Akin Gump Took on Section 301 Clients for $50,000, Plus 5% Cut of Tariff Refunds

Best Buy Purchasing and Best Buy Health “have been adversely affected” by the Section 301 List 3 tariffs on Chinese imports, argued the subsidiaries Monday in a complaint (in Pacer) at the U.S. Court of International Trade. It was among the roughly 3,300 suits filed at the CIT since Thursday to vacate the Lists 3 and 4A tariffs, including 700 on Monday, the last filing day for importers to qualify for refunds if the actions are successful. There was some debate Tuesday whether the Monday deadline could be open to interpretation.

The Best Buy subsidiaries have made “numerous” tariffed importations of List 3 goods since the duties took effect two years ago Thursday, said the complaint. It cited more than 10 dozen Harmonized Tariff Schedule product subheadings with 25% tariff exposure. The complaint made no mention of Best Buy’s ongoing List 4A tariff exposure at 7.5% on finished TVs and other consumer tech imports from China.

Chicago law firm Faegre Drinker is representing the Best Buy subsidiaries at the CIT. Akin Gump was counsel to flooring importers HMTX Industries in the first complaint Sept. 10 (see 2009110041) that snowballed into the thousands of other actions filed until the close of business Monday. Virtually all the complaints seek to have the tariffs thrown out, arguing the Office of the U.S. Trade Representative overstepped its authority under the 1974 Trade Act and violated the Administrative Procedure Act by running allegedly sloppy and nontransparent rulemakings. USTR has maintained silence.

Akin Gump crafted nearly identical arguments two years ago when CTA hired the firm to draft a complaint to block the List 3 tariffs that the association never followed through on. Akin Gump has been working on the arguments in the HMTX case “for well over a year,” CTA emailed members days ago. The association took a hands-off approach as the thousands of complaints were mounting, except to link Akin Gump with member companies that were pondering lawsuits of their own.

If the HMTX plaintiffs win, “we can expect that list 3 (and therefore list 4 as it was administered the same) tariffs will disappear,” CTA told members. “HOWEVER, regarding refunds of tariffs already paid, the only clear beneficiary is a company with legal standing. AKA a company which files suit on specific products on lists 3 and 4.” CTA acknowledged there’s “a good deal of legal uncertainty about whether companies who do not file a lawsuit would reap the benefit, particularly after their entries liquidate, so the safer course may be to file.”

CTA told members Akin Gump was offering to file and litigate “new company claims for 301 ‘me-too’ cases” at a flat $50,000 retainer, plus a 5% cut of tariff refunds awarded, capped at $250,000. Industry people told us Akin Gump was willing to negotiate less costly terms for smaller enterprises that couldn’t afford the fee. We learned that Sandler Travis floated offers to represent smaller clients at a $3,500 fixed fee with a 10% cut of refunds. Akin Gump filed complaints Monday for more than 100 companies in addition to the original HMTX complaint, emailed a spokesperson Tuesday. "We don’t comment on our fees or fee arrangements." Neither Sandler Travis nor CTA responded to questions.

There's some question whether the deadline for court challenges to Lists 3 and 4A of tariffs has passed. Some lawyers peg the deadline to Monday based on a two-year statute of limitations from when the List 3 tariffs were published in the Federal Register, (see 2009160056). Filing sooner than later is better, the lawyers said.

On one of the claims in the HMTX filing that USTR violated the APA, "it is well-established that a party acquires standing to sue under the APA when it suffers actual 'injury in fact,'" blogged the Neville Peterson law firm. In APA cases, the first injury in fact an importer suffers occurs on the first date that Customs demands payment of Section 301 tariffs from that importer, it said. "If your company was not assessed with Section 301 tariffs until October 1, 2018, you arguably have until September 30, 2020 to file a suit." Each new tariff payment constitutes a separate injury of fact, triggering the legal standing to sue under the APA, it said.

Chris Kane of Simon Gluck made a similar argument. "Practically speaking, the Legal concept of 'ripeness' informs us that 'you can't yell and get help until you've been hurt,'" he wrote. "You don't have a case until you've actually PAID money that the government should not have collected. That would mean that the statute of limitations would begin to expire two years after your first payment, and not finally expire until two years after your last payment."

Though constitutional claims don't appear to be part of the HMTX suit, that could change, emailed Kane. "If what the USTR and friends did with regard to the implementation of List 3 and 4A is an unconstitutional deprivation of Due Process and Equal Protection under the 5th Amendment to the U.S. Constitution," said Kane, "there might be NO statute of limitations." That may arise in response to the expected DOJ motion to dismiss likely coming "within the next 4-5 months," said Kane. "I plan to raise it." Justice didn't comment.