U.S. Auto Parts Network, Inc. v. United States

307 F.Supp.3d 1373

U.S. AUTO PARTS NETWORK, INC., Plaintiff,

v.UNITED STATES, United States Department of Homeland Security, Secretary Kirstjen Nielsen, and Chief Frederick J. Eisler, III, Defendants.

Slip Op. 18–38

Court No. 18–00068

United States Court of International Trade.

April 6, 2018

Barry F. Irwin and Reid P. Huefner, Irwin IP LLC, of Burr Ridge, IL, for Plaintiff U.S. Auto Parts Network, Inc. With them on brief were Iftekhar A. Zaim and Chris Eggert.

Beverly A. Farrell and Monica P. Triana, Trial Attorneys, Commercial Litigation Branch, Civil Division, U.S. Department of Justice, of New York, N.Y., and Amy M. Rubin, Assistant Director, for Defendants United States, U.S. Department of Homeland Security, Secretary Kirstjen Nielsen, and Chief Frederick J. Eisler, III. With them on brief was Chad A. Readler, Acting Assistant Attorney General. Of Counsel were Ed Maurer and Yelena Slepak, U.S. Customs and Border Protection.

MEMORANDUM AND ORDER

Choe–Groves, Judge:

Plaintiff U.S. Auto Parts Network, Inc. ("U.S. Auto" or "Plaintiff") is a company that sells, among other products, vehicle grilles and associated parts for vehicle repairs ("Repair Grilles"). Plaintiff commenced this action to obtain judicial review of the decision made by U.S. Customs and Border Protection ("Customs") to impose an enhanced single entry bond requirement for each of Plaintiff's shipments into the United States in the amount of three times the shipment value ("SEB Requirement"). See Am. Verified Compl. ¶ 9, Apr. 5, 2018, ECF No. 17 ("Compl."). Before the court is the Plaintiff's Motion for Temporary Restraining Order. See Pl.'s Mot., Apr. 2, 2018, ECF No. 5; Mem. P. & A. Supp. U.S. Auto's Appl. TRO, Apr. 2, 2018, ECF No. 6 ("Pl.'s Mem."). For the reasons explained below, the court grants in part and denies in part Plaintiff's motion.

BACKGROUND

Section 42 of the Lanham Act forbids the importation and entry of merchandise into the United States that copies or simulates the name of a domestic manufacturer or registered trademark in such a way that causes confusion to the public regarding the true origins of the product. See 15 U.S.C. § 1124 (2012).¹ Under Section 526 of the Tariff Act of 1930,² "[a]ny such merchandise bearing a counterfeit mark³ ... imported into the United States in violation of" Section 42 of the Lanham Act shall be seized by Customs officers and subject to forfeiture. See 19 U.S.C. § 1526(e). Customs officers have the additional authority to require "bonds or other security ... they[ ] may deem necessary for the protection of the revenue or to assure compliance with any provision of law, regulation, or instruction which the Secretary of the Treasury or the Customs Service may be authorized to enforce." Id. § 1623(a). Customs' own regulation and directive provide further guidance as to how the agency determines the amount of a bond. See 19 C.F.R. § 113.13 (2018) ;⁴ Compl. Ex. E, Apr. 5, 2018, ECF No. 17–5.

U.S. Auto received notice of the enhanced bond in an email from Customs on March 7, 2018. See Compl. Ex. B, Apr. 5, 2018, ECF No. 17–2. According to the correspondence, because U.S. Auto "had over 30 shipments containing" merchandise in violation of 19 U.S.C. § 1526(e), "a single entry bond at three times the value of the shipment [will be] required on all future shipments to adequately ensure compliance with applicable Intellectual Property Rights laws and the prohibition on importation of counterfeit or copyrighted goods. Any future entries without a single entry bond for three times the shipment value will be rejected." Id. Customs imposed the treble bond requirement pursuant to 19 C.F.R. § 113.13(c) and (d). See id.

U.S. Auto commenced this action on April 2, 2018. See Summons, Apr. 2, 2018, ECF No. 1; Compl., Apr. 2, 2018, ECF No. 2. The complaint alleges violations of the Administrative Procedure Act, as well as the Fifth and Eighth Amendments of the United States Constitution. See Compl. ¶¶ 22. Plaintiff filed its Motion for Temporary Restraining Order concurrently, seeking relief from Customs' treble bond requirement. See Pl.'s Mot. TRO, Apr. 2, 2018, ECF No. 5. Defendants (collectively, "Government") filed a response. See Defs.' Resp. Pl.'s Mot. TRO, Apr. 5, 2018, ECF No. 15 ("Defs.' Resp."). The court held a hearing by telephone conference with the Parties on April 6, 2018. See Teleconference, Apr. 6, 2018, ECF No. 19.

DISCUSSION

I. Subject Matter Jurisdiction

The court must first determine whether it possesses subject matter jurisdiction over this action. Plaintiff asserts that the court has jurisdiction over all currently-imported goods subject to the SEB Requirement under 28 U.S.C. § 1581(i).⁵ See Compl. ¶ 24; Pl.'s Mem. 25–26. Plaintiff also contends that the court has jurisdiction over all prospective imports subject to the SEB Requirement under 28 U.S.C. § 1581(h) or, in the alternative, 28 U.S.C. § 1581(i). See Compl. ¶ 24; Pl.'s Mem. 26.

The court reviews challenges to Customs' determinations regarding bond sufficiency under 28 U.S.C. § 1581(i)(4). See, e.g., Harmoni Int'l Spice, Inc. v. United States, 41 CIT ––––, ––––, 211 F.Supp.3d 1298, 1306 (2017) (asserting jurisdiction under 28 U.S.C. § 1581(i)(4) over action involving Customs' requirement that company post single bond at a rate based on antidumping duty rate preliminarily assigned by the U.S. Department of Commerce); Seafood Exps. Ass'n of India v. United States, 31 CIT 366, 375, 479 F.Supp.2d 1367, 1376 (2007) (asserting jurisdiction over challenge to Customs' bond directive pursuant to 28 U.S.C. § 1581(i)(4)"as it relates to § 1581(i)(1) and (i)(2)"). The court exercises subject matter jurisdiction, therefore, over the entirety of this action pursuant to 28 U.S.C. § 1581(i)(4).

II. Plaintiff's Motion for Temporary Restraining Order

A. Legal Standard

Rule 65(b) of the Rules of this Court allows for the issuance of a temporary restraining order in an action. USCIT R. 65(b). The court considers four factors when evaluating whether to grant a temporary restraining order or preliminary injunction. See Winter v. Nat. Res. Def. Council, Inc., 555 U.S. 7, 20, 129 S.Ct. 365, 172 L.Ed.2d 249 (2008) ; see also Silfab Solar, Inc. v. United States, Slip Op. 18–15, 296 F.Supp.3d 1295, 1299–300, 2018 WL 1176619, at *3 (CIT Mar. 5, 2018) (recognizing that the standard for evaluating a motion for a temporary restraining order and a motion for preliminary injunction are the same). These factors are: (1) whether the party will incur irreparable harm in the absence of such order or injunction; (2) that the party is likely to succeed on the merits of the action; (3) that the balance of hardships favors the imposition of temporary equitable relief; and (4) that the temporary restraining order or injunction is in the public interest. See Winter, 555 U.S. at 20, 129 S.Ct. 365 ; see also Wind Tower Trade Coal. v. United States, 741 F.3d 89, 95 (Fed. Cir. 2014). No one factor is " ‘necessarily dispositive,’ because ‘the weakness of the showing regarding one factor may be overborne by the strength of the others.’ " Belgium v. United States, 452 F.3d 1289, 1292–93 (Fed. Cir. 2006) (citing FMC Corp. v. United States, 3 F.3d 424, 427 (Fed. Cir. 1993) ). The factors should be weighed according to a "sliding scale," however, which means that a greater showing of irreparable harm in Plaintiff's favor lessens the burden on Plaintiff to show a likelihood of success on the merits. See id. (internal citations omitted). The court will evaluate each of the four factors in turn.

B. Irreparable Harm

Plaintiff must show that it will suffer irreparable harm absent a grant of a temporary restraining order. See Winter, 555 U.S. at 20, 129 S.Ct. 365. Irreparable harm includes "a viable threat of serious harm which cannot be undone." Zenith Radio Corp. v. United States, 710 F.2d 806, 809 (Fed. Cir. 1983) (internal citations omitted). An allegation of financial loss alone, generally, does not constitute irreparable harm if future money damages can provide adequate corrective relief. See Sampson v. Murray, 415 U.S. 61, 90, 94 S.Ct. 937, 39 L.Ed.2d 166 (1974). Bankruptcy or substantial loss of business may constitute irreparable harm, however, because "loss of business renders a final judgment ineffective, depriving the movant of meaningful judicial review." Harmoni Int'l Spice, Inc., 41 CIT at ––––, 211 F.Supp.3d at 1307 (citing Doran v. Salem Inn, Inc., 422 U.S. 922, 932, 95 S.Ct. 2561, 45 L.Ed.2d 648 (1975) ). "Price erosion, loss of goodwill, damage to reputation, and loss of business opportunities" may also constitute irreparable harm. Celsis In Vitro, Inc. v. CellzDirect, Inc., 664 F.3d 922, 930 (Fed. Cir. 2012) (internal citations omitted).

U.S. Auto claims that the SEB Requirement threatens the viability of its business. See Pl.'s Mem. 19–21. U.S. Auto receives an average of forty shipments per week, each having a commercial value of approximately $42,000. See Am. Decl. Aaron Coleman Supp. U.S. Auto Mem. Supp. Appl. TRO ¶ 6, Apr. 5, 2018, ECF No. 18 ("Coleman Decl."). Customs' new instructions require a bond valuing roughly $125,000 per shipment, which equates to an estimated $5 million per week. See id. ¶ 9. U.S. Auto asserts that it has not been able to find a surety that will cover the bond requirement without full collateral, and the business cannot sustain itself on domestically-sourced inventory alone. See id. ¶¶ 10, 16. "Without the ability to import any merchandise ... in a short period of time, U.S. Auto will no longer be able to continue in business and will likely be forced to cease all operations and liquidate the company." Id. ¶ 32. Plaintiff also contends that its inability to pay the bond requirement will harm its supply chain, cause inventory shortfalls, damage its relations with business partners, and lead to a loss of reputation and goodwill. See id. ¶¶ 18–29.

The Government contests Plaintiff's proffered support as "speculative, vague and/or unsupported statements." D...