Shoes v. United States

718 F.3d 1370

RACK ROOM SHOES, Plaintiff–Appellant,andSkiz Imports LLC, Plaintiff–Appellant,andForever 21, Inc., Plaintiff–Appellant,

v.UNITED STATES, Defendant–Appellee.

Nos. 2012–1391, 2012–1392, 2012–1439.

United States Court of Appeals, Federal Circuit.

June 12, 2013.

Rehearing and Rehearing En Banc Denied Sept. 5, 2013.

John M. Peterson, Neville Peterson, LLP, of New York, NY, argued for plaintiff-appellant, Rack Room Shoes. With him on the brief were George W. Thompson, Russell A. Semmel and Richard F. O'Neill.

Damon V. Pike, The Pike Law Firm, P.C., of Decatur, GA, argued for plaintiff appellant, Forever 21, Inc. and Michael T. Cone, FisherBroyles, LLP, of New York, NY, argued for plaintiff appellant, Skiz Imports LLC.

Jeanne E. Davidson, Director, Commercial Litigation Branch, Civil Division, United States Department of Justice, of Washington, DC, argued for defendant-appellee. With her on the brief were Stuart F. Delery, Principal Deputy Assistant Attorney General, Reginald T. Blades, Jr., Assistant Director, Barbara S. Williams, Attorney in Charge, International Trade Field Office, and Aimee Lee, Senior Trial Counsel. Of counsel on the brief were Yelena Slepak, Attorney, Office of Assistant Chief Counsel, International Trade Litigation, United States Customs and Border Protection, of New York, N.Y. and Leigh Bacon, Attorney, Office of the General Counsel, United States Trade Representative, of Washington, DC.

Before MOORE, CLEVENGER, and REYNA, Circuit Judges.

REYNA, Circuit Judge.

In this case, we once again are faced with the question of what facts an importer must plead to state a claim that a tariff rate in the Harmonized Tariff Schedule of the United States (“HTSUS”) violates equal protection. Importers Rack Room Shoes (“Rack Room”), Skiz Imports LLC (“Skiz”), and Forever 21, Inc. (“Forever 21”) (collectively, “Importers”) brought suit in the Court of International Trade (“Trade Court”) alleging that various classifications in the HTSUS discriminated on the basis of age or gender in violation of the equal protection component of the Due Process Clause of the Fifth Amendment. The Trade Court dismissed these complaints for failure to state a claim. For the reasons that follow, we dismiss Skiz's complaint for lack of standing and we affirm the Trade Court's dismissal of Rack Room's and Forever 21's complaints for failure to state a claim.

Background

This case has its genesis in Totes–Isotoner Corp. v. United States, 594 F.3d 1346 (Fed.Cir.2010), and it is there that we begin. In Totes, an importer challenged a tariff classification on men's gloves. The Totes complaint alleged that the HTSUS assigned a rate of 14% ad valorem to men's gloves and 12.6% ad valorem for all other gloves, including women's and children's gloves. Complaint ¶¶ 9–11, Totes–Isotoner Corp. v. United States, 569 F.Supp.2d 1315 (Ct. Int'l Trade 2008) (No. 1:07–CV–00001), ECF No. 4 (“ Totes Complaint ”). Count I of the complaint alleged a claim of gender discrimination under the equal protection component of the Due Process Clause of the Fifth Amendment, stating that there was no exceedingly persuasive justification for assessing a higher tariff rate for men than for women. Id. ¶¶ 15–16. Count II alleged a similar claim for age discrimination, stating that there was no rational basis for charging a higher rate for men's gloves than for children's gloves. Id. ¶¶ 18–19.

The Trade Court dismissed the Totes complaint for failure to state a claim, and this court affirmed. See Totes, 594 F.3d at 1349. In so doing, we held that “because the challenged provisions of the HTSUS are not facially discriminatory, Totes [was] required to allege facts sufficient to establish a governmental purpose to discriminate.” Id. at 1358. We recognized that the Totes complaint alleged that men had been disparately impacted, but observed that “[i]t is well established that disparate impact standing alone does not establish a violation of equal protection.” Id. at 1356. In particular, the complaint needed “to allege facts sufficient to establish a governmental purpose to discriminate between male and female users.” Id. at 1358.

After certiorari was denied in Totes, the Trade Court allowed other importers, whose complaints had been suspended pending the outcome in Totes, to amend their claims to assert disparate impact and purposeful discrimination. Rack Room, Skiz, and Forever 21 each added additional allegations to their complaints in an effort to show discriminatory purpose.

In its complaint, Rack Room alleges that it imports footwear that is classified into various subheadings of HTSUS headings 6403 and 6406. Like the classifications at issue in Totes, the subheadings for these categories break down into footwear for “men, youth, and boys” and footwear for “other persons.” For six of these subheadings, men's footwear is assessed at a rate of 1.5% less than women's footwear. For one subheading, women's footwear is assessed at a rate of 1.5% less then men's. In a final subheading, women's footwear is assessed at a rate of 4.3% more than men's. Based on these tariffs, Rack Room argues that the HTSUS discriminates on the basis of gender, charging higher tariffs to women's entries, and on age, charging higher tariffs to other persons (which includes only adult women) than to youths (which includes girls).

Rack Room's complaint is more detailed than the Totes complaint. For example, Rack Room specifically alleged that “[f]ootwear for men are generally worn by men; footwear for women are generally worn by women,” and that the resulting higher duty assessments based on gender or age burdened importers, sellers, and purchasers of the goods. In a section entitled “Congressional Intent,” Rack Room asserts that the HTSUS “allows for the differentiation of goods on the basis of standards that do not involve protected classes of persons, such as differentiation of goods based on differences in composition of materials, weight of materials, size of the article, or function of the article.” It claims that “Congress intended to discriminate by directing and implementing classifications based on gender when it could have used other non-gender factors to distinguish or to separate merchandise for duty assessment purposes....” Complaint ¶ 31, Rack Room Shoes v. United States, 821 F.Supp.2d 1341 (Ct. Int'l Trade 2012) (No. 1:07–CV–404), ECF No. 2 (“ Rack Room Complaint ”).

Forever 21 is an importer and retailer of men's and women's apparel and footwear. It imported and paid duties on goods classified in several dozen HTSUS headings. Roughly half of these classifications assess higher rates on men's goods; the remaining classifications assess higher rates on women's goods. Forever 21 alleged that “[u]pon information and belief, the additional duties on merchandise imported for men or women, as the case may be, are imposed by the government with the intention and result that the people primarily wearing such merchandise are discriminatorily burdened because of their gender.” Forever 21 made a similar representation “upon information and belief” regarding classifications that discriminated based on age. In addition, Forever 21 attached two pages from the explanatory notes to the Tariff Classification Study (1960) (“TCS”) observing that the economic justification of age- and gender-based classifications of McKay-sewed leather footwear was questionable.

Skiz was incorporated for the purpose of mounting an equal protection challenge against the HTSUS. Skiz imported and paid duties on gloves, apparel and footwear falling within several classifications. It did not, however, sell these goods to customers. In its complaint, Skiz used the same “information and belief” language employed by Forever 21 and cited the same two pages of the TCS.

The Trade Court consolidated the Skiz and Forever 21 cases into the instant case. Consolidation, Test Case Designation & Scheduling Order at 1, Rack Room, 821 F.Supp.2d 1341 (No. 1:07–404). In the same order, it stayed 124 additional suits resting on the same legal basis, as well as “all subsequently filed cases that challenge the constitutionality of Customs' assessment of different duty rates on same or similar products based on age or gender.” ¹See id. at 2, 4–7. The Trade Court then granted the government's motion to dismiss for failure to state a claim and denied the subsequent motion for reconsideration. We have jurisdiction under 28 U.S.C. § 1295(a)(5).

Discussion

Rack Room argues that the Trade Court erred in concluding that Rack Room failed to allege facts sufficient to state a claim because the HTSUS is facially discriminatory and because Congress's failure to choose nondiscriminatory alternatives is evidence of discriminatory intent. Forever 21 and Skiz argue that the Trade Court erred in concluding that certain historical evidence relied upon by both parties did not give rise to a plausible inference of discriminatory intent.

The government responds that the HTSUS is not facially discriminatory, that Importers have not adequately pleaded disparate impact, and that Importers have not shown that the HTSUS does not withstand rational basis scrutiny. The government also argues that Importers are without standing to challenge the HTSUS.

“We apply a de novo standard of review to ... a trial court's dismissal for failure to state a claim for which relief can be granted.” Sioux Honey Ass'n v. Hartford Fire Ins. Co., 672 F.3d 1041, 1049 (Fed.Cir.2012), cert. denied,––– U.S. ––––, 133 S.Ct. 126, 184 L.Ed.2d 28 (2012). Standing is a question of law which we review de novo. Totes, 594 F.3d at 1350.

I

We begin with the government's argument that Importers lack third party standing. Importers each respond that this case is identical to Totes, in which this court found that third party standing was proper because the importers' standing was “by its nature, derivative.” Totes, 594 F.3d at 1352 n. 2. Skiz additionally contends that it...