United States v. Katana Racing, Inc.

569 F.Supp.3d 1296

UNITED STATES, Plaintiff,

v.KATANA RACING, INC., d/b/a Wheel & Tire Distributors, Defendant.

Slip Op. 22-30

Court No. 19-00125

United States Court of International Trade.

March 28, 2022

Ashley Akers, Trial Attorney, International Trade Field Office, Commercial Litigation Branch, Civil Division, U.S. Department of Justice, Washington, DC, Joseph H. Hunt, Assistant Attorney General, Jeanne E. Davidson, Director, and Tara K. Hogan, Assistant Director, for the plaintiff. Of Counsel Karen Hiyama, Senior Attorney, Office of the Assistant Chief Counsel, U.S. Customs and Border Protection, Detroit, MI.

John M. Peterson, Richard F. O'Neill, and Patrick B. Klein, Neville Peterson LLP, New York, NY, for the defendant.

Opinion & Order

AQUILINO, Senior Judge:

This matter concerns a complaint for unpaid customs duties and fees owing to the United States Treasury allegedly "stem[ming] from violations of subsection 592(a) of the Tariff Act of 1930, 19 U.S.C. § 1592(a), with respect to 386 entries of certain passenger vehicle and light truck tires(‘PVLT’) from [the People's Republic of] China into the United States from November 24, 2009 through August 7, 2012" via untrue declarations on entry forms filed with plaintiff's U.S. Customs and Border Protection ("CBP"). See Complaint ¶1.

Oddly, the complaint does not seek penalties per se, only recovery of $5,742,483.80 plus interest and costs, purportedly the responsibility of the nominal importer-of-record ("IOR") on the entry documents, a certain California-based reseller of PVLT and other motor vehicle wares. See id. ¶3.

Summonsed herein, the defendant has interposed, prior to filing an answer, a motion to dismiss for lack of jurisdiction pursuant to USCIT Rule 12(b)(1) and 12(b)(6), explaining that it was the victim of a scheme of identity theft of its company name and denying it violated § 1592(a). The complaint predicates timeliness¹ on its July 15, 2019 filing, the basis therefor being the latest of three consecutive waivers by the defendant of the statute of limitations ("SoL") up to and including July 19, 2019. See id. ¶ 4. The defendant, however, revoked its last SoL waiver on June 26, 2019, and it contends that jurisdiction here is lacking, being time-barred either by 19 U.S.C. § 1621 or by laches. See Def's Memorandum of Points and Authorities in Support of Motion to Dismiss ("Def's Br.") at 33 & Ex. P.

I

To defendant's knowledge,

this case represents the first instance in the history of the current Section 592 law -- i.e., since the [Customs Procedural Reform and Simplification Act of 1978, Pub. L. No. 95-410, 92 Stat. 893 ] -- where the Government has brought suit to collect withheld duties under Section 592(d) without even attempting to undertake the administrative proceedings necessary to establish that a predicate violation of Section 592(a) occurred. Accordingly, this action must be dismissed as time-barred, for failure to exhaust administrative remedies, and for failure to state a claim upon which relief can be granted.

Def's Br. at 20-21 (emphasis in original).

Defendant's counsel contend that dismissal is compelled because the plaintiff never found or articulated that their client violated § 1592(a). A finding of such a violation is an obvious and necessary predicate to assessing responsibility, let alone penalties for withheld duties under that statute, they argue. Section 1592(b)(1) specifies the administrative process pursuant to which CBP is authorized to determine the existence of a § 1592(a) violation. Counsel contend that CBP never followed or "exhausted" such procedure to determine any violation by the defendant, much less others actually responsible. Hence, when it became "clear" that no such administrative procedures were forthcoming, despite previous administrative promise(s) to the contrary, the defendant revoked its last SoL waiver.

On that basis, defendant's counsel argue for equitable tolling against CBP's arguments vis-à-vis defendant's revocation of its latest SoL, which would result in time-barring of this action and dismissal pursuant to Rule 12(b)(1) and/or 12(b)(6).

The issues of moment defendant's counsel distill to these:

1. Whether CBP is required to conduct administrative procedures to "assert and determine" the existence of a 19 U.S.C. § 1592(a) violation for which the defendant bears responsibility before commencing suit to recover "withheld duties" under 19 U.S.C. § 1592(d) ;

2. Whether the defendant could properly revoke its last SoL, prior to the commencement of this case, because that act implicates whether this action is timely commenced within the five-year SoL set out in § 1621, eight to ten years having elapsed since the transactions at issue; and

(3) Whether laches applies in the alternative.

See Def's Reply. Its initial brief also noted the following:

To the extent the parties rely on materials outside the pleadings, USCIT Rule 12(d) permits the Court, upon notice to the parties, to treat the motion as one for summary judgment. See [,] e.g., Easter v. United States, 575 F.3d 1332, 1335-36 (Fed. Cir. 2009) ; Cisco Sys. v. United States, 804 F.Supp.2d 1326, 1336-1337 (Ct. Intl. Tr. 2011) ; U.S. Ass'n of Imps. of Textiles & Apparel v. United States, 366 F.Supp.2d 1280, at 1285-1286 (Ct. Intl. Tr. 2005).

Def's Br. at 4 n.4.

Plaintiff's general disagreement with the foregoing, and the court's consideration thereof, resulted in a cross-motion for summary judgment. See ECF No. 24 ("Pl's X-Mot"). In response, the defendant urges a decision on its motion to dismiss first, before turning to any decision on the merits. E.g., ECF No. 37.

Consideration of the parties’ positions persuades the court that it lacks jurisdiction over this matter.

II

Judicial consideration often involves interpretation of governing legal authorities, such as statutes and other questions of law. E.g. Kent v. Principi, 389 F.3d 1380, 1384 (Fed. Cir. 2004) (interpretation of a statute or regulation is a question of law) (citation omitted); Yanko v. United States, 869 F.3d 1328, 1331 (Fed. Cir. 2017) (treating as a "pure legal issue of statutory interpretation" claim based on interpretation of statutory provision and related executive order). Such legal interpretations are appropriately resolved under a Rule 12(b)(6) motion to dismiss. See Yanko at 1331 (citation omitted).

Rule 12(b)(6) dismissal is appropriate when a complaint's allegations do not entitle a remedy. See United Pac. Ins. Co. v. United States, 464 F.3d 1325, 1327 (Fed. Cir. 2006) (citation omitted). A motion thereunder "tests the legal sufficiency of a complaint," Browning v. Clinton, 292 F.3d 235, 242 (D.C. Cir. 2002), to determine if it presents a legally cognizable right of action, Bell Atl. Corp. v. Twombly, 550 U.S. 544, 555, 127 S.Ct. 1955, 167 L.Ed.2d 929 (2007) (citation omitted), or fails to "state a claim to relief that is plausible on its face." 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 ). The court accepts well-pleaded factual allegations as true and draws all reasonable inferences in favor of the claimant, Kellogg Brown & Root Servs., Inc. v. United States, 728 F.3d 1348, 1365 (Fed. Cir. 2013), with the exception of legal conclusions among the allegations, Twombly, 550 U.S. at 555, 127 S.Ct. 1955, nor need a court "accept as true allegations that contradict matters properly subject to judicial notice or by exhibit". Secured Mail Sols., LLC v. Universal Wilde, Inc., 873 F.3d 905, 913 (Fed. Cir. 2017) (citation omitted).

A Rule 12(b)(6) motion is thus considered under the same standard as a motion for judgment on the pleadings. See SAP Am., Inc. v. InvestPic, LLC, 898 F.3d 1161, 1166 (Fed. Cir. 2018). It presents either a "facial" challenge to a pleading or to the factual basis of the jurisdiction invoked. See, e.g., Cedars-Sinai Med. Ctr. v. Watkins, 11 F.3d 1573, 1583 (Fed. Cir. 1993). Facial challenges are based on the "sufficiency" of a pleading's allegation(s), which are to be evaluated presuming the allegations as true and as construed in their best light. See id., citing Scheuer v. Rhodes, 416 U.S. 232, 236, 94 S.Ct. 1683, 40 L.Ed.2d 90 (1974). If a challenge denies or controverts material aspects of the complaint as pled, then the movant is deemed to be challenging the factual basis for subject matter jurisdiction, in which case only the uncontroverted factual allegations of the complaint are accepted as true for purposes of the motion. See id., citing, inter alia, Gibbs v. Buck, 307 U.S. 66, 72, 59 S.Ct. 725, 83 L.Ed. 1111 (1939) ; Kellogg Brown, 728 F.3d at 1365.

If jurisdiction is contested, consideration of extrinsic evidence outside the pleadings may be necessary to resolving that issue. See Aerolineas Argentinas v. United States, 77 F.3d 1564, 1572 (Fed. Cir. 1996) ("[a] party may challenge the court's jurisdictional authority by denying or controverting necessary jurisdictional allegations"), citing, inter alia, KVOS, Inc. v. Associated Press, 299 U.S. 269, 278, 57 S.Ct. 197, 81 L.Ed. 183 (1936). When "close calls" are present, the foregoing may appear to obfuscate judgment on the pleadings and summary judgment, but if subject matter jurisdiction is lacking, then there can be no adjudication on the merits, see id.; consideration of matters outside the pleadings in deciding a 12(b)(6) motion brings the matter into the realm of summary judgment, and it is therefore appropriate to treat the motion as such. See USCIT Rule 12(d) ; see, e.g., Forest Lab'ys, Inc. v. United States, 29 CIT 1401, 1402, 403 F.Supp.2d 1348 (2005), aff'd, 476 F.3d 877 (Fed. Cir. 2007).

III

According to defendant's papers, the United States imposed "safeguard" import duties on PVLT from the People's Republic of China ("PRC") pursuant to 19 U.S.C. § 2451(f) (omitted since Dec. 11, 2013). Proclamation No. 8414, 3 C.F.R. § 8414 (2009). They were imposed in addition to the 3.4% or 4% ad valorem tariffs on PVLT² and were in...