Hartford Fire Ins. Co. v. United States

• Citation: 33 ITRD 1225,648 F.3d 1371
• Decision Date: 11 August 2011
• Docket Number: No. 2010–1198.,2010–1198.
• Parties: HARTFORD FIRE INSURANCE COMPANY, Plaintiff–Appellant,v.UNITED STATES, Defendant–Appellee.
• Court: United States Courts of Appeals. United States Court of Appeals for the Federal Circuit

648 F.3d 1371

33 ITRD 1225

HARTFORD FIRE INSURANCE COMPANY, Plaintiff–Appellant,

v.UNITED STATES, Defendant–Appellee.

No. 2010–1198.

United States Court of Appeals, Federal Circuit.

Aug. 11, 2011.

Frederic D. Van Arnam, Jr. Barnes, Richardson & Colburn, of New York, New York, argued for plaintiff-appellant. With him on the brief was Eric W. Lander.Claudia Burke, Senior Trial Counsel, Commercial Litigation Branch, Civil Division, United States Department of Justice, of Washington, DC, argued for defendant-appellee. With her on the brief were Tony West, Assistant Attorney General, Jeanne E. Davidson, Director, and Franklin E. White, Jr., Assistant Director.Before RADER, Chief Judge, PLAGER and LOURIE, Circuit Judges.Opinion for the court filed by Circuit Judge PLAGER. Dissenting opinion filed by Circuit Judge LOURIE.PLAGER, Circuit Judge.

This is a suretyship case arising under the customs laws of the United States. The surety was barred from suing to challenge its liability under its surety contract on the grounds that, because it knew of its potential protest grounds in time to file its protest administratively within the time period provided in 19 U.S.C. § 1514(c)(3), it could not bring a lawsuit under the special provisions of 28 U.S.C. § 1581(i). Because we conclude that the United States Court of International Trade (“Court of International Trade”) erred in determining that the surety's claim accrued prior to the end of the protest period, we reverse the dismissal of the complaint and remand the case for further proceedings consistent with this opinion.

Background

During one month in the summer of 2003, Sunline Business Solutions Corporation (“Sunline”) imported eight entries of frozen cooked crawfish from the People's Republic of China. These entries are referred to as the “Hubei entries” by the parties and the Court of International Trade. United States Customs and Border Protection (“Customs”) law requires that importers post securities for entries of imported merchandise. 19 C.F.R. § 142.4. Importers often use a surety bond as a method of posting the required security, whereby the surety guarantees to the United States that it will pay the importer's entry obligation should the importer fail to make its required payment. Sunline procured its required eight single entry bonds, see 19 C.F.R. § 113.62, for the Hubei entries from Appellant Hartford Fire Insurance Company (“Hartford”).

At the time of entry into the United States, the Hubei entries were subject to an existing antidumping order (A570–848–036). However, following an administrative review of that order by the International Trade Administration, the Hubei entries were liquidated, as defined in 19 C.F.R. § 159.1, and a new, higher, antidumping duty rate was levied. See Freshwater Crawfish Tail Meat from the People's Republic of China; Notice of Final Results of Antidumping Duty Administrative Review, and Final Rescission of Review, in Part, 69 Fed.Reg. 61,636 (Dep't of Commerce Oct. 20, 2004) (notice of final results of admin. review). By June 22, 2005, Sunline had not made a payment for these additional antidumping duties, so Customs sought to obtain the payment from Sunline's surety, Hartford. Hartford Fire Ins. Co. v. United States, 679 F.Supp.2d 1362, 1364 (Ct. Int'l Trade 2009).

Meanwhile, in May of 2005, Hartford's counsel learned from an individual connected with a Customs brokerage firm that personnel from Sunline had been arrested for using false invoices. See United States v. Shen, No. 03–CR01208 (C.D.Cal. Nov. 25, 2003). On June 3, 2005, Hartford undertook an investigation into the Shen matter by filing a Freedom of Information Act (“FOIA”) request with Customs. Then, on October 7, 2005, Hartford requested a copy of the Shen criminal case file from the Central District of California. From investigating the Shen case file, Hartford believed it learned of potential grounds upon which it could deny liability regarding Customs demand for payment. Hartford, 679 F.Supp.2d at 1367.

Specifically, within the Shen case file there was a letter dated June 19, 2003, from Shanghai Taoen International Trading Company (“STI”) to Customs alleging that illegal importations of crawfish tailmeat from China were occurring. This notification to Customs occurred more than a month before Hartford began issuing surety bonds to Sunline for the Hubei entries. Following the receipt of the STI letter, Customs began an investigation into the importation of crawfish tailmeat from China. Hartford alleges in its amended complaint that the failure of Customs to disclose its crawfish tailmeat investigation to Hartford prior to its issuance of the Sunline surety bonds constitutes a material misrepresentation by Customs, thus making the bonds voidable at Hartford's election.

Pursuant to 19 U.S.C. § 1514, Hartford had 90 days in which to file an administrative protest with Customs from the mailing date of the notice of demand for payment against its bonds—which it did not do. Instead, on February 7, 2007, Hartford filed suit under 28 U.S.C. § 1581(i) in the Court of International Trade, seeking to have its surety bonds with Sunline voidable at Hartford's option because of the information it discovered after investigating the Shen case file. Id. at 1365.

Subsection 1581(i) of title 28 grants exclusive jurisdiction to the Court of International Trade over:

[A]ny civil action commenced against the United States, its agencies, or its officers, that arises out of any law of the United States providing for—

(1) revenue from imports or tonnage;

(2) tariffs, duties, fees, or other taxes on the importation of merchandise for reasons other than the raising of revenue;

(3) embargoes or other quantitative restrictions on the importation of merchandise for reasons other than the protection of the public health or safety; or

(4) administration and enforcement with respect to the matters referred to in paragraphs (1)-(3) of this subsection and subsections (a)-(h) of this section.

In the Court of International Trade, Hartford argued that jurisdiction is proper under this subsection because it did not learn of the basis for its cause of action until after the protest period expired, thus it was not possible for it to bring an administrative protest under 19 U.S.C. § 1514(c)(3). The trial court disagreed with Hartford and held that, because Hartford “could and should have reasonably known of the existence of its present claims against Customs within the statutorily prescribed time period for filing a protest,” and because Hartford's claims are within the scope of protestable claims under 19 U.S.C. § 1514(c)(3), a law suit pursuant to subsection 1581(i) is unavailable; in effect, the court lacks subject matter jurisdiction. Hartford, 679 F.Supp.2d at 1368.

Hartford timely appealed the decision of the Court of International Trade. We have jurisdiction pursuant to 28 U.S.C. § 1295(a)(5).

Discussion

As with other questions of law, we review the Court of International Trade's jurisdictional rulings without deference. JCM, Ltd. v. United States, 210 F.3d 1357, 1359 (Fed.Cir.2000).

The question is whether Hartford is entitled to bring a lawsuit under section 1581(i), challenging the Government's demand, for payment under the surety contract. In interpreting the very broad language of section 1581(i), we have limited its scope so that it “may not be invoked when jurisdiction under another subsection of section 1581 is or could have been available, unless the remedy provided under that other subsection would be manifestly inadequate.” Int'l Custom Prods. v. United States, 467 F.3d 1324, 1327 (Fed.Cir.2006) (quoting Norcal/Crosetti Foods, Inc. v. United States, 963 F.2d 356, 359 (Fed.Cir.1992)). The application of such a standard is simple enough for the majority of protests eligible to be filed administratively by a surety under 19 U.S.C. § 1514(c).

But in the “unusual situation where a claim does not accrue until after the protest period has expired,” this court has observed that “[n]o administrative [protest] procedure exists.” St. Paul Fire & Marine Ins. Co. v. United States, 959 F.2d 960, 964 (Fed.Cir.1992). Furthermore, because “[a] surety must have some grounds for objecting to the government's demand,” it cannot simply file a placeholder protest while it searches for a protestable basis. Id. at 963. Therefore, this court has recognized that if the grounds for the administrative protest were not known and could not have reasonably been known until after the protest period expires, section 1581(i) is an appropriate jurisdictional basis for bringing the suit. Id. at 964 (citing Chevron U.S.A., Inc. v. United States, 923 F.2d 830, 834 (Fed.Cir.1991)).

Here, the trial judge found that Hartford reasonably should have known about the protest grounds in May 2005 when it first heard about the Shen case. Hartford, 679 F.Supp.2d at 1367. In our view, such a conclusion fails to fully appreciate the circuitous route involved before Hartford was able to discover its alleged causes of action. First, Hartford only indirectly learned of the Shen matter—its counsel heard about it from a third party. Second, the Shen case involved entirely different shipments of crawfish, which were not the subject of any surety bond issued by Hartford. Third, the Shen case was brought against two individuals who worked for Sunline and not against the company itself; in fact, Sunline was never named in the Shen case as a party. The circumstances leading up to Hartford's eventual discovery of the information it alleges to support its causes of action remind one of a detective story filled with happenstance, rather than what might be expected to surface as a result of routine uncovering of information through the exercise of due diligence.

The trial court noted that Hartford did not request a copy of the Shen criminal case file until a full four months later from the date its outside counsel first heard...