Nichols & Co., Inc. v. United States

• Decision Date: 03 February 1978
• Docket Number: Court No. R65/11409,C.D. 4734
• Citation: 447 F. Supp. 455
• Court: U.S. Court of Customs and Patent Appeals (CCPA)
• Parties: NICHOLS & COMPANY, INC. v. UNITED STATES.

447 F. Supp. 455

NICHOLS & COMPANY, INC. v. UNITED STATES.

C.D. 4734; Court Nos. R65/11409, etc.

United States Customs Court.

February 3, 1978.

Doherty & Melahn, Boston, Mass. (William E. Melahn, Boston, Mass., of counsel), for plaintiff.

Barbara Allen Babcock, Asst. Atty. Gen., Washington, D. C., Saul Davis, Trial Atty., New York City, for defendant.

RE, Chief Judge:

In this action for the reappraisement of imported merchandise both parties have moved for summary judgment pursuant to Rule 8.2(a) of this court.¹ The defendant has also moved for severance.

It is undisputed that the facts are identical to those of the test case under which the present action was suspended, Nichols & Company, Inc. v. United States, 60 Cust.Ct. 917, R.D. 11555 (1968), aff'd, 64 Cust.Ct. 849, A.R.D. 271 (1970), aff'd, 454 F.2d 1183, 59 CCPA 67, C.A.D. 1041 (1972). The imported merchandise in both cases consists of nylon staple fibers, substandard acrylic staple fibers and first grade acrylic staple fibers. The parties have stipulated that the merchandise was included in the Final List of the Secretary of the Treasury, T.D. 54521 (1958).

In both actions the fibers were appraised on the basis of foreign value, pursuant to section 402a(c) of the Tariff Act of 1930, as amended by the Customs Simplification Act of 1956.² In the test case, and in this action, plaintiff has contended that the proper valuation is export value pursuant to section 402a(d) of the Tariff Act of 1930, as amended by the Customs Simplification Act of 1956.³ In the present case plaintiff has also asserted the alternative claim of United States value, pursuant to section 402a(e) of the Tariff Act of 1930, as amended by the Customs Simplification Act of 1956.⁴

As in the test case of Nichols & Company, Inc., all three types of fibers were manufactured in France by Société Crylor, a member of a chemical group known as Rhone Poulenc. The fibers were sold by Rhodiaceta, the general sales agent for that group, to the West German firm of Chemfa, 80% of which is owned by Nichols & Company, Inc. Chemfa resold the merchandise to Nichols who shipped it from Bremen and Rotterdam. Rhodiaceta did not sell directly to the United States and, therefore, could not deal directly with Nichols. Negotiations for the sales contract, however, under which all shipments of the fibers were made, included a representative of Nichols. It was understood by all parties that the fibers were to be exported to Nichols. At the time of exportation of the merchandise, French law permitted the sale of fibers only on the condition that they not be resold in the French market as fibers.

In the test case, as well as in the case at bar, the country of exportation was stipulated to be France. On these facts in the test case, based on the absence of a free market in France for the imported merchandise, the trial court found that plaintiff had overcome the presumption of correctness⁵ as to the foreign value basis of appraisement. The court also found that plaintiff had succeeded in establishing that export value was the proper basis of appraisement. However, since plaintiff had not introduced evidence as to export value in the French market, the presumption of correctness that attached to the appraiser's finding of the amount of value was not overcome.

That the valuation issue had been presented, tried and determined may be gleaned from the specific references in the decision of the trial court to the evidentiary value of invoice statements. The trial court stated that it found plaintiff's argument "difficult to follow," and rejected plaintiff's request that it be given an opportunity "to remedy this defect in its proofs." 60 Cust.Ct. at 922-23. Prophetically, the trial court write that "plaintiff has had its day in court, has rested and submitted its case for decision on the proofs it adduced." To dispel any doubt the trial court explained:

"The situation is that plaintiff has established that the merchandise at bar should be valued on the basis of export value, but it has failed to prove an export value different from the value found by the appraiser. There is a twofold presumption of correctness as to the appraiser's findings: as to basis, and as to amount. Plaintiff has overcome the presumption as to the first, the basis for appraisement. Plaintiff has adduced no proofs as to export value in the French market. Hence, the presumption of correctness, as to the appraiser's finding of the amount of value, has not been overcome." 60 Cust.Ct. at 923.

The Appellate Term of this court affirmed. It expressly passed upon the evidence presented in the trial court on the question of value, and held that the importer failed to rebut the presumption of correctness. In holding that Nichols had not established the absence of a foreign statutory value for "similar" merchandise as required under section 402a(c) of the Tariff Act of 1930, as amended, it stated:

"The presumption of correctness obtaining in this case with respect to the appraisement is that the appraiser found every fact to exist which is necessary to sustain the existence of a foreign value. And the burden of proof is on appellant to rebut this presumption of correctness before undertaking to establish another value for the merchandise at bar." 64 Cust.Ct. at 855.

The Court of Customs and Patent Appeals affirmed.

Relying upon the test case, the defendant has moved for summary judgment contending that the valuation issue in both cases is the same in all material respects. It is the defendant's position that the issue of valuation was previously litigated to a valid final judgment against the same plaintiff in the test case. It therefore urges that plaintiff should be collaterally estopped from relitigating it. The defendant further contends that United States value, as an alternative claim, does not preclude the application of the doctrine of collateral estoppel. It argues that plaintiff would also have to negate any foreign or export value for such or similar merchandise before the court examine the applicability of the United States value claim.

Plaintiff opposes defendant's motion for summary judgment on the ground that the liberal discovery rules of the United States Customs Court enacted in 1970 constitute an intervening change in the controlling law which renders the doctrine of collateral estoppel inapplicable. Plaintiff also maintains that the valuation decision in the test case was not a final judgment on the merits which would warrant the application of the doctrine of collateral estoppel. Finally, plaintiff asserts that since the defendant withheld material evidence in the original Nichols case, it should not be permitted to invoke collateral estoppel.

Before reaching the merits of the defendant's motion for summary judgment, and the question of collateral estoppel, the court will consider the defendant's motion for severance. Some confusion has been caused by the fact that the scheduled appeals for reappraisement, which defendant seeks to sever, were never consolidated with consolidated case number R65/11409, the case at bar.⁶ These cases are part of consolidated case number R66/493, which was suspended under the test case. Moreover, the defendant has listed in the schedule appended to its motion papers consolidated case number R67/16854, another case which was not previously consolidated with R65/11409, but which was also suspended under the test case.

Since all three consolidated cases, R65/11409, R66/493 and R67/16854, were suspended under the same test case pursuant to Rule 14.7(a),⁷ it is clear that they were all found to involve the same issues of fact or law as in the test case. Thus, the "common question of law or fact" which is necessary for consolidation pursuant to Rule 10.3(a)⁸ has been satisfied. In view of the requisite common question of law or fact existing in these cases, the court consolidates, sua sponte, case numbers R66/493 and R67/16854 under case number R65/11409.⁹

Defendant seeks severance of those reappraisement cases¹⁰ with dates of exportation in 1963 and 1965. Defendant contends that it is proper to sever those cases since the valuation question in the motion for summary judgment pertains to merchandise exported during 1962. Since the "time of exportation" of the merchandise is crucial in considering proper valuation under foreign value, export value or United States value, defendant's motion to sever and renumber is granted.

The defendant's motion for summary judgment raises the question of the applicability of the doctrine of collateral estoppel in customs litigation.

Collateral estoppel, or estoppel by judgment, is related to the doctrine of res judicata. Although res judicata shields a litigant from multiple suits and vexatious litigation, primarily it fosters the public policy which puts an end to litigation and promotes stability in human relations. The doctrine is of ancient origin and finds expression in the latin maxim "interest reipublicae ut sit finis litium," meaning that it is in the public interest that there be an end to litigation.

As indicated by the Supreme Court of the United States in Commissioner v. Sunnen, 333 U.S. 591, 596-97, 68 S.Ct. 715, 92 L.Ed. 898 (1948), res judicata prevents relitigation in a subsequent action between the same parties, or their privies, of questions or issues which were actually litigated or could have been litigated in the prior action, if the prior action resulted in a final judgment on the merits. In contrast, a prior judgment between the same parties based on a different claim or cause of action may invoke the doctrine of collateral estoppel. Unlike res judicata, collateral estoppel precludes a relitigation in the second action of only those issues which were actually litigated in the prior action, but not those which might have been litigated. Commissioner v. Sunnen, 333 U.S. at 598, 68 S.Ct. 715.

Since a party may be precluded from...