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Ammex, Inc. v. Wenk

United States Court of Appeals, Sixth Circuit

August 21, 2019

Ammex, Inc., Plaintiff-Appellant,
Gordon Wenk, in his capacity as Director of the Michigan Department of Agriculture & Rural Development, Defendant-Appellee.

          Argued: February 1, 2019

          Appeal from the United States District Court for the Eastern District of Michigan at Detroit. No. 2:18-cv-10751-Laurie J. Michelson, District Judge.


          Robert M. Palumbos, DUANE MORRIS LLP, Philadelphia, Pennsylvania, for Appellant.

          Elizabeth Morrisseau, OFFICE OF THE MICHIGAN ATTORNEY GENERAL, Lansing, Michigan, for Appellee.

         ON BRIEF:

          Robert M. Palumbos, J. Manly Parks, Leah A. Mintz, DUANE MORRIS LLP, Philadelphia, Pennsylvania, Amy E. McCracken, DUANE MORRIS LLP, Chicago, Illinois, for Appellant.

          Elizabeth Morrisseau, Danielle Allison-Yokom, OFFICE OF THE MICHIGAN ATTORNEY GENERAL, Lansing, Michigan, for Appellee.

          Before: GRIFFIN, WHITE, and BUSH, Circuit Judges.

          WHITE, J., delivered the opinion of the court in which GRIFFIN, J., joined. BUSH, J. (pp. 12-24), delivered a separate opinion concurring in the judgment.



         Plaintiff-Appellant Ammex, Inc. (Ammex) appeals the district court's denial of its motion seeking to preliminarily enjoin the Michigan Department of Agriculture and Rural Development (MDARD) from enforcing a gasoline-volatility standard on the basis that the standard violates the Supremacy Clause and dormant Foreign Commerce Clause of the United States Constitution. Because we conclude that the MDARD's enforcement of the standard is enforcement of federal law, we affirm the district court's denial of Ammex's motion for preliminary injunction.

         I. Background

         A. Ozone Air Quality Standards Under the Clean Air Act

         In 1970, Congress amended the Clean Air Act (CAA) to direct the Environmental Protection Agency (EPA) to establish National Ambient Air Quality Standards (NAAQS) for certain air pollutants. See 42 U.S.C. § 7409. "Although the [NAAQS] are set federally, the 'primary responsibility for assuring' they are met lies with the States." Sierra Club v. Korleski, 681 F.3d 342, 343 (6th Cir. 2012) (quoting 42 U.S.C. § 7407(a)). The CAA thus directs each state to propose a state implementation plan (SIP) that "specif[ies] the manner in which national . . . ambient air quality standards will be achieved and maintained" in that state. 42 U.S.C. § 7407(a). After providing "reasonable notice and public hearings," the state is required to submit the SIP to the EPA. Id. § 7410(a)(1). The EPA must then determine whether the proposed SIP meets certain minimum criteria, and, if so, approve the SIP. Id. § 7410(k)(1)(B), (3). The EPA must also "assemble and publish a comprehensive document for each State" listing the requirements of the SIP, and "publish notice in the Federal Register of the availability of such documents." Id. § 7410(h)(1). The CAA provides that the EPA and citizens can enforce violations of an EPA-approved SIP in federal court. See id. §§ 7413(a), 7604.

          In 1990, Congress again amended the CAA to, among other things, set a national Reid Vapor Pressure (RVP)[1] standard for gasoline. See id. § 7545(h). Congress required the EPA to "promulgate regulations making it unlawful for any person during the high ozone season (as defined by the Administrator) to sell, offer for sale, dispense, supply, offer for supply, transport, or introduce into commerce gasoline with a Reid Vapor Pressure in excess of 9.0 pounds per square inch (psi)." Id. § 7545(h)(1). Congress prohibited states from setting a different RVP standard, see id. § 7545(c)(4)(A)(ii), unless the EPA finds the deviation "necessary" to achieve a NAAQS and approves the modified standard in the state's SIP. See id. § 7545(c)(4)(C)(i); 71 Fed. Reg. at 46880 (explaining that "a State may prescribe and enforce a[] . . . low-RVP requirement only if the EPA approves the control into the State's SIP" and the EPA "find[s] that the state control is necessary to achieve a NAAQS"); see also 42 U.S.C. § 7545(h)(1) (enabling the EPA to "establish more stringent Reid Vapor Pressure standards in a nonattainment area as the [EPA] finds necessary").

         B. Michigan's Efforts to Meet Ozone Air Quality Standards

         Michigan has had an EPA-approved SIP since 1972. 37 Fed. Reg. 10, 842, 10, 873 (May 31, 1972). In 2004, the EPA informed Michigan that eight counties in southeast Michigan, including Wayne County, were "nonattainment" areas for the ozone NAAQS. 71 Fed. Reg. at 46880. In response, Michigan enacted House Bill 5508, which amended Mich. Comp. Laws § 290.650d (hereinafter the "Summer Fuel Law") to limit the RVP for gasoline sold during the summer months within those eight counties. The Summer Fuel Law provides that gasoline stations in those counties must sell gasoline with a vapor pressure that does not exceed 7.0 psi during the summer months: "Beginning June 1 through September 15 of 2007 and for that period of time each subsequent year, the vapor pressure standard shall be 7.0 psi for dispensing facilities in Wayne" and seven other counties in southeast Michigan. Mich. Comp. Laws § 290.650d. The term "dispensing facility" is defined as "a site used for gasoline refueling." Id. § 290.642(m). The MDARD is responsible for enforcing the RVP standard. Id. § 290.647.

         Michigan thereafter sought the EPA's approval to revise its SIP to incorporate House Bill 5508. 71 Fed. Reg. at 46879. After concluding that the revised RVP standards were "necessary" for attainment of the applicable ozone NAAQS, the EPA approved the incorporation of House Bill 5508 into Michigan's SIP. Approval and Promulgation of Air Quality Implementation Plans; Michigan; Control of Gasoline Volatility, 72 Fed. Reg. 4432, 4434-35 (Jan. 31, 2007). The EPA has since "incorporat[ed] by reference" House Bill 5508 into the federal regulation setting forth Michigan's SIP. 40 C.F.R. § 52.1170.

         C. Michigan's Enforcement Against Ammex

         Ammex operates a duty-free store near the Ambassador Bridge, which connects Detroit, Michigan, to Windsor, Canada. Ammex's facility is located in Wayne County, Michigan, beyond the exit point established by United States Customs and Border Protection, i.e., the point at which a person approaching the United States' border with Canada has "no practical alternative" but to exit the United States. 19 C.F.R. § 19.35(d). Ammex sells a variety of goods, including duty-free gasoline. Ammex began selling gasoline in the late 1990s, and sells about 400, 000 gallons each month. Ammex has historically purchased gasoline from a supplier in a free-trade zone in Toledo, Ohio.

         In the summer of 2012, the MDARD tested Ammex's gasoline and found that it had an RVP that exceeded the Summer Fuel Law's 7.0 psi requirement. The MDARD issued a stop-sale order preventing Ammex from selling the non-compliant gasoline. The MDARD filed an action against Ammex in state court, and the parties eventually reached a settlement that (1) required Ammex to sell gasoline that complied with the 7.0 RVP standard between June 1 and September 15 of each year and (2) provided that the state court retained jurisdiction to enforce the settlement agreement for three years. Ammex sold gasoline that complied with the Summer Fuel Law during the summers of 2013, 2014, 2015, 2016, and 2017.

         D. Ammex's Suit

         In the months leading up to the summer of 2018, Ammex believed that it would be unable to secure gasoline that complied with both federal-customs regulations regarding duty-free sales[2] and the Summer Fuel Law. Ammex was unable to purchase gasoline meeting the 7.0 psi requirement because one of the tanks that Ammex leased from a tank farm to hold the bonded gasoline was undergoing repairs and maintenance. Ammex's attempts to find another supplier of gasoline that met both the duty-free and gasoline-volatility requirements were unsuccessful.

         As a result, Ammex filed this action for a declaratory judgment against Gordon Wenk (Wenk), in his official capacity as Director of the MDARD. The complaint asserts that Wenk's enforcement of the Summer Fuel Law against Ammex is unconstitutional under the dormant Foreign Commerce Clause and that the Summer Fuel Law, as applied to Ammex, is preempted by federal-customs law.

         Ammex filed a motion for a preliminary injunction, asking that the district court enjoin Wenk from enforcing the Summer Fuel Law against it during the pendency of the litigation. The district court denied the motion for preliminary injunction.

         The district court first considered Wenk's argument that House Bill 5508, or at least the Summer Fuel Law, is federal law, and therefore did not violate the dormant Foreign Commerce Clause[3] or the Supremacy Clause.[4] The district court noted that Wenk appeared to be correct, observing that the EPA approved the Summer Fuel Law and incorporated it into the Code of Federal Regulations; the EPA could enforce the law; and the EPA prompted the revised standard and found it necessary to meet the ozone NAAQS.

         The district court opted not to decide the issue, however, and instead proceeded to analyze whether, if the Summer Fuel Law is state law, it violates either the Supremacy Clause or the dormant Foreign Commerce Clause. The district court concluded that the Summer Fuel Law does not violate either clause, and therefore Ammex had not shown a likelihood of success on the merits to warrant a preliminary injunction.

         II. Discussion

         "A district court must balance four factors when considering a motion for a preliminary injunction: (1) whether the movant has a strong likelihood of success on the merits; (2) whether the movant would suffer irreparable injury absent the injunction; (3) whether the injunction would cause substantial harm to others; and (4) whether the public interest would be served by the issuance of an injunction." Bays v. City of Fairborn, 668 F.3d 814, 818-19 (6th Cir. 2012).

         "When a party seeks a preliminary injunction on the basis of a potential constitutional violation, 'the likelihood of success on the merits often will be the determinative factor.'" Obama for Am. v. Husted, 697 F.3d 423, 436 (6th Cir. 2012) (quoting Jones v. Caruso, 569 F.3d 258, 265 (6th Cir. 2009)). "Whether the movant is likely to succeed on the merits is a question of law we review de novo." City of Pontiac Retired Emps. Ass'n v. Schimmel, 751 F.3d 427, 430 (6th Cir. 2014) (en banc) (per curiam). "We review for abuse of discretion, however, the district court's ultimate determination as to whether the four preliminary injunction factors weigh in favor of granting or denying preliminary injunctive relief." Id. (internal quotation marks omitted). "This standard is deferential, but ...

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