Rare Class Action Lawsuit at CIT Seeks Refunds of Section 232 Duties for All Importers

A class action lawsuit filed at the Court of International Trade Jan. 16 could result in billions of dollars in refunds to all importers that have paid Section 232 tariffs on steel products, though its chances of success are still unclear, and any payment is a long way off, lawyers say.

Borusan Mannesmann and its U.S. affiliate, represented by a legal team led by Julie Mendoza of Morris Manning, say the tariffs are unconstitutional. They seek to represent a class of all importers of record that have paid Section 232 duties since they were first put in place in March 2018 -- a total of $6.8 billion dollars, according to the complaint.

Though provided for by court rules, the lawsuit is one of only a “handful of class actions” that have ever been filed at CIT, said Michael Roll of Roll & Harris. “It’s a very rare bird,” said Michael O’Rourke of Sandler Travis.

The eventual success of the class action will hinge on the outcome of a lawsuit filed by the American Institute for International Steel (AIIS) in June 2018 that argues that the Section 232 tariffs are an unconstitutional delegation of authority by Congress (see 1806270036). CIT ruled against AIIS last March, citing binding Supreme Court precedent but expressing some unease with the propriety of the underlying statute (see 1903250032). The case is currently on appeal at the Federal Circuit.

Mendoza said the AIIS case will be the ultimate decider of the class action’s identical claims. “The only difference here is the remedy. The AIIS case seeks declaratory and injunctive relief. This case seeks damages -- refunds of the unlawfully collected duties. The outcome of this case will be determined by the final resolution of the AIIS case, which is presently before the Court of Appeals,” Mendoza said.

That represents a major hurdle, but the Federal Circuit can be unpredictable, and could end up issuing a favorable ruling. “It’s hard to be sure exactly what they’re going to do,” O’Rourke said. The court has “a record of reversing the CIT on a relatively frequent basis,” he said.

The other hurdle that must be cleared is whether CIT will agree to treat affected importers of record as a class. While the trade court did certify bonded warehouse owners were a class in a 1980s case challenging customs fees, the few other class actions since then have not cleared that bar.

Roll, who represented Baxter Healthcare in one of those few other class actions at CIT in the mid-1990s, says whether the class is certified can depend on the judge presiding. The judge has to “find that the class action vehicle is superior to requiring individual litigants to bring their own cases -- and the discretion lies in evaluating what would make the class action superior,” he said.

The alternative, and the route overwhelmingly followed, involves designation of one lawsuit as a “test case,” with other importers in similar situations filing suit to suspend their own entries under that test case, O’Rourke said. That can lead to situations wherein a large percentage of the claimants that “park their” cases under the test case can collect, but it can also become “a battle to show that your facts are exactly the same as the test case,” he said.

It also costs money. According to the complaint, a class action is appropriate for Section 232 duties because, without it, “many Class members would likely find the cost of litigating their claims prohibitively high and would therefore have no effective remedy at law.” Said Mendoza by email, “we believe this case is appropriate for class certification. We believe there may be thousands of individual importers, and for many small importers the cost of bringing a refund action would be prohibitive.”

While Baxter’s attempt at class certification was ultimately unsuccessful, the circumstances may be more favorable for Borusan, Roll said. Part of the reason Judge Jane Restani denied it in Baxter’s class action, which sought Harbor Maintenance Tax refunds, had to do with some issues identifying who actually paid the tax. No such issue exists for Section 232 tariffs, with CBP’s automation efforts since allowing it to identify “each and every importer that has paid,” Roll said.

But in Baxter, Restani also said class actions are better suited to cases involving a “private wrongdoer,” rather than the government imposing taxes mandated by statute. That same logic could also apply here, Roll said.

If the class does get certified, importers of record who paid Section 232 tariffs will get a notice, and have the right to “opt out” and potentially bring their own lawsuit, or, by default, remain a member, Roll said. “Importers who have not already filed a lawsuit would not have to file any paperwork to join the class. They would be joined into the class by virtue of the judge certifying a class and by virtue of them not opting out,” he said.

Certification would be a boon to smaller importers, and to large importers that have not yet filed suit, Roll said. But it’s important for each importer that has paid Section 232 tariffs to check with their counsel “to fully evaluate the best course of action for them to take,” Roll said. “Don’t forget, however, that class or no class, the merits of the case still have to be decided favorably for importers in order for any of this to mean anything,” he said.

Email ITTNews@warren-news.com for a copy of the complaint.