United States District Court, D. Alaska
CRUISE LINES INTERNATIONAL ASSOCIATION ALASKA and CRUISE LINES INTERNATIONAL ASSOCIATION, Plaintiffs,
v.
THE CITY AND BOROUGH OF JUNEAU, ALASKA, a municipal corporation, and RORIE WATT, in his official capacity as City Manager, Defendants.
ORDER
H.
Russel Holland United States District Judge.
Cross-motions
for Summary Judgment; Motion to Determine Law of the
Case
Plaintiffs
move for summary judgment.[1] In response, defendants move for a
determination of the law of the case on the Tonnage Clause
and Rivers and Harbors Act.[2] Defendants also oppose
plaintiffs' motion for summary judgment and cross-move
for summary judgment.[3] Defendants' motion for a determination
of law is opposed[4] as is defendants' cross-motion for
summary judgment.[5] Oral argument has been heard on the
foregoing motions. At oral argument, counsel agreed that the
defendants' motion to determine the law of the case was
purely a matter of law and should be taken up first.
Facts
Plaintiffs
are Cruise Lines International Association Alaska (CLIA
Alaska)[6] and Cruise Lines International Association
(CLIA). CLIA is a global organization that represents 51
cruise lines operating worldwide. CLIA Alaska represented
cruise lines that entered Alaska waters. CLIA Alaska members
included Carnival Cruise Lines, Crystal Cruises, Disney
Cruise Lines, Holland America Line, Norwegian Cruise Line,
Oceana Cruises, Princess Cruises, Regent Seven Sea Cruises,
Royal Caribbean International, and Silverseas Cruises.
Defendants
are The City and Borough of Juneau, Alaska (CBJ) and Rorie
Watt, in his official capacity as the City Manager. CBJ owns
and operates the Cruise Ship Terminal and the Alaska Steam
Ship Dock, which are two of the four cruise docks located in
the downtown area of the City of Juneau. The other two cruise
ship docks, AJ Juneau Dock and Franklin Dock, are privately
owned. The Franklin Dock is owned by Princess
Cruises.[7] The AJ Juneau Dock is owned in part by
Holland America.[8] CBJ, which has approximately 32, 000
year-round residents, receives approximately 1, 000, 000
cruise ship passengers each year from early May through
mid-September.
This
case involves challenges to two passenger fees imposed by
CBJ. First, the Marine Passenger Fee (MPF) is a
$5-per-passenger fee assessed on any marine passenger ship,
with some exceptions, [9] that enters any CBJ port. The MPF for each
ship that enters any CBJ port is calculated based on the
passenger manifest, and the owner or agent of the ship, not
the individual passengers, is responsible for paying the
MPF.[10] CBJ Code §§ 69.20.030 and
69.20.040.[11] The MPF was first imposed in 2000, at
which time the stated purpose of the fee was
to address the costs to the City and Borough for services and
infrastructure usage by cruise ship passengers visiting
Juneau, including emergency services, transportation impacts
and recreation infrastructure use, and to mitigate impacts of
increased utilization of City and Borough services by cruise
ship passengers.[12]
In
2012, CBJ amended the “purpose and intent”
portion of the MPF ordinance. The purpose of the MPF is now
“to address the costs to the City and Borough for
services and infrastructure rendered to cruise ships and
cruise ship passengers visiting the City and
Borough.”[13] Revenue from the MPF is placed in the
Marine Passenger Fund, and the proceeds of the Fund are:
appropriated in support of the marine passenger ship industry
including:
(1) Design, construction, enhancement, operation, or
maintenance of capital improvements;
(2) Operating funds for personnel, training, commodities,
rentals, services and equipment for services provided, made
available to, or required as a result of marine passenger
ships and marine passengers;
(3) Projects and programs that promote safety, environmental
improvements[, ] efficiency of interstate and international
commerce, or enforcement of laws caused or required by marine
passenger ships and marine passengers;
(4) Acquisition of land required to execute the activities
listed in this section;
(5) Reserved; [and]
(6) Surveys, analyses, polls, monitoring, and similar efforts
to measure, describe or predict, or manage marine passengers,
for items listed in subsection (a)(1)-(a)(4) of this section.
CBJ Code § 69.20.120. In FY 2017, the revenue from the
MPF was approximately $5 million.
CBJ
allocates a portion of the revenue generated by the MPF to
municipal government departments which perform functions
“that are available for use by cruise ship
passengers.”[14] These departments have included
Emergency Medical Services, Libraries, Police, Parks and
Recreation, Streets, Finance, and the City Manager's
Office.[15] The allocated portion is transferred to
the General Government Fund. “The amount allocated is
based on the number of hours cruise ship passengers spend in
Juneau compared to the number of hours residents, independent
visitors, conventioneers, and embarking/disembarking
passengers spend in Juneau on an annual
basis.”[16]
Revenue
from the MPF is also used to directly fund projects. Each
year, the City Manager accepts proposals for projects to be
funded by the MPF. CBJ Code § 69.20.120(b)(1). A draft
list of proposals is prepared and put out for public comment
as well as comment from the cruise line industry. CBJ Code
§ 69.20.120(b)(3). After comment and review by the
finance committee, a final list is forwarded to the Assembly
for approval. Id.
The
direct funding includes projects and services that are
provided by CBJ. By way of example, for FY 2015, CBJ used
revenue from the MPF[17] for downtown foot/bike police patrols,
downtown restroom cleaning, downtown sidewalk cleaning, Air
Medevacs, EMS services, Docks and Harbors general operations
and building maintenance, downtown pay phones, emergency room
staff at the Bartlett Regional Hospital, and the city bus
service.[18]
The
direct funding also includes projects and services that are
provided by third parties via operating grants. By way of
example, for FY 2015, operating grants funded by revenue from
the MPF were given to Tourism Best Management Practices,
[19]
SAIL -Accessible Training and Trip Coordination,
[20]
Airlift Northwest, [21] Franklin Dock Enterprises,
[22]
AJ Juneau Dock, LLC, [23] Goldbelt, [24] and the Juneau Convention
and Visitors Bureau.[25] Grant funds were also used to pay for
the downtown crossing guards and the Downtown Security
Program.[26]
Finally,
revenue from the MPF is also used for capital projects. By
way of example for FY 2015, funds generated by the MPF were
used for the Waterfront Seawalk, [27] electrical winches,
real-time weather monitoring and communications, and Last
Chance Basin Hydro-Geo.[28]
The
second fee being challenged is the Port Development Fee
(PDF), which is a $3.00 fee imposed on, with a few
exceptions, [29] “vessels carrying passengers for
compensation on port calls in the City and Borough. . .
.”[30] Pursuant to Assembly resolutions, the
PDF has been imposed by CBJ since at least 2002, although the
amount of the fee has increased over time to the current
$3.00. The owner or agent of the vessel is responsible for
paying the PDF.[31] Funds generated by the PDF are intended
to be used “for capital improvements to the downtown
waterfront for the provision of service to the cruise ship
industry” and any projects paid for with PDF funds are
intended “to benefit all entities which remit the
Fee.”[32]In FY 2017, the PDF generated
approximately $3 million in revenue. Since 2011, funds
generated by the PDF have only been used for the 16B
project[33] and the Seawalk project.[34]
Claims
and Issues
A.
Plaintiffs' Claims/Issues
On
April 13, 2016, plaintiffs commenced this action to challenge
the MPF and PDF. In their first amended complaint, plaintiffs
assert four causes of action. In their first cause of action,
plaintiffs assert that the MPF and PDF violate the Tonnage
Clause of the United States Constitution. In their second
cause of action, plaintiffs assert that the MPF and PDF
violate the Rivers and Harbors Appropriation Act of 1899
(RHAA), as amended, 33 U.S.C. § 5. In their third cause
of action, plaintiffs assert that the MPF and PDF violate the
Commerce Clause of the United States Constitution. In their
fourth cause of action, plaintiffs assert that the MPF and
PDF violate the Supremacy Clause of the United States
Constitution, and they allege that 42 U.S.C. § 1983
provides a basis for their Tonnage Clause and Commerce Clause
claims.
Plaintiffs
seek declaratory and injunctive relief. Plaintiffs seek
declarations that 1) the MPF and PDF violate the Tonnage
Clause, the Supremacy Clause, and the Commerce Clause, 2)
defendants have deprived plaintiffs of their federal rights
in violation of § 1983, 3) “[d]efendants are
legally barred from imposing or collecting” the MPF and
PDF “to the extent that revenues therefrom are
unlawful, excessive, or otherwise impermissible;” and
4) “[d]efendants are legally barred from further use
of” the MPF and PDF “revenue to fund activities
that are unrelated to and do not benefit the Cruise
Lines' vessels and passengers or that do not reflect the
direct cost of providing services to cruise
vessels.”[35] Plaintiffs seek a permanent injunction
prohibiting defendants from 1) “imposing or collecting
the” MPF and PDF “to the extent that the amount
thereof is excessive or otherwise impermissible;” and
2) “further use of the revenues from the” MPF and
PDF “to fund activities that are unrelated to and do
not benefit the Cruise Lines' vessels and passengers, or
approximate their use of CBJ's port.”[36] Plaintiffs
contend that many of CBJ's uses of the MPF and PDF
revenue are unconstitutional or otherwise unlawful,
including:
revenues directed to general government operations; legal
fees and costs (internal or external); infrastructure
construction; maintenance, and improvements such as
sidewalks, roadways, walkways, promenades; hospital costs;
internet service and library upgrades; police and crossing
guard costs; parks and beautification projects; and public
transit.[37]
Plaintiffs
now move for summary judgment on their first, second, and
fourth causes of action and argue that it is not necessary
for the court to address their third cause of action.
B.
Defendants' Claims/Issues
By
their motion to determine the law of the case, defendants ask
the court to determine:
1) Whether the Tonnage Clause permits the use of fees for
services that benefit vessel passengers and/or the vessel;
2) Whether the Tonnage Clause permits the use of fees for
services that benefit vessel passengers and/or the vessel
even if those services may be available to and/or used by the
general public;
3) Whether the RHAA permits the use of fees for services that
benefit vessel passengers and/or the vessel;
4) Whether the RHAA permits the use of fees for services that
benefit vessel passengers and/or the vessel even if those
services may be available to and/or used by the general
public.
Defendants
also cross-move for summary judgment. Defendants seek the
dismissal of all of plaintiffs' causes of action, arguing
that CBJ's use of MPF and PDF revenue has not been
unconstitutional or unlawful. In addition, defendants state
the defenses of statute of limitations, failure to exhaust
administrative remedies, waiver, estoppel and/or
quasi-estoppel, and laches.
C.
Matters Not in Dispute
First,
in plaintiffs' amended complaint and in their opening
brief, plaintiffs seem to contend that the court should void
the MPF ordinance and PDF resolution and enjoin CBJ from
collecting the MPF and PDF altogether because the fees were
unconstitutional and unlawful. In their reply brief,
plaintiffs acknowledge that the MPF ordinance and PDF
resolution are not necessarily unconstitutional or unlawful
on their face, but rather plaintiffs contend that some of
CBJ's uses of the revenue generated by the MPF and PDF
are unconstitutional or unlawful. Plaintiffs contend that
they are asking the court to enjoin CBJ from using future
revenue from the MPF and PDF in an unconstitutional or
unlawful manner.
Second,
plaintiffs do not seek the refund of MPF or PDF paid to date.
Third,
plaintiffs are associations of which cruise vessel owners are
members. Plaintiffs seek declaratory and injunctive relief
for the benefit of their members. Defendants concede that
plaintiffs have standing to sue on behalf of their members
for purposes of raising constitutional and statutory
challenges to the MPF and PDF which are imposed upon
association members' vessels calling at the Port of
Juneau. That is, defendants concede that plaintiffs have
standing to bring their claims for declaratory and injunctive
relief as presently pleaded.[38]
Discussion
A.
Motion to Determine the Law of the Case
In
their motion to determine the law of the case, defendants
first ask the court to determine whether the Tonnage Clause
and the RHAA permit revenue from the MPF and PDF to be used
for services that benefit vessel passengers, but do not
benefit the vessel itself. The court begins with the Tonnage
Clause.
The
Tonnage Clause of the United States Constitution, Article I,
Section 10, Clause 3, provides that:
No State shall, without the Consent of Congress, lay any Duty
of Tonnage. . . .
The
Tonnage Clause “seeks to prevent states with
‘convenient ports' from placing other States at an
economic disadvantage by laying levies that would
‘ta[x] the consumption of their neighbours.'”
Polar Tankers, Inc. v. City of Valdez, Alaska, 557
U.S. 1, 7 (2009) (quoting 3 Records of the Federal Convention
of 1787, pp. 542, 519 (M. Farrand rev. 1966)). The
“‘prohibition against tonnage duties has been
deemed to embrace all taxes and duties regardless of their
name or form, and even though not measured by the tonnage of
the vessel, which operate to impose a charge for the
privilege of entering, trading in, or lying in a
port.'” Id. at 8 (quoting Clyde
Mallory Lines v. Alabama ex rel. State Docks Comm'n,
296 U.S. 261, 265-266 (1935)). “Although the Clause
forbids all charges, whatever their form, that impose
‘a charge for the privilege of entering, trading in, or
lying in a port, nothing in the history of the adoption of
the Clause, the purpose of the Clause, or th[e Supreme]
Court's interpretation of the Clause suggests that it
operates as a ban on any and all taxes which fall on vessels
that use a State's port, harbor, or other
waterways.” Id. at 9 (citations and emphasis
omitted).
Plaintiffs
acknowledge that the Tonnage Clause does not preclude fees
imposed for services provided to a vessel entering a port,
such as charges for regulation of harbor traffic, pilotage,
wharfage, use of locks, medical inspections of vessels, or
emergency services for vessels. “Charges for such
services, even those that vary according to tonnage, are
constitutional for at least two reasons. First, they are not
taxes-which are assertions of sovereignty-but are instead
demands for reasonable compensation-which are assertions of a
right of property.” Maher Terminals, LLC v. Port
Authority of New York and New Jersey, 805 F.3d
98, 107 (3rd Cir. 2015) (citing Packet Co. v.
Keokuk, 95 U.S. 80, 85 (1877)). “Second, charges
for services are constitutional because they facilitate,
rather than impede, commerce.” Id. (citing
Clyde Mallory Lines, 296 U.S. at 265-66). But, a
state or local government “may not escape the Tonnage
Clause's reach merely by labeling a [fee] as a charge for
services.” Id. “Fees for service can
still violate the Tonnage Clause if they have ‘a
general, revenue-raising purpose.'” Lil'
Man In The Boat, Inc. v. City and County of San
Francisco, No. 17-cv-00904-JST, 2017 WL 3129913, at *4
(N.D. Cal. July 24, 2017) (quoting Polar Tankers,
557 U.S. at 10). “In other words, where a fee is used
‘for projects which do not and could not benefit'
those paying the fee, the fee is unconstitutional.”
Id. (quoting Bridgeport & Port Jefferson
Steamboat Co. v. Bridgeport Port Auth., 567 F.3d 79,
82-83 (2d Cir. 2009)).
Case
law over the past 150 years, most of it from the United
States Supreme Court, unequivocally supports the proposition
that, in order for a fee imposed upon a vessel to be
permissible under the Tonnage Clause, it must be compensation
for a service rendered to the vessel itself. Thus, Keokuk
Northern Line Packet Co. v. City of Keokuk, 95 U.S. 80
(1877), holds that a city may impose and collect wharfage
from vessel owners which moor at city-constructed wharves.
See also Northwestern Union Packet Co. v. City of St.
Louis, 100 U.S. 423, 429 (1879) (wharfage fees
constitutional because they were “paid as compensation
for the use of an improved wharf and not for the mere
privilege of entering or stopping at the Port of St. Louis or
for landing at the shore, in its natural condition, where
there were no conveniences which could be called a
wharf”); Cincinnati P.B.S.&P. Packet Co. v.
Catlettsburg, 105 U.S. 559, 562 (1881) (“[n]or is
there any room to question the right of a city or town
situated on navigable waters to build and own a wharf
suitable for vessels to land at and to exact a reasonable
compensation for the facilities thus afforded to vessels by
the use of such wharves”); Huse v. Glover, 119
U.S. 543, 548 (1886) (“[t]he exaction of tolls for
passage through the locks is as compensation for the use of
artificial facilities constructed[, ] . . . like charges for
the use of wharves and docks constructed to facilitate the
landing of persons and freight, and the taking them on board,
or for the repair of vessels”).
In
Southern S.S. Co. of New Orleans v. Port Wardens, 73
U.S. 31 (1867), the United States Supreme Court evaluated and
struck down a fee imposed on every ship entering the Port of
New Orleans, regardless of whether the ship was rendered a
service of any kind while in port. The Court compared this
fee to fees for pilotage and half-pilotage fees which the
Court had found to not run afoul of the Tonnage Clause. The
Court explained:
Pilotage is a compensation for services performed,
half-pilotage is compensation for services which the pilot
has put himself in readiness to perform by labor, risk, and
costs and which he has actually offered to perform. But in
the case before us there were no services and no offer to
perform any.
Id. at 34. This case stands for the proposition that
the mere availability of a service does not run afoul of the
Tonnage Clause if the availability of that service is of
benefit to a vessel. There is no requirement that fees
imposed upon vessels have a physical impact upon the vessel.
But a fee imposed “not for services provided to the
vessel” is unconstitutional because such fees are
deemed “designed to raise revenue used for general
municipal service.” Polar Tankers, 557 U.S. at
8, 10 (Valdez' personal property tax held
unconstitutional because it was “not for services
provided to the vessel”).
In
Morgan's Louisiana & T. R. & S. S. Co. v.
Board of Health of State of Louisiana, 118 U.S. 455.,
460 (1886), the fee being challenged was a fee that vessels
were required to pay, as part of Louisiana's quarantine
system, to be “examined at the quarantine station, with
respect to their sanitary condition and that of their
passengers[.]” The Court found that the fee did not
violate the Tonnage Clause because it was “compensation
for a service rendered, as part of the quarantine system of
all countries, to the vessel which receives the certificate
that declares it free from further quarantine
requirements.” Id. The fee in question also
provided some benefit to vessel passengers as the funds
generated by the fee were used “for [the] care and
treatment of diseased ...