United States v. Am. Home Assurance Co.

151 F.Supp.3d 1328

United States of America, Plaintiff,

v.American Home Assurance Company, Defendant.

Slip Op. 15–141

Consol. Court No. 09–00401

United States Court of International Trade.

December 17, 2015

Amended: March 15, 2016

Edward F. Kenny and Beverly A. Farrell, Trial Attorneys, Commercial Litigation Branch, Civil Division, United States Department of Justice, of New York, NY, argued for plaintiff. With them on the brief were Stuart F. Delery, Principal Deputy Assistant Attorney General, Amy M. Rubin, Senior Trial Counsel, and Justin R. Miller, Trial Attorney, Commercial Litigation Branch, Civil Division, United States Department of Justice. Of counsel on the briefs were Melissa Erny, Brandon T. Rogers, and Kyle Gormon, Office of Assistant Chief Counsel, United States Customs and Border Protection, of Indianapolis, IN.

Herbert C. Shelley, Michael T. Gershberg, and Mark F. Horning, Steptoe & Johnson LLP, of Washington, DC, argued for defendant.

OPINION

EATON, Judge:

This matter is before the court on the cross-motions for summary judgment of plaintiff United States (“plaintiff” or “the Government”), on behalf of the United States Customs and Border Protection Agency (“Customs”), and defendant American Home Assurance Company (“defendant” or “AHAC”). See Pl.'s Mot. for Summ. J. (ECF Dkt. No. 76); Def.'s Mot. for Summ. J. (ECF Dkt. No. 78). Jurisdiction lies pursuant to 28 U.S.C. § 1582(2) (2012) (“The Court of International Trade shall have exclusive jurisdiction of any civil action which arises out of an import transaction and which is commenced by the United States ... to recover upon a bond relating to the importation of merchandise required by the laws of the United States or by the Secretary of the Treasury.”).

In this consolidated action,¹ the United States seeks to recover on bonds issued by AHAC securing unpaid duties on garlic, mushrooms, and potassium permanganate imported into the United States from the People's Republic of China (“PRC”). Specifically, the Government claims that AHAC is liable for duties up to the amounts of the bonds,² and for (1) pre-liquidation interest pursuant to 19 U.S.C. § 1677g (2006) ;³ (2) prejudgment statutory interest pursuant to § 580; (3) post-liquidation interest under § 1505(d) for non-payment of the duties; (4) equitable prejudgment interest; and (5) post-judgment interest under 28 U.S.C. § 1961. See Mem. in Supp. of Pl.'s Mot. for Summ. J. 6 (ECF Dkt. No. 76) (“Pl.'s Br.”). By its cross-motion, with the exception of post-judgment interest, defendant disputes these claims. See Mem. of Law in Supp. of Def.'s Mot. for Summ. J. (ECF Dkt. No. 78) (“Def.'s Br.”).

For the reasons set forth below, plaintiff's motion for summary judgment is granted, in part, and defendant's cross-motion for summary judgment is granted, in part.

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, 247–48, 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., Div. of U.S. JVC Corp. v. United States, 234 F.3d 1348, 1351 (Fed.Cir.2000). To defeat summary judgment “all that is required is that sufficient evidence supporting the claimed factual dispute be shown to require a jury or judge to resolve the parties' differing versions of the truth at trial.” Anderson, 477 U.S. at 249, 106 S.Ct. 2505 (internal quotation marks and citation omitted).

BACKGROUND

The facts described below have been taken from the parties' statements of undisputed material facts. See Def.'s Statement of Material Facts as to Which There Is No Genuine Issue to Be Tried (ECF Dkt. No. 78) (“Def.'s Statement”). Citation to the record is provided where a fact, although not admitted in the parties' papers, is uncontroverted by record evidence.

In each of these seven cases, the bonds under which the Government seeks recovery⁴ were issued by AHAC—a company authorized to issue surety bonds—to secure the duties due on entries for four different importers between February 2001 and March 2002. See Def.'s Statement ¶¶ 7, 9. Each importer defaulted on payment of antidumping duties owed to Customs and has since disappeared. According to AHAC, the defaults were intentional and part of “a massive scheme of fraud by the exporters of the Chinese products and their importers” to avoid antidumping duties by obtaining surety bonds for entries made by new shippers⁵ and importers, which had no intention of remaining in business long enough to pay the assessed duties. See Def.'s Br. 2.

Until 1999, AHAC issued customs bonds through an underwriting agent, C.A. Shea & Company, Inc. (“Shea”). See Def.'s Statement ¶ 1. Beginning in 1999, AHAC engaged a different underwriting agent, Global Solutions Insurance Services, Inc. (“GSIS”), to “underwrite bonds covering regular customs duties and antidumping duties for AHAC.” Def.'s Statement ¶ 2. GSIS underwrote all of the bonds for AHAC at issue in this case. See Def.'s Statement ¶ 2.

An important statutory provision in this case pertains to notice that liquidation of imported merchandise⁶ has been suspended. See 19 U.S.C. § 1504(c). The subsection states, “[i]f the liquidation of any entry is suspended, the Secretary ^{[7 ]} shall by regulation require that notice of the suspension be provided, in such manner as the Secretary considers appropriate, to the importer of record or drawback claimant, as the case may be, and to any authorized agent and surety of such importer of record or drawback claimant.” Id. (emphasis added). The significance of such notice is that it would have alerted AHAC to the potential for increased antidumping duty liability following the completion of the administrative reviews.⁸

According to Customs, its automated commercial system was, and continues to be, programmed to generate notices of suspension of liquidation to sureties. Def.'s Statement ¶ 24. Prior to May 11, 2005, however, the system was not programmed to issue Customs Form 4333–A notices of suspension of liquidation to sureties other than to those sureties issuing continuous bonds⁹ unless the sole bond in the system was a single transaction bond.¹⁰ See Def.'s Statement ¶ 24. In other words, in those situations where multiple sureties insured individual entries, only the surety that issued a continuous bond would receive a notice of suspension. Thus, under circumstances where there were multiple entries each secured by a single transaction bond and a continuous bond, the sureties that issued single transaction bonds would not have been given the statutorily-required notice.

In five of the seven consolidated cases (court numbers 09–401, 09–442, 09–491, 10–002, and 10–311), AHAC issued only single transaction bonds, while another surety issued the continuous bonds. See Def.'s Statement ¶ 8. Thus, no notice of suspension of liquidation was provided to AHAC by Customs' automated system in these five cases. See Def.'s Statement ¶¶ 25–26, 44–45, 62–63, 80–81, 99–100. In the two remaining cases (court numbers 10–003 and 11–206), AHAC issued both single transaction bonds and continuous bonds to secure the entries at issue. Def.'s Statement ¶ 8. In these cases, Customs' automated system generated notices to AHAC because it had issued a continuous bond. Neither AHAC nor GSIS, its underwriting agent for the applicable bonds, however, directly received such notice. See Def.'s Statement ¶¶ 114, 128. Rather, in these two cases, notice was sent to Shea, AHAC's previous underwriter for unrelated bonds, who had no relationship to the bonds at issue in this case. Def.'s Statement ¶¶ 114, 128.

All of the bonds issued by AHAC secured the duties eventually owed on imported merchandise that was subject to antidumping duty orders issued by the United States Department of Commerce (“Commerce” or “the Department”).¹¹ See Def.'s Statement ¶ 6. In 2004 and 2005, after the importers defaulted on the antidumping duties owed on all of the entries in this action, Customs demanded payment from AHAC, which AHAC timely protested.¹² See Def.'s Statement ¶ 10. AHAC filed Freedom of Information Act (“FOIA”) requests for “all the documentation relevant” to the demands for payment, to which, according to AHAC, Customs was slow in responding.¹³ See Def.'s Br. 8.

Once AHAC supplemented its protests with the information received in response to its FOIA requests, and after additional delays, Customs denied the protests in all but two cases.¹⁴ See Def.'s Statement ¶ 11. AHAC did not appeal any of these protest denials to this Court. Customs commenced these collection actions in this Court between September 2009 and October 2010, close to the six-year statute of limitations for filing collections action. See 28 U.S.C. § 2415(a). Shortly after the Government brought these collection actions to recover the unpaid duties on the bonds, AHAC executed time-limited waivers of the statute of limitations for the entries covered by court numbers 09–491 and 10–311.¹⁵ Def.'s Statement ¶¶ 160, 162.

Earlier in these proceedings, AHAC sought dismissal of the Government's action, arguing the case should be dismissed because the company did not receive notice of the suspension of liquidation of some entries. See United States v. Am. Home Assurance Co. (AHAC I ), 35 CIT ––––, ––––, Slip Op. 11–57, at 5, 2011 WL 1882635 (2011). Specifically, AHAC argued that, because it failed to receive notice of suspension as required by 19 U.S.C. § 1504(c), liquidation of the entries was not actually suspended. Mem. in Supp. of Def.'s Mot. to Stay Discovery and in Opp'n to Pl.'s Mot. for Stay 2–3 (ECF Dkt. No. 28) (“Def.'s Mot. to Stay”). Because, according to AHAC, there was no suspension of liquidation, the entries...