Lawyers Mull Chances of Success for Class Action Lawsuit on IEEPA Refunds
A class action lawsuit seeking refunds for tariffs imposed under the International Emergency Economic Powers Act may face difficulties before the Court of International Trade but is ultimately subject to the discretion of the trade court, various trade lawyers told us. However, there's reason to believe a recent proposed class action suit filed at CIT, Freestyle World v. U.S., may fare better than previous attempts to certify a class at the trade court, some lawyers said.
Sign up for a free preview to unlock the rest of this article
If your job depends on informed compliance, you need International Trade Today. Delivered every business day and available any time online, only International Trade Today helps you stay current on the increasingly complex international trade regulatory environment.
To certify a class at CIT, a representative of the class must show the class is so large that joining all the members is "impracticable," the class members share a question of law or fact, the representative's claims are typical of the class' claims and the representative will "fairly and adequately protect the interest of the class."
From there, CIT Rule 23(b) imposes additional considerations for the presiding judge to consider when mulling whether to certify the class. Among other things, such factors include whether the party opposing the class has "acted or refused to act on grounds that apply generally to the class, so that final injunctive relief or corresponding declaratory relief" for the whole class is appropriate, and whether the common issues of fact or law common to the class "predominate over" questions only affecting individual members.
Last month, Freestyle World filed suit, seeking class certification under Rule 23 for all importers with IEEPA tariff liability under $1 million and who hasn't filed suit at CIT seeking refunds. The importer sought permission to participate in a proceeding last week before Judge Richard Eaton on the question of IEEPA tariff refunds (see 2603050044).
Michael Roll, partner at Roll & Harris, told us that it's likely the plaintiffs in Freestyle World can satisfy the four prerequisite requirements to certifying a class. Roll likened the matter to Baxter Healthcare v. U.S., a case Roll worked on, that involved a proposed class of importers seeking refunds of Harbor Maintenance Tax payments after the U.S. Supreme Court found the tax to be unconstitutional.
In Baxter, Judge Jane Restani actually found the proposed class met all the basic requirements but refused to certify the class for discretionary reasons. For instance, the judge found the court's test case procedure to be adequate in "exact expenditure by the United States," particularly where it should be up to Congress to "decide whether to create a special procedure to refund small amounts to individuals who choose not to sue or cannot rely on uncertain administrative relief."
"I would have thought that Judge Restani would come out a different way here than she did in the Baxter case," Roll said. So far, the trade court's involvement in the refund process hasn't taken the form of a test case procedure, but rather flows from Eaton's March 4 now-suspended order in a single case, Atmus Filtration v. U.S., telling CBP to refund all IEEPA tariffs for non-finally liquidated entries. While Eaton hasn't certified a class, "he's still treating [the case] as a class," setting up questions, should the government appeal, about whether the order will stand on appeal, Roll said.
A key factor that could inform CIT's decision to certify a class is the available administrative pathway to remedies. So far, the agency has yet to establish or announce such a procedure, but it told Eaton that it's working on a process to stand up a refund mechanism that could be ready in 45 days.
Though Roll said he doesn't believe CBP's proposed refund mechanism is sufficient to justify rejecting class certification, since CBP's proposal requires use of the agency's ACE system and given that the agency now processes all refund payments electronically. By the government's own admission, only 6,000 out of the over 330,000 importers that paid IEEPA tariffs have ACE accounts, but having those accounts is necessary "for everybody to get their money back" even if ordered by the trade court, Roll said.
However, other factors, such as the requirement that the class members share an issue of law and fact, could complicate matters. While the importers certainly share the same legal claim that the IEEPA duties are unlawful and the companies' tariff bills need not be of similar size to justify class certification, as class-action plaintiffs' attorney John Allen Yanchunis told us, the court's analysis could be complicated by the role of protests.
Matthew Seligman, professor at Stanford Law School, said that if protests are required to assert refund claims, "then a class action 100% will not work." The reason is that each importer would have a different issue of fact -- when and whether a protest was filed -- that wouldn't be shared among the class members and would also add an administrative exhaustion requirement to the class. The class-wide issues, "like, were the tariffs illegal," are clearly shared among the class, "but everything else is individualized," Seligman said.
Seligman anticipated that in response to such an argument, the class action plaintiffs could claim that the government's refund process is "pretty formulaic" and involves very similar facts and processes among importers. Roll said the protest piece of the puzzle could just impact the implementation of class-wide relief rather than complicating the decision of whether to certify a class at all.
However, if a class gets certified, it most likely would benefit small importers that lack the resources to file either protests or lawsuits, Seligman said.