U.S. v. Am. Home Assurance Co.

UNITED STATES of AMERICA., Plaintiff, v. AMERICAN HOME ASSURANCE CO., Defendant.

Slip Op. 11-57 Court No. 09-00401

UNITED STATES COURT OF INTERNATIONAL TRADE

Dated: May 17, 2011

Before: Richard K. Eaton, Judge

OPINION

[Plaintiff's and defendant's cross-motions to stay denied.]

Tony West, Assistant Attorney General; Barbara S. Williams, Attorney in Charge, International Trade Field Office, Commercial Litigation Branch, Civil Division, United States Department of Justice (Edward F. Kenny); Office of Chief Counsel, International Trade Litigation, United States Customs and Border Protection (Brandon T. Rogers), of counsel, for plaintiff United States of America.

Steptoe & Johnson LLP (Herbert C. Shelley and Mark F. Horning)for defendant American Home Assurance Co.

Eaton, Judge: Before the court are the parties' cross-motions to stay these proceedings. Plaintiff the United States of America (the "Government"), on behalf of United States Customs and Border Protection ("Customs"), seeks to stay its response to defendant American Home Assurance Co.'s ("AHAC") motion for summary judgment pending the completion of discovery. AHAC, in turn, seeks to stay the completion of discovery pending thecourt's decision on its motion for summary judgment.

Although the parties' respective motions seek only to stay parts of these proceedings, they raise a significant issue concerning the effect, if any, of Customs' failure to provide a surety with notice of a suspension of liquidation. Specifically, the issue presented is whether Customs' failure to provide AHAC with notice of the suspension of liquidation of the entries subject to the surety's bond, as required by 19 U.S.C. § 1504(c) (2006), invalidates the suspension of liquidation. For the reasons set forth below, the court holds that it does not. Based on this holding, the court denies both parties' motions to stay.

BACKGROUND

By its complaint, the Government seeks to recover in excess of $3.5 million on bonds executed by AHAC to secure the payment of antidumping duties by Pan Pacific Products, Inc. ("Pan Pacific") on 119 entries of merchandise imported into the United States from the People's Republic of China ("PRC") between May 2001 and March 2002. The parties do not dispute the basic facts relating to the entries at issue.

The first 103 of these entries were made between May 30, 2001 and January 23, 2002, and were subject to the Department of Commerce's (the "Department" or "Commerce") third administrative review of the antidumping duty orders of preserved mushrooms fromthe PRC for the period of review ("POR") February 1, 2001 through January 31, 2002. See Certain Preserved Mushrooms from the PRC, 68 Fed. Reg. 41,304 (Dep't of Commerce July 11, 2003) (final results of administrative review). The remaining sixteen entries were made between February 1, 2002 and March 10, 2002, and were subject to Commerce's fourth administrative review of preserved mushrooms from the PRC for the POR February 1, 2002 through January 31, 2003. See Certain Preserved Mushrooms from the PRC, 69 Fed. Reg. 54,635 (Dep't of Commerce Sept. 9, 2004) (final results of administrative review).

Upon the request for an administrative review for each POR, liquidation of the entries subject to each review, including Pan Pacific's, was suspended. See 19 U.S.C. § 1675(a)(2)(C); Canadian Wheat Bd. v. United States, 33 CIT _, _, 637 F. Supp. 2d 1329, 1334 n.6 (2009), aff'd, No. 2010-1083, Slip Op. (Fed. Cir. Apr. 19, 2011) (noting that a request for administrative review suspends liquidation pending the outcome of the review); 19 C.F.R. § 351.212(c)(1) (2010). It is undisputed that Customs failed to provide the statutory notice of those suspensions to Pan Pacific's surety, AHAC. See generally Pl.'s Mot. for Stay ("Pl.'s Mot."), ECF No. 27.. Some years later, when Customs was unable to obtain payment of antidumping duties from Pan Pacific, it demanded payment from AHAC. See Compl. at exhibits D, E, and F, ECF No. 2. When AHAC refused to pay, the Government commencedthis action. See Summons (Sept. 18, 2009), ECF 1.

Among other affirmative defenses raised in its answer, AHAC asserts that Customs' claims are barred by the six year statute of limitations set forth in 28 U.S.C. § 2415(a) (2006). On January 11, 2011, AHAC moved for summary judgment on this basis. See generally Def.'s Mem. of Law in Supp. Mot. Sum. J. ("SJ Mot."), ECF No. 26.

On February 9, 2011, the Government moved to stay its response to AHAC's motion for summary judgment, asserting that it needed to conduct further discovery before it could adequately respond. Pl.'s Mot. 5-6. The Government claims that it needs additional time to address AHAC's affirmative defense that it has been materially prejudiced by Customs' failure to provide notice of the suspensions. Therefore, the Government maintains that it "must complete discovery before we can satisfactorily address all the relevant issues... that are implicated by AHAC's motion for summary judgment." Pl.'s Mot. 6. The Government seeks to stay the proceedings even though the affirmative defense of prejudice, found in the answer, is not specifically referenced in AHAC's summary judgment motion. Pl.'s Mot. 5-6; Am. Ans. 11, ECF No. 25; see generally SJ Mot.

On February 11, 2011, AHAC filed its own motion, seeking to stay discovery pending the outcome of its motion for summary judgment. Def.'s Mot. to Stay Disc. ("Def.'s Mot.") 1, ECF No.28. Oral argument was held on April 19, 2011.

DISCUSSION

The Government argues that, if Customs' failure to notify AHAC can invalidate the suspensions at all, it can only be upon AHAC showing that it was prejudiced by the lack of notice. The Government, therefore, seeks to stay its response to AHAC's motion for summary judgment in order to complete discovery regarding the prejudice, if any, suffered by AHAC as a result of Customs' failure to provide the required notice. Pl.'s Mot. 5-6.

AHAC counters that discovery should be stayed as a matter of judicial economy because "[t]here are 'substantial grounds' and a 'foundation in law' for concluding that the Government's claims are barred by the statute of limitations." Def.'s Mot. 5. The theory underlying AHAC's statute of limitations defense, and its motion for summary judgment, is that Customs' failure to notify the surety that liquidation of the entries at issue was suspended invalidated the suspensions as a matter of law. Based on this contention, AHAC reasons "[t]hat lack of notice caused these entries to be deemed liquidated one year after entry pursuant to 19 U.S.C. § 1504(a)(1)(A)." Def.'s Mot. 3. According to the surety, this alleged deemed liquidation occurred more than six years prior to the commencement of this action and, thus, the Government's claim is barred by the six year statute oflimitations. See SJ Mot. 5-6; Def.'s Mot. 3.

I. Arguments of the Parties

The parties agree that the statute of limitations on the Government's claims runs from the date of liquidation. The parties disagree, however, as to when liquidation occurred. According to the Government, it occurred between September and December 2003, following Commerce's actual liquidation of the entries upon the completion of its administrative reviews. Thus, the Government argues that liquidation occurred less than six years prior to the commencement of this action. See Compl. ¶¶ 12-15.

AHAC insists, however, that liquidation of the entries was never suspended and that, as a result, the entries were deemed liquidated pursuant to 19 U.S.C. § 1504(a) one year after the date they entered the United States. According to AHAC, all of the deemed liquidations would have occurred no later than March 2003 and, thus, beyond the six year statute of limitations. Def.'s Mot. 3.

The Government disputes AHAC's statute of limitations claim. The plaintiff asserts that the lack of notice to AHAC did not affect the validity of the suspensions because suspension happens as a matter of law, regardless of whether notice is provided to the surety. Pl.'s Mot. 3. The Government further argues that Customs' failure to provide notice to AHAC did not thereafter automatically invalidate the suspensions of liquidation because § 1504(c) does not provide for a consequence for failure to comply with the notice requirement, making the statutory directive to provide notice directory, not mandatory. Pl.'s Mot. 5; see also Alberta Gas Chems., Inc. v. United States, 1 CIT 312, 315-16, 515 F. Supp. 780, 785 (1981) ("It is settled that '[a] statutory time period is not mandatory unless it both expressly requires an agency or public official to act within a particular time period and specifies a consequence for failure to comply with the provisions.'")(citations omitted).

In the alternative, the Government argues that, if lack of notice could vitiate the suspensions, under the rule of prejudicial error, the suspensions would only be invalid if AHAC could demonstrate that it was prejudiced by notice not being provided. Pl.'s Mot. 5-6. Accordingly, the Government argues that it needs further discovery on the issue of prejudice to adequately respond to AHAC's summary judgment motion. Pl.'s Mot. 5-6.

AHAC counters that a stay is appropriate to avoid the undue waste and expense that would result from conducting discovery when it is likely that this matter will be resolved in AHAC's favor by summary judgment. The surety maintains that no showing of prejudice is required for it to succeed on its summaryjudgment motion. For AHAC, the fact that it was not given notice rendered the suspensions invalid, ab initio, resulting in deemed liquidations one year after the entries were made. "Therefore, irrespective of the reason for a suspension, once entries are deemed liquidated, the statute of limitations begins to run if the requisite notice has not been given to a relevant party." Def.'s Mot. 5. Thus, AHAC argues that it is appropriate for the court to stay discovery pending resolution of its dispositive...