United States v. Pressman-gutman Co. Inc.

Decision Date16 September 2010
Docket NumberSlip Op. 10-105.,Court No. 06-00043.
PartiesUNITED STATES, Plaintiff, v. PRESSMAN-GUTMAN CO., INC. and American Motorists Insurance Company, Defendants.
CourtU.S. Court of International Trade

OPINION TEXT STARTS HERE

Tony West, Assistant Attorney General; Barbara S. Williams, Attorney in Charge, International Trade Field Office, Commercial Litigation Branch, Civil Division, U.S. Department of Justice (James A. Curley and Jason M. Kenner); Albert Ted Kundrat, Office of the Assistant Chief Counsel, Bureau of Customs and Border Protection, U.S. Department of Homeland Security, Of Counsel; for Plaintiff.

Neville Peterson LLP (John M. Peterson, Curtis W. Knauss, and Michael T. Cone), for Defendant Pressman-Gutman Co., Inc.

Law Offices of Michael P. O'Connor (Michael P. O'Connor), for Defendant American Motorists Insurance Company.

OPINION

RIDGWAY, Judge.

The Government commenced this action to collect $120,000 in liquidated damages, plus interest, from Defendant Pressman-Gutman Co., Inc., or, in the alternative, from Pressman-Gutman's surety, Defendant American Motorists Insurance Company. See Plaintiff's Brief in Support of its Opposition to Defendants' Motions to Dismiss This Action (“Pl.'s Opposition to Motions to Dismiss) at 1, 4; Complaint ¶¶ 1, 5. The Government contends that Pressman-Gutman is liable for liquidated damages because, according to the Government, the company breached the terms of its customs bond by failing to redeliver certain imported merchandise to the U.S. Customs Service, 1 notwithstanding the agency's issuance of demands for redelivery. See Pl.'s Opposition to Motions to Dismiss at 1-4. 2

Now pending before the Court is Pressman-Gutman's Motion to Dismiss this action for failure to state a claim upon which relief can be granted, filed pursuant to Rule 12(b)(5) of the Rules of this Court. See Defendant's Memorandum of Law and Points of Authority in Support of its Motion to Dismiss Pursuant to 12(b)(5) (“Pressman-Gutman Motion to Dismiss) at 1, 27; USCIT R. 12(b)(5). Pressman-Gutman argues, inter alia, that Customs' demands for redelivery were untimely, that there is therefore no breach of the company's customs bond and no basis for any claim for liquidated damages, and, accordingly, that this action must be dismissed. See Pressman-Gutman Motion to Dismiss at 1-3; Defendant's Reply Addressed to its Motion to Dismiss (“Pressman-Gutman Reply”) at 1-2.

In its Cross Motion to Dismiss Action/Cross Motion for Collateral Security and Attorney's Fees, AMICO seconds Pressman-Gutman's arguments urging dismissal of this action. See Defendant, American Motorists Insurance Company's Memorandum of Law and Points of Authority in Support of its Cross Motion to Dismiss and for Collateral Security and Attorney's Fees (“AMICO Cross-Motion) at 1-2. But AMICO devotes the bulk of its seven-page brief to its claim against Pressman-Gutman for collateral security and attorneys' fees and expenses under an indemnity agreement between the two parties. See AMICO Cross-Motion at 2-7.

Based on its assertions that Customs' demands for redelivery were untimely (and that the claim for liquidated damages is therefore without merit), Pressman-Gutman argues that it should not be required to provide collateral security to AMICO, or, in the alternative, that it should be permitted to deposit the security with the Court. See Defendant's Memorandum of Law and Points of Authority in Support of Its Response to American Motorists Insurance Company's Cross-Motion to Dismiss and for Collateral Security and Attorney's Fees (“Pressman-Gutman Response to Cross-Motion) at 1-2, 9-13. In addition, Pressman-Gutman contends that conflicts of interest and other grounds mitigate its obligation to reimburse AMICO's attorneys' fees and expenses. See Pressman-Gutman Response to Cross-Motion at 2, 13-20.

Jurisdiction lies under 28 U.S.C. §§ 1582 and 1583 (1994). 3 For the reasons that follow, Pressman-Gutman's Motion to Dismiss must be granted. AMICO's Cross-Motion as to collateral security is therefore denied as moot; and, as to attorneys' fees and expenses, the Cross-Motion is granted in part and denied in part.

I. The Motions to Dismiss Filed by Pressman-Gutman and AMICO

Pressman-Gutman emphasizes that Customs regulations require that, in a case such as this, “any demand for redelivery ... be made no later than ... 30 days after the end of the conditional release period.” See 19 C.F.R. § 113.62(d); see generally Pressman-Gutman Motion to Dismiss at 6-17; Pressman-Gutman Reply at 1-2. Pressman-Gutman further argues that Customs Headquarters has consistently interpreted agency regulations to mean that, in a case such as this, the “conditional release period” begins when Customs requests a sample of the merchandise at issue, and ends when Customs receives the requested sample. See Pressman-Gutman Motion to Dismiss at 7-15; Pressman-Gutman Reply at 2-3.

Here, it is undisputed that the demands for redelivery were made well more than 30 days after Customs received the requested samples. See Complaint ¶¶ 13-14, 25-26. As such, Pressman-Gutman contends that Customs' demands for redelivery were untimely and are unenforceable, that there was therefore no breach of Pressman-Gutman's customs bond, and that there is thus no basis for the liquidated damages claim that is the subject of this case. See Pressman-Gutman Motion to Dismiss at 2, 17; Pressman-Gutman Reply at 1. Accordingly, Pressman-Gutman reasons, the Government cannot maintain this action. See Pressman-Gutman Motion to Dismiss at 2-3, 27; Pressman-Gutman Reply at 2.

The Government concedes that the demands for redelivery in this case were made well more than 30 days after Customs received the requested samples from Pressman-Gutman. See Pl.'s Opposition to Motions to Dismiss at 3-4. However, the Government contends that an individual Customs staffer at the Port of JFK Airport in New York “extended” the conditional release periods here within 30 days of Customs' receipt of the samples, by sending notices to Pressman-Gutman stating that the samples had been forwarded to the lab for analysis and that the [c]onditional release period [was being] extended for 90 days pending lab analysis.” See id. at 2-6, 9-13; Complaint, Exhs. 5, 14. The Government asserts that, because the demands for redelivery were issued within 30 days after the end of the “extended” conditional release period, the demands were therefore timely. See Pl.'s Opposition to Motions to Dismiss at 5, 8-10, 14. The Government concludes that Pressman-Gutman breached the terms of its customs bond by failing to redeliver the merchandise at issue, and that Customs is therefore entitled to the liquidated damages at issue in this action. See id. at 1-2; Complaint ¶¶ 6-7, 15, 19, 27, 31.

As detailed below, the Government's theory of this case is bankrupt. Its argument rests entirely on the slender thread of a single phrase that is read out of context and appears in only a handful of Customs documents, all of which date back nearly two decades. Even more to the point, the Government's case flouts both (1) 19 C.F.R. § 113.62(d), which requires that Customs make any demand for redelivery within 30 days of the end of the “conditional release period,” and (2) approximately 20 years of rulings by Customs Headquarters, which have consistently and repeatedly interpreted the agency's regulations to mean that, in a case such as this, the “conditional release period” ends when Customs receives a requested sample.

The Government has no colorable claim here. This is an action that never should have been brought; and the motions to dismiss it now must be granted.

A. Statement of Facts

The relevant facts are straightforward and uncontested. This action arose from a classification dispute involving two entries of textile fabrics made in September 1999-the first entry on or about September 3, 1999, and the second on or about September 22, 1999. See Pressman-Gutman Motion to Dismiss at 3-4; Pl.'s Opposition to Motions to Dismiss at 3; Complaint ¶¶ 9-10, 21-22, Exhs. 2-3, 11-12. Soon after each entry, Customs issued a standard form Request for Information (“CF 28”) for each of the two entries, requesting samples of the merchandise as part of the agency's analysis of the proper classification and quota category for the goods. See Complaint ¶¶ 11, 23, Exhs. 4, 13; Pressman-Gutman Motion to Dismiss at 4-5; Pl.'s Opposition to Motions to Dismiss at 3-4; Pressman-Gutman Response to Cross-Motion at 3. The fabric's country of origin was never at issue. Id.

Pressman-Gutman promptly complied with Customs' requests. The samples from the first and second entries were sent to Customs on or about October 6, 1999 and on or about October 19, 1999, respectively. See Pl.'s Opposition to Motions to Dismiss at 3-4; Complaint ¶¶ 12, 24, Exhs. 4, 13. The record does not disclose exactly when Customs received the samples. It is, however, undisputed that Customs received the samples from the first entry no later than October 15, 1999, and from the second entry no later than October 25, 1999, because-on those dates, respectively-a Customs staffer at the Port of JFK Airport issued additional CF 28s, both of which stated (in upper case letters):

[Samples] sent to the lab for analysis. Conditional release period extended for 90 days pending lab analysis. Failure to retain merchandise during the conditional release period can result in liquidated damages.

Complaint ¶¶ 13, 25, Exhs. 5, 14; see also Pressman-Gutman Motion to Dismiss at 4-5; Pl.'s Opposition to Motions to Dismiss at 3-4.

One month passed, followed by another, and yet another. Then, on February 8, 2000, more than three months (and, in the case of the first entry, nearly four months) after the agency had acknowledged receipt of the samples from Pressman-Gutman, Customs demanded redelivery of the merchandise from both entries. See Pressman-Gutman Motion to Dismiss at 4-5; Pl.'s Opposition...

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