United States v. Great Neck Saw Mfrs., Inc.

311 F.Supp.3d 1337

UNITED STATES, Plaintiff,

v.GREAT NECK SAW MANUFACTURERS, INC., Defendant.

Slip Op. 18–42

Court No. 17–00049

United States Court of International Trade.

Dated: April 16, 2018

Albert S. Iarossi, Trial Attorney, Commercial Litigation Branch, Civil Division, U.S. Department of Justice, of Washington, D.C., for Plaintiff United States. With him on the brief were Chad A. Readler, Acting Assistant Attorney General, Jeanne E. Davidson, Director, and Patricia M. McCarthy, Assistant Director.

Carl R. Soller, Soller Law Intl, LLC, of So. Elmont, NY for Defendant Great Neck Saw Manufacturers, Inc.

OPINION and ORDER

Gordon, Judge:

Before the court is the motion of Defendant Great Neck Saw Manufacturers, Inc. ("GNSM") to dismiss the complaint of Plaintiff United States ("the Government"), pursuant to USCIT Rule 12(b)(6) for failure to state a claim. See Def.'s Mot. to Dismiss Pursuant to CIT Rule 12(b)(6), ECF No. 18 ("Def.'s Mot."); see also Pl.'s Resp. to Def.'s Mot. to Dismiss, ECF No. 22 ("Pl.'s Resp"). For the reasons set forth below, the court denies GNSM's motion.

I. Background

GNSM is an importer and manufacturer of hand tools including screwdrivers, saws, levels, layout tools, knives, and flashlights ("subject merchandise"). Compl. ¶ 4, ECF No. 2. The Government brought this action against GNSM pursuant to 19 U.S.C. § 1592 and 28 U.S.C. § 1582 for civil penalties in the amount of $1,111,351.24 based on GNSM's negligence or gross negligence in the importation of the subject merchandise and unpaid customs duties in the amount of $307,767.49. See id. ¶ 1. The Government alleges that U.S. Customs and Border Protection ("Customs") conducted two audits of GNSM for entries during the period June 20, 2005 through December 31, 2009 ("audit period"), and that Customs concluded that GNSM improperly deducted a payment of a five percent buyer's commission from the commercial invoice unit cost. Id. ¶¶ 5, 8. The complaint further alleges that GNSM treated the commission as a non-dutiable charge, resulting in an inaccurate entered value for the subject merchandise. Id. ¶ 10. The Government also claims that while the commission was listed at the bottom of a commercial invoice as a deduction, along with non-dutiable costs of ocean freight and insurance, it was paid directly to GNSM's foreign sellers via wire transfer. Id. ¶ 11.

The complaint states that Customs determined that the payments were not bona fide buying commissions despite GNSM's argument that it maintained bona fide buying relationships with the intermediaries identified in its buying agreements. Id. ¶¶ 13, 15. The Government alleges that GNSM's three buying agreements show that the agents' names and addresses were identical to those of the foreign sellers that appeared on the commercial invoices, thereby calling into question the existence of a bona fide buying agency relationship. Id. ¶ 12. Lastly, the complaint alleges that GNSM continued its deduction of these commissions despite being explicitly notified by Customs, as early as June 28, 2007, that the commissions were non-deductible. Id. ¶¶ 22, 23 ("June 2007 Notice"). This behavior, the Government claims, constitutes more than mere negligence. Id. ¶ 24. The complaint characterizes the improper deduction of these buying commissions as the material false statements resulting from Defendant's negligence or gross negligence in violation of § 1592(a). Id. ¶ 36. GNSM timely filed an answer to the complaint followed by a motion to dismiss pursuant to USCIT Rule 12(b)(6). See Answer, ECF No. 12; Def.'s Mot.

II. Standard of Review

In deciding a USCIT Rule 12(b)(6) motion to dismiss for failure to state a claim upon which relief can be granted, the court assumes all factual allegations to be true and draws all reasonable inferences in the plaintiff's favor. See Cedars–Sinai Med. Ctr. v. Watkins, 11 F.3d 1573, 1583–84 & n.13 (Fed. Cir. 1993).

A plaintiff's factual allegations must be "enough to raise a right to relief above the speculative level on the assumption that all the allegations in the complaint are true (even if doubtful in fact)." See Bell Atlantic Corp. v. Twombly, 550 U.S. 544, 555, 127 S.Ct. 1955, 167 L.Ed.2d 929 (2007). "To survive a motion to dismiss, a complaint must contain sufficient factual matter, accepted as true, to ‘state a claim of relief that is plausible on its face.’ " See Ashcroft v. Iqbal, 556 U.S. 662, 678, 129 S.Ct. 1937, 173 L.Ed.2d 868 (2009) (quoting Twombly, 550 U.S. at 570, 127 S.Ct. 1955 ).

III. Discussion

A. Timeliness/Judgment on the Pleadings under Rule 12

USCIT Rule 12 requires a defendant to either file an answer to a complaint or move to present certain defenses within the time allowed for a response. See USCIT R. 12(a), (b). Rule 12 specifically provides that a motion asserting that a complaint fails to state a claim upon which relief may be granted "must be made before pleading if a responsive pleading is allowed." USCIT R. 12(b). Rather than filing a USCIT Rule 12(b)(6) motion to dismiss, GNSM chose to file its answer. The Government argues that having filed an answer, GNSM was time barred from filing a motion to dismiss for failure to state a claim. See Pl.'s Resp. at 3.

The Government is technically correct; however, Rule 12 also provides that a party may move for judgment on the pleadings after the pleadings are closed, but early enough not to delay trial. See USCIT R. 12(c). When a court is confronted with a situation in which a party has filed a motion to dismiss after filing an answer, rather than denying the motion to dismiss as untimely, the court will treat the motion as one for judgment on the pleadings under Rule 12(c). See 2–12 Milton I. Shadur, Moore's Federal Practice—Civil, § 12.38 (3d ed. 2018) ("... a motion to dismiss filed after the pleadings close will be treated as a motion for judgment on the pleadings."); see also Whitehurst v. Wal–Mart Stores East, L.P., 329 Fed.Appx. 206, 208 (11th Cir. 2008) ("[T]he court may construe the Rule 12(b)(6) motion as one seeking judgment on the pleadings under Rule 12(c)."). Accordingly, the court will construe Defendant's motion to dismiss as a Rule 12(c) motion for judgment on the pleadings.

A motion for judgment on the pleadings is reviewed under the same standard as a motion to dismiss for failure to state a claim. See Forest Labs., Inc. v. United States, 29 CIT 1401, 1402–03, 403 F.Supp.2d 1348, 1349 (2005), aff'd, 476 F.3d 877 (Fed. Cir. 2007). In deciding a Rule 12(c) motion for judgment on the pleadings, the court must accept all well-pleaded facts as true and view them in the light most favorable to the non-moving party. See United States v. Ford Motor Co., 497 F.3d 1331, 1336 (Fed. Cir. 2007) ; 5C Wright & Miller, Federal Practice and Procedure § 1368 (3rd ed. 2017).

To survive a motion under Rule 12(c), a complaint must contain "sufficient factual matter, accepted as true, to ‘state a claim for relief that is plausible on its face.’ " See Iqbal, 556 U.S. at 677–78, 129 S.Ct. 1937 (citation omitted). This requires that the complaint plead facts which allow the court to draw a reasonable inference that the defendant is liable for the alleged misconduct. Id.

Additionally, the court must determine whether Defendant's motion (whether a Rule 12(b)(6) or Rule 12(c) motion) was filed in contravention of the deadlines for further proceedings in this action. See Scheduling Order, ECF No. 15. Furthermore, if the court considers Defendant's motion under Rule 12(c), the court must also determine whether Defendant's motion would improperly delay consideration of the merits. See USCIT R. 12(c). Here GNSM filed its answer on July 26, 2017. One month later, the court issued a scheduling order governing further proceedings, including the filing of motions regarding the pleadings, discovery, and disposition on the merits by summary judgment or trial. See Scheduling Order. The deadline for motions regarding the pleadings was October 27, 2017, which was extended to November 6, 2017 pursuant to an order on an unopposed motion. See Consent Mot. for Extension of Time, ECF No. 16; Order, ECF No. 17. That motion and order did not change the May 2018 date for the closure of discovery nor the August 2018 due dates for dispositive motions or a request for trial. Defendant then filed its motion to dismiss on November 5, 2017. Based on these circumstances, the court concludes that Defendant's motion to dismiss was interposed prior to the deadline provided in the Scheduling Order and early enough in the life of this action so as not to delay the final disposition on the merits. Accordingly, the court will not deny GNSM's Rule 12(b)(6) motion as untimely and will instead consider the motion under Rule 12(c).

B. Negligence or Gross Negligence Claim

Defendant challenges the Government's claim for civil penalties (Count II) as inadequately pled in that the complaint fails to allege negligence or gross negligence on the part of GNSM. See Def.'s Mot. at 8–11. Under Section 1592, no person, by gross negligence or negligence, may enter merchandise into United States by means of a document, written or oral statement, or act that is material and false, or any omission that is material. See 19 U.S.C. § 1592(a)(1)(A)(i) & (ii).

A claim of negligence "arises out of ‘an act or acts (of commission or omission) done through either the failure to exercise the degree of reasonable care and competence expected from a person in the same circumstances in ascertaining the facts or in drawing inferences therefrom...." United States v. Ford Motor Co., 29 CIT 827, 845, 395 F.Supp.2d 1190, 1207–08 (2005) (quoting 19 C.F.R., Part 171, App. B(B)(1) ), aff'd in part and remanded, 463 F.3d 1267 (Fed. Cir. 2006). Therefore, the Government must allege that GNSM "entered or introduced, or attempted to enter or introduce, merchandise into United States commerce by means of either (i) a material and false statement, document or act, or (ii) a material omission." See ...