Int'l Custom Prods., Inc. v. United States

• Decision Date: 24 June 2015
• Docket Number: Slip Op. 15–68.,Court No. 07–00318.
• Citation: 77 F.Supp.3d 1319
• Parties: INTERNATIONAL CUSTOM PRODUCTS, INC., Plaintiff, v. UNITED STATES, Defendant.
• Court: U.S. Court of International Trade

77 F.Supp.3d 1319

INTERNATIONAL CUSTOM PRODUCTS, INC., Plaintiff

v.UNITED STATES, Defendant.

Slip Op. 15–68.

Court No. 07–00318.

United States Court of International Trade.

June 24, 2015.

Gregory H. Teufel, OGC Law, LLC of Pittsburgh, PA, for Plaintiff. With him on the brief was Jeremy L.S. Samek, Eckert Seamans Cherin & Mellott, LLC, of Pittsburgh, PA.

Edward F. Kenny and Jason M. Kenner, Trial Attorneys, Commercial Litigation Branch, Civil Division, U.S. Department of Justice, of Washington, DC, for Defendant. With them on the brief were Joyce R. Branda, Acting Assistant Attorney General, and Amy M. Rubin, Assistant Director, International Trade Field Office.

MEMORANDUM AND ORDER

CARMAN, Senior Judge:

Plaintiff International Custom Products, Inc. (“ICP”), an importer of a product known as white sauce, seeks an award pursuant to the Equal Access to Justice Act (“EAJA”), 28 U.S.C. § 2412(d), of attorney's fees, expenses, and costs in this case. For the reasons explained below, the Court grants ICP's motion in part.

Background

At issue in this case were (1) the validity of a ruling letter issued by Customs and Border Protection (“CBP”) to ICP, which established a classification of ICP's white sauce for tariff purposes (the “Ruling Letter”), and (2) the propriety and impact of CBP's issuance on April 18, 2005 of a Notice of Action that classified all unliquidated and future entries of white sauce under a tariff heading different from that provided in the Ruling Letter (and at a rate increase of approximately 2400%). The procedural history of this case is long and involves a number of intertwined actions between ICP and the government; the relevant background is laid out in some detail in Int'l Custom Prods., Inc. v. United States, 36 CIT ––––, 878 F.Supp.2d 1329 (2012) ( “ICP III ”), familiarity with which is presumed.

In short, ICP applied to CBP for the Ruling Letter, classifying its white sauce under a Harmonized Tariff Schedule (“HTSUS”) heading for “[s]auces and preparations therefor.” See ICP III, 878 F.Supp.2d at 1331. CBP issued the requested ruling in 1999. See id. On April 18, 2005, CBP abruptly changed course, issuing a Notice of Action that reclassified 87 already-imported shipments of ICP's white sauce under an HTSUS provision for “[b]utter and ... dairy spreads,” at a tariff rate approximately 2400% higher than the rate provided in the Ruling Letter. See id. The Ruling Letter indicated that “action has been taken” to rate-advance the relevant entries, and mandated that “all shipments of this product must be classified” under the butter and dairy spread tariff provision in the future. Id.

ICP has been involved in litigation seeking to remedy the Notice of Action ever since. In its initial case, brought in 2005, the Court found jurisdiction pursuant to 28 U.S.C. § 1581(i) and granted judgment for ICP, but the judgment was reversed on jurisdictional grounds and the case dismissed pursuant to a ruling from the Court of Appeals for the Federal Circuit. See Int'l Custom Prods. v. United States, 29 CIT 617, 374 F.Supp.2d 1311 (2005) (“ICP I ”), rev'd in part, vacated in part, 467 F.3d 1324 (Fed.Cir.2006). ICP then filed a number of follow-up cases. The present case stems from a group of 11 entries made by ICP shortly after the issuance of the Notice of Action in 2005. In 2007, CBP liquidated those 11 entries pursuant to the rate given in the 2005 Notice of Action, and ICP subsequently protested the liquidation by paying penalties as to a single entry and initiating this suit. See Int'l Custom Prods. v. United States, 32 CIT 302, 304–05, 549 F.Supp.2d 1384, 1388–89 (2008) (“ICP II ”). This case was tried to the bench in 2012 and resulted in a judgment for Plaintiff on the grounds that the Ruling Letter was improperly revoked by the Notice of Action and that the white sauce at issue was therefore liquidated at the wrong tariff rate. See ICP III, 878 F.Supp.2d at 1331. The Court also found that ICP obtained the Ruling Letter without materially misrepresenting the nature of white sauce, and that the white sauce import underlying this case conformed to the description of the product given in the Ruling Letter. See id. at 1350. The judgment was upheld on appeal, International Custom Products v. United States, 748 F.3d 1182 (Fed.Cir.2014) (“ICP IV ”), after which followed this fee application.

Standard of Review

EAJA entitles a party who prevails in a civil action against the United States for, among other things, judicial review of agency action to recoup its fees and other expenses—“unless the court finds that the position of the United States was substantially justified or that special circumstances make an award unjust.” 28 U.S.C. § 2412(d)(1)(A).

Thus, in order to award fees and expenses, the Court must find that (1) the party seeking the award was the prevailing party, (2) the position of the United States was not substantially justified, (3) special circumstances do not make an award unjust, and (4) the application for fees is timely and supported by an itemized accounting. See Lizarraga Customs Broker v. Bureau of Customs and Border Protection, 35 CIT ––––, ––––, 2011 WL 4910421 at *5 (2011). The government concedes that “ICP prevailed in this action,” which is correct. Def.'s Mem. in Opp'n to Pl.'s Application for Att'ys [sic] Fees and Expenses Under the Equal Access to Justice Act (“Def.'s Mem. ”), ECF No. 274, at 6. ICP has filed an itemized accounting in support of its timely fees application. See ECF No. 268 and attachments. What remains for the court is to determine whether the position of the United States was substantially justified and whether special circumstances make an EAJA award unjust.

In determining whether the position of the United States was substantially justified, the phrase “ ‘position of the United States' means, in addition to the position taken by the United States in the civil action, the action or failure to act by the agency upon which the civil action is based.” 28 U.S.C. § 2412(d)(2)(D). This includes arguments made by government attorneys during the suit as well as the underlying actions of the relevant agency—here, the issuance of the Notice of Action by CBP. See Shah Bros., Inc. v. United States, 38 CIT ––––, ––––, 9 F.Supp.3d 1402, 1406 (2014) (citing DGR Assocs., Inc. v. United States, 690 F.3d 1335, 1340 (Fed.Cir.2012) ).

The United States bears the burden of demonstrating that its position was substantially justified by showing it was “clearly reasonable.” See id. (citing Libas, Ltd. v. United States, 314 F.3d 1362, 1365 (Fed.Cir.2003) and quoting Gavette v. Office of Pers. Mgmt., 808 F.2d 1456, 1467 (Fed.Cir.1986) (emphasis in original)); see also Diamond Sawblades Mfrs. Coalition v. United States, 36 CIT ––––, ––––, 816 F.Supp.2d 1342, 1356 (2012).¹ The statute states that “[w]hether or not the position of the United States was substantially justified shall be determined on the basis of the record ... which is made in the civil action for which fees and other expenses are sought.” 28 U.S.C. § 2412(d)(1)(B). The government's position will be substantially justified where it was founded on a “reasonable basis both in law and fact” and was “justified to a degree that could satisfy a reasonable person.” Pierce v. Underwood, 487 U.S. 552, 563–65, 108 S.Ct. 2541, 101 L.Ed.2d 490 (1988). Even where the position of the United States is “not correct,” it can be justified; and it can be “substantially” justified as long as “a reasonable person could think it correct.” Id. at 566 n. 2, 108 S.Ct. 2541. However, the standard for substantial justification is “slightly more stringent” than a simple reasonableness standard. Fakhri v. United States, 31 CIT 1287, 1292, 507 F.Supp.2d 1305, 1312 (2007) (citing Spencer v. NLRB, 712 F.2d 539, 558 (D.C.Cir.1983) ).

The Supreme Court states that the court must evaluate the substantial justification of the government's pre-litigation and litigation conduct together, making only “one threshold determination for the entire civil action.” Comm'r, Immigration & Naturalization Serv. v. Jean, 496 U.S. 154, 159, 110 S.Ct. 2316, 110 L.Ed.2d 134 (1990) ; see also Chiu v. United States, 948 F.2d 711, 715 (Fed.Cir.1991) (instructing trial courts to evaluate substantial justification on an overall basis that takes in “the entirety of the government's conduct”). In making this evaluation, the court should consider the “clarity of the governing law,” or whether “the legal issue was novel or difficult.” Norris v. SEC, 695 F.3d 1261, 1265 (Fed.Cir.2012) (per curiam ).

Special circumstances making a fee award unjust, even where the government is not substantially justified, “have been recognized where the government unsuccessfully advanced novel and credible legal theories in good faith.” Am. Air Parcel Forwarding Co. v. United States, 12 CIT 850, 853, 697 F.Supp. 505, 507 (1988) ; see also Shah Bros., 9 F.Supp.3d at 1406. A prior ruling against the government on the theory being advanced can detract from such a claim being found novel.See Fakhri, 507 F.Supp.2d at 1314. The special circumstances exception to fee awards also “gives the court discretion to deny awards where equitable considerations dictate an award should not be made.” Devine v. Sutermeister, 733 F.2d 892, 895–96 (Fed.Cir.1984) (internal quotations and citations omitted).

Discussion

I. Plaintiff is Entitled to EAJA Fees

The Court finds that the position of the United States was not substantially justified and that no special circumstance makes a grant of fees and expenses improper. As a consequence, the Court finds that Plaintiff is entitled to recover fees and expenses pursuant to EAJA.

A. The Position of the United States

The position of the United States includes actions taken by the relevant agency and also litigation positions adopted by lawyers during the course of the lawsuit. Here, the agency actions at issue are the actions taken by CBP prior to the filing of this lawsuit. The actions of the ...