LESLIE E. KOBAYASHI, District Judge.
Before the Court is Plaintiff American Promotional Events, Inc.—Northwest, doing business as TNT Fireworks', ("Plaintiff" or "TNT") Motion for Preliminary Injunction ("Motion"), filed on April 11, 2011. Defendant City and County of Honolulu ("Defendant" or "City") filed its memorandum in opposition on May 23, 2011, Plaintiff filed its supplemental memorandum in support on May 31, 2011, and Defendant filed its supplemental memorandum in opposition on June 6, 2011. This matter came on for hearing on June 13, 2011. Appearing on behalf of Plaintiff were Thomas Berger, Esq., and Robert
Plaintiff seeks a preliminary injunction that enjoins Defendant:
[Motion at 7.]
Effective January 2, 2011, the Honolulu City Council amended the City Fire Code, adding a new Section 6 ("Fireworks Ordinance"), entitled "Regulation of Fireworks." It states, in pertinent part:
Revised Ordinances of Honolulu ("ROH") §§ 20-6.2, -6.3, -6.9.
The Complaint alleges jurisdiction pursuant to 28 U.S.C. §§ 2201-2202, the Declaratory Judgment Act, and alleges violations of 42 U.S.C. § 1983, Article I, Section 8, clause 3 of the Constitution of the United States of America ("Commerce Clause"), and Articles VIII ("Local Government") and I, Section 5 ("Due Process") of the Constitution of the State of Hawai'i. [Complaint at ¶ 1.] The Complaint alleges that the City's restrictions on the sale of consumer fireworks expose Plaintiff to fines, criminal liability and other penalties.
Plaintiff is engaged in the business of importing and wholesaling "consumer fireworks and fire crackers," and does not import or wholesale "display fireworks." It runs its import and distribution operations from a warehouse located in Honolulu. [Id. at ¶ 22.] Plaintiff claims that it has invested over $750,000 to improve the warehouse in compliance with State and County fire and building codes. [Id. at ¶ 23.] The warehouse is Plaintiff's central distribution facility; consumer fireworks are delivered to the warehouse, where they are unpackaged and stored. [Id. at ¶ 24.] Plaintiff also has a firecracker inventory at the warehouse for sales statewide. [Id. at ¶ 31.]
Plaintiff orders consumer fireworks in bulk from international manufacturers throughout the year, and claims that it is "impossible for TNT Fireworks to directly ship these orders from international manufacturers to the County of Hawaii, the County of Maui, and County of Kauai ("Neighbor Islands") without traveling through the port of Honolulu[.]" [Id. at ¶ 25.] The Complaint alleges that Plaintiff is the distributor for over one-hundred retail clients on the Neighbor Islands, where consumer fireworks are legal, with some restrictions. According to the Complaint, Neighbor Island retailers will not accept delivery of fireworks from Plaintiff until a few days before fireworks selling season, therefore, a centralized warehouse in Honolulu is necessary for distribution.
Plaintiff alleges that, on or before March 31, 2010, the Honolulu Fire Department ("HFD") granted it licences "to import, wholesale, and store fireworks product intended for sale in the State of Hawaii" at its warehouse. According to the Complaint, on November 10, 2010, HFD notified Plaintiff that valid licences for import, wholesale, or storage of consumer fireworks would be honored through March 11, 2011. [Id. at ¶¶ 33-34.]
On March 15, 2011, Plaintiff applied to HFD for two permits for "Proposed Cultural Use of Consumer Fireworks," and the permits were approved that same day. On March 16, 2011, Plaintiff applied for three licences to import, wholesale, and store consumer fireworks in the State ("License Applications"), listing the storage facility as its Honolulu warehouse. [Id. at ¶¶ 35-36.] Plaintiff received a response from HFD on April 5, 2011, stating that:
[Id. at ¶ 37.]
The Complaint alleges three claims for relief: (1) violation of 42 U.S.C. § 1983 and the Commerce Clause; (2) invalid attempt by the City to regulate matters of statewide concern, in violation of Article VIII of the Hawai'i Constitution; and (3) vague and overbroad restrictions that violate due process of law under the Hawai'i Constitution.
Plaintiff's Motion repeats the allegations in the Complaint and seeks a preliminary injunction preventing the City from enforcing the Fireworks Ordinance. Plaintiff explains that Honolulu is the "hub" for the Hawaiian shipping industry. [Mem. in Supp. of Motion, Decl. of Jerald Farley ("Farley Decl."), at ¶ 5; Exh. 1 (12/13/10 Shipping Industry Presentation).] Goods arriving into Hawai'i travel to the Honolulu "hub," before continuing on to the Neighbor Islands, or "spokes." [Id.]
According to Plaintiff, the "consumer fireworks business model is unique. [TNT] spends eleven (11) months of the year preparing for a selling season of two (2) to three (3) weeks. Retail orders are placed with [TNT] throughout the year. Likewise, orders are placed with the manufacturers for shipment throughout the year." [Farley Decl. at ¶ 14.] With respect to the distribution and shipment of fireworks, Plaintiff asserts that:
[Id. at ¶¶ 15-16, 18.] In order to operate this distribution system, TNT spent $750,000 to improve its Honolulu warehouse. [Id. at ¶ 11.]
[Id. ¶¶ 12-13.] According to Plaintiff, the value of its current retail consumer fireworks inventory stored at the Honolulu Warehouse exceeds $800,000. [Id. at ¶ 20.] Plaintiff argues that the cost of opening a distribution warehouse on the Neighbor Islands is prohibitively expensive and not practical given the "hub and spoke" shipping economy. [Mem. in Supp. of Motion at 7.]
On March 16, 2011, Plaintiff applied to the HFD for three licenses to import, wholesale, and store fireworks, listing the Honolulu warehouse as the storage facility and including checks to the City totaling $6,000. [Id. at 9.] According to Plaintiff, "Chuck Perry of the Honolulu Fire Department told [a TNT employee] that no licenses of any kind would be processed until the Department had determined that only firecrackers remained in the warehouse." [Farley Decl. at ¶ 8.] By letter dated April 1, 2011, HFD informed Plaintiff that "Ordinance 10-25 does not permit the importation, storage, and/or sale of any fireworks other than display fireworks or firecrackers as defined therein." [Farley Decl., Exh. 7 (4/1/11 Letter from Fire Chief K. Silva).] On April 5, 2011, the City and HFD informed Plaintiff that "they could provide `no guarantee' that the provisions, penalty, and forfeiture powers set forth by the Fireworks Control Law or the Honolulu Fireworks Ordinance would not be applied to TNT during the pendency of the License Application process[.]" [Motion, Decl. of Thomas Berger ("Berger Decl."), at ¶ 7.]
Plaintiff argues that the: (1) Honolulu Fireworks Ordinance, Revised Ordinances of Honolulu ("ROH") 10-25, § 20-6; (2) City's "Official Policy" that the import and storage of consumer fireworks in Honolulu violates the Fireworks Ordinance; and (3) City's "Decision" to not grant TNT's License Applications because the License Applications do not comply with the Fireworks Ordinance and Official policy, each violate its rights under the federal and state Constitutions.
Plaintiff argues that the City's Fireworks Ordinance, Official Policy, and Decision
Plaintiff claims that there is "no conceivable fact pattern under which a fireworks importer and wholesaler in the State of Hawaii can operate a statewide business without violating," the City's rules. [Id.] Further, it argues that it is "impossible for TNT to transport firework product to the neighbor islands efficiently or economically by plane or by truck. The transportation of firework product in bulk by plane is dangerous, costly, and is strictly regulated by the federal government." [Id. at 14-15.]
Locating a distribution warehouse on the Neighbor Islands is "economically unfeasible," and would nonetheless violate the Fireworks Ordinance, according to Plaintiff. For example, if TNT had a warehouse in Kauai or Maui county, the fireworks would still be imported from China to the State of Hawai'i via Honolulu, and once in Honolulu, TNT would be in violation of the City's laws prohibiting the import and storage of consumer fireworks in Honolulu. [Id. at 15-16.] "Import" is defined in the Fireworks Ordinance to mean "to transport or attempt to transport fireworks into the city or to cause fireworks to be transported into the city," and therefore, the moment fireworks are "unloaded off a ship in Honolulu harbor the dockworker handing and transporting the product is in violation of the [City's] Official Fireworks Policies. Likewise, the party that ordered the product is in violation of the [City's] Official Fireworks Policies regardless of the intended destination of the product." [Id. at 16.]
Under the balancing test set forth in Pike v. Bruce Church, Inc., 397 U.S. 137, 142, 90 S.Ct. 844, 25 L.Ed.2d 174 (1970), Plaintiff argues that "nondiscriminatory regulations that have only incidental effects on interstate commerce are valid unless `the burden imposed on such commerce is clearly excessive in relation to the putative local benefits.'" [Id. at 17 (quoting Oregon Waste Systems, Inc. v. Dep't of Envtl. Quality, 511 U.S. 93, 99, 114 S.Ct. 1345, 128 L.Ed.2d 13 (1994)).] Plaintiff discusses the weight and nature of the local regulatory concern in light of the burden on interstate commerce, and argues that the City's policies substantially affect and burden its interstate business operations. Plaintiff asserts that the City's legitimate public safety concerns do not justify the Fireworks Ordinance, and creates public safety anomalies. For example, if retailers from Neighbor Islands are prohibited from returning unsold consumer fireworks to a Honolulu warehouse, then there is an increased chance the unsold products will enter the Neighbor Islands black-market from unauthorized leakage by employees. Plaintiff argues the Fireworks Ordinance effectively destroys the process by which Plaintiff consolidates unused fireworks for the next selling season, by making it illegal for the retailers to send the unsold merchandise back to Honolulu. [Id. at 17-18.]
Plaintiff next argues that the City's fireworks laws violate the Constitution of the
Plaintiff argues that the Fireworks Ordinance exceeds the powers conferred to the counties by general law. Plaintiff states that, when the Hawai'i Legislature enacted "SB No. 1059 in 2009, which provides power to the county to enact `ordinances that are more stringent in the control or prohibition of fireworks than this chapter[,]" it did not contemplate providing counties with power to regulate the import, storage, and wholesaling of fireworks in the State. [Id. at 20.] Plaintiff contends that, because the power to regulate the import, storage, and wholesaling was not expressly provided to the counties, that the City's exercise of this power is not valid. [Id.]
Plaintiff describes the City's duty to administer Chapter 132D, Haw.Rev.Stat., as "ministerial" to the extent it issues import, storage, and wholesaling licenses to applicants. Plaintiff argues that there is no valid reason for the City to deny its License Applications submitted in March 2011. Further, Plaintiff argues that the Legislature did not intend for county ordinances enacted pursuant to Haw.Rev.Stat. § 132D-17.5 to abrogate the ministerial administrative duty imposed on the City. [Id. at 21.]
Plaintiff also argues that, because the regulation of commerce between the different counties is a matter of statewide concern, the City cannot lawfully create restrictions on consumer fireworks that interfere with the flow of commerce between the Hawaiian Islands. Therefore, Plaintiff claims that the Fireworks Ordinance, which prohibits the import and storage of consumer fireworks on Oahu, is void on its face because it effectively regulates commerce between the islands, a matter of statewide concern. [Id. at 21-22.]
Finally, Plaintiff argues that the City's policies amount to continuing violations of rights that are guaranteed by Article I, § 5 of the Hawaii Constitution.
Plaintiff argues the Fireworks Ordinance is vague because it creates a standard that is internally inconsistent and confusing, such that a person of ordinary intelligence is left with the impression that their conduct may be lawful when, in fact, it is not. For example, Plaintiff asserts that the exceptions to the law are effectively circular, and therefore confusing, and that a person may believe they are protected from arrest or prosecution by securing a permit, but may still be exposed to inconsistent or arbitrary enforcement. It also claims that the exceptions are ambiguous and that the HFD or Police Department cannot enforce the Fireworks Ordinance in a manner that is not arbitrary and discriminatory. [Id. at 24-25.]
Plaintiff states that the viability of its statewide business operation in fireworks importing and wholesaling is threatened. It claims its constitutional rights are violated and the City's conduct exposes Plaintiff to significant and continuing injury, including business risk and disruption of its operations. Plaintiff also warns that it may be exposed to misdemeanor criminal
Plaintiff also argues that the balance of equities tips in its favor because of the importance of protecting its constitutional right to engage in interstate commerce. It also argues that Neighbor Island retailers are expecting fireworks for the Fourth of July to be delivered on time, and that customers statewide expect to be able to use firecrackers during the lawful fireworks season and for cultural purposes. [Id. at 28-29.]
The City filed its memorandum in opposition on May 23, 2011. The City argues that Plaintiff is not entitled to a preliminary injunction because: it is unlikely to succeed on the merits of any of its three causes of action; it will not suffer irreparable harm; the balance of equities weighs in the City's favor; and public interest and safety require the Court to deny Plaintiff's request.
The City discusses the legislative history behind the consumer fireworks ban on Oahu. On June 22, 2010, Act 170 amended Haw.Rev.Stat. Chapter 132D ("Fireworks Control Law") "by removing the prohibitions on the Counties' authority to regulate fireworks." [Mem. in Opp. at 2.] The Act 170 legislative history includes the following language: "Your Committee on Conference believes that counties should have sufficient latitude to enact their own ordinances that are at least as stringent as state law, including banning fireworks entirely. This measure clarifies existing law to that effect." [Id. (quoting Conf. Comm. Rep. No. 71-10, SB1059 SD2, HD3, CD1).]
Shortly after Act 170 amended the State Fireworks Control Law, the City enacted Ordinance 10-25, which is the subject of this lawsuit. According to the City, the difference between the State Fireworks Control Law and the Honolulu Fireworks Ordinance is that all consumer fireworks are prohibited within the City and County of Honolulu. "Consumer fireworks are normally identified as those fireworks that are purchased, without a permit, at common retail outlets such as Longs, Costco, etc. . . . [and] include fireworks that emit smoke or shower of sparks including sparklers." [Id. at 5.]
With respect to Plaintiff's License Applications, the City states that, on April 19, 2011, HFD issued Plaintiff three licenses to import, store, and wholesale fireworks. [Id., Decl. of Counsel, Exhs. G-1, G-2, G-3; Aff. of Socrates Bratakos ("Bratakos Aff."), at ¶¶ 5, 6, 8, 9.] The three licenses each contain a handwritten note indicating "1.4g = firecrackers only." [Mem. in Supp., Decl. of Counsel, Exhs. G-1, G-2, G.] The note is intended to remind Plaintiff "that ROH § 20-6.2 prohibits consumer fireworks within Honolulu County." [Bratakos Aff. at ¶ 6.]
The City claims that the licenses issued to Plaintiff would be "recognized by the Neighbor Islands, allowing TNT Fireworks to import all types of 1.4 G class of fireworks including consumer fireworks into the state destined for the Neighbor Islands." [Mem. in Opp. at 7-8.] Further, "HFD is aware that some fireworks companies have import licenses issued by other Neighbor Islands with no storage facilities in Honolulu County. HFD has never required a separate import license issued by Honolulu County for these fireworks, even though the fireworks may be transported through Honolulu County." [Bratakos Aff. at ¶ 9.] Charles Perry, HFD Fireworks Inspector, states that:
[Mem. in Opp., Aff. of Charles Perry ("Perry Aff.").]
The City argues that Plaintiff cannot prevail on its Commerce Clause challenge because it has not met the "very high burden of proof" necessary to "establish that no set of circumstances exist under which [the Ordinance] would be valid. The fact that [the Ordinance] might operate unconstitutionally under some set of circumstances is insufficient to render it wholly invalid." [Mem. in Opp. at 10 (citing S.D. Myers, Inc. v. City & County of San Francisco, 253 F.3d 461, 467 (9th Cir.2001)).]
First, the City argues that the Fireworks Ordinance does not discriminate against interstate commerce, but rather, is neutral because the ban on consumer fireworks affects both instate and out-of-state interests. [Id. at 12.]
Second, the City claims that Plaintiff reads the Fireworks Ordinance too broadly when it claims that ROH § 20-6.2(c) precludes consumer fireworks from even passing through Honolulu harbor. The City asserts that under the import license it issued to Plaintiff, "Plaintiff is permitted to import all types of 1.4G class of fireworks including consumer fireworks destined for the Neighbor Islands." [Id. at 14.]
Third, the City contests Plaintiff's claim that consumer fireworks must be shipped to Honolulu. Relying on the same Horizon Lines shipping presentation that Plaintiff cited in its memorandum in support, the City claims that "consumer fireworks can easily be shipped from out-of-state through Honolulu to the Neighbor Islands." [Id. at 15.] Further, the City asserts that the Fireworks Ordinance "cannot be reasonably read to prohibit the incidental transfer of consumer fireworks from Horizon's ship to a barge destined for the Neighbor Islands." [Id.] According to the City, HFD has recognized import licenses issued by Neighbor Islands, "and has not precluded the transportation of those fireworks through Honolulu Harbor, nor has HFD required a separate import license be obtained from Honolulu County." [Id. at 15-16.]
Next, the City cites cases from the Fifth and Tenth Circuits holding that:
[Id. at 16.]
The City argues that, although the Fireworks Ordinance may require Plaintiff to alter its business operations, "such as storing consumer fireworks in another County where the use is legal[,]" such effects on private companies to do not violate the Commerce Clause. [Id. at 19.] Further, other than "inconvenience," the City argues that Plaintiff submits no evidence that unpacking and organizing consumer fireworks on another island interferes with interstate commerce. [Id.]
The City next argues that the State has delegated to the counties the full authority to ban fireworks in Haw.Rev.Stat. § 132D-17.5, therefore, the City has not interfered with the State's control of regulating fireworks. The City argues that its ban on consumer fireworks is valid under State law. [Id. at 21.]
The Fireworks Ordinance is clear and unambiguous that it "does not affect the shipping of consumer fireworks to Neighbor Islands[,]" argues the City. [Id. at 22.] The City argues that ROH § 20-6.2 "prohibits consumer fireworks in Honolulu County. TNT Fireworks cannot bring consumer fireworks to its warehouse[.]" [Id.]
Next, the City argues that Plaintiff will suffer no irreparable harm, because HFD has granted an import license and the Fireworks Ordinance does not interfere with Plaintiff importing consumer fireworks to the Neighbor Islands. The City also states that Plaintiff's expenditures associated with improving its Honolulu warehouse were incurred before the Fireworks Ordinance became effective. [Id. at 23-24.]
The City contends that the balance of equities weighs in its favor because the burden on Plaintiff to obtain licenses and store consumer fireworks on the Neighbor Islands is minimal compared to the burden on HFD to monitor consumer fireworks stored at the Honolulu warehouse for shipment to and return from the Neighbor Islands. That is, the City would not be able to confirm whether the consumer fireworks were actually delivered to Neighbor Island retailers if they were processed through the Honolulu warehouse. [Id. at 24-25.]
With respect to the public interest, the City cites safety data showing that the majority of fireworks-related injuries occur on Oahu. The elected City Council "determined that a total ban on consumer fireworks should be imposed." [Id. at 26.] The City argues that the public safety of its citizens "requires that consumer fireworks be stored and wholesaled in a County where such activities are permitted." [Id.]
At a May 16, 2011 status conference, the Court permitted Plaintiff to file a supplemental memorandum regarding relevant events occurring after the filing of the Motion. [Dkt. no. 11.] Plaintiff filed its supplemental memorandum in support on May 31, 2011. The supplemental memorandum includes additional information regarding
[Suppl. Mem. in Supp., Decl. of Chad Cloutier ("Cloutier Decl.").]
Plaintiff urges the Court to look at the "practical effect" of the challenged ordinance to determine whether it constitutes direct regulation of interstate commerce. "The practical effect of the Fireworks Ordinance is that TNT cannot import consumer fireworks through Honolulu without exposing itself to criminal and civil penalties." [Suppl. Mem. in Supp. at 5-6.]
Plaintiff also argues that the Fireworks Ordinance projects the City's regulatory scheme onto the Neighbor Islands and states in the continental United States where consumer fireworks are legal, and that the Commerce Clause protects against this "type of extraterritorial legislation." [Id. at 6.]
Plaintiff argues that there is "no way TNT can get around the City and County of Honolulu in transporting product into the state." [Id. at 7.] It cannot relocate its warehouse to a Neighbor Island because of "the significant additional transportation costs . . . would be passed onto the consumers in the State of Hawaii through increased product prices. Also, due to logistical
Plaintiff asserts that the City's argument that Haw.Rev.Stat. § 132D-17.5 gives the City the power to regulate the import, transport, and storage of consumer fireworks is unreasonable and inconsistent with the statute's plain meaning. Plaintiff argues that, because § 132D-17.5 does not explicitly confer onto the City the power to regulate the import and storage of fireworks, the Legislature did not intend for a county to have such power. Instead, the Legislature intended to allow a county to prohibit only the use of fireworks. [Id. at 8-9.]
Plaintiff believes that the City concedes that Plaintiff is likely to succeed on the merits of its third claim for relief, and that the City did not sufficiently address the claim because of the "inconsistent and arbitrary enforcement statements that have been presented to TNT." [Id. at 11.] Plaintiff asserts that "the changing enforcement statements" and "internal inconsistencies in the Fireworks Ordinance are the exact type of conduct that the due process clause is designed to protect against." [Id.]
Plaintiff will suffer irreparable harm if the City is not enjoined because the HFD "could arbitrarily enforce the Fireworks Ordinance exposing TNT to civil and criminal sanctions." [Id. at 11-12.] Plaintiff also argues that it would need to devise an alternative distribution system, resulting in substantial costs, and would pass those costs on to the consumer. It would also suffer from merchandise shortages and lost sales, and the exact amount of damages would be difficult to calculate. [Id. at 13.]
In its supplemental memorandum in opposition filed June 6, 2011, the City argues that the Commerce Clause cause of action fails because the Fireworks Ordinance does not prohibit shipping consumer fireworks to the Neighbor Islands via Honolulu harbor. "ROH § 20-6.2 does not prohibit shipments of consumer fireworks from sitting in Honolulu harbor waiting for transfer to the Neighbor Islands, or consumer fireworks passing through, whether or not it is actually off-loaded." [Suppl. Mem. in Opp. at 4-5.] The Fireworks Ordinance "does not preclude the importation of consumer fireworks into anywhere in the State of Hawaii except Honolulu. The flow of consumer fireworks into or out of the State of Hawaii or between the various Neighbor Islands is not affected by the Ordinance." [Id. at 10-11.]
According to the City, the Commerce Clause does not protect a particular method of operation in a retail market, and that it "is only TNT Fireworks' own business practice that it seeks to protect." [Id. at 9.] The City cites Exxon Corp. v. Governor of Maryland, 437 U.S. 117, 98 S.Ct. 2207, 57 L.Ed.2d 91 (1978), for the proposition that the Commerce Clause does not protect the methods and operations of a business from burdensome regulations; rather, the Clause protects the interstate market. [Id. at 9-10.]
Next, the City argues that, because the Court must construe the Fireworks Ordinance narrowly and find any ambiguities in favor of constitutionality, the Court must find that the ordinance does not affect the shipping industry or intrastate commerce. The City claims that the Fireworks Ordinance
With respect to Plaintiff's claim that the Fireworks Ordinance is vague and overbroad, the City states that it "in not vague or overbroad, it contains a ban on consumer firework[s] on Oahu. Nothing could be clearer." [Id. at 12.]
The City claims that Plaintiff will suffer no harm if the Court denies the Motion because HFD has granted an import license allowing Plaintiff to import consumer fireworks "to any of the Neighbor Islands." [Id. at 12.]
The City also argues that the storage of consumer fireworks on Oahu poses a danger to its citizens, and that the city should "not be required to be exposed to this risk when consumer fireworks are illegal in Honolulu. Since TNT Fireworks will sell all of its consumer fireworks on the Neighbor Islands where such use is permitted, there is no detriment to storing [them] on the Neighbor Islands." [Id. at 14.]
At the hearing on June 13, 2011, the Court heard additional testimony from: Keith Kiyotoki, a representative of interisland shipping line Young Brothers, Ltd.; Chad Cloutier, TNT's Director of Sales; and HFD Battalion Chief Socrates Bratakos.
In Winter v. Natural Resources Defense Council, Inc., 555 U.S. 7, 129 S.Ct. 365, 374, 172 L.Ed.2d 249 (2008), the Supreme Court explained that "[a] plaintiff seeking a preliminary injunction must establish that he is likely to succeed on the merits, that he is likely to suffer irreparable harm in the absence of preliminary relief, that the balance of equities tips in his favor, and that an injunction is in the public interest." So long as all four parts of the Winter test are applied, "a preliminary injunction [may] issue where the likelihood of success is such that `serious questions going to the merits were raised and the balance of hardships tips sharply in [plaintiff's] favor.'" Alliance for Wild Rockies v. Cottrell, 622 F.3d 1045, 1049 (9th Cir.2010) (quoting Clear Channel Outdoor, Inc. v. City of Los Angeles, 340 F.3d 810, 813 (9th Cir.2003)).
The Court first addresses Plaintiff's likelihood of success on its three claims for relief.
The Commerce Clause provides that "Congress shall have Power . . . [t]o regulate Commerce . . . among the several States." U.S. Const. art. I, § 8, cl. 3. It also carries negative or implicit consequences for states or municipalities' authority to regulate interstate commerce, referred to as the "dormant Commerce Clause."
In reviewing challenges to local regulations under the Commerce Clause, the Ninth Circuit follows a two-tiered approach:
S.D. Myers, Inc. v. City & County of San Francisco, 253 F.3d 461, 466 (9th Cir.2001) (quoting Brown-Forman Distillers Corp. v. N.Y. State Liquor Auth., 476 U.S. 573, 579, 106 S.Ct. 2080, 90 L.Ed.2d 552 (1986)).
Pac. Merch. Shipping Ass'n v. Goldstene, 639 F.3d 1154, 1177-78 (9th Cir.2011).
As to the first prong, whether the local statute "directly regulates," the Ninth Circuit explains that:
S.D. Myers, Inc., 253 F.3d at 467 (some citations and quotation marks omitted).
First, the regulatory scheme at issue here does not appear to fall under the "direct" category of state regulations because the apparent purpose of the Fireworks Ordinance is to protect the health and well-being of the City's residents from the harmful effects of consumer fireworks. The Fireworks Ordinance's central purpose is not to regulate commerce. See Pac. Merch. Shipping Ass'n, 639 F.3d at 1177-78 ("[T]he Supreme Court used the term `direct' to refer to regulations whose central purpose is to regulate commerce, usually in order to benefit local interests." (citation omitted)). The otherwise evenhanded and generally applicable Fireworks Ordinance also does not appear to discriminate against any out-of-state interests; that is, the City is not attempting to regulate conduct in another state. We are instead faced with a local Fire Code ordinance having only an incidental or indirect effect on commerce. The Court, therefore, must determine whether the burdens outweigh the putative benefits so as to render the Fireworks Ordinance unreasonable or irrational.
Gravquick A/S v. Trimble Navigation Int'l Ltd., 323 F.3d 1219, 1224 (9th Cir.2003) (quoting Pike v. Bruce Church, Inc., 397 U.S. 137, 142, 90 S.Ct. 844, 25 L.Ed.2d 174 (1970)). Because the effects on interstate commerce here appear to be incidental, the Fireworks Ordinance must be upheld unless the burden is clearly excessive. Plaintiff, the party challenging the validity of the Fireworks Ordinance under the Commerce Clause, has the burden of demonstrating that the burden on interstate commerce is clearly excessive to the benefit. See S.D. Myers, Inc., 253 F.3d at 471 (requiring the plaintiff to provide "specific details" as to how the local ordinance affected interstate commerce). The Court finds that Plaintiff is not likely to meet its burden.
Nat'l Ass'n of Optometrists & Opticians v. Brown, 709 F.Supp.2d 968, 975-76 (E.D.Cal.2010).
The Court agrees with Plaintiff that there is a burden on the interstate and international shipment of consumer fireworks into the State as a result of the Fireworks Ordinance. The parties stipulated that under the State's "hub and spoke" shipping model, goods imported into the State first arrive in Honolulu before continuing on to the Neighbor Islands. The Fireworks Ordinance prohibits the importation of consumer fireworks into Honolulu. Thus, the Fireworks Ordinance, in conjunction with the "hub and spoke" shipping model, works to prevent the importation of consumer fireworks (other than firecrackers). The City's interest in the safety of its citizens, however, reasonably outweighs any incidental impact on interstate commerce. See, e.g., Cascade Fireworks, Inc. v. State, 86 Or.App. 355, 738 P.2d 1013, 1015 (1987) (upholding state regulation on the sale of fireworks and finding "the state's interest in the safety of its citizens clearly outweighs any incidental impact on interstate commerce"). The Court finds that the Fireworks Ordinance's putative health and safety benefits are not so outweighed by any burden on interstate commerce as to render the ordinance unreasonable or irrational.
The Court also concurs with the City that it is Plaintiff's business judgment and shipping industry strictures, and not the Fireworks Ordinance, which affect interstate commerce. The prohibition on storing fireworks is limited to Oahu where Plaintiff has chosen to locate its warehouse,
The Court is mindful of the effect the Fireworks Ordinance and this Court's ruling may have on Plaintiff's operations within the State, including the possibility that Plaintiff will consider withdrawing from this market. The Commerce Clause, however, does not protect Plaintiff's method of operation in a retail market. The Supreme Court in Exxon Corp. v. Governor of Maryland, 437 U.S. 117, 127, 98 S.Ct. 2207, 57 L.Ed.2d 91 (1978), rejected the argument that the state interfered "with the natural functioning of the interstate market either through prohibition or through burdensome regulation." The Exxon decision explains:
Id. at 127-28, 98 S.Ct. 2207 (citations omitted); see also Nat'l Ass'n of Optometrists & Opticians, 709 F.Supp.2d at 978 ("[P]laintiffs have not shown that these regulations are a burden to interstate commerce, but rather that they inhibit the business model plaintiffs find to be most profitable."); Wal-Mart Stores, Inc. v. City of Turlock, 483 F.Supp.2d 987, 1012 (E.D.Cal.2006) ("The Commerce Clause does not protect the particular structure or methods of operation of a retail market. Nor does it give an interstate business the right to conduct its business in what it considers the most efficient manner, for the Constitution protects the interstate market, not particular interstate firms." (citation and quotation marks omitted)).
For these reasons, the Court FINDS that based on the current record before the Court, Plaintiff is not likely to succeed on the merits of its first claim for relief.
Article VIII, section 1 of the Hawai'i Constitution states: "The legislature shall create counties, and may create other political subdivisions within the State, and provide for the government thereof. Each political subdivision shall have and exercise such powers as shall be conferred under general laws." Plaintiff claims that the Fireworks Ordinance exceeds the authority granted to the City.
The Hawai'i Supreme Court has explained the relationship between the State and counties as follows:
State v. Medeiros, 89 Haw. 361, 365, 973 P.2d 736, 740 (1999).
Plaintiff, however, argues that, because § 132D-17.5 does not explicitly confer onto the City the power to regulate the import and storage of fireworks, the Legislature did not intend for a county to have such power; instead, the Legislature intended to allow a county to prohibit only the use of fireworks. The Court disagrees and finds that the Fireworks Ordinance is an ordinance that is "more stringent in the control or prohibition of fireworks" enacted within the City's power granted by Haw.Rev.Stat. § 132D.
Nor is the Fireworks Ordinance an invalid law of general application or statewide concern. Plaintiff claims that the Fireworks Ordinance, which prohibits the import and storage of consumer fireworks on Oahu, is void on its face because it effectively regulates commerce between the islands, a matter of statewide concern. A law of general application throughout the state is a law of statewide concern within the meaning of article VIII, section 6 of the Hawai'i Constitution. Richardson v. City & County of Honolulu, 76 Haw. 46, 66, 868 P.2d 1193, 1213 (1994). The Fireworks Ordinance regulates only the possession, import, storage, and licensing of fireworks within the City and County of Honolulu, and does not apply equally to the Neighbor Islands.
For these reasons, the Court FINDS that based on the current record before the Court, Plaintiff is not likely to succeed on the merits of its second claim for relief.
Plaintiff brings this cause of action pursuant to Article I, section 5 of the Hawai'i Constitution, which states: "No person shall be deprived of life, liberty or property without due process of law, nor be denied the equal protection of the laws, nor be denied the enjoyment of the person's civil rights or be discriminated against in the exercise thereof because of race, religion, sex or ancestry."
According to the Hawai'i Supreme Court:
State v. Bates, 84 Haw. 211, 220, 933 P.2d 48, 57 (1997) (quoting State v. Gaylord, 78 Haw. 127, 137-38, 890 P.2d 1167, 1177-78 (1995)) (alterations in Bates) (some citations omitted).
With these principles in mind, the Court first examines whether the Fireworks Ordinance is void for vagueness. It is a basic principle of due process that an enactment is void for vagueness if its prohibitions are not clearly defined. The Fireworks Ordinance states, in pertinent part:
ROH § 20-6.2.
The Court finds that the prohibitions set forth in the Fireworks Ordinance are clearly defined and give a person of ordinary intelligence a reasonable opportunity to know what is prohibited, so that he or she may act accordingly. See United States v. Jae Gab Kim, 449 F.3d 933, 941-42 (9th Cir.2006). The Court, however, is mindful that the City's statements regarding enforcement at the June 13, 2011 hearing and in its filings may have the tendency to create ambiguity. For example, the City explained that it would not prohibit the shipment of consumer fireworks to the Neighbor Islands via Honolulu harbor. The parties do not dispute that Honolulu harbor is within the City and County of Honolulu for purposes of the Fireworks Ordinance. According to the City, HFD has recognized import licenses issued by Neighbor Islands, "and has not precluded the transportation of those fireworks through Honolulu Harbor, nor has HFD required a separate import license be obtained from Honolulu County." [Mem. in Opp. at 15-16.] This assertion was supported by the testimony of Keith Kiyotoki, a sales and marketing manager for Young Brothers, who testified at the hearing that importers of consumer fireworks into the State of Hawai'i, other than Plaintiff, use freight forwarders who act like consolidators. The freight forwarders pick up containers that have been shipped to Honolulu harbor, take them to their warehouses to load fireworks along with other cargo destined for a Neighbor Island, and then return the containers to Young Brothers for shipment to the Neighbor Island. The City's witness, HFD Battalion Chief Bratakos, confirmed that the fire department considers a container with consumer fireworks that is taken by an importer or a licensed bonded freight forwarder to a licensed bonded warehouse where the contents are unpacked and are intended for immediate repackaging and shipping to the Neighbor Islands as being part of the shipping process. If these consumer fireworks are held for a matter of days and up to a week, it would be considered temporary
Plaintiff, however, takes issue with Defendant's interpretation of the Fireworks Ordinance and argues that it conflicts with the ordinance's plain language. Plaintiff fears that the Honolulu Fire Department may change this interpretation without notice and, as a result, Plaintiff is at risk of being cited or even criminally prosecuted. Plaintiff, in essence, is not challenging the ordinance itself as being vague but, instead, is challenging the manner in which Defendant has chosen to enforce it. An analogy, while imperfect, may be the state law against exceeding the posted speed limit. If a vehicle is driven as little as one mile over the limit, the driver is in violation of the law. There is nothing vague about it and the prohibitions are clearly defined. A police officer or even a police department may, however, decide that citations for speeding will be issued only for drivers who are more than five miles above the speed limit. This choice of enforcement does not render the law unconstitutionally vague.
While the Court shares some of Plaintiff's concerns with respect to the City's statements regarding the incidental importation of consumer fireworks destined for the Neighbor Islands, in light of the pre-enforcement nature of Plaintiff's challenge, the Court finds that the Fireworks Ordinance itself is not unconstitutionally vague. See Stoianoff v. State of Mont., 695 F.2d 1214, 1222 (9th Cir.1983) ("The possibility that the Act will be enforced arbitrarily, is of no due process significance unless the possibility ripens into a prosecution." (citation omitted)). Further, the Fireworks Ordinance does not vest the City with "virtually complete discretion" to determine whether the ordinance has been violated, and therefore, the ordinance is not unconstitutionally vague. See Kolender v. Lawson, 461 U.S. 352, 359, 103 S.Ct. 1855, 75 L.Ed.2d 903 (1983); see also Village of Hoffman Estates v. Flipside, Hoffman Estates, Inc., 455 U.S. 489, 503, 102 S.Ct. 1186, 71 L.Ed.2d 362 (1982) ("The language of the ordinance is sufficiently clear that the speculative danger of arbitrary enforcement does not render the ordinance void for vagueness.").
The Court next turns to Plaintiff's overbreadth challenge. "The doctrine of overbreadth, although closely related to a vagueness claim, is distinct in that while a statute may be clear and precise in its terms, it may sweep so broadly that constitutionally protected conduct is included in its proscriptions." Tauese v. State, Dep't of Labor & Indus. Relations, 113 Haw. 1, 28 n. 27, 147 P.3d 785, 811 n. 27 (2006) (quoting State v. Bui, 104 Haw. 462, 465, 92 P.3d 471, 474 (2004)). Plaintiff does not sufficiently identify any constitutionally protected conduct included within the Fireworks Ordinance's proscriptions. It argues only that the ordinance is overbroad because it would punish the "innocent" and "constitutionally protected behavior" of importing and supplying fireworks to the Neighbor Islands. The Court disagrees and finds that the Fireworks Ordinance does not punish the importing and supplying of consumer fireworks to the Neighbor Islands.
The primary compliance hurdle for Plaintiff appears to be its need to store and repackage consumer fireworks in between the Neighbor Islands' legal fireworks selling seasons. Plaintiff has chosen to centrally locate its warehouse in Honolulu, which, when combined with the unique nature of the consumer fireworks' market (that is, that the retail season is essentially two weeks during the Fourth of July and two weeks during New Year's Eve) and the State's shipping practices, works to Plaintiff's disadvantage under the
For these reasons, the Court FINDS that on the current record before the Court, Plaintiff is not likely to succeed on the merits of its third claim for relief.
The Court next turns to the analysis of whether Plaintiff will suffer irreparable harm in the absence of an injunction. The primary injuries alleged by Plaintiff relate to monetary harm (e.g., that it would "have to abandon its $750,000 investment in the Warehouse distribution facility [and] devise an alternative distribution system that somehow complies with the Fireworks Ordinance at substantial costs" [Suppl. Mem. in Supp. at 13]). Typically, monetary harm does not constitute irreparable harm. L.A. Mem'l Coliseum Comm'n v. Nat'l Football League, 634 F.2d 1197, 1202 (9th Cir.1980). This is so because "economic damages are not traditionally considered irreparable because the injury can later be remedied by a damage award." Cal. Pharmacists Ass'n v. Maxwell-Jolly, 563 F.3d 847, 852 (9th Cir. 2009).
Plaintiff, however, also alleges constitutional violations. "Unlike monetary injuries, constitutional violations cannot be adequately remedied through damages and therefore generally constitute irreparable harm." Nelson v. NASA, 530 F.3d 865, 882 (9th Cir.2008), reversed on other grounds, ___ U.S. ___, 131 S.Ct. 746, 178 L.Ed.2d 667 (2011). The Court, however, has determined that Plaintiff is not likely to succeed on its claims of constitutional violations, and without more, the Court will not presume irreparable harm in this instance.
Plaintiff further alleges it will suffer loss of business reputation and goodwill amongst the general public and its customers. At the June 13, 2011 hearing, TNT's Director of Sales, Chad Cloutier, testified that TNT's business reputation would be effected if it were unable to get consumer fireworks to its Neighbor Island Customers in time for the upcoming Fourth of July season. He also said it could possibly endanger TNT's national contracts. Injuries to goodwill and business reputation are generally considered to be intangible and, as a result, irreparable. See, e.g., Rent-A-Center, Inc. v. Canyon Television & Appliance Rental, Inc., 944 F.2d 597, 603 (9th Cir. 1991) ("[W]e have also recognized that intangible injuries, such as damage to ongoing recruitment efforts and goodwill, qualify as irreparable harm."); MySpace, Inc. v. Wallace, 498 F.Supp.2d 1293, 1305 (C.D.Cal.2007) ("Harm to business goodwill and reputation is unquantifiable and considered irreparable.").
Plaintiff has not, however, produced any evidence of actual loss of goodwill or business reputation, but speculated that it will suffer loss if it is found to be in violation of the Fireworks Ordinance or unable to timely deliver shipments to Neighbor Island retailers. "Although the loss of goodwill and reputation are important considerations in determining the existence of irreparable injury, there must be credible and admissible evidence that such damage threatens Plaintiff's businesses with termination." Dotster, Inc. v. Internet Corp. For Assigned Names & Nos.,
The conclusory statements provided at the June 13, 2011 hearing alone cannot support a finding of irreparable injury for the issuance of a preliminary injunction at this stage. See, e.g., Am. Passage Media Corp. v. Cass Commc'ns, Inc., 750 F.2d 1470, 1473 (9th Cir.1985) (declarations of plaintiff's executives detailing the disruptive effect of defendant's exclusive contracts on plaintiff's business could not support the issuance of a preliminary injunction because they were "conclusory and without sufficient support in facts"); Goldie's Bookstore, Inc. v. Sup. Ct., 739 F.2d 466, 472 (9th Cir.1984) (reversing issuance of preliminary injunction where district court had determined that plaintiff "would lose goodwill and `untold' customers" because the finding was not based on any factual allegations and was speculative). In light of the speculative and tenuous evidence of possible loss of goodwill or business reputation,
"To determine which way the balance of the hardships tips, a court must identify the possible harm caused by the preliminary injunction against the possibility of the harm caused by not issuing it." Univ. of Haw. Prof'l Assembly v. Cayetano, 183 F.3d 1096, 1108 (9th Cir.1999). It appears that the primary hardship that denying the injunction would cause Plaintiff is the loss of profits stemming from its business. Although Plaintiff argues that the balance of equities tips in its favor because of the importance of protecting its constitutional right to engage in interstate commerce, the Court does not find that Plaintiff is likely to succeed on the merits of this claim. The Court greatly sympathizes with Plaintiff, and acknowledges that the Fireworks Ordinance deals a heavy blow to Plaintiff. Financial hardship will be great because of the investment in its Honolulu warehouse and inventory, the cost of relocating to a Neighbor Island, and the additional shipping expense caused by the "hub and spoke" system used by the local shippers.
On the other hand, according to the City, granting the injunction would require HFD to monitor consumer fireworks stored on Oahu, shipped out to the Neighbor Islands, and returned after the selling season. The City argues that its citizens should not be exposed to this risk when consumer fireworks are illegal on Honolulu, and that, because consumer fireworks are legal on the Neighbor Islands, there is no detriment to Plaintiff storing them there. After careful thought and review of the record, the Court FINDS that Plaintiff has not established that the balance of hardships tips in its favor.
With respect to the public interest inquiry:
Stormans, Inc. v. Selecky, 586 F.3d 1109, 1139-40 (9th Cir.2009) (some citations and quotation marks omitted). The public interest inquiry primarily addresses the impact on non-parties rather than parties.
Plaintiff argues that Neighbor Island retailers are expecting fireworks for the Fourth of July to be delivered on time, and that customers statewide expect to be able to use firecrackers during the lawful fireworks season and for cultural purposes. The City contends that public safety and the City Council's legislative determination to ban consumer fireworks weigh more heavily in favor of the public interest. The City avers that the majority of fireworks imported into the State are consumer fireworks, and that the majority of fireworks injuries statewide occur in the City and County of Honolulu. [Perry Aff. at ¶ 21, 23.] In light of all the facts and circumstances discussed above, the Court FINDS that Plaintiff has not established that the public interest requires entry of a permanent injunction at this point.
In sum, the Court concludes that Plaintiff has not demonstrated a high likelihood of success on the merits or irreparable harm, and that the balance of equities and consideration of the public interest do not require an injunction at this time.
On the basis of the foregoing, American Promotional Events, Inc.—Northwest, doing business as TNT Fireworks', Motion for Preliminary Injunction, filed on April 11, 2011, is HEREBY DENIED.
IT IS SO ORDERED.
Revised Ordinances of Honolulu ("ROH") § 20-6.1.
