CIT Saddles Importer With Attorney Fees in Case Over Seized Drug Paraphernalia

Importer Keirton USA is not entitled to $487,198.31 in attorney fees and other expenses incurred during its suit against the U.S. regarding goods CBP seized as drug paraphernalia, the Court of International Trade ruled April 11. Judge Claire Kelly said that because the issue in the case -- whether Washington state law permitted the goods to be imported over the federal ban on drug paraphernalia -- was a novel one and the government had a reasonable basis in law for litigating the issue, Keirton was not entitled to the legal fees.

To have received reimbursement for the legal fees, Keirton needed to show it succeeded in court and the U.S. position "was not substantially justified." The court looks to three factors to judge if an issue is substantially justified: whether the issue is a novel one, the government has a reasonable basis for making its case and there is a split in the applicable authority. Kelly found the U.S. case against the attorney fees to be justified on these first two grounds.

The issue of whether Washington state's law permitting the import of marijuana paraphernalia qualified for an exemption from the federal law banning drug paraphernalia was one of first impression, the court said. "Prior to Keirton filing its complaint, no court had ruled on whether Washington State’s repeal of its prohibition on marijuana paraphernalia constituted 'authorization' under § 863," Kelly said. While the trade court ultimately did rule on this issue in Eteros Technologies USA v. U.S., permitting the import of marijuana paraphernalia in Washington (see 2209210034), this ruling did not come out until after Keirton launched its suit.

The court added that the U.S. Supreme Court's ruling in Murphy v. NCAA did not "undermine the nature of the issue as one of first impression." CIT previously used Murphy to find the term "authorization" had been defined in a way that allowed Washington's law to qualify for the exemption to the federal ban on the goods at issue. Keirton had argued the issue in its case wasn't novel because Murphy had already interpreted the word "authorized." "However, neither § 863 nor the Washington statute was before the Murphy Court," the judge said. "Therefore, despite Murphy’s interpretation of 'authorized,' the issue here was one of first impression."

Kelly also held that the U.S. did not advocate an unsupportable position. The government claimed the repeal of a prior ban, as was the case in Washington, was an insufficient authorization of the import of drug paraphernalia, and said federal law requires a direct, affirmative approval of the conduct at issue. "Although the government’s arguments were not ultimately persuasive, they were nevertheless reasonable arguments at the time they were advanced," the opinion said.

(Keirton USA v. United States, Slip Op. 23-47, CIT # 21-00452, dated 04/11/23; Judge: Claire Kelly; Attorneys: Bradley Thoreson of Buchalter for plaintiff Keirton; Luke Mathers for defendant U.S. government)