Swisher International, Inc. v. United States

Slip Op. 01-144

UNITED STATES COURT OF INTERNATIONAL TRADE

____________________________________
:
SWISHER INTERNATIONAL, INC., :
:
Plaintiff, :
:
v. : Court No. 95-03-00322
:
UNITED STATES, :
:
Defendant. :
____________________________________:
____________________________________
:
SONY ELECTRONICS, INC., and, :
ARBON STEEL & SERVICE CO., INC., :
:
Plaintiffs, :
:
v. : Court No. 98-07-02438
:
UNITED STATES, :
:
Defendant. :
____________________________________:

[Summary judgment for defendant.]

Dated: December 11th, 2001

McKenna & Cuneo, L.L.P. (Peter Buck Feller, Daniel G. Jarcho, and Joseph F. Dennin)
for plaintiff Swisher.

Galvin & Mlawski (John J. Galvin) for plaintiffs Sony Electronics, Inc., and Arbon Steel
& Service Co., Inc.

Robert D. McCallum, Jr., Assistant Attorney General, David M. Cohen, Director,
Commercial Litigation Branch, Civil Division, United States Department of Justice (Jeanne E.
Davidson, Todd M. Hughes, and Jeffrey A. Belkin), Richard McManus Office of the Chief
Counsel, United States Customs Service, of counsel, for defendant.
COURT NO. 95-03-00322 PAGE 2

Coudert Brothers (Steven H. Becker and Paul A. Horowitz) for amici HMT Plaintiffs’
Steering Committee.

Baker & McKenzie (Susan G. Braden, William D. Outman, Kevin M. O’Brien, Teresa A.
Gleason, Michael E. Murphy) for amicus IBM.

OPINION

RESTANI, Judge: This action is before the court on cross-motions for summary

judgment pursuant to USCIT R. 56. The sole issue is whether plaintiffs are entitled to

prejudgment interest on fees paid under the export provision of the Harbor Maintenance Tax

(“HMT”).

Jurisdiction

This court has jurisdiction pursuant to 28 U.S.C. § 1581(a) for claims based on protest of

refund denials. See Swisher Int’l, Inc. v. United States, 205 F.3d 1358, 1364 (Fed. Cir.2000),

cert. denied, 581 U.S. 1036 (2000). The court has jurisdiction under 28 U.S.C. 1581(i) for

claims not arising from administrative proceedings. See United States Shoe Corp. v. United

States, 114 F.3d 1564, 1570 (Fed. Cir. 1997).

Standard of Review

Summary judgment is appropriate when “the pleadings, depositions, answers to

interrogatories, and admissions on file, together with the affidavits, if any, show that there is no

genuine issue as to any material fact and the moving party is entitled to judgment as a matter of

law.” USCIT R. 56(c).
COURT NO. 95-03-00322 PAGE 3

Background

The HMT is an ad valorem tax on commercial cargo involved in “any port use.” See 26

U.S.C. § 4461(a) (1996). In United States Shoe Corp. v. United States, 19 CIT 1284, 1289, 907

F. Supp. 408, 413 (1995), the court held that the HMT, as applied to exports, violated the Export

Clause of the Constitution. See U.S. Const., Art. I, § 9, cl. 5. The court later awarded judgment

for plaintiffs in the form of a refund of the principal amount paid “together with interest.” See

United States Shoe Corp. v. United States, 19 CIT 1413, 1413, 924 F. Supp. 1191, 1191 (1995).

The court subsequently noted that the question of interest was “not a matter without

controversy and it cannot be resolved as a simple clerical matter.” U.S. Shoe, 20 CIT 206, 207

(1996). Although the court called for additional briefing on the question of whether exporters

may recover interest, the U.S. Customs Service (“Customs”) filed a notice of appeal from the

court’s earlier decision on the constitutional issue. As a result, the court’s final order awarding

interest in U.S. Shoe was not addressed on appeal. The CIT’s decision holding the HMT

unconstitutional was affirmed by the Federal Circuit, 114 F.3d 1564 (Fed. Cir. 1997), and by the

U.S. Supreme Court, 523 U.S. 360 (1998).

After the Supreme Court’s decision in U.S. Shoe, the CIT developed a test case

procedure to resolve the remaining issues surrounding the HMT, including the award of

prejudgment interest. See IBM v. United States, No. 94-10-00625, slip op. 98-78, WL 325156

(Ct. Int’l Trade June 17, 1998), was selected as the test case to determine whether prejudgment

interest should be awarded on HMT refunds. In IBM, the CIT entered judgment for plaintiff,

ordered a refund of the principal paid, and adopted its prior position awarding interest. See id.

On appeal, the Federal Circuit reversed the CIT’s award of interest, holding that the statutory
COURT NO. 95-03-00322 PAGE 4

provisions in question did not provide the necessary authorization to award interest. See IBM v.

United States, 201 F.3d 1367, 1369 (Fed. Cir. 2000), cert. denied, 531 U.S. 1185 (2001).

Various plaintiffs filed motions seeking additional proceedings on the issue of

prejudgment interest. Because the Federal Circuit had only addressed statutory authorization for

interest in IBM, plaintiffs Sony Electronics, Inc., and Arbon Steel & Service Co. Inc.

(“Sony/Arbon”) were granted leave to prosecute a complaint asserting various constitutional

bases for the award of prejudgment interest.1 Sony/Arbon argues that plaintiffs are entitled to

interest under the Export Clause, the Takings Clause of the Fifth Amendment, the Fifth

Amendment Due Process Clause, and under rights guaranteed by the Ninth and Tenth

Amendments. Swisher International, Inc. (“Swisher”) subsequently filed a motion for entry of

judgment in which Swisher asserts similar constitutional claims as well as a statutory claim

under 19 U.S.C. § 1505(b),2 that Swisher argues was not addressed by the Federal Circuit in

IBM.

Discussion

The federal government is immune from an award of interest absent an express waiver of

sovereign immunity. See Library of Congress v. Shaw, 478 U.S. 310, 311 (1986); see also IBM,

201 F.3d at 1370. “Apart from constitutional requirements, in the absence of specific provision

by contract or statute, or ‘express consent ... by Congress,’ interest does not run on a claim

against the United States.” Shaw, 478 U.S. at 317 (quoting United States v. Louisiana, 446 U.S.

1
Sony Electronics, Inc., v. United States was consolidated with Arbon Steel & Service
Co. Inc., v. United States; No. 98-10-02987.
2
The “new” statutory argument is limited to the claims falling under 28 USC § 1581(a),
administrative protest denial jurisdiction.
COURT NO. 95-03-00322 PAGE 5

253, 264-265 (1980), quoting Smyth v. United States, 302 U.S. 329, 353 (1937)). Swisher first

argues that 19 U.S.C. § 1505(b) provides the express consent necessary to award Plaintiffs

prejudgment interest here.

A. Section 1505(b)

The Harbor Maintenance Tax does not expressly authorize the payment of interest on

HMT refunds. See IBM, 201 F.3d at 1371. Express consent may, however, be found

“elsewhere.” See id. (analyzing customs and internal revenue tax provisions to determine

whether express consent exists). 26 U.S.C. § 4462(f) requires that all administrative and

enforcement provisions of customs laws and regulations apply to the HMT as if it were a

customs duty. See IBM, 201 F.3d at 1371 (“. . . even though the HMT is codified as an excise

tax and is part of the Internal Revenue Code, Congress intended the administration and

enforcement of the tax to be treated as if the tax was a customs duty.”). Because the HMT is

treated as a customs duty, Swisher argues that the express consent necessary to award interest

can be found in 19 U.S.C. § 1505(b), the administrative provision regarding payment and refund

of customs duties.

Section 1505(b) provides, in part, for the refund of excess duties, with interest, upon

liquidation or reliquidation. 19 U.S.C. § 1505(b).3 Swisher argues that because § 1505(b)

3
19 U.S.C. § 1505(b) reads:

The Customs Service shall collect any increased or additional duties and fees due,
together with interest thereon, or refund any excess moneys deposited, together with
interest thereon, as determined on a liquidation or reliquidation. Duties, fees, and interest
determined to be due upon liquidation or reliquidation are due 30 days after issuance of
the bill for such payment. Refunds of excess moneys deposited, together with interest
thereon, shall be paid within 30 days of liquidation or reliquidation.
COURT NO. 95-03-00322 PAGE 6

provides for an award of interest on refunds of excess monies deposited to pay duties, it should

be construed to allow for an award of interest on refunds of the monies deposited to pay the

HMT, which must be treated as duty under § 4462. The principal problem is that § 1505(b) is

not designed to apply to the HMT.

The interest provision in §1505(b) applies where a refund has been determined after a

liquidation or reliquidation. “It is clear in order for Customs to be liable for interest, a refund

must be ‘determined on a liquidation or reliquidation.’ Indeed, under the statute it is a

liquidation or reliquidation which triggers interest liability.” Dal-Tile Corp. v. United States, 116

F. Supp. 2d 1309, 1314 (Ct. Int’l Trade 2000); see also Travenol Labs., Inc. v. United States, 118

F.3d 749 (Fed. Cir. 1997), 753 n. 5 (the “event that gives rise to interest liability is liquidation or

reliquidation”); Novacor Chem. Inc. v. United States, 171 F.3d 1376, 1382 (Fed. Cir. 1999)

(reliquidation “is the triggering event in a dispute surrounding an award of interest”).

Under 19 C.F.R. § 159.1, liquidation is defined as the final computation of the duties or

drawback accruing on an entry. “Liquidation (or reliquidation), therefore, determines whether

there has been an overpayment or underpayment, and thus defines the basis upon which interest

might be due.” Travenol, 118 F.3d at 753. There has been no liquidation or reliquidation to

trigger § 1505(b) here. Swisher argues, however, that Customs’ initial denial of its refund

request was effectively a liquidation and a new determination is equivalent to a reliquidation,

thus triggering the interest provisions of § 1505(b), and distinguishing its procedural posture

from that of the IBM plaintiffs, who did not seek an administrative decision from Customs.
COURT NO. 95-03-00322 PAGE 7

In IBM, the court rejected the argument that language regarding “liquidation” could be

interpreted to include other actions by Customs. 201 F.3d 1367. The court looked to the actual

purpose of § 1505(c),4 which describes specifically how interest is determined:

On its face, the statute contemplates an entirely different factual scenario from the one
before us. However, amici suggest that by substituting the exporter for the “importer of
record,” the HMT quarterly report for the “entry,” and Customs’ acceptance of the HMT
payment for “liquidation,” we can apply § 1505(c) to provide interest on HMT refunds.
We are without power to rewrite a Congressional enactment to make it fit a case for
which it was clearly not intended, no matter how compelling the case, particularly in
light of the Supreme Court’s mandate that Congress must expressly consent to an award
of interest. See Shaw, 478 U.S. at 314. Accordingly, § 1505(c) does not authorize
interest on HMT refunds.

IBM, 201 F.3d at 1374 (emphasis added). For precisely the same reason, this court is prohibited

from rewriting § 1505(b).

The basic purpose of liquidation and reliquidation is to finalize duties owed, allow parties

to protest the classification or valuation of goods and allow a remedy for both underpayment and

overpayment. See Travenol, 118 F.3d at 753. Swisher wants HMT payments to be equated to

customs duties, but does not and could not argue that it overpaid an otherwise valid customs duty

because its goods were improperly classified or valued and is, therefore, entitled to a refund of

4
19 U.S.C. § 1505(c) reads as follows:

Interest assessed due to an underpayment of duties, fees, or interest shall accrue, at a rate
determined by the Secretary, from the date the importer of record is required to deposit
estimated duties, fees, and interest to the date of liquidation or reliquidation of the
applicable entry or reconciliation. Interest on excess moneys deposited shall accrue, at a
rate determined by the Secretary, from the date the importer of record deposits estimated
duties, fees, and interest or, in a case in which a claim is made under section 1520(d) of
this title, from the date on which such claim is made, to the date of liquidation or
reliquidation of the applicable entry or reconciliation. The Secretary may prescribe an
alternative mid-point interest accounting methodology, which may be employed by the
importer, based upon aggregate data in lieu of accounting for such interest from each
deposit data provided in this subsection.
COURT NO. 95-03-00322 PAGE 8

the difference including interest. Such a claim would be properly asserted under § 1505(b).

Instead, Swisher argues that any and all HMT payments should be construed as overpayments of

an invalid customs duty, and, therefore, it is entitled to a refund of the entire amount with

interest, even though Customs did not improperly classify or value goods.5 This statute, like

§ 1505(c), contemplates an entirely different factual scenario than the one before the court. It

seems clear that § 1505(b) was not created to provide recourse for an unconstitutional tax but

was merely intended to remedy mistaken customs classifications and valuations. The court

would have to stretch the meaning of its language in a way not permitted by the court in IBM to

provide the remedy that Swisher suggests, and such judicial manipulation was precisely the

focus of IBM.6

Moreover, if the court were to find that HMT refund decisions were the functional

equivalent of a liquidation, the court would not only rewrite § 1505(b), but would necessarily

alter the meaning of § 1505(c) as well. Section 1505(c) defines the period during which interest

runs when a liquidation or reliquidation has determined that a refund is due. The period is

between the date of the duty deposit until the date of entry liquidation or reliquidation. Because

the two sections work hand in hand, the meaning of § 1505(c) would also change to read that the

time of payment of the HMT, like the time of deposit of duties, marks the time at which interest

5
While certain “fees” may be a liquidated and refunded under § 1505(b), it is clear that
these are not HMT payments but other fees paid by importers in addition to duties that are part
of the duty liquidation process. Swisher argues that it is the equivalence of “customs duties” and
HMT, not these miscellaneous fees and HMT, that is required by § 4462(f).

6
In IBM, the court recognized that 26 U.S.C. § 4462(f) provided for the HMT payments
to be treated as customs duties for administrative and enforcement purposes, but still declined to
substitute new terms for the statutory interest language in order to allow interest. See IBM, 201
F.2d at 1371-74.
COURT NO. 95-03-00322 PAGE 9

begins to run. The Federal Circuit has plainly rejected such that interpretation of § 1505(c). See

IBM, 201 F.3d at 1374.7 Whether or not a refund denial is like an erroneous liquidation, the

HMT payment is not a “duty” “deposit” paid on an “entry” by an “importer of record.” Because

the court is prohibited from rewriting § 1505(c), it is necessarily prohibited from rewriting

§ 1505(b).

Federal courts are required to strictly construe waivers of sovereign immunity. Shaw,

478 U.S. at 318.

“[T]here can be no consent by implication or by use of ambiguous language. Nor can an
intent on the part of the framers of a statute or contract to permit the recovery of interest
suffice where the intent is not translated into affirmative statutory or contractual terms.
The consent necessary to waive the traditional immunity must be express, and it must be
strictly construed.”

United States v. N.Y. Rayon Importing Co., 329 U.S. 654, 659 (1947). Accordingly, the court

must find against awarding interest even where there is a compelling public policy to do so.

Shaw, 478 U.S. at 318. This principle and the holding in IBM compel the court to find that §

1505(b) does not provide the express waiver of sovereign immunity necessary to award

prejudgment interest on HMT export payments.

B. Export Clause

In Shaw, the Supreme Court acknowledged that “constitutional requirements” may

permit the award of interest against the federal government in the absence of an express statutory

or contractual waiver. 478 U.S. at 317. Plaintiffs argue that because the Export Clause is an

“unqualified prohibition” on export taxes, see U.S. Shoe, 523 U.S. at 368, the remedy for a

violation of the Export Clause necessarily includes a refund with interest. In Cyprus Amax Coal

7
HMT payments are not “deposits” within the meaning of § 1505(c), which become final
upon liquidation.
COURT NO. 95-03-00322 PAGE 10

Co. v. United States, 205 F.3d 1369, 1373 (Fed Cir. 2000), the court recognized that the Export

Clause “provides a cause of action with a monetary remedy,” without independent statutory

authorization. That does not equate, however, to a waiver of sovereign immunity for interest

claims.

The Just Compensation Clause of the Fifth Amendment, also referred to as the Takings

Clause, is the only provision of the Constitution that the U.S. Supreme Court has found to

contain a clear waiver of sovereign immunity authorizing prejudgment interest. See, e.g., Shaw,

478 U.S. at 317; Smyth, 302 U.S. at 353; U.S. v. Alcea Band of Tillamooks, 341 U.S. 48, 49

(1951); Boston Sand & Gravel v. U.S., 278 U.S. 41, 47 (1928); Tillson v. U.S., 100 U.S. 43, 47

(1879). In Shaw, the Supreme Court implied that this “constitutional requirement” exception

arises only in a taking under the Fifth Amendment. 478 U.S. 310, 317 n.5 (cites omitted). In

fact, Plaintiff Sony quotes Merchants Matrix Cut Syndicate, Inc. v. U.S., 284 F.2d 456 (7th Cir.

1960) for the proposition that “with the exception of just compensation claims under the Fifth

Amendment, interest is not recoverable against the United States in the absence of an express

provision to the contrary.” As a matter of first impression, Plaintiffs ask the court to recognize a

new waiver of sovereign immunity under the Export Clause.

Plaintiffs cite to Hatter v. United States, 38 Fed. Cl. 166, 182 (1997) (“Hatter VI”), for

the proposition that the court may look beyond the Just Compensation Clause to find a

constitutional waiver of sovereign immunity. In Hatter v. United States, 64 F.3d 647 (Fed.

Cir.1995) (“Hatter IV”), the Federal Circuit held that assessing a social security tax for the first

time on sitting federal judges gave rise to an action under the Compensation Clause of Article

III. The Federal Circuit remanded the matter to the Court of Federal Claims to calculate
COURT NO. 95-03-00322 PAGE 11

damages. On remand, the Court of Federal Claims held that the remedy included interest

because Article III, much like the Just Compensation Clause of the Fifth Amendment, created an

affirmative requirement to pay and, therefore, the traditional rule against interest did not apply.

See Hatter VI, 38 Fed. Cl. at 182-83 . Plaintiffs argue that because Swisher’s claim, like Hatter

VI, arises directly under the Constitution, the Export Clause requires an award of interest. The

Federal Circuit, however, never addressed on appeal whether the Compensation Clause

contained the necessary waiver of sovereign immunity and, therefore, there is no binding

precedent before this court expanding the traditional rule.8 Even if the court were to accept

Hatter VI’s view of the Compensation Clause of Article III, Hatter VI does not provide the

answer here.

Interest does not attach merely because a claim arises under the Constitution. It is the

unique language of the Just Compensation Clause of the Fifth Amendment which requires

prejudgment interest. See, e.g., Monangahela Navigation Co. v. United States, 148 U.S. 312,

325-26 (1893). While the Export Clause may be interpreted as money-mandating, see Cyprus

Amax, 205 F.3d at 1373, it does not contain express language which requires that the

8
The 1997 Court of Federal Claims’ decision in Hatter was one of many. See Hatter v.
United States, 21 Cl.Ct. 786 (1990) (“Hatter I”), rev’d, 953 F.2d 626 (Fed.Cir.1992) (“Hatter
II”), on remand, 31 Fed.Cl. 436 (1994) (“Hatter III”), rev’d, 64 F.3d 647 (Fed.Cir.1995) (“Hatter
IV”), aff’d, 519 U.S. 801 (1996) (“Hatter V”), on remand, 38 Fed.Cl. 166 (1997) (“Hatter VI”).
After the Court of Federal Claims awarded interest in Hatter VI, the Federal Circuit reversed and
remanded the matter on a different issue. See Hatter v. U.S., 85 F.3d 1356 (Fed Cir. 1999)
(“Hatter VII”). The Hatter VII court did not address interest. That decision was later vacated
and the opinion withdrawn so that the court could hear the matter en banc. See Hatter v. United
States, 199 F.3d 1316 (Fed. Cir. 1999) (“Hatter VIII”). The Federal Circuit, without addressing
the award of interest, again reversed the Court of Federal Claims on other grounds. See Hatter v.
United States, 203 F.3d 795 (Fed. Cir. 2000) (“Hatter IX”), aff’d in relevant part, 532 U.S. 557
(2001) (“Hatter X”). In the course of Hatter’s complicated history, the issue of interest was
never addressed beyond Hatter VI and, therefore, was never the subject of any substantive
appellate discussion.
COURT NO. 95-03-00322 PAGE 12

government provide “just” compensation. It is the meaning embodied in the term “just

compensation” which creates the requirement that the government provide a “full and exact

equivalent” in the form of interest. See Olson v. United States, 292 U.S. 246, 254-55 (1934). If

the compensation clause of Article III of the Constitution requires payment of interest, it is

because that particular clause contains an affirmative requirement for undiminished and timely

paid compensation. The Export Clause merely contains a prohibition against government action.

The remedy for the prohibition may take various forms; it is not an absolute and affirmative

requirement to restore Plaintiffs to their prior position. It is this affirmative requirement that

fully waives sovereign immunity under the Just Compensation Clause of the Fifth Amendment

and perhaps under Article III. Because the Export Clause does not contain that affirmative

requirement, the court cannot construe the clause as the full and express waiver of sovereign

immunity necessary to allow prejudgment interest.

C. Fifth Amendment Taking

Plaintiffs argue that the imposition of the HMT on exports was a taking under the Fifth

Amendment and, therefore, the traditional rule against interest does not apply. The Takings

Clause of the Fifth Amendment guarantees that private property shall not be taken for public use

without just compensation. See U.S. Const. amend. V. A Fifth Amendment takings claim

requires a two-step analysis. First, Plaintiff must establish that it possesses a compensable

property interest. See, e.g., Lucas v. South Carolina Coastal Council, 505 U.S. 1003, 1014

(1992); Kaiser Aetna v. U.S., 444 U.S. 164, 179-180 (1979). Plaintiff must then show that the

United States, through a valid act of Congress, took that private property interest for public use

without just compensation. See Short v. U.S., 50 F.3d 994, 1000 (Fed. Cir. 1995).
COURT NO. 95-03-00322 PAGE 13

To satisfy the first requirement, Plaintiffs argue that its invalidly extracted money is a

property interest protected under the Fifth Amendment citing Board of Regents v. Roth, 408 U.S.

564, 571-72 (1972) (“[T]he property interests protected by procedural due process extend

beyond actual ownership of real estate, chattels, or money.”). Generally, taxation is not

considered to be a taking because the monies paid are not a recognizable protected property

interest. See, e.g., United States v. Sperry Corp., 493 U.S. 52, 53 (1989) (holding that a

deduction of a tribunal user fee from a settlement award is not a taking); Commercial Builders v.

Sacramento, 941 F.2d 872, 876 (9th Cir. 1991) (holding that a purely financial exaction does not

constitute a taking); Coleman v. C.I.R., 791 F.2d 68, 70 (7th Cir. 1986) ( holding that taxes are

not takings, unless the Government tries to “achieve through special taxes what the Takings

Clause of the Fifth Amendment forbids if done directly.”); Atlas Corp. v. United States, 895

F.2d 745, 756 (Fed. Cir. 1990) (“Requiring money to be spent is not a taking of property”);

Commonwealth Edison Co. v. United States, 46 Fed. Cl. 29, 40 (2000) (same); Branch v. United

States, 69 F.3d 1571, 1576 (Fed. Cir. 1995) (rejecting the argument that a federal statute

constituted a taking, “because the property allegedly taken was money).

A limited number of courts have suggested that a tax may be a taking, but only if the tax

is confiscatory. “Levying of taxes does not constitute a Fifth Amendment taking unless the

taxation is so ‘arbitrary as to constrain to the conclusion that it was not the exertion of taxation,

but a confiscation of property.’” Quarty v. United States, 170 F.3d 961, 969 (9th Cir. 1999)

(quoting Brushaber v. Union Pac. R.R. Co., 240 U.S. 1, 24 (1916)). To prove that the tax HMT

is confiscatory, Plaintiffs must establish that the tax was not reasonably related to a substantial

public purpose. See Penn Central Transp. Co. v. City of New York, 438 U.S. 104, 127 (1978).
COURT NO. 95-03-00322 PAGE 14

An act intended to fund the maintenance of this country’s harbors is clearly related to a

substantial public purpose and, therefore, the HMT on exports was not confiscatory.

Plaintiffs argue that an unconstitutional tax is an ipso facto taking. Plaintiffs quote the

concurring opinion of Justice Scalia in Reynoldsville Casket Co. v. Hyde: “if a plaintiff seeks the

return of money taken by the government in reliance on an unconstitutional tax law, the court

ignores the tax law, finds the taking of the property wrongful, and provides a remedy.” 514 U.S.

749, 760 (1995). (Emphasis in Plaintiff’s Brief.). Plaintiffs reliance on Reynoldsville Casket is

misplaced. The majority opinion recognized that the remedy for an unconstitutional tax is not,

as Plaintiffs would argue, the same as if a taking had occurred but depends upon the underlying

factor that rendered the tax unconstitutional. See id. at 755 (citing McKesson Corp. v. Div. of

Alcoholic Beverages & Tobacco, 496 U.S. 18 (1990)). In McKesson, 496 U.S. at 51-52, the

Supreme Court recognized that the remedy for an unconstitutional tax may not even be the

repayment of the tax, but in the case of a discriminatory tax may involve the levying of an

additional, offsetting tax. If, as Plaintiffs suggest, an unconstitutional tax is an ipso facto taking,

the remedy would be limited to just compensation, and could not in some cases be cured by the

levy of additional taxes. While it is clear that a remedy involving an additional tax is

inapplicable here, it is equally clear that the remedy for an unconstitutional tax is not necessarily

the remedy for a taking. The flexibility of remedy supports the argument that payment of a tax,

unconstitutional or not, is not a property interest protected under the Takings Clause of the Fifth

Amendment.

Even if Plaintiffs’ unconstitutionally exacted money was a recognized protected property

interest, Plaintiffs fail to satisfy the second step of the takings analysis. The HMT does not
COURT NO. 95-03-00322 PAGE 15

constitute a taking because the HMT was not a valid exercise of Congress’ power of eminent

domain. The HMT on exports was an unauthorized use of Congress’ otherwise valid power to

tax under Article I of the Constitution, not a valid exercise of the government’s power of

eminent domain. See U.S. Shoe, 523 U.S. 360. “[T]he power of taxation should not be confused

with the power of eminent domain. Each is governed by its own principles.” Houck v. Little

River Drainage Dist., 239 U.S. 254, 264 (1915). Because Congress was not exercising its

power of eminent domain in passing the HMT, a takings analysis is inappropriate.

Moreover, the HMT was not a valid act of Congress. “[A] taking claim must be

premised upon a government action that is either expressly or impliedly authorized by a valid

enactment of Congress.” Dureiko v. United States, 209 F.3d 1345, 1359 (Fed. Cir. 2000).

Plaintiff’s entire argument is premised on the notion that the HMT was an invalid,

unconstitutional act. Plaintiff cannot now argue that the HMT was simultaneously a valid

exercise of the federal government’s power of eminent domain. Because the HMT was not a

valid exercise of Congress’ power of eminent domain and because the monies paid are not a

property interest protected under the Fifth Amendment, the HMT is not subject to a takings

analysis. Consequently, Plaintiffs are not entitled to interest under the Takings Clause of the

Fifth Amendment.

D. Fifth Amendment Due Process

Sony/Arbon argues that imposition of the HMT on exports was a violation of Plaintiffs’

substantive due process rights. The Fifth Amendment of the U.S. Constitution states that no

person shall be deprived of life, liberty or property without due process of law. See U.S. Const.

amend. V. The standard of review governing a due process challenge to a taxing statute is
COURT NO. 95-03-00322 PAGE 16

“whether the taxing statute is so arbitrary and capricious as to amount to a denial of due

process.” Pledger v. C.I.R., 641 F.2d 287, 292 (5th Cir. 1981). A tax will not constitute a

deprivation of property under the Due Process Clause unless it is so arbitrary as to be

confiscatory. See Quarty, 170 F.3d at 969 (quoting Brushaber, 240 U.S. at 24). Plaintiffs argue

that an unconstitutional tax is per se confiscatory.

In Sperry, 493 U.S. at 65, the Court held that a Congressional act is not a violation of the

Due Process Clause if it is rationally related to a legitimate public purpose. The HMT was

intended to finance the general maintenance of U.S. ports. S. Rep. No. 99-126, at 9-10 (1985),

reprinted in 1986 U.S.C.C.A.N. 6639, 6646-47. Funding the maintenance of U.S. ports by

charging those parties that use the ports is an otherwise valid exercise of Congress’ power to tax

for a legitimate public purpose. While one provision of the HMT was found unconstitutional,

that is insufficient to render the tax so arbitrary and capricious as to violate Plaintiffs’ rights

under the Due Process Clause of the Fifth Amendment.

Even if the HMT did violate the Due Process Clause, Plaintiffs fail to provide any

support for their claim that an award of interest is constitutionally required to remedy such a

violation. “[N]o language in the [Fifth Amendment Due Process Clause] itself requires the

payment of money damages for its violation.” Murray v. U.S., 817 F.2d 1580, 1583 (Fed. Cir.

1987). Even though a tax is declared unconstitutional pursuant to the Due Process Clause, the

remedy does not necessarily include a refund, McKesson, 496 U.S. at 51, much less interest. As

a result, Plaintiffs’ Due Process claims fail.
COURT NO. 95-03-00322 PAGE 17

E. Ninth and Tenth Amendments

Plaintiffs Sony/Arbon lastly argue that the HMT need not contain a waiver of sovereign

immunity because the doctrine of sovereign immunity does not apply here. Citing North Am.

Co. v. SEC, 327 U.S. 686, 704-05 (1946), Plaintiffs argue that the United States is not an

“absolute sovereign” and, more importantly, that Congress was acting outside of its sovereign

role when it passed the unconstitutional HMT on exports. Plaintiffs argue that Congress’

passage of the HMT on exports was, in fact, an exercise of “a different and forbidden power”

that infringed upon rights protected under the 9th and 10th Amendments.

The Ninth Amendment provides that “[t]he enumeration in the Constitution of certain

rights, shall not be construed to deny or disparage others retained by the people.” U.S. Const.

amend. IX. In United States v. Choate, 576 F.2d 165, 181 (9th Cir. 1978), the court held that the

rights protected by the Ninth Amendment are those that are so basic and fundamental and deeply

rooted in our society as to be “essential rights” but which, nevertheless cannot find direct support

elsewhere in the Constitution (quoting Griswold v. Connecticut, 381 U.S. 479, 488-89 (1965)).

The Tenth Amendment provides that “[t]he powers not delegated to the United States by the

Constitution, nor prohibited to it by the states, are reserved to the states respectively or to the

people.” U.S. Const. amend. X. Plaintiffs cite to Kansas v. Colorado, 206 U.S. 46, 90 (1907),

for the proposition that the principal purpose of the Tenth Amendment was to reserve to the

people all power not granted to the federal government or to the states. Plaintiffs reason that

“the sovereign power to tax exports remains the exclusive province of the ‘sovereign People’ of

this Nation under the Ninth and Tenth Amendments,” Plaintiff Sony’s Brief at 15. (emphasis in

original), and therefore, the HMT on exports was not imposed by the federal government in its

capacity as a sovereign.
COURT NO. 95-03-00322 PAGE 18

Taken to its logical conclusion, Plaintiffs argue that any act passed by Congress which is

later declared unconstitutional would automatically be a violation of the Ninth and Tenth

Amendments because it was beyond Congress’ power to pass in the first place. Plaintiffs cite

no support for this proposition. In addition, Plaintiffs fail to identify any case that provides for

prejudgment interest as a remedy for a Ninth or Tenth Amendment violation. Accordingly, the

court finds that Plaintiffs are not entitled to interest under the Ninth or Tenth Amendment.

Conclusion

The court finds that Plaintiffs are not entitled to prejudgment interest under § 1505(b),

the Export Clause, the Takings Clause, the Due Process Clause of the Fifth Amendment, or the

Ninth and Tenth Amendments. The court grants summary judgment for Defendant.

_______________________
Jane A. Restani
JUDGE

Dated: New York, New York

This 11th day of December, 2001.