United States Court of Appeals
For the First Circuit
No. 03-1990
UNITED PARCEL SERVICE, INC.,
UNITED PARCEL SERVICE, CO.,
Appellees, Plaintiffs,
v.
JUAN A. FLORES-GALARZA, Secretary of the Department of
the Treasury of the Commonwealth of Puerto Rico, in his
official capacity,
Appellant, Defendant.
APPEAL FROM THE UNITED STATES DISTRICT COURT
FOR THE DISTRICT OF PUERTO RICO
[Hon. Carmen Consuelo Cerezo, U.S. District Judge]
Before
Boudin, Chief Judge,
Torruella, and Howard, Circuit Judges.
Gerardo De Jesus Annoni, with whom Luis Sanchez-Betances, and
Sanchez-Betances & Sifre, P.S.C. were on brief, for appellant.
Ruth N. Borenstein, with whom Paul T. Friedman, Morrison &
Foerster, LLP, Pedro J. Manzano, and Fiddler Gonzalez & Rodriguez,
LLP were on brief, for appellees.
September 14, 2004
HOWARD, Circuit Judge. In an earlier chapter of this
ongoing litigation, United Parcel Service, Inc. and United Parcel
Service, Co. (collectively "UPS") sued to enjoin a statutory scheme
prohibiting an air carrier's delivery of packages in Puerto Rico
unless the carrier either demonstrated that the recipient had paid
an excise tax or prepaid the tax on the recipient's behalf. The
district court granted the injunction, concluding that the scheme
was preempted by federal law. United Parcel Service, Inc. v.
Flores-Galarza, 210 F. Supp.2d 33 (D.P.R. 2002). Puerto Rico's
Treasury Secretary appealed and we affirmed the central holding of
the district court's decision. United Parcel Service, Inc. v.
Flores-Galarza, 318 F.3d 323 (1st Cir. 2003). Seeking clarity on
the scope of the injunction, however, we remanded three discrete
issues to the district court for further consideration. The
district court ruled in favor of UPS on these issues, United Parcel
Service, Inc. v. Flores-Galarza, 275 F. Supp.2d 155 (D.P.R. 2003),
and the Secretary has again appealed.
The $14.24 Million Fine
Relying on our prior decision for factual background, we
turn directly to the three issues in dispute.1 First, the district
1
In an eleventh-hour reply brief, the Secretary argued that
certain conduct by UPS since the first appeal renders the
injunction moot. As the party claiming mootness, the Secretary
"bear[s] a heavy burden in attempting to establish its
applicability." Conservation Law Found. v. Evans, 360 F.3d 21, 24
(1st Cir. 2004)(internal quotation marks omitted). The materials
provided to us to support the Secretary's argument in this respect
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court invalidated the Secretary's $14.24 million administrative
fine against UPS, concluding that it had been imposed pursuant to
authority preempted by the Federal Aviation Administration
Authorization Act, 49 U.S.C. § 41713 (the "FAA Authorization Act").
We agree.
For just two business days in July 2001, the now-
preempted statutory regime was eliminated through legislation known
as Act 322, which required air carriers to provide "the minimum
information agreed as necessary in order for the Secretary to
proceed to collect the excise taxes, without reasonably interfering
in the ordinary course of business in interstate commerce"
(emphasis added). Subsequent legislation quickly restored the old
regime and UPS resumed its submission of detailed package
information to the Secretary. As documented in the record, the
parties agreed that UPS would provide certain limited information
regarding the packages delivered in Puerto Rico on the two days
that Act 322 was in effect (the "July 2001 deliveries"), namely the
recipient, sender, weight, and insurance value of each package.
As described in the declaration of a representative of
the Secretary, at no time did UPS agree to provide daily cargo
manifests, the more detailed records required under the old regime
fall far short of satisfying this burden of proof. We therefore
see no bar to our deciding the three issues raised in this second
appeal.
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that described the contents of the packages. UPS offered to
provide the cargo manifests as long as the Secretary agreed not to
claim in the pending litigation that UPS had waived any rights by
doing so. The Secretary did not agree to this condition and
ultimately fined UPS, citing enforcement authority that had been
part of the old regime.
The Secretary argues that the district court erred in
granting summary judgment because a genuine issue of material fact
existed as to whether the administrative fine was imposed for
failure to submit cargo manifests (also referred to as "shipping
manifests"). According to the Secretary, the fine was based on
UPS's failure to provide the information it agreed to produce
pursuant to Act 322. To the extent that the Secretary argues that
UPS promised daily cargo manifests for the July 2001 deliveries,2
this assertion is plainly contradicted by the record, including a
declaration of the Secretary's own representative. And insofar as
the Secretary contends that the fine was imposed for any reason
other than UPS's failure to produce cargo manifests (an obligation
2
The Secretary's argument in this respect is curiously
ambiguous. The Secretary refers without citation to evidence that
UPS agreed to provide "the information contained in the shipping
manifests" (emphasis added). The Secretary does not represent that
UPS promised the cargo manifests themselves, but leaves such a
suggestion hanging in the air. The information UPS did agree to
provide (i.e., recipient, sender, weight and insurance value)
undoubtedly would have been "contained in" detailed cargo
manifests, as the Secretary contends. But this cannot be construed
as a promise to produce the much more comprehensive manifests.
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imposed only under the now-preempted regime) we reject this
argument as inconsistent with the Secretary's prior representations
to this court. In his prior appeal, the Secretary argued in his
brief that:
UPS was imposed an administrative fine for its
failure to produce cargo manifests for the two
days Act No. 322 was in effect, as mandated by
the Secretary. This much is uncontroverted,
and is evidenced by the contemporaneous
correspondence between the parties leading to
the fine filed by [sic] UPS.
We conclude that the fine was imposed because UPS did not comply
with a demand for information that exceeded its legal obligations
to the Commonwealth. The Secretary’s arguments to the contrary,
including his discussion of unrelated federal record-keeping
regulations, are unavailing. We find no genuine dispute of
material fact precluding summary judgment.
The Secretary also contends that the district court did
not have jurisdiction to invalidate the fine because UPS did not
specifically ask for relief from the fine in its complaint (which
was filed months before the fine was imposed) or seek leave to
amend its complaint to address this issue. The district court
concluded that the fine controversy fell within the complaint’s
general request for relief from “any other statutes, regulations,
or other provisions that have the force and effect of law and
relate to the price, route, or service of interstate air carriers
transporting property into Puerto Rico.” The Secretary identifies
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no authority for the proposition that the district court erred in
so construing the language of the complaint and his remaining
arguments on this issue are either duplicative of arguments made
and rejected in the first appeal or unpersuasive.3 We affirm the
district court’s ruling setting aside the fine.
The Savings Clauses
The second issue before the district court was whether
two savings clauses of the FAA Authorization Act, 49 U.S.C. §§
41713(b)(4)(B)(i)-(ii), should limit the scope of the injunction.
The first clause preserves
the safety regulatory authority of a State
with respect to motor vehicles, the authority
of a State to impose highway route controls or
limitations based on the size or weight of the
motor vehicle or the hazardous nature of the
cargo, or the authority of a State to regulate
motor carriers with regard to minimum amounts
of financial responsibility relating to
insurance requirements and self-insurance
authorization.
49 U.S.C. § 41713(b)(4)(B)(i).
On remand, the Secretary asserted that several of the
enjoined statutes fell within this savings clause, and thus were
not preempted. The district court found that none of the
provisions the Secretary cited actually addressed motor vehicle
safety and that they therefore did not fall within this savings
3
For instance, the Secretary inexplicably argues for the first
time that UPS is not an air carrier. Cf. UPS, 318 F.3d at 335 n.18
(“[T]he Secretary does not deny that . . . UPS is an ‘air carrier’
within the meaning of the statute.”).
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clause. UPS, 275 F. Supp.2d at 159. The Secretary challenges this
finding, arguing that the clause quoted above is not limited to
motor vehicle safety or the prevention of motor vehicle accidents,
but instead preserves the states’ authority over safety issues
generally. He urges us to conclude that statutes that had required
carriers to, inter alia, keep documents and records required by the
Treasury Department, pay license fees, submit copies of their
corporate officers’ criminal records, and post a bond to secure
payment of penalties imposed by the Treasury Department, fall
within this savings clause because they are “directed at precluding
carriers from engaging or assisting in illegal conduct.” This
interpretation does not square with the plain language of §
41713(b)(4)(B)(i), which addresses the regulation of motor
vehicles, and the Secretary cites no authority that persuades us
otherwise.
The second savings clause preserves the right of states
to regulate “the transportation of household goods.” 49 U.S.C. §
41713(b)(4)(B)(ii). Household goods are defined at 49 U.S.C. §
13102(10),4 and the district court, properly relying on prior
4
The term "household goods", as used in
connection with transportation, means personal
effects and property used or to be used in a
dwelling, when a part of the equipment or
supply of such dwelling, and similar property
if the transportation of such effects or
property is--
(A) arranged and paid for by the householder,
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interpretations of the phrase by the Interstate Commerce
Commission, concluded that the transportation of household goods
generally refers to the services of moving companies. UPS, 275 F.
Supp.2d at 160. The Secretary disputes this interpretation as too
narrow, asking us to find that Puerto Rico’s regulatory authority
over UPS is not preempted because UPS transports packages
containing items that may be used in a home. But as described in
our earlier opinion, the enjoined scheme impermissibly affected
UPS’s prices, routes, and services in part because it required UPS
to identify the contents of the packages (a deviation from standard
procedures used for deliveries elsewhere in the United States) for
the purposes of calculating the excise tax. Any exception granting
UPS regulatory authority over those packages that contain household
goods would swallow the rule of preemption. See UPS, 275 F.
Supp.2d at 161 (“Forcing carriers to give special handling to all
packages containing goods used in a home . . . would resurrect the
unwieldy patchwork of state laws that Congress intended to
except such term does not include property
moving from a factory or store, other than
property that the householder has purchased
with the intent to use in his or her dwelling
and is transported at the request of, and the
transportation charges are paid to the carrier
by, the householder; or
(B) arranged and paid for by another party.
49 U.S.C. § 13102(10).
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eliminate through the [FAA Authorization Act].”). The fact that
the Secretary has not even identified particular statutory
provisions of the enjoined scheme that should survive preemption
(but apparently advocates for a general regulatory authority on the
basis of the type of packages UPS delivers) demonstrates that his
interpretation of the savings clause is unworkable.
The Licensing Requirement
The final issue on remand was whether 13 P.R. Laws Ann.
§ 9059, a provision requiring air carriers to pay an annual fee of
$2000 for a license and to display the license in public, should
have been included in the injunction. The fate of this section
warranted special attention, we concluded, because the district
court initially included § 9059 within the scope of the injunction
but later reinstated the provision without explanation. We also
noted that UPS had referenced § 9059 in its summary judgment
papers, but unlike other statutory provisions UPS claimed were
preempted, UPS had not expressly requested that the injunction
encompass § 9059 in its prayer for relief. UPS cross-appealed on
this issue, and we remanded to allow the district court an
opportunity to explain its reasoning and to affirm or modify the
injunction accordingly. On remand, the district court found that
§ 9059 was preempted. UPS, 275 F. Supp.2d at 161.
The Secretary argues that the Butler Act, 48 U.S.C. §
872, stripped the district court of jurisdiction to enjoin § 9059
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because it is merely a revenue-raising tax. The Butler Act
excludes from federal court jurisdiction any suit "for the purpose
of restraining the assessment or collection of a tax imposed by the
laws of Puerto Rico." 48 U.S.C. § 872. The district court
concluded that jurisdiction was proper because § 9059 was a
regulatory fee, not a tax. It accepted UPS’s argument that the
Secretary had conceded the regulatory nature of § 9059 when he
argued on remand that the provision was “part of the state safety
licensing scheme.” The district court’s ruling on subject matter
jurisdiction is subject to de novo review. See Bull HN Info. Sys.,
Inc. v. Hutson, 229 F.3d 321, 328 (1st Cir. 2000).
We do not read the language quoted by the district court
-- which appeared in the Secretary’s alternative argument that §
9059 could survive preemption under one of the savings clauses --
as an admission that § 9059 is merely regulatory in nature.
Indeed, the Secretary expressly argued against such a
characterization in the same filing on which the court relies. We
conclude that the district court’s stated basis for its finding is
insufficient.
While critical of the Secretary’s unsupported assertions
that the fee imposed by § 9059 is a tax, UPS has presented no
evidence to the contrary. As the party invoking federal
jurisdiction, UPS bore the burden of establishing its existence
once challenged by the Secretary. See Mangual v. Rotger-Sabat, 317
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F.3d 45, 56 (1st Cir. 2003); Bull HN Info. Sys., 229 F.3d at 328;
see also Marcus v. Kansas, 170 F.3d 1305, 1309 (10th Cir. 1999)
(“Because the jurisdiction of federal courts is limited, there is
a presumption against our jurisdiction, and the party invoking
federal jurisdiction bears the burden of proof.”) (internal
quotation marks and citation omitted)). UPS has not demonstrated
that the federal courts are empowered to enjoin the fee imposed by
§ 9059, and we therefore vacate the district court’s injunction as
to this aspect of the statute.
As to the requirement that the license be displayed, it
is not clear whether UPS has any objection to displaying the
license if it must pay the tax. If it does object, the parties can
address in the district court the questions whether the display
requirement is part of a tax collection mechanism and, if so,
whether the federal courts have jurisdiction to enjoin it -- issues
not briefed on this appeal -- and the district court can tailor the
injunction in accordance with the result. But even if the display
requirement were protected, Puerto Rico could not consistent with
federal law use non-display of the license to preclude UPS
deliveries in Puerto Rico.
The decision of the district court is affirmed in part
and vacated in part, and the matter is remanded for further
proceedings consistent with this opinion. Each side shall bear its
own costs.
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It is so ordered.
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