LKQ Corp. v. U.S. Dep't of Homeland Sec. & Sec'y Kirstjen Nielsen

369 F.Supp.3d 577

LKQ CORPORATION and Keystone Automotive Industries, Inc., Plaintiffs,

v.UNITED STATES DEPARTMENT OF HOMELAND SECURITY and Secretary Kirstjen Nielsen, in her official capacity, Defendants.

C.A. No. 18-225 (MN)

United States District Court, D. Delaware.

Signed February 22, 2019

MEMORANDUM OPINION

NOREIKA, U.S. DISTRICT JUDGE:

Before the Court is the motion (D.I. 9) of Defendants the United States Department of Homeland Security and its Secretary, Kirstjen Nielsen, to dismiss the Complaint (D.I. 1) filed by Plaintiffs LKQ Corporation and Keystone Automotive Industries, Inc. (collectively "LKQ" or "Plaintiffs") for lack of subject matter jurisdiction and failure to state a claim. For the reasons discussed below, the Court will GRANT Defendants' motion.

I. BACKGROUND

Since April of 2017, the United States Customs and Border Protection ("CBP"), an agency within Defendant, United States Department of Homeland Security, has executed more than 165 seizures of LKQ replacement automotive grilles ("Repair Grilles") because of alleged infringement of U.S. trademarks. (D.I. 1 at ¶¶ 2-4). Seizures have occurred at the Port of Savannah, Georgia, Port of Long Beach, California, and Port of International Falls, Minnesota. (Id. ¶ 4). For each seizure, CBP issued written notification to LKQ identifying the property seized and outlining the processes by which Plaintiff could challenge the seizure. (Id. ¶ 5; D.I. 11, Ex. 3).¹ The notices explain the petition option as follows:

Petition: You may file a petition with this office within 30 days from the date of this letter in accordance with title 19 United States Code (U.S.C.), section 1618 ( 19 U.S.C. § 1618 ) and title 19, Code of Federal Regulations (C.F.R.), section 171.1 and 171.2 ( 19 C.F.R. §§ 171.1, 171.2 ), seeking remission of the forfeiture. The petition does not need to be in any specific form, but it must describe the property involved, identify the date and place of the seizure, include all the facts and circumstances which you believe warrant relief from forfeiture, and must include proof of your interest in or claim to the property.

* * *

If you are dissatisfied with the petition decision (initial petition or supplemental petition), you will have an additional 60 days from the date of the initial petition decision or 60 days from the date of the supplemental petition decision, or such other time as specified by the Fines, Penalties and Forfeitures Officer to file a claim to the property, along with the required cost bond, requesting referral of the matter to the U.S. Attorney's Office for judicial action.

* * *

At any point prior to the forfeiture of the property, you may request a referral to the U.S. Attorney by filing a claim and cost bond. Please see section 4 of this letter for information on how to file a claim and cost bond . If you take such action after filing a petition for relief, your pending petition will be withdrawn from consideration.

(D.I. 11, Ex. 3 at 2-3). After receiving the notices, LKQ submitted at least 81 petitions for remission or mitigation. (D.I. 1 ¶ 6). Those petitions were "referred to the Chief, Intellectual Property Rights Branch [of the CBP] for a recommendation." (Id. , Ex. C).

Plaintiffs characterize the petitions by category: (1) grilles that were seized but then deemed to be returned "because LKQ was licensed to make those grilles under its design patent license agreements;" (2) grilles that were seized and then deemed to be returned, but for which CBP "alleges it had probable cause at the time to seize because the Automakers told CBP that the grilles violated their rights;" (3) "grilles that CBP now acknowledges are not counterfeit but that CBP, instead, now alleges are confusingly similar to the asserted mark;" (4) "grilles that CBP maintains are allegedly counterfeit;" (5) grilles "that have been seized on the basis that they are counterfeit but that CBP has not yet formalized its seizure decision;" and (6) grilles for which Plaintiffs have requested referral to the U.S. Attorney. (Id. ¶¶ 6, 8). At the time of the Complaint, the grilles in the first two categories were subject to storage fees and "hold-harmless" agreements "disallowing any future claims against the government related to the improper seizures." (D.I. 1 ¶¶ 7, 9). It is undisputed, however, that CBP later "agreed to remit these grilles without those conditions." (D.I. 10 at 8; D.I 16 at 17). Petitions relating to at least thirteen (13) seizures have been withdrawn, filed as claims, and referred to the U.S. Attorneys' offices in the districts where the original seizures took place. (D.I. 10 at 8-9).

On February 2, 2018, Plaintiffs filed their Complaint in this Court. (D.I. 1). The Complaint contains seven counts alleging the following: violations of the Administrative Procedure Act ("APA"), 5 U.S.C. § 706(2)(A) (Counts I-V), excessive fines in violation of the Eighth Amendment (Count VI); and violation of Plaintiffs' due process rights in violation of the Fifth Amendment (Count VII). (Id. ). Defendants filed their motion to dismiss (D.I. 9) on May 9, 2018, asserting pursuant to Rule 12(b)(1) that the Court lacks subject matter jurisdiction for Counts I through VI, and pursuant to Rule 12(b)(6) that Counts VI and VII fail to state a claim upon which relief may be granted. (D.I. 10 at 10-20). Plaintiffs oppose the motion.

II. LEGAL STANDARD

A complaint must contain " ‘a short and plain statement of the claim showing that the pleader is entitled to relief,’ in order to ‘give the defendant fair notice of what the ... claim is and the grounds upon which it rests.’ " Bell Atlantic Corp. v. Twombly , 550 U.S. 544, 554-55, 127 S.Ct. 1955, 167 L.Ed.2d 929 (2007) (citing Conley v. Gibson 355 U.S. 41, 47, 78 S.Ct. 99, 2 L.Ed.2d 80 (1957) ; Fed. R. Civ. P. 8(a)(2) ).

A. Standard Pursuant to Rule 12(b)(1)

"If the court determines ... it lacks subject matter jurisdiction, the court must dismiss the action." Fed. R. Civ. P. 12(h)(3). Motions brought under Rule 12(b)(1) for lack of subject matter jurisdiction may present either a facial or factual challenge to the court's jurisdiction. Lincoln Ben. Life Col. v. AEI Life, LLC , 800 F.3d 99, 105 (3d Cir. 2015). A challenge is facial when a motion to dismiss is filed prior to an answer and asserts that the complaint is jurisdictionally deficient on its face. Cardio-Medical Assoc., Ltd. v. Crozer-Chester Medical Center , 721 F.2d 68, 75 (3d Cir. 1983). In reviewing a facial challenge under Rule 12(b)(1), the standards relevant to Rule 12(b)(6) apply. Lincoln , 800 F.3d at 105 ("In reviewing a facial attack, the court must only consider the allegations of the complaint and documents referenced therein and attached thereto, in the light most favorable to the plaintiff"). A plaintiff bears the burden of establishing subject matter jurisdiction. Id.

B. Standard Pursuant to Rule 12 (b)(6)

When dismissal is sought under Rule 12(b)(6), the court conducts a two-part analysis. Fowler v. UPMC Shadyside , 578 F.3d 203, 210 (3d Cir. 2009). First, the court separates the factual and legal elements of a claim, accepting "all of the complaint's well-pleaded facts as true, but [disregarding] any legal conclusions." Id. at 210-11. Second, the court determines "whether the facts alleged in the complaint are sufficient to show ... a ‘plausible claim for relief.’ " Id. at 211 (quoting Ashcroft v. Iqbal , 556 U.S. 662, 679, 129 S.Ct. 1937, 173 L.Ed.2d 868 (2009) ). A claim is facially plausible where "plaintiff pleads factual content that allows the court to draw the reasonable inference that the defendant is liable for the misconduct alleged." Iqbal , 556 U.S. at 678, 129 S.Ct. 1937. "A pleading that offers ‘labels and conclusions’ or ‘a formulaic recitation of the elements of a cause of action will not do.’ " Id. Further, "[t]he complaint must state enough facts to raise a reasonable expectation that discovery will reveal evidence of [each] necessary element" of the plaintiff's claim. Wilkerson v. New Media Tech. Charter Sch. Inc. , 522 F.3d 315, 321 (3d Cir. 2008) (internal quotations omitted).

"The issue is not whether a plaintiff will ultimately prevail but whether the claimant is entitled to offer evidence to support the claims." In re Burlington Coat Factory Sec. Litig. , 114 F.3d 1410, 1420 (3d Cir. 1997) (quoting Scheuer v. Rhodes, 416 U.S. 232, 236, 94 S.Ct. 1683, 40 L.Ed.2d 90 (1974) ). The court may grant a motion to dismiss only if, after "accepting all well pleaded allegations in the complaint as true, and viewing them in the light most favorable to plaintiff, [the] plaintiff is not entitled to relief." Id. "In deciding a Rule 12(b)(6) motion, a court must consider only the complaint, exhibits attached to the complaint, matters of public record, as well as undisputed authentic documents if the complainant's claims are based upon these documents." Mayer v. Belichick , 605 F.3d 223, 230 (3d Cir. 2010) (emphasis added).

III. ANALYSIS

Defendants have challenged each of the Complaint's seven Counts under either Rule 12(b)(1) or 12(b)(6). Defendants argue that Counts I, II, III, IV, V, and VI must be dismissed because Plaintiffs have failed to establish that the Court has subject matter jurisdiction over those claims, and that Counts VI and VII must be dismissed because Plaintiffs have failed to state a claim upon which relief may be granted under Rule 12(b)(6).

A. The Court Lacks Subject Matter Jurisdiction Over Counts I – VI

1. Counts I, II, III

"It is axiomatic that the United States may not be sued without its consent and that the existence of consent is a prerequisite for jurisdiction." United States v. Mitchell , 463 U.S. 206, 212, 103 S.Ct. 2961, 77 L.Ed.2d 580 (1983). Under the APA, Congress has waived sovereign immunity over actions "seeking relief other than monetary damages and stating a claim that an agency or an officer or employee thereof acted or failed to act in an official capacity or under color of legal authority." 5 U.S.C. §...