “the benefits and protections of the laws of [the] state,” Int‘l Shoe Co., 326 U.S. at 319, and there is no due process problem with the state or locality extracting revenue from that party‘s transactions. But when minimum contacts with that state or locality are lacking, the state or locality offers no services or protections to justify the tax it receives. Gordon may be correct that the due process
In light of these principles, the district court did not abuse its discretion by concluding that Gordon is likely to succeed on this first step of his merits argument. In so holding, we caution that we are not deciding as a matter of law which sovereign a court must look to in completing its minimum contacts analysis. That question is one of significant moment, touching core federalism concerns. J. McIntyre Mach., Ltd., 131 S. Ct. at 2789. And as this discussion reveals, the PACT Act has been cast in a mold that has never been constitutionally tested. We are unwilling to resolve such an important and novel constitutional question without the benefit of further factual development.
Before we may affirm the preliminary injunction, however, we must address the second constitutional question that informed the district court‘s conclusion that Gordon is likely to succeed on the merits of his claim.
2
Under Section 2a of the PACT Act, Gordon‘s obligation to collect a given state or local tax attaches when he initiates a transaction within that jurisdiction. Gordon‘s due process challenge presents the question whether a single sale is enough to establish minimum contacts with that jurisdiction. The government asserts it is, providing a constitutional basis for the Act even if Gordon is correct that the Due Process Clause demands minimum contacts with the state or local taxing authority. Appellants’ Br. 30-33. Once again, the question is a close one, deserving of further development at a trial on the merits, so we affirm and remand. See Red Earth, 657 F.3d at 145 (affirming a preliminary injunction against Section 2a of
Due process jurisprudence on “minimum contacts” has evolved significantly over the past half-century. In National Bellas Hess v. Department of Revenue, the Supreme Court held that minimum contacts do not exist between a state and a seller “whose only connection with customers in the State is by common carrier or the United States mail.” Id. at 758; see also Miller Bros. Co., 347 U.S. at 344-45. National Bellas Hess was commonly understood to require that the seller have some “physical presence” in the taxing state. Quill, 504 U.S. at 306-07. Thirty years later, in Quill, the Supreme Court overruled that holding. Id. at 308. Relying on “comparable” reasoning in cases concerning the personal jurisdiction of courts, the Court concluded that North Dakota‘s imposition of a duty to collect a use tax on Quill did not violate the Due Process Clause, even though Quill‘s only contacts with citizens of North Dakota occurred by means of mail or common carrier. Id. The court relied on the fact that Quill purposefully directed its activities at residents of North Dakota, that it had conducted a high volume of business with customers in that state, and that the use tax was “related to the benefits Quill receives from access to the state.” Id.
But “[t]he Supreme Court has never found “that a single isolated sale . . . is sufficient“” to establish minimum contacts. Red Earth, 657 F.3d at 145 (quoting J. McIntyre Mach., Ltd., 131 S. Ct. at 2792 (Breyer, J., concurring)). While it may prove to be the case that, in the Internet age, a single sale establishes “minimum contacts” as a matter of law, this seems like precisely the sort of difficult constitutional question on which our analysis would benefit from factual development. For example, how difficult is it for a delivery seller to identify and calculate applicable taxes at the point of sale? What sorts of
B
We likewise hold that the district court did not abuse its discretion in determining where the public interest lies when it concluded that “enforcement of a potentially unconstitutional law that would also have severe economic effects is not in the public interest.” Gordon, 826 F. Supp. 2d at 297.
Relying upon United States v. Oakland Cannabis Buyer‘s Coop., 532 U.S. 483, 497 (2001), the government argues that the court erred as a matter of law “by failing to give any deference to Congress‘s assessment of where the public interest lies.” Appellants’ Br. 39.10 In Oakland, the government invoked the Controlled Substances Act to enjoin the cooperative from distributing marijuana. Citing the “public interest,” the district court modified the injunction to permit distribution in cases of medical necessity. 532 U.S. at 495. The Supreme Court overturned the court of appeals decision affirming the modified injunction, holding that the district
The district court did not transgress the limits on its discretion here. Oakland prohibits a district court from second-guessing Congress‘s lawful prioritization of its policy goals. Id. For example, under the rationale of Oakland, it would have been wrong for the district court to hold that the public interest in preserving tobacco industry jobs outweighs the public health harms attributable to underage smoking. Such a holding would interfere with Congress‘s “delegated powers” to “decide[] the order of priorities.” Id. (internal quotation marks omitted). But the district court here did not second-guess Congress‘s policy priorities – only the lawfulness of Congress‘s means of achieving those priorities. In doing so, the court acknowledged the obvious: enforcement of an unconstitutional law is always contrary to the public interest. See, e.g., Lamprecht v. FCC, 958 F.2d 382, 390 (D.C. Cir. 1992); G & V Lounge v. Michigan Liquor Control Comm‘n, 23 F.3d 1071, 1079 (6th Cir. 1994); Llewelyn v. Oakland Cnty. Prosecutor‘s Office, 402 F. Supp. 1379, 1393 (E.D. Mich. 1975) (“[I]t may be assumed that the Constitution is the ultimate expression of the public interest.“). The Constitution does not permit Congress to prioritize any policy goal over the Due Process Clause.
Finally, we hold that the district court did not abuse its discretion when it concluded that Gordon was likely to suffer irreparable harm and that the balance of the equities tips in his favor.
Gordon argued that the PACT Act would cause him irreparable harm because it threatened the existence of his business and violated his constitutional rights. “[S]uits for declaratory and injunctive relief against the threatened invasion of a constitutional right do not ordinarily require proof of any injury other than the threatened constitutional deprivation itself.” Davis v. District of Columbia, 158 F.3d 1342, 1346 (D.C. Cir. 1998). Thus, “[a]lthough a plaintiff seeking equitable relief must show a threat of substantial and immediate irreparable injury, a prospective violation of a constitutional right constitutes irreparable injury for these purposes.” Id. (internal citation omitted). The district court did not abuse its discretion by concluding that Gordon had demonstrated such a threat: when he was in business, the Act required Gordon to pay what he alleges are unconstitutional taxes or else risk criminal and civil penalties.
Similarly, the district court concluded that “a potential deprivation of [Gordon‘s] constitutional right to due process . . . outweighs the possible injury to defendants from enjoining enforcement until the merits of Gordon‘s claim can be determined.” Gordon, 826 F. Supp. 2d at 297. Although the preliminary injunction might temporarily frustrate the federal government‘s interest in enforcing state and local tax laws, the district court permissibly gave greater weight to the possibility that Gordon could suffer an ongoing constitutional violation while this litigation proceeds.
III
Before we turn to the claims the district court dismissed, we must consider the government‘s argument that the preliminary injunction is overbroad. The government argues that the injunction, which bars it from enforcing the tax provisions against Gordon at all, should have prohibited it only from enforcing the provisions against Gordon‘s sales into jurisdictions with which he lacks minimum contacts. We hold that the district court adequately fulfilled its duty to “maintain the act in so far as it is valid.” Red Earth, 657 F.3d at 145 (quoting Alaska Airlines, Inc. v. Brock, 480 U.S. 678, 684 (1987)). By demanding that the injunction be narrower, the government asks the district court to put the cart before the horse. To accede to the government‘s argument, the district court would not only have to define the much-disputed concept of “minimum contacts,” but would also have to engage in
More fundamentally, we are not convinced by the government‘s premise: that Gordon may challenge the PACT Act only “as applied” against his sales into jurisdictions with which he lacks minimum contacts. The government points out that a court may find a statute to be invalid on its face only if a plaintiff has shown that the Act has no “plainly legitimate sweep.” Wash. State Grange v. Wash. State Repub. Party, 552 U.S. 442, 449 (2008) (citation omitted); see also United States v. Salerno, 481 U.S. 739, 745 (1987) (holding that facial challenges will be sustained only if “no set of circumstances exist under which the Act would be valid“). The government argues that any facial challenge to the PACT Act must fail because there is no dispute that the federal government may compel a delivery seller to collect taxes for at least those state and local governments with which it has minimum contacts. Thus, the Act has a “plainly legitimate sweep,” even if it sweeps too broadly.
But when a statute erases the boundaries that define a sovereign‘s jurisdiction, as the PACT Act does to the boundaries of state and local taxing jurisdictions, any legitimate application is pure happenstance. It is perhaps this consideration that has led the Supreme Court to sustain facial challenges to laws that omit constitutionally-required jurisdictional elements, even though all such laws necessarily have a “plainly legitimate sweep.” For example, in United States v. Lopez, the Supreme Court struck down the Gun-Free
IV
We review de novo the district court‘s dismissal of Gordon‘s remaining claims. See Schrader v. Holder, 704 F.3d 980, 984 (D.C. Cir. 2013).
A
Gordon argues that Section 2a violates the Tenth Amendment by commandeering states to administer a federal taxation scheme.11 The district court properly dismissed this Tenth Amendment challenge for failure to state a claim for
This is not a case in which “the Federal Government [is] compel[ling] the States to implement, by legislation or executive action, federal regulatory programs.” Printz, 521 U.S. at 925. Instead of drafting states to enforce federal law, the PACT Act pledges the federal government to enforce state law. See
In fact, the challenged provisions of the PACT Act do not direct the states to do anything. Any administrative burden that results is merely incidental to Congress‘s lawful exercise of its power to regulate the private participants in interstate commerce. In New York, the Court left open the possibility that Congress could pursue permissible policy goals by directly regulating private parties rather than states. 505 U.S. at 159-60. That is what Congress has done here.
The affirmative burdens placed on the states in Printz and New York were unavoidable. By contrast, states may avoid any burdens imposed by the PACT Act – a distinction the Supreme Court has treated as constitutionally significant. In FERC v. Mississippi, for example, the Court rejected a Tenth Amendment challenge to a federal statute that called for states to consider federal standards in regulating public utilities. 456 U.S. 742 (1982). The Court emphasized that “if a State has no
Additionally, the PACT Act does not blur the lines of political accountability as did the statute challenged in New York, 505 U.S. at 169. Here, states still freely set the tax rates for which they may be held accountable. And because the Act applies directly to the sellers, it is clear that Congress is the source of the new duty, not the states. See United States v. Morrison, 529 U.S. 598, 654 n.21 (2000) (Souter, J., dissenting) (“Had Congress chosen . . . to proceed instead by regulating the States, rather than private individuals, this accountability would be far less plain.“).
The PACT Act regulates individuals, not states; its only incidental effect on the states is to require them to collect additional tax revenue if they choose to join Congress in regulating interstate commerce in tobacco products. This sort of burden is constitutionally permissible.
The district court also properly dismissed Gordon‘s Fifth Amendment challenge to the PACT Act‘s ban on shipping tobacco products in the U.S. mail. Gordon argues that the ban deprives him of due process and the equal protection of the laws.
There is no dispute that the district court properly applied rational basis review to the mail ban. Accordingly, Gordon has a claim only if he can show that there is no “rational relationship between [the ban] and some legitimate governmental purpose.” Am. Bus. Ass‘n v. Rogoff, 649 F.3d 734, 742 (D.C. Cir. 2011) (citation omitted). This burden “to negative every conceivable basis which might support” the law is especially difficult to meet. FCC v. Beach Commc‘ns, Inc., 508 U.S. 307, 315 (1993). Rational basis review “is not a license for courts to judge the wisdom, fairness, or logic of legislative choices.” Id. at 313. Courts must uphold legislation “[e]ven if the classification involved . . . is to some extent both underinclusive and overinclusive . . . .” Vance v. Bradley, 440 U.S. 93, 108 (1979). In the ordinary case, “a law will be sustained if it can be said to advance a legitimate government interest, even if the law seems unwise or works to the disadvantage of a particular group, or if the rationale for it seems tenuous.” Romer v. Evans, 517 U.S. 620, 632 (1996).
Gordon argues that this is no ordinary case because Congress has never before banned the shipment of a product that is legal in all fifty states and does not present a danger to the mail or mail carriers. Appellee‘s Br. 47. Unprecedented laws, he asserts, are subject to more “careful” rational basis review under Romer v. Evans. Appellee‘s Br. 50; see also Romer, 517 U.S. at 633 (discussing the unprecedented nature of the law under review). We need not decide whether Romer
Although we are by no means restricted to the stated reasons for passing a law in our search for a “rational basis,” Beach Commc‘ns, 508 U.S. at 315, we need look no further than the statute itself to discern three rational bases for the mail ban. As we observed in Gordon I, Section 1 of the Act reveals that it was “aimed primarily at combating three evils: tobacco sales to minors, [illicit] cigarette trafficking, and circumvention of state taxation requirements.” 632 F.3d at 723 (citing Pub. L. No. 111-154, § 1(b)). Gordon does not dispute that these purposes are “legitimate governmental purposes,” but argues that the mail ban fails to advance them because it is duplicative, overinclusive in some ways, and underinclusive in others. His arguments ask us to engage in a higher level of scrutiny than rational basis review allows.
For example, Gordon argues that Congress could have accomplished the goal of preventing illicit cigarette trafficking by enhancing penalties for violations of existing laws, rather than broadly excluding both licit and illicit tobacco deliveries from the mail. Once again, the legislative record reveals a rational basis for choosing one path over the other: delivery sellers “have been very successful at eluding traditional enforcement measures, by making their cigarette and smokeless tobacco deliveries by mail.” H.R. Rep. No. 111-117,
With respect to sales to minors, Gordon argues that the mail ban is duplicative because Congress promulgated age verification requirements in
Finally, Gordon argues that the mail ban is duplicative because the tax provisions already effectively prevent circumvention of state taxes. But as we note above, Congress concluded that the mail enables determined sellers to evade the law – including, presumably, the PACT Act‘s command that sellers pay state and local taxes in advance of the sale. It is entirely rational for Congress to buttress other legal provisions by closing a popular channel for noncompliant commerce.
Because Gordon has not met his high burden “to negative every conceivable basis” for the Act, Beach Commc‘ns, 508 U.S at 315, the district court was correct to dismiss Gordon‘s claim. And because the only challenge to the mail ban was properly dismissed, we need not decide whether the district
V
For the foregoing reasons, the district court‘s decision is affirmed and the case is remanded for further proceedings consistent with this opinion.
So ordered.
In 2010, Congress passed and President Obama signed the Prevent All Cigarette Trafficking Act. That law requires cigarette sellers to comply with various state tax laws. The law was prompted by Congress‘s finding that Internet cigarette sellers were not complying with federal, state, and local tax laws, resulting in billions of dollars in lost tax revenue each year. Importantly for present purposes, violations of the Act are subject to federal criminal prosecution or federal civil suit. In such federal lawsuits, the United States is the relevant sovereign and jurisdiction. As I will explain, when the Federal Government (not a State) regulates a U.S. seller such as Gordon, there is no Due Process Clause minimum contacts issue.
To begin, it is well-settled that Congress may enact federal laws that require sellers of a product to comply with certain state laws. So long as the federal law is otherwise justified under the Constitution – for example, as a Commerce Clause regulation of commercial activity – the fact that the federal law piggy-backs on state law in this fashion is irrelevant. The Supreme Court has long upheld federal laws of that sort. See Kentucky Whip & Collar Co. v. Illinois Central Railroad Co., 299 U.S. 334 (1937); Clark Distilling Co. v. Western Maryland Railway Co., 242 U.S. 311 (1917). A number of federal laws follow that model. See, e.g.,
There is no dispute here that the relevant provisions of the Prevent All Cigarette Trafficking Act are valid under the Commerce Clause. The question concerns the law‘s compliance with the minimum contacts principle of the Due Process Clause.
When Congress enacts a federal law of this kind and renders violators of that law subject to federal criminal prosecution or federal civil suit, the law does not violate the
To be sure, a seller like Gordon may raise a Due Process Clause minimum contacts objection in any state-law proceeding. See Quill Corp. v. North Dakota, 504 U.S. 298 (1992). But the Prevent All Cigarette Trafficking Act does not negate a seller‘s ability to raise a Due Process Clause minimum contacts objection in state-law cases.
In my view, therefore, Gordon‘s Due Process Clause claim is entirely without merit.1 To grant a preliminary injunction, however, a District Court must find a likelihood of success on the merits, among other things. See Winter v. Natural Resources Defense Council, 555 U.S. 7, 20 (2008)
When, as here, a District Court incorrectly finds a likelihood of success on the merits, that legal error constitutes an abuse of discretion, and we must vacate the preliminary injunction. See Kiyemba v. Obama, 561 F.3d 509, 513 (D.C. Cir. 2009) (“If the moving party can show no likelihood of success on the merits, then preliminary relief is obviously improper and the appellant is entitled to reversal of the order as a matter of law.“); Air Line Pilots Association International v. Eastern Air Lines, Inc., 863 F.2d 891, 894 (D.C. Cir. 1988) (“We reverse the district court and hold that it should not have granted the motions for a preliminary injunction because the unions did not show a substantial likelihood of success on the merits.“); see generally So v. Suchanek, 670 F.3d 1304, 1310 (D.C. Cir. 2012) (“A district court by definition abuses its
Because Gordon‘s Due Process Clause claim is meritless, I would vacate the District Court‘s preliminary injunction against enforcement of the tax-related provisions of the Act. As to Gordon‘s cross-appeal challenging the District Court‘s denial of a preliminary injunction to enjoin enforcement of the Act‘s mailing ban on Fifth Amendment grounds, I would affirm the District Court because Gordon has not shown a likelihood of success on the merits of that claim, for reasons the majority opinion explains.
I do not join fully in Judge Griffith‘s opinion because I think it opines on matters far beyond the issues before the court, and I do not wish to elevate those opinions to circuit law.
First, footnote 1 of Judge Griffith‘s opinion indulges, I think quite gratuitously, in a discussion of the effect of the so-called “Dormant Commerce Clause.” So far as I can tell, no party in this case relies upon the Dormant Commerce Clause, the Dormant Commerce Clause is not relied upon in the briefs, the Dormant Commerce Clause has nothing to do with the result, and this case has nothing to do with the Dormant Commerce Clause.
Further, I cannot support Judge Griffith‘s opinion in its test of “democratic legitimacy” for the minimum contacts necessary to provide due process for taxation. Griffith op. at 19-21. The search for democratic underpinnings for constitutional provisions may be academically interesting, but I find no case in which this court, the Supreme Court, or any other federal court has undertaken that search before affirming the legitimacy of a tax. Because Judge Griffith‘s opinion supplies sufficient indicia of minimum contacts without relying on this novel approach, I join the result, indeed I join most of the opinion, but I cannot fully join the elevation to circuit law of a new test for minimum contacts, or of the discussion of the attributes of the “Dormant Commerce Clause.”