United States v. Am. Home Assurance Co.

653 F.Supp.3d 1277

UNITED STATES of America, Plaintiff, v. AMERICAN HOME ASSURANCE COMPANY, Defendant.

Slip Op. 23-118 Court No. 20-00175

United States Court of International Trade

August 18, 2023

Peter A. Mancuso, Trial Attorney, Commercial Litigation Branch, Civil Division, U.S. Department of Justice, of New York, N.Y., argued for Plaintiff United States of America. With him on the brief were Brian M. Boynton, Acting Assistant Attorney General, Jeanne E. Davidson, Director, and Justin R. Miller, Attorney-In-Charge. Of counsel on the brief was Suzanna Hartzell-Ballard, Office of the Assistant Chief Counsel, U.S. Customs and Border Protection, of New York, N.Y.

Taylor Pillsbury, Meeks, Sheppard, Leo & Pillsbury, of Laguna Beach, CA, argued for Defendant American Home Assurance Company. With him on the brief was Michael B. Jackson.

OPINION

Eaton, Judge:

This is a collection action commenced by the United States, on behalf of the Department of Homeland Security, U.S. Customs and Border Protection ("Plaintiff" or "Customs"), for recovery on customs bonds. Jurisdiction is found under 28 U.S.C. § 1582(2) (2018).¹

Before the court are Customs' motion for summary judgment and the cross-motion for summary judgment of Defendant American Home Assurance Company ("Defendant" or "AHAC"), the company that wrote the contested bonds. See Pl.'s Mem. Supp. Mot. Summ. J., ECF No. 22 ("Pl.'s Br."); Def.'s Mem. Supp. Cross-Mot. Summ. J. and Resp. Pl.'s Mot. Summ. J., ECF No. 23 ("Def.'s Br."); Pl.'s Resp. to Cross-Mot. and Reply in Supp. Mot. Summ. J., ECF No. 24 ("Pl.'s Reply"); Def.'s Reply in Supp. Cross-Mot., ECF No. 27; see also Def.'s Suppl. Br. Supp. Cross-Mot. Summ. J., ECF No. 54; Def.'s Am. Suppl. Br. Supp. Cross-Mot. Summ. J., ECF No. 67 ("Def.'s Am. Suppl. Br."); Pl.'s Mem. Resp. Def.'s Am. Suppl. Br., ECF No. 68 ("Pl.'s Resp. Am. Suppl. Br."); Def.'s Reply Pl.'s Resp. Def.'s Am. Suppl. Br., ECF No. 69 ("Def.'s Reply Am. Suppl. Br."). The court has accepted for filing two amicus curiae briefs.²

Each party has filed a statement of undisputed material facts in support of its motion, as required by Rule 56.3. See USCIT R. 56.3(a); see also Pl.'s R. 56.3 Statement, ECF No. 22-1 ("Pl.'s SOF"); Def.'s R. 56.3 Statement, ECF No. 23-1 ("Def.'s SOF"). The parties agree on the facts not in dispute, except in a few limited instances that are not material to the court's analysis of the issues. See Pl.'s Resp. Def.'s SOF, ECF No. 24-1 (admitting all, except portions of paragraphs 6, 9, 12, 17, 20, and 23); Def.'s Resp. Pl.'s SOF, ECF No. 27-1 (admitting all).

By its motion, Customs asks the court to award it unpaid duties in the amount of $379,009.00 plus interest³ for AHAC's alleged breach of eight single transaction bonds⁴ that secured the payment of antidumping duties owed on entries of preserved mushrooms from the People's Republic of China ("China").⁵ See Pl.'s Br. at 1-2.

By its cross-motion, AHAC argues that it is entitled to summary judgment because Customs' claims are barred (1) under the doctrine of res judicata, or in the alternative, (2) by the applicable statute of limitations.⁶ See Def.'s Br. at 10-21.

For the following reasons, the court finds that Customs' claims are barred by the running of the statute of limitations. Accordingly, Customs' motion is denied, and AHAC's cross-motion is granted.

BACKGROUND

Between February 2001 and January 2002, U.S. importers Panjee Co., Ltd. ("Panjee") and Pan Pacific Products, Inc. ("Pan Pacific") imported preserved mushrooms from China into the United States. Pl.'s SOF ¶¶ 1, 19. Panjee made six entries between February and May 2001. Id. ¶ 1. Pan Pacific made two entries—one in March 2001, and the other in January 2002.⁷ Id. ¶ 19.

In the entry summaries accompanying their respective entries, Panjee and Pan Pacific each asserted that the imported merchandise was subject to the antidumping duty order on preserved mushrooms from China, at a specified rate.⁸ Id. ¶¶ 4, 22.

Normally, an importer is required to deposit with Customs, at the time of entry, a cash deposit equal to the amount of duties and fees estimated to be payable on the imported merchandise. See 19 U.S.C. § 1505(a) (2018); see also 19 C.F.R. § 141.1 (the importer is liable for duties). Here, in lieu of making a cash deposit of the estimated duties, Panjee and Pan Pacific deposited with Customs single transaction bonds: six bonds to cover Panjee's entries, and two bonds to cover Pan Pacific's entries. Pl.'s SOF ¶¶ 9, 27. These bonds were permitted, for a time,⁹ in new shipper reviews, to take the place of cash deposits of estimated duties otherwise required on merchandise that was subject to an antidumping or countervailing duty order. So, at the time of importation, the importers believed that they owed antidumping duties on their respective entries of merchandise, and the single transaction bonds took the place of the cash deposits that would otherwise be required as the source of payment for those duties at liquidation. The stated amount of the bonds was sufficient to pay the estimated duties. Pl.'s SOF ¶¶ 5, 8, 23, 26.

Panjee's six entries liquidated by operation of law¹⁰ on February 20, 2003. Id. ¶ 10. One of Pan Pacific's two entries also liquidated by operation of law on February 20, 2003, and the other liquidated by operation of law on January 11, 2004. Id. ¶ 28. All eight entries liquidated at the rate asserted at the time of entry. See supra note 8; Pl.'s SOF ¶¶ 10, 28.

Then, more than a decade passed. During that time, Customs took no action to collect on the debts owed by the importers for duties on their respective entries. That is, Customs did not send a bill to Panjee or to Pan Pacific. Nor did Customs commence a lawsuit against either importer. Customs also took no steps to obtain payment of the duties by calling on AHAC's bonds even though they would have been sufficient to pay the duties owed. In its motion papers, Customs does not offer any reason for its failure to take action to collect on the importers' debts. Nor does it explain why it took no action to collect these debts from AHAC, whose bonds made it both jointly and jointly and severally liable for the debts. At oral argument, Customs' counsel's explanation for the delay was that the collection of duties on the eight entries had "slipped through the cracks" at the agency.¹¹

On September 26, 2014, about eleven years after liquidation, Customs sent six bills to Panjee and two bills to Pan Pacific for the duties owed on each of their respective entries. Pl.'s SOF ¶¶ 12, 30. Each of the eight bills contained identical language: "This Bill is a notice of debt currently owed to [Customs]." Pl.'s Br. Exs. 4 & 8, ECF Nos. 22-5 & 22-9 (emphasis added).

Thereafter, on July 6, 2015, and February 3, 2016, Customs issued notices to AHAC of the outstanding bills via a "Formal Demand on Surety for Payment of Delinquent Amounts Due," otherwise known as a "612 report." See Pl.'s SOF ¶¶ 14, 32; Pl.'s Br. Exs. 5 & 9, ECF Nos. 22-6 & 22-10; see also Pl.'s Br. Ex. 3 ¶¶ 16, 28, ECF No. 22-4. For Customs, the 612 report constituted a demand for payment.¹² AHAC did not pay. See Pl.'s SOF ¶¶ 16, 34.

On September 16, 2020, four years after the last 612 report and more than sixteen years after liquidation, Customs commenced this action by filing a summons and complaint to collect on the eight single transaction bonds: Count I is based on Panjee's six entries; Counts II and III are based on Pan Pacific's two entries. See Compl., ECF No. 3. In its amended answer, AHAC raised several affirmative defenses, including that Customs' claims were barred under the doctrine of res judicata and by the applicable statute of limitations. See Am. Answer at 9-10, ECF No. 18.

Motion practice followed. After court-ordered supplemental discovery and briefing,¹³ the parties' cross-motions for summary judgment are now before the court for decision.

STANDARD OF REVIEW

Summary judgment shall be granted "if the movant shows that there is no genuine dispute as to any material fact and the movant is entitled to judgment as a matter of law." USCIT R. 56(a); see Anderson v. Liberty Lobby, Inc., 477 U.S. 242, 247, 106 S.Ct. 2505, 91 L.Ed.2d 202 (1986). "When both parties move for summary judgment, the court must evaluate each motion on its own merits, resolving all reasonable inferences against the party whose motion is under consideration." JVC Co. of Am. v. United States, 234 F.3d 1348, 1351 (Fed. Cir. 2000) (citation omitted).

DISCUSSION

I. Customs' Claims Are Not Barred Under the Doctrine of Res Judicata

Under the doctrine of res judicata (or claim preclusion), "[a] final judgment on the merits of an action precludes the parties or their privies from relitigating issues that were or could have been raised in that action." Federated Dep't Stores, Inc. v. Moitie, 452 U.S. 394, 398, 101 S.Ct. 2424, 69 L.Ed.2d 103 (1981) (citations omitted); Golden Pac. Bancorp v. United States, 15 F.3d 1066, 1071 (Fed. Cir. 1994) ("Under the doctrine of res judicata, a judgment on the merits in a prior suit bars a second suit involving the same parties or their privies based upon the same claim or cause of action."). "Over the years, the doctrine has come to incorporate common law concepts of merger and bar,[¹⁴] and will thus also bar a second suit raising claims based on the same set of transactional facts." Ammex, Inc. v. United States, 334 F.3d 1052, 1055 (Fed. Cir. 2003) (emphasis added) (citing Migra v. Warren City School Dist. Bd. of Educ., 465 U.S. 75, 77 n.1, 104 S.Ct. 892, 79 L.Ed.2d 56 (1984)).

Under case law, "to prevail on a claim of res judicata, the party asserting the bar must prove that (1) the parties are identical or in privity; (2) the first suit proceeded to a final judgment on the merits; and (3) the second claim is based on the same set of transactional facts as the first." Id. (emphasis added) (first citing Parklane Hosiery Co. v. Shore, 439 U.S. 322, 326 n.5, 99 S.Ct. 645, 58 L.Ed.2d 552 (1979);...