United States v. Nitek Elecs., Inc.

• Citation: 34 ITRD 1411,844 F.Supp.2d 1298
• Parties: UNITED STATES, Plaintiff, v. NITEK ELECTRONICS, INC., Defendant.
• Decision Date: 13 April 2012
• Court: U.S. Court of International Trade

844 F.Supp.2d 1298

34 ITRD 1411

UNITED STATES, Plaintiff,

v.NITEK ELECTRONICS, INC., Defendant.

United States Court of

International Trade.

Slip Op. 12–50.

Court No. 11–00078.

April 13, 2012.

Stuart F. Delery, Acting Assistant Attorney General; Jeanne E. Davidson, Director; Patricia M. McCarthy, Assistant Director, Washington, DC; Delisa M. Sanchez, Commercial Litigation Branch, Civil Division, U.S. Department of Justice; and Eric P. Delmar, U.S. Customs and Border Protection, Of Counsel, for Plaintiff United States.

Baker & McKenzie, LLP (William D. Outman, II, San Francisco, CA, Michael E. Murphy, Kevin J. Sullivan, Washington, DC), for Defendant Nitek Electronics, Inc.

MEMORANDUM & ORDER

BARZILAY, Senior Judge:

Plaintiff United States brings this action pursuant to section 592 of the Tariff Act of 1930, 19 U.S.C. § 1592, seeking recovery of lost duties (Count I), lost antidumping duties (Count II), and penalties based upon negligence (Count III). Compl. ¶¶ 33–39. Currently before the court is Defendant Nitek Electronics, Inc.'s (“Defendant” or “Nitek”) motion to dismiss this action pursuant to USCIT Rule 12(b)(1) for lack of subject matter jurisdiction or, in the alternative, USCIT Rule 12(b)(5) for failure to state a claim. For the reasons below, the court denies Defendant's Rule 12(b)(1)motion, denies Defendant's Rule 12(b)(5) motion with respect to Counts I and II, and grants Defendant's Rule 12(b)(5) motion with respect to Count III.

I. Background

On April 1, 2004, U.S. Customs and Border Protection (“Customs”) issued a letter to Nitek, pursuant to § 1592(d), demanding payment of duties allegedly owed on certain entries of gas meter swivels and gas meter nuts from the People's Republic of China. Compl. ¶¶ 5, 20, Ex. B. Customs claimed that the merchandise—entered between June 14, 2001, and March 22, 2004—was misclassified under the U.S. Harmonized Tariff Schedule (“HTSUS”), resulting in lost duties. Compl. ¶¶ 6, 7, 8, Ex. B. Further, Customs alleged that Nitek failed to classify its merchandise as subject to the antidumping duty order Certain Malleable Iron Pipe Fittings From the People's Republic of China, 68 Fed.Reg. 69,376 (Dep't of Commerce Dec. 12, 2003) (notice of antidumping duty). Compl. ¶¶ 9, 20, Ex. B.

On March 21, 2005, Customs issued a pre-penalty notice alleging that Nitek “entered or attempted to enter pipe fittings into the commerce of the United States by means of material false statements and documents, and/or omissions.” Compl. Ex. E. Customs alleged a “tentative culpability” of gross negligence and appended a list of the 38 pertinent entries. Compl. Ex. E. Included with the pre-penalty notice was a statute of limitations waiver form, which Nitek subsequently executed. Compl. ¶ 23, Exs. E, F.

Concurrently with these ongoing penalty proceedings, other importers of gas meter swivels and gas meter nuts brought an action in this Court challenging the antidumping duty order. See Sango Int'l L.P. v. United States, 30 CIT 602, 429 F.Supp.2d 1356 (2006) (“Sango International ”). In a letter dated April 1, 2005, Nitek requested that Customs suspend the penalty proceedings pending resolution of Sango International. Compl. ¶ 24, Ex. G. Customs agreed to stay the proceedings in exchange for two subsequent waivers of the statute of limitations. Compl. ¶¶ 25, 29, Exs. H, I, K, L. After a series of remands, the U.S. Court of Appeals for the Federal Circuit (“Federal Circuit”) issued a final decision in Sango International on June 4, 2009, sustaining the order. See Sango Int'l L.P. v. United States, 567 F.3d 1356 (Fed.Cir.2009).

Customs issued a final penalty claim against Nitek on February 24, 2011. Compl. ¶ 30, Ex. M. Customs again alleged a “tentative culpability” of gross negligence, but omitted from the appendix of subject entries six entries previously listed in the pre-penalty notice. Compl. Ex. M. Customs also informed Nitek that, absent agreement to an additional waiver of the statute of limitations, Nitek had seven days “to file a petition for relief from the penalty issued.” Compl. Ex. M.

On March 3, 2011, counsel for Defendant filed a letter with Customs stating that Nitek had acted with reasonable care in classifying its merchandise and, in an effort to resolve the claim, offered to pay all duties owed. Def.'s Reply Ex. 1.¹ Plaintiff thereafter filed this action.

II. Standard of Review

A fundamental question in any action before the Court is whether subject matter jurisdiction exists over the claims presented. See Steel Co. v. Citizens for a Better Env't, 523 U.S. 83, 94–95, 118 S.Ct. 1003, 140 L.Ed.2d 210 (1998). “[W]hen a federal court concludes that it lacks subject-matter jurisdiction, the court must dismiss the complaint in its entirety.” Arbaugh v. Y & H Corp., 546 U.S. 500, 514, 126 S.Ct. 1235, 163 L.Ed.2d 1097 (2006); see13 Charles Alan Wright & Arthur R. Miller, Federal Practice and Procedure § 3522 (3d ed. 2011) (“A federal court's entertaining a case that is not within its subject matter jurisdiction is no mere technical violation....”). The plaintiff bears the burden of establishing jurisdiction, see Norsk Hydro Can., Inc. v. United States, 472 F.3d 1347, 1355 (Fed.Cir.2006), but, in deciding a Rule 12(b)(1) motion to dismiss, the Court accepts as true all uncontroverted factual allegations in the complaint, Engage Learning, Inc. v. Salazar, 660 F.3d 1346, 1355 (Fed.Cir.2011).

To survive a Cedars–Sinai Med. Ctr. v. Watkins, 11 F.3d 1573, 1584 n. 13 (Fed.Cir.1993) motion to dismiss, “a complaint must contain sufficient factual matter ... 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 Bell Atl. Corp. v. Twombly, 550 U.S. 544, 570, 127 S.Ct. 1955, 167 L.Ed.2d 929 (2007)). “A claim has facial plausibility when the plaintiff pleads factual content that allows the court to draw the reasonable inference that the defendant is liable for the misconduct alleged.” Id. (citing Twombly, 550 U.S. at 556, 127 S.Ct. 1955). The plaintiff bears the burden of pleading the requisite facts, USCIT R. 8(a)(2) (“A pleading that states a claim for relief must contain ... a short and plain statement of the claim showing that the pleader is entitled to relief.”), but the Court accepts as true all well-pled factual allegations and draws all reasonable inferences in favor of the plaintiff, Cedars–Sinai Med. Ctr. v. Watkins, 11 F.3d 1573, 1584 n. 13 (Fed.Cir.1993).

III. Discussion

A. Subject Matter Jurisdiction

This Court has exclusive jurisdiction over any action by the United States to recover a penalty imposed for a violation of 19 U.S.C. § 1592.²28 U.S.C. § 1582(1). In a § 1592 recovery action, however, the Court “shall, where appropriate, require the exhaustion of administrative remedies,” 28 U.S.C. § 2637(d); United States v. Rotek, Inc., 22 CIT 503, 508, 1998 WL 314028 (1998) (not reported in F.Supp.) (“ Rotek ”), the detailed procedures for which Congress enacted in § 1592(b), see§ 1592(b). It is also well established that § 2637(d) grants the court the discretion to waive § 1592(b) exhaustion in appropriate circumstances. See, e.g., Agro Dutch Indus. Ltd. v. United States, 508 F.3d 1024, 1029 (Fed.Cir.2007); Rotek, 22 CIT at 508.

Defendant argues that Customs failed to perfect its penalty claim via the administrative process in § 1592(b) and that, as a result, the court lacks jurisdiction over this action. Def.'s Br. 8; Def.'s Reply 4–8. Defendant concedes (as it must) that exhaustion in this case is discretionary but argues that Plaintiff has failed to demonstrate that a waiver of exhaustion is appropriate and that jurisdiction therefore cannot attach. Def.'s Reply 6.

Dismissal based upon a lack of subject matter jurisdiction concerns the court's power to hear a case rather than the parties' ability to seek relief. Landgraf v. USI Film Prods., 511 U.S. 244, 274, 114 S.Ct. 1483, 128 L.Ed.2d 229 (1994). Thus, the court is guided by the Supreme Court's recent admonitions that courts be mindful of the “important distinctions between jurisdictional prescriptions and claim-processing rules....” Reed Elsevier, Inc. v. Muchnick, ––– U.S. ––––, 130 S.Ct. 1237, 1244, 176 L.Ed.2d 18 (2010) (“Reed Elsevier ”); Arbaugh, 546 U.S. at 511, 126 S.Ct. 1235 (“On the subject-matter jurisdiction/ingredient-of-claim-for-relief dichotomy, this Court and others have been less than meticulous.”). In particular, these holdings have emphasized the precept that “when Congress does not rank a statutory limitation on coverage as jurisdictional, courts should treat the restriction as nonjurisdictional in character.” Arbaugh, 546 U.S. at 516, 126 S.Ct. 1235;see United States v. Robert E. Landweer & Co., 36 CIT ––––, ––––, 816 F.Supp.2d 1364, 1368–69 (2012) (“Landweer ”) (“[T]he court presumes that exhaustion is non-jurisdictional unless Congress has stated in sweeping and direct language (i.e., in clear and unequivocal terms) that there is no subject matter jurisdiction prior to exhaustion.” (citing Avocados Plus Inc. v. Veneman, 370 F.3d 1243, 1248 (D.C.Cir.2004))). In Reed Elsevier, the Court found nonjurisdictional a statutory precondition that “is not clearly labeled jurisdictional, is not located in a jurisdiction-granting provision, and admits of congressionally authorized exceptions.” Reed Elsevier, 130 S.Ct. at 1247;accord Ford Motor Co. v. United States, 635 F.3d 550, 556 (Fed.Cir.2011).

As an initial matter, § 1592(b) is neither clearly labeled jurisdictional nor located in the provision granting the Court jurisdiction over these penalty claims, § 1582(1). Applying the guidance in Reed Elsevier, the court finds that these considerations strongly counsel against treating § 1592(b) as jurisdictional.

Further undermining Defendant's argument, § 1592(b) is subject to a congressionally authorized exception. “[S]ubject-matter jurisdiction, because it involves a court's power to hear a case, can never be...