United States District Court, District of Columbia
S. CHUTKAN United States District Judge
case brought under the Administrative Procedure Act
(“APA”), 5 U.S.C. § 558, Plaintiff Gulf
Coast Maritime Supply, Inc. (“Gulf Coast”) moves
for a preliminary injunction to halt the termination of its
basic permits for importing and wholesaling alcohol, and its
tobacco export warehouse proprietor permit. Defendants the
United States of America, Alcohol and Tobacco Tax and Trade
Bureau (“TTB”) of the U.S. Department of the
Treasury, and John Manfreda in his official capacity as
Administrator of TTB move to dismiss the suit for lack of
subject matter jurisdiction. Upon consideration of the
parties' motions and the arguments presented by counsel
at the hearing held on October 6, 2016, Defendants'
motion to dismiss is GRANTED and Plaintiff's motion for a
preliminary injunction is therefore DENIED.
case involves two types of permits: the basic permits for
importing and wholesaling alcohol (“basic
permits” or “alcohol permits”) and the
tobacco export warehouse proprietor permit (“tobacco
permit”). These permits allow the permit holder to
import, store, and sell tobacco or alcohol without paying
taxes on those products.
law requires businesses importing or purchasing alcoholic
beverages for resale to have a permit issued by the Secretary
of the U.S. Treasury. 27 U.S.C. § 203. To obtain a
permit, importers or wholesalers like Gulf Coast must submit
an application to TTB. 27 U.S.C. § 204; 27 C.F.R. §
1.25. Once approved, the business may use the alcohol permit
until suspended, revoked, or annulled as provided herein, or
voluntarily surrendered; except that . . . if
transferred by operation of law or if actual or legal control
of the permittee is acquired, directly or indirectly, whether
by stock ownership or in any other manner, by any person,
then such permit shall be automatically terminated
at the expiration of thirty days thereafter.
27 U.S.C. § 204(g) (emphasis added). Thus, when a
permittee experiences a change in actual or legal control,
its permit “automatically terminate[s]” under the
statute. The permittee then has thirty days to submit a new
application, and if it does so its prior permit remains valid
until TTB reaches a decision on the application. Id.
Alternatively, TTB may revoke a permit after “due
notice and opportunity for [a] hearing, ” if the
business “has willfully violated any of the
conditions” of the permit, “has not engaged in
the operations authorized by the permit for a period of more
than two years, ” or if the permit “was procured
through fraud, or misrepresentation, or concealment of [a]
material fact.” 27 U.S.C. § 204(e). After
revocation or denial of a new application, the permittee has
sixty days to appeal TTB's decision to a U.S. Court of
Appeals, which has “exclusive jurisdiction.” 27
U.S.C. § 204(h).
sale of tobacco products is subject to an excise tax on the
manufacturers or importers of such products. 26 U.S.C. §
5703(a)(1). An export warehouse, such as Gulf Coast, stores
tobacco products for shipment to purchasers outside of
internal revenue jurisdiction, and as such is not required to
pay the federal taxes on the tobacco it stores. 26 U.S.C.
§ 5702(h), (i). Export warehouse proprietors must
operate with a permit issued by TTB. 26 U.S.C. §§
5712, 5713. Without such a permit, they may become liable for
the excise tax and penalties if they receive tobacco products
that did not have the excise tax paid by the manufacturer. 26
U.S.C. §§ 5703(a)(2), 5704(b), 5761(c). Proprietors
must apply for a permit before commencing business and
“at such other time as the Secretary shall by
regulation prescribe.” 26 U.S.C. § 5712. The TTB
regulation for tobacco permits states:
Where the issuance, sale, or transfer of the stock of a
corporation, operating as an export warehouse
proprietor, results in a change in the identity of the
principal stockholders exercising actual or legal control of
the operations of the corporation, the corporate
proprietor shall, within 30 days after the change occurs,
make application for a new permit; otherwise, the present
permit shall be automatically terminated at the
expiration of such 30-day period . . . . If the application
for a new permit is timely made, the present permit shall
continue in effect pending final action with respect to such
27 C.F.R. § 44.107 (emphasis added). The statute
separately provides that TTB can suspend or revoke permits,
requiring a show cause hearing. 26 U.S.C. § 5713(b).
Parties and This Litigation
Gulf Coast is a corporation in Houston, Texas, that acquires
untaxed alcohol and tobacco products and sells them to
commercial vessels for consumption while at sea. (Compl.
¶¶ 14, 16-17). Plaintiff has held alcohol and
tobacco permits since 1973. (Id. ¶ 16, 17;
Compl. Exs. 5, 8). Prior to 1994, Gulf Coast's shares
were divided in half and owned by Salem Geller and Barbara
Geller, who were married. (Compl. Ex. 1). In November 1994,
Gulf Coast's stock allocation changed, such that Salem
and Barbara Geller each owned forty-five percent of the
shares and their son Jay Geller owned ten percent.
(Id.). This was reported to TTB that same month.
(Id.). This ownership allocation remained in place
until August 2013, when Salem Geller died. Prior to his
death, Salem was the “primary owner and operator”
of Gulf Coast. (Compl. Ex. 2). Barbara Geller then inherited
Salem's shares, leaving her with ninety percent of the
shares and majority control of Gulf Coast. (Compl.
¶¶ 23-27). After his death in 2013 through 2016,
Gulf Coast's manager Jay Goldstein continued to use Salem
Geller's signature stamp to file reports with TTB.
(Wachholder Decl. ¶ 8; Gov't Ex. 101).
April 14, 2016, TTB informed Gulf Coast that because of the
change in stock allocation in August 2013, TTB determined
that Plaintiff's permits had terminated automatically by
operation of law in 2013, and continued operation would be
taxable and potentially subject to civil or criminal