DOJ Fends Off Proposed Amicus Brief in Case Over Jones Act Violations in Alaska District Court
The Department of Justice opposed logistics company Lineage Logistics Holdings' bid to appear in a case over Jones Act violations, arguing that the proposed amicus brief filing does not raise any new issues, instead giving "additional perspectives on arguments already advanced." Urging the court to deny the proposed brief entry into the case, DOJ told the court to look at other pleadings "for more detailed and thorough exploration of the issues" (Kloosterboer International Forwarding LLC, et al. v. United States, D. Alaska #3:21-00198).
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The case was brought by two shipping companies, Kloosterboer International Forwarding and Alaska Reefer Management, which both face penalties in excess of $25 million for violating the Jones Act. The companies claim that they qualify for an exception to the act that allows for goods to travel between U.S. ports on non-U.S.-flagged ships if they pass, at least in part, on a Canadian rail through route. To qualify for the exemption, a 100-foot long rail line was built in Canada. The companies send the goods down the track and back before entering them into the U.S. (see 2109170048).
Lineage Logistics sought to bolster ARM and KIF's defense of this rail and their qualification for the Third Proviso of the Jones Act (see 2112270047). The company argued, among other things, that using a rail line to take advantage of an exception to a law does not violate the law. In the 1972 opinion in Reliance Electric Co. v. Emerson Electric Co., the Supreme Court held that “Liability cannot be imposed simply because the investor structured his transaction with the intent of avoiding liability under § 16(b). The question is, rather, whether the method used to ‘avoid’ liability is one permitted by the statute.”
DOJ said the company's arguments "only distract from the real focus of this case, which is whether the [Bayside Canadian Railway] could ever meet the requirements of the Third Proviso." DOJ then went on to argue that it cannot. "First, the 100-foot rail line at issue here was designed, constructed, maintained and operated solely to evade the requirements of the Jones Act," the brief said. "It was not built to fulfill those requirements, but to evade them, while providing Plaintiffs with a thin veneer of deniability. As such, it thwarts the purpose of the Jones Act and the Third Proviso.
This also violates the key tenet of Reliance, DOJ said. "Clearly, Congress would not have condoned the construction and use of a 100-foot set of tracks-to-nowhere to overcome the Jones Act, a law considered vital to the national interest. As the past CBP administrative rulings and case law indicate, the use of an established rail line on a through route is a 'permissible method' of structuring a business transaction to meet the requirements of the Third Proviso. The BCR is something different: an impermissible method of attempted compliance -- a constructed artifice; its sole purpose is to evade the law."
DOJ also argued that the amicus brief is attempting to "compare apples and oranges" concerning the BCR's status as a Canadian through route, arguing that the route does in fact transport goods. It said the movement of goods on the BCR is not "transportation" since it only moves 200 feet, starting and ending at the same place. "This same back-and-forth movement is not equivalent to continuous movement of goods as would be accomplished on a legitimate through route, in light of the Supreme Court’s definitions and usage of 'transportation' and 'through route,'" DOJ said.