Costco's Lawsuit Raises the Remedial Stakes in the SCOTUS Tariffs Cases
Last week, Costco filed a lawsuit in the Court of International Trade (CIT) against U.S. Customs & Border Protection (CBP), its Commissioner, and the United States, seeking declaratory and injunctive relief from the same tariffs currently at issue in the Supreme Court cases that were argued last month. Costco doesn't make any new arguments for the tariffs' unconstitutionality, instead relying on the CIT's own prior ruling in one of the cases now up at SCOTUS.
Why now? Costco explains in its brief that the deadline for "liquidation" of Costco's tariffs is rapidly approaching. Costco acknowledges that CBP itself has the discretion to delay liquidation. It also acknowledges that even after liquidation, it has another 180 days in which to file a protest but, citing Federal Circuit precedent, its complaint alleges that a CBP liquidation might not be protestable even if unlawful. Judicial relief before liquidation, Costco contends, is necessary to preserve its right to a refund in the event that the Supreme Court agrees with the CIT that the tariffs are unlawful.
As I wrote on this blog just before and just after the SCOTUS oral argument, the government's argument that the challenged tariffs are valid under the International Economic Emergency Powers Act (IEEPA) is weak. The government should lose in the Supreme Court. Based on the oral argument, I believe--although I'm hardly certain--that the government will lose. But Costco's filing complicates matters, at least a little.
Trump has repeatedly made the false claim that "other countries" pay the tariffs he has imposed, overstated the amount of revenue his tariffs will raise by an order of magnitude, and promised the same money from tariffs to pay for multiple programs. Thus, his predictions of catastrophic economic consequences if the government loses the case should not be taken seriously. Even so, a SCOTUS ruling against the tariffs would give rise to remedial complexity.
The defendants have agreed that they will refund the tariffs paid by the particular plaintiffs before the Supreme Court now, but that's small potatoes compared with the amount that has been paid by all importers. With each passing day, it becomes more likely that other large importers (Amazon, WalMart, etc.) will follow Costco's lead and sue in the CIT. And many--perhaps most--importers that do not file their own lawsuits in advance of a SCOTUS ruling would likely file protests after such a ruling if it is for the plaintiffs invalidating the tariffs (assuming that occurs within the 180-day period).
A skittish Supreme Court might want to look for a way to invalidate the tariffs as applied retroactively and prospectively with respect to the plaintiffs currently before it but only prospectively with respect to other actors that have paid what are, after all, unlawful tariffs. Is there a way to do it?
In one sense, yes, obviously: There is no Super-Supreme Court, so if the Supreme Court says that non-parties to the cases currently before it don't get refunds, that's that. What I'm asking, however, is whether there is a legally defensible mechanism to provide refunds only to the parties before it. The short answer is not really.
To see why, consider how the Supreme Court handled retroactivity in habeas corpus cases before its 1989 decision in Teague v. Lane. Since the enactment of the Antiterrorism and Effective Death Penalty Act (AEDPA), persons in state custody pursuant to a criminal conviction have faced a one-year statute of limitations for bringing federal habeas cases, but before AEDPA, there was no statute of limitations. Thus, for example, if Johnson was convicted of a crime in 1955 based on evidence that, pursuant to a 1965 Supreme Court ruling, was unconstitutionally admitted, Johnson could bring a habeas action in 1965. If the state lost, it would have difficulty re-trying Johnson, because the evidence--especially witnesses' recollections--would be stale. Even successful re-trials would be costly. As a consequence, the Supreme Court developed special practices to prevent its criminal procedure rulings from applying in such circumstances. Often, the Court would announce a rule--apply it in the case before it--but then say it applies only prospectively to other cases.
That practice was roundly criticized as unfair. Why should the party who happened to make it to the Supreme Court get the benefit of the new decision when it was denied to otherwise similarly situated prisoners? The answer was that the Court thought it too costly to apply the rule retroactively to everyone but could not apply it purely prospectively in the sense of announcing the rule but not giving even the prevailing habeas petitioner in the Supreme Court the benefit of the rule. To do that would be to issue an advisory opinion.
Even so, critics--both on and off the Court--condemned the practice as unfair to non-parties. The Court then changed course. In Griffith v. Kentucky, the Court held that whenever it adopted a new rule of criminal procedure, it would apply to everyone whose conviction had not yet become final, while in Teague (and subsequent cases that followed the approach of the Teague plurality) the Court held that it would not apply new rules (subject to what is now one exception) to anyone seeking federal habeas.
There is a very large literature criticizing Teague and AEDPA on various grounds, many of which I find persuasive. I'm not interested in those issues right now. Rather, I want to focus on what seemed to be common ground in the debate leading up to Griffith and Teague: that it would be unfair and unprincipled for the Court to decide a case, give the benefit of the rule announced in the case to the parties before it, but reject its application in other cases involving similarly situated persons.
Can the Court get around that problem in the tariffs cases? I suppose the Court could hold that the parties before it and everyone else are entitled to have the tariffs invalidated prospectively but that no one is entitled to a refund. True, the government agreed during the course of litigation that it would give refunds to the parties to the current SCOTUS litigation in the event the tariffs are invalidated, but that's more in the nature of a contractual undertaking than a ruling by the Supreme Court. So the Court could, in principle, avoid implicating itself in any unfairness as between parties and non-parties.
The problem, however, is that if IEEPA doesn't authorize the tariffs, then the plaintiffs are entitled to a refund, even apart from any contractual obligation. A judicial decision to withhold a refund (or treat it as a purely contractual matter) would be without any principled basis. "It's too expensive" isn't a legal reason.
In the end, the Justices should recognize that even if it results in over a hundred billion dollars of refunds, a ruling invalidating the tariffs is probably cheaper in the long run--because of the economic harm that can be avoided by eliminating the tariffs going forward--than a ruling upholding the tariffs out of fear of remedial messiness.
— Michael C. Dorf