Cruise Lines International Association Alaska v. City and Borough of Juneau, Alaska

          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 ...